Telling on Ourselves: The Drive to “Self-Report” Fraud
Welcome to the May 2026 edition of our newsletter! In this issue, we’ll examine recent efforts by government agencies to encourage companies to “self-report” improper or illegal activity, and what your company can do to prepare in the event you need to make such a report.
Self-Policing of Illegal and Fraudulent Activity in a Corporate Environment
In May 2026, three former senior executives of a Malaysian telecommunications company’s United States-based subsidiary were charged in New York federal court with wire fraud, identity theft, and other allegations related to a scheme where they were accused of diverting company revenues from broadband contract sales into their own pockets. “The charges in the Indictment arise from an alleged scheme by the defendants to divert more than $20 million of company funds through four interconnected frauds,” a U.S. Justice Department statement about the indictment said. “The defendants used false statements, forged records, fictitious transactions, and corporate and individual impersonations to deceive counterparties, suppliers, auditors, and supervisors.”
The Justice Department statement said later: “Telekom Malaysia initiated an internal investigation of the American Subsidiary and the defendants. Upon discovering the fraud, Telekom Malaysia self-reported the conduct to the United States Attorney’s Office and received a conditional declination of charges against the company based on the company’s commitment to full cooperation, restitution, remediation of harm caused by the misconduct, and its agreement to report criminal conduct for a three-year period. Today’s action reflects the Office’s commitment to using self-reports as a means to quickly and effectively bring cases that hold individual executives accountable for their misconduct.”
In April 2026, the Southern District of New York – the primary jurisdiction for many cross-border financial crime cases — adopted a voluntary self-reporting program for financial crimes meant to encourage corporate cooperation in cases where employees pay bribes to foreign officials and other misconduct. “The purpose of this program is to encourage early voluntary self-disclosure of criminal conduct, to promote timely and effective enforcement of criminal laws, to encourage repayment of victims, and to provide companies with greater certainty when reporting potential financial misconduct to federal prosecutors,” the Southern District’s statement said. “Under this program, eligible companies that self-report qualifying illegal activity, cooperate fully, and remediate harm caused by misconduct will have a clear, agreed-upon path to a declination. Specifically, shortly after a company makes a self-report, the Office will issue a conditional declination letter stating its intent to decline prosecution against the company, conditioned on the company’s cooperation with the Office’s investigation and satisfaction of all eligibility requirements, including full restitution of victim losses.”
Cooperating with Corporate Self-Reporting Under the SDNY Guidelines
If your client determines that an employee has committed illegal fraudulent activity, the self-reporting process carries with it certain longer-term commitments. “Under this program, eligible companies that self-report qualifying illegal activity, cooperate fully, commit to ongoing reporting of criminal conduct for three years, and remediate harm caused by misconduct will have a clear, agreed-upon path to a declination,” a statement said. “Specifically, shortly after a company makes a self-report, the Office will issue a conditional declination letter stating its intent to decline prosecution against the company, conditioned on the company’s cooperation with the Office’s investigation and satisfaction of all eligibility requirements, including full restitution of victim losses. Upon a company’s fulfillment of its cooperation and remediation obligations and payment of restitution, the Office will issue a final declination notice, concluding the matter without criminal charges.” Companies seeking this status must disclose “all relevant, non-privileged information known to the company relating to the illegal activity,” identifying parties involved in the fraud, and sharing all non-privileged, factual internal investigation materials. Additionally, the program requires that, “subject to individuals’ Fifth Amendment rights,” companies must undertake “best efforts to make available for interviews or testimony present or former officers, directors, employees, agents, and consultants of the company located in the United States and overseas, including but not limited to sworn testimony before a federal grand jury or in federal trials.”
Thorough internal investigation of any alleged fraudulent conduct is a key component of the voluntary self-disclosure process. This should include analysis of internal e-mails, telephone records and other materials, as well as asset profiles and other public records-driven investigations of relevant parties, which can help to understand a party’s motivations prior to and during involvement in a fraudulent scheme, and provide a fuller picture of a company’s potential and actual liability for an employee’s conduct.