Legal Considerations for Ready-to-Drink Cocktails

The ready-to-drink cocktail or “RTD” category has exploded in recent years, and it’s occupied by more than merely craft distillers familiar with a carefully made cocktail. Brewers, distillers and even vintners have joined in, capitalizing on consumers’ desires for pre-made, no-fuss beverages. The most unexpected development to emerge with RTDs, however, is the legal complexity surrounding these products—something the industry is only beginning to understand.

Many of these legal issues stem from the fact that the legal regulatory landscape in most states has not caught up with the rapidly evolving alcohol industry. That leaves ready-to-drink cocktails, much like hard seltzers, as not having a specific class or type in certain states. Suppliers looking to enter the space have plentiful options when creating a new product, subject to what licenses the manufacturer holds and what those licenses allow them to produce.

Ready-to-drink cocktails can be spirits, malt, sugar, cider or wine-based. The base of the RTD product, nonetheless, is the key federal factor. It is also an important factor in most states when determining how the product will be treated from a legal perspective in the following areas:

  • Licensing needed to manufacture, distribute and sell the product;
  • Applicable franchise law (Do beer franchise laws apply to low-proof spirits?);
  • Available channels of distribution (Can you sell this product in grocery or convenience store?);
  • Excise tax rate charged to the manufacturer (Does state law have a lower excise tax rate for low ABV products?);
  • Labeling and advertising considerations (Is your product a modified traditional product?); and
  • Trade practice considerations/promotions (Do spirits laws apply?).

Industry members dabbling in a sphere that is relatively new to the market, state regulators and legislatures should be mindful of the patchwork of emerging regulations. Like hard seltzer, ready-to-drink cocktails are not a clearly defined category under existing alcohol law. Meanwhile, states are working quickly to legislate in this domain. New Jersey is considering a reduced alcoholic beverage tax rate on low-ABV liquors to align with the beer tax rate (NJ SB 701), Vermont is considering legislation to define “low alcohol spirits beverage” and treat it as a “vinous beverage” (VT HB 590) and the Washington State Senate has a bill pending that would establish a tax on low-proof beverages (WA SB 5049).

From franchise issues to excise tax, the issues discussed here are only a glimpse of the nuanced and complicated legal landscape that governs the distribution of RTDs and alcoholic beverages across all categories.

© 2022 McDermott Will & Emery

Greenwashing and the SEC: the 2022 ESG Target

A recent wave of greenwashing lawsuits against the cosmetics industry drew the attention of many in the corporate, financial and insurance sectors. Attacks on corporate marketing and language used to allegedly deceive consumers will take on a much bigger life in 2022, not only due to our prediction that such lawsuits will increase, but also from Securities & Exchange Commission (SEC) investigations and penalties related to greenwashing. 2022 is sure to see an intense uptick in activity focused on greenwashing and the SEC is going to be the agency to lead that charge. Companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information as required to the SEC must pay extremely close attention to the language used in all of these types of documents, or else run the risk of SEC scrutiny.

SEC and ESG

In March 2021, the SEC formed the Climate and Environmental, Social and Governance Task Force (ESG Task Force) within its Division of Enforcement. Hand in hand with the legal world’s attention on greenwashing in 2021, the SEC’s ESG Task Force was created for the sole purpose of investigating ESG-related violations. The SEC’s actions were well-timed, as 2021 saw an enormous increase in investor demand for ESG-related and ESG-driven portfolios. There is considerable market demand for ESG portfolios, and whether this demand is driven by institute influencers or simple environmental and social consciousness among consumers is of little importance to the SEC – it simply wants to ensure that ESG activity is being done properly, transparently and accurately.

Greenwashing and the SEC

The SEC has stated that in 2022, it will be taking direct aim at greenwashing issues on many different levels in the investment world. As corporations and investment funds alike increasingly put forth ESG-friendly statements pertaining to their actions or portfolio content, the law has thus far failed to keep pace with the increasing ESG statement activity. It is into this gap that the SEC sees itself fitting and attempting to ensure that the public is not subject to greenwashing. In order to tackle this objective, expect the SEC to focus on the wording used to describe investments or portfolios, what issuers say in filings, and the statements made by investment houses and advisors related to ESG.

From this stem several topics that the SEC’s ESG Task Force will scrutinize, such as: whether “ESG investments” are truly comprised of companies that have accurate and forthright ESG plans; the level of due diligence conducted by investment houses in determining whether an investment or portfolio is “ESG friendly”; how investment world internal statements differ from external public-facing statements related to the level of ESG considerations taken into account in an investment or portfolio; selling “ESG friendly” investments with no set method for ensuring that the investment continues to uphold those principles; and many others.

2022, the SEC, and ESG

Given the SEC’s specific targeting of ESG-related issues beginning in 2021, we predict that 2022 will see a great degree of SEC enforcement action seeking to curb over zealous marketing language or statements that it sees as greenwashing. Whether these efforts will intertwine with the potential for increased Department of Justice criminal investigation and prosecution of egregious violators over greenwashing remains to be seen, but it is nevertheless something that issuers and investment firms alike must closely consider.

While there are numerous avenues to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, the underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with  ever-evolving corporate practices, a focused interest by the SEC on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.

CFPB Solicits Whistleblowers to Strengthen Enforcement of Consumer Financial Protection Laws

In its revamped whistleblower webpage, the CFPB is enlisting the help of whistleblowers to provide tips about the following issues:

  • Any discrimination related to consumer financial products or services or small businesses
  • Any use of artificial intelligence/machine learning models that is based on flawed or incomplete data sets, that uses proxies for race, gender, or other group characteristics, or that impacts particular groups or classes of people more than others;
  • Misleading or deceptive advertising of consumer financial products or services, including mortgages
  • Failure to collect, maintain, and report accurate mortgage loan application and origination data
  • Failure to provide or use accurate consumer reporting information
  • Failure to review mortgage borrowers’ loss mitigation applications in a timely manner
  • Any unfair, deceptive, or abusive act or practice with respect to any consumer financial product or service.

The CFPB has also announced that it seeks tips to help it combat the role of Artificial Intelligence in enabling intentional and unintentional discrimination in decision-making systems.  For example, a recent study of algorithmic mortgage underwriting revealed that Black and Hispanic families have been more likely to be denied a mortgage compared to similarly situated white families.

