Dawn raids are a weapon within regulator's armoury that they seem to wield with varying degrees of frequency. Regardless it must be daunting for companies to experience, especially if they are not prepared or experienced in dealing with these situations. This interesting article by Amy Riella, Brittany Harwood and Lara McMahon of Vinson & Elkins builds on the fact that the number of FCA dawn raids nearly doubled between 2017 and 2018.
The article explores potential drivers for this increase and whether it lasts or not will become apparent with time, but there are a large number of regulators that have these powers and therefore it is always going to be prudent for a company to consider how they should respond and be prepared.
Responding to dawn raids always involves a technology element as the regulators will be keen to get their hands on relevant data sets and will often be focused on communication data as well as official business records. Therefore, companies need to be prepared not only to monitor the data the regulators are capturing and/or searching but also to perform the tasks themselves, with appropriate legal guidance, to ensure that they are able to analyse the data and get a view on how the regulators may respond and/or react.
In some cases this can have a global dimension with multiple sites in multiple countries being subject to coordinated raids, therefore a global response is also often required - ensuring that the response is consistent and coordinated. Additionally, depending on the regulator, leniency applications can sometimes be a consideration and as such speed is of the essence - specifically the speed at which key documents can be reviewed and analysed by the legal team so that they can make informed decisions in this respect.
At the end of the day, I am not sure anyone is ever fully prepared for a dawn raid, but having training for those employees likely to come into contact with regulators - and especially the IT staff - is a critical element of any response plan - as the article sets out. A dawn raid is certainly an event where it pays to be prepared and not having to think about it for the first time as the regulators are knocking on the door!
Over the course of just a year, the number of dawn raids conducted by the FCA nearly doubled, jumping from 13 in 2017 to 25 in 2018... ...At minimum, companies with a presence in the UK should be cognizant of the FCA’s increased use of dawn raids as an investigation tool. Dawn raids are not unique to the FCA, and are used by regulators around the world, including U.S. Department of Justice prosecutors in connection with the Federal Bureau of Investigation and European Competition authorities. Although on the whole, dawn raids are still relatively uncommon, they are incredibly disruptive to the company’s business, stressful for company personnel involved, a drain on resources in terms of time and expenses needed to comply with requests that come with a raid, and often draw negative attention and publicity.