Cycles are nothing new in the world of white-collar enforcement, which often impact the perceived importance of corporate governance processes. However, as we say in my other home country, “plus ça change, moins ça change” (the more things change, the more they stay the same!) 

Rules tighten in the aftermath of scandal or financial crisis, then loosen in the name of relaxing regulations that stifle innovation, economic growth or administrative priority shifts. Regulatory enforcement intensity waxes and wanes, but the importance of appropriate governance and controls remains critical to corporate well-being.

We now appear to be entering another familiar enforcement phase: a pullback in domestic focus, deeper scrutiny on specific areas, a lighter touch on corporate accountability and greater attention on foreign actors. While this is certainly not unprecedented, this environment raises important questions and challenges about corporate behavior, compliance resilience and the long-term risks of a less stringent enforcement environment.

Like a pandemic, fraud spreads silently at first — thriving in weak systems, exploiting human vulnerabilities and multiplying rapidly before anyone realizes the true scale of the contagion. Just as the Enron and WorldCom scandals in the early 2000s were preceded by a deregulatory boom and SOX was the response, the 2008 financial crisis followed years of unchecked risk-taking with the results we all saw. Today’s enforcement climate raises questions about whether we are once again setting the stage for the next wave of misconduct. And in order to have fraud, one needs opportunity, pressure and rationalization. 

Where the risk may surface first

Certain sectors are especially vulnerable in this type of environment. As well as the more traditionally targeted industries, new areas like crypto and digital assets,  which continue to develop ahead of clear regulatory frameworks, are particularly at risk. While high-profile prosecutions have taken place, certain new industry participants still operate in a regulatory gray zone, and investors lack many of the protections common in more mature financial markets.

Often overlooked, environmental claims also deserve attention. If enforcement around environmental disclosures and emissions standards weakens, it could create incentives for companies to exaggerate sustainability efforts or underreport risk. These actions often don’t attract immediate scrutiny — but they can lead to significant liability down the line.

Opportunity: The return of the light-touch era?

Recent developments suggest a clear change in tone from federal regulators. Penalties are being moderated in some cases, deferred prosecution agreements seem to have less teeth, and monitoring remedies may be refocused. While enforcement has not disappeared — nor is it likely to — its domestic focus appears to be narrowing. At the same time, there’s greater emphasis on foreign companies and overseas corruption and there are signals that foreign regulators, particularly in Europe, are willing to step in.

For today’s financial and compliance leaders — many of whom may not have been in senior roles during prior enforcement waves — this could seem like a reprieve. But it may also create blind spots. When rules seem less urgent or enforcement risk feels more distant, some organizations deprioritize the very controls and practices that help them navigate.

The past reminds us that such lulls can create fertile ground for misconduct, especially if companies start to believe that scrutiny is less likely, or consequences will be delayed.

Here’s a simple equation: Economic Pressure + Relaxed Oversight = Increased Fraud Risk.

At the same time, macroeconomic signals point to uncertainty. If economic headwinds intensify — especially with recessionary concerns, uncertainty around tariffs, extended and disrupted supply chains leading to margin compression — companies may feel increasing pressure to meet or maintain performance expectations. In such a climate, the line between aggressive accounting and earnings manipulation can start to blur and the need to gain market share may lead to bribes, among other malfeasance.

Misconduct in these environments rarely becomes visible right away. It builds quietly over time, often uncovered only years later during internal audits, in the aftermath of bankruptcies when performance was stretched to the breaking point, in the case of restatements, or as a result of a whistleblower. The risk may not be immediately visible — but it is cumulative and real.