Proposed CFPB Whistleblower Reward Program

Currently, there is no whistleblower reward program at the CFPB and sanctions collected in CFPB enforcement actions do not qualify for SEC related action whistleblower awards.  In light of the success of the SEC’s Whistleblower Program as an effective tool to protect investors and strengthen capital markets, the CFPB requested that Congress establish a rewards program to strengthen the CFPB’s enforcement of consumer financial protection laws.

In September 2021, Senator Catherine Cortez Masto introduced the Financial Compensation for Consumer Financial Protection Bureau Whistleblowers Act (S. 2775), which would establish a whistleblowers rewards program at the CFPB similar to the SEC Whistleblower Program.  It would authorize the CFPB to reward whistleblowers between 10% to 30% of collected monetary sanctions in a successful enforcement action where the penalty exceeds $1 million.  And in cases involving monetary penalties of less than $1 million, the CFPB would be able to award any single whistleblower 10% of the amount collected or $50,000, whichever is greater.

The Financial Compensation for CFPB Whistleblowers Act is cosponsored by Chairman of the Senate Banking, Housing, and Urban Affairs Committee Senator Sherrod Brown and Senators Dick Durbin, Elizabeth Warren, Jeff Merkley, Richard Blumenthal, and Tina Smith. In the House, Representative Al Green introduced a companion bill (H.R. 5484).

A whistleblower reward program at the CFPB could significantly augment enforcement of consumer financial protection laws, including laws barring unfair, deceptive, or abusive acts and practices.  The CFPB has authority over a broad array of consumer financial products and services, including mortgages, deposit taking, credit cards, loan servicing, check guaranteeing, collection of consumer report data, debt collection associated with consumer financial products and services, real estate settlement, money transmitting, and financial data processing.  In addition, the CFPB is the primary consumer compliance supervisory, enforcement, and rulemaking authority over depository institutions with more than $10 billion in assets.

Hopefully, Congress will act swiftly to enact the Financial Compensation for CFPB Whistleblowers Act.

Protection for CFPB Whistleblowers

Although Congress did not establish a whistleblower reward program when it created the CFPB, it included a strong whistleblower protection provision in the Consumer Financial Protection Act of 2010 (CFPA).  The anti-retaliation provision of the Consumer Financial Protection Act provides a cause of action for corporate whistleblowers who suffer retaliation for raising concerns about potential violations of rules or regulations of the CFPC.

Workers Protected by the CFPA Anti-Retaliation Law

The term “covered employee” means “any individual performing tasks related to the offering or provision of a consumer financial product or service.”  The CFPA defines a “consumer financial product or service” to include “a wide variety of financial products or services offered or provided for use by consumers primarily for personal, family, or household purposes, and certain financial products or services that are delivered, offered, or provided in connection with a consumer financial product or service . . . Examples of these include . .. residential mortgage origination, lending, brokerage and servicing, and related products and services such as mortgage loan modification and foreclosure relief; student loans; payday loans; and other financial services such as debt collection, credit reporting, credit cards and related activities, money transmitting, check cashing and related activities, prepaid cards, and debt relief services.”

Scope of Protected Whistleblowing About Consumer Financial Protection Violations

The CFPA protects disclosures made to an employer, to the CFPB or any State, local, or Federal, government authority or law enforcement agency concerning any act or omission that the employee reasonably believes to be a violation of any CFPB regulation or any other consumer financial protection law that the Bureau enforces. This includes several federal laws regulating “unfair, deceptive, or abusive practices . . . related to the provision of consumer financial products or services.”

Some of the matters the CFPB regulates include:

  • kickbacks paid to mortgage issuers or insurers;
  • deceptive advertising;
  • discriminatory lending practices, including a violation of the Equal Credit Opportunity Act (“ECOA”);
  • excessive fees;
  • any false, deceptive, or misleading representation or means in connection with the collection of any debt; and
  • debt collection activities that violate the Fair Debt Collection Practices Act (FDCPA).

Some of the consumer financial protection laws that the CFPB enforces include:

  • Real Estate Settlement Procedures Act;
  • Home Mortgage Disclosure Act;
  • Equal Credit Opportunity Act;
  • Truth in Lending Act;
  • Truth in Savings Act;
  • Fair Credit Billing Act;
  • Fair Credit Reporting Act;
  • Electronic Fund Transfer Act;
  • Consumer Leasing Act;
  • Fair Debt Collection Practices Act;
  • Home Owners Protection Act; and
  • Secure and Fair Enforcement for Mortgage Licensing Act

Reasonable Belief Standard in Banking Whistleblower Retaliation Cases

The CFPA whistleblower protection law employs a reasonable belief standard.  As long as the plaintiff’s belief is reasonable, the whistleblower is protected, even if the whistleblower makes a mistake of law or fact about the underlying violation of a law or regulation under the CFPB’s jurisdiction.

Prohibited Retaliation

The CFPA anti-retaliation law proscribes a broad range of adverse employment actions, including terminating, “intimidating, threatening, restraining, coercing, blacklisting or disciplining, any covered employee or any authorized representative of covered employees” because of the employee’s protected whistleblowing.

Proving CFPA Whistleblower Retaliation

To prevail in a CFPA whistleblower retaliation claim, the whistleblower need only prove that his or her protected conduct was a contributing factor in the adverse employment action, i.e., that the protected activity, alone or in combination with other factors, affected in some way the outcome of the employer’s decision.

Where the employer takes the adverse employment action “shortly after” learning about the protected activity, courts may infer a causal connection between the two.  Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1001 (9th Cir. 2009).

Filing a CFPA Financial Whistleblower Retaliation Claim

CFPA complaints are filed with OSHA, and the statute of limitations is 180 days from the date when the alleged violation occurs, which is the date on which the retaliatory decision has been both made and communicated to the whistleblower.

The complaint need not be in any particular form and can be filed orally with OSHA. A CFPA complaint need not meet the stringent pleading requirements that apply in federal court, and instead the administrative complaint “simply alerts OSHA to the existence of the alleged retaliation and the complainant’s desire that OSHA investigate the complaint.” If the complaint alleges each element of a CFPA whistleblower retaliation claim and the employer does not show by clear and convincing that it would have taken the same action in the absence of the alleged protected activity, OSHA will conduct an investigation.

