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5 Trends in 2022 Financial Fraud Enforcement

  1. Cryptocurrency Infrastructure Regulation by Enforcement – Equipped with a greater understanding of how to identify fraud within the cryptocurrency space, several federal agencies are investigating and bringing enforcement actions with greater regularity against industry players. Prosecutors are particularly focused on the money laundering risks posed by exchange platforms, tumblers, and mixers, whereas other regulators, including the SEC and CFTC, are competing to define the regulatory boundaries for companies that issue digital tokens and offer decentralized finance technology (DeFi). As this area is still uncharted territory for regulators, they appear to be creating rules as they go along.

  2. Increased Focus on the Demand Side of Worldwide Corruption – At the end of 2021, the White House issued a new US Strategy on Countering Corruption, which made it government-wide priority to pursue corrupt foreign officials and those who assist them. While the Department of Justice (DOJ) will continue to aggressively enforce the Foreign Corrupt Practices Act (FCPA), which targets companies that provide bribes, DOJ will increase its focus on the government officials worldwide who demand them. At stake for these officials and those who help them, including accountants, bankers, and other professionals, are potential criminal penalties, economic sanctions, and immigration/visa consequences.

  3. Accelerated Paycheck Protection Program (PPP) Fraud Enforcement –This COVID-19 relief program, which offered forgivable loans to businesses that retained their staff in a challenging economic climate, was susceptible to both fraud and mistake, given the pace at which funds were handed out. DOJ began to crack down on fraudulent applications almost immediately, with easy-to-spot infractions at the top on its list. As enforcement continues, companies that used more sophisticated methods to commit PPP fraud, or that provided inconsistent information on loan applications and to investors, will become the next likely targets.

  4. Implementation of 2020 Anti-Money Laundering (AML) Legislation to Begin – Although this landmark piece of legislation was enacted in early 2021, it was not self-executing. Implementing regulations will continue to be promulgated throughout 2022, with likely significant impact on the AML enforcement landscape. Of particular interest are the legislation’s corporate registry requirement and its new whistleblower provision, which may trigger a new wave of investigations of institutions and individuals.

  5. Fallout from Explosion in Special Purpose Acquisition Companies (SPACs) Transactions – In 2021, the SEC brough its first enforcement action related to a proposed merger between a SPAC (or so-called “blank check company”) and a privately held target company, for violations of federal securities law. Given the explosive growth in SPAC transactions, federal enforcement, particularly on the basis of alleged misstated financials or other misrepresentations to investors, is only likely to increase.

About the Author

Greenberg Traurig, LLP Shareholder Kyle R. Freeny is a skilled trial attorney and former federal prosecutor for the Special Counsel’s Office and the Department of Justice (DOJ), Criminal Division’s Money Laundering and Asset Recovery Section (MLARS). She focuses her practice on white collar criminal defense, government and internal investigations, and anti-money laundering (AML) and international corruption matters.