I am astonished there are still so many articles out there advising readers on how to establish the imperative for compliance. Nearly 15 years after the rise of compliance to an officer-level position, with significant reporting obligations to a company’s audit committee and/or board, is it really true that the profession has to continually justify itself as not simply a cost center? Has the business-friendly White House enabled a new complacency? I believe not. What I call “the way of compliance” is and should be here for “good.” Pun intended.
Despite Wall Street’s postelection exuberance over the “new normal” noncompliance regime, the current administration in D.C. offers no respite from the “way of compliance.” One can simply look to two recent administrative moves that I plucked from my reading pile: the first is the appointment of James McDonald, the former assistant U.S. attorney for the Southern District of New York, as head of enforcement at the Commodity Futures Trading Commission. Add to that the comments of Acting Chairman of the CFTC J. Christopher Giancarlo at the United States Chamber of Commerce annual summit in late March: “There will be no pause, no letup and no relaxation in the CFTC’s mission to uncover and punish wrongdoing.” It is clear that the “way of compliance” remains the road to take.
Take another recent action, arguably far more telling than the first. The Department of Justice’s Fraud Section of its Criminal Division recently posted on the “Compliance Initiative” webpage a document titled “Evaluation of Corporate Compliance Programs.” In this document, the authors stress that the “Filip Factors,” (taken from former Deputy Attorney General Mark Filip’s 2008 memorandum regarding the Principles of Federal Prosecution of Business Organizations), while not to be applied in a rigidly formulaic manner, are still to be considered in assessing the effectiveness of a corporate compliance program. These factors are considered in the context of an investigation into a corporate entity’s potentially criminal activity and include the “existence and effectiveness” of a corporation’s compliance program, as well as “remedial efforts ‘to implement an effective corporate compliance program or to improve an existing one.’”
The document lists pages of sample topics and questions that may be asked by DOJ in assessing a very individualized, case-specific determination as prosecutors conduct an investigation and consider any potential charges.
Reading this as a former chief compliance officer of a publicly traded company, I immediately took note of several topics and lines of inquiry: prior opportunities to discover the misconduct, oversight of the compliance function and board interactions, placement of the compliance function with regard to other strategic functions, the concept of risk management and risk-based training, an entire section on “continuous improvement, periodic testing and review” and new sections discussing third-party management and M&A due diligence focused on compliance.
Clearly, DOJ considers compliance a strategic function, right up there with other corporate strategic functions. And this guidance document actually expands the imperative to integrate the compliance function into the corporation – joint venture, M&A and procurement all now become a critical “way of compliance” artery. This artery enables a strategic compliance team to take the heart of an organization, as well as its culture of trust and accountability that all executive teams strive to create, and carry it through the entire organization.
The “way of compliance” need not be a solitary journey. Outside perspectives are important as compliance professionals must continually focus on the right way to conduct business and push their colleagues to aspire to what is right. If approached from a healthy perspective with a dose of humility, the “way of compliance” is a rewarding strategic and results-driven enterprise.
This alert was written by Jane Lewis-Raymond when she was a partner at the firm.