With the July 11 announcement by Deputy Attorney General Rod Rosenstein of the new Department of Justice (DOJ) Task Force on Market Integrity and Consumer Fraud comes the obvious question: How will this task force affect the ongoing role of the Bureau of Consumer Financial Protection(CFPB); the Financial Crimes Enforcement Network (FinCen); a preexisting fraud task force; and the prudential regulators who do the same exact thing? We discuss this issue below.
Detailed discussion
The task force will be chaired by Rosenstein and vice-chaired by the associate attorney general, and will include the heads of the DOJ’s Criminal, Civil, Tax and Antitrust divisions, together with the FBI director and select United States attorneys. Other invitees include senior officials from various government agencies. Critical here is to note that the task force will focus on fraud against consumers—in particular, against the elderly, service members and veterans—as well as corporate fraud against the general public and the government. From a financial services industry perspective, the task force indicates it will focus on cases involving, among other things, (1) fraud against financial markets and consumers, (2) digital currency fraud, (3) money laundering, and (4) “other” financial crimes.
The task force, created by presidential executive order, represents another step in the DOJ’s shift to coordinating governmental action among agencies to achieve joint results against corporate misconduct rather than, in the administration’s view, “piling on” with multiple investigations by various local, state, federal and foreign enforcement agencies.
So who are these other “senior officials” who have been invited, and from which other government agencies? The announcement identifies the agencies that will be “invited” to task force meetings, presumably because they were not consulted in advance. These include the CFPB as well as the Federal Trade Commission and the U.S. Securities and Exchange Commission (SEC), plus the prudential banking regulators, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., to name just two.
The DOJ was already a party, and the CFPB was a co-chair of the Non-Discrimination Working Group, for the Obama-era Financial Fraud Enforcement Task Force (FFETF) – dismantled with this announcement – which was established in late 2009 to wage “an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.” It included over 20 federal agencies, 94 U.S. Attorney’s Offices, and numerous state and local partners. Its website, StopFraud.gov, provided extensive guidance to consumers and publicized the FFETF’s successes.
In addition, there is already a major federal agency devoted to investigating financial crimes: FinCen, which operates within the Department of the Treasury.
So, is this just all some political window dressing? In making his announcement, Rosenstein pointed to, among other things, a joint effort by the Department of Homeland Security, the Department of the Treasury and the Postal Inspection Service that resulted in 74 arrests in the United States and overseas for cyber-enabled financial fraud targeting companies, real estate purchasers and the elderly, fraudulently obtaining money and sensitive personal information. But that is precisely the kind of effort that would normally have been conducted in coordination with FinCen and the FFETF. Rosenstein also highlighted the DOJ’s civil enforcement authority to recover proceeds from fraud schemes and impose penalties. In 2017, the DOJ obtained over $3.7 billion in judgments and settlements from fraud against the government. The new Task Force on Market Integrity and Consumer Fraud will allow the government to do “even more” by pooling resources—including subject matter expertise, data repositories, and analysts and investigators—enabling the government to identify and stop fraud on a wider scale than any one agency could do on its own.
SEC Chairman Jay Clayton also provided remarks about the task force. He noted recent SEC enforcement actions where interagency cooperation led to effective consumer protection, including a case in which 13 individuals ran a scam targeting elderly investors, the shutdown of an Initial Coin Offering scam and efforts to combat fraud using new technologies.
Acting CFPB Director Mick Mulvaney spoke about the importance of interagency cooperation, citing the recent settlement with a major bank as an example of the CFPB working with other agencies. Mulvaney noted that cooperation is more important than ever because “criminals do not stay neatly within state lines or even national borders.”
The new task force is also part of the DOJ’s policy, announced last May, to encourage cooperation by companies facing penalties for corporate misconduct, all with a goal of achieving joint results among federal, state, local and foreign enforcement agencies, and imposing appropriate punishment without unnecessarily prolonging investigations and using too many investigative resources. Rosenstein emphasized that companies should continue to cooperate with investigations, voluntarily report misconduct and remediate harm.
Why it matters
At this point, it is difficult to discern how the new task force will distinguish itself from the FFETF or, more importantly, how it will interact with the prudential regulators at the state level. For example, there is no indication that the task force will include senior officials from prominent state regulators such as the California Department of Business Oversight or the New York Department of Financial Services, or that they will even be invited to the show. Stay tuned.