In the ever-evolving landscape of financial regulations and enforcement, the year 2023 has seen significant strides in the fight against corruption and financial misconduct. The U.S. Securities and Exchange Commission (SEC) has been at the forefront of these efforts, announcing its enforcement results for Fiscal Year 2023. With 784 enforcement actions filed, orders for nearly $5 billion in financial remedies, and close to $1 billion distributed to harmed investors, the SEC’s actions demonstrate its commitment to safeguarding the integrity of the financial markets. This article will explore the key trends, developments, and insights arising from the SEC’s enforcement actions against corruption and compliance in 2023. It will also consider how these actions may foreshadow further reforms and accountability efforts in 2024 and beyond.
Top Global Anti-Corruption Developments in 2023
- Nick Ephgrave was appointed as the new Director of the UK’s Serious Fraud Office (SFO). Under Lisa Osofsky’s tenure, SFO secured 29 convictions, 8 deferred prosecution agreements, and over £150 million in seized criminal proceeds, including the largest-ever corporate penalty. The report acknowledged challenges, including the Unaoil investigation and trial collapses.
- In July 2023, China’s National Health Commission initiated a year-long crackdown on pharmaceutical corruption, vowing a “zero tolerance” policy. Over 30 hospital chiefs and officials were investigated, with draft amendments proposing harsher penalties for bribery. More than 30 pharmaceutical companies publicly disclosed marketing expenses, emphasizing the need for vigilance in the sector.
- Switzerland returned over $138 million to Taiwan, related to a 1990s bribery case involving Taiwanese businessman Andrew Wang and French defense company Thales. The funds were laundered through accounts in Europe, marking a significant recovery effort.
- Zhang Li, CEO of a Chinese real estate company, entered a three-year Deferred Prosecution Agreement (DPA) for bribing a San Francisco official, as per DOJ. Zhang’s company agreed to plead guilty to honest services wire fraud, with a $1 million fine.
- The SFO successfully recovered a £200,000 property and £8,000 in rental profits from agent Dr. Guang Jiang, involved in bribery for UK tech firm Sarclad Ltd. This followed a £350,000 recovery from Jiang’s accounts, highlighting the SFO’s pursuit of criminal assets.
- In a significant development, former Mozambique Finance Minister Manuel Chang was extradited to the US to face charges related to a $2 billion bribery, fraud, and money laundering scheme. He had been held in a South African prison since 2018.
- Singapore, known for its strong stance against corruption, saw the arrest of Transport Minister S. Iswaran and businessman Ong Beng Seng in July 2023. Both were assisting in an ongoing corruption investigation, a rare occurrence.
- In July 2023, the Foreign Extortion Prevention Act was re-introduced in the US Congress. It aims to criminalize foreign officials’ solicitation or receipt of bribes from US individuals or companies, with penalties of up to 15 years in prison and substantial fines.
In July 2023, Romania became the 45th party to the OECD’s Convention on Combating Bribery of Foreign Public Officials, committing to legally binding standards against bribery in international business transactions. This move marked a significant step in Romania’s path toward joining the OECD.
Key Highlights of the SEC’s Enforcement Efforts in 2023
Diverse Range of Enforcement Actions
One of the standout features of the SEC’s enforcement efforts in 2023 is the diverse range of actions taken. These actions spanned the entire spectrum of the securities industry, from tackling billion-dollar frauds to addressing emerging threats involving crypto asset securities and cybersecurity. The SEC’s ability to adapt to evolving market dynamics is evident in its enforcement actions against a wide array of market participants, including public companies, investment firms, gatekeepers, and even social media influencers.
Record-Breaking Financial Remedies
Fiscal Year 2023 witnessed the SEC obtaining orders for a staggering $4.949 billion in financial remedies. These remedies comprised $3.369 billion in disgorgement and prejudgment interest and $1.580 billion in civil penalties, both of which were the second-highest amounts on record. Such substantial financial penalties serve as a powerful deterrent against wrongdoing and emphasize the SEC’s commitment to holding violators accountable.
