Info

FCPA Compliance Report

Tom Fox has practiced law in Houston for 30 years and now brings you the FCPA Compliance and Ethics Report. Learn the latest in anti-corruption and anti-bribery compliance and international transaction issues, as well as business solutions to compliance problems.
RSS Feed Subscribe in Apple Podcasts
FCPA Compliance Report
2019
May


2018
November
October
September
August
July
June
May
April
March
February
January


2017
December
November
October
September
August
July
June
May
April
March
February
January


2016
December
November
October
September
August
March
February


2015
December


Categories

All Episodes
Archives
Categories
Now displaying: 2017
Nov 9, 2017

The 360-degree approach to compliance works with all the stakeholders in a compliance program, even the Document Document Document stakeholders; IE., the regulators. By using innovative techniques, one law firm came up with mechanism to present verifiable evidence to regulators, using the basic techniques of social media in operationalizing compliance as a solution to a difficult compliance issue around, of all things, honey. This example shows how creative thinking by a lawyer, in the field of import compliance, led to the development of a software application, using some of the concepts of social media. Once again demonstrating the maxim that compliance practitioners (and lawyers) are only limited by their imagination, the use of this software tool demonstrates the power of what a 360-degree view can bring to your compliance program. 

Gar Hurst, partner at the law firm of Givens and Johnston PLLC in Houston, faced an issue around US anti-dumping laws for honey that originated in China. The US Government applies anti-dumping trade sanctions to goods from a specific list of countries. They do this when a domestic interest group alleges and proves, at least theoretically, that the producers in certain foreign countries are selling their goods into the US market at below fair-market value. By doing this, they are harming the US domestic industry. The dumping duties, which can result from this, can easily be 100, 200, even up to 500% of import duties. To get around the anti-dumping laws, importers would ship Chinese originated honey to Indonesia, Vietnam or some other country and pass it off as originating from one of those locations. 

The problem that faced was how to prove the honey did not originate from China. Hurst said, “We were working with a Southeast Asian honey producer. They were in this situation where Customs was essentially treating them as though they were a Chinese producer. We’ve provided them documents. We’ve provided them invoices. We’ve provided them production documents but there was nothing that we could give them documentary that they didn’t believed could be faked. That was the problem, documents on their face are just a form of testimonial evidence. Meaning, somebody somewhere said, this honey is from the Philippines. It’s only as good as the word of the person who wrote it on. We needed something that would get beyond that problem.” 

Using awareness around communications through a smart phone, Hurst and his team came up with an idea “that with the explosion of smartphone technology which is in the hands of basically everybody in the United States and soon to be everyone in the world, these devices basically allow a person to take a picture that is geo-tagged and time and date stamped and then upload that picture to a database in the cloud. Effectively, that’s what we did.” As Hurst explained the process which they came up it was amazingly simply, “We basically created an app that resided on Android phone that they could then go around and document the collection of all these various barrels of honey and its processing. Every time they take a picture, it would be time and date stamped with geo-tagging as well. You know when and where a picture of a particular barrel of honey which we would label with some special labels so you could identify it when and where that was taken.” The product they came up with is called CoVouch

From there the information is uploaded into a secure database that Hurst and his team created in the cloud. His firm then took all the evidence they had documented that the honey originated in Indonesia, not China, and presented it to the US Customs service to show his client had not sourced its honey in China. In version 2.0 Hurst and his development team are creating a searchable database which US Customs can use to make spot checks and other determinations. 

Recognizing the level of technical sophistication of honey farmers in Asia, CoVouch is amazingly simply to use. It takes pictures, puts time stamps on them and puts geo-tags that show the location where the picture was taken and with glued or pasted on bar codes, you can trace the shipment of honey throughout its journey. But it does so in a way that tells a story. Hurst said, “you’re telling the story but the provenance, of one imported barrel of honey and how did it get to where it’s at. It’s different. That’s exactly what we’re trying to do and trying to do it in a way that is easy enough so that, as you put it, a fairly, uneducated farmer in Indonesia can do it and a busy Customs agent in the United States can review it.” 

Such a software system uses the concepts around social media to make a honey farmer a provider of documents evidence, through photographs, to meet US anti-dumping laws. But I see the application as a much broader tool that could be used by anyone who needs to verify information on delivery, delivery amounts, delivery times and delivery locations. This could be a field hand who is delivering chemicals even West Africa and does not know how to speak English. Hurst pointed to uses around whether something might be eligible for special import or export regulations due to NAFTA, whether restricted trade goods, such as those used in the oilfield industry, worked their way into Iran and even applicability under the Buy American Act around the US content in goods. 

For the compliance practitioner, you could use such a tool to not only receive information, and more importantly photographic evidence, but you could also deliver information. But the key is that you are only limited by your imagination. CoVouch could be a tool that you use internally for delivery of information and receipt of information inside your company. 

Three Key Takeaways

  1. Use the tools of social media to help tell your story of compliance.
  2. You are only limited by your imagination.
  3. Converging text, pictures and data can be a powerful tool in compliance. 

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 9, 2017

In this episode, I have New Yorker writer and reporter Adam Davidson on his recent article entitled, "Piercing the Veil of Secrecy Shrouding the Trump Deal in the Republic of Georgia”. In this article Davidson looks at some of the business practices of the Trump organization. It is a look the Silk Road Group, a mysterious holding company that set out, several years ago, to build a Trump Tower in the Republic of Georgia. Davidson found it to be a diffuse container holding at least several dozen corporate entities who, legally, at least, were registered in different countries around the world and had uncertain relationships to each other. In light of the recent indictments from Mueller’s office, it makes fascinating reading. Davidson is the author of “Trump’s Worst Deal” one of the most significant articles on the Trump organizations business dealings outside the US.

Nov 8, 2017

One of the more difficult things to predict in a merger and acquisition context is how the cultures of the two entities will merge. Further, while many mergers claim to be a ‘merger of equals’ the reality is far different as there is always one corporate winner that continues to exist and one corporate loser that simply ceases to exist. This is true across industries and countries; witness the debacle of DaimlerChrysler and the slow downhill slide of United after its merger with Continental.    

