The U.S. Justice Department's moving to curtail the use of compliance monitors, and we've got some early takeaways from the defense bar. Plus: A software company's general counsel makes the business case for a more hands-on regulatory approach in the United States for data privacy and security. And we spotlight two former Securities and Exchange Commission lawyers decamping for Big Law jobs.

As always thanks for reading—and please do send feedback. I appreciate hearing from you about what's on your plate—observations, trends, new clients. I'm at [email protected] and 202-828-0315, or follow me on Twitter @cryanbarber.

Will Compliance Monitors Disappear from DOJ's Settlement Demands?

The U.S. Justice Department's criminal division—now under the leadership of former Kirkland & Ellis partner Brian Benczkowski—is moving forward with new guidance that could curtail the imposition of compliance monitors in deferred prosecution and non-prosecution agreements. I wrote about the guidance here—and read Benczkowski's full memo here.

There's no doubt the guidance could benefit defense counsel—but we'll wait and see how far Main Justice takes the new guidance, which replaced an Obama-era memo released by Lanny Breuer, then the assistant attorney general in charge of the criminal division.

One chief takeaway from Benczkowski's guidance is that prosecutors face a higher bar for seeking to impose a monitor in the first place, and companies and their lawyers get more say in who they want as the monitor. Benczkowski said he wants to make monitors the exception, not the norm. And that's music to the ears of white-collar defenders.

A team from Wilmer Cutler Pickering Hale and Dorr—including Ronald Machen, the former U.S. attorney for D.C.—offered this analysis:

“Both Benczkowski's remarks and the text of the 2018 Monitor Memorandum suggest that future corporate resolutions with the Criminal Division will include a closer assessment of a company's compliance program. Indeed, Benczkowski's speech indicates that department is actively working to deepen its talent pool when it comes to the ability to assess corporate compliance programs—and to evaluate the “potential benefits” of a corporate monitor. The tenor of Benczkowski's remarks and the text of the 2018 Monitor Memorandum both appear to suggest, at the very least, a closer look by the Department prior to imposing a monitor—and perhaps ultimately an overall decline in the number of resolutions requiring a monitorship as a condition of settlement.”

Benczkowski's guidance reflects “the Trump Administration Justice Department's more pragmatic approach to addressing corporate wrongdoing,” Robert Anello, a partner at Morvillo Abramowitz Grand Iason & Anello wrote in a piece at Forbes. Anello said “the gist of the revised approach is to allow corporations that demonstrate a willingness to improve internal compliance to do so, rather than require them to take on costly and disruptive monitors.”

Anello added: “For years, the likelihood that prosecutors would insist on the installation of a monitor and its associated costs and substantial disruption to a corporation's operations have played a large role in a company's negotiation and resolution of a criminal case. The new guidance, as set forth in the Benczkowski Memorandum, signal that this outsized influence will be reduced.”

In its own alert, Cleary Gottlieb Steen & Hamilton said the guidance gives a company facing the possibility of a monitorship with more of an opportunity to make the case for why it doesn't need one.

Eric Feldman, a senior vice vice president and managing director of corporate ethics and compliance programs at Affiliated Monitors Inc., said he was not as “alarmed” as others were by the new guidance.

“I don't see this as a fundamental change. What I see this as is I think a sensible emphasis on remediation by companies. So it always should have been remediation,” Feldman said. “Hearing DOJ set this out in a much clearer way, that the imposition of a monitor is not going to be punitive, that it's only going to be in cases where the government needs that assurance that the company is taking steps to remediate the controls, the ethics and compliance programs and the activity that may have contributed to the misconduct in the first place, that makes a lot of sense.”

>> More reading: Compliance Week spotlighted some of the new training and hiring policies that Benczkowski announced in his remarks last week in New York. And the Wall Street Journal has more here on the new guidance.

Compliance Headlines: CFPB Will Define 'Abusive' Behavior

“A federal regulator plans to explain what it considers to be 'abusive' practices by companies selling financial services, a move aimed at giving a clearer idea of what behavior would get companies into trouble under relatively new government enforcement powers,” the Wall Street Journal reports. “I think 'unfair' is fairly well-established in the law, 'deceptive' is very well-established in the law and to my knowledge, I don't think 'abusive' is nearly as established in the law,” CFPB head Mick Mulvaney said. The American Banker has more here.

Some other stories that caught my eye…

>> The Trump administration's Iran sanctions has presented a wrinkle—one that comes with potentially wide consequences. From the NYT, a spotlight on the bank messaging system Swift: “The Trump administration now has to weigh some tough choices. It could take a hard-edge approach and impose penalties on Swift or the banks and people connected to the entity. But that could unsettle the major financial institutions that own and rely on Swift. The importance of the messaging service is hard to overstate. Swift connects more than 11,000 banks across more than 200 countries, and there is no other entity that could quickly step in and take its place.”

