Dawn raid preparedness: a practical guide

September 2022 | SPOTLIGHT | FRAUD & CORRUPTION

Financier Worldwide Magazine

September 2022 Issue

During the coronavirus (COVID-19) pandemic, many companies accelerated efforts to put in place physical and technological structures, such as virtual desktops, to enable remote access to work documents.

Companies are also increasingly adopting remote file sharing solutions as well as document retention systems for employees working from home. Easier access to stored electronic documents, coupled with a decreasing reliance on hardcopy documents and records, has naturally altered the ways and ease in which authorities conduct dawn raids and obtain documents in investigations.

The current work from home culture may also invite dawn raids on private residences where documents relevant to investigations may be stored.

An underprepared workforce will lead to an ineffective dawn raid response. Companies are advised to regularly review their document and information access, as well as storage and retention policies. Staff should also be regularly trained on dawn raid preparedness.

Generally, there are three pillars to an effective dawn raid response. First, staff must take all practical steps to ensure that the investigation does not exceed its scope. Failing to object at appropriate junctures risks exposing the company to additional liability and an unnecessarily disruptive (and costly) investigation.

Second, the company must safeguard all legally privileged material to ensure that legal deliberations and legal work products are not divulged or produced in jurisdictions where legal privilege is recognised and enjoyed.

Third, and perhaps most importantly, the company as well as its employees must comply with all laws requiring cooperation with authorities. Too often, the cover-up is worse than the crime, and in many jurisdictions, while regulatory breaches only (or only typically) attract civil or administrative penalties, obstruction of process crimes are criminal matters.

Dawn raid preparedness ensures that every employee – from the receptionist to senior management – is aware of his or her roles and responsibilities during an unannounced investigation. Any standard operating procedures (SOPs) on dawn raids should be updated to include recent developments in investigation procedures, including the potential for the inspections to include raids of home offices and access by authorities to virtual desktops. Companies should ensure that reception, the IT department and PR staff, as well as senior management, are familiar with dawn raid SOPs.

We set out below some general pointers that companies can consider when formulating their dawn raid response strategies. While exact procedures will vary across jurisdictions, we have based our recommendations on dawn raids by antitrust and consumer law authorities.

Scope of investigations

Employees should be trained to identify the scope of investigations as stated in the relevant letter of authorisation or warrant. Any requests for information appearing to be outside the scope should be referred to legal counsel for further action. For example, materials relevant to the company’s operations in foreign jurisdictions would typically not be relevant and there may be grounds to resist their production.

Relatedly, in most developed jurisdictions, investigating officers do not have the power to conduct ‘fishing expeditions’ for information. To ensure that all interviews are conducted in a fair and authorised manner, companies should ensure, as far as reasonably practicable, that all interviews are conducted in the presence of trained legal counsel.

Employees should be mindful that the company may not only be exposed to regulatory scrutiny but also to third-party litigation in private claims.

Legally privileged and confidential material

While investigating officers typically have the right to require the production of copies of any document relevant to the investigation, whether hard copy or electronic, many jurisdictions afford legal advice and other legal work products privileged status. This also prevents legally privileged documents from disclosure to third-party claimants in private litigation.

Therefore, it is good practice to clearly mark legal advice and legal work products as legally privileged, to ensure that such documents are not inadvertently disclosed. Staff should be trained to refer any request for material that is marked legally privileged to legal counsel to confirm that there are grounds for resisting their disclosure. Companies should seek advice from lawyers in their respective jurisdictions on whether the doctrine of legal privilege applies in their jurisdiction and what information and documents may be considered to be legally privileged.

As for requests of commercially sensitive material and information that is confidential, employees should be trained to flag and claim confidentiality over such material even though their disclosure may still be required. Signed acknowledgments that confidentiality has been claimed over the document should also be retained. These procedures help to ensure that the investigating authorities are made aware, and do not disclose such information without the company’s consent or relevant statutory authority to do so.

Cooperation with the authorities

As is the case with all interactions with the authorities, employees should be aware that they must not provide false or intentionally misleading information.

Due to the extensive nature of antitrust investigations, dawn raids also frequently involve the use of special investigation procedures.

For example, for investigations spanning multiple days, authorities may place seals across doors or cupboards to prevent tampering of evidence. Appropriate measures should therefore be taken to ensure that such seals are not damaged, such as by putting in place clear warning signs, calling off any cleaning scheduled, or posting a security guard outside the room. IT staff must be notified, and any automatic or scheduled deletion of electronic documents must be halted.

The tampering of evidence is an offence in most jurisdictions and the company as well as its staff may be subject to criminal penalties for interfering with any seals or evidence put aside by the authorities.

Post-dawn raid plans

After a dawn raid, the company should seek confirmation that the dawn raid has come to an end, that the company has adequately cooperated with investigators, and that normal business operations can resume at the premises. The company should also take note of any unresolved issues and any outstanding documents which the company has undertaken to produce, among others.

After investigating officers leave the premises, a review of all documents copied or seized by investigators should be carried out to assess the level of exposure faced by the company. In the case of cartel investigations, the company may also wish to consider whether, in jurisdictions where lenient treatment programmes are available, a leniency application should be made.

Senior management should, in cooperation with the PR team, communicate to all employees involved in the investigation to refrain from disclosing any information about the investigation to persons outside the company. For prudence, management may also wish to prepare a press statement which appropriately deals with any inquiries about the dawn raid and the company’s involvement in the alleged infringement. Additionally, listed companies should ensure that they comply with their disclosure obligations under relevant securities laws.

Conclusion

We encourage companies which have not yet established dawn raid defence SOPs or conducted training on dawn raid preparedness for their employees to do so. Prevention is, after all, better than cure.

Companies that have established dawn raid preparedness processes should also regularly review these processes in tandem with their document and information access, retrieval and storage processes and seek advice from legal and technical experts, where necessary, to ensure minimal disruption to business operations – most significantly, to minimise the company’s exposure to regulatory and litigation risks.

Corinne Chew is a director, Low Jia Rong is an associate and Zhu Zhuohui is a practice trainee at Drew & Napier LLC. Dr Chew can be contacted on +65 6531 2326 or by email: corinne.chew@drewnapier.com. Mr Low can be contacted on +65 6531 2769 or by email: jiarong.low@drewnapier.com. Ms Zhu can be contacted by email: zhuohui.zhu@drewnapier.com.

Corinne Chew, Low Jia Rong and Zhu Zhuohui

Drew & Napier LLC