In the compliance space this clash of cultures is often seen. One company may have a robust compliance program, with a commitment from top management to have a best practices compliance program. The other company may put profits before compliance. Whichever company comes out the winner in the merger, it can certainly mean not only conflict but if the winning entity is not seen as valuing compliance, it may mean investigations and possibly even violations going forward. 

These cultural differences were discussed by Erin Meyer in the Harvard Business Review article “Being the Boss in Brussels, Boston and Beijing”. The author identified four different cultures of leadership. Somewhat surprisingly, they are not segregated by geographic region. The author found that “attitudes toward decision making can range along a continuum from strongly top-down to strongly consensual; attitudes towards authority can range from extremely egalitarian to extremely hierarchical.” The four are: (1) Consensual and egalitarian; (2) Consensual and hierarchical; (3) Top-down and hierarchical; and (4) Top-down and egalitarian. 

Consensual and egalitarian 

This type of leadership is typically found in Scandinavian countries; Denmark, Netherlands, Norway and Sweden. The author notes, “Consensual decision making sounds like a great idea in principle, but people from fundamentally nonconsensual cultures can find the reality frustratingly time-consuming.” Some of the things you should expect are decisions to take longer, with more meetings and process which requires you, as a Chief Compliance Officer (CCO), to demonstrate patience in the process. As a CCO you will be seen as a facilitator and must “take the time to ensure that the decision you make is the best one possible, because it will be difficult to change later.” 

Consensual and hierarchical 

This type of leadership is found in Belgium, Germany and Japan; where the groups favor a leader investing more time in winning support of his underlings before coming to a decision. This means that your group will expect you as the leader to be a part of the discussions while being a part of the decision-making process. You should focus on the quality and completeness of information gathered and the soundness of the reasoning process because final decisions are commitments and not “easily altered.” Yet there should be a consensus and you must “invest the time necessary to get each stakeholder on board.” 

Top-down and hierarchical 

This group has the widest geographic range, including countries as diverse as Brazil, China, France, India, Indonesia, Mexico, Russia and Saudi Arabia. It is incumbent to remember you are the boss and expected to make the decision. The key ingredient is to “Be clear about your expectations. If you want your staff to present three ideas to you before asking your opinion, or to give you input before you decide, tell them. Old habits die hard for all of us, so reinforce—with clarity and specificity—the behavior you are looking for.” Particularly as an American, you must be care as an analogy may be interpreted as a decision. 

Top-down and egalitarian 

This will be the structure that Americans are most familiar with and it includes countries most like the US: Australia, Canada and United Kingdom. Meyer believes these can be seen as speak up cultures, “no matter what your status is. You might not be asked explicitly to contribute, but demonstrate initiative and self-confidence by making your voice heard. Politely yet clearly provide your viewpoint even when it diverges from what the boss seems to be thinking.” Yet the final point, and this is what drives many other cultures crazy under this type of structure, is that decisions are not typically set in stone, there is a continual feedback loop of information which can affect a change in the decision when warranted so you must remain flexible. 

These cultures will impact your compliance program as well, in addition to your role as a leader. Simply think of your hotline and the reluctance of many cultures to ‘speak-up’ or even raise their hand when they see an ethical or compliance issue. You must work with your various cultures within your organization to overcome such reluctance. Understanding this cultural disconnect is important. For many businesses, “the greatest business opportunities lie in the big emerging economies, which include Bangladesh, China, India, Indonesia, Russia, and Turkey. In nearly every case, these are cultures where hierarchy and deference to authority are deeply woven into the national psyche.” The management style of pushing decisions down in the “organization does not fit easily into the emerging-market context and often trips up Western companies on their first ventures abroad on the business side and most certainly in the compliance realm”, particularly if there is a different perception of what might be termed ‘ethical’. 

Learning how your employees in other countries will approach decision-making and leadership will give you, as the CCO, insight into how they will approach compliance. It will require you to get out into the field to talk with folks. If your company grows organically or through mergers and acquisitions or goes the joint venture route, it will need to understand how your new employees will not only think through issues but how they will relate to instructions from the home office in America. 

Three Key Takeaways

  1. Culture clash through a merger can be extremely negative for a company.
  2. What are the cultures of leadership in your organization?
  3. Learning how your employees approach decision making can provide insight into how the will approach compliance. 

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 8, 2017

In this episode, Matt Kelly and I take a deep dive into the Justice Department’s Evaluation of Corporate Compliance Programs, released in February 2017. We consider this document in light of the wide-ranging review by the Justice Department of the various Memos from DAG’s over the past 15 years or so to determine if there should be consolidation or clarification into a new “Rosenstein Memo” or if there should be updates to the US Attorney’s Manual. Will the DOJ simply declare the Evaluation is no longer operative because it came out of the Obama Administration’s Justice Department? We consider the information presented in the Evaluation and how its value works in numerous ways for the compliance practitioner.

For more reading see Matt’s blog post “Future of the Effectiveness Questions

Looking for one of the top Master Classes in Compliance? Join myself and Jonathan Marks of Marcum LLC at the FCPA Master Class will be held on November 28 and 29, 2017 at the offices of Marcum LLC, 750 3rd Avenue, 11th Floor, New York, NY 10017. A Certificate of Completion will be provided to all who attend in addition to the continuing education credits that each state approves. The cost to attend is $1,495 per person. Breakfast, lunch and refreshments will be provided both days. For registration information, click here.

Nov 7, 2017

Next in 360-degrees of communication is the sharing of information, which Bryan Kramer discussed in his book “Shareology: How Sharing is Powering the Human Economy. It is a study of how, what, where, when and why people and brands share. 

The answer comes down to one thing: connection. He found that “People all have the desire to reach out and connect with other people, whether it’s through sharing content and having someone reply back or by sharing other people’s content and helping them out.” Kramer identified six types of people who share: 

  • Altruist: Someone who shares something specific about one topic all the time.
  • Careerist: Someone who wants to become a thought leader in their own industry, so they can see their career grow.
  • Hipster: Someone who likes to try things for the first time and share it faster than everyone else.
  • Boomerang: Someone who asks a question so they can receive a comment only to reply.
  • Connector: Someone who likes to connect one or more persons to each other.
  • Selective: This is the observer. 

