In this podcast series, I visit with Vin DiCianni, founder and President of Affiliated Monitors, Inc. (AMI) and Eric Feldman, Senior Vice President of AMI. We consider the global view of ethics, compliance and corporate culture of non-US companies, outside the US; in both their home countries and in other countries and has a long history of working with internationally based companies. AMI does independent integrity monitoring in multiple countries outside the US and for many non-US organizations. It is therefore well positioned to observe some of the challenges for monitors working internationally. In this concluding Part V, I discuss some of the challenges for monitors in the international arena with Feldman.

Feldman noted that while the word ‘monitor’ can sometimes drive fear into the heart of a non-US company, this not need be the case. Feldman said that the AMI is collaborative in nature. The approach the company takes is, “about improving, remediating the company, not going after them with a baseball bat, not attempting to continue the investigation of the problems that led to the settlement and the agreement in the first place. That proactive mindset that we have is geared towards identifying what works within a company, taking into account the culture of the company and the culture of the country that the company is located in and how we come up with recommendations to strengthen the ethics and compliance program and the culture.”

It is about the demonstration of value to the company retaining the monitor. Feldman posed the question, “What is the value of an independent third party coming from the outside of your company and assessing the extent to which you’ve done due diligence to prevent fraud, waste, abuse, mismanagement and corruption and due diligence?” He further noted, it is also about “ensuring that your ethics and compliance activities actually are working and are having an impact on the workforce.”

There is an ongoing evolution by many non-US companies, literally around the world, regarding compliance. They are responding to increased enforcement activity and action by not just the United States but by their own countries. This has led to the same requirement to have an independent third party come in to let them know where they stand, to let them know what is and is not working for their own internal corporate cultures.

One of the things about monitors and monitoring outside the US is the different types of judicial approaches prosecutors might invoke. For instance the UK model of Deferred Prosecution Agreements (DPAs) has much greater judicial involvement and presumably ongoing oversight. This could well lead to differences in monitoring from the US approach. Feldman noted, “a big part of monitoring process, whether it’s proactive or reactive, is to take into account the different cultures of the countries where the companies operating.” He cited to the example of a whistleblower hotline and a speak up culture, stating, “when you’re looking at employee reporting in some countries it’s not part of the culture and it’s seen as a lack of respect for employees to speak up and tell their supervisors that they’re wrong or to question what a supervisor or manager is doing, it’s seen as a lack of respect. So in order to encourage a speak up culture in a country which is not a speak up country, you have to devise other methods of extracting employees, opinions and views and making them feel comfortable to raise issues and ask questions.”

This is the type of issue that requires an independent monitor to “have some people on the ground working with you and with a really good understanding of the culture in that country and how it impacts how the employees view their roles in each individual company.” A monitor must consider the methodology and approach. While monitor expertise is always critical, it must be tempered with “an eye toward ensuring that the local culture.”

Feldman concluded that it comes down to dialogue with the multiple stakeholders and parties involved. From the regulators and the judiciary, it may be a discussion around the form of the penalty and its resolution. With the sanctioned company, it could be around its goals for a more robust compliance program going forward and completion of whatever ongoing term a judge may apply. Having this conversation around expectations, where there is very clearly a public interest involved, what is in the public’s interest in terms of settling the case corruption with the company and focusing on remediating what led to the problem in the first place is most critical.

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.

In this podcast series, I visit with Vin DiCianni, founder and President of Affiliated Monitors, Inc. (AMI) and Eric Feldman, Senior Vice President of AMI. We consider the global view of ethics, compliance and corporate culture of non-US companies, outside the US; in both their home countries and in other countries where. AMI does independent integrity monitoring in multiple countries outside the US and for many non-US organizations. This work has given them a unique vantage point to observe developments. In this Part IV, I discuss the changing face of monitors in the international arena with DiCianni.

Monitoring in the international arena is not as prevalent as it is in the domestic US context. This ties somewhat to the maturity of international anti-corruption enforcement. This is something we have certainly seen an increase in over the past couple of years beginning under the Obama Administration and continuing under the Trump Administration. This will most probably portend to an increase in monitors and monitoring outside the US. Certainly, such a concept is not foreign to countries outside the US, as there was a monitor involved with Siemens AG around its 2008 Foreign Corrupt Practices Act (FCPA) resolution.

