On May 9, 2025, President Trump issued an Executive Order that purports to reduce regulatory burdens and ensure that “no American is transformed into a criminal for violating a regulation they have no reason to know exists.”  The Executive Order sets forth a policy disfavoring criminal enforcement of regulatory offenses except in circumstances where persons know—or can be presumed to know—of the regulatory requirements and “willingly choose not to comply.”  It also emphasizes that strict liability criminal regulatory offenses are “generally disfavored” and encourages agencies, where enforcement is warranted, to consider civil or administrative enforcement rather than criminal prosecution, in a manner consistent with due process and the right to a jury trial.

To implement these principles, the Executive Order directs each agency, in consultation with the Attorney General, to submit to the Office of Management and Budget (OMB) within 365 days a report listing all enforceable criminal regulatory offenses, including the applicable mens rea, or requisite mental state, standard and potential penalties.  These reports must be posted publicly and updated annually, and criminal enforcement of unlisted offenses is “strongly discouraged.”  Additional directives include publishing Department of Justice (DOJ) referral guidance and exploring the adoption of a “default mens rea for criminal regulatory offenses,” subject to exceptions.  The Executive Order explicitly excludes from its application immigration enforcement and national security functions.

BACKGROUND

The Executive Order represents the Trump Administration’s latest effort to curtail federal regulation and limit what it views as government overreach.[1]  It is framed as a response to long-standing concerns regarding the size and complexity of the federal regulatory framework.

The Executive Order contends that the executive branch has, in practice, assumed quasi-legislative authority by promulgating regulations that carry criminal consequences, which risks “abuse,” enables selective enforcement against individuals, and disproportionately “privileges” large corporations who are better equipped to retain legal counsel to navigate “complex regulatory schemes” at the expense of individuals and small businesses.

EXECUTIVE ORDER

The Executive Order outlines a series of measures aimed at reducing the use of criminal penalties for regulatory violations and increasing transparency in the enforcement of such offenses:

First, the Executive Order states that it is the policy of the United States that: (i) criminal enforcement of regulatory offenses is disfavored; (ii) criminal prosecution is “most appropriate” for persons who know—or can be presumed to know—of the regulatory requirements and nonetheless “willingly choose not to comply”; (iii) strict liability offenses are “generally disfavored,” and where enforcement is warranted, agencies should consider civil over criminal enforcement for strict liability regulatory offenses, or, where appropriate and consistent with due process and the right to a jury trial (see Jarkesy v. SEC, 603 U.S. 109 (2024)), administrative proceedings; and (iv) agencies promulgating regulations that may carry criminal penalties should clearly identify the conduct subject to criminal enforcement, the statutory authority for doing so, and the applicable mens rea standard.

Second, the Executive Order requires each agency, in consultation with the Attorney General, to submit to the OMB within 365 days a comprehensive list of all enforceable criminal regulatory offenses.  For each offense, the agency must include the applicable mens rea standard and the range of potential criminal penalties.  These reports must be posted publicly and updated annually. The Executive Order “strongly discourage[s]” criminal enforcement of offenses that are not included in these public reports.  It also instructs the Attorney General to consider whether a regulatory offense appears in the relevant agency’s public report before initiating an investigation or criminal proceeding.

Third, to promote regulatory transparency in the future, the Executive Order further directs agencies to: (i) identify any proposed or final rule in the Federal Register that “may constitute” a criminal regulatory offense; (ii) specify the applicable mens rea for each element of a criminal regulatory offense; and (iii) subject strict liability offense to heightened review as a “significant regulatory action” under Executive Order 12866 of September 30, 1993 (Regulatory Planning and Review).

