The FCPA Compliance Report is the longest running podcast in compliance. This summer, the Compliance Podcast Network posted its 1000th podcast in its catalogue. The FCPA Compliance Report is the most senior podcast in this network. To commemorate this event, I am featuring a five-year retrospective for the topic of each podcast. In each podcast, I consider where we were, where we are now and where we will be going in the next five years.

In the Episode, I visit with podcast favorite Mike Volkov and we consider FCPA enforcement and compliance programs over the past five years. In this podcast we discuss:

  1. How the 2012 FCPA Guidance was one of the seminal releases of information by prosecutors and regulators.
  2. The Ten Hallmarks of an Effective Compliance provide all compliance practitioners with information needed to design, create and implement a best practices compliance program.
  3. The DOJ and SEC have continually listened to the concerns of businesses and compliance practitioners over the past 5 years in formulating enforcement policies.
  4. The DOJ telegraphed its enforcement priorities through its enforcement actions.
  5. The 2017 FCPA Corporate Enforcement Policy was the culmination of this journey.
  6. Compliance professionals should use data to demonstrate effectiveness and continuous improvement of their compliance programs.

Where has compliance and enforcement been over the past 5 years and where is it going? Mike Volkov and I explore on the FCPA Compliance Report.

Yesterday, November 11th, was the 100thanniversary of the end of World War I (WWI). While any retrospective of the end of this catastrophic loss of over 20 million lives would probably be insufficient, it is appropriate to reflect on what the conflict wrought. In addition to the lives lost in WWI, it directly led to World War II (WWII) with over 40 million in losses of life. When you add in the interregnum of conflicts in the interwar years of 1918 to 1939, then consider the post-WWII conflicts all the way up to the fall of the Berlin Wall in 1989, you see the scope of what this cataclysmic conflict unleashed in ways seen, foreseen and unseen. All of these events helped lead to the upsurge in the fight against bribery and corruption.

The driving force in the fight against the worldwide scourge of bribery and corruption can now be seen as an outgrowth of the forces unleashed by WWI, when in its immediate aftermath, the winning powers divided up the Middle East into the lines which still in place today. For the fight against corruption leads in the fight against terrorism, a by-product of hobbling of worldwide economic growth by the nefarious nature of bribery and corruption on the international economy and robust economic growth.

Today I begin a five-part podcast series on ethics, compliance and independent integrity monitoring with Affiliated Monitors, Inc., (AMI) who is the sponsor of the series. It focuses on the international aspects of compliance and anti-corruption enforcement. It not only reminds everyone that not only has the US led the fight against bribery and corruption through the passage and robust enforcement of the Foreign Corrupt Practices Act (FCPA) but also through its leadership in mandating and then expanding compliance. Beginning with the US Sentencing Guidelines in 1992 and moving forward into the past decade of the doing of compliance as has been required by the Department of Justice (DOJ) and Securities and Exchange Commission. Starting as early as 1998, the DOJ began articulating what should constitute a best practices compliance program.

Through enforcement actions, Opinion Releases and most significantly in the 2012 FCPA Guidance with its Ten Hallmarks of an Effective Compliance Program; the DOJ and SEC have led the conversation on compliance programs. That leadership has continued through speeches, presentations, the 2016 FCPA Pilot Program, the 2017 Evaluation of Corporate Compliance Programs, with its theme of operationalizing compliance and the FCPA Corporate Enforcement Program and its continued evolution in 2018. The DOJ has continued to emphasize corporate compliance programs as a key step in the international fight against bribery and corruption.

This is where you and I come in. While the DOJ and SEC have led the implementation and furthering of compliance programs as a legal requirement, it is compliance professionals who have led the continued evolution of compliance programs inside corporations. Compliance is a service within your organization, yet under the operationalized model, compliance is a profit generator for a business. Just as law departments generate business by doing transactions, compliance can be viewed as delivering services not only to the business units but also third parties with whom the company does business. This means not only traditional transaction partners such as sales agents, representatives and distributors but also joint venture (JV) partners, teaming partners and others. Compliance can deliver compliance related services to these third parties as a profit center.

Doing compliance means doing business. There are multiple types of risks in a business; operational, regulatory and reputational, just to name a few. The effort to measure and then manage each of these risks can be led by the compliance function. The more efficiently these risks are measured (i.e. assessed) the more easily and efficiently these risks can be managed. This means that the business is not faced with a binary 1/0 or Go/No Go decision on risk but if compliance moved into measuring and the managing risk through the operationalization of compliance into the business unit; the process would help you to do business more efficiently and with greater profitability.

Compliance is a platform to make your company not only a better run organization but can also demonstrate the thoughtfulness and effectiveness of your compliance program should a regulator ever come knocking. This is because if you operationalize compliance into the fabric of your organization, compliance internal controls will touch every aspect of the employment experience in ways that are not obtrusive and will not slow down what you are trying to achieve.

Take compliance as a platform in Human Resources (HR). At every point in talent management, HR can insert compliance into the cycle. Those points include the pre-employment interviews and screening, the interview process with progressively higher senior management, the initial on-boarding process, the quarterly, semi-annual or annual performance review, annual bonus reviews, assessments and awards, promotions and even exiting of an employee. The platform of compliance can record each of these touch points and you now have an internal control burned into HR which is a compliance internal control. Further, if there is any attempt to circumvent or over-ride one of these HR internal controls involving the hiring of a son or daughter of a foreign governmental official, a red flag can be raised and sent to the compliance function for further review.

