The Biden Administration, including the President himself, has signaled an intent to aggressively ratchet up enforcement efforts on many fronts, spanning both the criminal and civil contexts. The U.S. Department of Justice (DOJ), Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC), among other regulatory agencies, have all shown signs of a more zealous enforcement approach, which marks a change in the regulatory landscape compared to that of the prior administration.
The shift toward an aggressive regulatory environment includes the deployment of more proactive investigative methods, a greater focus on prior misconduct, increasingly stringent corporate resolutions, and broader theories of corporate liability. These changes have undeniable implications for companies in all sectors, such as: (1) the need for robust compliance programs that incorporate strong prophylactic controls and remediate misconduct appropriately; and (2) the increasing importance of expert legal advice in navigating the heightened expectations of regulators and understanding the regulatory risks companies face in conducting their operations.
- DOJ corporate criminal enforcement
- CFTC – cryptocurrency and climate change
- Antitrust Enforcement (DOJ and FTC)
The Biden Administration has been persistently vocal in announcing more rigorous enforcement priorities to thwart corporate criminal conduct. Top officials from the DOJ have announced a broad policy agenda that will “invigorate” the agency’s efforts to confront corporate criminal misconduct.
The most impactful of these officials’ statements came from Deputy Attorney General Lisa Monaco in October 2021. Monaco announced that:
- To be eligible for any cooperation credit, a company must identify all individuals involved in the misconduct, regardless of their position, status, seniority, or level of involvement in the misconduct. Cooperating companies will be required to provide all non-privileged materials related to the identified individuals. This directive marks a slight escalation from the DOJ’s prior policy of allowing cooperating companies to disclose only the individuals whom the companies determine to be “substantially involved” in the criminal conduct.
- The DOJ will evaluate “all prior misconduct . . . when it comes to decisions about the proper resolution with a company, whether or not that misconduct is similar to the conduct at issue in a particular investigation.” As such, federal prosecutors are now directed to comprehensively assess a company’s entire criminal, civil, and regulatory record in making charging decisions.
- Prior guidance from the DOJ that “suggested that monitorships are disfavored or are the exception” is rescinded. Thus, to the extent one existed, there is no longer a presumption against the imposition of a corporate compliance monitor.
Deterring misconduct by repeat corporate offenders
Perhaps the most notable policy announced by Deputy Attorney General Monaco is the DOJ’s consideration of whether repeat corporate offenders — companies that have reached previous resolutions with the DOJ, regardless of office or section — should be granted a non-prosecution agreement (NPA) or deferred prosecution agreement (DPA). Monaco indicated that the DOJ will consider whether the opportunity to receive multiple NPAs and DPAs “instills a sense among corporations that these resolutions and the attendant fines are just the cost of doing business”. The DOJ will consider whether there are other approaches that will have a greater impact on deterring misconduct.
Depending on the conclusion the DOJ reaches, DPAs and NPAs may, going forward, be unavailable to certain companies with a history of recidivism. Monaco made clear that “there will be serious consequences for violating [the] terms” of DPAs and NPAs, and the DOJ will be studying whether companies under an NPA or DPA “take those obligations seriously enough”. As evidence of the DOJ’s position, Monaco noted that two multinational corporations recently received a breach notification from the DOJ.
Proactive detection of foreign corruption
The growing link between issues of national security and corporate criminal misconduct is likely to yield greater enforcement. Monaco recognized that “[c]orporate crime has an increasing national security dimension.” In June 2021 President Biden declared that the fight against global corruption is a core national security interest and directed his administration to better fight corruption through enforcement and cooperation with regulators around the world.
The Administration’s prioritization of combatting global corruption as a national security concern has considerable implications for the enforcement of the Foreign Corrupt Practices Act (FCPA), which is the country’s chief legal mechanism for rooting out and punishing corruption abroad. Indeed, top officials at the DOJ have signalled a changing approach to FCPA enforcement. FCPA investigations are increasingly conducted via proactive means (e.g., through proactive data mining for investigative leads, use of law enforcement sources and cooperators, and active cooperation with foreign governments) and rely less on companies self-reporting FCPA violations.
