U.S. corporate enforcement in 2023: national security driven, expectations for corporate compliance programs, and more international cooperation

There have been novel efforts to incentivize companies to disclose misconduct, including enhancing prosecutor discretion to offer a declination even where there are aggravating circumstances, provided that there has been prompt self-disclosure, cooperation, and the company’s compliance program was in shape at the time of the misconduct. The actions (or inaction) of compliance officers are being increasingly scrutinized.

Revisions to the Evaluation of Corporate Compliance Programs (ECCP) puts a renewed focus on financial incentives and disincentives (including insisting that companies claw back compensation from executives who have engaged in wrongdoing). The revised ECCP also contains heightened expectations regarding corporate management of employee use of ephemeral messaging, eg WhatsApp.

Ever deepening cooperation between the U.S. government regulators and their international counterparts continues to evolve, with the first ever U.S./Columbia and U.S./South Africa coordinated resolutions.

Investigations trends/developments

Fighting corruption and corporate enforcement as a national security interest

There has been a shift in corporate criminal enforcement due to the rapid expansion of national security-related corporate crime. U.S. Government Agencies are seeing new national security dimensions in corporate criminal enforcement, including in FCPA cases following the Biden administration’s declaration that fighting corruption is a national security interest. The U.S. Department of Justice (DOJ) recently announced that it is adding more than 25 new corporate crime prosecutors to its National Security Division, including the division’s first-ever Chief Counsel for Corporate Enforcement. The DOJ will also increase by 40% the number of prosecutors in the Criminal Division’s Bank Integrity Unit, which holds accountable financial institutions that violate U.S. sanctions and the Bank Secrecy Act.

Notable examples of recent enforcement include:

• In the first-ever corporate guilty plea for material support to terrorism, the world’s largest cement manufacturer admitted to paying ‘donations’ to ISIS to protect its business and gain market share. The company paid more than USD775 million in penalties.
• A global tobacco company signed a deferred prosecution agreement (DPA) for violating U.S. sanctions after the company admitted to selling tobacco in North Korea, which, in turn, generated revenue that advanced North Korean nuclear programs. Under the DPA, the company paid USD629 million in penalties and fines.
• In the first-ever criminal resolution from illicit sales and transport of Iranian oil in violation of U.S. sanctions, a shipping company pleaded guilty and the U.S. seized nearly one million gallons of contraband Iranian oil. The company was sentenced to three years of corporate probation and a fine of almost USD2.5 million.

Increased international cooperation

Linked to national security concerns, the authorities display an ongoing need and focus on increasing cooperation with non-U.S. regulators. Prosecutors continue to focus on international cooperation and developing relationships with their counterparts aboard. In December 2023, the DOJ Criminal Division announced the International Corporate Anti-Bribery initiative (ICAB). The ICAB is led by three experienced prosecutors and its goal is to build on the DOJ’s existing bilateral and multilateral partnerships and to continue to form new partnerships. In recent years, the DOJ has worked with enforcement organizations in the United Kingdom, Brazil, Malaysia, Switzerland, Ecuador, France, South Africa, the Netherlands, and Singapore. DOJ concluded its first coordinated resolution with South Africa in late 2022, and with Colombian authorities in August 2023. In 2024, we expect to see more countries cross this threshold.

Compliance emphasis

In 2023, the DOJ continued to focus on encouraging corporate compliance programs to prevent misconduct. The DOJ Fraud Section’s Corporate Enforcement, Compliance and Policy Unit (CECP Unit), formed March 2022, has made announcements around two challenging areas for compliance teams: executive compensation and the use of personal devices and ephemeral messaging. These announcements reinforce the need for companies to have policies and procedures that are thoughtful and well-reasoned.

In March 2023, the CECP Unit published more expansive guidance in an updated revised Evaluation of Corporate Compliance Programs (the ECCP), which describes the factors the DOJ considers when evaluating a company’s compliance program. The revised ECCP emphasizes the importance of financial incentives and disincentives by establishing a new criterion that focuses on whether a company’s policies permit clawing back executive compensation for misconduct. Additionally, the DOJ renamed the section regarding the incentive criteria from ‘Incentive System’ to ‘Financial Incentive System’ to add focus to the policies around compensation.

