The Changing Landscape of Dawn Raids: Preparing for Hybrid Inspections
The pandemic accelerated widespread digitization in almost every industry. Moving from hard copy to digital documentation influences many business and legal processes, including the way authorities around the world conduct dawn raids. This is an unannounced inspection by regulatory or criminal investigatory authorities into matters such as antitrust law, financial markets regulation, data protection, and financial crime. They typically occur in the morning and have generally been carried out onsite. However, the rise in remote work has altered investigatory approaches and there has been a notable increase in hybrid raids. Teams can simultaneously raid physical offices and private residences to ensure they collect data on remote worker devices – sometimes in multiple countries.
Although dawn raids are not frequent, they occur without warning and can put an organization at significant risk for noncompliance if not prepared. It is important to know who can conduct dawn raids and how investigations are shifting with the remote work culture. This knowledge better positions organizations to proactively create plans limiting risk.
The U.S. Department of Justice (DOJ) Antitrust Division has the power to investigate anti-competitive behaviors in both civil and criminal contexts. Dawn raids occur more often in the U.S. for matters involving suspected criminal antitrust violations, such as collusion. DOJ officers, FBI agents, and local law enforcement can enter the premises (offices and local residences) to investigate after obtaining a search warrant.
Hybrid dawn raids are also ramping up in other locations around the world. For example, last year the European Commission announced a wave of post-pandemic dawn raids. The Commission has statutory powers to investigate anti-competitive practices affecting trade between EU member states such as restrictive agreements and abuse of dominance.
Penalties can include fines and imprisonment for criminal matters. Organizations can also receive fines for noncompliance with procedural mandates such as failure to turn over requested documentation or concealing evidence.
Considerations and Preparation
If organizations handle a dawn raid incorrectly, significant liability may result. The trend of increased hybrid raids can be daunting, as many do not have a solid plan that accounts for custodians working remotely. To reduce the shock factor and keep compliant, it is crucial to be prepared and leverage partnerships that will limit exposure and foster preparedness.
Here are four ways to enhance dawn raid preparedness:
Understanding risk factors: Knowledge of the type of data an organization maintains will uncover which information is at risk and the regulatory bodies that would control potential investigations. Certain business activities increase dawn raid vulnerability, such as communications between organizations that could appear as collusion or collecting sensitive consumer information invoking data protection legislation. A proactive risk assessment allows for earlier custodian identification, notification, and training opportunities.
Mapping data: Many organizations already utilize data mapping as an information governance tool. After determining that an organization could be subject to a dawn raid, specific mapping for high-risk data will aid with investigatory compliance. Mapping should entail identifying, understanding, and plotting what information an organization has, how the data flows through the organization, who has physical or remote access to the data, and where the information is stored. Mapping can also uncover improper data handling by remote workers that organizations need to address. Establishing control and accessibility allows for easier retrieval and assessment of privilege during a sudden investigation.
Forming response teams: The core team should include onsite reception, IT staff, legal counsel, management, human resources, and any outside partner overseeing forensic collection or compliance efforts. Also account for key custodians who could be subject to at-home investigations. Provide proper notice and training on what can happen during a raid – including an active search of the premises, interviews, inquiries about storage locations for relevant documents, and seizure of evidence for review off-premises. Regarding electronic data, investigators can seal off premises to prevent interference with data sources, request passwords, copy drives, remove devices, and more.
Second, anticipate challenges that could arise and confirm what constitutes acceptable behavior. Some actions to avoid during a raid include hostile reception, evidence destruction or concealment, providing false or misleading information, and access obstruction. Absence of a plan could also lead to leakage of privileged information, so make sure the team has knowledge of what they can withhold.
Performing readiness assessments and mock exercises: Evaluating and testing policies and procedures will identify gaps. Consider partnering with a provider with experienced experts offering a combination of regulatory knowledge and forensic IT skills to guide assessments. Having an initial workshop can be beneficial to discuss procedures, common challenges, overcoming obstacles, and best practices for dawn raid preparedness. This also provides opportunities to voice anticipated concerns and uncover rick factors.
A readiness assessment can be a valuable tool to create a risk matrix, map data, establish a tailored response framework accounting for hybrid inspections, and determine whether to hold a mock dawn raid. All of this will strengthen the foundation of an organization’s dawn raid readiness program. Providers can also work in tandem with the team to improve programs and implement best practices leading up to and during a raid. This includes:
- Understanding how to image or copy data on devices
- Creating a memorandum for regulators outlining information management, storage, and retention policies that is regularly updated
- Circulating an internal dawn raid procedure memorandum for both onsite and remote employees
- Copying data seized and imaged by regulators to assess potential exposure
- Observing and noting the entire investigatory process
These are just a few key components of a robust dawn raid readiness program. Regular assessments and audits will highlight specific processes that reduce exposure and streamline compliance in the event of a dawn raid, while also accounting for the likelihood of hybrid raids based on the organization’s remote work policies.
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