Compliance & Ethics
Rebecca Sherratt Image
Rebecca Sherratt
Publications Editor, Diligent Market Intelligence

Sanctions, supply chains and safe harbor: Top compliance trends to watch in 2024

January 23, 2024
0 min read
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From geopolitical uncertainty to ESG scrutiny to incentives for voluntary disclosures, 2023 was an eventful year in compliance — and these trends stand to continue in the months ahead.

What’s the overarching context? What do compliance leaders need to know, watch and do?

Diligent Market Intelligence’s (DMI) Compliance Trends 2024 report dives into the details. Read on for key takeaways.

Sanctions activity supersedes FCPA action

If corporate compliance had a “What’s Out/What’s In” list for the new year, Foreign Corrupt Practices Act (FCPA) enforcement actions would fall into the former category, decreasing to only 21 in 2023 from 26 the year before.

By contrast, sanctions activity has surged. Diligent’sinfo4c Sanctions List database tracked a full 21,784 new records in 2023.

The reasons behind this shift in regulator focus can be found in the headlines: Russia, Ukraine, Belarus, Moldova, the Israel-Hamas War.

“Both the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) are closely scrutinizing companies engaged in export control, especially after Russia’s invasion of Ukraine,” Tom Fox, founder of the Compliance Podcast Network, told Diligent in an interview.

Given the volume and suddenness of it all, “sanctions have been really difficult for compliance teams to cope with,” Ezekiel Ward, founder of North Star Compliance, told Diligent. “Gathering the data and making the right decisions is where companies need outside help. If someone in the middle of the chain is sanctioned, to what extent does that follow down the chain?”

Increased scope and consequences for ESG

Another area where compliance teams will be challenged to strengthen their supply chain oversight is ESG, thanks to new regulations at both state and global levels.

In response to growing concern for the planet and human rights, California’s Bill SB 261 and Labor Law S-211 call for companies to report on their Scope 3 emissions, as well as efforts to prevent and reduce the risk of forced labor in the production and import of goods.

On the other side of the Atlantic, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) expands and adds teeth to the Corporate Sustainability Reporting Directive enacted at the beginning of 2023. The CSDDD will require environmental and human rights due diligence across subsidiaries and supply chains by EU and non-EU companies alike — with non-compliance now spurring both liability and financial penalties.

“Up until now, ESG has probably been more of a reputational risk,” Ward said. “Only recently has legislation meant there is the potential for tangible consequences where issuers fail to comply.”

Powerful incentives for voluntary disclosures

A third trend involves the DOJ’s incentives for companies to promptly disclose misconduct, fully and in a timely manner.

In October 2023, the DOJ announced a new safe harbor for exposing and disclosing wrongdoing related to mergers and acquisitions. Other incentives relate to a three-year pilot to monitor the impact of compensation clawbacks. Under this initiative, reductions in compensation, or good faith attempts to recoup compensation, could help mitigate criminal fines.

In both of these cases, voluntary disclosures could save a company millions of dollars in fines from the DOJ (subject of course to various caveats).

“Compliance should no longer be viewed as just a cost center for companies,” Deputy Attorney General Lisa Monaco said in the announcement. “Good corporate governance and effective compliance programs can shield companies from enormous financial risks and penalties.”

“They want you to identify the problem, they want you to clean it up… and the declination is the reward for that,” said Michael Volkov, founder of Volkov Law. “They’re trying to make it as attractive as they can. This is an important reminder of the importance of devoting adequate resources to risks.”

For a closer look at what GRC teams can expect in the year ahead, download DMI’s full Compliance Trends 2024 report.


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