During the 2024 American Bar Association National Institute on White Collar Crime (the 2024 White Collar Conference) earlier this month, US Attorney General (AG) Merrick Garland, US Deputy Attorney General (DAG) Lisa Monaco, Acting US Assistant Attorney (AAG) General Nicole Argentieri and other US government officials spoke extensively on the US Department of Justice’s (DOJ) heightened corporate enforcement efforts. Building on last year’s changes to DOJ’s corporate enforcement policies, DOJ will be using a “mix of carrots and sticks” – including a new DOJ-run whistleblower program – to promote corporate compliance, encourage voluntary self-disclosure, and hold individuals and corporations accountable for corporate misconduct.

DAG Monaco and AAG Argentieri unveiled plans for a whistleblower program that will reward individuals who help DOJ uncover significant corporate or financial misconduct. The new whistleblower program will “fill gaps” not covered by existing whistleblower programs and provides DOJ with another tool to encourage companies to enhance their compliance programs and voluntarily self-disclose misconduct. DOJ will use the next 90 days to fully develop its whistleblower program before formally implementing a pilot program.

At the conference, AG Garland, DAG Monaco and others discussed recent DOJ corporate enforcement policy initiatives. DOJ’s leadership repeatedly emphasized the substantial financial benefits of voluntary self-disclosure, cooperation and remediation while stressing the importance of accountability for individual wrongdoers and the need to address corporate recidivism. Companies with a history of misconduct can expect to receive harsher financial penalties designed to deliver meaningful consequences.

DOJ officials also discussed a number of ongoing DOJ enforcement priorities, including artificial intelligence (AI), cryptocurrency, data protection and sanctions. DOJ cautioned that criminal deployment of AI will result in prosecutors seeking stiffer penalties and highlighted an increasing connection between corporate enforcement objectives and American national security interests related to the protection of sensitive data.

IN DEPTH

DOJ’s New Whistleblower Pilot Program

The headline from the 2024 White Collar Conference is DOJ’s new whistleblower program. DAG Monaco and AAG Argentieri announced that DOJ will use the next 90 days to develop and implement a DOJ-run pilot whistleblower program, which is expected to start later this year. If an individual helps DOJ discover misconduct that was otherwise unknown to DOJ, then the whistleblower can qualify for a monetary share of any resulting civil or criminal forfeiture action.

By implementing its own whistleblower program, DOJ is hoping to emulate the success of other whistleblower programs, which have become “indispensable” for many federal agencies. For example, in 2023, the US Securities and Exchange Commission’s (SEC) Whistleblower Program received more than 18,000 tips and awarded nearly $600 million to whistleblowers. The Commodity Futures Trading Commission’s (CFTC) Whistleblower Program has resulted in enforcement actions leading to more than $3 billion in financial penalties in the past decade.

DOJ’s whistleblower program is meant to “fill gaps” and proactively address misconduct that existing federal whistleblower programs do not already cover. In particular, DOJ is focused on criminal abuses of the US financial system, foreign corruption matters outside the jurisdiction of the SEC and domestic corruption matters involving bribes to government officials. DOJ also appears to be heavily focused on privately-owned companies. As examples of cases that would fall within DOJ’s new whistleblower program, DAG Monaco referenced the chief financial officer of a private equity firm forging loan documents or a private technology startup paying bribes to obtain regulatory approvals.

DAG Monaco and AAG Argentieri also made clear that DOJ’s whistleblower program is designed to drive companies to voluntarily self-disclose misconduct and to do so quickly. Whistleblowers can only obtain an award by providing original information, and companies can only obtain the benefits of DOJ’s voluntary self-disclosure program if they are “first in the door.” As DAG Monaco explained, “[w]hen everyone needs to be first in the door, no one wants to be second.” DOJ expects these “incentives to reinforce each other and multiplier effect, encouraging both companies and individuals to tell us what they know as soon as they know it.”

DAG Monaco and AAG Argentieri said DOJ will offer payments to whistleblowers under the following conditions:

• Only after all victims have been properly compensated
• Only to those who submit truthful information not already known to the government
• Only when the information is provided voluntarily and not in response to any government inquiry, preexisting reporting obligation or imminent threat of disclosure
• Only to those not involved in the criminal activity itself
• Only in cases where there is not an existing financial disclosure incentive – such as a qui tam or another applicable federal whistleblower program

Other key details of the forthcoming whistleblower program, however, have yet to be developed or announced. DOJ provided no information regarding the range of potential whistleblower awards, the criteria for determining the amount of a whistleblower award, or who will be ultimately responsible for determining whether an individual is entitled to a whistleblower award. Until these additional details are known, it is difficult to predict whether the program will have a meaningful impact on corporate enforcement going forward.

DOJ’s ‘Carrots and Sticks’ Approach to Corporate Enforcement

Throughout the 2024 White Collar Conference, DOJ officials spoke extensively about DOJ’s ongoing corporate enforcement efforts and policies. AG Garland, DAG Monaco and other officials repeatedly emphasized the need to hold both individuals and corporations accountable for misconduct, while encouraging companies to invest in a culture of compliance and voluntarily self-disclose any misconduct. To achieve these goals, DOJ continues to implement what it refers to as a “carrots and sticks” approach to corporate enforcement.

