In November 2015, The Department of Justice (DOJ) appointed Hui Chen as the new corporate compliance expert. As the DOJ increasingly creates new laws pertaining to proper business conduct and corporate compliance, Chen’s role is to provide transparent interpretations of these laws to company leadership. She will also provide guidance to the DOJ regarding the existence and effectiveness of any compliance program’s measures to “detect and prevent future wrongdoing.”
The recent increase in government oversight of compliance programs leaves boards of directors searching for best practices in fraud prevention. To mitigate company sentencing, organizations must establish a strong compliance program, ensure employee cooperation, and deploy proper testing of said compliance and cooperation.
The scrutiny of compliance programs has escalated. The DOJ seeks out well-designed programs that are applied throughout the organization and actually work. What combination of tactics ensure an effective and well-designed program?
Guiding Principles: An organization should establish guiding principles to guide how the compliance program will be structured, governed, and operated.
Risk Assessment: Define potential threats, likelihood of risk, and a proper response.
Hiring Requirements: Outline hiring prerequisites and recognize where higher risk roles exist departmentally.
Training: Compliance programs must use clear vernacular and be published in writing with easy company access. Upon clear written program establishment, organizations should conduct trainings to properly communicate and explain the documented program. Training hosted by compliance leaders with stature and respect elicits avid listeners prone to uphold program terms. Trained employees should then be liable and incentivized for maintaining lawful working practices.
DOJ compliance oversight is taking a new focus on individuals, not solely on the programs themselves. Strong compliance programs with non-compliant employees are as useful as no compliance program at all.
How does a company measure employee cooperation? Both leadership and employees must ethically handle conflicts of interest within and outside the workspace.
Cooperation with government and corporate laws is inherent to employee cooperation. When an employee lives outside of deemed lawful conduct, they must accept reasonable punishment with intent to act lawfully going forward.
The testing of compliance programs and employee adherence to these programs is the final key to avoiding corporate punishment. Companies can ensure strong programs and employee cooperation through several methods: guiding principles, risk assessments, and hiring assessments.
Guiding principles are the overarching strategic principles guiding how the compliance program will be structured, governed, and operated in the future. By documenting guiding principles, the business is able to easily maintain their purpose and objectives for the compliance program and the overall corporation as a whole. Often, change of leadership or processes leads to decisions and changes that are outside of the predetermined principles of the program. Guiding principles aide compliance programs in delivering ultimate value and impact and ensure that they accommodates future state business requirements.
Risk assessments help an organization to identify highly regulated areas of the business. Processes and procedures should be documented for these highly regulated areas in an effort to identify high-risk departments or people. Risk assessments outline potential threats to an organization, the likelihood of the risk occurring, and a proper response to the risk. This provides the organization an opportunity to react quickly to opposing situations with little impact on the business. The Department of Justice monitors not only the breach of compliance programs, but the organization’s response and mitigation tactics. But how does an organization recognize a department or individual as high risk?
A human resources hiring assessment outlines hiring prerequisites and indicates where higher risk roles exist departmentally. If an organization does not have stringent background checks or requirements prior to hiring an employee, this employee could be at risk for illegal behavior within the organization. This can also be viewed departmentally. A department manager that doesn't enforce a strict hiring practice with lawful employee requirements could evolve into a department employed by high-risk individuals likely to break compliance program rules.
The Department of Justice has increased their enforcement and regulation of compliance programs. By implementing a strong compliance program, ensuring employee cooperation, and deploying proper testing and mitigation of these programs, organizations will be prepared and equipped for DOJ regulation.
