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The next year in global investigations

Aaron Marcu


Partner, New York

Adam Siegel


Partner, New York

Olivia Radin


Partner, New York

Eric Bruce


Partner, Washington, DC

Kimberly Zelnick


Partner, New York

Daniel Braun


Partner, Washington, DC

The recovery era’s sinking tide exposes all reefs

The global economic response to the pandemic is likely to be the most important trend for many areas of legal risk in 2021, and investigations and enforcement are no exception. Prosecutors and regulators – cooperating between agencies and across borders – will be on the lookout for fraud and other misconduct by employees trying to keep their companies afloat or profit improperly from inside information amid the recent rash of bankruptcies, historically volatile securities and commodities markets, and overwhelming business pressures brought to bear by COVID-19. And like the 2008 financial crisis, this behavior will be exposed as investors liquidate their portfolios and financial institutions call their loans amid increasing rates of default.

Governments will also look to their own checkbooks for possible leads; dozens of fraud cases have already arisen from the historic relief packages authorized in the depths of the crisis, with more likely as political leaders face public pressure to ensure funds are used to restart economies, not line fraudsters’ pockets. These inquiries may affect those that helped others to participate in the stimulus programs but missed red flags or inadvertently facilitated fraud. Where companies have taken advantage of pandemic-depressed valuations to engage in cross-border M&A, authorities may continue to focus on anti-bribery risks and other types of misconduct – especially when eager, hurting sellers required a compressed diligence timeline. Finally, uneven recoveries between national economies may inflame trade-related tensions as countries seek to protect wounded domestic industries and retaliate against nations believed to be playing unfairly. As companies caught between the US and China have seen, this friction will be accompanied by more investigations, more sanctions, and more regulatory risk.

Investigators have spent the last decade perfecting new tools, from more comprehensive whistleblower reward programs to new criminal statutes (such as US anti-spoofing laws) and sophisticated data analytics departments. Once the disruption passes, authorities will have a mountain of data to review and analyze, and they appear committed to the task ahead. For example, one US Department of Justice (DOJ) official already stated that the pandemic has provided DOJ with “years and years of cases to come”. The director of enforcement at the Commodity Futures Trading Commission has flagged COVID-19-related issues as a priority and said: “We now have the tools, including through the development of our data analytics program, to better test and verify the information we receive.” These pre-existing trends are likely to find reinvigorated political support in the incoming administration: President-elect Biden is widely expected to pursue financial and corporate fraud more aggressively than President Trump. Indeed, many high-level regulators from the Obama years – when these tools and techniques were first implemented – are reportedly in the running for key posts or are already assisting with presidential transition efforts. As the uncertainty caused by COVID-19 recedes, the new (but experienced) team in Washington appears eager to dig into the problems it has exposed.