One of the new areas articulated in the Evaluation of Corporate Compliance Programs was around payments and payroll. For the both the compliance professional and the corporate payroll function, there is a significant role for a corporate payroll function in the operationalization of a corporate compliance program.
It is found in Prong 4, “Operational Integration”, which is the section that includes who is responsible for integrating your policies and procedures throughout your organization, what internal controls are in place and specific inquiries into the role of the company payment system in any Foreign Corrupt Practices Act (FCPA) violation and how oversight is dedicated in your organization. The questions posed are, “Payment Systems – How was the misconduct in question funded (e.g., purchase orders, employee reimbursements, discounts, petty cash)? What processes could have prevented or detected improper access to these funds? Have those processes been improved?” This is immediately followed by an equally important set of questions, “Approval/Certification Process – How have those with approval authority or certification responsibilities in the processes relevant to the misconduct known what to look for, and when and how to escalate concerns? What steps have been taken to remedy any failures identified in this process?” Finally, the questions around payment systems are proceeded by the following, “Controls – What controls failed or were absent that would have detected or prevented the misconduct? Are they there now?”
Taken together, these three groups of questions may not seem particularly new, innovative or even something different from what payroll currently does for an organization. However, the Evaluation, with its emphasis on the operationalization of a corporate compliance program, clearly demonstrates the role of payroll in compliance. The Evaluation requires that payroll not only form a part of any best practices compliance program but when it comes to the specific subject matter expertise (SME), payroll is on the front lines of any attempts to prevent, detect and then remediate anti-corruption compliance violations.
This means that not only can payroll be one of the compliance function’s strongest corporate allies, the role of payroll, by its nature, works to operationalize compliance. This is because to implement the appropriate internal controls around compliance, payroll must know the specific requirements of the FCPA, know what kinds of issues are likely to come up that might create a risk of bribery and corruption, all leading to an understanding of the appropriate compliance internal controls to implement around payroll and payments.
This is most particularly true around offshore payments, which are generally defined as payments made to a location other than the home domicile of the party or the location where the services where delivered. If a Tunisian agent who performs services in Dubai asks for payment in a location other than Dubai or Tunisia, that would qualify as an offshore payment. If you train people who are in payroll on this issue, they may well pick up the phone, and notify compliance when they see a request for payment in a geographic location separate and apart from one of the two standard payment venues. Those are the types of communications, when properly documented, that demonstrate your compliance program is operationalized into the fabric of the organization.
The role of global payroll in FCPA compliance is not often considered in operationalizing your compliance program, yet the monies to fund bribes in violation of the FCPA must come from somewhere. Unfortunately, one of those places is out of payroll. All Chief Compliance Officers need to sit down with his or her head of payroll, have them explain the role of payroll, then review the internal controls in place to see how they facilitate the goals of compliance. From that review, you can then determine how to use payroll to help to operationalize your compliance program.
The Department of Justice has now provided its clearest statement on how it expects a company to actually do compliance going forward. Long gone are the days where the DOJ simply considered the inputs of a written program as sufficient to protect companies from FCPA violations. Yet the mandate to operationalize a corporate compliance program drives home the concept that compliance is a business process, which should be administered by the appropriate business unit with the requisite SME. When it comes to following the money, payroll is the most well suited corporate discipline to provide this first level of oversight and controls.
Three Key Takeaways
- Payroll can be a key prevent and detect control.
- The Evaluation specified the tying of the corporate compliance function to the corporate payroll function?
- Offshore payments remain a key indicium for a red flag.
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