Whistleblower Program Success
The SEC’s Whistleblower Program reached new heights in 2023. The Commission issued whistleblower awards totaling nearly $600 million, the highest ever awarded in a single year. The surge in whistleblower tips, reaching over 18,000 in FY 2023, reflects the increasing importance of whistleblowers in uncovering securities law violations. This program incentivizes individuals to come forward and strengthens the SEC’s ability to uncover misconduct.
Proactive Industry Initiatives
The SEC’s Division of Enforcement undertook several proactive industry initiatives to investigate recurring or widespread violations. For instance, the Marketing Rule initiative resulted in charges against nine investment advisers who advertised hypothetical performance without the required policies and procedures. Failures by insiders and major shareholders to file required SEC forms led to actions against both individuals and publicly traded companies. Additionally, regulation A violations and misconduct by crypto intermediaries were also addressed through enforcement actions.
Focus on Gatekeepers and Market Abuse
Gatekeepers, such as accountants, auditors, and other professionals, play a crucial role in safeguarding investors. The SEC took action against firms like Marcum LLP and Prager Metis for violating audit standards and auditor independence rules. The Commission’s efforts to combat market abuse included charges against social media influencers for manipulating exchange-traded stocks, cases of insider trading, and front-running schemes, emphasizing its commitment to maintaining market integrity.
Crypto Asset Securities Enforcement
Cryptocurrency-related enforcement gained prominence in 2023. The SEC addressed billion-dollar crypto fraud schemes, unregistered crypto asset offerings, illegal celebrity touting, and alleged rampant noncompliance in the crypto asset intermediary space. Notable actions involved Terraform Labs, FTX CEO Samuel Bankman-Fried, and charges against platforms like Binance and Coinbase. These actions signal the SEC’s intention to regulate the crypto market rigorously.
In an era of increasing cyber threats, the SEC is vigilant in ensuring that market participants disclose material cybersecurity risks and incidents. Notably, it charged broker-dealer Virtu for failing to prevent the misuse of sensitive customer information and software company Blackbaud Inc. for making misleading disclosures about a ransomware attack. These actions underscore the importance of robust cybersecurity measures in the financial sector.
Environmental, Social, and Governance (ESG) issues have gained prominence among investors. The SEC brought several enforcement actions addressing ESG matters in FY 2023. Charges against Deutsche Bank subsidiary and Goldman Sachs Asset Management for misleading statements related to ESG products highlight the growing scrutiny of ESG claims.
Public Finance and Foreign Corrupt Practices
The SEC continued its efforts to combat corruption both domestically and abroad. Actions against public companies like Exelon Corporation and charges against companies like Koninklijke Philips N.V. for improper conduct in China demonstrate the Commission’s commitment to enforcing the Foreign Corrupt Practices Act (FCPA).
Emphasis on Individual Accountability
Individual accountability remains a cornerstone of the SEC’s enforcement program. Approximately two-thirds of the SEC’s cases in FY 2023 involved charges against one or more individuals. The Commission also obtained orders barring 133 individuals from serving as officers and directors of public companies.
FCPA Enforcement in 2024: Insights and Expectations
As we look ahead to 2024, it’s crucial to anticipate the potential shifts and trends in Foreign Corrupt Practices Act (FCPA) enforcement. While FCPA enforcement in the past year has demonstrated consistency, it is essential to consider what the future might hold in this ever-evolving landscape.
1. Evolving SEC and DOJ Activity
In the past year, the SEC’s enforcement activities related to FCPA have remained steady, maintaining a level consistent with previous years. However, the U.S. Department of Justice (DOJ) has operated slightly slower. To gain a deeper understanding of the enforcement landscape in 2024, monitoring whether the DOJ intensifies its efforts and aligns more closely with the SEC’s pace or continues its current trajectory will be essential.
2. Policy Updates and Enforcement Priorities
One of the key areas to watch in 2024 is the issuance of new DOJ policies or updates to existing ones. The FCPA landscape can be significantly influenced by changes in enforcement priorities and policies. It’s important to stay informed about any shifts in DOJ guidance, as this can impact how companies approach compliance and risk mitigation.
