Compliance teams will be faced with greater demands in 2023 as international politics spurs more sanctions, deeper regulation and enhanced enforcement.
A new report from Diligent sets out the changing landscape of demands in the compliance space, with a plethora of new regulatory burdens, waves of sanctions and strict enforcement with bigger penalties.
ESG Due Diligence, published in February 2023, quotes Diligent data showing that more than 14,000 new sanctions records were published last year, representing a 32% increase on the total at the end of 2021. Lisa Monaco, the U.S. deputy attorney-general, has signaled that this will be an area of focus for the Department of Justice (DOJ), noting in June that “We are pouring resources into sanctions enforcement.”
Spikes from February to April highlight that Russia’s war on Ukraine was the big factor in the rising number of sanctions, although the U.S.-China rivalry and the rise of cryptocurrency were also influential at a smaller order of magnitude.
At the same time, Foreign and Corrupt Practices Act (FCPA) actions have begun to rise from 2021’s nadir. Although the number of enforcement actions has yet to reach pre-pandemic levels, penalties increased from $360 million in 2021 to $1.54 billion, according to data from the FCPA Clearinghouse. That reflects a few big recidivist offenders but also tougher language from officials and the burden of investigating more complex supply chains.
“Because so many FCPA cases involve third parties, I think that’s an area of focus,” Sullivan & Cromwell’s Aishling O’Shea told Diligent for the report.
It’s not just the U.S. that is increasing compliance obligations. Companies that do business around the world are also affected by the European Union’s Corporate Sustainability Reporting Directive (“CSRD”), the German Act on Corporate Due Diligence in Supply Chains, the U.K. Bribery Act, and the United Nations 2030 Agenda for Sustainable Development. Geopolitical instability is merely exacerbating the trend toward greater scrutiny, particularly of supply chains and third parties.
“A company’s screening needs may change on a dime as risks change,” notes Diligent’s Oliver Windgaetter, in the report.
To help companies navigate and report on third parties, Diligent provides a robust third-party risk management solution that scales as your organization evolves, automatically adjusting to changing regulatory and risk landscapes. We take a risk-based approach that helps you develop a credible and defensible assessment process for all third-party relationships, ensuring your organization is aware of potential ethical and compliance risks that may harm your reputation or be in violation of various anti-bribery and corruption (“ABAC”) regulations.
The solution is accompanied by the ability to access high quality due diligence investigations, informed by global regulatory changes.
In addition, Diligent’s Info4c database covers approximately 100 sanctions worldwide and a watchlist compiled from 800 different sources, ranging from most-wanted lists to blacklisted manufacturers.