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Enforcement agencies and regulators across the globe are taking an increasing interest in a range of wrongful behaviours conducted by financial institutions and corporates. Over the past two decades, the number and profile of multi-agency, multi-jurisdictional, regulatory and criminal investigations have risen exponentially. Better and more effective cooperation between law enforcement authorities across the globe means that this trend is likely to continue.
Moreover, global authorities are adopting an increasingly collaborative approach to the (formal and informal) sharing of information. As a result, enforcement agencies across multiple jurisdictions are more often coordinating their investigations into the same underlying conduct and reaching coordinated enforcement resolutions.
In this, the first of three articles examining the cross-jurisdictional approach to corporate accountability, we consider the increasing communication between international law enforcers.
Until quite recently, national authorities would investigate and take action against national wrongdoers. It was only a decade ago that authorities on both sides of the Atlantic struck the first co-ordinated settlement of their respective investigations into alleged corporate bribery by the same company. The increasingly global nature of commercial organisations means that investigations into alleged corporate wrongdoing frequently fall within the competency of a number of jurisdictions. In addition, the changing nature of corporate misconduct, both financial and otherwise, means that enforcement agencies are increasingly recognising the benefits of co-ordinating their activities, sharing information and acknowledging where an investigation can more appropriately be run by someone else.
It was perhaps no surprise that the first deferred prosecution agreement (“DPA”) to be concluded in the UK, that involving Standard Bank in November 2015, formed part of what the US Securities and Exchange Commission (“SEC”) termed a “co-ordinated global settlement” between it and the UK’s Serious Fraud Office (“SFO”). Although the SEC required Standard Bank to pay a disgorgement of $8.4 million to settle the US charges, it deemed that obligation satisfied by the payment of an equal amount to Her Majesty’s Treasury as part of the UK DPA – a remarkable acknowledgment of the SFO’s growing importance in the global enforcement arena.
International cooperation also promotes fact-finding for all agencies involved. Historically, mutual legal assistance treaty requests, which have to be submitted by law enforcement agencies to central governments, were the standard way for agencies to gather evidence located in other jurisdictions. Such formal intra-governmental requests could, however, be time-consuming and long-winded. Hence, within the EU, the so-called European Investigation Order (“EIO”) was introduced by Directive 2014/41/EU regarding the European Investigation Order in Criminal Matters. Designed with the overarching principle of mutual recognition, the EIO is intended to streamline and speed up requests for mutual legal assistance, making them quicker and easier to effect.
By the bilateral data access agreement entered into between the UK and the United States on 3 October 2019, the UK and United States aim to pursue the same goal of faster access to information. Law enforcement agencies, when armed with appropriate court authorisation, may now go directly to tech companies or communication service providers based in the other country to access electronic data. Further bilateral agreements are anticipated, including between the United States and Australia, who recently announced that they have begun negotiations on such an agreement.
Improved efficiency between enforcers and regulators is also generated through the use of databases allowing access to information in other jurisdictions. Notable examples are the European Criminal Register Information System (“ECRIS”), which permits the exchange of information on criminal convictions between EU Member States, and FIU.Net, an information system which connects decentralised databases, enabling national Financial Intelligence Units to share information on money laundering and the financing of terrorism.
Joint Investigation Teams (“JIT”), which bring together agencies in two or more jurisdictions may be established for carrying out a particular investigation. One prominent example is the JIT between France’s Parquet National Financier and the SFO, who worked closely together on their investigation into alleged bribery and corruption at Airbus. The three-and-a-half year investigation culminated in January 2020 with a €3.6bn global settlement with the airline, which also included a DPA with the U.S. Department of Justice (“DOJ”).
Where multiple agencies are involved, companies often try to achieve some finality and certainty by seeking a global resolution with all potential enforcers. A coordinated resolution can also potentially mitigate the “piling on” of penalties. Agencies appreciate this risk: the DOJ’s “Policy on Coordination of Corporate Resolution Penalties” (May 2018) encourages DOJ prosecutors to coordinate – where possible – both within the department and with other federal, state, local, and foreign investigating authorities to avoid “the unnecessary imposition of duplicative fines, penalties and/or forfeiture against the company.”
This goal of avoiding “piling on” penalties can be found in the UK, as well, where the SFO has recently issued statements emphasizing the need to cooperate, as far as possible, with regulators across jurisdictions.
While the introduction of DPAs in the UK may have stemmed partly from a desire on the part of the UK to tackle the growing incidence of financial crime at a managed cost, it is also an example of enforcement authorities observing the approaches of their international counterparts and adopting similar tactics where appropriate. DPAs have been available in the US since the 1990s but it took until 2014 for a similar process to be introduced into the UK. Since then, DPAs, with local variations, have evolved in jurisdictions including France, Singapore, Argentina, Canada and, coming soon, Australia.
The recognition of what other enforcement authorities are doing is made all the easier by the proliferation of surveys and reports by global NGOs and social commentators routinely comparing and contrasting national performances. A recent report by Transparency International rates the performance of 47 leading global exporters and publicly points the finger at those failing to demonstrate adequate anti-corruption enforcement. FATF, the Financial Action Task Force, describes itself as “the global money laundering and terrorist financing watchdog”. This inter-governmental body sets international standards that aim to ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. It constantly monitors countries to ensure these standards are implemented fully and effectively and openly reports its findings.
We are also seeing an increase in personal communications between agencies. Where once there may have been suspicion of another prosecutor’s motives, authorities in major jurisdictions are now acknowledging the benefits of establishing personal relationships and even sending their personnel to experience law enforcement abroad at first hand.
Speaking at the Cambridge Symposium on Economic Crime in 2019, Lisa Osofsky, director of the SFO (and herself a US-trained lawyer and former federal prosecutor in Chicago) commented that “prosecutors simply cannot do [their] jobs today without working with [their] counterparts around the globe” and accordingly they are “increasingly linking arms in the march against transnational fraud and corruption”. To help forge inter-agency bonds, there have been a number of lawyers and prosecutors from the DOJ seconded to the SFO, as indeed was Osofsky herself in the 1990s, tasked with sharing working practices and strengthening relationships.
Increased cooperation between global law enforcement authorities is likely only to increase. As enforcement agencies co-ordinate their enquiries, this raises both challenges and opportunities for companies under investigation. In the second article in this series, we will examine how to best handle the different approaches practised by enforcement authorities in key jurisdictions.
This article first appeared in Thomson Reuters Regulatory Intelligence here.
12 November 2020
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