Clifford Chance

On Monday, the DOJ's Criminal Division announced significant changes to its corporate enforcement policy, monitor selection policy, and corporate whistleblower program, and further clarified going forward enforcement priorities. These changes are intended to alleviate the perceived burden on US business from "unchecked and long-running investigations" unnecessarily costly to American businesses and to the DOJ, and to focus government resources on areas that pose the highest threat to American interests. The key takeaways from this announcement and the resulting White-Collar Enforcement Plan, which prioritizes "focus," "fairness," and "efficiency," are below.

• Current DOJ enforcement priorities: The DOJ will focus not only on crimes involving drug cartels and transnational criminal organizations, human smuggling operations, the flow of fentanyl and other dangerous drugs into the United States, child predation, violent crimes, and fraud in US markets and government programs, but also targeted international money laundering, "financial institutions, shadow bankers and other intermediaries" processing transactions in support of sanctions evasion by US adversaries and terrorist regimes, trade and customs fraud including tariff evasion, and bribery and associated money laundering that impact US national interests. In choosing cases, the DOJ will prosecute crimes that "have the greatest impact in protecting American citizens and companies and promoting U.S. interests."¹
• Increased transparency: The revised policies make clearer the factors weighed in, and benefits of, voluntary self-disclosure and cooperation. "A fair justice system requires that the Department be maximally transparent so that companies—including directors, executives, employees, and counsel—can make appropriate decisions when faced with potential misconduct."
• Reiteration of the DOJ's focus on individual accountability: The Plan reiterates the DOJ's longstanding emphasis on prosecuting individual wrongdoers.
• Early termination of, and shorter-term, corporate resolutions: The DOJ is reviewing existing agreements with companies with a view towards early termination, depending on the duration of the post-resolution period, whether there is a substantial reduction in the company’s risk profile, the extent of remediation and maturity of the compliance corporate program, and whether the company self-reported the misconduct. Going forward, the Plan emphasizes that the term of any resolution agreement should be proportional to the severity of the conduct, the company's cooperation and remediation, and the effectiveness of the compliance program at the time of resolution. The term of an agreement "should not be longer than three years except in exceedingly rare cases, and Criminal Division prosecutors should assess these agreements regularly to determine if they should be terminated early."
• Shorter-term and more targeted investigations: The Plan requires prosecutors to conduct investigations expeditiously and efficiently. The DOJ will track the status of investigations to ensure they are moving forward.
• Enhanced benefits for voluntary self-disclosure: The revised Corporate Enforcement and Voluntary Self-Disclosure Policy provides for:
  
  • A clearer path to declinations, involving less DOJ discretion and thus more certainty for companies in self-disclosure determinations. Companies that self-disclose, fully cooperate, timely and appropriately remediate, and meet the necessary criteria will, according to the announcement, "receive a declination, not just a presumption of a declination." Even companies with aggravating circumstances may be eligible for a declination depending on the severity of the circumstances and the level of cooperation and remediation.
  • Increased accessibility of NPAs for good faith but delayed or late self-disclosure, e.g., after the DOJ is already aware of the conduct, and for cases involving aggravating factors. Companies will be eligible for an NPA with a term of fewer than three years, a 75% reduction of the criminal fine, and no monitor.
  • Longstanding requirements to promptly disclose all relevant facts and the identities of involved individuals, provide access to relevant documents and witnesses, and timely and appropriately remediate based on a root cause analysis.
• Narrowed use and scope of monitorships: Revisions to the DOJ's monitor selection policy will similarly result in less prosecutorial discretion in imposing monitors, fewer monitorships imposed overall, and tailoring of the scope of a monitor's review to deter recurrence but reduce costs. According to the announcement, "the value monitors add is often outweighed by the costs they impose," so the DOJ expects fewer monitorships will be imposed, and pre-existing monitorships will be reviewed with a view to narrow their scope or terminate the monitorship altogether. The revised policy provides for:
  • Imposition of a monitor only when the benefits outweigh the costs, with consideration given to the nature and seriousness of the conduct, the likelihood of recurrence based on the company's risk profile at the time of resolution, the availability of other independent oversight (e.g., regulatory), the efficacy of the company's compliance program and culture, and the maturity of the company's controls and audit function;
  • Appropriately tailored and focused monitorships to avoid unnecessary burdens on the company's operations through fee caps proportional to the company and misconduct, increased Criminal Division oversight of the monitor's budget and progress, and biannual meetings between the company, monitor, and the DOJ; and
  • Supervisory approval of the imposition of a monitor.
• New focus in whistleblower awards pilot program: Revisions to this program expand the subject matters to which a whistleblower's tip must pertain to include: corporate procurement and federal program fraud; trade, tariff, and customs fraud; violations of federal immigration law; and violations involving sanctions, material support of foreign terrorist organizations, or those that facilitate cartels and TCOs, including money laundering, narcotics, and Controlled Substances Act violations.

To be best positioned to take advantage of these policy changes, especially in an environment where we expect some types of whistleblower complaints to increase and receive additional attention, compliance departments must ensure that controls are regularly updated and enhanced to cover the DOJ's new enforcement priorities. This is particularly important for financial institutions, defense and government contractors, companies exposed to investor and consumer fraud, companies that deal in cross-border trade, and healthcare businesses involved with Medicare and Medicaid programs. In addition, the decision whether, when, and how to self-disclose potential violations remains a sensitive analysis that requires thorough evaluation. The same is true for partnerships with regulators and law enforcement agencies. While now may be the time for your business to develop or enhance these relationships, this too requires careful consideration and planning.

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¹ The full list of enforcement priorities is:

1. Waste, fraud, and abuse, including health care fraud and federal program and procurement fraud;
2. Trade and customs fraud, including tariff evasion;
3. Fraud perpetrated through VIEs;
4. Fraud that victimizes U.S. investors, individuals, and markets;
5. Conduct that threatens the country’s national security, including threats to the US financial system by gatekeepers;
6. Material support by corporations to foreign terrorist organizations, including recently designated cartels and TCOs;
7. Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs;
8. Violations of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act;
9. Bribery and associated money laundering that impact US national interests, undermine national security, harm the competitiveness of US businesses, and enrich foreign corrupt officials; and
10. Crimes involving digital assets that victimize investors and consumers, that use digital assets in furtherance of other criminal conduct, and willful violations that facilitate significant criminal activity.