OSHA investigates CFPA complaints to determine whether there is reasonable cause to believe that protected activity was a contributing factor in the alleged adverse action.  If OSHA finds a violation, it can order reinstatement of the whistleblower and other relief.

Article By Jason Zuckerman of Zuckerman Law

For more financial legal news, click here to visit the National Law Review.

© 2021 Zuckerman Law

Senate Bill Would Amend FIFRA to Prohibit Dangerous Pesticides and Cancel Registrations of Organophosphates, Neonicotinoids, and Paraquat

On November 23, 2021, Senator Cory Booker (D-NJ) announced his intention to reintroduce the Protect America’s Children from Toxic Pesticides Act of 2021, that would amend the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) “to [protect fully] the safety of children and the environment, to remove dangerous pesticides from use, and for other purposes.” Similar legislation was introduced in the House (H.R. 7940) and Senate (S. 4406) in 2020, but the bills did not move out of committee.

Ending Indefinite Delays on Review of Dangerous Pesticides

The bill would amend FIFRA Section 2 to add a provision regarding registration review determination, defined as “the final decision to renew the registration of a pesticide product or active ingredient to authorize the use of the pesticide product or active ingredient” for an additional 15-year period from the date of the previous registration, reregistration, or registration review determination and in compliance with all applicable laws and regulations. Registration review determinations would not include any intermediate determination regarding the continued use of pesticide product or active ingredient.

The bill would allow an interested person to petition the U.S. Environmental Protection Agency (EPA) to designate an active ingredient or pesticide product as a dangerous pesticide, which would be defined as an active ingredient or pesticide product that may:

  • Be carcinogenic;
  • Be acutely toxic;
  • Be an endocrine disruptor;
  • Cause harm to a pregnant woman or a fetus; or
  • Cause neurological or developmental harm.

EPA would have 90 days after receiving the petition to make a finding as to whether the petition presents substantial scientific information indicating that the designation of the petitioned active ingredient or pesticide product as a dangerous pesticide may be warranted. If EPA fails to make a finding, the active ingredient or pesticide product would be deemed to be a dangerous pesticide. In making its finding, EPA “shall fully consider all relevant evidence,” including epidemiological studies or data; peer-reviewed literature; and data generated by a federal or state agency or an agency of a foreign government.

If EPA issues a finding that an active ingredient or pesticide product may warrant designation as a dangerous pesticide, the registration would be suspended immediately and remain suspended until EPA makes a registration review determination. The continued sale and use of existing stocks of a suspended active ingredient or pesticide product would be prohibited. If EPA fails to suspend the registration of an active ingredient or pesticide product that may warrant designation as a dangerous pesticide by no later than 60 days after any deadline described in this subsection, the registration of the active ingredient or pesticide product would be “immediately and permanently canceled” and the sale of existing stocks would be prohibited.

Emergency Review of Other Pesticides Banned in Other Nations

The bill would amend FIFRA Section 6 to require EPA to suspend immediately the registration of any active ingredient or pesticide product that is banned or otherwise prohibited from entering the market by the European Union (EU), one or more EU member states, or Canada. EPA would then complete an expedited review of the justification and rationale for the ban. Unless EPA determines that the decision was “clearly erroneous,” the suspended registration would be canceled not later than two years after the date of completion of the review. EPA “shall fully consider all relevant evidence,” including epidemiological studies or data; peer-reviewed literature; and data generated by a federal or state agency or an agency of a foreign government. In determining whether the ban was “clearly erroneous,” EPA would be prohibited from considering “any economic analysis of the benefits or costs of continuing to register the pesticide.” Before making a final determination, EPA would provide the draft determination for a comment period of not less than 90 days.

Ensuring Accountability in Conditional Registrations

The bill would amend FIFRA Section 3(c)(7) to provide registrants only two years to meet the terms and requirements of conditional registration. If a registrant fails to comply with the conditions by the earlier of the deadlines established by EPA or two years after the effective date of the conditional registration, EPA would cancel the conditional registration. Conditional registrations outstanding at the time the bill is enacted for which the registrant has not met the conditions would be canceled. The continued sale and use of existing stocks of a pesticide for which the conditional registration has been canceled would be prohibited.

Prohibition on the Sale or Use of Existing Stocks of Suspended or Canceled Pesticides

The bill would amend FIFRA Section 6(a) to prohibit the sale or use of existing stocks of a pesticide for which the registration is suspended or canceled, or vacated or set aside by judicial decree.

Amending Emergency Exemption Provisions

The bill would amend FIFRA Section 18 to limit emergency exemptions for the same active ingredient or pesticide product in the same location to two years in any ten-year period. EPA would no longer grant emergency exemptions to use an active ingredient or pesticide product that is not registered for any use or that is registered conditionally.

Adding Transparency for Inert Ingredients

The bill would amend FIFRA Section 2(n) to require that the ingredient statement include:

  • The name and percentage of each active ingredient in the pesticide product;
  • The name and percentage of each inert ingredient in the pesticide product;
  • If applicable, a statement that the pesticide product contains an inert ingredient determined by a state or federal agency, or the Administrator based on epidemiological data or peer-reviewed literature, to be likely:
    • To be carcinogenic;
    • To be an endocrine disruptor;
    • To be acutely toxic;
    • To cause harm to pregnant women or fetuses; or
    • To cause neurological or developmental harm.

The bill would amend FIFRA Section 3(c)(9) so that any required label or labeling must provide a complete list of inert ingredients.

Cancellation of Registration of Organophosphates

On the date of enactment, the bill would deem all organophosphate pesticides “to generally cause unreasonable adverse effects to humans,” and the registration of all uses of organophosphate pesticides would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of an organophosphate or any pesticide chemical residue that results from organophosphate use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of organophosphate pesticides would be prohibited on the date of enactment. The bill would not allow any future organophosphate registrations and organophosphate pesticides would be ineligible for emergency use.