The guardrails that remain

That said, several key safeguards are still intact — offering a measure of counterbalance even as federal enforcement evolves:

• International enforcement continues to expand. Regulators abroad are increasingly assertive, particularly in Europe and Asia. U.S.-based companies operating globally are still subject to foreign anti-corruption laws and cross-border cooperation among authorities is increasing.
• Domestically, state attorney generals can fill some of the gaps. Many AGs have a long history of stepping in — particularly in areas like health care fraud, consumer protection and investor rights. But these offices may lack the scale, budget and investigative horsepower of federal agencies.
• Federal action continues in targeted areas. Enforcement efforts remain active in sectors like health care, particularly in cases involving government reimbursement fraud or improper billing practices. These cases suggest that federal oversight has not disappeared — just narrowed in focus.
• Auditing standards are as demanding as ever. Despite other regulatory changes, public company auditors remain under pressure to detect fraud and report weaknesses. Regulatory expectations in this area have not been relaxed, and auditors are increasingly expected to identify red flags in financial statements.
• Private litigation remains a meaningful deterrent. Shareholder lawsuits and class actions continue to hold companies accountable when disclosures fall short or risks are misrepresented. This legal pressure — driven by investors and plaintiffs’ attorneys rather than government — operates independently of political cycles.
• Whistleblowers are still protected and can be highly incentivized. Tipsters have played a key role in uncovering many recent frauds, and protections for whistleblowers remain strong. In a lower-enforcement climate, their role becomes even more important.

Compliance programs: Relevance beyond enforcement

Many organizations have made real strides in strengthening internal compliance programs over the past decade — driven by regulatory pressure, investor expectations and reputational concerns. Even in a less stringent enforcement environment, these investments remain vital.

First, reputational risk and public accountability haven’t faded. In fact, social media and stakeholder activism make it easier than ever for ethical lapses to attract attention — even without government involvement.

Second, mergers and acquisitions continue to present risk. Acquiring entities are often held responsible for inherited compliance failures. Robust internal controls, due diligence and risk assessments are essential for identifying hidden liabilities before they become public problems.

Finally, even in the absence of immediate enforcement, forward-thinking organizations understand that compliance isn’t just about staying out of trouble. It’s about building sustainable operations, maintaining trust with stakeholders, establishing a reputation of integrity and anticipating risk — not reacting to it.

A moment to be proactive

As enforcement priorities shift, the temptation to loosen internal controls or scale back compliance efforts and investments may be tempting. But this moment is not one for complacency. If history is any guide (and it usually is), misconduct that begins under light scrutiny tends to end under a more intense spotlight — often years later.

Strong compliance programs can stop the spread of fraud before it takes hold, building organizational immunity through vigilance, accountability and early detection. This is a time to take stock:

• Are controls over financial reporting keeping pace with business complexity and the evolving new risks created by change in policies, and geopolitical uncertainty identified?
• Are new risks — especially in fast-evolving unregulated sectors — being properly identified, assessed and mitigated?
• Are compliance programs appropriately resourced and empowered to act?

These are the questions worth asking now, before risk has a chance to compound.
The enforcement cycle may be reprioritized, but risk itself hasn’t gone anywhere. Economic pressures, evolving industries and shifting regulatory priorities all create new vulnerabilities. And while some external guardrails remain in place, they are no substitute for proactive, internal risk management.

Those who treat this moment as a time to reinforce — rather than retreat from — strong compliance will be better positioned to navigate whatever comes next. Because while enforcement climates may rise and fall, the consequences of ethical failure are always significant, often lasting — and sometimes, fatal.

The Republican legislative balancing act now shifts to the Senate.

Senate Majority Leader John Thune (R-South Dakota) said this week House Republicans would like to see as few changes as possible to the sweeping tax and spending package (H.R. 1) the House passed by a single vote this morning. But he was quick to add that the Senate will have its say as it aims to get the massive reconciliation package a step closer to becoming law.

“The Senate will have its imprint on it,” said Thune.

Indeed, GOP senators have their own demands, and the package will have to survive the chamber’s complex rules — a historically time-consuming process.

Byrd Rule issues

The reconciliation process allows tax and spending legislation to pass with a simple majority, but the bill still needs to survive the Byrd Rule — named after the late Sen. Robert Byrd (D-West Virginia), known for his mastery of parliamentary procedure. It prevents lawmakers from tucking non-budgetary provisions into the legislation.