All of these categories are relevant to a CCO or compliance practitioner in considering the use of social media in a compliance program. They describe not only the reasons to use social media but they can also help you to identify who in your organization might be inclined to use social media and how it can facilitate your compliance program going forward. 

The Altruist, Hipster and Careerist speak to how a CCO or compliance practitioner can be seen in getting out the message of compliance throughout your organization. Whichever category you might fall into, it is still about the message or content going forward. There is nothing negative in being one or the other if your message is useful. There is certainly nothing wrong with incorporating a little Hipster into your communication skills. As my daughter often reminds me, Dad you are so uncool that you are retro, but that is cool too. Applying that maxim to your compliance regime, if you can communicate in a manner your workforce sees as interesting or even hip, it may well help incorporation of that message into corporate DNA. 

The Boomerang, Connector and Selective categories as good ways to think about how your customer base in compliance (i.e. your employees) might well use social media tools to communicate with the compliance function. The use of social media is certainly a two-way street and every compliance practitioner must be ready to accept those communications back to you. Indeed, some comments by your customer base could be the most important interactions that you have with employees as their comments or questions could lead you to uncovering issues which may have arisen before they become Code of Conduct or compliance violations. More importantly, it could allow you to introduce a proscriptive solution which moves your program beyond even the prevent phase. 

A key message is that companies do not write the way they speak, and do not speak the language of their employees. [Even more true for lawyers!] Compliance can be seen as a brand and “brands and the people representing those brands need to change their language. If they focus on the title and the quality of the content, among other things, it’ll resonate more with their audience.” 

Sharing is a primary method to communicate and connect. In any far-flung international corporation this is always a challenge, particularly for discipline which can be viewed as home office overhead at best; the Land of No populated by Dr. No at worst. Work to hone your message through social media. Part of this is based on experimenting on what message to send and how to send it. Another aspect was based upon the Wave (of all things); its development and coming to fruition in the early 1980s. It took some time for it to become popular but once it was communicated to enough disparate communications, it took off, literally. “It’s the same thing with social media. On social media, we think something will go viral because the art is beautiful or the science is full of deep analytics, but at the end of the day it really takes time to build the community.” 

This means that you will need to work to hone your message but also continue to plug away to send that message out. The Morgan Stanley Declination will always be instructional as one of the stated reasons the Department of Justice (DOJ) did not prosecute the company as they sent out 35 compliance reminders to its workforce, over 7 years. Social media can be used in the same cost effective way, to not only get the message of compliance out but also to receive information and communications back from your customer base, the company employees. 

Three Key Takeaways

  1. What makes your employees want to share information?
  2. Facilitate mechanisms which allow sharing with the compliance function.
  3. The Morgan Stanley declination still resonates.

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 6, 2017

In this episode, I visit Lauren Briggerman and Dawn Murphy-Johnson on the Fall 2017 issue of Executives at Risk. It is newsletter put out by the law firm of Miller & Chevalier, where they both work. Some of this quarter’s highlights which discuss are: 

  1. Compelled testimony-The Second Circuit's decision overturning two convictionsin the Department of Justice's (DOJ's) London Interbank Offered Rate (LIBOR) currency manipulation investigation, which came as a result of DOJ's reliance on testimony compelled by a foreign jurisdiction. Does this decision make life for prosecutors more difficult or does it make it impossible?
  2. The German expansion of investigation into VW scandal, does this mean the German government will actually prosecute any individuals?
  3. The German prosecutorial raid on the law firm of Jones Day and documents seized from its work on the VW case. We consider where does the matter stands in light of the German Court halting prosecutors' access to seized law firm documents.
  4. We consider the matter of Thomas Haidar, the former Chief Compliance Officer from MoneyGram who was banned for three years and fined for failure to prevent money Laundering violations. We consider just how significant this case is for CCOs or does it simply follow the line of cases that says if a CCO is a part of the fraud they can be prosecuted.
  5. Judge Rakoff criticism of the US Sentencing Guidelines as "Number-Crunching Gibberish,” as he slashes a sentence for former manager.  
  6. We conclude with the recent remarks by DAG Rod Rosenstein that enforcement agencies will continue to focus on individual Defendants. We end with an exploration of Rosenstein’s recent announcement that the DOJ is looking a new policy statements so where do you all think this may go. 

For a copy of Executives at Risk: Key Developments - Fall 2017, click here.

Nov 6, 2017

I am a huge fan of using social media in your compliance function. But how can you get your arms around how to structure such a program for their company? In an article in the MIT Sloan Management Review, entitled “Finding the Right Role for Social Media in Innovation”, Deborah Roberts and Frank Pillar reviewed companies that were not deriving significant benefit from their customer facing social media efforts. I found their discussion of potential remedies as a useful tool to help CCOs design an internal company wide social media campaign. 

After acknowledging that social media focuses on the social aspects of the communication, the most important thing to remember is that communication in social media is two-way; both inbound and outbound. It helps to bring your employee base together in an efficient manner to create an environment conducive to compliance for your organization. It also has the benefit of continued engagement. It is more than putting on training or even a Compliance Week set of initiatives, you can continue the conversation and enthusiasm about compliance going forward throughout the year. 

The authors break this down further into three parts that emphasize (1) the need to listen to and learn from user-generated content; (2) the need to engage and facilitate dialogue with employee innovators; and (3) to find an audience of early adopters to create excitement and collect feedback. 

Listen First 

This is the method the authors suggest of how to generate employee insights into your compliance program “where activities are designed to extend the breadth and depth of how organizations search for innovations” even in the compliance arena. The key is that the compliance function must be listening and listening in a manner which they may not have used previously. You will need to “learn to read the signals from large, diverse, disconnected, and unstructured pools of data generated by users. In addition, they will learn to analyze and convert blog posts, tweets, and user-generated content into valuable insights for new products.” 