The Biden Administration’s emphasis on combatting global corruption along with the DOJ’s increasing deployment of proactive investigative methods are, taken together, likely to yield an aggressive FCPA enforcement environment for the foreseeable future. An aggressive enforcement approach to the FCPA, however, is simply one example of the broader shift in corporate criminal enforcement that Deputy Attorney General Monaco announced. As she indicated in her closing remarks, Deputy Attorney General Monaco’s statements mark the beginning, not the end, of actions the DOJ will take in its renewed emphasis on corporate criminal enforcement.
Increasing DOJ resources and toolkit
The DOJ is “building up to surge resources for corporate enforcement” and has “started to redouble [its] commitment to white-collar enforcement.” The DOJ uses sophisticated data analytics to investigate suspected white-collar crime. The Fraud Section has, for a long time, used such analysis in financial services and healthcare fraud, as well as the use of data analysis in connection with insider trading cases by the SEC and the U.S. Attorney’s Office for the Southern District of New York.
Areas of focus: sanctions, export controls, cryptocurrency
Sanctions and export control and cryptocurrency are likely to be specific areas of focus.
There has been a recent and significant increase in sanctions and export control investigations. There are approximately 150 current sanctions and export control investigations. The DOJ is likely to use new tools in export and sanctions cases, including a more rigorous use of asset forfeiture mechanisms.
Regarding cryptocurrency, Principal Associate Deputy Attorney General Carlin has said the area is “ripe for innovation and vigorous enforcement” and that the Bank Secrecy Act will be a critical component of the DOJ’s efforts in that regard.
Like the FCPA, sanctions and export control and cryptocurrency enforcement are likely only the tip of the iceberg in terms of the DOJ’s plans for greater corporate criminal enforcement. Given the challenging enforcement environment ahead, companies must heed Deputy Attorney General Monaco’s warning that “[c]ompanies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.”
The SEC, so far in the Biden Administration, has also signaled an aggressive enforcement tone. At the Securities Enforcement Forum program on November 4, 2021, SEC Chairman Gary Gensler was strident in his rhetoric: “[t]he Commission will make war without quarter on any who sell securities by fraud or misrepresentation” (quoting a 1934 speech from Joseph P. Kennedy, the first SEC Chairman) and “[t]hat means holding individuals and companies accountable, without fear or favor, across the approximately USD100 trillion capital markets we oversee.”
Gensler stressed that cooperation means more than meeting legal obligations and “self-serving, independent investigations.” In order to receive cooperation credit, a person or organization must provide genuine helpful cooperation that advances the SEC’s case, not simply provide documents and testimony as required by law.
Echoing Monaco’s remarks on repeat offenders, Gensler stated that the organization’s entire history is relevant when assessing penalties. He also questioned whether NPAs and DPAs are appropriate for recidivists. This is a position that will be of concern to securities firms and other regulated entities that fall foul of the SEC’s rules from time to time despite the best of intentions and world-class compliance programs.
Making an example
Of note from Gensler’s speech was his focus on “high-impact” cases. Gensler stated:
“A high-impact case pulls many other actors back from the line. This prompts legal alerts, client letters and bulletins to go out. Compliance departments, lawyers and accountants change internal procedures as well. Such high-impact cases are important. They change behavior. They send a message to the rest of the market, to participants of various sizes, that certain misconduct will not be permitted. Some market participants may call this “regulation by enforcement.” I just call it “enforcement.””
What does this mean? Likely, it means a focus on cases in areas that Gensler has identified, such as Crypto, Cybersecurity, ESG, SPACs, retail investor conflicts, and the FCPA. In those areas we can expect the SEC to seek significant relief, including outsized penalties to drive home the SEC’s positions.
The SEC Chairman and other SEC officials at the Securities Enforcement Forum program also referenced a number of procedural shifts to speed up SEC investigations. Gensler noted that the defense bar often makes a strategic decision to burn the clock and, in response, he has directed the staff to cut back on meetings, especially during the Wells process. SEC Enforcement Director Gurbir Grewal indicated that he is instilling a sense of urgency in his staff to quickly complete investigations, and that he trusts the staff to get it right so that appeals of the staff’s judgment or views should be limited and quite targeted.
Finally, SEC officials have talked about the limited relevance of the precedent of prior SEC actions in determining an appropriate sanction.
The SEC is clearly signaling a significantly enhanced enforcement program — enhanced in terms of speed but also in terms of penalties and sanctions. The SEC Enforcement staff listens to speeches and statements of senior officials and, anecdotally, we have been seeing increased SEC staff aggressiveness, shorter deadlines, less process, and the seeking of higher penalties.
