Tag: SEC

In addition to the speeches presented at the ABA’s 38th Annual National Institute on White Collar Crime, by Deputy Attorney General Lisa Monaco (2023 Monaco Speech) and Assistant Attorney General Kenneth A. Polite (Polite Speech); there was the release of the 2023 U.S. Department of Justice Criminal Division Evaluation of Corporate Compliance Programs (ECCP). Today we review another new addition to the ECCP, dealing with messaging apps.

There is not much which seems to excise the regulators in the compliance space as much as messaging apps. The Securities and Exchange Commission (SEC) has brought multiple and very large enforcement actions against regulated industries around their allowing employees to use messaging apps with no corporate oversight. The Department of Justice (DOJ) has been talking about messaging apps for over two years and now incorporated its guidance into the ECCP.

The ECCP opened this section by noting, “Messaging applications have become ubiquitous in many markets and offer important platforms for companies to achieve growth and facilitate communication.” For any company under investigation or in a Foreign Corrupt Practices Act (FCPA) enforcement action, the DOJ will evaluate its “policies and mechanisms for identifying, reporting, investigating, and remediating potential misconduct and violations of law…governing the use of personal devices, communications platforms, and messaging applications, including ephemeral messaging applications.” Off the shelf policies will not be sufficient as the company’s management of messaging apps “should be tailored to the corporation’s risk profile and specific business needs.” Not surprisingly the DOJ is also concerned about storage, access and even backups, requiring that “business-related electronic data and communications are accessible and amenable to preservation by the company.” Training and communication of these policies and procedures will also be evaluated and “whether the corporation has enforced the policies and procedures on a regular and consistent basis in practice.”

The Messaging Apps

Under the section entitled “Communication Channels”, the DOJ poses a series of questions that every compliance program must answer. These questions include:

• What electronic communication channels does the company and its employees use, or allow to be used, to conduct business?
• How does that practice vary by jurisdiction and business function, and why?
• What mechanisms has the company put in place to manage and preserve information contained within each of the electronic communication channels?
• What preservation or deletion settings are available to each employee under each communication channel, and what do the company’s policies require with respect to each?
• What is the rationale for the company’s approach to determining which communication channels and settings are permitted?

Under this section, compliance must delineate which messaging apps a company uses and why. Is it consistent or does it vary country by country? What mechanism has your organization put in place to manage this risk? Finally, how are the communications preserved and what is your rationale for your system?

Policies and Procedures

Under the section entitled “Policy Environment”, the DOJ poses a series of questions that every compliance program must answer. These questions include:

• What policies and procedures are in place to ensure that communications and other data is preserved from devices that are replaced?
• What are the relevant code of conduct, privacy, security, and employment laws or policies that govern the organization’s ability to ensure security or monitor/access business-related communications?
• If the company has a “bring your own device” (BYOD) program, what are its policies governing preservation of and access to corporate data and communications stored on personal devices—including data contained within messaging platforms—and what is the rationale behind those policies?
• How have the company’s data retention and business conduct policies been applied and enforced with respect to personal devices and messaging applications?
• Do the organization’s policies permit the company to review business communications on BYOD and/or messaging applications?
• What exceptions or limitations to these policies have been permitted by the organization? If the company has a policy regarding whether employees should transfer messages, data, and information from private phones or messaging applications onto company record-keeping systems in order to preserve and retain them, is it being followed in practice, and how is it enforced?

This section presents several areas a compliance professional should look into for their program. Do you have an appropriate set of policies and procedures in place and are they the same for company issued phones and BYOD phones? If not, why not. Do you have a data retention policy in place for messaging apps and their platforms and is it applied consistently (if at all)? Does your organization review business communications through messaging apps or does your organization even have the right to do so? Finally, are messages preserved somewhere?

Under the section entitled “Risk Management”, the DOJ poses a series of questions that every compliance program must answer. These questions include:

• What are the consequences for employees who refuse the company access to company communications? Has the company ever exercised these rights?
• Has the company disciplined employees who fail to comply with the policy or the requirement that they give the company access to these communications? Has the use of personal devices or messaging applications—including ephemeral messaging applications—impaired in any way the organization’s compliance program or its ability to conduct internal investigations or respond to requests from prosecutors or civil enforcement or regulatory agencies?
• How does the organization manage security and exercise control over the communication channels used to conduct the organization’s affairs?
• Is the organization’s approach to permitting and managing communication channels, including BYOD and messaging applications, reasonable in the context of the company’s business needs and risk profile?

This  final section might as well have been named ‘consequence management’ but I guess that moniker was already taken. Here the DOJ wants to know what consequences recalcitrant  employees faced for failure to follow the appropriate  policies and procedures.  Moreover, did any employee actions around messaging apps hinder or block internal investigations or regulators queries or attendant responses?  Next, is an appropriate level of internal security being exercised for such communications? Finally, are the company’s action reasonable in the context of its business needs and risk management protocol?

Obviously, there is quite a bit in these three sections every compliance professional will have to consider. But the framework already exists which you can adapt. It is risk assessmentrisk management strategyongoing monitoringongoing improvement. It may take some work but your blueprint to handle these requirements exists.

Join us tomorrow when we conclude our review of the 2023 ECCP.