March 08, 2021
Many now consider the world to be a much smaller place than just five years ago, let alone a decade prior. The unbounded internet, cheaper and faster travel, the growth of multi-national corporations, the liberalization of global markets and hyper-advancements in technology and communication all have contributed towards a growing sense that our lives, our work and our economies are more integrated than ever before. The global spread of the coronavirus over the last twelve months, and the ensuing proliferation of virtual gatherings of every kind, highlight just how interconnected we all are.
For years, regulators, law enforcement agencies and prosecutors around the world struggled to adapt to this changing environment. Slow and cumbersome mechanisms such as mutual legal assistance treaties and memoranda of understanding struggled to keep pace with a tsunami of transactions crossing borders on a daily basis. Simply put, governments were using a 20th-century toolkit to address 21st-century conduct.
This appears to be changing, however. With increasing frequency, authorities are collaborating across borders and markets–and harnessing advanced technologies and surveillance tools in the process–to mount investigations and prosecutions that are every bit as sophisticated as the underlying transactions in question. Accordingly, global corporations and financial institutions would be wise to take notice and revisit their compliance programs and strategies for managing increased enforcement risks.
The trend is best exemplified by the record-setting €3.6 billion settlement Airbus reached with authorities in France, the U.K. and the U.S. in January 2020 to resolve allegations of bribery and corruption. The first thing to note is the sheer breadth of the investigation. It spanned the Americas, Europe, Africa and Asia and relied on evidence obtained from over 200 sources. Where the investigating authorities could not obtain information using their own powers, they successfully invoked assistance from local enforcement agencies.
The second thing to note is that the cross-border nature of the investigation was underpinned by various statutes with extra-territorial reach. For decades, the U.S. has been the market leader in investigating and sanctioning wrongdoing beyond its shores–often with tenuous links to its jurisdiction–but other countries are now following suit. A company’s place of incorporation or operations, the listing of securities on an exchange, the use of a particular currency or the involvement of nationals may be enough to establish a legal and factual nexus to the enforcing country, irrespective of where the underlying conduct occurred.
The third thing to note is the level of cooperation between the French, U.K. and U.S. authorities–first, through the establishment of a formal “joint investigation team” between France’s PNF and the U.K.’s SFO; second, through the “carving up” of the investigation, with each authority focusing on particular geographical regions or entities; and third, through coordinated settlement processes–resolved and announced at the same time in all three jurisdictions.
The fourth thing to note is the rise of “spin off” investigations. The Airbus investigation–and specifically, outreach by the French, U.K. and U.S. regulators seeking assistance–prompted domestic regulators across Europe, South America, Africa and Asia to open parallel investigations of their own.
The Airbus example may be striking, but it is not unique. Recent coordinated settlements reached with Goldman Sachs, Petrobras and Rolls-Royce–to name but a few–provide further evidence of this growing trend and such action is not limited to the investigation of allegations of bribery and corruption. Coordinated action, as part of criminal, civil and regulatory investigations, has also been taken in relation to AML failings, sanctions violations and breaches of antitrust laws. Furthermore, the enforcement authorities involved are not just the “traditional players” from North America, Europe and Asia. Increasingly, other nations are looking for their “slice of the pie” too. How then should businesses respond?
The way in which many corporations now do business means that regulatory issues that arise rarely will be limited to a particular country or even region. Accordingly, businesses should be developing global strategies to manage multi-jurisdictional internal and external investigations into alleged misconduct. Such strategies should take account of the common types of wrongdoing that frequently straddle borders–such as bribery and corruption, money laundering and sanctions evasion–and follow compliance best practices expected by global regulators. Further, companies should proactively anticipate and address the thorny practical issues that arise in cross-border investigations, such as data privacy, legal professional privilege, and labor and employment matters. Developing clear global standards and procedures will help to ensure consistency of approach, and doing so before an issue arises is far better than having to react on-the-spot if an enforcement authority shows up asking questions.
Businesses also should have in place strategies to deal with multiple enforcement agencies carrying out joint or parallel investigations. While communication and cooperation between authorities is much improved and, in many cases, better than ever, corporations cannot assume that reports to, or information shared with, a particular authority will be forwarded to counterparts. As a result, how, when and to whom to report suspected wrongdoing and/or to cooperate are vitally important decisions that can significantly impact a corporation's ability to secure leniency or a deferred prosecution agreement.
Finally, businesses should maintain relationships with external partners with a global presence–such as lawyers, accountants and forensic technology companies–that they can turn to on short notice when challenging circumstances arise. Advisors who are familiar with a company’s processes and procedures, and possess the knowledge and experience to complement in-house talent, can provide much-needed support and expertise when responding to unexpected events such as dawn raids or short-notice inspections.
Having developed global strategies, corporations should ensure that they are implemented locally in all parts of the business. Relevant and practical training should be delivered in local languages and tailored to address common issues arising from local customs and practices. Also, it may be necessary to augment or modify global policies and procedures in particular countries or regions in order to comply with local laws. For example, blocking statutes may prevent the provision of information or documents to foreign enforcement authorities without the consent of domestic bodies or courts, and other laws, such as the EU General Data Protection Regulation, may limit the extent to which certain data may be transmitted beyond the boundaries of geographical areas.
Businesses also should use the services of local counsel. Working in conjunction with in-house teams and global advisors, they are a key component in the development and implementation of effective global strategies. Not only do they practice local law, they have experience of local procedures, policy and customs, and will be able to conduct proceedings in local languages. They also are likely to have existing relationships with domestic regulators, law enforcement agencies and prosecutors, which can prove to be invaluable. In some countries, the reluctance of a corporation to use local counsel is seen as disrespectful by enforcement authorities and courts–a view that can make achieving a favorable outcome all the more difficult.
Finally, businesses should bear in mind that while many enforcement authorities are willing to cooperate with one another, there are some that will refuse to do so and instead take their own action in their time to secure their own outcome, irrespective of the steps taken by others. In such circumstances, a corporation can find itself in the middle of a geopolitical chess game between competing authorities. These situations can be difficult to navigate and underline the importance of global and local counsel working with one another to serve the best interests of their client, in all parts of the world.
The trend towards a “global” enforcement regime is set to continue. Having developed the relationships and mechanisms necessary to achieve a number of coordinated outcomes, enforcement authorities will no doubt continue pushing the boundaries, both literally and figuratively, to redress cross-border misconduct. As global enforcement risks rise, businesses should be keenly focused on having effective compliance policies and investigation protocols in place before the proverbial knock on the door.