The “sticks” include aggressive prosecution of the most serious individual and corporate wrongdoers and significant consequences for corporate recidivists. AG Garland noted that DOJ’s “first priority in the area of white collar crime is going after individual bad actors.” He explained that the “greatest deterrence to white collar crime is fear of individual prosecutions of executives.” DAG Monaco and AAG Argentieri then emphasized convictions DOJ has recently obtained against individual corporate executives, including the convictions of FTX’s CEO Samuel Bankman-Fried and Binance’s CEO Changpeng Zhao. DAG Monaco, AAG Argentieri and other officials also spoke repeatedly about the need to address corporate recidivism, with increased financial penalties for companies with a history of past misconduct.

As for the “carrots,” DAG Monaco highlighted the benefits of DOJ’s voluntary self-disclosure (VSD) programs, touting the single corporate VSD policy for all US Attorney’s Offices nationwide that was rolled out last year. Voluntary self-disclosure remains at the core of DOJ’s corporate enforcement efforts. DAG Monaco’s mantra for corporations that discover misconduct is to “step up and own up,” encouraging disclosure first and foremost if they desire the most beneficial treatment considerations, including declination, non-prosecution agreements and deferred prosecution agreements, and substantially reduced monetary penalties. She, however, noted that even if DOJ discovers misconduct in the absence of company disclosure, cooperation and remediation remain valuable considerations for DOJ in the process of resolution.

DOJ believes its “carrots and sticks” approach is working. AAG Argentieri noted that DOJ has already seen “substantial year-over-year increases in disclosures” from companies to DOJ’s fraud section, with nearly twice as many disclosures in 2023 as in 2021.

DOJ’s Current Enforcement Priorities

AG Garland, DAG Monaco and other officials also discussed a number of ongoing DOJ’s enforcement priorities. In addition to traditional financial crimes, government officials repeatedly referenced AI, cryptocurrency, data security and sanctions.

DOJ and other government officials focused heavily on AI throughout the 2024 White Collar Conference. AG Garland observed that AI demonstrates great promise, but it has evolved with equally great risk, particularly in accelerating cyberattacks, advancing fraud and enhancing national security threats. DOJ will be hiring experts in computer science and technology to address AI capabilities and enforcement concerns. DAG Monaco also noted that federal prosecutors will seek penalty enhancements if AI is used to further criminal activity.

Assistant Attorney General for National Security, Matthew Olsen, emphasized the importance of sensitive data security as a crucial measure to protect US national security interests. Citing President Joe Biden’s recent Executive Order that grants authority to DOJ to issue regulations to strengthen security protections for Americans’ bulk sensitive data, including personal, health and financial data, AAG Olsen encouraged companies to have a clear understanding of the data that they have collected for their businesses and how it is safeguarded, where that data is being transmitted, who has access to the data, and where the data will potentially be shared, through sales or otherwise.

AAG Olsen also noted that corporations “are on the front lines when it comes to enforcing critical national security tools, like sanctions and export controls.” AAG Olsen said that the National Security Division has more than “doubled the number of prosecutors working on sanctions, export control, and foreign agent laws” and “brought on two veteran prosecutors to serve as the division’s first ever chief and deputy chief counsel for corporate enforcement.”

DOJ and other government agencies remain focused on fraud involving cryptocurrency. As noted above, AAG Argentieri highlighted the recent FTX and Binance convictions. And SEC’s Director of Enforcement, Grubir Grewal, and CFTC’s Director of Enforcement, Ian McGinley, both addressed their agencies’ ongoing enforcement efforts regarding cryptocurrency.

KEY TAKEAWAYS

• DOJ is aggressively encouraging companies to voluntarily self-disclose misconduct and to do so at the earliest possible opportunity. DOJ clearly expects the threat of increased whistleblower activity to further pressure companies to voluntarily self-disclosure misconduct.
• While the new whistleblower program underscores DOJ’s efforts to incentivize self-disclosure, it is unclear whether the program will have a meaningful impact on enforcement. Rewards will only be available to individuals with no involvement in the alleged misconduct and only after all victims have been paid. These limitations could substantially reduce the financial incentives for potential whistleblowers to come forward and report wrongdoing.
• Companies that do not voluntarily self-report misconduct should expect DOJ to seek harsher financial penalties going forward. Throughout the 2024 White Collar Conference, government officials explained that financial penalties cannot become “the cost of doing business” and noted that increased penalties may be necessary to deter future misconduct.
• A well-designed and robust corporate compliance program is critical in the current enforcement environment, where DOJ is actively encouraging whistleblowers to come to DOJ first. Companies should ensure that their compliance programs are designed to proactively identify misconduct which is then investigated and remediated so that self-disclosure is at least an option.
• DOJ increasingly views corporate enforcement as a national security issue. Companies can expect DOJ to continue to focus on sanctions and export control violations.
• DOJ recognizes both the promise and perils of AI. DOJ officials expressed growing concern about the use of AI to commit sophisticated financial fraud, as well as cybercrimes that manipulate data and threaten national security interests. If AI is uncovered as part of corporate misconduct, federal prosecutors are likely to pursue enhanced penalties. Companies should continuously monitor fraud prevention strategies and data security protocols to identify and address evolving risks associated with disruptive technologies like AI.

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