“The committees are working closely to try and identify potential Byrd problems ahead of time,” Thune said.

The Senate parliamentarian makes calls on challenges against provisions in the bill and whether they survive the “Byrd Bath.” Democrats plan to aggressively use the rule to challenge items they believe don’t satisfy the Byrd standard. Once the package makes it to the floor, senators will be prepared for a marathon vote-a-rama on amendments.

GOP senators hope the advance work will help keep the measure moving, but a look at the history of the chamber’s experience with big bills shows it will likely be a lengthy process.

For the reconciliation bills enacted since 1980, the time between adoption of a budget resolution and enactment of the reconciliation bill ranges from 28 to 385 days, with a 152-day average, according to the Congressional Research Service. The Senate passed the Democrats’ 2022 sweeping reconciliation legislation with changes roughly nine months after the House passed it.

Independence Day target

“It will take longer than expected just because it is arduous and it’s designed to be that way,” Sen. Mike Rounds (R-South Dakota) said. “It would be great to get it out before the Fourth of July break.”

Majority Whip John Barrasso (R-Wyoming) said the Senate Finance Committee has been meeting since last summer and “have some ideas that may or may not be in the House bill.” Barrasso said he’ll work with every member of his conference, calling Trump and Vice President JD Vance persuasive members of the whip team as well.

Congress didn’t clear Republicans’ 2017 tax overhaul until December of that year, Barrasso said, but this bill faces a tighter deadline because it includes a debt ceiling hike. The borrowing limit could hit as soon as August.

Sen. John Hoeven (R-North Dakota) said the message to Senate Republicans right now is to work with committees of jurisdiction.

“Whatever committee you’re on, work with your chairman on your committee, is really where we’re at,” Hoeven said.

Thune originally proposed moving the measure in two parts, but Trump wants his agenda rolled into a single package, which the House dubbed “The One Big Beautiful Bill Act.” Sen. Ron Johnson (R-Wisconsin) is still advocating for the previous approach.

Asked when the Senate could get it done, Johnson said, “We are so far away from an acceptable bill, it’s hard to say.”

“I think we could move very quickly if we split it into two.”

Next steps

If the Senate amends the reconciliation legislation, the House would need to vote on the amended legislation or they would need to be reconciled in a conference committee. That’s likely to lead to more challenges, given the tight margins in the House.

Rep. Chip Roy (R-Texas), one of the most vocal conservative hardliners who ended up supporting the bill, acknowledged Senate changes are coming and suggested tough negotiations lie ahead between the chambers.

“We’ll give them some flexibility, they gotta work their will, but somewhere between us and the Senate and the White House, there’s gonna be some red lines and those will be public pretty soon,” Roy said.

President Donald Trump’s signature tax bill narrowly passed the House Thursday morning, advancing a sprawling multitrillion-dollar package that would avert a year-end tax increase at the expense of adding to the U.S. debt burden.

The bill now heads to the Senate, where groups of Republicans are pressing for extensive change. Lawmakers plan to vote on approval by August. The bill includes a $4 trillion increase in the U.S. debt ceiling, which the Treasury Department forecasts could otherwise force a default as soon as August or September, adding urgency to the timeline.

The 215-214 House vote, with one abstention, was met with cheers from Republicans in the chamber. It followed a furious offensive by Trump, who visited the Capitol to rally Republicans, worked lawmakers by phone late into the night and summoned holdouts to the Oval Office. His budget office released a statement branding any GOP lawmaker who failed to support the package guilty of the “ultimate betrayal.”

Trump took a victory lap on his social media platform Truth Social Thursday morning, calling the One Big Beautiful Bill Act the “the most significant piece of Legislation that will ever be signed in the History of our Country!”

