It was a year of the broken windows enforcement policy, when the SEC and DOJ brought small enforcement actions but no blockbusters. But there was still plenty to talk about in 2015.
Here are eight enforcement and compliance stories we’d rank at the top for the year just passed. We were looking for big trends, and that’s what these stories are about.
Let’s start with princelings. The SEC charged BNY Mellon with violating the FCPA by providing valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund. The bank paid $15 million to settle the charges. Hiring a family member or friend of a government official isn’t always a violation of the FCPA. But a hiring decision intended to reward or induce an official to award work can be an offense.
The DOJ blew up FIFA. A 47-count federal indictment unsealed in New York in May charged 14 defendants involved in a 24-year alleged corruption scheme at the heart of international soccer. The DOJ followed up in December. It unsealed a 92-count superseding indictment charging 16 more defendants with racketeering, wire fraud, and money laundering conspiracies. So far, eight defendants have pleaded guilty. After the second indictment, FIFA’s ethics committee imposed eight-year suspensions on its president, Sepp Blatter, and his handpicked replacement, Michel Platini.
Compliance officers and company lawyers moved further apart. Donna Boehme and Mike Scher spent 2015 talking about Compliance 2.0. It starts by untethering the compliance department from the general counsel. “That change alone redefines compliance officers and what they do,” Mike wrote. Once separated from the law department, compliance officers are expected to make independent decisions based on the law and codes of conduct. They aren’t there anymore to be window dressing and a scapegoat when things go wrong.
The UK Serious Fraud Office used its first deferred prosecution agreement. In late November, ICBC Standard Bank paid a $33 million fine to the UK Serious Fraud Office and entered into a DPA for failing to prevent Tanzania bribes. Lord Justice Leveson at Southwark Crown Court approved the SFO’s first application to use a deferred prosecution agreement to end an investigation.
America made fighting graft a national security priority. President Obama issued a National Security Strategy in February, the first one since 2010. The NSS said graft is a direct threat to peace, the rule of law, human rights, democratic institutions, and even public health. Compliance officers take note: The National Security Strategy sets the agenda for the entire executive branch, including the DOJ and SEC, the State Department, the Commerce Department, the Treasury Department, and so on.
Compliance officers were in demand, and pay went up. The global demand for compliance officers exploded. They now expect a 30 percent pay raise for changing jobs. An SCCE survey released in October showed that compliance officers are making more money than ever. For a chief compliance officer outside the health care sector, total average compensation hit $179,753. That’s up from $139,582 in 2013. “What’s happening is corporate America is seeing that the position they once thought might be more of a mid-level is more of a higher level,” SCCE chief Roy Snell told the Wall Street Journal. In Singapore, bankers blamed delays of three months or more for new account openings on a shortage of compliance officers.
The DOJ hired Hui Chen as a “full-time compliance expert.” Part of her job is to evaluate the compliance programs of companies under investigation for possible FCPA violations. That doesn’t mean there will be a compliance defense, the DOJ said. But guest contributors Worth MacMurray and Melanie Reed said it does mean the DOJ “will develop and apply benchmarks for evaluating corporate compliance and remediation measures and will provide expert guidance for prosecutors and monitors where a Fraud Section case resolution involves on-going program assessments.” We called that the start of a back-door compliance defense.
Singapore’s first prime minister, Lee Kuan Yew, died in March. He was one of the most effective anti-corruption crusaders in history. Our guest contributor, Adrian Tan, said of Lee: “He had many achievements, but his one big idea must have been this: In Asia, how would one Third World island, with no resources, distinguish itself as a trading and financial hub? He would make the island, Singapore, clean, in every sense of the word. . . The idea of a corruption free country in Asia was, in the 1960s, a revolutionary business idea. It was a unique selling point like no other.”
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.