Compliance professionals will need the skills of both a social scientist and a data scientist. This is because compliance practitioners will need to “assimilate, combine, and utilize data from many different sources” across the globe as compliance practitioners need “to acquire skills in computational techniques to unveil trends and patterns within and between the various data sets.” The overall goal “is to sharpen their business acumen and teach them how to communicate the findings to those involved in [compliance] projects.” 

Engage and Facilitate a Discussion 

The next step is companies understand is to actively engage and involve employees in the innovation process around compliance. The overall goal is to be more collaborative to allow employees to be more involved in the design process. As a CCO or compliance professional you will learn how to engage, find, and pick the right participants, then develop the right incentives to encourage participation. Creativity is both an input and an output of the process. Managers must also develop skills in relationship building and gain experience in the art of conversation and dialogue, which is a key aspect of any collaboration. Managers must learn how to become better facilitators and community managers. 

One of the important factors is to visit with “unconventional users” to help facilitate the creative process. Here social media itself can be a powerful tool, facilitating a two-way communication street to allow the compliance function to hear and even see what business and other types in the field may see and hear. The model of involving employees for in-house innovation has always been useful to help build buy-in and acceptance but the authors also found that more diverse participation in the creation process can provide a richer developed process. 

Collect Feedback 

Social media facilitates a two-way street of communication. Social media can also afford the compliance function the opportunity to interact more directly with its customer base, the company’s employees, in a manner that is far more engaging than the old command and control approach. 

If your goal in the compliance function is to create awareness and publicize your compliance program and initiatives, social media can be a powerful tool for you. This is so paramount it should become a core activity of your compliance function. Using social media tools, your compliance function can not only tell the story of compliance but also communicate expectations and even train. Yet once again it is simply more than a one-way tool as using social media facilitates a two-way communication. Just as employees are more apt to tell you about a concern immediately or soon after they have been trained on that issue; they may well communicate directly with you after having received a social media communication on subjects such as managing of third party relationships. 

CCOs and compliance practitioners need to develop a dedicated compliance strategy around social media, in the context of your corporate objectives. It allows you a 360-degree view of compliance, through which you can take the input from your employee base and create a compliance experience that your employees will embrace. 

Three Key Takeaways

  1. Never forget that social media is a two-way communication.
  2. Company employees are the customers of the compliance department.
  3. As with all compliance issues, assess what works for your company and tailor your social media approach appropriately.

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 3, 2017

Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories, including: 

  1. Astros win the 2017 World Series in seven games. See Tom’s complete report in the FCPA Compliance Report.
  2. SEC names Charles Cain as head of FCPA Unit. See article by Dick Cassin in the FCPA Blog.
  3. Small banks face the same risks on money laundering as larger banks do, as small Texas bank fined by FinCEN. Sam Rubenfeld reports in the WSJ Risk and Compliance Report.
  4. The myth of the revolving door. See article in Just Anti-Corruption (sub. req’d)
  5. French Court Convicts Equatorial Guinean Vice President Teodorin Obiang for Laundering Grand Corruption Proceeds. See article by Shirley Pouget and Ken Hurwitz in the Global Anticorruption Blog.
  6. Compliance goes Hollywood. Is Jay Rosen involved? Matt Kelly reports in Radical Compliance.
  7. Adam Turteltaub speaks with incoming SCCE President Gerry Zack on the SCCE’s Compliance Perspectives podcast.
  8. Brandon Fox (no relation) takes a look at the report of corruption at FIFA, its responses and implications in NYU’s Compliance and Enforcement blog. Part I on the Garcia Report; Part II on responses going forward.
  9. Will the Trump Administration blow up America’s biggest trading relationships? Tom considers this question with Doreen Edelman about the ongoing NAFTA negotiations the Compliance Report-International Edition podcast.
  10. Join Tom’s monthly podcast series on One Month to a More Effective Compliance Program. In November, I consider how a 360-degree view of communications can enhance your compliance program. This month’s sponsor is the Dun & Bradstreet. It is available on the FCPA Compliance Report, iTunes, Libsyn, YouTube and JDSupra.
Nov 3, 2017

How does one company and one Chief Compliance Officer (CCO) actively use social media to make more effective the company’s compliance culture. The company is the Dun & Bradstreet (D&B) and its CCO, Louis Sapirman, whom I visited with about his company’s integration of social media into compliance. 

Sapirman emphasized the tech savvy nature of the company’s work force. It is not simply about having a younger work force. If your company is in the services business it probably means an employee base using technological tools to deliver solutions. He also pointed to the data driven nature of the D&B business so using technological tools to deliver products and solutions is something the company has been doing for quite a while. This use of technological tools led the company to consider how such techniques could be used internally in disciplines which may not have incorporated them into their repertories previously. 

Not surprisingly, with most any successful corporate initiative, Sapirman said it began at the top of the organization, literally with the company’s Chief Executive Officer, Robert Carrigan. Sapirman noted that the CEO saw the advantage of using social media internally and challenged many in his organization to take a new look at the way their functions were using social media. From there Sapirman and his team saw the advantages of using social media for facilitating a two-way communication. Sapirman comprehended the possibility for use of social media for compliance with those external to the company as well. 

Internally Sapirman pointed to a tool called Chatter, which he uses similarly to those in Twitter engaging in a Tweet-up. He has created an internal company brand in the compliance space, using the moniker #dotherightthing, which trends in the company’s Chatter environment. He also uses this hashtag when he facilitates a Chatter Jam, which is a real-time social media discussion. He puts his compliance team into the event and they hold it at various times during the day so it can be accessed by D&B employees anywhere in the world. 

He said that he seeds Chatter Jam so that employees are aware of the expectations and to engage in the discussion respectfully of others. When they began these sessions he also reminded employees that if they had specific or individual concerns they should bring them to Sapirman directly or through the hotline. However, he does not have to make this admonition any more, as everyone seems to understand the ground rules. Now this seeding only relates to the topics that each Chatter Jam begins with going forward. 

One of the concerns lawyers tend to have about the use of social media is with general and specific topics coming up on social media and the ill it may cause the organization. Sapirman believes that while such untoward situations can arise, if you make clear the ground rules about such discussions, these types of issues do not usually arise. That has certainly been the D&B experience. 

