Enforcement Actions & Penalties Flashcards

Under the Bank Secrecy Act, 'willful blindness' to suspicious activity can support a finding of a willful violation because:

Answer: Deliberate ignorance of obvious facts is treated legally as equivalent to actual knowledge

Courts and regulators treat deliberate avoidance of obvious facts (willful blindness or conscious disregard) as the equivalent of actual knowledge for establishing willful violations.

When a compliance program is deemed 'paper only' during a regulatory review, the enforcement implication is typically that:

Answer: The program provides no mitigation credit because it was not implemented in practice

Regulators give no credit for compliance programs that exist only on paper without genuine implementation, training, monitoring, and enforcement.

The SEC's 'cooperation framework' outlined in the Seaboard Report most directly incentivizes companies to:

Answer: Conduct thorough internal investigations and voluntarily disclose misconduct to receive enforcement consideration

The Seaboard Report established factors — including self-policing, self-reporting, remediation, and cooperation — that the SEC considers when deciding whether to bring charges and how severe they should be.

Which of the following best describes 'injunctive relief' as an enforcement remedy in a compliance context?

Answer: A court order requiring a party to stop engaging in, or affirmatively take, certain conduct

Injunctive relief is a court-ordered equitable remedy that either enjoins (prohibits) conduct or compels affirmative action to prevent ongoing or future harm.

A 'lookback period' in a regulatory enforcement action refers to:

Answer: The historical time period over which regulators examine conduct for violations

The lookback period defines how far back in time regulators will review transactions or conduct when assessing potential violations.

Under the Dodd-Frank Act's whistleblower program, the SEC awards a percentage of sanctions to whistleblowers who provide original information leading to enforcement actions resulting in sanctions exceeding:

Answer: $1,000,000

The SEC's Dodd-Frank whistleblower program pays 10-30% of sanctions collected in cases where total sanctions exceed $1 million.

Which enforcement concept requires regulators to demonstrate that a compliance violation caused actual consumer harm before imposing civil money penalties?

Answer: Substantial injury standard under the FTC Act's UDAP framework

The FTC Act's 'unfairness' standard requires that consumer injury be substantial, not reasonably avoidable, and not outweighed by countervailing benefits.