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We recently gathered a group of regulatory attorneys from across Reed Smith to provide a rundown of the key trends to watch for in Q2 2023. If you missed the webinar, you can access the recording on demand.
Please see a short summary of our top takeaways for Q2 below and look out for an invite to the next installment, where we will discuss the key trends for Q3. We hope you can join us!
Sanctions and export controls
- Sanctions and export control compliance should be top-of-mind for every business. The relevant agencies are putting the enforcement resources in place to drive this focus for years to come, beyond just issues with Russia, China, and Iran.
- It does not take much to establish a U.S. nexus sufficient to apply U.S. sanctions to foreign affiliates. Infrastructure in the U.S. used to support a transaction (e.g., servers, systems) or the use of U.S. dollars can be sufficient, even if no U.S. persons are involved.
- Sanctions screening expectations continue to evolve. Geolocation tools (i.e., IP blocking software) have become an essential element of a sanctions compliance program. Companies should also consider all known information about a customer or counterparty (e.g., information entered in free text boxes), not just standard screening fields like name and address.
U.S. Disruptive Technology Strike Force
- Justice and Commerce departments are leading an interagency strike force to investigate and prosecute illegal diversion of U.S. technologies to China, Iran, Russia, and North Korea.
- We anticipate an uptick in export control enforcement activity and increased private sector outreach by government investigators seeking to collect information regarding illicit procurement networks.
- Looking ahead, the U.S. government is exploring how to monitor outbound investments in dual-use technology to prevent providing adversaries with a national security advantage.
Insurance coverage for investigations
- The length and cost of investigations is causing a harder line on insurance coverage for investigations.
- The proof requirements necessary to trigger coverage may be difficult to meet in the absence of full information from the investigatory authority.
- Choice-of-law may determine whether an investigatory subpoena is treated as a covered claim.
U.S. antitrust trends
- Be aware of dramatic changes in the volume and scope of antitrust enforcement by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) with respect to both merger and conduct investigations.
- Ensure that agreements, compliance, and training materials align with updated agency guidance and trends.
- Labor markets remain a major focus along with private equity and technology.
EU antitrust trends
- Bear in mind that non-reportable mergers and acquisitions can still be scrutinized.
- Ensure that your compliance policies and dawn raid manuals are up to date.
- Review your supply and distribution agreements by June to take advantage of the new regulation and ensure that your agreements do not contain any hardcore restrictions.
DOJ self-disclosure policy
- New standards applicable to all U.S. Attorney’s Offices offer the potential for greater transparency and predictability.
- Valuable incentives come with stringent requirements and high expectations.
- The voluntary self-disclosure policy is one of several recent announcements from the DOJ regarding corporate enforcement, including those relating to compensation, the use of personal devices, and compliance programs.
CFTC enforcement priorities
- Think proactively about compliance and regulatory requirements in order to create a demonstrable culture of compliance. Ensure that your compliance program is appropriately scaled to the business size and risks; review recordkeeping policies and practices (including the ways employees use messaging apps for business purposes); and create systems to train for and monitor issues like insider trading, spoofing, and manipulation.
- Examine the business services you offer and analyze whether any registration requirements are applicable. The Commodity Futures Trading Commission (CFTC) requires registration in connection with certain common types of services, creating uncertainty between the lines between certain registered entities (e.g., commodity trading advisor and swap execution facility).
- Review and audit your swap data reporting policies and systems. Reporting requirements are highly technical and are subject to change, but the CFTC has brought several actions for innocuous reporting violations. These actions often base the number of offenses on how long the reporting errors occurred, so identifying any issues quickly is important.
Public corruption prosecutions
- Public corruption has been, is, and will remain a top DOJ priority.
- Public corruption investigations focus not only on elected officials (e.g., alleged bribe recipients) but also on companies and their government relations units (e.g., alleged bribe facilitators/payers).
- The DOJ has been deploying aggressive theories in the public corruption space; accordingly, companies should take steps to ensure that their external affairs are above reproach.
FCPA trends
- Robust enforcement continues, and a post-pandemic pipeline of investigations is building.
- There is increasing global cooperation among law enforcement agencies.
- The DOJ is emphasizing the tangible benefits of early cooperation and self-disclosure in Foreign Corrupt Practices Act (FCPA) cases.
Serious Fraud Office activity
- Increasing global cooperation among law enforcement agencies should lead to increased enforcement action by the Serious Fraud Office (SFO).
- The SFO has heralded the introduction of a new failure to prevent fraud offence, which may come into force by the end of 2024.
- Under the new offence, “large organisations” will be criminally liable if an employee or agent commits fraud for the organisation’s benefit and if the organisation does not have “reasonable procedures” in place to stop fraud from occurring.
Client Alert 2023-095
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