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THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

Government Investigations and White Collar Litigation Group
Enforcement and Prosecution Policy and Trends, Fraud, Deception and False Claims, Government Contracts

Analysis of the DOJ’s 2020 FCA Statistics and the Trends Therein

The U.S. Department of Justice (DOJ) recently issued its annual press release summarizing fraud-related recoveries from False Claims Act (FCA) matters in the prior fiscal year. While the headline number for FY 2020 of $2.2 billion in settlements and judgments involving fraud and false claims against the government is down about $900 million from the average annual recoveries over the prior three years, a deeper look at the underlying statistics and macro trends suggests an upswing in False Claims Act matters, particularly non qui tam (whistleblower) cases, and suggests that an increase in government fraud-related recoveries are likely in future years.

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Enforcement and Prosecution Policy and Trends, Fraud, Deception and False Claims

DOJ Accelerates Enforcement Efforts Against Cybercriminals Who Engage in Ransomware Attacks

On successive days last week, the Department of Justice (DOJ) unveiled enforcement actions against international cybercriminal organizations that utilized ransomware to infect computer systems and then extort payment, often in the form of cryptocurrency, from victims worldwide.  First, the Criminal Division’s Computer Crime and Intellectual Property Section and the U.S. Attorney’s Office for the Middle District of Florida announced the unsealing of charges against a Canadian national for his alleged involvement in the ransomware scheme known as NetWalker that generated tens of millions of dollars from businesses, public entities, and individuals whose computer databases were encrypted and rendered useless, pending satisfaction of a ransom demand.  The following day, the U.S. Attorney’s Office for the Middle District of North Carolina and the Criminal Division’s Computer Crime and Intellectual Property Section revealed their participation in a multinational enforcement operation that disrupted and dismantled Emotet, a botnet that utilized malware, including ransomware, to target critical infrastructure in the United States and abroad.  These actions highlight U.S. law enforcement’s increased focus on preventing ransomware attacks, which in the future will rely on both traditional collaboration among international law enforcement agencies and reporting from private entities over which the government exercises regulatory control.

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Fraud, Deception and False Claims, Uncategorized

With Fraud Against UK Businesses at Epidemic Levels, Businesses Need to Know How to Protect Themselves

Fraud has reached epidemic levels in the UK and should be seen as a national security issue, says think tank the Royal United Services Institute (RUSI) in a paper published last week[1]. It is the crime to which UK citizens are most likely to fall victim[2]. Its impact on the private sector has consequences for both the stability of individual companies and the broader reputation of the UK as a place to do business.

85% of reported fraud in 2019/2020 was cyber enabled[3] fraud[4]. With limited in person interaction due to the pandemic, and increasing levels of remote working, this figure is expected to increase in the coming year. Cyber fraud is a constantly evolving area with perpetrators adapting their methods as new technologies become available. Common examples of cybercrime are denial of service (DoS), botnet, phishing, and ransomware attacks. Continue Reading

Compliance, Enforcement and Prosecution Policy and Trends, Securities and Commodities

Consolidated Financial Account Reports and Use of Vendors: FINRA Continues Regulatory Scrutiny – What’s Old is New

Overview

Consolidated financial account reports can offer a broad – all-encompassing — view of customers’ investments regardless of where the assets are held and may even include non-securities assets. Customers often demand them and firms and financial advisers provide them. FINRA has had these types of communications to customers on its radar screen for years.

Equally, on FINRA’s radar screen for years has been the need to supervise regulatory functions outsourced to third party vendors. FINRA has frequently reminded firms that outsourcing regulatory functions does not relieve the firm of its compliance obligations and that firms must supervise the outsourced activity.

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Compliance, Enforcement and Prosecution Policy and Trends, Government Contracts

The DFARS Rule on Covered Telecommunications Equipment or Services Is Final

The Department of Defense (DoD) issued a final rule on Covered Telecommunications Equipment or Services that implements Section 1656 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. 115-91). To read more of our analysis, please click here.

Anti-Money Laundering, Enforcement and Prosecution Policy and Trends

The Brexit Deal; UK Crime Fighting with European Friends

Since Brexit, the relationship between the European Union (EU) and the UK concerning law enforcement cooperation is now governed by the UK-EU Trade and Cooperation Agreement (the Agreement).

The UK Government state that the safety and security of British citizens is a top priority.  It argues that the Agreement provides a comprehensive package of operational capabilities that will help protect the public and bring criminals to justice.

Meanwhile critics say the new arrangements fall far below that which the UK enjoyed as a member of the EU.  In particular access to ‘real time’ information sharing systems which is a major blow to UK law enforcement agencies.  They say that detection of crime will be slower and more cumbersome.

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Government Contracts

Biden Administration to Strengthen “Buy American” Rules

On Jan. 25, 2021, President Joseph R. Biden signed an executive order aimed at strengthening “Buy American” rules to increase the federal government’s procurement of American-made goods.

According to the White House, this order makes several significant changes to the implementation of the laws requiring federal government agencies to procure materials and products domestically.

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Securities and Commodities

Congress Affirms and Extends SEC’s Disgorgement Powers

On January 1, 2021, the United States Senate joined the House of Representatives in overriding President Trump’s veto, and the National Defense Authorization Act (NDAA) became law. The NDAA was passed chiefly to authorize appropriations for military activities of the Department of Defense. The NDAA also includes a provision codifying the U.S. Securities and Exchange Commission’s (SEC) authority to seek in federal court actions disgorgement up to five years after the occurrence of securities laws violations, and expands that authority to ten years where those violations involve scienter-based (intentional) fraud. The new law resolves the much debated issues regarding the SEC’s disgorgement authority and the extended period during which the SEC now may seek disgorgement will have an immediate, significant impact on individuals and entities involved in SEC investigations and litigation.

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Financial Institution Regulation

FinCEN Director Blanco Comments on Section 314(b)’s New Guidance

On December 10, 2020, FinCEN Director Kenneth Blanco delivered prepared remarks at the ABA’s annual Financial Crimes Enforcement Conference. At the outset, Director Blanco addressed the importance of U.S. national security amidst the unprecedented environment created by the COVID-19 pandemic. In his remarks, Director Blanco announced “important guidance” and “much needed clarity” concerning FinCEN’s voluntary Section 314(b) information sharing program.

Section 314(b) of the USA PATRIOT Act provides financial institutions safe harbor from civil liability when sharing with another financial institution information regarding customers suspected of possible terrorist financing or money laundering activities. 31 C.F.R. § 1010.540(b)(1). Financial institutions share information under this provision to facilitate investigations of suspicious activity and assist in preparing more complete Suspicious Activity Reports (“SARs”).

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Compliance, Enforcement and Prosecution Policy and Trends

New Due Process Protection Act Amends Criminal Rule 5, May Strengthen Defendants’ Brady Rights

A new law will require all federal judges to enter an order at the beginning of every criminal case advising prosecutors of their duties under Brady v. Maryland, 373 U.S. 83 (1963) to disclose exculpatory evidence to the defense. Intentional violations of the orders could subject prosecutors to stern sanctions – up to and including vacating a conviction or disciplinary action against the prosecutor – or even contempt.

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