DiCianni admitted that he has been described as a missionary around independent integrity monitoring. (As the Compliance Evangelist, I get that.) However, DiCianni evangelizes “about independent monitoring and how it could be an effective resource for government agencies just as it has been in the US.” He did admit that while foreign jurisdictions are understanding the benefits of an independent integrity monitor from a conceptual basis, “it is a mindset and it’s a change that I don’t know that they’re quite ready for yet.” Interestingly, one reason is the difference in judicial approach, particularly from countries which are code based as opposed to common law based. In the code-based countries there is a mindset to hold a company criminally liable and not to work a settlement resolution to remedy the underlying factors which led to the legal violation.

One of the reasons I find independent integrity monitoring so powerful is that it brings a sense of both institutional justice and fairness into the workplace and with the now increased scrutiny around corporate culture and whether a company is basically fair to its employees. I asked DiCianni if that that is a message that resonates outside of the United States in Europe? He believes it is “getting there”.

One impediment can be that sometimes the problem is both “deeper and it is cultural.” As an independent integrity monitor, you are “coming in and helping sort of assess the culture and strengthen the culture, assess the strength of a compliance and ethics program and controls”. But the role can also be as a mentor, and DiCianni is seeing “a real interest, to move in that direction. At the end of the day we are looking at whether or not the program is strong and whether or not the culture was strong. I think that some government agencies outside the US, think is their role and they are not ready and willing to outsource that role.”

One of the things that I am always sensitive to outside the US is the ugly American syndrome and/or does it simply look like American imperialism to say only Americans can be independent integrity monitors. DiCianni replied that while one should always be sensitive to that issue, many compliance practitioners rightly look to the US for leadership in this profession. Through both the enforcement regimes of the Department of Justice (DOJ) around the FCPA and the maturity of the compliance profession in the US, American leadership is well-known and appreciated in this area. Another key component is to use established professionals from the country to help any US based independent integrity monitor.

Tomorrow we conclude with international challenges for monitors.

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.

 

This week I am running a special five-part sponsored podcast series with Vincent DiCianni, founder and President of Affiliated Monitors, Inc. (AMI) and Eric Feldman, Senior Vice President of AMI. We are considering the global view of ethics, compliance and monitoring in non-US companies, outside the US; in both their home countries and in other countries where they may do business. AMI does independent integrity monitoring in multiple countries outside the US and for many non-US organizations and so is well placed to both observe and participate in developments. I was interested in how US based monitors can help develop an international model of independent integrity monitoring to help non-US companies make more effective their compliance regimes.

Monitoring in the international arena is not as prevalent as it is in the domestic US context. This ties somewhat to the maturity of international anti-corruption enforcement. This is something we have certainly seen an increase in over the past couple of years beginning under the Obama Administration and continuing under the Trump Administration. This will most probably portend to an increase in monitors and monitoring outside the US. Certainly, such a concept is not foreign to countries outside the US, as there was a monitor involved with Siemens AG around its 2008 Foreign Corrupt Practices Act (FCPA) resolution.

DiCianni admitted that he has been described as a missionary around independent integrity monitoring. (As the Compliance Evangelist, I get that.) However, DiCianni evangelizes “about independent monitoring and how it could be an effective resource for government agencies just as it has been in the US.” He did admit that while foreign jurisdictions are understanding the benefits of an independent integrity monitor from a conceptual basis, “it is a mindset and it’s a change that I don’t know that they’re quite ready for yet.” Interestingly, one reason is the difference in judicial approach, particularly from countries which are code based as opposed to common law based. In the code-based countries there is a mindset to hold a company criminally liable and not to work a settlement resolution to remedy the underlying factors which led to the legal violation.

One of the reasons I find independent integrity monitoring so powerful is that it brings a sense of both institutional justice and fairness into the workplace and with the now increased scrutiny around corporate culture and whether a company is basically fair to its employees. I asked DiCianni if that that is a message that resonates outside of the United States in Europe? He believes it is “getting there”.

One impediment can be that sometimes the problem is both “deeper and it is cultural.” As an independent integrity monitor, you are “coming in and helping sort of assess the culture and strengthen the culture, assess the strength of a compliance and ethics program and controls”. But the role can also be as a mentor, and DiCianni is seeing “a real interest, to move in that direction. At the end of the day we are looking at whether or not the program is strong and whether or not the culture was strong. I think that some government agencies outside the US, think is their role and they are not ready and willing to outsource that role.”

