In 2024, the National Crime Agency (the “NCA”), which is the UK’s lead agency against organized crime; human, weapon and drug trafficking; cybercrime; and economic crime, announced its “groundbreaking” data sharing partnership with seven UK banks, namely Barclays, Lloyds, Metro Bank, NatWest, Santander, Starling Bank, and TSB.[1]
This new public-private partnership (“PPP”) was the largest of its kind anywhere in the world and the initial results of the project suggest it is revolutionizing the fight against financial crime.
On December 16, 2024, the European Union (EU) adopted its 15th package of sanctions against Russia in response to its ongoing aggression toward Ukraine. The new measures target key sectors of Russia’s military-industrial complex, including the “shadow fleet” and companies that support this complex. Our colleagues at The Trade Practitioner cover this significant development in detail, read the full post at The EU Strengthens Sanctions Against Russia with 15th Package of Restrictive Measures | The Trade Practitioner.
Failure to comply with the complex web of US sanctions laws and regulations carries significant risks both in terms of exposure to civil fines and penalties and reputational harm. To help maritime sector stakeholders navigate these regulations, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has published scenario-based sanctions compliance guidance on October 31, 2024, to aid commodities brokers, insurers, ship management service providers, shipbroking companies, port authorities and other industry participants to identify attempts at sanctions evasion, address due diligence issues and implement best practices. This guidance supplements OFAC’s previously published guidance related to the maritime sector, including the May 14, 2020 “Sanctions Advisory for the Maritime Industry, Energy and Metal Sectors, and Related Communities.”
Our colleagues Marion Seranne and Saeid Abedi recently covered the French Anti-Corruption Agency’s (“AFA”) newly published guidance addressing Corporate Reporting Sustainability Directive (“CSRD”) reporting for companies that do not meet the French Sapin II law thresholds. In short, the agency stated that CSRD reporting standards trigger an obligation to implement an antibribery and corruption compliance program – a noteworthy point for companies looking to understand how (and if) the CSRD applies to their operations.
On September 27, 2024, the Financial Conduct Authority (“FCA”), which is a financial regulatory body in the UK that regulates firms providing financial services to consumers, fined a UK Challenger Bank (the “Bank”) £29 million due to significant failings in its financial sanctions compliance and anti-money laundering systems and controls.
The FCA’s Summary of Reasons found that, while the Bank had undergone “exponential growth” between 2016 and 2023, growing its customer base more than 8,000 percent from approximately 43,000 customers to approximately 3.6 million customers and its revenue more than 3 million percent from approximately £13,000 to approximately £453 million, “its financial crimecontrols [had]failed to keep pace”. Of note, the penalty would have been £41 million, 30% more, but for the Bank’s agreement to reach an early resolution with the FCA.
Our client alert covers the FCA’s findings in more detail and discusses the steps that all regulated firms, not least disruptive companies that are leveraging pioneering financial technology to grow as fast as possible, should be taking to help ensure compliance. It is key that firms reconsider their financial crime risk assessments and controls on a regular basis, to confirm that they remain appropriate for the nature and size of their business and the risks identified. Businesses that are fast-growing, introducing innovative products, entering new markets, or otherwise susceptible to abuse by sanctioned persons, money launderers, or other malicious actors, should undertake this reconsideration urgently.
Please do not hesitate to reach out if you would like to discuss how we can help you to assess the adequacy of your existing sanctions and anti-money laundering compliance programs, which in turn will help to mitigate exposure to government investigations, prosecutions and penalties, derivative litigation, and reputational loss and brand devaluation.
In a post published earlier this year, we highlighted the importance of proactively managing artificial intelligence (“AI”) risks as part of an effective compliance program. Specifically, we explored the key considerations for organizations to effectively navigate AI-related risks and enhance their compliance efforts. We also referenced Deputy Attorney General Lisa O. Monaco’s announcement incorporating an assessment of AI-related risks into its policy on Evaluation of Corporate Compliance Programs (“ECCP”).[1] On September 23, 2024, Principal Deputy Assistant Attorney General Nicole M. Argentieri announced that the U.S. Department of Justice (“DOJ”) updated the ECCP (“ECCP Update”) to guide federal prosecutors in analyzing how companies utilize new technologies, including AI, in their operations, and whether this use is accompanied by an appropriate assessment of the risks these technologies may present.[2] The revisions in the ECCP Update aim to “account for changing circumstances and new risks” posed by AI and other emerging technologies in compliance programs, reinforcing the DOJ’s commitment on corporate compliance in an evolving technological landscape.[3]
On August 28, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued two final rules to counter financial crime and safeguard national security: one broadening the definition of “financial institution” to include certain registered investment advisers (“RIAs”) and exempt reporting advisers (“ERAs”) under the Bank Secrecy Act (“BSA”), and one mandating FinCEN reporting on certain residential real property transfers.
As outlined in more detail below, RIAs and ERAs will need to reevaluate their anti-money laundering (“AML”) risks and revise their compliance programs accordingly as additional scrutiny will be placed upon certain transactions. Real estate experts should also ensure that their clients are in compliance with the new rules.
Non-financial misconduct (“NFM”) within the financial sector has posed significant challenges for the U.K. Financial Conduct Authority (“FCA”) for several years. The FCA handbook prescribes that regulated firms must assess and certify to the FCA, at least annually, that senior individuals and those performing regulated activities meet the relevant standards of fitness and propriety to be approved to perform those roles.
Tom Firestone recently blogged on how the recent prosecutions of Senator Robert Menendez and Representative Henry Cuellar under a previously never used statute, 18 USC 219, raise serious Constitutional issues. 18 USC 219 makes it a crime for members of Congress (and other government officials) to engage in activity that requires registration under the Foreign Agents Registration Act (“FARA”). But members of Congress are not permitted to register under FARA. What’s more, FARA is extremely broad and covers acting at the “request” of a foreign principal. And 219 does not require evidence of corruption or improper intent. So, does a member of Congress commit a federal crime by supporting a foreign aid bill at the urging of a foreign leader? Tom offers insight on this complicated issue – check out his full blog on Bribery Matters: Are the Menendez and Cuellar FARA Charges Unconstitutional? (briberymatters.com)
Summer may be coming to an end, but whistleblower awards are far from over. On August 23, 2024, the Securities Exchange Commission (“SEC”) announced payment of over $98 million total to two whistleblowers who provided the SEC with information that led to successful enforcement actions – the fifth largest since the program’s inception in 2011, which to date has awarded nearly $1.8 billion to whistleblowers. This year the Department of Justice (“DOJ”) has followed in the SEC’s footsteps and created the Criminal Division Corporate Whistleblower Awards Pilot Program which allows for financial awards to whistleblowers. With increasing external incentives for speaking up on potential misconduct, there is also a need for similar internal reporting incentives.
