The 2012 FCPA Guidance specifies that “a good compliance program should constantly evolve. A company’s business changes over time, as do the environments in which it operates, the nature of its customers, the laws that govern its actions, and the standards of its industry. In addition, compliance programs do not just exist on paper but are followed in practice will inevitably uncover compliance weaknesses and require enhancements. Consequently, DOJ and SEC evaluate whether companies regularly review and improve their compliance programs and not allow them to become stale.”
Continuous improvement requires that you not only audit but also monitor whether employees are staying with the compliance program. In addition to the language set out in the FCPA Guidance, two of the seven compliance elements in the US Sentencing Guidelines call for companies to monitor, audit, and respond quickly to allegations of misconduct. These three activities are key components enforcement officials look for when determining whether companies maintain adequate oversight of their compliance programs.
One tool that is extremely useful in the continuous improvement cycle, yet is often misused or misunderstood, is ongoing monitoring. This can come from the confusion about the differences between monitoring and auditing. Monitoring is a commitment to reviewing and detecting compliance variances in real time and then reacting quickly to remediate them. A primary goal of monitoring is to identify and address gaps in your program on a regular and consistent basis across a wide spectrum of data and information.
Auditing is a more limited review that targets a specific business component, region, or market sector during a particular timeframe in order to uncover and/or evaluate certain risks, particularly as seen in financial records. However, you should not assume that because your company conducts audits that it is effectively monitoring. A robust program should include separate functions for auditing and monitoring. Although unique in protocol, the two functions are related and can operate in tandem. Monitoring activities can sometimes lead to audits. For instance, if you notice a trend of suspicious payments in recent monitoring reports from Indonesia, it may be time to conduct an audit of those operations to further investigate the issue.
Your company should establish a regular monitoring system to spot issues and address them. Effective monitoring means applying a consistent set of protocols, checks, and controls tailored to your company’s risks to detect and remediate compliance problems on an ongoing basis. Many compliance practitioners understand you should be checking in routinely with local Finance departments in your foreign offices to ask if they have noticed recent accounting irregularities. Regional directors should be required to keep tabs on potential improper activity in the countries in which they manage. These ongoing efforts demonstrate that your company is serious about compliance.
Ongoing monitoring is not limited to the financial component of compliance. Another approach to review emails as both a preventative and detection program through the technique of email sweeps. The concept is straightforward; at regular intervals you can sweep through your company email database for identified key words that can be flagged for further investigation, if required. The beauty of this approach is that does not require an extensive eDiscovery software tool or license purchase. It can be accomplished generally in two days or less. Also it is not limited to anti-corruption compliance but any of the risk factors identified for your company.
The objective of this approach is to ‘find the smoke’ which may be the evidence of a compliance breakdown (and related fire) by sweeping through emails is to uncover those that may contain real issues. From this starting point, you can assess and prioritize, by checking and verifying that there are issues worth investigating. From here you can identify the issues you want to investigate first. Further, and if warranted, you can invoke your investigation protocol, with all the requisite protections and securities.
In addition to the cost effectiveness of this approach, in that you are only paying for the services when you need them and as they are delivered, this approach satisfies the Tom Fox mantra of Document, Document, and Document because everything you have done can be verified and audited. Finally, as the regulators continue to evolve in their understandings and appreciation of a best practices compliance program, you will evolve your compliance program to a new level of detection that could well allow you to have a more robust prevent mode. When your compliance program has a strong prevent prong, it can be the most effective to stave off any issues from becoming Foreign Corrupt Practices Act (FCPA) violations.
Continuous improvement through continuous monitoring will help keep your compliance program abreast of any changes in your business model’s compliance risks and allow growth based upon new and updated best practices specified by regulators. A compliance program is a continuously evolving organism, just as your company is continually improving its business processes. The FCPA Guidance makes clear the “DOJ and SEC will give meaningful credit to thoughtful efforts to create a sustainable compliance program if a problem is later discovered. Similarly, undertaking proactive evaluations before a problem strikes can lower the applicable penalty range under the U.S. Sentencing Guidelines. Although the nature and the frequency of proactive evaluations may vary depending on the size and complexity of an organization, the idea behind such efforts is the same: continuous improvement and sustainability.”
Three Key Takeaways
- Ongoing monitoring is not limited to financial monitoring, a holistic approach would look at other indicia of corruption.
- Where there is smoke, there is most usually fire.
- Continuous improvement can be achieved in a variety of efficient, cost effective ways.
Email sweeps can be a timely and cost effective tool for continuous improvement through ongoing monitoring.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit this month’s sponsor Affiliated Monitors at www.affiliatedmonitors.com.