The second tipping point for compliance which has occurred over the last 30 days or so is the information which has leaked out that the Department of Justice (DOJ) is in the process of hiring an outside advisor to provide to the Foreign Corrupt Practices Act (FCPA) unit an additional perspective on best practices for an anti-corruption compliance program. This person, identified as Hui Chen, will advise the DOJ on not only the efficacy of a company’s compliance program but also whether Declinations should be granted based upon the facts and circumstances presented by each matter.
Based on this new compliance counsel position, I think there are now different imperatives. The first is that it will become even more important and critical for company’s to have a robust demonstrable program in place. The foundational elements of a best practices compliance program are well known and available to anyone looking. Of course, I would say one of the best places to start is my book Doing Compliance: Design, Create, and Implement an Effective Anti-Corruption Compliance Program which is based on the 10 Hallmarks of an Effective Compliance Program, as laid out in the FCPA Guidance. But you can use other formulations such as Martin’s Five Elements of an Effective Compliance Program, the OECD 13 Good Practices or even the UK’s Six Principles of Adequate Procedures as the basis for your compliance program.
Stephen Martin, the Managing Director and founder of Baker & McKenzie’s compliance consulting practice and someone who helps companies proactively enhance corporate compliance programs, has said about the creation of this new DOJ compliance consultant position, “Historically, it has been difficult for compliance professionals to explain the “return on investment” in compliance programs to senior management and Board of Directors. Companies questioned whether DOJ and SEC [Securities and Exchange Commission] really credited a pre-existing compliance program or enhancements done during an investigation and/or resolution. The DOJ and SEC listened to the compliance community and publicly released the rationale in the Morgan Stanley declination as resulting from the effectiveness of Morgan Stanley’s compliance program. Now, the DOJ is furthering its focus on the importance of compliance by clearly signaling how intently DOJ will be evaluating compliance programs in charging decisions, resolutions and monitorships. By retaining a compliance consultant with previous DOJ and in-house compliance experience, DOJ is sending a strong message to senior management and Boards of Directors that it is now critical that companies have a robust, effective and sophisticated compliance program covering both FCPA and non-FCPA risk areas.
For DOJ, this is a great step forward in being able to actually understand compliance programs and how they operate in the real world, in difficult environments when investigating and resolving matters. For companies, the “return on investment” is clear…the benefits of an effective compliance program far outweigh the costs of the program and help mitigate government enforcement and compliance related risks. For compliance professionals, the DOJ’s increasing focus provides the rationale for helping companies truly move to instituting and maintaining a practical, best practices compliance program that meets the rising expectations of the DOJ.”
Mike Volkov, in a post entitled “Political Cynicism and DOJ’s Appointment of an Internal “Compliance Program” Expert”, said the following, “It is always good to have access to compliance expertise when examining company compliance programs and imposing corporate compliance requirements. If the compliance counsel is charged with the responsibility for reviewing and revising the Schedule C requirement routinely imposed on companies that settle criminal cases, such an assignment could be a welcome development. Such revisions could be used as an opportunity to enhance corporate compliance obligations and promote effective compliance solutions.
Further, a compliance counsel could help to bridge the gap between antitrust and criminal division leaders and bring some consistency to the issue of crediting companies for corporate compliance programs. Finally, a compliance counsel could be assigned to an even more important task — further revision of the US Sentencing Guidelines to update and incorporate compliance developments into a more relevant set of standards for an effective ethics and compliance program.”
Both Martin and Volkov recognize that such an outside expert will put additional scrutiny on any compliance program that the DOJ may review. To my mind, it will make the role of the Chief Compliance Officer (CCO) and the function of a compliance program even greater and more important going forward. Yet equally important will be the focus of this new compliance counsel on decisions around whether or not to press criminal charges or give a Declination to a company. While this new compliance counsel position at the DOJ makes implementing and documenting the above steps all the more important, it also gives companies a greater chance to avoid potential FCPA liability through a DOJ Declination to Prosecute if they can demonstrate they have an effective compliance program.
Moreover, if you tie the information about the new compliance counsel with the announcement of the Yates Memo and the increased focus on corporate internal investigations to identify senior executives for prosecution, it is now even more important that companies have a robust compliance program in place. As more pressure will be put on quickly and efficiently investigating potential FCPA violations, I think the same will become truer for internal remediation of issues going forward. The message could not be clearer.
We now have two data factors around my theory that we are at a ‘tipping point’ for compliance. Stay tuned for tomorrow’s next data element.
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© Thomas R. Fox, 2015