This Week in AML

DOJ's Updated Corporate Enforcement Policy

The US Department of Justice has updated its Corporate Enforcement Policy for criminal activity. John and Elliot discuss some aspects of the voluntary self-disclosure part of the CEP and how financial crime compliance professionals can make use of the policy guidance documents in reviewing elements of their compliance programs.



A Plenary and a New Report – Much to Discuss - TRANSCRIPT

John Byrne: Hey, Elliot, how you doing?

Elliot Berman: I'm good, John. How are you?

John Byrne: I'm good today. As we record this is International Women's Day, and I want to urge folks to go on our website to see a number of interviews that we have done over the course of time on some of our advisory board members, our women in AML project, and some other things there. Wanna make sure that even after International Women's Day, people are paying attention to some of the really great content provided by leaders in AML and financial crime prevention.

Elliot Berman: Yes a good pool of resources and an important day of recognition. So John, did you see there were a number of things that came out of the US Department of Justice regarding voluntary disclosure programs. Did you see those items come out?

John Byrne: I did. And under the category of how the Justice Department evaluates corporate compliance programs, people might be inclined to think those are criminal case. But I would argue a lot of the themes in how the Justice Department evaluates and how US Attorneys evaluate compliance are clearly relevant t to our community in general. So I did see that, I guess there was a number of speeches and presentations. One was from the Assistant Attorney General, Kenneth Polite did the keynote at the Bar Association's White Collar Crime Institute, and I know he gave a speech at Georgetown.

So there was a number of things there that I saw. But what's the headline from all of this that, that you note?

Elliot Berman: I think there's a couple of headlines. So the first is back in the 2010's this whole idea of voluntary disclosure was a pilot program focused principally on the Foreign Corrupt Practices Act - F CPA. It became a regular program of the criminal division after about a year. Recently the US Attorney's offices, which who are also part of the Justice Department, but operate in each of the federal court districts and are the federal prosecutors in those districts have also announced a parallel corporate enforcement policy that includes a voluntary disclosure component. So that's, I think, important as you mentioned, whether it's something coming out of DOJ Washington, or whether it's something in the US attorney's offices, they're now evaluating all this stuff the same.

And the third is there is a corporate decision to be made once a self discovery occurs of a potential criminal violation about whether or not to self-

disclose to DOJ or just fix it and not disclose, or I suppose in my opinion, the worst choice just ignore it, . And there's definitely incentive in these voluntary programs toward disclosure.

John Byrne: That's right. I do wanna make A curve or a U-turn, whatever you wanna call it here. The other thing I just wanted to mention quickly is in the speech to the Bar Association, they also highlighted the Bank Integrity Unit at the Justice Department.

And I thought a couple things they mentioned there made a lot of sense. They said they've imposed more than 13 billion in financial penalties in 10 corporate criminal resolutions with global financial institutions specifically for sanctions violations. So they highlight that. They also say they're working closely with their partners in the National Security Division.

And then to your point, they talked about the FCPA aspect of this, but the key for the speech was to say they work with all their collective partners to deal with the fight against corruption. So all of this is relevant to the priorities we have in the US to everything that we care about.

So I just wanted to make that additional point. But yes some of the things that DOJ will look at in terms of the effectiveness of a program, and this will help with self-disclosure, is whether the company has clear consequence management procedures, that meaning identify, investigate discipline violations. Are they in place? Are they enforced consistently across an organization? And then also do they convey to their employees that generic unethical conduct isn't tolerated. And specifically they'll be swift consequences regardless of who engages in the activity.

So I think all of that is, is relevant. I would urge folks to take a look at the document, it's 20 pages, of how they evaluate corporate compliance. Because again, as I said upfront, even though this is criminal, these key aspects are relevant regardless of whether there's a civil or criminal case.

Elliot Berman: Yes. One of the things that did happen and again, just to clarify what I said earlier, is in I believe it was 2018 this concept that started out as focused strictly on FCPA was broadened and now applies to all federal criminal prosecutions. So the opportunity for corporations and other entities to self-disclose and receive and be incentivized for that.

And the incentives are a number of things. One is the the possibility that DOJ will decline to prosecute. Secondly, there are positive reductions in , where the negotiation or the calculation of fines will occur. Without getting

deep into the crazy numbers, there's a range of fines for different types of criminal behavior.

If a company meets the criteria and self discloses, DOJ will start actually below the bottom of that range. In looking at what fine and or penalty they may invoke. This is a very high level recitation of a very technical area. So of course, consult your local criminal defense counsel.