The Criminal Division launched a Pilot Program Regarding Compensation Incentives and Clawbacks (the Pilot Program) in 2023, which requires that all corporate resolutions include the implementation of compliance-promoting criteria in its compensation and bonus systems. The Albemarle resolution in September 2023 was the DOJ’s first-ever use of the Pilot Program. According to the DOJ, Albemarle paid above market commissions and compensated third-party intermediaries knowing that the money would likely be used to pay bribes to government officials. Albemarle ultimately entered into a non-prosecution agreement with the DOJ and agreed to a penalty of USD98.2 million and an administrative forfeiture of USD98.5 million. The penalty reflects a reduction of USD763,453 for withholding bonuses from executives involved in the misconduct.

The DOJ also announced the Revised Memorandum on Selection of Monitors in Criminal Division Matters (the Monitor Memo).

See more details about these new policies and guidance on our blog related to the New U.S. DOJ guidance.

Self-reporting encouraged

The DOJ’s Criminal Division issued a revised Corporate Enforcement and Voluntary Self-Disclosure Policy in early 2023 which increases incentives for voluntary self-disclosure (VSD) of misconduct.

Prosecutors now have discretion to determine that a declination is appropriate, even where there are aggravating circumstances, if a company:

• voluntarily discloses “immediately”;
• had an effective compliance program and system of internal accounting controls at the time of the misconduct and disclosure; and
• provided ‘extraordinary’ cooperation with the DOJ’s investigation and fully remediated the underlying conduct.

Going further to encourage self-disclosure, in October 2023, the DOJ announced a new safe harbor policy for voluntary self-disclosures made in the M&A context. We cover the new policy in detail here. The DOJ’s goal is to encourage companies to conduct robust due diligence and post-acquisition integration to be able to identify potential misconduct, remediate it, and notify the DOJ. 

The DOJ Criminal Division indicated in a December 2023 speech that it will not wait for companies to self-disclose or for witnesses to come forward, but rather the DOJ has been using, and will continue to use, data analytics to generate FCPA cases. The DOJ urged companies to take note of these efforts when considering whether to self-disclose.

Enforcement actions against gatekeepers

U.S. regulators have recently placed a greater emphasis on the role gatekeepers, eg chief compliance officers and other compliance personnel, have in the commission and remediation of misconduct. In October 2023, Grewal clarified that the Commission would bring an enforcement action against compliance personnel where those individuals affirmatively participate in misconduct, mislead regulators, or where there was a wholesale failure to carry out their compliance responsibilities.

The SEC recently charged an investment advisory firm and its CEO/CCO where, for at least ten years, instead of adopting policies and procedures that related to the firm’s business or even the federal securities laws, the firm adopted a handbook published by a professional trade organization containing standards of practice for candidates preparing for that organization’s exams. The firm did not tailor the handbook to its actual business, and it did not conduct any compliance training or annual reviews of its program. 

In a purported effort to ‘empower’ gatekeepers and chief compliance officers, the DOJ introduced a new certification requirement for CCOs – as used in the May 2022 Glencore resolution – which requires CCOs and CEOs to certify that a corporation’s post-enforcement compliance program has been “reasonably designed to prevent anti-corruption violations.”

Predictions for 2024 and beyond 

We expect that the U.S. regulators will continue to cooperate with their counterparts abroad to obtain evidence and resolve matters of mutual interest. Companies need to prepare and right-size their global compliance programs to take advantage of opportunities to identify, detect, and stop misconduct, but also to be prepared with defenses or mitigating factors regarding the effectiveness of the compliance program. As geopolitical tensions continue to drive enforcement, and cooperation among like-minded global regulators, developing an effective compliance program is critical. 

This article is part of our Cross-Border White Collar Crime and Investigations Review. Please click here for our overviews and insights in other jurisdictions.