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Subject to Inquiry

THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

Government Investigations and White Collar Litigation Group
Anti-Money Laundering

Highlights from the 2024 SIFMA Anti-Money Laundering and Financial Crimes Conference on the Corporate Transparency Act

On May 6, 2024, the Financial Crimes Enforcement Network (“FinCEN”) Director Andrea Gacki, Acting Chief of the Enforcement Division Steve Hsieh, Acting Associate Director of the Policy Division James Martinelli, and other key industry leaders, convened at SIFMA’s Anti-Money Laundering and Financial Crimes conference in New York to discuss, among other things, FinCEN’s priorities for the Corporate Transparency Act (“CTA”).

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Enforcement and Prosecution Policy and Trends, Financial Institution Regulation

CFPB: For-Profit School Misrepresented ISAs, Made False Claims About Grads’ Employment Rates

On April 17, 2024, the Consumer Financial Protection Bureau entered an order against a for-profit vocational school and its CEO for mischaracterizing the school’s income-share agreements (ISAs) and misrepresenting its graduates’ employment rates. The CFPB said the school drove students to finance their training programs with promises of high graduate employability. To finance students’ education, the school offered ISAs, under which students received their education in exchange for a percentage of their future earnings. The school falsely told students that its ISAs were not loans, carried no finance charges and were “risk free.” And the school advertised on its website that 71% to 86% of its students were placed in jobs within six months of graduation, when its nonpublic reporting to investors consistently showed placement rates closer to 50%, the CFPB noted. The order marks the CFPB’s second enforcement action targeting ISAs.

Read on for details about how the school’s actions violated federal laws, including the Consumer Financial Protection Act, the Truth in Lending Act and Regulation Z, and the FTC’s Holder Rule.

Enforcement and Prosecution Policy and Trends

SEC Speaks 2024: In Defense of Enforcement’s Aggressive Agenda

On April 2 and 3, 2024, U.S. Securities and Exchange Commission Chair Gary Gensler, Division of Enforcement Director Gurbir Grewal and other senior SEC officials convened at the SEC Speaks conference held in Washington, DC to discuss the SEC’s accomplishments in fiscal year 2023 and announce its priorities for 2024. 

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Compliance, Financial Institution Regulation, Securities and Commodities

Spring Has Sprung for Recent Reg NMS Reporting Changes

On March 6, the SEC released its long-anticipated adopting release amending Rule 605.[1]  Separately, in late February, FINRA issued Regulatory Notice 24-05 discussing new FINRA Rule 6151, which requires member firms to provide Rule 606 reports to FINRA. The following provides a brief overview of these recent moves by both regulators.   

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Enforcement and Prosecution Policy and Trends

Deputy Attorney General Monaco Announces New DOJ Whistleblower Program

On March 7, 2024, U.S. Deputy Attorney General Lisa Monaco gave remarks at the American Bar Association’s 39th National Institute on White Collar Crime in San Francisco, California. Monaco provided updates on the U.S. Department of Justice’s (DOJ or the Department) corporate criminal enforcement efforts and announced a handful of new Department initiatives, including a new DOJ whistleblower program that gives monetary rewards for whistleblowers in cases that lead to criminal or civil forfeiture.

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Anti-Money Laundering, Compliance

Federal District Court Declares Corporate Transparency Act (CTA) Unconstitutional

On March 1, 2024, the United States District Court for the Northern District of Alabama declared the Corporate Transparency Act (“CTA”) unconstitutional.  Enacted as part of the Anti-Money Laundering Act of 2020, the CTA requires certain legal entities to report beneficial ownership information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).  The reporting provisions took effect on January 1, 2024.  In National Small Business United v. Yellen (5:22-cv-01448-LCB), the District Court, in a memorandum opinion, rejected the Government’s position when it held that the CTA exceeds Congress’ power to regulate these business entities. The Court issued a Final Judgment on March 1st as well, permanently enjoining enforcement of the CTA against the two plaintiffs.   

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Energy Enforcement, Sanctions, Trade Embargo, and Export Controls

G7+ Coalition Issues Alert on Russian Oil Price Cap Evasion Methods and How to Report Violations

On February 1, 2024, the G7+ Coalition (consisting of the G7, the European Union, and Australia) published an Oil Price Cap (OPC) Compliance and Enforcement Alert (the “Alert”), identifying notable OPC evasion methods and recommending various methods to reduce the risk of evasion and its negative impacts.  The OPC was enacted in December 2022 in response to the Russian incursion into Ukraine and related disruptions to global oil flows and energy security.  The Alert seeks to bolster legitimate commercial efforts to comply with the OPC and provides guidance to regulators on how to combat the innovative methods by which bad actors are attempting to circumvent it.  The G7+ Coalition is further encouraging regulators to supplement its findings and recommendations with their own detailed advisories, sector-specific guidance, and case studies.

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Compliance

FinCEN Issues Access Rule Compliance Guide for Beneficial Ownership Information

Rule Regarding Access to Beneficial Ownership Information Takes Effect

On February 21, 2024, FinCEN published a Small Entity Compliance Guide to aid in compliance with the Corporate Transparency Act’s (“CTA”) Beneficial Ownership Information (“BOI”) Access and Safeguards Rule (“Access Rule”).  The Compliance Guide is called the Small Entity Compliance Guide only because federal law requires that the federal government issue guidance specifically directed at facilitating smaller business’s compliance efforts.  Notwithstanding the title, the Compliance Guide will assist financial institutions (“FIs”) of all sizes with understanding FinCEN’s expectations for access to the BOI database once such access is approved.

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Anti-Money Laundering

Bank Secrecy Act’s Anti-Money Laundering and Counter Terrorism Financing Requirements to Apply to Investment Advisers

The Bank Secrecy Act (“BSA”) establishes program, recordkeeping, and reporting requirements for certain financial institutions to combat and detect money laundering, terrorist financing, and other illicit activities.  On February 13, 2024, FinCEN proposed new rules which expand the scope of the BSA to include certain investment advisers, which currently are not subject to any federal or state regulations regarding anti-money laundering (“AML”) or counter-financing of terrorism (“CFT”) compliance.  FinCEN also published a fact sheet on the proposed rules that provides a helpful summary of the key provisions.

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Enforcement and Prosecution Policy and Trends, Government Contracts, Sanctions, Trade Embargo, and Export Controls

Disruptive Technology Strike Force Continues Focus on Trade Secret Theft, Export Control Enforcement

During a summit celebrating its one-year anniversary, the Disruptive Technology Strike Force provided updates on its efforts to prevent authoritarian regimes and hostile nation-states from acquiring critical technologies.

Read on for details about a new expansion of the effort, recent prosecutions and the group’s continued focus on cases involving theft of trade secrets and export control enforcement.

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