Over the past several years, the CFTC has aggressively staked out a position in the emergent cryptocurrency markets as well as the accelerating debate regarding climate change-related risk.
With regard to the former, the CFTC has pushed further into the spot markets, enforcing alleged failures to register with the Commission by nascent trading platforms. With regard to the latter, a subcommittee overseen by the now-Acting Chairman of the CFTC, Rostin Behnam, published a report highlighting the risks posed by climate change to financial market stability and carving out a potential role for the CFTC in addressing such risks going forward.
With the transition to the Biden Administration, the CFTC’s focus on these areas has only increased, with the agency actively pursuing cryptocurrency trading venues located outside the U.S. for registration failures and other violations linked to making their trading platforms available to U.S. persons. In October of this year, Acting Chairman Behnam noted that recent crypto cases are the “tip of the iceberg.” Reflecting the CFTC’s continued focus on this perceived threat, enforcement penalties continue to increase in size — most recently measured in the hundreds of millions (USD). Regarding climate change, the CFTC continues to position itself at the center of the debate, for example, in continued discussions about mandating a price for carbon.
A major pillar of President Biden’s campaign was to increase and expand antitrust enforcement. With its recent nominees and policy announcements, the Biden Administration has chartered the course for a sharp pivot in U.S. antitrust policy at the federal level and outlined a progressive antitrust agenda that may challenge decades of established practice.
The Biden Administration appointees embody a new progressive approach to antitrust and are known for criticizing established antitrust policy and enforcement. These include Jonathan Kanter, appointed to be Assistant Attorney General for Antitrust at the DOJ; Big Tech opponent Lina Khan, appointed to Chair of the FTC; and White House competition advisor Tim Wu. All three are adherents to the “new Brandeis movement” of antitrust academia — a group originally focused on criticisms of the perceived failure of existing U.S. antitrust laws to curb the power of Big Tech companies — and have all voiced concerns about U.S. antitrust orthodoxy and the lack of monopoly enforcement actions brought by U.S. regulators.
The shift in standards proposed by this group, however, is not limited to Big Tech or even Tech more generally. We can expect much greater scrutiny under existing standards and application of more novel theories to non-tech sectors, particularly in the areas of enforcement. An example of this can be seen in an Executive Order on competition, which was signed by President Biden on July 9, 2021. It aims at reforming competition policy on a broad level, while also targeting certain industries across the American economy. In the Order, President Biden asked federal agencies — both competition agencies and the regulators of the individually targeted industries — to use their powers to increase competition and combat what the Administration perceives as harms to individual consumers caused by the behavior of dominant companies in highly concentrated industries. In particular:
- The Order prompts the DOJ and FTC to action, urging them to challenge previously consummated mergers that may now be found to violate the antitrust laws, to place additional scrutiny on mergers, and generally to enforce antitrust laws vigorously.
- It singles out the markets for labor, healthcare, transportation, agriculture, internet service, technology, and banking and consumer finance for particular focus by competition regulators and other agencies.
- To coordinate implementation of the Order’s provisions, it establishes the White House Competition Council, composed of the heads of various federal agencies and chaired by the Special Assistant to the President for Economic Policy and Director of the National Economic Council.
The appointments and Order solidify the Biden Administration’s embrace of the antitrust thinking of the progressive wing of the Democratic Party. They serve as an important guidepost for the policies of the new administration, signalling a much more progressive stance on antitrust issues compared to prior administrations.
The full impact of the Biden Administration’s antitrust policies will come into even clearer focus once the Order is fully implemented and the new enforcers begin to develop their own cases to test their challenge to antitrust orthodoxy in court. In the meantime, companies should expect extensive reviews of mergers, greater scrutiny of market practices, and more court cases to be brought.
The Biden Administration’s push for aggressive enforcement, including its commitment of significant resources to this effort, likely means that companies will increasingly face greater and more frequent scrutiny from regulators. As such, building and maintaining compliance programs that adequately monitor for, prevent, and remediate misconduct is critical for companies in navigating the more turbulent regulatory environment on the horizon.
This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions.
 Then-Acting Assistant Attorney General Nicholas McQuaid at the June 2021 ACI FCPA Conference, and then-Acting Fraud Section Chief Daniel [Align under above]Kahn: “We have upped our detection, and we are learning of cases through a number of different ways.”
William E. White
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