Carolina A. Fornos

n October 6, 2021, the Department of Justice (DOJ) announced the launch of a new initiative to combat the growing threat of cyberattacks. The Civil Cyber-Fraud Initiative (Initiative), led by the Civil Division’s Commercial Litigation Branch (Civil Division), aims to combat cybersecurity threats by imposing penalties for government contract and grant recipients who fail to follow required cybersecurity standards.

Congress enacted significant anti-money laundering (AML) reforms in the Mac Thornberry National Defense Authorization Act (2021 NDAA). The 2021 NDAA advances the most significant changes to the U.S. Bank Secrecy Act since the USA PATRIOT Act passed in the wake of 9/11. Over the next two years, the 2021 NDAA reforms will be the subject of regulatory guidance and implementation. Incoming Treasury Secretary Janet Yellen and other Biden administration appointees will have a significant opportunity to develop and shape the scope of these reforms. The new rules and ongoing implementation are expected to impact financial institutions, a broad range of financial services companies, and individuals and businesses that operate through the formation of U.S. legal entities.

On June 1, 2020, DOJ updated its Guidance (2020 Update), once again, on how it will evaluate corporate compliance programs in deciding “whether to bring charges, and negotiating plea or other agreements.” The 2020 Update builds on the 2019 Update from April 30, 2019, and emphasizes three questions: Is the corporation’s compliance program well designed? Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively? Does the corporation’s compliance program work in practice? In updating its Guidance, DOJ did not change the criteria previously explained in our prior alert. Instead, DOJ’s 2020 Update emphasizes the need for a tailored program that continuously adapts and evolves based on individual risk factors and requires updating based on lessons learned by the company, as well as the marketplace. DOJ further poses a number of questions prosecutors may consider when evaluating compliance programs.

On March 23, 2020, President Trump invoked the authority under the Defense Production Act of 1950, as amended (50 U.S.C. § 4501 et seq.) (DPA) and signed Executive Order 13910. The Defense Production Act provides, in part, that “to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation.” 50 U.S.C. § 4512. That same provision requires the President to designate the “materials the accumulation of which is unlawful and any withdrawal of such designation.” Id. By Executive Order 13910, the President delegated the task to identify such materials to the Secretary of Health and Human Services (HHS). See Executive Order 13910. As a result, on March 25, 2020, the Secretary of HHS issued a Notice of Designation of Scarce Materials or Threatened Materials Subject to COVID-19, designating no less than 15 categories of materials falling under the Executive Order (e.g., N-95 masks, ventilators, surgical or exam gloves, sanitizing and disinfecting products suitable for use in a clinical setting). But what is “in excess of the reasonable demands” or “in excess of prevailing market prices” is murky at best, with violators subject to punishment by a fine up to $10,000 and/or imprisonment for up to a year. 50 U.S.C. § 4513. In addition, those same materials are subject to seizure from law enforcement and those reselling, whether directly or indirectly, could be exposed to civil liability from various market participants.

On April 30, 2019, the Criminal Division of the Department of Justice (DOJ) released an updated Guidance for evaluating corporate compliance programs. The Guidance is intended to provide insight into compliance program factors that prosecutors will consider in their charging decisions in criminal matters. It expands upon a February 2017 guidance document issued by the Department’s Fraud Section (a sub-division of DOJ’s Criminal Division). The Guidance provides greater “transparency” into the Department’s recent thinking on effective corporate compliance programs, as revealed by Assistant Attorney General Brian Benczkowski’s keynote address at the Ethics and Compliance Initiative (ECI) 2019 Annual Impact Conference. In his address, AAG Benczkowski reaffirmed the central role of corporate compliance programs in the context of DOJ’s charging decisions. According to the Guidance, compliance programs will be significant in “determining the appropriate (1) form of any resolution or prosecution; (2) monetary penalty, if any; and (3) compliance obligations contained in any corporate criminal resolution (e.g., monitorship or reporting obligations).”