Each employee uses their own names during these Chatter Jams so there is employee accountability and transparency as well. Sapirman said they further define each communication through a hashtag so that it cannot only immediately be defined but also searched in the archives going forward. He provided the examples of specific regulatory issues and privacy. This branding also enhances the process going forward. 

I asked Sapirman if he could point to any specific compliance initiatives that arose during or from these Chatter Jams. Sapirman emphasized that these events allow employees the opportunity to express their opinions about the compliance function and what compliance means to them in their organization. One of these discussions was around the company’s Code of Conduct. He said that employees wanted to see the words “Do The Right Thing” as the name of the Code of Conduct. 

I inquired about D&B’s use of social media in connection with their third parties. Sapirman said that the company allows some of them access to its internal Chatter tools to facilitate direct communications. Further, these external contractors can connect with both Sapirman and the company through Twitter. He said that he is consistently communicating to the greater body of customers about the compliance initiatives or compliance reminders on what the D&B compliance function is doing and how it is going about doing them. He believes it is an important communications tool to make sure that he and his team are getting their compliance messages out there. 

Sapirman also described using Chatter in a manner that sounded almost like Facebook and its new live video function. He said they can deliver short video vignettes about compliance to employees. The compliance function or the employee base can develop these. 

All the initiatives Sapirman described drove home to me three key insights. The first is how compliance, like society, is evolving, in many ways ever faster. As more millennials move into the workforce, the more your employee base will have used social media all their lives. Once upon a time, email was a revelatory innovation. Now if you are not communicating, you are falling behind the 8-ball. Employees expect their employers to act like and treat them as if this is the present day, not 1994 or even 2004. 

The second is that these tools can go a long way towards enhancing your compliance program going forward. Recall the declination to prosecute that Morgan Stanley received from the Department of Justice, back in 2012, when one of its Managing Directors had engaged in FCPA violations. One of the reasons cited by the DOJ was 35 email compliance reminders sent over 7 years, which served to bolster the annual FCPA training the recalcitrant Managing Director received. You can use your archived social media communications as evidence that you have continually communicated your company’s expectations around compliance. It is equally important that these expectations are documented (Read – Document, Document, and Document). 

Finally, never forget the social part of social media. Social media is a two-way communication. Not only are you setting out expectations but also these tools allow you to receive back communications from your employees. The D&B experience around the name change for its Code of Conduct is but one example. You can also see that if you have several concerns expressed it could alert you earlier to begin some detection and move towards prevention in your compliance program. 

Three Key Takeaways

  1. How does 360 degrees of communication work in compliance.
  2. Focus on the ‘social’ part of social media.
  3. Use internal corporate social media to have a conversation.

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 2, 2017

In this episode, I visit Stuart Levine, one of the country’s leaders on effective Boards of Directors. Levine Chairman of the Board and CEO of STUART LEVINE & ASSOCIATES. Mr. Levine has significant board and executive leadership experience across multiple disciplines including financial services, technology and healthcare specializing in strategy, large-scale change management, leadership development, strategic communication, board governance and customer focus.

We focus on Board optimization and try to answer the question of why your Board is not optimized. We consider what is an optimized board and are you serving on one?  Levine explains the key factors contributing to an optimized board are boards are a strong culture, focus on ensuring company strategy and succession planning and have engaged directors who are prepared for all meetings. Unfortunately, these four factors aren’t easily achieved and require strong leadership from the CEO and dedication from all the directors. 

We consider the recent NACD report communicate on Board culture and how can a Board optimize its culture and collaboration. Explains how tone at the top and a company’s culture truly starts with the Board. Finally, we consider why Boards become operational and look backward instead of focusing on strategy and how to they correct this. 

For more on Stuart Levine and his firm, click here

For more information on Board Optimization see Levine’s article in Forbes.com Why Your Board Isn’t Optimized

Nov 2, 2017

What is the message of compliance inside of a corporation and how it is distributed? In a compliance program, the largest portion of your consumers/customers are your employees. Social media presents some excellent mechanisms to communicate the message of compliance going forward. Many of the applications that we use in our personal communication are free or available at very low cost. So why not take advantage of them and use those same communication tools in your internal compliance marketing efforts going forward.

On a Social Media Examiner podcast entitled “Social Sharing: How to Inspire Fans to Share Your Stories”, Michael Stelzner, interviewed Simon Mainwaring, author of “We First: How Brands and Consumers Use Social Media to Build a Better World”, who discussed three key components to  successful marketing, (1) Let your employees know what you stand for; (2) Celebrate their efforts; and (3) Give them a tool kit of different ways to participate. I think each of these concepts can play a key role for the compliance practitioner in internally marketing their compliance program.

Let Your Employees Know What You Stand For

In the 2012 FCPA Guidance, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) said that the basis of any anti-corruption compliance program is the Code of Conduct as it is “often the foundation upon which an effective compliance program is built. As DOJ has repeatedly noted in its charging documents, the most effective codes are clear, concise, and accessible to all employees and to those conducting business on the company’s behalf.” Catherine Choe, has said that she believes “Two of the primary goals of any Code are first, to document and clarify minimum expectations of acceptable behavior at a company, and second, to encourage employees to speak up when they have questions or witness misconduct.” 

But more than the Code of Conduct, does your company really communicate that it stands for compliance? Obviously formal compliance is important but more is required to reinforce that your company has a culture of compliance throughout the organization. In other words, are you communicating what you stand for and not simply the rules and regulations of a compliance program?

Celebrate Their Efforts

The 2012 FCPA Guidance speaks to the need to incentivize employees in the company realm. The Guidance states, “DOJ and SEC recognize that positive incentives can also drive compliant behavior. These incentives can take many Guiding Principles of Enforcement forms such as personnel evaluations and promotions, rewards for improving and developing a company’s compliance program, and rewards for ethics and compliance leadership. Some organizations, for example, have made adherence to compliance a significant metric for management’s bonuses so that compliance becomes an integral part of management’s everyday concern.” But more than simply incentives, it is important to “[M]ake integrity, ethics and compliance part of the promotion, compensation and evaluation processes as well.”

