In recent months, the US Department of Justice (DOJ) has begun to signal the Biden administration’s enforcement agenda as well as some of the methods that DOJ intends to use to achieve its objectives. Public statements by DOJ leadership attest to a renewed focus on corporate enforcement, including in the areas of corruption, market manipulation, and insider trading, as well as DOJ’s intention to vigorously pursue sanctions and export control violations, cryptocurrency-related crime, and ransomware attacks, with a notable ongoing focus on China.
Anti-corruption, Corporate Enforcement and the Era of “Big Data”
Statements from both the White House and DOJ strongly suggest that the Biden administration is poised to build further upon the years-long commitment to foreign corruption enforcement and has now defined that battle as a “core United States national security interest.” DOJ leadership previewed this past summer its plans to ramp up enforcement using new proactive investigation tactics. And in remarks earlier this month at a Global Investigations Review Conference, Principal Associate Deputy Attorney General John Carlin highlighted that DOJ is “redoubl[ing]” its commitment to corporate enforcement and “building up to surge resources” including with the creation of a new squad of FBI agents who will be embedded in DOJ’s criminal fraud section.
In terms of tools, federal authorities are continuing to use data analytics such as ARTEMIS (the SEC’s data analytics program) and commodities surveillance programs to detect possible market misconduct. DOJ leadership also continues to emphasize that, just as regulators are using data to root out insider trading and commodities manipulation, the expectation is that corporations will use technology to monitor their own compliance. Finally, and as we have previously blogged, DOJ enjoys newly expanded authority to investigate financial crime abroad: specifically, the 2021 National Defense Authorization Act empowers US regulators to subpoena “any records” relating to “any account” of a non-US bank if that non-US bank has a US correspondent account and the records are the subject of “any investigation of a violation of a criminal law of the United States,” a powerful tool that can be used to probe foreign corruption and money laundering.
Focus on Foreign Policy, the Huawei Prosecution and Cybercrime
The Biden DOJ has also said that it is prioritizing sanctions and export control enforcement and increasing the allocation of resources accordingly. Carlin noted that the National Security Division has about 150 open sanctions and export control investigations. The prosecution of Huawei, the world’s largest telecommunications equipment manufacturer, and the recent deferred prosecution agreement (DPA) that Huawei’s Chief Financial Officer Wanzhou Meng entered into with DOJ are particularly powerful examples of this trend.
In a 16-count wide ranging indictment that reached back to 2001 conduct, DOJ charged Huawei and Meng with racketeering, financial fraud, money laundering, obstruction, and sanctions violations. Notably, the facts to which Meng ultimately admitted last month in connection with her DPA were far narrower and related primarily to statements that Meng made regarding Huawei’s operations in Iran in a single meeting with a global bank in 2013. In exchange for her execution of the DPA, DOJ agreed to withdraw its request for Meng’s extradition from Canada and, if she complies with its terms, to seek dismissal of the charges entirely in 2022. The charges against Huawei remain pending, however, as do the computer fraud and economic espionage charges that DOJ brought this past July against the four Chinese nationals who allegedly hacked into dozens of computer systems belonging to US and non-US companies, universities and governments for the benefit of China and its state-owned and sponsored instrumentalities.
China is responding with its own countermeasures. As we have previously discussed, China’s Ministry of Commerce has introduced Blocking Rules that allow the Ministry of Commerce to prohibit Chinese individuals and entities from complying with designated non-Chinese laws (including US secondary sanctions). In addition, China has passed a Data Security Law, which came into effect this past September 1, 2021, and among other things provides that data stored in China cannot be produced to foreign regulators without prior approval from Chinese authorities (though the Law does not specify which authorities may grant such approval). As a result of these cross-winds, multinational companies located or doing business in the United States may find themselves the recipients of subpoenas from DOJ seeking information regarding their operations in China to which they cannot respond without violating Chinese law.
The potential consequences of DOJ refocusing its efforts on corporate enforcement are significant, especially as DOJ continues to investigate overseas conduct and China seeks to rebuff those efforts. Companies that conduct business in high risk jurisdictions should be mindful that DOJ is not shying away from enforcement, even of very high-profile targets or when doing so may cause diplomatic tension. (The recent extradition of Alex Saab, which has seemingly generated great anger within the Maduro administration in Venezuela, is another recent and prime example). Companies involved in sensitive sectors, such as cryptocurrency, should similarly be aware that DOJ has announced its intention to augment its scrutiny of their operations.
With new DOJ leadership taking the helm, one thing appears certain: DOJ’s prosecutorial ambitions are expanding and will continue to look broadly beyond US borders.