3. Foreign-Bribery Related Court Decisions
Court decisions related to foreign bribery cases can set important precedents and shape FCPA enforcement strategies. Observing how courts interpret and apply the law in specific cases can provide insights into the legal landscape and may influence future enforcement actions.
4. Global Anti-Corruption Initiatives
FCPA enforcement doesn’t operate in isolation, and global anti-corruption initiatives continue to be a significant factor. Monitoring international efforts to combat corruption, such as initiatives by international organizations and agreements between countries, can help predict how U.S. enforcement agencies might collaborate with their global counterparts in 2024.
5. Enforcement Agency Expectations
Lastly, understanding what to expect from enforcement agencies in 2024 is crucial. With their deep knowledge and experience in the field, insights from experts like Charles Duross can provide valuable perspectives on the enforcement priorities and strategies of both the SEC and DOJ in the coming year.
As we explore the potential developments in FCPA enforcement for 2024, it becomes evident that organizations must remain vigilant in their efforts to maintain robust compliance programs. The insights and expectations for the year ahead are closely linked to the services provided by ABAC™ experts.
ABAC’s ISO Certifications and ABMS: Ensuring Compliance for Businesses
Achieving and maintaining compliance with SEC, DOJ, and FCPA regulations is a top priority for businesses operating in today’s global marketplace. ABAC™ Group’s ISO certifications and Integrated Management Systems (IMS) offer valuable tools and frameworks to assist businesses in their compliance efforts. Here’s how these resources can help businesses stay compliant:
- Structured Compliance Framework: ABAC™ Group’s ISO certifications provide a structured framework for businesses to establish, implement, maintain, and continually improve their ABAC™ compliance programs. ISO standards, such as ISO 37001 for Anti-Bribery Management Systems, offer a systematic approach to managing bribery risks.
- Risk Assessment and Mitigation: ISO-integrated IMS helps businesses identify and assess bribery and corruption risks across their operations. This proactive risk assessment allows organizations to implement effective risk mitigation strategies and controls, reducing the likelihood of compliance breaches.
- Policy Development: ABAC™ Group assists businesses in developing comprehensive anti-bribery and anti-corruption policies aligned with ISO standards. These policies outline clear expectations and procedures for employees, ensuring that everyone within the organization understands their role in compliance.
- Employee Training: IMS emphasizes the importance of employee training and awareness. ABAC™ Group can provide tailored training programs to educate employees about bribery and corruption risks, enabling them to recognize and report potential violations.
- Third-Party Due Diligence: Many compliance breaches occur through interactions with third parties. IMS helps businesses implement robust due diligence processes for third-party relationships, ensuring that partners and suppliers also adhere to anti-corruption standards.
- Continuous Improvement: ISO certifications promote a culture of continuous improvement. ABAC™ Group’s services assist businesses in monitoring and reviewing their compliance programs regularly, identifying areas for enhancement, and making necessary adjustments to stay ahead of evolving regulatory requirements.
- Demonstrable Compliance: IMS allows businesses to demonstrate their commitment to compliance to stakeholders, including customers, partners, investors, and regulatory authorities. This can enhance an organization’s reputation and competitiveness.
- Global Alignment: ISO standards are internationally recognized, making them particularly valuable for businesses with a global presence. ABAC™ Group’s services help organizations align their compliance efforts with global best practices and local regulatory requirements.
- Efficient Resource Management: ABAC™ Group’s expertise in IMS ensures that businesses can optimize resource allocation for compliance activities. This efficiency translates to cost savings while maintaining robust compliance measures.
- Legal Protection: By implementing ISO-certified IMS, businesses can establish a defense against potential legal actions in case of compliance violations. Demonstrating a proactive commitment to compliance can mitigate penalties and legal consequences.
Secure your business’s compliance for the year 2024 and beyond by leveraging ABAC™ Group’s compliance solutions! Wishing you a season filled with joy and a year ahead that sparkles with integrity. Let ABAC™ Group light the way on your compliance journey!