Compliance is a marketing platform. Some attention has been paid to the use of compliance as a recruiting and hiring tool for millennials. One of the facts of their generation is they want to work at companies which are seen to be doing business ethically, all the while making money. Moreover, as Ethisphere demonstrates annually with its World’s Most Ethical Company awards, businesses which win those awards, on average, exceed the New York Stock Exchange (NYSE) blue chip average for profitability. Earlier this month, a new academic paper demonstrated the financial benefits of a robust internal whistleblower program. Even more than the dollar return, a robust compliance program demonstrates a company’s commitment to institutional justice and institutional fairness.

Compliance embraces public advocacy. The Volkswagen (VW) emissions-testing scandal is one of the largest corporate scandals of the past few years. One thing that makes the VW scandal so unique is that it is one of the few scandals where a company’s actions were so transgressive they damaged the reputations of its competitors. As a response to the VW scandal, Ulrich Grillo, President of the German industry association BDI, recognized that compliance is the answer. He urged companies to check their management processes, including compliance and control systems. He suggested one of the key questions to ask should be “Are we doing everything right?” When you have the President of a national industrial association saying compliance is the answer, you need to sit up and take notice.

As we move from the legal based model of compliance to the more mature understandings that compliance may best well be thought of as a business process, we begin to see how compliance can fit seamlessly into a business. This integration will allow a business to move more nimbly and with greater acumen. Compliance has been driven largely by legal requirements. The enactment of the FCPA in 1977, the implementation of the 1992 US Sentencing Guidelines, the passage of Sarbanes-Oxley (SOX) in 2002 and Dodd-Frank in 2010 have all led to development and innovation in compliance. The DOJ and SEC have continually challenged companies to move the bar of compliance best practices forward again with the emphasis on operationalization of compliance. This development will continue to advance the corporate compliance function. When the regulators come to recognize and indeed advocate the business application of a legal solution, that solution will not go away but will continue to grow.

While today is November 12th, it is still appropriate for you to consider the veterans we honor. At one point, my father and all my uncles, who all had served our country were still alive. I am down to one uncle now so I think I will take the time to call him up and thank him for his service. My family’s experience is probably not uncommon, as you may have had uncles, aunts or other family members who served. Those numbers may be dwindling, so think about calling them up to say thanks. You might also reflect on what was unleashed on the world some 100 years ago on November 11th, 1918.

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, 2018

Goldman Sachs has a very bad week, most particularly around its role in the 1MDB scandal. Tom and Jay consider that story and look at some of the week’s top compliance and ethics stories.

  1. Malaysian officials call for Goldman Sachs to return the $600MM profits it made on the 1MDB bond sales. Stephania Palma reports in the Financial Times. (sub req’d) Goldman Sachs reserves up to $1.8bn to pay for the scandal. Sam Rubenfeld reports in the WSJ Risk and Compliance Journal. Tom has a 3-part series on the matter. Part I-background facts in the guilty plea and indictments, Part 2-the bribery and money-laundering schemes and Part 3-what does it all mean for compliance professionals.
  2. New academic reports shows better whistleblower programs save companies money. For the full report, click here. Matt Kelly has two posts on Radical Compliance (hereand here). Tom blogs about it on the FCPA Compliance and Ethics Blog.
  3. What happens when a compliance professional is not up for the job. David Crow looks at a FCA investigation in the Financial Times. (Sub req’d)
  4. Who is Responsible for Ethics? Marsha Ershagahi Hames explains in LRN’s Blog.
  5. Did the Hoskins decision change any requirements around due diligence on intermediaries or other third-parties? Eric Lochner opines in the FCPA Blog.
  6. Does the recent Stryker FCPA enforcement action change the requirements for per diem expense reimbursements? Kyden Creekpaum writes in the FCPA Blog.
  7. Does a Golden Passport portend corruption? Dick Cassin explores in the FCPA Blog.
  8. Magistrate recommends PdVSA suit alleging recoupment of bribery proceeds by tossed. Carol Balado reports in com. (sub req’d)
  9. Is the (SEC) glass half-full or half-empty? In half-full article, FCPA Unit head says more industries about to be sweep. Ryan Barber in com(sub req’d) In the half-empty department, Co-Director of Enforcment, Stephanie Akavian says its impact, not numbers that matter (meaning the numbers are way down). Francine McKenna reports in MarketWatch.
  10. Ever wonder how a SEC investigation begins? Dan Portnov explains it all in Grand Jury Target.
  11. Looking for the top training on how to operationalize your compliance program? Tom announces a new Compliance Master Class to be held in NYC November 12 & 13, hosted by Jonathan Marks and Baker Tilly. For agenda, more information and registration details click here.
  12. Tom premiers new podcast offering, the Daily Compliance News on the Compliance Podcast Network. Have cup of coffee and catch up on the day’s top compliance stories with the Compliance Evangelist.

What were the top stories this week in compliance? Check out This Week in FCPA with Tom Fox and Jay Rosen to find out.

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.

NOVEMBER 9, 2018 BY TOM FOX

In today’s edition of Daily Compliance News:

  • What happens when the regulators question your tech solutions? (Wall Street Journal)
  • Are Chinese companies being targeted for FCPA prosecutions? (FCPA Blog)
  • KPMG (finally) begins to address conflicts of interest. (Financial Times)
  • In the wake of a massive employee walkout, Google modifies its company policies around harassment. (New York Times)

Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a deep dive into the recently announced reorganization of the Michigan State University compliance function, rolling it into the newly created Office of Audit, Risk, and Compliance.

Some of the highlights from this podcast are:

  1. Does MSU interim President John Engler get compliance?
  2. What is the role of a CCO at a major state university?
  3. Does rolling compliance under internal audit demonstrate a adherence to or lack of commitment to compliance?

For more see Matt’s blog post, Michigan State Reorgs Compliance Again