Mainwaring’s concept means going beyond incentivizing. To me his word ‘celebrate’ means a more public display of success. Financial rewards may be given in private, such as a portion of an employee’s discretionary bonus credited to doing business ethically and in compliance. While it is certainly true those employees who are promoted for doing business ethically and in compliance are very visible and are public displays of an effective compliance program. I think that a company can take this concept even further through a celebration to help create, foster and acknowledge the culture of compliance for its day-to-day operations. Bobby Butler, former CCO at Universal Weather and Aviation, Inc., has spoken about how his company celebrated compliance through the event of a corporate Compliance Week celebration. He said that he and his team attended this event and used it as a springboard to internally publicize their compliance program. Their efforts included three separate prongs: they were hosting inter-company events to highlight the company’s compliance program; providing employees with a Brochure highlighting the company’s compliance philosophy and circulating a Booklet which provided information on the company’s compliance hotline and Compliance Department personnel.

Give Your Employees a Tool Kit For Compliance

A key component of any effective compliance program is an internal reporting mechanism. The 2012 FCPA Guidance states, “An effective compliance program should include a mechanism for an organization’s employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation.” The Guidance goes on to also discuss the use of an ombudsman to address employee concerns about compliance and ethics. I do not think that many companies have fully explored the use of an ombudsman but it is certainly one way to help employees with their compliance concerns. Interestingly, in an interview in the Wall Street Journal with Sean McKessy, the initial and now former, Chief of the SEC’s Office of the Whistleblower, said, “companies are generally investing more in internal compliance as a result of our whistleblower program so that if they have an employee who sees something, they’ll feel incentivized to report it internally and not necessarily come to us.”

One tool a compliance practitioner can utilize in the realm of social media is Periscope. It allows you to tell a compliance story in real time, throughout your organization and beyond. They are both live streaming apps that enable you to create a video and open the portal to anyone who wants to use it. Anybody in your Twitter community can click on that link and watch whatever you’re showing on your phone. The big piece is the mobile aspect. It’s as simple as a basic tweet and hitting the “stream” button.

However, there are a wide variety of social media tools available that you can incorporate into your compliance program. Apps like Pinterest, Snapchat, Instagram and others may seem like tools that are solely suited to personal use. However, their application is much broader. As with many ideas in the compliance space, a CCO or compliance practitioner is only limited by their imagination. For these apps, they can be most useful when you tell the story of compliance in your company.

Hootsuite did a campaign called “Follow the Sun” using Periscope. They asked their employees showcase what they called #HootsuiteLife. They gave access to different people in every company office around the globe. Throughout the day, it would “Follow the Sun,” and people in different offices would log into the Hootsuite account and walk around and show off their culture, interviewing their friends, etc. They talk about the importance of culture and now they are proving it. The number of inbound applications drastically increased after people got that sneak peek into their company. Think how powerful such a presentation could be for your organization.

There is much to be learned by the CCO and compliance practitioner from the disciplines of marketing and social media. These concepts are useful to companies in getting their sales pitches out and can be of great help to you in collaborating and marketing throughout your company. These are only some of the tools which you can incorporate into your compliance program going forward but also a different way to think about who your customers are and how you are reaching them with your message of doing compliance.

Three Key Takeaways

  1. Let Your Employees Know What You Stand For.
  2. Celebrate not only successes but even employees’ efforts.
  3. Give employees a tool kit for compliance using social media.

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Nov 1, 2017

In this episode, Matt Kelly and I take a deep dive into the scandal around Harvey Weinstein. We consider it from the compliance perspective, both programatic and for the CCO. We consider the different types of harassment which comes may face claims of from the fallout. We also consider the Board response by The Weinstein Company board and for the claims involving Bill O'Reilly. 

For additional reading see Matt Kelly's blog post Fighting Harassment Where it Lives

Nov 1, 2017

Welcome to Day One of 360-degrees of communication in compliance. This month you will learn about techniques that the CCO can use to provide you not only a well-rounded role as a CCO but also facilitate a much more holistic approach to compliance in your organization. Best of all the techniques, discussed are largely available to you at little to no cost. There are things that you can do both in your method of running the CCO positions and innovations that you can bring to the compliance function in your organization. 

A 360-degree view of compliance is an effort to incorporate your compliance identity into a holistic approach so that compliance is in touch with and visible to your employees at all times. It is about creating a distinctive brand philosophy of compliance which is centered on your consumers. In other words, the customers of your compliance program; I.E., your employees it helps to anticipate all the aspects of your employees needs around compliance especially when compliance is either perceived as new perceived as something that comes out of the home office or is perceived as the Land of No. It gives you the opportunity to build a new brand image for your compliance program. 

Social media is a big part of a 360-degree view so there will be a focus on the use of social media in compliance and how it can facilitate your compliance program through your compliance messaging. I will discuss some specific techniques of social media tactics that have been successfully used by companies. We will consider the culture of compliance and the clash of different cultures that an organization may have, particularly through mergers and acquisitions but also internally, through organic growth and how a 360-degree view can help overcome this. Storytelling and compliance is another mechanism which is facilitated through a 360-degree. 

Other issues to be considered include how can a 360-degree view of communication facilitate your role as a leader in your company and in your compliance program? What are the techniques which can provide a holistic approach to your compliance function? What is the two-way street approach wedded to the benefit of 360-degrees of compliance and communication? Communication is much more powerful when it is a two-way street. Such a view also allows you to information from your customer base, once again your employees back up to your compliance program and incorporate that feedback loop directly into your compliance program going forward. 

There are several concepts which should be included in your 360-degree view of communications in compliance. Begin with an objective so you identify the purpose of your communication and the target of whom you are going to communicate to. Identify as clearly as you can the purpose and reason to ensure your message is aligned with your objectives. For instance, are you implementing a 360-degree view of communication to educate, inform, change perceptions or build trust and commitment? 