One of the things that I am always sensitive to outside the US is the ugly American syndrome and/or does it simply look like American imperialism to say only Americans can be independent integrity monitors. DiCianni replied that while one should always be sensitive to that issue, many compliance practitioners rightly look to the US for leadership in this profession. Through both the enforcement regimes of the Department of Justice (DOJ) around the FCPA and the maturity of the compliance profession in the US, American leadership is well-known and appreciated in this area. Another key component is to use established professionals from the country to help any US based independent integrity monitor.

We turned to a discussion of trends in ethics and compliance programs in the country of Spain. DiCianni noted that corruption has been a long-standing problem for the country. However the government has moved to address this problem. This has led to a great interest in compliance programs, leading to more robust ethics and compliance in organizations. This is in the face of no real government enforcement efforts. It seems that organizations are looking to implement a compliance program literally for themselves. Further, they are doing so to help themselves move to a proactive level of compliance rather than simply reactive.

Two areas that interest me about working with and traveling to countries outside the US are the local compliance practitioners. The first is that compliance professionals outside the US are very enthusiastic about the compliance practice and the compliance profession. Moreover, they really believe in compliance and ethics and that they can make a difference inside of a corporation to help change an entire country’s culture. The second observation is that I see a lot of people directly out of college in their mid-twenties with this enthusiasm for compliance going into the compliance field.

DiCianni certainly agreed with the first observation. He said, “compliance officers, once they take on that role and they understand the importance of it and they understand how compliance is being used by other companies. I saw that firsthand in almost everyone that was in the Madrid and Bilboa AMI roundtables I led. It is very palpable to see how much they really like the compliance function. People never want to go back to their old roles. They really liked the compliance role and helping the company.” He disagreed with my observation on the youth. He found that most of the compliance professionals he met, came from other corporate disciplines such as the legal department. This was certainly the path I took and the path for many in the compliance profession here in the US.

From the corporate perspective, one of the things DiCianni has observed is multi-national companies bringing compliance into Spanish corporate culture. From there they are driving compliance through their supply chain and other third-party relationships. DiCianni observed another interesting driver for compliance in Spain is that both law and accounting firms are pushing their clients to invest in compliance programs.

DiCianni concluded by noting that while compliance is a concept that many practitioners and corporations are comfortable with, the values-based ethics portion that has taken hold in other countries is not as prevalent in Spain. Things like a whistleblower hotline, how it is supposed to work and how it is supposed to be effective is really not considered. In their area of training, there is a plethora of computer-based training but not the type of training which makes it more topical for people. He observed that when “you talk to people about ethics, it’s really a new concept for them. They understand compliance and complying with the rules, but ethics is something different.” Even most compliance professionals have not received any instruction  about ethics. He concluded that in many ways “it’s sort of a new concept for them.”

The challenges for non-US companies are usually different from the mature compliance programs of American companies. Both the leadership and culture of non-US companies can lead to challenges that many US companies faced 10-20 years ago. However, just as anti-corruption investigation and enforcement has increased internationally, the importance and prevalence of compliance has done so as well. Many compliance practitioners outside the US are very passionate about compliance because they see it as a way for them to directly impact the global scourge of bribery and corruption. As leaders in much of the effort, American compliance professionals have a very large role to play going forward.

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

Today’s guests are Jon Feig and Andy Reisman, who both work in the Integrity section of Ernst & Young. They are part of a group that published an article in Fraud Magazine entitled: What’s your integrity agenda? Bridge the gap between intentions and behavior, which was an astounding piece in the area of innovation and compliance. What is integrity in an organization? Why do companies need to confront integrity risks directly? Andy defines integrity around actions: bridging the gap between the promises a company makes to act ethically, and its actual behavior to the stated promises. The main question is: “Are we doing what we said that we would do?”

What is the issue of compliance?

It’s both an art and a science. There are policies, systems, programs, and processes that control the integrity agenda. And these have to relate to helping leaders face issues and not shy away from tough questions and establishing compliance officers as trusted advisors. These pieces sit together as four interrelated elements of the integrity agenda.

