Anti-Money Laundering December 4, 2024

Federal District Court Issues Nationwide Preliminary Injunction Against Enforcement of the Corporate Transparency Act

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”). 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 Texas Top Cop Shop v. Garland (4:24-cv-00478-ALM), the District Court, in a memorandum opinion, rejected the Government’s position when it held that “the CTA appears likely unconstitutional,” and accordingly, issued a nationwide preliminary injunction against enforcement of the CTA and its implementing regulations, including staying the January 1, 2025 compliance deadline. The memorandum opinion and order can be found here.

This decision comes just a few months after National Small Business United v. Yellen (5:22-cv-01448-LCB), in which the District Court for the Northern District of Alabama held that the CTA exceeded Congress’ power to regulate commerce and permanently enjoined its enforcement against plaintiffs in that case, and just a few weeks before the year-end BOI reporting deadline for entities created prior to January 1, 2024, which the Eastern District of Texas stayed.

At this time, entities will not be required to comply with the reporting deadline and there will be no penalty for non-compliance. However, this is preliminary, and McGuireWoods will be closely monitoring developments in each of these cases.

For questions about this decision, the CTA, or AML compliance generally, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of the McGuireWoods Financial Services & Securities Enforcement team, Government Investigations & White Collar Litigation team, Healthcare team, Tax & Employment Benefits team, or Corporate & Private Equity team.

Anti-Money Laundering December 2, 2024

Deadline to Determine Corporate Transparency Act Reporting Obligations Fast Approaching

By Jeffrey M. Hanna and Lauren Mann

As 2024 comes to a close, companies created prior to January 1, 2024 should be mindful of the year-end deadline to analyze whether they must report Beneficial Ownership Information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) pursuant to the reporting provisions of the Corporate Transparency Act (“CTA”). Companies should take immediate action to determine whether filing is necessary to avoid potential civil and/or criminal penalties. McGuireWoods described the CTA’s requirements in a previous post and the requirements are also summarized below.

Government Contracts October 24, 2024

DoD Issues Final CMMC Framework for Defense Contractors

By Edwin O. Childs, Abram J. Pafford, Andrew Konia, Jack White, Jason M. Vespoli, Marua Naehr and John Sullivan

After a nearly five-year rulemaking process, the U.S. Department of Defense (DoD) published the Final Cybersecurity Maturity Model Certification 2.0 (CMMC) program rule in the Federal Register on Oct. 15, 2024, codified at 32 CFR Part 170. Contract clauses implementing the CMMC program rule will be issued as part of the Defense Federal Acquisition Supplement, and DoD expects to require CMMC certifications as a condition of award beginning in 2025 as part of a phased-in approach.

The final CMMC program rule is the culmination of a lengthy rulemaking process to implement third-party certified cybersecurity program standards for the Defense Industrial Base. The DoD significantly revised CMMC program requirements since the inception of CMMC 1.0 in 2020. At its most basic level, the CMMC program is a transition from a self-certification model for cybersecurity compliance, to a third-party verification process contemplated by the CMMC program rule.

Read on to learn more about the final rule and its implications for contractors and subcontractors.

Financial Institution Regulation, Securities and Commodities October 14, 2024

Crypto.com Sues the SEC in Texas – Arguments and Implications for the Cryptocurrency Industry

By David Hirsch, Garen S. Marshall and Rhea Shahane

On October 8, 2024, Crypto.com filed a civil complaint against the Securities and Exchange Commission (“SEC”) and each of its Commissioners in the Eastern District of Texas seeking declaratory and injunctive relief. Crypto.com sued the SEC after the regulator sent it a Wells notice, indicating the Division of Enforcement intended to recommend an enforcement action against the Company for operating as an unregistered securities broker-dealer and an unregistered clearing agency in connection with secondary-market sales of certain Targeted Network Tokens.[1]

Compliance October 3, 2024

AI Risk and Whistleblower Protection Spotlighted in DOJ’s Revised Corporate Compliance Guidance

By V. Kathleen Dougherty, Brandon M. Santos, Garen S. Marshall, Elizabeth F. Tyler and Brenna M. Molinare

On September 23, 2024, the U.S. Department of Justice (DOJ) updated its Evaluation of Corporate Compliance Programs (ECCP) guidance.