Next,  who is your audience? To communicate effectively you need to understand your audience. In any corporation, there are multiple audiences who are the key stakeholders in the 360-degree process. How much do they know? Some of the stakeholders include the Board of Directors, senior management, middle management, employee teams, committees, coaches, facilitators, customers, business partners, vendors, sales agents and representative, strategic alliances and business ventures. What are your distribution channels and how do you track your messaging? You should create a comprehensive spreadsheet to track the messages the intended audience and the delivery mechanism. Another key ingredient of the 360-degree approach is feedback. This is a key component of the 360-degree experience and educate each stakeholder on the benefits of feedback from the 360-degree approach. 

Finally, you need to evaluate what you have done. You can monitor your communication activities by tracking attendance at the events, website statistics, open rate of emails, downloads of materials, video hits; in other words, the same techniques that your marketing folks would use to determine their messaging’s effectiveness. The objective is to build trust for the 360-degree process by determining if the goal achieved. You can utilize surveys or focus groups to assess the impact on your target audience. By focusing on your customer customers of compliance, I.E. your employees, it allows you to identify gaps and improve the communication process for your compliance program. 

Three Key Takeaways 

  1. Remember the definition of 360-degrees of compliance communications. It is an effort that includes the compliance identity into a holistic approach so compliance is in touch and visible to your employees at all times.
  2. What is your objective? What are you trying to do with your 360-degrees view of compliance communications and how are you using that mechanism to deliver the objective your compliance program desires.
  3. Evaluate. You need to evaluate has the message been delivered has it been heard and is it being implemented. 

This month’s podcast series is sponsored by Dun & Bradstreet.  Dun & Bradstreet’s compliance solutions provide comprehensive due diligence reporting and analysis to reduce your risk of working with fraudulent companies by accessing a company’s beneficial ownership, reputation risk and more.  For more information, go to dnb.com/compliance.

Oct 31, 2017

In the final episode of this month’s series of One Month to More Effective Compliance for Business Ventures, I sat down with this month’s podcast sponsor, Mike Volkov, CEO of the Volkov Law Group to explore the key insight from this month’s series. It is that business ventures, whether joint ventures (JVs), partnerships, franchises, team agreements, strategic alliances or one of the myriad types of business relationships a US company can form outside the US are different than the usual risk presented by third parties. The problems for companies is that they tend to treat business venture risk the same as third party risk. They are different and must be managed differently.

These problems continue to exist in places like China and India where there have been a number of FCPA enforcement actions involving U.S. companies which enter these market via joint ventures. They have some sort of arms-length business relationship with a Chinese or Indian company; then they move to a joint venture relationship; and as the final step they end up buying out the foreign partner so that they bring the joint venture into the company. By the time of the full merger into the US organization, the corruption is so established and ingrained that it continues. Then it is no longer them doing bribery and corruption; it is now you doing the bribery and corruption.

Volkov explained it begins with the business reason for setting up the JV. The US company wants a connected, well-placed partner who can gain them influence in the foreign market. That foreign partner may be a government official, employee of a state-owned enterprise, or a state-owned enterprise itself. He noted “by definition then the JV relationship you are creating has risks in terms of why you are even doing business with them or even bringing them to the joint venture.” The next problem is in JV governance.

The first problem was why the JV was created but the next is how it will be created? Will it be 50/50 ownership between the US and foreign partner or something else? If its 50/50 how will you split the Board or other governing body. How will resolve final disputes? All of these questions should be considered from the FCPA perspective.

Next, what are the incentives of all the parties and what were the roles that everybody was going to take on regarding the business operation. Volkov said “if you have a 50/50 joint venture then you would have a situation where the joint venture itself retains third parties or distributors.” Whose third-party risk management program will be followed? What if red flags arise, who and more importantly, how will they clear them going forward.

Next is the JV going to use lobbyists and consultants to facilitate the JV operations. The foreign partner may want to hire without such third parties with no US partner input. The bottom line is that this is an incredibly high risk which requires more than just third party risk management strategies because you need to get into the guts of the business; how it was created, how it operates and then how is it going to operate.

A different situation comes into play with franchisors and international franchising. Here the issue may be one of control and you must look at the nature of the relationship between the parties in a franchise relationship. Most franchise agreements raise significant FCPA risks. They are outside the classic agent/distributor situation a business needs to take a hard look at the nature of the business venture or how it is operating, why the people have gotten together, next look at the intricacies of the business; and finally apply a risk analysis to the entire transaction.

In addition to the following the money issues present in every business relationship, the franchisee may also hire its own third parties, have its own interactions with foreign government regulators, need to train on compliance programs and of course have its own compliance program in place. Yet how many international franchisors have thought through all of these compliance requirements. Regarding franchising, it is both structure and oversight that are required. A company must use it full compliance tool kit in managing the relationship. Sitting back, putting compliance requirements in a franchise agreement will simply not suffice. There must be active management of the compliance risk going forward on an ongoing basis.

The bottom line is that may compliance practitioners have not thought through the specific risks of business ventures such as joint ventures, franchises, strategic alliances, teaming partner or others as opposed to sales agents or representatives on the sales side of the business. I hope that this series will help facilitate a discussion that maybe people will begin to think about more of the issues and more of the risk and perhaps put a better risk management strategy in place.

Three Key Takeaways

  1. Business ventures bring different FCPA risks from third parties.
  2. JVs have both external compliance risks and corporate governance risks.
  3. Use your compliance tool kit for business ventures in managing the FCPA risk for franchises.

 Business Ventures must be managed differently than third party agents under the FCPA.

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 31, 2017

In this episode, I visit with Doreen Edelman, a partner at Baker Donelson. We discuss the current state of NAFTA negotiations and some of the key issues including:

  1. The demand for a US content requirement in the auto industry. Currently under NAFTA, vehicles require at least 62.5 percent North American content but the U.S. is proposing to increase the North American content requirement to 85 percent, along with a United States content requirement increase to 50 percent. The goal of such a requirement is the reduction of the current $64 billion U.S. trade deficit with Mexico.
  2. The US has proposed inserting a sunset clause that would formally end NAFTA after five years, unless all parties agreed to re-authorize and extend the agreement.
  3. The US has demanded to amend the dispute-resolution framework and wants to either eliminate the arbitration panels entirely, make them non-binding, or make them voluntary.
  4. There are requests from Mexico and Canada for more access to US government contracts.  NAFTA currently ensures that there is a roughly proportional amount of its parties’ government procurement budget available to other NAFTA member countries. The US position is the current process is inherently unfair, and now seek a system that limits US procurement from companies in Canada and Mexico while granting greater access to US companies seeking to sell goods and services to those governments.
  5. The US is seeking to end the current Canadian supply management system for dairy, chicken, eggs, and turkey. The current protections have been in place since the 1970’s and set prices that protect Canadian farmers from competition. The system’s detractors view it as government overreach that runs counter to free-market principles. 