>> Dubai-based Mashreqbank PSC agreed to pay New York financial regulators $40 million for violating state and U.S. anti-money laundering laws. “In addition to the $40 million fine, the bank was ordered to hire a consultant to oversee and address compliance deficiencies, and to hire a 'lookback consultant' to review the branch's transaction-clearing activity from April to September of 2016,” the Wall Street Journal reported. Superintendent Maria Vullo said in a statement: “DFS appreciates Mashreqbank's strong cooperation in resolving this matter. By this consent order, the bank is being held accountable for ensuring vigilance against money laundering and other illicit activity to ensure that our financial system remains safe and sound.” Read the consent order here.

>> Catching up with Julio Avalos, general counsel to the software coding platform GitHub Inc. The Wall Street Journal reports: “As lawmakers in Washington this week discuss creating new federal privacy legislation, Mr. Avalos warned that the U.S.' hands-off approach to regulating tech companies so far could disadvantage businesses. After more than two decades since the last U.S. major internet legislation passed, there's a need for a new regulatory approach to data privacy and security, he said.”

Who Got the Work

>> McDermott Will & Emery partner Timothy Hoeffner, Morrison & Foerster's Carl Loewenson Jr. and Gregory Bruch of Bruch Hanna all played a role in a recent Securities and Exchange Commission settlement resolving charges against three accountants who were accused of improper conduct in an audit of AmTrust Financial Services Inc. The accountants—all formerly of BDO USA LLP—signed off on documentation for the audit in spite of not completing the work, according to the SEC. To resolve the charges, all three agreed to suspensions that will bar them from participating in the financial reporting and auditing of public companies. Loewenson's client, Lev Nagdimov, who was accused of instructing the audit team to sign off on all work papers and audit programs regardless of whether its work was finished, will have to wait five years to apply for reinstatement. The two other accountants, Richard J. Bertuglia and Thomas Green, will have to wait three years and one year, respectively.

>> David Willingham and Michael Roth of Boies Schiller Flexner declared partial victory after an in-house judge for the SEC issued a limited ruling against their client, litigation financier RD Legal Capital, which was accused of misleading investors about the riskiness of its interests in legal disputes. The administrative law judge found that RD Legal, by investing assets in cases that involved litigation risk, went beyond the strategy it advertised to investors—”but not to the extent alleged by the [enforcement] division and not with scienter.” The judge ordered RD Legal to pay a $575,000 civil penalty. Its founder, Roni Dersovitz, was ordered to pay a civil penalty of $56,250 and suspended from the securities industry for six months. His lawyers at Boies Schiller said: “We are grateful that the SEC's own Administrative Law Judge dismissed all of the Commission's claims alleging Roni Dersovitz and RD Legal Capital acted with an intent to deceive investors … As we always knew to be true, the Court found today that neither Mr. Dersovitz nor RDLC acted with any fraudulent intent. Mr. Dersovitz and RDLC in fact delivered to their investors strong above-market results during the very period of time covered in the SEC's complaint.”

>> The granola bar maker Kind LLC has hired Covington & Burling to lobby on “federal activity regarding food labeling claims.” On the Covington team is Jessica O'Connell, who served as an associate chief counsel at the U.S. Food and Drug Administration before becoming a partner at Covington. She's joined by another former FDA lawyer, Wade Ackerman, who also worked as a senior counsel for the Senate Committee on Health, Education, Labor and Pensions before becoming a Los Angeles-based partner at the firm.

Speaking of Covington and lobbying… We've got some details on a new financial disclosure from Covington lobbyist Richard Hertling, who's up for a seat on the U.S. Court of Federal Claims.

Notable Moves and Promotions

>> White & Case is bulking up its Washington office with the addition of longtime U.S. Securities and Exchange Commission attorney Era Anagnosti, who was serving until recently in the Corporation Finance division as the acting assistant director for the Office of Financial Services, my colleague Megan Tribe reports.

>> Ann LaCarrubba is venturing into the crypto in-house world to serve as general counsel and chief compliance officer to the blockchain-based fintech startup Celsius Network. My colleague Kristen Rasmussen has more.

>> Megan Monroe-Coleman was named chief compliance officer at HBUS, the “U.S. strategic partner of Huobi, the world's leading digital currency marketplace.” Monroe-Coleman formerly was a compliance official at Intuit. She spent seven years, earlier, at PricewaterhouseCoopers.

>> Former federal prosecutor R. Matthew Hiller has joined DLA Piper in Chicago as a litigation partner. Hiller was formerly a cyber-crimes prosecutor.

>> C. Wallace DeWitt, formerly senior counsel to SEC Commissioner Michael Piwowar, has joined Cahill Gordon & Reindel as counsel in the securities and regulatory enforcement practice.

>> Scott Ferber, former counsel for cyber investigations at the U.S. Justice Department, has joined King & Spalding as a partner in the data, privacy and security practice.

>> Melissa Richards, the former chief legal & risk officer at national mortgage banking firm CMG Financial, has joined Mayer Brown as a partner in the firm's financial services regulatory and enforcement practice. Steve Kaplan, a co-leader of the practice group, said “Melissa has cultivated an outstanding reputation in California and nationwide for handling compliance, licensing, regulatory examination and enforcement defense work across the mortgage and consumer financial services industries.”