Compliance programs and their ability to identify or prevent wrongdoing and fraud are headed into a period of heightened scrutiny by government agencies in both the UK and the U.S.
UK Serious Fraud Office
In the UK, the Serious Fraud Office (SFO), responsible for investigating and prosecuting fraud and corruption, recently announced a renewed emphasis on reviewing investments organizations make in compliance programs and processes.
During a virtual address at the SCCE Corporate Compliance Enforcement Conference on Feb. 23, 2021, SFO Director Lisa Osofsky said the agency is re-emphasizing the need for a strong compliance program. The better the program, the more likely the agency is to negotiate more lenient penalties on organizations under review for actions such as fraud. As with the U.S. Department of Justice (DOJ), SFO prosecution can lead to both a fine and also the appointment of an independent compliance monitor.
“Are [compliance programs] part of the company’s DNA?” Ms. Osofsky asked compliance practitioners during her online speech with the SCCE. “Or do they just adorn a very nice couple of binders that are held on a bookshelf that don’t really do much more than provide window-dressing?”
U.S. Department of Justice
In the U.S., more aggressive enforcement of the Foreign Corrupt Practices Act (FCPA) is expected as the Biden administration strengthens staffing in the DOJ and its fraud and foreign bribery units. Staffing of prosecutors has once again increased, and the DOJ recently hired a high-profile lawyer with expertise in corporate compliance monitoring, the Wall Street Journal reported in a review of recent appointments that are focused on compliance.
“There really is a lot of compliance experience brought to bear and we are always looking to bring in people who have compliance expertise and experience as well,” Daniel Kahn, an acting chief at the Justice Department’s fraud strategy section said at the SCCE meeting.
The SFO’s Osofsky also said at the SCCE meeting that her department, like the DOJ, is investing in more compliance oversight capabilities. “We’re upskilling ourselves to be better and smarter in this evaluation, including bringing in people with experience and expertise in this area,” she said.
Securities and Exchange Commission (SEC)
Meanwhile, in an announcement of its 2021 examination priorities, the SEC said that it will emphasize operational resiliency in the face of the pandemic and new, emerging risks related to environmental, social and governance (ESG) concerns. The SEC’s Division of Examinations said it will maintain focus on retail investors, information security, financial technology, registered investment advisors, broker-dealers, mutual funds, municipal advisors, and market infrastructure, as well as anti-money laundering programs and London Inter-Bank Offered Rate (LIBOR).
Ongoing key initiatives for SEC oversight include fees and financial incentives that may cause conflicts of interest with retail investors, compliance with anti-money laundering requirements, compliance with core financial services duties, and the impact of advancements in financial technologies and digital assets. The SEC’s Division of Examinations also emphasized threats to cybersecurity and the need for firms to proactively identify and address these risks, particularly due to remote workforces during the pandemic.
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