What does the anti-regulation bent of the Trump administration mean for three of the most talked about cross-border enforcement initiatives of the last decade: anti-corruption, anti-money laundering and economic sanctions?
Crystal ball gazing is a favorite Washington pastime usually guided by a combination of hope and self-interest and is generally no more accurate than blindfolded dart throwing. However, in this case we think there are two reasons why our prediction -to expect continued robust enforcement - is right. First, each of these enforcement intiatives has been reinforced by high evolved compliance regimes that have become embedded in the best-practice expectations and oversight infrasturctures of well-run businesses. Second, the Trump administration acknowledges and embraces the fact that these laws are at the core of enforcement efforts to "level the playing field" for American companies and retard foreign competitors' ability to use fraudulent conduct to enhance corss-border business.
Many of the most celebrated enforcement actions of the last decade were not developed by prosecutors but rather were the product of whistleblowers and self-reporting based on internal compliance procedures. The result is that today fraudulent conduct is increasingly identified and exposed without government initiation. While there is frequent debate about whether these "self-reporting" expectations should be carved back, robust compliance has become "good governance" and whistleblowing is part of the new reality for global business. In sum, the pipeline for corruption, money laundering and economic sanctions cases is virtually out of the administration's control and it is unlikely that relevant authorities will turn their back on fraudulent conduct once exposed. Similarly, the public has come to expect a well-run business will develop and deploy meaningful compliance policies- whether to catch financial fraud or to protect the markets from crisis- and it strains credulity to think that anything will change that public expectation and the pressure it creates for commitment by businesses.
Furthermore, nothing we have seen from the Trump administration causes us to anticipate a radical departure from the decades-long trajectory towards increasingly robust enforcement in these areas. From the Attorney General down, FCPA enforcement has been singled out as a priority. On April 24, 2017, Attorney General Jeff Sessions said that the FCPA is a "critical" enforcement priority for the Department of Justice. Sessions specifically stated that the Department of Justice will continue to strongly enforce the FCPA and other anti-corruption laws. Sessions said that the DOJ wants to "create an even playing field for law-abiding companies" because corruption "harms free competition, distorts prices and often leads to substandard products and services coming into this country."
The same level playing field principles apply for anti-money laundering and economic sanctions enforcement. Anti-money laundering enforcement identifies and penalizes wrongdoers by seizing their ill- gotten gains. In this respect, the financial system plays a critical role in the global fight against corruption and terrorism - one of the current administration's top priorities - by identifying suspicious transactions and bringing them to light.
Similar to AML and FCPA, sanctions enforcement is the punishment of those who seek to undermine economic policies established by the current administration to punish rogue nations whose policies are viewed as a danger to the country. One need only remember the "Panama Papers" scandal, a massive data leak spotlighting the use of off-shore and shell corporations for money laundering and tax and economic sanctions evasion, to be reminded that scrutiny of cross-border transactions is not simply the domain of government inquiry. And as with that scandal, once disclosed, enforcement is impossible to avoid. Given the stated positions of the Trump administration, it is hard to believe that they will turn a blind eye toward institutions doing business with money launderers, aiding the bomb building objectives of countries like North Korea, or failing to identify transactions that fill the coffers of terrorist organizations like ISIS.
So what does this mean? Punishing bad actors is always good politics. From our perspective, the Trump administration's rhetoric about scaling back regulation has nothing to do with enforcement and is unlikely to meaningfully impact regulations viewed as critical to advancing administration objectives. Although the enforcement priorities of the current administration may continue evolving, we see no evidence that the requirements for meaningful compliance oversight, backed by enthusiastic enforcement, are going away anytime soon.
The best strategy for looking around the enforcement corner remains investing in comprehensive compliance programs and undertaking serious internal investigations when circumstances merit. Compliance with anti-corruption, anti-money laundering and economic sanctions is a cost of doing business in a globalized economy. The challenge is to integrate a compliance program that effectively decreases risk while at the same time furthering business objectives. Adopting well-crafted, risk-based processes and procedures that are robustly implemented by compliance staff and monitored on an ongoing basis will continue to be the right way to meet this challenge by adding value to the business overall and enhancing the effectiveness of existing compliance procedures.