Cancellation of Registration of Neonicotinoids

On the date of enactment, the bill would deem all active ingredients and pesticide products containing one or more of the active ingredients imidacloprid, clothianidin, thiamethoxam, dinotefuran, acetamiprid, sulfoxaflor, and flupyradifurone (neonicotinoid pesticides) “to generally cause unreasonable adverse effects to the environment,” and the registration of all uses of neonicotinoid pesticides would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of a neonicotinoid pesticide or any pesticide chemical residue that results from neonicotinoid pesticide use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of neonicotinoid pesticides would be prohibited on the date of enactment. The bill would not allow any future neonicotinoid registrations and neonicotinoid pesticides would be ineligible for emergency use.

Cancellation of Registration of Paraquat

On the date of enactment, the bill would deem paraquat “to generally cause unreasonable adverse effects to humans,” and the registration of all uses of paraquat would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of paraquat or any pesticide chemical residue that results from paraquat use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of paraquat would be prohibited on the date of enactment. The bill would not allow any future paraquat registrations and paraquat would be ineligible for emergency use.

Empowering Communities to Protect Themselves from Pesticides

The bill would amend FIFRA Section 24 to extend the authority of a state to regulate the sale or use of any federally registered pesticide or device to “any political subdivision of a State.”

Protecting Farmworkers from Dangerous Pesticides

The bill would amend FIFRA Section 3(c)(9) to require that labels be printed in both English and Spanish. If a pesticide product is known to be used in agriculture by more than 500 individual persons or applicators who speak the same language other than English or Spanish, EPA will provide a translation of the label in that language on its website. The bill would amend FIFRA to include a section concerning farmworker safety. Employers of farmworkers would be required to report to EPA farmworker incidents, defined as exposure of a farmworker to an active ingredient, a pesticide product, a tank mixture of multiple pesticides, a metabolite, or a degradate that results in:

  • An illness or injury:
    • Requiring medical attention or hospitalization of the farmworker; or
    • That requires the farmworker to stop working temporarily or permanently;
  • A permanent disability or loss in function of the farmworker; or
  • Death of the farmworker.

The bill would require EPA to implement an online system to facilitate the reporting of farmworker incidents within 60 days of the bill’s enactment. The online system must allow for anonymous reporting to protect farmworkers from retaliation. Employers that fail to report a farmworker incident would be fined $1,000 per day beginning on the eighth day after the farmworker incident occurs. Employers that knowingly fail to report or that pressure or coerce a farmworker not to report would be liable for a criminal penalty of up to $100,000, six months in prison, or both. The bill calls for EPA to implement a reward system that provides a monetary award of not less than $25,000 per person per farmworker incident that leads to the identification of one or more employers that have failed to report a farmworker incident.

Within 15 days of receiving a report of a farmworker incident, EPA would transmit a report of the incident to the manufacturer of each involved pesticide product and the manufacturer of each involved active ingredient or ingredients. If a farmworker incident results in the death of a farmworker, the pesticide product or active ingredient that caused the death would be immediately suspended, pending a review. Pesticide product manufacturers who receive a farmworker incident report would have 60 days to provide EPA an assessment of the incident, including whether any changes to the label of the pesticide product or active ingredient are warranted at the time of the assessment to avoid future farmworker incidents. Active ingredient manufacturers who receive a report of a farmworker incident would have 60 days to provide to EPA an assessment of the farmworker incident, including whether any changes to the pesticide product or active ingredient are warranted at the time of the assessment to avoid future farmworker incidents.

No later than the earlier of 90 days after receiving an assessment from a pesticide product or active ingredient manufacturer or 180 days after the occurrence of the farmworker incident, EPA will make a draft determination as to whether a change in the label of an involved pesticide product is warranted. EPA will publish its draft determination in the Federal Register for a 30-day comment period. No later than 30 days after the close of the public comment period, EPA will make a final determination as to whether the label should be changed and publish its decision in the Federal Register.

If EPA makes a final determination that the label of the applicable product must be changed and the manufacturer of the pesticide product or active ingredient fails to do so, the pesticide product or active ingredient “shall be immediately and permanently canceled by operation of law and without further proceedings.” If a pesticide product or active ingredient is responsible for ten or more farmworker incidents of any type, or three or more incidents resulting in death, and the pesticide product or active ingredient has not received a final determination regarding a registration review during the preceding 15-year period, EPA will “immediately suspend the pesticide product or active ingredient until a final determination is made regarding the registration review of the pesticide.”

Authority to Bring Civil Action

The bill would amend FIFRA Section 16 to allow any person to bring a civil action where there is an alleged failure of EPA to comply with any of its provisions. The U.S. District Courts would have exclusive jurisdiction over such actions.

Employee Protection

The bill would amend FIFRA to add a section regarding employee protection. Employers would be prohibited from discharging or discriminating against an employee because the employee has commenced or is about to commence a proceeding under the Act, has testified in a proceeding, or has assisted or participated in a proceeding. Employees would have 30 days from the date of the alleged violation to file a complaint with the Secretary of Labor and the Secretary would have 30 days to conduct an investigation.

Commentary

This bill is unlikely to become law any time soon. This legislation, or anything like it in terms of its presumption that pesticides approved by EPA under current law are fundamentally flawed, would present a radical change to current EPA authority and procedures. Advocates of such change believe otherwise, and point to the fact that FIFRA has not been amended for 25 years. Whether this is sufficient to garner broad support of national environmental and consumer advocacy groups is unclear. Assuming it gains the support of at least a handful of Democrats in the Senate, along with a likely House companion bill, this legislation lays the groundwork for advocating eventual changes to FIFRA. This approach takes a page from the Toxic Substances Control Act (TSCA) reform playbook. Certain Members of Congress and TSCA stakeholders established policy positions for reform five or more years before reauthorization occurred. Similar to TSCA, the legislation is premised on the view that FIFRA is fundamentally flawed, a widely held view with TSCA reform. This view is not widely shared with regard to FIFRA, however. Critics of this proposed legislation will argue that EPA has been effective at implementing FIFRA driven by the requirements of the 1996 Food Quality Protection Act amendments, following a rigorous scientific process with various required safety factors to determine that pesticides used on food meet a “reasonable certainty of no harm” standard. In that view, this bill may be a solution in search of a problem. If this legislation is indeed used as a starting point for reform, there will be many more years before any common ground is found — and common ground likely will be essential for any kind of meaningful FIFRA “modernization.”

©2021 Bergeson & Campbell, P.C.

