Fraud and enforcement: A look back at 2023 and 5 predictions for 2024

ARTICLE | January 09, 2024

Authored by RSM US LLP

2023 was certainly a busy year for government officials, regulatory bodies and professional associations that focus on compliance, fraud prevention and investigations. From individual accountability within corporations to a changing of the guard at the highest level of the Department of Justice’s Foreign Corrupt Practices Act (FCPA) unit, there has never been a more important time for organizations to take the appropriate steps to enhance their compliance programs and conduct thorough investigations as the need arises.

What does that mean for 2024? How will this focus affect you and your organization? To start, you need to invest in a strong foundation of compliance—inclusive of people, processes and technology. And there are new areas to focus on, like artificial intelligence (AI) regulations and greenwashing. Below, we take a look at some of the key activities in 2023 and predict what you’ll see in 2024, along with steps you can take now to mitigate the impact on your business and stay on your strategic path forward.

2023 in review

Over the past year, several significant developments—spearheaded by leading regulatory and professional agencies—required companies to adjust compliance strategies. The following is a sampling of some of the more influential actions:

• January: The DOJ announced key revisions made to the corporate enforcement policy which emphasize the importance of individual accountability in corporate crime.
• March: During the American Bar Association's White Collar Crime Institute, DOJ officials emphasized the importance of self-disclosure, compliance in compensation and addressing root causes of corporate crime.
• March: The White House announced a $1.6 billion anti-fraud plan which allocates funds to investigate systemic pandemic fraud, invest in fraud prevention and identity theft, and assist victims of identity theft.
• May: The Association of Certified Fraud Examiners released the second edition of its Fraud Risk Management Guide. This publication offers a blueprint for helping organizations establish an overall fraud risk management program.
• July: David Fuhr, the former second-in-command at the DOJ's FCPA unit, took over the role of acting chief of the unit, succeeding David Last.
• August: The DOJ announced that it is taking action against COVID-19 fraud. It has brought enforcement actions totaling over $830 million and launched two additional COVID fraud strike force teams.
• October: The Securities and Exchange Commission’s Division of Examinations released its 2024 examination priorities, highlighting emerging risks to investors and markets.
• October: The DOJ announced that it is prioritizing corporate compliance and urged companies to strengthen diligence and governance to improve national security.
• November: The SEC announced its enforcement actions in the 2023 fiscal year, securing nearly $5 billion in remedies and awarding a record-breaking $600 million to whistleblowers.

In summary, expectations are rising, and scrutiny is increasing both in the U.S. and globally. This increased focus means corporations must be prepared to respond credibly and comprehensively to inquiries on proactive compliance efforts as well as reactive investigations.

Trends to expect in 2024

In 2024, we expect increased regulatory scrutiny to continue, with more attention on several emerging fraud and enforcement areas. The following topics will likely be on the radar of regulators and professional organizations in 2024, and your compliance strategies may need to evolve accordingly to meet new demands.

1. Development of AI-related regulations

AI-powered systems are rapidly transforming industries across various sectors, and regulators are working to establish comprehensive guidelines for responsible and ethical deployment.

Takeaway

Start now to understand the AI tools your business is currently deploying and how AI may be used in the future. Know where and what data AI is using and then gain a strong understanding of the potential regulations. Develop your compliance team and work plan supported by appropriate resources, internally and externally.

2. Record-breaking whistleblower activity

The swell of fraud investigations is fueled by an increase in whistleblower reports, influenced by strengthened EU and United States regulations, and subsequently more tips and proactive investigations. Record whistleblower awards in 2023 and the ongoing focus of both the DOJ and SEC on voluntary disclosure signals a trend shaping fraud investigations in the EU and the U.S. This trajectory is expected to continue in 2024.

Takeaway

Ensure your whistleblower and investigation policies, procedures and response plans are up to date. This includes having state-of-the-art AI-powered technology, supported by a comprehensive investigations team which includes independent third-party providers for more complex or sensitive situations.

3. Increased corporate compliance focus

With regulators and government bodies emphasizing the importance of comprehensive corporate compliance programs, organizations should be investing in compliance teams and tools, including assessing and testing their programs to ensure there is substance, not just form.

Takeaway

Insist on a culture of compliance. Conduct periodic independent, third-party risk assessments of your compliance program, documenting findings, remediation and enhancement steps. Make sure that the sophisticated technology and tools you use to run your business are also used in your compliance efforts.

4. Greater emphasis on cybersecurity

The SEC is ramping up enforcement with increased penalties and a focus on litigated cases, particularly in insider trading and cybersecurity. Rising cyberattack risks, cybercrime and cryptocurrency concerns may result in stricter regulations, necessitating enhanced data security measures and increased employee training.

Takeaway

Cyber criminals are getting smarter every day. Ensure your cybersecurity policies, procedures and response plans consider the latest technologies, deploy the appropriate specialized resources and are tested often for the inevitable “when,” not “if.”

5. Surge in investigations related to greenwashing

Increasing consumer demand for sustainability, heightened regulatory scrutiny and evolving sustainability standards are driving a rise in greenwashing investigations. Companies are likely to face a continued surge in such inquiries as consumers, regulators and investors become more discerning and environmentally conscious.

Takeaway

Conduct an independent, third-party risk assessment of your environmental, sustainability and governance policies, procedures and reporting. This should include your entire supply chain, including third-party providers. Identify areas of weakness and prepare a remediation plan, which includes a response plan for third-party inquiries and investigations.

With new threats quickly emerging, the regulatory environment is expanding quicker than ever before. To remain compliant and protect your key processes, you must be proactive and maintain agile compliance processes that can quickly adapt to new compliance demands. With regulatory guidelines, the only constant is change, and those who can adapt the quickest will ultimately have the most success.