Fourth, the Executive Order also instructs agencies—again in consultation with the Attorney General—to explore adopting a “default mens rea for criminal regulatory offenses” that applies “unless a specific regulation states an alternative mens rea.”  Within 30 days of submitting their initial reports, each agency head must submit a follow-up report to the Director of OMB, also in consultation with the Attorney General, evaluating “whether the applicable mens rea standards for criminal regulatory offenses enforced by the agency are appropriate.”  Where consistent with statutory authority, the report should include a plan to revise existing mens rea standards, adopt a generally applicable default standard, and provide justification for each offense where the agency proposes to depart from that default.

Fifth, agencies are also instructed to publish guidance on how criminal violations of regulatory offenses should be referred to the Department of Justice (DOJ) for enforcement.  This guidance is expected to consider several factors, including: (i) the actual or potential harm caused by the alleged offense; (ii) the defendant’s potential gain from the offense; (iii) whether the defendant possessed specialized knowledge, expertise, or licensure in the industry related to the rule or regulation at issue; and (iv) the extent to which the defendant was aware that their conduct was unlawful, including their knowledge—or lack thereof—of the applicable regulation.

Finally, the fact sheet accompanying the Executive Order states that it “does not apply to immigration law enforcement or national security functions.”

IMPLICATIONS

The practical impact of this Executive Order on ongoing and future criminal investigations and prosecutions remains uncertain, for both individual and corporate clients.

First, the Order notably highlights that, in some circumstances, “Americans can be convicted without knowing they violated a rule.”  This criticism of the current regulatory framework appears aimed at addressing not only strict liability crimes (i.e., crimes for which the government need not prove that the defendant acted intentionally), but also “general intent” crimes, which require proof that defendants acted intentionally but not that they knew their conduct was illegal.  (By contrast, “specific intent” crimes—e.g., violations of OFAC sanctions regulations—require such knowledge of illegality).  The Order’s implicit criticism of criminal enforcement under a general intent standard could have important policy implications, particularly in corporate criminal investigations of general intent crimes such as the unlicensed operation of money service business and violations of certain Securities Exchange Commission (SEC) regulations.

Second, uncertainty remains regarding which offenses agencies will identify in their forthcoming reports to the Director of OMB.  The inclusion or omission of particular offenses may signal a recalibration of enforcement priorities or otherwise influence ongoing or future investigations and prosecutions.  In addition, the mens rea standards articulated in these reports may depart from traditional interpretations, potentially reflecting a broader shift in how intent is assessed and applied in various regulatory contexts.

Third, the directive for each agency head, in consultation with the Attorney General, to evaluate and potentially adopt a default mens rea standard for criminal regulatory offenses introduces additional ambiguity.  The substance and breadth of any proposed default standard, the extent to which deviations will be permitted, and the degree to which the standard would be consistently applied across agencies remain unresolved.  How individual agencies—and Attorney General Bondi—interpret and apply this directive could have significant implications for criminal exposure moving forward.

Notwithstanding the Executive Order’s signaling a potential shift in regulatory enforcement priorities, companies should not treat it as a basis to downplay potential criminal regulatory issues or relax compliance efforts.  Mitigating the risk of federal criminal regulatory enforcement remains a core feature of corporate risk management. Moreover, the Order is unlikely to impact the enforcement of the types of criminal statutes—e.g., bank and wire fraud, securities fraud, health care fraud, prohibitions against sanctions and money laundering—that DOJ most commonly pursues against large companies.  Finally, the Executive Order appears aimed primarily at easing burdens for individuals, small businesses, and new market entrants—rather than large, well-resourced entities.  As such, maintaining robust compliance protocols remains critical.

 ENDNOTE

[1]     For example, on January 20, 2025, President Trump established the Department of Government Efficiency (DOGE) to examine how to streamline the Federal Government, eliminate unnecessary programs, and reduce bureaucratic inefficiency.  On January 31, 2025, President Trump launched a 10-to-1 deregulation initiative aimed at ensuring every new rule is justified by clear benefits.

This post comes to us from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “President Trump Issues Executive Order, ‘Fighting Overcriminalization in Federal Regulations’,” dated May 14, 2025, and available here.