The four elements of the integrity agenda

  • ‘Governance’ is where it starts. It makes sure that integrity function design is present, roles and responsibilities are outlined, and that there exists a proper vision mission to ethical obligations. Jon goes into more detail about what questions the ‘Governance’ element answers to ensure the business is accountable.
  • ‘Culture’ asks: do you have open and transparent communication? Does the organization feel protected? People should feel like they can talk to management about things that may be wrong or that they don’t like. Research shows that people want to do the right thing, and the culture needs to support that.
  • ‘Controls and Procedures’ covers things like third-party due diligence and management, identifying what characteristics may come forward through technology-enhanced procedures and data analytics about performance, and making sure there’s continuous improvement of controls.
  • ‘Insights’ is a broad category, but its main question is: “Where is it that we’re trying to go and how can we find insights from whatever data exists?” It looks at the data from the above three categories and tries to prevent and detect problems. Jon digs deeper into the different questions and problems clients face, and how insights might help them uncover the answers and understand what’s possible.

Final thoughts:Andy shares that the anti-fraud professional (whether a fraud examiner, an auditor, or a compliance professional) has made a commitment. They care not only about the losses to the company, but about ethical lapses that could corrode the culture of the company and undermine it. They understand the purpose of protecting the company, keeping it on course, separating those who are truly bad apples, guiding people who may be under conflicting partners, and empowering people.

Jon leaves us with the compliance dilemma: how do we comply with various laws and regulations, as well as company policies and codes of conduct with decreasing budgets and higher scrutiny? It’s a very difficult position for compliance professionals to be in. So how do we use the integrity agenda to help solve the compliance dilemma?

Resources:

The article: “What’s your integrity agenda?”

(Authored by Vince Walden, Eugene Soltes, Jon Feig, and Andrew Reisman in the September/October 2018 issue of Fraud Magazine)

Jonathan Feig

Andrew Reisman

So far in this 5-part series, we’ve dived deep into the different aspects of ‘front line’ compliance. For the final episode, Tom discusses the process of innovation itself. In an article in the MIT Sloan Management Review, entitled “Finding a Lower-Risk Path to High-Impact Innovations,” authors Joseph V. Sinfield and Freddy Solis came up with a different method to view the innovation process. They call it the ‘Lily Pad’ approach, and Tom breaks down some interesting ways to apply it.

  • Tom begins with the premise of the article, found in the traditional risk-reward theory, that talks about how the way an organization views innovation affects the way the company goes about it. Those that invest more want to see more return, and those who don’t often see more incremental changes.
  • Which one is more effective? The authors of the article mentioned above believe the incremental approach, or the ‘Lily Pad’ approach, allows a progressive cascade of innovation moving forward – or leaping from one lily pad to the next.

The Lily Pad approach can be adopted for compliance. Ask the following questions:

  • Does the innovation “offer multiple pathways from first principles to impact” and how relevant is the innovation to multiple business lines or units?
  • Will the innovation change the perspective of employees and even move towards reconfiguring the compliance ecosystem?
  • Finally, is there potential for both growth and improvement in the innovation going forward?

After you have gone through and answered these questions, you should be ready to move forward with what the authors called ‘enabling actions’ and implement one or more of the innovations. By using their approach, the authors write that “Lily pad applications for an enabling innovation provide opportunities to match capability, purpose, and context in a manner that advances select performance dimensions of the innovation, aligns elements of ecosystems, and/or begins to shift” employee views across your organization. But more than simply the singular innovation, the lily pad approach allows your company to reduce the time and cost to jump to the next iteration of development.

Here are 4 key questions to ask yourself about your compliance program:

  • First, do you understand the role of innovation in your compliance strategy?
  • Second can you spot the innovations as this may well require you to think differently, particularly if you come from the legal department or have legal training, which certainly does not favor or foster innovation.
  • Next, do you have the ability to adapt to innovations in your compliance function to the company as a whole?
  • Put another way, can you demonstrate how an innovation in compliance will help the company do business more efficiently and in compliance with applicable laws?

We hope you have enjoyed this special five-part series highlighting some ways to innovate in compliance. For more information on the innovation process in compliance, check out my latest book, The Compliance Handbook.

Ongoing Education

If you’re a compliance professional looking for a convenient and effective way to fulfill your continuing education requirements, visit Tom’s website and choose from 4 hour-long training packages that will keep you up to date with the latest developments in the compliance field.