Compliance — are you steering the course that satisfies the authorities?

Michael Roberts and Stephanie Yonekura

Last year, we predicted that to grant a lenient sentence enforcement officials would want to see functional, implemented, and tested compliance programs, not simply paper plans. The preconditions for full credit under the Foreign Corrupt Practices Act (FCPA) pilot program shed light on what enforcement officials expect. And remarks during the first year that Hui Chen served as the Department of Justice (DOJ) Fraud Section’s first compliance counsel also offer insights.

CCOs must have free rein

Both Andrew Weissmann, Chief of DOJ Criminal Division’s Fraud Section, and Stephen Cohen, Associate Director of Enforcement at the Securities and Exchange Commission, have explained that the enforcement agencies will examine the quality of the compliance programs at companies under FCPA scrutiny. Companies able to show their chief compliance officer (CCO) operates independently — and has adequate resources and authority — are more likely to escape FCPA liability.

Mr Cohen added that he would ask questions to determine the level of independence the CCO enjoys. These would cover:

  • whether the CCO is part of the senior management team and a participant in regular meetings of that group;
  • who in the company has authority
  • to fire the CCO;
  • whether the CCO has a direct reporting line to the board;
  • who at the company can overturn
  • a decision by the CCO; and
  • how the compliance budget is set.

Although CCO independence is important, Mr Weissmann emphasized that integration with business units is vital. He explained that business units should take charge of at least part of the compliance function so the CCO does not become “a policeman who tells the business unit what it cannot do.”

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