The CLOUD Act, Bridging the Gap between Technology and the Law

Part I: Background

During the era when the Sony Walkman birthed the personal audio revolution, Nintendo Entertainment Systems appeared on American shores, and Gordon Gekko made wireless phone calls on his chunky mobile phone, the 99th United States Congress passed the Stored Communications Act (SCA). Enacted in 1986, the SCA governs U.S. authority to compel disclosure of electronic communications or data stored with a service provider.

Fast forward two decades, the gap between advancements in technology and legislation became readily apparent when a federal appeals court, the United States Second Circuit, decided on July 14, 2016, that U.S. law enforcement could not compel a U.S. Cloud Service Provider (CSP) to disclose Content Information (e.g., emails) stored abroad with a U.S. search warrant.[1]

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Mexico’s Anticorruption Legislation and its Impact

As a tsunami of corruption scandals devastates Latin America’s political landscape, it can be easy to dismiss the slow and uncertain steps many countries are taking in the fight against corruption as political jujitsu, enough to appease but not to change. We do not, and we remain optimistic as Mexico, Peru, Colombia, Argentina and – of course – Brazil enact stronger anticorruption legislation. We believe we are seeing the water recede, changing the way many in these countries are doing business. Mexico’s anticorruption legislation goes further than most. It applies to public officials and everyone – individuals and companies – doing business with the government and requires companies to implement internal changes and controls.

In the first of a three-part series, we recently discussed Mexico’s anticorruption legislation and its impact in a post on our Latin America Legal blog. You can read it here.


Supreme Court to Decide Security of the Cloud

On February 27, 2018, the Supreme Court heard oral arguments in a case that will affect the security of data stored in the cloud. At issue in United States v. Microsoft is whether a U.S. based digital communications provider must comply with a warrant for user data stored on servers located outside of the U.S. This case is being heard against the backdrop of Congressional debates regarding proposed amendments to Section 2703 of the Stored Communications Act – some of which are tailored to address this very issue.

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SCOTUS Decides: Dodd-Frank Whistleblower Protections Only Cover Those Who Report to the SEC

In a unanimous decision authored by Justice Ruth Bader Ginsburg, the United States Supreme Court ruled on February 21, 2018 that the anti-retaliation provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) only cover whistleblowers who report potential violations of the securities laws to the Securities and Exchange Commission (the “SEC” or the “Commission”) and not those who only report internally.  The decision reversed an earlier ruling by the Ninth Circuit Court of Appeals and resolved a circuit split on the issue.  As a result, employees who only report potential violations internally must pursue anti-retaliation claims under the less generous provisions of the Sarbanes Oxley Act of 2002 (“SOX”).

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FinCEN proposes ban on Latvian bank

Laundering MoneyOn February 13, 2018, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a finding and notice of proposed rulemaking (“NPRM”), pursuant to the USA Patriot Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank, AS (“ABLV”).

Details of Allegations

ABLV is Latvia’s third biggest bank with assets of around 3.6 billion euros in September 2017. It has subsidiaries in Luxembourg and the United States, and offices in Russia, Ukraine, and Hong Kong.

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SEC’s 2018 Exam Priorities Reflect Continued Focus on Cybersecurity

Annually, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) publishes its examination priorities for the new year.  Recently, OCIE announced five priorities that will inform its examinations moving in to 2018.

OCIE is committed to “promoting compliance, preventing fraud, identifying and monitoring risk, and informing policy.” In support of these “pillars,” OCIE intends to focus on:

  1. Issues of importance to retail investors, such as fee disclosures, mutual funds, and exchange-traded funds;
  2. Entities that are critical to the proper functioning of capital markets, such as clearing agencies and national securities exchanges;
  3. Oversight of the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB);
  4. Cybersecurity; and
  5. Anti-money laundering programs.

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DOJ Reveals Data Team – Future of Enforcement

The 2017 Year in Review of the Department of Justice reveals a Data Analytics Team (the “Team”) for tracking healthcare fraud. The Healthcare Fraud Unit launched the Team in order to provide data mining expertise that efficiently detects healthcare fraud. This development demonstrates that data analytics is the future of enforcement. A fuller description of the Team and data mining is found on the Triage blog here.

Court’s Detailed Rejection of Plea Leads to New Bargain

Judge pronouncing sentence to manA recent blog post summarized an opinion in which a district court catalogued his reasons for rejecting a corporate “C” plea involving a pharmaceutical company.  Several developments have occurred since the court’s opinion including a plea and sentencing hearing scheduled for January 30, 2018. 

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DOJ Announces Revised FCPA Corporate Enforcement Policy

In late 2017, Deputy Attorney General Rosenstein announced a revised FCPA Corporate Enforcement Policy to be incorporated into the United States Attorneys’ Manual. With this revised policy, the Department of Justice (DOJ) aims to provide a level of certainty to companies in order to encourage voluntary disclosures of potential violations of the FCPA.

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Help Proposed for Anti-Money Laundering Deadline

Hanging $100 BillsAs the two-year deadline approaches, help is proposed to meet upcoming anti-money laundering compliance requirements. A recent draft bill aims to assist banks and other regulated entities in complying with one of the most significant anti-money laundering requirements of the Final Rules on Customer Due Diligence Requirements (the “Rules”). The proposal will assist banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities in implementing greater customer due diligence measures.

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