Monitors use of messaging apps, warns DOJ Polite

If the Justice Department evaluates your compliance program as part of an investigation into your company, it will expect you to generate communications from third-party messaging apps to evaluate your policies for handling them, Kenneth Polite, Jr. said last week.

Messaging apps have been the most popular among regulators and law enforcement agencies as their use has grown, allowing employees to easily circumvent record-keeping requirements and avoid producing documents during investigations.

For this reason, the department expects companies to be prepared to explain how they handle these communications.

“If a company hasn’t created communications from these third-party messaging apps, our prosecutors won’t take that at face value,” Polite said. white collar crime conference hosted by the American Bar Association in Miami on Friday. “They ask if the company has access to such communications [and] whether they are stored on company devices or servers.”

Individual reviews

Because companies differ in the role messaging apps play in their business, there’s no hard-and-fast rule about what is and isn’t acceptable treatment, Polite said. However, this does not prevent the department from evaluating the efficiency of the company.

“We are looking at how policies governing messaging apps should be tailored to a company’s risk profile and specific business needs, and ensure that business-related electronic data and communications can be preserved and accessed where appropriate,” he said.

In addition to having the right policy, the company needs to make sure that its employees know about it and take it seriously.

“Our prosecutors … will look at how companies communicate policies to employees and whether they consistently enforce them,” he said.

In a recent high-profile case involving the use of self-deleting messages, a federal judge investigating the financial collapse of cryptocurrency exchange FTX accused the company’s CEO of violating the rules of his bail package by communicating via encrypted messages. messaging app Signal.

over the bail hearing In Sam Bankman-Fried’s case last month, U.S. District Court Judge Lewis Kaplan for the Southern District of New York said he wanted a defense attorney to give him more information about how they can secure the former FTX CEO’s communications while he prepares for trial. about his role in the crypto exchange crash.

In another recent case, the Securities and Exchange Commission fined dozens of banks tens of millions of dollars each, and in some cases as much as $200 million, for allowing their employees to negotiate securities trades on messaging apps.

The banks hit with the biggest penalties later tried to recover the amounts from their employees.

Compensation Policy

Polite doubled down on Assistant Attorney General Lisa Monaco’s message at the same conference that the department wants to see more companies do what banks do. While neither Polite nor Monaco cited the banks, they made it clear that they wanted the companies to adopt a clawback policy similar to the one banks have followed to reward employees who circumvent the rules, including rules about using messaging apps too.

“The crime branch is launching a pilot program … to offer fine reductions to companies seeking to recover damages in appropriate cases,” Polite said.

The clawbacks are part of a two-part policy that ties compliance performance to compensation. The second part gives companies the ability to reduce penalties by establishing a process to reduce executive compensation when compliance performance indicators are not met.

“Our goal is to ensure that the company has compliance criteria in place to reward ethical behavior and to punish and deter abuse,” he said.