Halloween is almost upon us and we celebrate the greatest Halloween cartoon in the history of the world, ever, “It’s the Great Pumpkin, Charlie Brown”, which premiered in 1966. As usual, the story revolves around the Peanuts gang, who are preparing for Halloween, Linus writes his annual letter to the Great Pumpkin, despite Charlie Brown’s disbelief, Snoopy’s laughter, Patty’s assurance that the Great Pumpkin is a fake, and even his own sister Lucy’s violent threat to make her brother stop. On Halloween night, the gang goes trick-or-treating. On the way, they stop at the pumpkin patch to ridicule Linus missing the festivities, just as he has done every year. Undeterred, Linus is convinced that the Great Pumpkin will come, and even persuades Charlie Brown’s little sister, Sally, to remain with him to wait. At 4:00 AM the next morning, Lucy awakes up and notices that Linus is not in his bed. She finds her brother asleep in the pumpkin patch, shivering. She brings him home and puts him to bed. Later, Charlie Brown and Linus are at a rock wall, commiserating about the previous night’s disappointments. Although Charlie Brown attempts to console his friend, admitting that he himself has done stupid things in his life also, Linus angrily vows to him that the Great Pumpkin will come to the pumpkin patch next year.

The compliance lesson from Linus’ adventure; it is process validation. Unlike Santa Claus, who we have been repeatedly told “Yes, Virginia there is a Santa Claus”; there has been no process validation for the Great Pumpkin. Linus faints when he thinks he sees the Great Pumpkin rising from his pumpkin patch; unfortunately it is only Snoopy. In the compliance world, process validation comes through oversight. Two of the seven compliance elements in the 1992 US Sentencing Guidelines call for companies to monitor, audit and respond quickly to allegations of misconduct. In the 2012 FCPA Guidance, in Hallmark IX of the Ten Hallmarks of an Effective Compliance Program, it mandated ongoing monitoring to continually update and improve your compliance program. The Department of Justice’s Evaluation of Corporate Compliance Program, 2019 Guidance, made clear that monitoring of your compliance program through reviewing data and looping it back into your system that is a bare minimum for an effective compliance program.

Many companies fall short on effective monitoring. This can sometimes be attributed to confusion about the differences between monitoring and auditing. Monitoring is a commitment to reviewing and detecting compliance programs 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. 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. While 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. To address this, your compliance team should be checking in routinely with local finance departments in your foreign offices to ask if they’ve noticed recent accounting irregularities. Regional directors should be required to keep tabs on potential improper activity in the countries they manage. Additionally the global compliance committee should meet or communicate as often as every month to discuss issues as they arise. These ongoing efforts demonstrate your company is serious about compliance.

I hope that you have the chance to watch It’s the Great Pumpkin, Charlie Brown again this year. I did. When you watch, think about the compliance implications. Will anyone ever set a ‘second set of eyes’ on the Great Pumpkin? If not, will it ever be validated? I hope that if you are trick-or-treating tonight, you will be safe and dry.

Doug Cornelius Responds:

Are you trying to say that the Great Pumpkin is not real?

Just wait ’til next year, Tom Fox. You’ll see!

Next year at this same time, I’ll find a pumpkin patch that is real sincere! And I’ll sit in that pumpkin patch until the Great Pumpkin appears. He’ll rise out of that pumpkin patch and he’ll fly through the air with his bag of toys.

The Great Pumpkin will appear! And I’ll be waiting for him!

I’ll be there! I’ll be sitting there in that pumpkin patch… and I’ll see the Great Pumpkin. Just wait and see, Tom Fox. I’ll see that Great Pumpkin.

I’ll SEE the Great Pumpkin!

Just you wait, Tom Fox.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2019

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