Article by Bergeson & Campbell, P.C.‘s Government Regulation practice group.
For more articles about toxic substance legislation, visit the NLR Biotech, Food & Drug section.

US to Expand Vaccination Requirement for Foreign National Travelers to Include All Land Border Crossers from Canada and Mexico in January

Starting Jan. 22, 2022, the Biden administration will require foreign national travelers engaged in essential travel to be fully vaccinated when crossing U.S. land borders or ferry terminals. Essential travel includes travel for work or study in the United States, emergency response, and public health. The new rules apply to foreign nationals; U.S. citizens and permanent residents may still enter the United States regardless of their vaccination status but are subject to additional testing requirements.

The new rules for essential travelers are in line with those that took effect Nov. 8, 2021, when the Biden administration lifted travel restrictions to allow fully vaccinated travelers engaged in non-essential (leisure) travel to enter the United States.

While much cross-border traffic was shut down in the early days of the COVID-19 pandemic, essential travelers have been able to travel unimpeded via land borders or ferry terminals. Starting Jan. 22, 2022, however, all foreign national travelers crossing U.S. land borders or ferry terminals – traveling for essential and non-essential reasons – must be fully vaccinated for COVID-19 and provide related proof of vaccination. Any exceptions to the vaccination requirement available to travelers at U.S. land borders are expected to be limited, just as exceptions currently available for air travel have been limited. See CDC guidance for details.

©2021 Greenberg Traurig, LLP. All rights reserved.

For more on vaccine requirements, visit the NLR Coronavirus News section.

Federal Regulators Issue New Cyber Incident Reporting Rule for Banks

On November 18, 2021, the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issued a new rule regarding cyber incident reporting obligations for U.S. banks and service providers.

The final rule requires a banking organization to notify its primary federal regulator “as soon as possible and no later than 36 hours after the banking organization determines that a notification incident has occurred.” The rule defines a “notification incident” as a “computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, a banking organization’s—

  1. Ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business;
  2. Business line(s), including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value; or
  3. Operations, including associated services, functions and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.”

Under the rule, a “computer-security incident” is “an occurrence that results in actual harm to the confidentiality, integrity, or availability of an information system or the information that the system processes, stores, or transmits.”

Separately, the rule requires a bank service provider to notify each affected banking organization “as soon as possible when the bank service provider determines it has experienced a computer-security incident that has materially disrupted or degraded or is reasonably likely to materially disrupt or degrade, covered services provided to such banking organization for four or more hours.” For purposes of the rule, a bank service provider is one that performs “covered services” (i.e., services subject to the Bank Service Company Act (12 U.S.C. 1861–1867)).

In response to comments received on the agencies’ December 2020 proposed rule, the new rule reflects changes to key definitions and notification provisions applicable to both banks and bank service providers. These changes include, among others, narrowing the definition of a “computer security incident,” replacing the “good faith belief” notification standard for banks with a determination standard, and adding a definition of “covered services” to the bank service provider provisions. With these revisions, the agencies intend to resolve some of the ambiguities in the proposed rule and address commenters’ concerns that the rule would create an undue regulatory burden.

The final rule becomes effective April 1, 2022, and compliance is required by May 1, 2022. The regulators hope this new rule will “help promote early awareness of emerging threats to banking organizations and the broader financial system,” as well as “help the agencies react to these threats before they become systemic.”

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.

For more articles on banking regulations, visit the NLR Financial Securities & Banking section.

Health Care Settings Subject to New COVID-19 Requirements Issued by New Jersey and OSHA

Health care settings continue to be at the center of testing and treatment for COVID-19 and are the focus of new safety requirements implemented to minimize risks of transmission. Last month, Governor Murphy issued an Executive Order related to vaccination management, COVID-19 testing, and data collection, which mandates “covered health care and high-risk congregate settings” to establish a policy requiring “covered workers” to either submit proof of full vaccination or to submit to weekly COVD-19 testing. This requirement goes into effect on September 7, 2021.

In addition, the Occupational Health and Safety Administration (OSHA) has implemented an emergency temporary standard (ETS) applicable to certain health care settings, which includes extensive safety and health measures. The ETS provides for certain exceptions for coverage, and while the precise definitions are complicated and must be consulted, the focus appears to be on those settings where employees are interacting with patients who are suspected or confirmed for COVID-19. Unlike the Executive Order, the OSHA ETS does not include vaccine or testing requirements; however, certain New Jersey health care providers will be covered by both measures.

Which health care and high-risk congregate settings must comply with the Executive Order?

The scope of this Executive Order is quite broad and will impact most health care settings across New Jersey, both in terms of the covered health care settings and the covered workers to which the vaccine or testing requirements will apply.

The Executive Order defines “health care facility” extremely broadly as including:

acute, pediatric, inpatient rehabilitation, and psychiatric hospitals, including specialty hospitals, and ambulatory surgical centers; long-term care facilities; intermediate care facilities; residential detox, short-term, and long-term residential substance abuse disorder treatment facilities; clinic-based settings like ambulatory care [which would include all private medical offices], urgent care clinics, dialysis centers, Federally Qualified Health Centers, family planning sites, and Opioid Treatment Programs; community-based healthcare settings including Program of All-inclusive Care for the Elderly, pediatric and adult medical day care programs, and licensed home health agencies and registered health care service firms operating within the State.

High-risk congregate settings under the Executive Order include:

State and county correctional facilities; secure care facilities operated by the Juvenile Justice Commission; licensed community residences for individuals with intellectual and developmental disabilities (“IDD”) and traumatic brain injury (“TBI”); licensed community residences for adults with mental illness; and certified day programs for individuals with IDD and TBI.

“Covered workers” is defined to include full and part time employees and independent contractors, as well as individuals with operational, custodial and administrative support roles.

How to Comply and Penalties for Violations

Covered workers are not required to provide proof of having been fully vaccinated under the Executive Order, but those who do not submit proof of full vaccination must submit to COVID-19 testing one to two times per week. The settings covered by this Executive Order may choose to impose more frequent testing as well. A covered worker will not be considered fully vaccinated until two weeks have elapsed since receipt of the second dose of a two-dose series, or a single dose of a one-dose.

