The Monaco Memo and the Future of Corporate Compliance: A Comprehensive Overview

In the ever-evolving story of corporate crime, a new chapter unfolded with the issuance of a memo by Deputy Attorney General Lisa Monaco. Hereinafter “The Monaco Memo”. The Monaco Memo marks a historical shift in the U.S. Department of Justice’s (“DOJ”) approach to tackling corporate misconduct. Building upon the legacy of the Yates Memo that was issued in 2015 – which emphasised individual accountability in corporate wrongdoing – the Monaco Memo expands its scope, introducing nuanced changes and stricter guidelines that are set to redefine the landscape of corporate compliance and enforcement. This article is the first in our series titled ‘The Monaco Memo and the Future of Corporate Compliance’, where we delve into how the United States revamped their stance on Corporate Crime Enforcement and how that effects and redesigns effective corporate compliance.

Historical Context: From Yates to Monaco

To understand the importance of the Monaco Memo’s, we first trace its roots back to the Yates Memo as this was one of the first big shifts in corporate crime enforcement by the DOJ. The Yates Memo, named after former Deputy Attorney General Sally Yates, was issued in 2015. Its core principle was clear: individual accountability must be at the forefront of corporate crime investigations. This emphasis on holding individuals, not just corporations, responsible for illegal activities marked a decisive step in the DOJ’s efforts to combat corporate misconduct.

The Yates Memo’s primary directive was to ensure that corporations would no longer shield their senior executives from liability. In practice, this meant that individuals were not prosecuted separately. The Yates Memo mandated that for a company to receive any consideration for cooperation, it must provide all relevant facts about the individuals involved in the misconduct. This policy aimed to incentivise corporations to be more forthcoming with information and to work alongside the DOJ in identifying culpable individuals. The Yates Memo’s focus on individuals was a response to public criticism that, despite significant financial settlements with corporations, few executives were held personally responsible for their roles in corporate scandals. In other words, the DOJ exploited ‘class justice’.

Fast forward to 2021, when Monaco published her first memorandum, titled “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies”. With this memo, Monaco published her initial revisions, reinstating the ‘all or nothing approach’ for cooperation credit of Yates. The revisions include requiring full disclosure about individuals involved in misconduct, a holistic evaluation of a company’s entire history of misconduct and revised guidance on corporate monitorships with decisions based on each case’s facts and circumstances. With these revisions, Monaco emphasised the need for prevention of repeated misconduct and the effectiveness of compliance programs. Apart from these revisions, Monaco introduced the creation of the ‘Corporate Crime Advisory Group’. This group shall eventually provide input and recommendations that will lead to the “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group”. Or how we like to call it, the Monaco Memo.

Dissecting the Monaco Memo and its Key Focus Areas

The Monaco Memo was issued on 15 September 2022. It builds upon the foundations laid by the Yates Memo, while also addressing some of its limitations and expanding its focus. Recognising the need for a more dynamic approach to corporate crime, the Monaco Memo not only reinforces the importance of individual accountability but also introduces new elements aimed at enhancing corporate compliance and self-disclosure practices. In short, the Memo provides guidance on four topics: (i) individual accountability, (ii) corporate accountability, (iii) independent compliance monitorships, and (iv) Commitment to Transparency in Corporate Criminal Enforcement. For the purpose of this series (i.e., Monaco and the Future of Corporate Compliance) we will focus on the first two topics and provide a summary of the key elements.

Guidance on Individual Accountability

The primary objective of the DOJ in is to ensure that individuals who perpetrate and benefit from corporate crime are held responsible. After all, such accountability acts as a deterrent against future misconduct and motivates adjustments in behaviour at both individual and corporate levels. In doing that, The Monaco Memo notes that to be eligible for any cooperation credit, corporations must produce and disclose all relevant (non-privileged) facts about individual misconduct in a timely manner. Such timely and complete disclosure is at the responsibility of the company. Evidence concerning individuals, as well as the prosecution of individuals, will be prioritised by the prosecutor. The fact that Monaco is serious about individual accountability is emphasised by the expectation that in cases where prosecutors aim to settle a corporate matter before fully investigating the individuals involved, they must accompany the prosecution or corporate resolution authorisation memorandum with an additional document. This document should detail all individuals potentially at fault, describe the current state of the investigation into their conduct, outline the remaining investigative steps, and provide a plan to conclude the investigation before the expiration of any relevant statute of limitations.

Furthermore, the Monaco Memo also addresses prosecution of individuals responsible for cross-border corporate crime by foreign counterparts. Cooperation with international law enforcement, including evidence sharing and capacity building, is a key part of the DOJ’s strategy to combat corporate crime. While recognising that successful prosecution in another jurisdiction can justify foregoing US federal prosecution, prosecutors must assess if there’s a significant likelihood of effective prosecution abroad, considering factors like the foreign jurisdiction’s prosecutorial strength and the expected consequences for the convicted individual. According to Monaco, US prosecutors should not delay federal prosecution to the extent that it weakens the federal case, particularly considering statutes of limitations, the likelihood of arrest, or case strength, nor should they hesitate to pursue charges if an individual is outside of the United States.

