Deputy Attorney General Lisa Monaco has announced a series of new initiatives that could significantly increase corporate and individual disclosure of wrongdoing.  The upshot is that companies will need to be that much more vigilant in creating and maintaining a compliance-minded organization. 

First, Monaco announced new voluntary disclosure incentives for companies that acquire other companies.  Specifically, an acquiring company will be given credit for investigating and reporting any wrongdoing committed by the newly acquired company and can avoid penalties for crimes that took place under prior ownership.  This is an important development for any company that engages in frequent acquisitions, including private equity funds.  In particular, such companies should be mindful of this new policy for both the due diligence process and in the development of post-acquisition corporate compliance programs.

Next, Monaco announced a new program of financial incentives for corporate whistleblowers.  Noting the existence of financial incentive programs run by the SEC, CFTC, and other agencies, as well as the potential for qui tam rewards, she emphasized that there is currently no financial incentive program designed to encourage corporate whistleblowers to report criminal activities to DOJ.  This new program will be developed over the next 90 days and will provide direct payments to those individuals who report information to DOJ that leads to corporate prosecutions or settlements.  This will apply only to information that DOJ did not already know and will be available only to individuals not involved in the relevant criminal conduct.  This is a significant development that may incentivize employees to report possible wrongdoing to the government, as opposed to the organization’s internal compliance apparatus.

Finally, Monaco announced new initiatives related to disruptive technology and AI. Prosecutors will be instructed to seek higher sentences for any crime in which AI was used in furtherance of the offense.  In addition, corporate compliance programs will be expected to take AI into account. For example, when assessing the type of resolution to offer a company, prosecutors will assess the company’s ability to manage AI risks.

The overall message from Monaco was clear: Companies need to focus on prompt internal investigations and voluntary disclosures of wrongdoing prior to a DOJ investigation in order to be eligible for significantly reduced penalties.  For companies that do not adequately heed this advice, there will now be enhanced incentives for employees to report any alleged misconduct to the authorities directly.

Authors: Daniel Ahn, Evan Barr, Mark Bini, Rizwan Qureshi, and Anthony Todd