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White Collar

3 simple questions to an effective compliance program

December 23, 2013

White Collar

3 simple questions to an effective compliance program

December 23, 2013

Back to Fish's Litigation Blog

 

In the modern age of global anti-corruption enforcement, an effective compliance program is no longer a luxury, it is a necessity.  Unfortunately, there is no magic formula that a company can follow in setting up or improving a compliance program.  This does not mean that a company must proceed blindly, however.  Past enforcement actions and declinations, as well as government publications such as the FCPA Resource Guide, offer insight into the basic structures that lead to effective compliance.  Drawing on these sources, there are three questions every company should ask in analyzing its compliance program. 

First, is the compliance program well designed?  A well-designed program is one with oversight, autonomy, and adequate resources.  There isn’t a one-size fits all approach to doing this.  Deciding where to put resources requires undertaking an appropriate risk assessment for different regions and increased due diligence in high-corruption jurisdictions.  Outside of geography, some types of transactions deserve increased due diligence, particularly the use of third parties such as vendors and the use of customs.  It is equally essential that the program include an accessible code of conduct and policies, along with periodic training for personnel.  Your employees are the foot soldiers faced with the daily choice to be compliant or not.  Even with the best of intentions, they may not realize that what they are doing is inappropriate if they have not been trained properly.  Nor is training alone sufficient to warrant good behavior.  The program should come equipped with carrots (employee rewards) and sticks (disciplinary measures).

Second, is the compliance program being applied in good faith?  It is absolutely essential that those in charge of the compliance program have the wherewithal to challenge unacceptable practices, particularly since the business side may try to justify the practice as “business as usual” or something that has “always been done.”  That can require a special personality.  At the same time, the commitment to compliance cannot stop at the compliance department.  A truly effective compliance program requires a proactive senior management that is willing to set a “tone from the top.”  From the boardroom to the break room, there should be no uncertainty that compliance is an essential feature of the company’s business practices.

Third, is the compliance program working?  Don’t test the laws of entropy.  Even the best system can fail and will eventually falter without some tweaking.  A compliance program cannot be static any more than some other part of a business.  It must feature continuous improvement through periodic testing and review.  In the case of acquisitions, this includes pre-acquisition due diligence and post-acquisition integration.  It also must have an effective reporting system that allows for identifying and correcting issues.  This includes some means of confidential reporting and conducting appropriate internal investigations in response to issues that arise.

Related Tags

compliance
FCPA
anticorruption

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