Acceptable proof of full vaccination includes: (1) CDC COVID-19 Vaccination Card; (2) Official record from the New Jersey Immunization Information System or other State immunization registry; (3) Record from a health care provider portal/medical record system on official letterhead signed by a physician, nurse practitioner, physician’s assistant, registered nurse or pharmacist; (4) Military immunization or health record from the U.S. Armed Forces; or (5) Docket® mobile phone application record or any state specific application that produces a digital health record. Records of such proofs must be maintained confidentially.

Those employees who do not submit proof of vaccination must submit to weekly testing, which can be either antigen or molecular tests with Emergency Use Authorization from the Food and Drug Administration or operating pursuant to the Laboratory Developed Test requirements by the U.S. Centers for Medicare and Medicaid Services. Covered settings may provide onsite COVID-19 tests, which can be either an antigen or molecular test. Covered settings must have a policy for tracking test results and are required to report results to the local public health department. However, in all other respects, vaccination and testing information must be kept confidential and separate from the employees’ personnel records.

The penalties for violations are stringent. Pursuant to N.J.S.A. 9:49, a violation may be considered a disorderly conduct offense, which can carry a penalty of a fine of up to $1,000 or 6 months imprisonment.

It should be noted that the requirements of the Executive Order with respect to screening and testing of unvaccinated workers do not override any requirement imposed by the covered setting regarding the testing and screening of symptomatic workers or vaccinated workers.

OSHA’s COVID-19 Emergency Temporary Standard (ETS) for Health Care Settings

Published on June 21, 2021[1] and in further effort to ensure the safety of health care workers, the OSHA ETS for health care and related industries provides that, unless an exception applies, in settings where employees provide health care services or health care support services, employers must develop and implement COVID-19 plans.

The analysis to determine whether an exception applies is complicated, and OSHA offers a flowchart to assist with this analysis. Among these exceptions are:

  • Private medical practices, where (i) the office is in a non-hospital setting, (ii) ALL non-employees are screened prior to entry, and (iii) anyone with suspected or confirmed COVID-19 is not permitted to enter the premises.
  • Well-defined hospital ambulatory care settings where all employees are fully vaccinated and all non-employees are screened prior to entry and people with suspected or confirmed COVID-19 are not permitted to enter those settings.
  • Home health care settings where all employees are fully vaccinated, all non-employees are screened prior to entry, and people with suspected or confirmed COVID-19 are not present.
  • Well-defined areas where there is no reasonable expectation that any person with suspected or confirmed COVID-19 will be present, the requirements in the ETS for personal protective equipment (PPE), physical distancing, and physical barriers do not apply to employees who are fully vaccinated.

For those covered health care settings with more than 10 employees, the COVID-19 plan must be in writing. It is not practicable to list every requirement in this alert without making it quite lengthy, but the following will highlight some of the notable plan requirements:

  • A designated safety coordinator who understands and is able to identify COVID-19 hazards in the workplace, is knowledgeable in infection control and has the authority to ensure compliance with the COVID-19 plan
  • A workplace hazard assessment (including involvement of non-managerial employees)
  • Policies and procedures to minimize the risk of transmission of COVID-19 to employees, which are extensive and include but are not limited to:
  • Limiting points of entry for patients and screening patients, clients and visitors at entry
  • Social distancing when indoors
  • Physical barriers between fixed work stations in non-patient areas
  • Cleaning and disinfecting surfaces and equipment in patient areas and in high touch areas at least once per day
  • Providing hand sanitizer with a minimum of 60% alcohol or easily accessible handwashing facilities
  • Providing Personal Protective Equipment (PPE) to employees with close contact exposure (within six feet in same room) to a person with suspected of confirmed COVID-19
  • Ensuring HVAC systems are used per manufacturer instructions and utilize Minimum Efficiency Reporting Value of 13 or higher if the system permits
  • Screening employees each workday/shift
  • Employees required to promptly notify employer of positive COVID-19 test, a suspected COVID-19 case or of COVID-19 symptoms

When an employee who has been physically present in the workplace tests positive, that employee must notify a designated employee within 24 hours

Employees should be trained on COVID-19 transmission and informed of their right not be retaliated against for exercising their rights under this ETS. Finally, health care settings with more than 10 employees must retain records of positive COVID-19 cases and all covered health care settings must report any COVID-19 fatalities and in-patient hospitalizations to OSHA.

ETS Requires Employers Pay Employees Forced to Quarantine or Isolate Under Defined Circumstances

Significantly, the ETS requires covered employers with ten or more employees to provide employees with substantial “medical removal protection benefits” if the employee must be removed from the workplace when the employer knows that the employee:

  1. Is COVID-19 positive, meaning that the employee was confirmed positive for or was diagnosed by a licensed health care provider with COVID-19;
  2. Has been told by a health care provider that they are suspected to have COVID-19;
  3. Is experiencing recent loss of taste and/or smell, with no other explanation; or is experiencing both fever (≥100.4° F) and new unexplained cough associated with shortness of breath; or
  4. Is required to be notified by the employer of close contact in the workplace to a person who is COVID-19 positive, UNLESS the employee has been fully vaccinated against COVID-19 (i.e., 2 weeks or more following the final dose), or had COVID-19 and recovered within the past 3 months, AND the employee does not experience the symptoms listed in item 3.

When an employee must quarantine or isolate under the aforementioned circumstances, medical removal benefits entitle the employee to regular pay the employee would have received had the employee not been absent from work, up to $1,400 per week until the employee is able to return to work. After three weeks of this leave, employers with 500 or less employees may reduce the benefits paid to two thirds of the employee’s regular rate of pay (up to $200 per day). If an employee removed from the workplace is too ill to work remotely, OSHA directs the employer to provide the employee with sick leave or other leave in accordance with the employer’s policies and applicable law. The employer’s payment obligation is reduced by the amount of compensation the employee receives from any other source, such as a publicly or employer-funded compensation program. Employers may also be entitled to an American Rescue Plan tax credit if they pay sick and family leave for qualified leave from April 1, 2021, through September 30, 2021. More information on the tax credit is available from the IRS.

Resources for Compliance

OSHA provides a lengthy COVID-19 plan template to assist health care providers, which may be customized for each workplace. There are additional resources available to health care providers including worksite checklists, sample employee screening questionnaires, an employee training presentation on the Health care ETS and a sample COVID-19 log. OSHA also offers an FAQ on the ETS standard.