Guidance on Corporate Accountability

In terms of corporate accountability, the Monaco Memo takes a deep-dive into a corporation’s past. It’s no longer only about the current issue at hand, but the entire history of misconduct is of importance. This approach targets corporate recidivism, ensuring businesses are accountable for their cumulative actions. In this regard, the Monaco Memo urges prosecutors to consider four things when prosecuting a company: (A) The corporation’s history of misconduct, (B) whether or not they self-disclosed the misconduct and how quickly the report was made after the misconduct came to surface, (C) the cooperation with the DOJ, and (D) the corporation’s compliance program.

A – Historical Misconduct of Corporations. The Monaco Memo has a clear message: Past misdeeds won’t be overlooked. This comprehensive review means that past transgressions, whether related or unrelated to current issues, influence DOJ’s current prosecutorial decisions. This approach aims to identify patterns of repeat offenses and hold corporations accountable not just for isolated incidents but for a history of misconduct, signalling a tougher stance against habitual corporate offenders.

B- Self-Disclosure Practices. The memo places significant emphasis on the timing and nature of a corporation’s self-disclosure. Corporations are now expected to report misconduct ‘timely’ and transparently. What is to be considered as ‘timely’ is to be seen. However, we think it should at least be considered as a promptly disclosure given the facts and circumstances. Delayed or obscured reporting could negatively impact the DOJ’s perception of a corporation’s cooperation and integrity. This change aims to cultivate a culture of immediate accountability, encouraging corporations to self-report issues as soon as they arise, rather than concealing them or delaying disclosure.

C- Level of Cooperation with the DOJ. In line with the memo’s stringent approach, full cooperation with DOJ investigations is mandatory for corporations to receive any cooperation credit. This involves providing exhaustive details about all individuals involved in the misconduct, irrespective of their rank or position within the company. The DOJ expects corporations to be active participants in the investigative process, assisting in identifying and holding accountable those responsible for corporate crime. Important to realise is that, in order to meet these expectations, companies should organise their compliance and systems in such a way that they are able to identify, produce and disclose relevant information. We will address this rather practical issue in a separate article.

D – Efficacy of Corporate Compliance Programs. Finally, the Monaco Memo also scrutinises the effectiveness of a corporation’s compliance programs. It’s not sufficient for a corporation to just have a compliance program in place. All companies are simply expected to have one. To be more precise, Monaco expects such a program to be robust, proactive, and capable of both preventing and detecting misconduct. The Memo mandates that these programs are to be tested, well-resourced, and genuinely integrated into the corporate culture and operations. Monaco also describes different aspects and metrics to be considered as part of (an effective) corporate compliance program. For example, they must include mechanisms like clawback provisions, allowing for retroactive penalties for personnel. This approach not only discourages non-compliant behaviour but also reinforces a culture where legal and ethical conduct is valued and rewarded. Furthermore, companies should consider the use of personal devices and third-party applications as part of their compliance. As noted earlier, this is crucial for maintaining the integrity of corporate communications and ensuring that relevant data can be recovered during investigations. Prosecutors are encouraged to assess how corporations manage these technologies when evaluating the effectiveness of their compliance programs and their cooperation in criminal investigations. The Memo calls for the incorporation of best practices regarding personal device and messaging platform usage into future DOJ compliance program evaluations.

By expanding the scope of enforcement actions to include a corporation’s full history, demanding timely and transparent self-disclosure, insisting on thorough cooperation in investigations, and emphasising the effectiveness of compliance programs, the DOJ signals a significant shift in the landscape of corporate accountability. It reflects a broader effort to ensure a culture of integrity and responsibility in the corporate world.

The Story Continuous: Impact of the Monaco Memo on Compliance Programs and Organisations

As we unpacked the Monaco Memo’s implications, it’s clear that the road ahead for compliance programs and organisations will be marked by significant changes. The memo’s focus on historical misconduct, self-disclosure, cooperation, and effective compliance programs signals a shift towards more stringent and comprehensive corporate accountability. Organisations must now adapt by enhancing their internal controls, especially around technology use and data preservation, and by fostering a culture of transparency and ethical behaviour.

Does this mean that we arrived at the ‘new corporate compliance destination’? Not yet – this evolution in corporate compliance is not close to be over. Monaco has indicated that more in-depth policies will follow and some (e.g., Safe Harbor Policy). This evolving landscape suggests that compliance programs must not only adapt to current guidelines but also remain agile and forward-thinking, ready to incorporate new directives as they emerge.

Stay tuned for future blog posts as we continue to explore and interpret these changes, offering insights into how organisations can navigate this new era of corporate compliance effectively.

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