“Now, it’s time for our friends in the United States Senate to get to work, and send this Bill to my desk AS SOON AS POSSIBLE! There is no time to waste,” Trump said.

House Speaker Mike Johnson and his lieutenants went through rounds of negotiations steps from the House floor to balance the demands of lawmakers from high-tax states pressing for an increase in the state and local tax deduction. Hardline conservatives insisted on deeper spending cuts and vulnerable swing-district Republicans were wary of slashing Medicaid.

The measure would avoid a blow to U.S. growth just as the economy struggles with the impact of the steepest tariff increases in almost a century, though it’s expected to add hundreds of billions a year to the deficit.

It would extend Trump’s first-term tax cuts due to expire Dec. 31, along with new tax relief including raising the limit on the deduction for state and local taxes to $40,000 and temporarily exempting tips and overtime pay from taxes.

Cuts to safety-net programs such as food stamps and Medicaid health coverage for the poor and disabled could worsen economic inequality even as wealthy Americans gain the largest share of tax cuts. 

Deficits driven by the tax cuts also risk exacerbating bond investors’ concerns about the ballooning U.S. debt, highlighted by Moody’s decision to downgrade the U.S. government’s credit rating.

Democrats vowed to make House Republicans pay a price in next year’s midterm elections, casting the measure as a Robin Hood-in-reverse effort to take from the poor and give to the rich.

“The GOP tax scam will hurt working families the most while delivering massive tax breaks for billionaires like Elon Musk,” said House Minority Leader Hakeem Jeffries of New York.

Republicans counter that their voters will be energized by enactment of Trump’s top legislative priority for the year and reward them politically. 

Spending cuts

Ultraconservative Freedom Caucus members were able to insert new language in the bill that would dramatically speed up the end of clean energy tax credits passed under the Biden administration, which would generally have to be put into service before 2029 and would have to be well under way within 60 days of the bill’s enactment. The hardliners also were able to move up the start date for new Medicaid work requirements to December 2026 from a 2029 start in the initial version of the package.

The acceleration of new Medicaid work requirements could become an issue in the midterm elections — which fall just one month earlier — with Democrats eager to criticize Republicans for restricting health benefits for low-income households.

Johnson was also able to strike an elusive deal with lawmakers from high-tax states on the state and local tax deduction. The deal would raise the $10,000 cap to $40,000 for individuals and joint filers starting this year, with a phase-out for those making more than $500,000 per year. The cap would increase by 1% a year for 10 years.

Other sweeteners were added for states like Texas, which would be the main beneficiary of $12 billion in reimbursements for state border security expenses incurred in recent years. And GOP leaders eliminated a provision that would have cut federal pensions by basing benefits on the highest five years of salary rather than the highest three, in a move cheered by Republican Representative Mike Turner of Ohio, who called the pension cut “unfair.”

The package also imposes tax increases on targets of Trump’s ire such as Harvard University and immigrants. Private universities with large endowments per student would pay a 21% tax on net investment income, up from the current rate of 1.4%. Immigrants would face a new levy on transfers of money to foreign countries.

The bill would boost military spending by $150 billion and add $175 billion for immigration enforcement, both top Trump priorities. It also includes numerous other provisions affecting health care, energy production and manufacturing, reorienting the government away from climate change concerns in favor of fossil fuels.

That includes the elimination of most EV tax credits, including for market leader Tesla, by the end of 2025, replaced by a tax break for auto loan interest for U.S.-built vehicles, a move championed by Trump and Ohio Senator Bernie Moreno.

Late changes to the bill even included changing the name of new savings accounts for babies born in the next few years, to be seeded with $1,000 from the government. It’s now “Trump” accounts instead of “MAGA” accounts.

Republican senators have said they will press for substantial changes before approving the package.

A number of Senate Republicans want to make permanent tax cuts that are now temporary under the package, especially breaks benefiting businesses. Some GOP senators have warned against any cuts to Medicaid. Others have pushed for far deeper overall spending cuts.