The week in GRC: Covid-19 creates legal minefield, and DoJ eyes tech industry liability shield
– The Wall Street Journal reported that the US Department of the Treasury moved to fill a gap in the country’s anti-money laundering (AML) regulatory framework and has begun a discussion over potential new rules intended to allow banks to allocate their compliance resources more effectively. The developments are part of activity at the Treasury’s Financial Crimes Enforcement Network (FinCEN) in recent months that seems to be a response to long-standing industry complaints, lawyers say.
A recent advance notice of proposed rulemaking seeks public comment on the requirement that financial institutions must maintain an ‘effective and reasonably designed’ AML program. Any amendments to the Treasury’s rules would clarify that such AML programs should be informed by a particular institution’s own risk assessment, and that they should result in the industry providing useful information to authorities, the notice said.
FinCEN has suggested making clarifications about the requirements of the Bank Secrecy Act that would allow banks to allocate their resources more effectively. The agency also recently completed a rule that imposes new AML requirements on certain financial institutions that have traditionally operated without a federal regulator.
– Private companies are racing to go public in the US amid growing uncertainty about what will happen to the stock market and economy after the presidential election, according to CNN. Experts say the Federal Reserve’s decision to keep interest rates at zero for the foreseeable future has helped create demand for IPOs while boosting the overall stock market and high-growth techs in particular.
More companies are choosing to list on Wall Street through mergers with so-called blank check special purpose acquisition companies. The SEC is also considering whether to approve a new rule that would allow companies to raise new money by directly listing their stocks. More companies could go public via direct listings if they were allowed to list shares and generate cash at the same time.
– The Business Roundtable’s statement regarding the purpose of a corporation, released last year, was held up by prominent executives as a landmark in the evolution of corporate governance. But The New York Times reported that, according to a study, its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to stand out in pursuit of racial and gender equality.
Financed by the Ford Foundation, the study is the work of KKS Advisors and the Test of Corporate Purpose, a group of researchers convened to assess how corporations have responded to the pandemic and the movement against racial injustice. ‘Since the pandemic’s inception,’ the study concludes, the Business Roundtable statement ‘has failed to deliver fundamental shifts in corporate purpose in a moment of grave crisis when enlightened purpose should be paramount.’
– According to the WSJ, companies are trying to figure out how to meet government expectations amid the slow move toward data-driven corporate compliance programs. The US Department of Justice (DoJ) in June instructed prosecutors to ask companies that come under investigation whether their compliance teams have access to data, if it is being used to monitor for risks and test policies and procedures. Authorities also have shown in recent settlements a willingness to reduce penalties for companies that have implemented data analytics or monitoring tools into their compliance programs.
These moves are encouraging compliance officers to find ways to access financial and operational data and adopt technology to better screen for risks such as bribery.
– According to CNBC, the DoJ proposed new legislation that would reform a key legal liability shield for the tech industry known as Section 230.
Section 230 of the Communications Decency Act protects online platforms from liability for their users’ posts and allows them to moderate and remove harmful content without being penalized. The draft legislation, which would need to be passed by Congress, aims to narrow the criteria online platforms must meet to earn the liability protections granted by Section 230. It would also carve out the statute’s immunity for certain cases, like offenses involving child sexual abuse.
– Budweiser and its parent company Anheuser-Busch InBev (AB InBev) announced that it will award 30 scholarships annually over the next five years aimed at developing greater representation of black people in the beer brewing industry, Reuters reported. The scholarships come at a time when nearly every company is confronting the issue of racism and diversity amid a national reckoning in the US in the aftermath of George Floyd’s death in May. ‘We realized we had a role not only to accelerate our diversity and inclusion agenda internally... but also externally by way of education,’ said Monica Rustgi, vice president of marketing for Budweiser USA.
AB InBev said it will stay in contact and track the successes of the award winners throughout the program but declined to elaborate on internal hiring goals.
– CNN reported that Wells Fargo CEO Charlie Scharf apologized after he reportedly blamed the lack of diversity at the bank on ‘a very limited pool of black talent to recruit from.’ In a memo to employees released by the bank, Scharf apologized for what he says was ‘an insensitive comment reflecting my own unconscious bias.’
‘There are many talented diverse individuals working at Wells Fargo and throughout the financial services industry and I never meant to imply otherwise,’ he wrote. ‘It’s clear to me that, across the industry, we have not done enough to improve diversity, especially at senior leadership levels.’
– The WSJ looked at how the Covid-19 pandemic has created a legal minefield for companies. For example, major disruptions have forced compliance officers to vet new suppliers and revamp internal safeguards, while travel curbs and remote working have complicated investigations and increased exposure to cyber-attacks.
Chief compliance officers must also help businesses navigate the risks and complex requirements of relief programs and the mechanics of an eventual return to the office while meeting the ever-shifting expectations of regulators and law enforcement agencies.
– Reuters reported that Canadian company Calfrac Well Services rejected a takeover offer from investor group Wilks Brothers and said it was sweetening its recapitalization plan to reduce debt. Calfrac’s board formally rejected the C$26.13 million ($19.5 million) offer from Wilks Brothers, which owns a near 20 percent stake in the oilfield services provider and is also a major bondholder.
Calfrac’s management in July presented shareholders with a recapitalization deal. But the plan met strong opposition from Wilks Brothers, which could not be reached immediately for comment.
– According to Reuters, Facebook’s long-delayed independent oversight board plans to launch in mid-to-late October, just before the US presidential election, although a board member said he did not know whether it would hear cases related to the contest. The board will initially have the authority to review decisions to take down posts from Facebook and Instagram and to recommend policy changes.