Enforcement and Penalties

Violations of the OSHA ETS may carry a maximum penalty of $13,653 per serious violation or per day for failure to abate beyond the abatement date. Willful or repeated violations carry a penalty of $136,532 per violation. OSHA will use its discretion to determine whether an entity’s failure to comply with the ETS standard despite its best efforts warrants relaxation of the enforcement penalties. However, the agency expects that most employers should be able to achieve compliance within the stated deadlines. When addressing penalties for violations, the agency will also consider the size of the company and any past violations.

Takeaways

Health care settings continue to be at the frontline as we battle COVID-19. State and Federal guidelines and mandates are evolving, extremely complicated and can be difficult to navigate. As a threshold matter, it is critical to determine which measures apply to the health care setting. Compliance is critical to minimize the risks to patients and employees and to avoid penalties for non-compliance. Clear communication with employees is crucial to ensure that they are familiar with the requirements and expectations, as well as to understand the employer’s efforts to keep them safe.

[1] Covered health care employers must comply with all provisions in the ETS as of July 6, 2021  except those requirements related to ventilation, physical barriers, and training, which had a  compliance deadline of July 21, 2021

© Copyright 2021 Sills Cummis & Gross P.C.

Article By Jill Turner LeverStacy L. LandauPatricia M. Prezioso, and Charles H. Newman with Sills, Cummis & Gross PC.

For more COVID-19 updates, visit the NLR Healthcare Law section.

Lawsuits Allege Fudged Fudge

 

hot fudge sundae misleadingly described as fudge dairy fat, are falsely and misleadingly described as “fudge.” (See Reinitz v. Kellogg Sales Company, Bartosiake v. Bimbo Bakeries

Three class-action lawsuits filed in district courts in Illinois allege that products containing vegetable oils, and not dairy fat, are falsely and misleadingly described as “fudge.” (See Reinitz v. Kellogg Sales CompanyBartosiake v. Bimbo Bakeries USA, Inc., and Lederman v. The Hershey Company).  The lawsuits, which are all filed by Sheehan & Associates, P.C. and are substantively identical, have targeted Kellogg Sales Company’s “Frosted Chocolate Fudge,” Bimbo Bakeries USA, Inc.’s “Chocolate Fudge Iced Cake,” and the Hershey Company’s “Hot Fudge” respectively.

The lawsuits allege that fudge is a candy made from the mixing of sugar, butter, and milk, and that the replacement of dairy fats (butter and/or milk) with vegetable oils in each of the three products at issue constitutes deceptive advertising.  In support of these claims, Plaintiff cites a hodgepodge of sources including three recipes from around the turn of the 20th century, a Wikipedia entry, Molly Mills, who is apparently “one of today’s leading authorities on fudge,” and a 1982 Bulletin from the International Dairy Federation.

Plaintiffs have not, however, provided any extrinsic evidence of consumer deception (e.g., market studies), and such information will almost certainly have to be produced for such a case to ultimately succeed. We have previously reported on several other class actions which allege that the replacement of dairy fat with vegetable oil is misleading to consumers (see here and here), and we will continue to monitor and report on the outcomes of these cases.

© 2021 Keller and Heckman LLP

Article by the Food and Drug Law at Keller and Heckman

See links for more articles on Biotech, Food, Drug law, and Consumer Protection law 

The Hot Coffee Case Revisited: Has Proximate Cause Changed in the 25 Years Since Liebeck v. McDonald’s Restaurants?

Two cases decided 25 years apart, but there were some facts in common: a hot drink, a consumer alleging that she was burned by the drink, and a lawsuit. These are the facts of the 1994 case Liebeck v. McDonald’s Restaurants that resulted in an award of millions to the consumer, but also the facts from Shih v. Starbucks, a case decided last year. In Shih, however, the court found in favor of the product supplier. What’s different about these cases? The answer: how the courts interpreted proximate cause.

In 1994, Liebeck v. McDonald’s Restaurants sparked a nationwide tort reform debate after a jury found McDonald’s liable for a consumer’s injuries after she spilled McDonald’s coffee on herself. At the time, many commentators predicted a wave of frivolous lawsuits and large judgments against businesses. But 25 years later, those predictions have not materialized. While consumers continue to sue, the doctrine of proximate cause limits the liability that businesses face from claims for injuries related to hot drinks.

Liebeck v. McDonald’s Restaurants

In 1992, Stella Liebeck bought a cup of hot coffee from a McDonald’s drive-through in New Mexico. While parked, she placed the cup of coffee between her legs and attempted to peel the cap off. The coffee spilled and Ms. Liebeck sustained second- and third-degree burns.

Liebeck sued McDonald’s, alleging that the hot coffee was defectively manufactured, that it violated the implied warranties of merchantability and fitness for a particular purpose, and that the defect caused her injuries. At trial, Liebeck’s attorneys offered evidence that McDonald’s asked franchisees to brew coffee at 180-190 degrees Fahrenheit. Additionally, the attorneys offered evidence that McDonald’s had received more than 700 reports of burns resulting from coffee spills out of billions of hot coffees sold during the time period.

The jury ruled in favor of Liebeck and awarded her compensatory damages of $200,000 and punitive damages of $2.7 million. But the jury determined that Liebeck was 20 percent at fault for her own injuries, and the court reduced the punitive award significantly, resulting in compensatory damages of $160,000 and punitive damages of $480,000.

Shih v. Starbucks

Shih v. Starbucks presents a similar set of facts, but with a different outcome. In June 2016, Tina Shih went to Starbucks with a friend, and each ordered a hot tea. Each tea was given to Shih in a double-cup – one full cup placed within an empty cup. Neither cup had a sleeve. Shih carried both teas to her table and sat down.

Shih claimed that because the cup of tea was filled to the top and was very hot, she did not want to lift it. Instead, she pulled the lid off the cup and moved her chair back to sip from the cup while it was on the table. Shih pushed her chair back to lean over the cup, lost her balance, and put her hand on the table to steady herself – causing the hot tea to spill in her lap. Shih sustained second-degree burns from the incident.

