Record Enforcement Activity in 2016 for FCPA, FCA, and BSA/AML Violations - Does it Mark an Upward Trajectory or the End of an Era?

In 2016, government enforcement of the Foreign Corrupt Practices Act (FCPA), the False Claims Act (FCA), and the anti-money laundering rules of the Bank Secrecy Act (BSA/AML) reached record highs, including billions of dollars in fines, penalties, and forfeitures.  The start of 2017 may usher in a new set of enforcement priorities, but until those changes become evident, companies and individuals should remain aware and wary of the significant risks these three laws pose.  Below are some highlights for further consideration:

FCPA Sets Records - 2016 was a record-breaking year in the enforcement of the anti-bribery and corruption provisions of the FCPA, particularly by the Securities and Exchange Commission (SEC), which filed 21 enforcement actions in its fiscal year 2016, compared to 9 in 2015.  Amounts paid in settlements and penalties also soared.  For example, foreign engineering conglomerate Odebrecht SA and its affiliate Braskem SA agreed in December to pay $3.5 billion under related plea and settlement agreements with the Department of Justice (DOJ) and the SEC, representing the largest ever global bribery resolution, for its alleged payment of bribes to government officials and political parties.  Many other companies, including Glaxo-Smith Kline plc and Embraer SA, paid settlements in the tens, and hundreds, of millions of dollars throughout the year over a wide range of alleged conduct occurring in regions around the globe. 

FCA Follows Close Behind - The FCA also remained a potent government enforcement weapon and similarly large risk.  In fiscal year 2016, the government collected $4.7 billion — the third-highest annual figure ever — in judgments and settlements related to allegedly false claims made by companies doing business with the government.  Nearly 90% of that sum was recovered from the financial and healthcare industries alone.  In those industries, large settlements by Wells Fargo and Pfizer led the way. Wells Fargo paid $1.2 billion to settle allegations that it falsely certified the eligibility of mortgage loans for Federal Housing Administration insurance, leading to allegedly improper government insurance payouts on loans which had defaulted after the 2008 recession.  Pfizer paid $784.6 million to settle claims that one of its subsidiaries allegedly defrauded Medicaid by failing to give state Medicaid programs the same drug pricing discounts provided to thousands of private hospitals.  Again, these companies are not alone, as many others paid high amounts to resolve FCA investigations. 

BSA/AML Remains Active - BSA/AML enforcement might be the smallest of the three in terms of total penalties, but its costs were nevertheless significant.  BSA/AML regulations require, among other things, that financial institutions record and/or report on cash purchases of negotiable instruments, cash transactions exceeding $10,000, and suspicious activity that might indicate money laundering, tax evasion or other crimes.  In 2016, financial institutions were hit with approximately $70 million in fines, penalties, and other costs.  In one example, the  Financial Industry Regulatory Authority (FINRA) fined Credit Suisse Securities LLC $16.5 million for anti-money laundering violations, including failure to monitor and detect suspicious trading and money movements.  In another, the Financial Crimes Enforcement Network of the Treasury Department (FinCEN) imposed on Cantor Gaming a civil monetary penalty of $12 million for BSA violations, including failures in its compliance program and recordkeeping.  Cantor Gaming also entered into a non-prosecution agreement with the DOJ, agreeing to a forfeiture of $6 million and a criminal fine of $10.5 million.

An Uncertain Path Forward in 2017 Time will tell whether the new administration’s policy and legislative reforms have any notable impact on FCA, FCPA, or BSA/AML enforcement, but it may remain a high priority for the federal government in 2017 and thereafter.  Calfee’s lawyers, including those on the White Collar Defense and Investigations team, have experience in each of these three areas and can help answer your questions or assist in investigating, or defending, where needed.