Companies often commence internal investigations to evaluate potential unlawful misconduct that comes to their attention through internal processes. When such investigations confirm that corporate employees have engaged in wrongdoing, the corporation is faced with a decision: whether it should self-report the wrongdoing to the appropriate regulatory authorities. Many considerations bear on this decision. In certain instances, such as when the company is publicly traded and in a highly regulated industry, the choice is obvious; self-reporting is essentially the only option because of disclosure and regulatory obligations. In other instances, companies may have more flexibility to decide on the best course. This article is intended to explore the different considerations that bear on a company’s decision regarding whether to self-report illegal activities by company employees to the authorities.
Legal Obligation to Report
In some circumstances, the law may require that illegal conduct uncovered during an internal investigation be disclosed. For example, the Bank Secrecy Act, and regulations promulgated by the Department of the Treasury pursuant to that act, require that all financial institutions file suspicious activities reports (SAR) with the Financial Crimes Enforcement Network (FinCEN) in many instances in which they become aware of potentially illegal activity.1 Banks have some latitude in whether they alert law enforcement through means other than a SAR filing, but the filing is mandatory and failure to file required SARs can have criminal and regulatory consequences for the institution.
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