Shih sued Starbucks. She alleged that the double-cup without a sleeve was a manufacturing defect, which – combined with the cup being filled to the brim with hot tea – caused her injuries. Starbucks moved for summary judgment on Shih’s claims, arguing that Shih could not prove the alleged manufacturing defect proximately caused her injuries. The court agreed, granted Starbucks’s motion, and entered judgment in favor of Starbucks. In 2020, the appeals court affirmed.

Proximate Cause is Key the Difference

The differences between Liebeck and Shih are the litigants’ defect claims and their respective theories of proximate causation. The proximate cause inquiry examines the relationship between the defendant’s alleged conduct and the plaintiff’s injury: if the defendant’s conduct is too attenuated from the consumer’s injuries, the defendant cannot be held liable for those injuries. Proximate cause exists when the defect in question increased the risk of harm to the consumer, and the consumer sustained injuries resulting from the increased risk. Courts generally test proximate cause by looking at whether the harm was a foreseeable result of the defect – meaning the business could reasonably have predicted the harm.

Liebeck’s attorneys successfully argued that the coffee was defective because it was served too hot and that the excessively hot temperature put Liebeck at an increased risk of burns. Liebeck established proximate cause by showing that her burn injuries were a foreseeable result of the alleged defect – the coffee being served very hot.

Shih could not establish proximate cause because the court held that the alleged defect was too attenuated from her injuries. Shih’s attorneys argued that the lack of a cup sleeve and the fact that the hot tea was full made it defective. Specifically, Shih would not have removed the tea lid, leaned forward, moved her chair, lost her balance and grabbed the table – causing it to wobble and spill the tea on her – if Starbucks had given her a cup sleeve or not filled the cup to the brim.

The court held that the alleged defect did not increase the risk of Shih being burned or otherwise injured by the hot tea; therefore, the defect was not the proximate cause of her injuries. The lack of a sleeve and the fullness of the tea did not increase Shih’s risk of losing her balance “while attempting to execute [this] kind of unorthodox drinking maneuver,” and spilling the tea on herself. The court’s use of “unorthodox” illustrates that, in the court’s view, Shih’s injuries were not a foreseeable result of the alleged defect. The court noted that while it is foreseeable that consumers could lose their balance and spill their drinks, losing one’s balance is not “within the scope of the risk” created by Starbucks’ decision to use a double cup and to fill the cup to the brim. Thus, Shih could not prove Starbucks’ actions proximately caused her injuries.

Twenty-five years after Liebeck sparked a national conversation about hot coffee and corporate liability, Shih demonstrates that courts continue to follow public policy limitations like proximate cause to protect businesses from unforeseeable consumer injuries.

© 2021 Schiff Hardin LLP

Article by Emilie McGuire and Jeffrey Skinner with Schiff Hardin LLP.

For more articles on class action lawsuits, visit the NLR Litigation section.

Agencies and Regulators Focus on AML Compliance for Cryptocurrency Industry

This year, regulators, supported by a slate of new legislation, have focused more of their efforts on AML violations and compliance deficiencies than ever before. As we have written about in the “AML Enforcement Continues to Trend in 2021” advisory, money laundering provisions in the National Defense Authorization Act for fiscal year 2021 (the NDAA) expanded the number of businesses required to report suspicious transactions, provided new tools to law enforcement to subpoena foreign banks, expanded the AML whistleblower program, and increased fines and penalties for companies who violate anti-money laundering provisions. The NDAA, consistent with Treasury regulations, also categorized cryptocurrencies as the same as fiat currencies for purposes of AML compliance.

In addition, as discussed in the “Businesses Must Prepare for Expansive AML Reporting of Beneficial Ownership Interests” advisory, the NDAA imposed new obligations on corporations, limited liability companies, and similar entities to report beneficial ownership information. Although the extent of that reporting has not yet been defined, the notice of proposed rulemaking issued by FinCEN raises serious concerns that the Treasury Department may require businesses to report beneficial ownership information for corporate affiliates, parents and subsidiaries; as well as to detail the entity’s relationship to the beneficial owner. Shortly after passage of the NDAA, Treasury Secretary Janet Yellen stressed that the Act “couldn’t have come at a better time,” and pledged to prioritize its implementation.

Money laundering in the cryptocurrency space has attracted increased attention from regulators and the IRS may soon have an additional tool at its disposal if H.R. 3684 (the bipartisan infrastructure bill) is signed into law. That bill includes AML provisions that would require stringent reporting of cryptocurrency transactions by brokers. If enacted, the IRS will be able to use these reports to identify large transfers of cryptocurrency assets, conduct money laundering investigations, and secure additional taxable income. Who qualifies as a “broker,” however, is still up for debate but some fear the term may be interpreted to encompass cryptocurrency miners, wallet providers and other software developers. According to some cryptocurrency experts, such an expansive reporting regime would prove unworkable for the industry. In response, an anonymous source from the Treasury Department told Bloomberg News that Treasury was already working on guidance to limit the scope of the term.

In addition to these legislative developments, regulators are already staking their claims over jurisdiction to conduct AML investigations in the cryptocurrency area. This month, SEC Chair Gary Gensler, in arguing that the SEC had broad authority over cryptocurrency, claimed that cryptocurrency was being used to “skirt our laws,” and likened the cryptocurrency space to “the Wild West . . . rife with fraud, scams, and abuse” — a sweeping allegation that received much backlash from not only cryptocurrency groups, but other regulators as well. CFTC Commissioner Brian Quintez, for example, tweeted in response: “Just so we’re all clear here, the SEC has no authority over pure commodities . . . [including] crypto assets.” Despite this disagreement, both regulatory agencies have collected millions of dollars in penalties from companies alleged to have violated AML laws or BSA reporting requirements. Just last week, a cryptocurrency exchange reached a $100 million settlement with FinCEN and the CFTC, stemming from allegations that the exchange did not conduct adequate due diligence and failed to report suspicious transactions.

With so many governmental entities focused on combatting money laundering, companies in the cryptocurrency space must stay abreast of these fast-moving developments. The combination of increased reporting obligations, additional law enforcement tools, and heightened penalties make it essential for cryptocurrency firms to institute strong compliance programs, update their AML manuals and policies, conduct regular self-assessments, and adequately train their employees. Companies should also expect additional regulations to be issued and new legislation to be enacted in the coming year. Stay tuned.

©2021 Katten Muchin Rosenman LLP