John Byrne: Right. The other part of this that I always find useful is we've talked a lot since you and I have been in compliance as long as we have, are there adequate resources? What's the level of autonomy that a compliance or a BSA officer has. We talk about that all the time. That's in this document too. Some of it's been there. Some of it's part of the update, but I think what I really find valuable is they wanna know what the structure is, what, how things set up.

They wanna know how does compliance compare with other functions within the company in terms of stature, compensation levels, that sort of thing. Funding and the resources. That's always been a big thing. We've heard from some of our clients that some institutions are cutting back, not necessarily on compliance, but they're stopping hiring and issues like that because of the economy and things that they're navigating.

But the bottom line is if you have reductions in funding and resources for things like staffing and compliance and training, clearly going to be held against you. And I think that makes sense. And then on an autonomy, I really like this because we've talked about the culture of compliance and tone at the top.

One of the things that DOJ asks in this document, or the prosecutors will ask, do the compliance and the relevant control functions have direct reporting lines to anyone on the board of directions or the audit committees and how often do they meet. Are senior management folks present for these? How do you ensure the independence of compliance?

These are all more than legitimate. And then for companies like us they wanna know outsourced compliance functions. Has the company outsourced? If so, why? Who oversees it? What level of access does the external firm have to company information? Things that we're obviously well apprised of when we take on a client, but all of that becomes so important.

And I can tell you from all my years doing this, I don't think our industry pays enough attention to DOJs guidance documents unless they're responding to some indictment or some criminal investigation. And that's where

I think you can be proactive here and look at all of these items and it's relevant to compliance on all sorts of levels.

Elliot Berman: Yes. And we see a lot of guidance documents coming out of the bank regulatory agencies and FinCEN. But these documents, as you mentioned coming from DOJ, cover many of the same topics, talk about many of these things in very similar language and are a nice roadmap for a self-check about how your organization's program is structured not only in the compliance function, but as you pointed out, the reporting lines going up. And as banks and other financial services, boards of directors have changed their own structures in terms of having risk committees that are separate and apart from their audit committee and things like that, making sure that those lines of reporting move appropriately is something that's clearly called out in the DOJ documents and is a good review document I think, for people to use in thinking about how they're structured.

John Byrne: Hey, one, one quick thing. I know we have enough time to talk about this, but there's also in these announcements a pilot program regarding compensation incentives. I know others have written about it. I've seen some analysis on LinkedIn, but basically it takes effect on March 15th, the ides of March, and it applies to all corporate resolutions involving the DOJ criminal division and two quick components.

Every corporate resolution will require companies to develop compliance, promoting criteria in their compensation and bonus, and then also fine reductions for companies that seek to claw back compensation from what they call quote, culpable employees and others who both had supervisory authority over the employees in the business area engaged in the misconduct and knew of or were willfully blind to the misconduct.

Clearly this is a focus from DOJ on individual accountability in corporate criminal enforcement. So that pilot program, I'm not clear besides it being a three year program who it all applies to, but people should read up on that as well.

Elliot Berman: Yes, absolutely. So John, besides keeping an eye on the Big East Tournament what else do you have going?

John Byrne: Yeah, I'd like to just note that Marquette's Coach Shaka Smart Big East Coach of the year, which is really very exciting. But later in the month we have our session we're doing on Wolfsburg with Alan Ketley, the Wolfsburg Secretariat, and William Langford. Excited about that, but it's another area of concern for our community.

The global nature of Wolfsburg is always so important. And then we've been able to do some interviews. Recently sat down with Liz Fraccaro from the Antiquities Coalition, and we talked about the recent arts and antiquities document from FATF. And then also an interesting and unique look at data issues from the Center for Data Analysis and Social Ethics at Marquette University, which will be out sometime next week.

Elliot Berman: Yeah, that'll post on the 13th. As far as the webinar later this month you can register for that at amlrightsource.com. And one more week of the shameless plug for the AML Partnership Forum, John?

John Byrne: Right. So April 26th to 28th in Washington, DC.

Registration is open. This is of the second annual forum. It's a unique opportunity to connect not only with your peers and colleagues in the private sector, but more importantly in the public sector. We have strong support from IRS, HSI and the FBI. We have some interesting panels and presenters.

No press involved, no exhibit halls. It's all to connect with one another. Share information and get better at our jobs. So more information on that is available on our website. We have a separate website for AMLPF . And then we've Elliot and I and others have posted a lot of this information on LinkedIn as well.

Elliot Berman: If you want to register for the forum, you can go to amlpf.com and there's a registration information button on the home page. And that'll take you right to the right place.

John, you have a great weekend and I will talk to you next week.

John Byrne: Take care. Stay safe.

Elliot Berman: You too. Bye-bye.