Category:

Fraud & Abuse

Nowhere to Hide: The Corporate Transparency Act Seeks to Unmask the Beneficial Owners of Shell Companies

In January of 2021, Congress adopted substantial changes to the nation’s anti-money-laundering laws, including enacting a new federal statute, the Corporate Transparency Act (CTA or Act), that will establish a centralized database of corporate beneficial ownership. The CTA mandates that by 2025 (or, in some cases, by 2024) all domestic and foreign companies doing business in the U.S. must provide information about the true beneficiaries of their operations by complying with new reporting requirements. The legislation is designed to capture information on an estimated 32 million companies that operate in unregulated areas or are too small to trigger disclosure obligations under other federal laws yet can be used by criminals, terrorists, and other bad actors to hide money laundering and other illicit financial activities. The Treasury Department’s Financial Crimes Enforcement Network bureau (FinCEN) explained the need for a beneficial ownership database, stating, “Illicit actors frequently use corporate structures such as shell and front companies to obfuscate their identities and launder their ill-gotten gains through the U.S. financial system. Not only do such acts undermine U.S. national security, but they also threaten U.S. economic prosperity: shell and front companies can shield beneficial owners’ identities and allow criminals to illegally access and transact in the U.S. economy, while creating an uneven playing field for small U.S. businesses engaged in legitimate activity.” FinCEN issued its final rule on the CTA’s reporting requirements on September 29, 2022. Although the regulations resolve many of the issues that arose after the Act’s passage, a number of compliance challenges and questions still remain.

The Sicker, The Better: Cigna Orchestrates Fraudulent Scheme to Defraud Government

Cigna Corporation (Cigna)–a global juggernaut in the insurance arena–faces a health care fraud lawsuit brought by the government under the federal False Claims Act (the FCA). By allegedly exaggerating patients’ illnesses to boost its own risk scores, Cigna secured inflated payments from the Medicare Advantage reimbursement system.

The SEC’s Regulation Best Interest: Purposes, Components, and Criticisms

In 2019, the U.S. Securities and Exchange Commission (SEC) adopted Regulation Best Interest (“Reg BI”). Reg BI is a standard of conduct that applies to broker-dealers (a firm in the business of selling securities) and persons associated with broker-dealers when making a recommendation of a certain investment strategy or securities transaction to a retail customer. The SEC gave broker-dealers a time window to implement this new law into firm policies and procedures, and while no regulatory action happened in the first few years of its enactment, the SEC brought its first action in June of this year and FINRA brought its first in October of this year. This makes it especially important for broker-dealer firms to ensure they are presently in compliance with the standards set forth in Reg BI.

Home Health Care: Cost-Effective, Convenient, and Vulnerable to Fraud

Home health agencies (HHAs) provide health care services to assist individuals with a disability, or who are ill, injured, or elderly. It is a cost-effective and convenient method of receiving quality care that is provided from the comfort of the patient’s own home. While HHAs have been around for years, primarily to serve the elderly and avoid hospitalization, the post-pandemic “at-home” era has made it the fastest-growing healthcare industry in the country. However, the high demands and good intentions of instilling home health agencies come with its adverse counterpart- fraud and abuse.

Our American Government: a Self-Serving Entity?

As of September 2022, the current Congress has an approval rating of just 17% – an ignominious reality – and a series of recent investigations won’t serve to ease the mounting public frustration. Insider recently identified at least 72 members of Congress in noncompliance with the Stop Trading on Congressional Knowledge Act (STOCK). This revelation – among others – has prompted a push for the enactment of more stringent congressional stockholding limitations.

Jarksey v. SEC and the Future of Administrative Adjudications

On May 18, 2022, the United States Court of Appeals for the Fifth Circuit issued a novel and divisive decision that greatly restricts the administrative enforcement powers of the SEC and its use of Administrative Law Judges (ALJs) in Jarksey v. SEC. Although much deliberation has been had over the implications and immediate impact of this ruling, the takeaway is that the Securities and Exchange Commission (SEC) may be facing significant challenges to its internal enforcement procedures in the near future.

Possible Pitfalls of the New DOJ Compliance Policy

In March 2022, the U.S. Department of Justice (DOJ) introduced a new policy idea that requires a Chief Compliance Officer (CCO) undergo certification. This certification requires CCOs to attest at the end of company resolutions that their compliance program is reasonably designed to detect and promptly remedy behavior suspected or known to be in violation of applicable laws. The new policy is part of an effort to take more proactive measures against criminal behavior and activities such as fraud, bribery, corruption, etc. The certification is also aimed at empowering the CCOs as they speak on behalf of their company’s obligations to the compliance program.

The AMLA – Blowing the Whistle on Fraud

Whistleblowing – a powerful weapon in the arsenal of defense against fraud – is a highly effective tool utilized by the government to enforce regulatory compliance. Nevertheless, many employees remain hesitant to initiate criminal proceedings. In 2021, in an effort to dispel such concerns and to empower potential whistleblowers to take action, Congress enacted the Anti-Money Laundering Act (AMLA).

The SEC and Its ESG Investment Disclosure Proposal

The Securities and Exchange Commission (SEC) established the Environmental, Social, and Governance (“ESG”) Task Force in 2021. In March and May of 2022, the SEC proposed a disclosure rule “forcing publicly traded companies to disclose how climate change could threaten their businesses and describe their contributions to global warming.” The rule further accentuates the SEC’s mission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” However, the proposal has faced substantial opposition, as some believe the proposal exceeds the SEC’s authority.