The ECCP provides prosecutors with questions and factors to consider when assessing a company’s compliance program. Prosecutors use the guidance to assist in making decisions about whether to charge a company and how to resolve cases. The guidance is equally instrumental for companies as they build, strengthen, and internally assess their compliance structure and controls.

Compliance September 23, 2024

“Call Us Before We Call You”: DOJ’s New Corporate Whistleblower Awards Pilot Program

By V. Kathleen Dougherty, Elizabeth F. Tyler and Elissa Baur

On September 17, 2024, Deputy Assistant Attorney General Nicole Argentieri stressed the intense focus placed by the U.S. Department of Justice (DOJ or the Department) on incentivizing companies to maintain healthy corporate compliance programs – and highlighted key aspects of the Department’s newest enforcement tool. Speaking at the NYU School of Law’s Program on Corporate Compliance and Enforcement, Argentieri emphasized the DOJ Criminal Division’s newly rolled out Corporate Whistleblower Awards Pilot Program, which offers monetary rewards for whistleblowers who provide information about certain corporate misconduct that results in a successful criminal or civil forfeiture of more than $1 million.

Compliance, Fraud, Deception and False Claims August 13, 2024

Key Takeaways From McGuireWoods’ Webinar on Enforcement Against PE Funds in Healthcare

By Brett Barnett, Mindy Sauter, Michael Elliott and Michael J. Podberesky

McGuireWoods partners Brett Barnett, Mindy Sauter, Mike Elliott, and Michael Podberesky recently conducted a solution-oriented discussion of key enforcement and compliance developments that impact private equity (PE) funds in healthcare. They also highlighted relevant cases regarding the government’s increased interest in compliance diligence in the PE space.

Read on to learn about the eight key takeaways from the July 9, 2024, discussion. To watch the full webinar, visit McGuireWoods’ website.

Enforcement and Prosecution Policy and Trends July 3, 2024

Supreme Court Holds That SEC Must Seek Civil Penalties in Federal Court

By E. Andrew Southerling, John S. Moran, Jonathan Ellis, Louis D. Greenstein and Stephen Tagert

In SEC v. Jarkesy, No. 22-859, 603 U.S. __ (2024), the Supreme Court held that the Seventh Amendment prohibits the Securities and Exchange Commission (SEC or Commission) from seeking civil penalties in certain enforcement actions when the Commission chooses to proceed in-house before its own administrative law judges (ALJs), rather than in federal court. In a 6-3 opinion written by Chief Justice Roberts, the Court held that the Seventh Amendment requires, at a minimum, that any fraud action involving civil penalties be tried in front of a jury in federal court. The Court’s decision will have immediate implications for the SEC’s enforcement program and will likely have broader implications for administrative adjudications for a host of federal agencies and federal laws.

Sanctions, Trade Embargo, and Export Controls July 1, 2024

OFAC Enforcement Action Targets Non-U.S. Business Purchasing Services From North Korean Firm

By Patrick Rowan and Alex J. Brackett

On June 26, Treasury’s Office of Foreign Assets Control (OFAC) announced the settlement of an enforcement action against an Italian animation company that violated OFAC’s sanctions on North Korea. The enforcement action highlights several key propositions regarding sanctions compliance: (1) non-U.S. businesses cannot ignore U.S. sanctions if they are transacting through the U.S. or using U.S. dollars; (2) penalties for civil violations of sanctions are imposed on a strict liability basis; and (3) the U.S. government is particularly focused on North Korean sanctions evasion.

Fraud, Deception and False Claims June 27, 2024

Federal District Court Finds Private-Insurer Relator Can Proceed with False Claims Action

By Michael J. Podberesky, Brett Barnett and Stephen Tagert

Last month, the U.S. District Court for the District of New Jersey held that a private company could proceed with its whistleblower action against a clinical laboratory that allegedly submitted false claims to the federal government for medically unnecessary urine drug tests (UDTs). The lawsuit is part of a growing trend of nontraditional whistleblower-like insurance companies, activists, investors and special purpose entities created to file False Claims Act actions, which traditionally had been brought by former or current employees of the target entities.

Read on to learn how the opinion demonstrates the U.S. Department of Justice’s continued crackdown on UDT laboratories — part of its effort to combat the opioid epidemic and the associated abuse of federal healthcare programs — and on nontraditional whistleblowers playing an increasingly important role in bringing FCA cases.

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