For more information on Edelman’s thoughts on the current state of the NAFTA negotiations see her blog post “As “Significant Conceptual Gaps” Persist, NAFTA Talks Extended to 2018” on her blog site Export Compliance Matters.

Oct 30, 2017

Most franchisors have thorough financial vetting requirements before allowing any person or business to become a franchisee. However, how many of these same businesses perform compliance due diligence on their prospective overseas franchises? How many US franchisors have compliance training programs? How many evaluate, on an ongoing basis, the compliance program of their overseas franchisees? How many US franchisors have a compliance hotline or other reporting mechanism for any compliance violations made against their franchisees? 

Another way to look at this issue comes from Aaron Murphy in his book, entitled “Foreign Corrupt Practices Act – A Practical Resource for Managers and Executives”. In a chapter entitled “You Do More With the Government Than You Think”, Murphy has several examples of how any US company doing business overseas will come into contact with a foreign governmental official and, thereby, create a possible FCPA liability. Many of these are areas which a US based franchisor would have to utilize to do business in a foreign country, including some or all of the following: 

  • Interactions with Customs Officials. Every time your company sends raw materials into, or brings them out of, a country there is an interaction with a foreign governmental official in the form of a customs official. Every customs transaction involves a payment to a foreign government and every transaction involves some form of a foreign governmental regulatory process. While the individual payment per transaction can be small, the amount of total transactions can be quite high, if a large volume of goods are being imported into a foreign country.
  • Interaction with Tax Officials. While interacting with international tax authorities can present problems similar to those with customs officials, the stakes can often be much higher since tax transactions may be less in frequency but higher in financial risk. These types of risks include the valuation of raw materials for VAT purposes before such materials are incorporated into a final product, or the lack of segregation between goods to be sold on the foreign country’s domestic market as opposed to those which may be shipped through a free trade zone for sale outside that country’s domestic market.
  • Licensing and Permits. Your company is a retail seller of clothes and cosmetics, franchises its operations outside the US and you do not understand how the FCPA applies to your foreign sales operations? Every physical location that you sell your goods in will require some type of license to operate your business. It could require multiple licenses such as a national license, state license and local municipal license, additionally you will need a building permit if you intend to build out or modify your retail stores.
  • Work Permits and Visas. If your company franchises overseas it will have to send someone from the home office to operate in-country at some point. In the post-9/11 world this probably means that, at a minimum, your company will have to obtain a visa for each employee who enters the foreign country and perhaps a work permit as well. The visa process can start in the United States with a trip to foreign government consulate or even the embassy and at that point you are dealing with a foreign governmental official. The work permit process can also begin in the United States but often may continue in the foreign country.
  • Inspections and Certifications. Consider the Tex-Mex restaurant chain that desires to take this cuisine across the world. In any city in the world there will be some type of certification process to enable to the business to set up and start operating and then there will be the need for ongoing inspections for sanitary conditions. Such inspections may be rare but if there is “slime in the ice machine” it may be grounds to close the restaurant. 

How would all of this play out for a franchisor? As a franchisor moves into foreign markets there could well be the temptation to “grease the skids” and make payments or offer gifts to government officials, or their family members, to get the permits or permissions necessary to open and operate. In many countries, bribery is a common way of getting business done, and there can be tremendous pressure from local agents or franchisee candidates to follow regional customs and use bribes to become or remain competitive. Even if it is not the US franchisor's own employees that engage in the FCPA violations, the US franchisor will still face the risk of an enforcement action if the franchisee’s employees engage in such conduct. 

Three Key Takeaways

  1. Franchises can bring an unexpected level of FCPA exposure.
  2. Franchisors must have more than financial vetting for potential franchisees.
  3. Use your compliance tool kit for business ventures in managing the FCPA risk for franchises.

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 30, 2017

In this episode, I visit with John Wood, who has served in numerous high-level executive branch positions, including U.S. Attorney for the Western District of Missouri, Chief of Staff for the U.S. Department of Homeland Security, Deputy Associate Attorney General, Counselor to the U.S. Attorney General, and Deputy General Counsel for the White House Office of Management and Budget. He was also a Supreme Court clerk.

We consider the recent speech by Deputy Attorney General Rod Rosenstein on the comprehensive review the Justice Department will go through looking at various and sometimes disparate Memos regarding corporate and individual prosecutions. 

Wood goes through some of the process the Justice Department will go through in this review. We discuss how it may impact the DOJ’s priorities regarding not only enforcement but also investigation. He notes the remarks by Rosenstein on corporate compliance programs and how the DOJ views their value in the overall fight against the global scourge of bribery and corruption. We also consider where the DOJ might go with an extension of the FCPA Pilot Program and what compliance practitioner might expect going forward.

For a copy of the text of DAG Rosenstein’s speech click here.

Oct 27, 2017

I am often asked about franchisor liability under the FCPA. Franchising has been a successful model in the US and now many corporations are looking at overseas expansion opportunities. Franchise law has become well developed across the US, with many states developing laws to protect the rights and obligations of both parties in a franchise agreement. According to an International Franchise Association survey of nearly 1,600 franchise systems, “nearly two-thirds (61 percent) of respondents currently franchise or operate in non-U.S. markets and three-fourths (74 percent) plan to begin international expansion efforts or accelerate their current ventures immediately.” 

There are no reported FCPA enforcement actions regarding franchisors. However, the factors in a franchise relationship would appear to lead to clear FCPA responsibility of the franchisor for its overseas franchisee’s actions. Additionally, court interpretation of the FCPA has held that it is applicable where conduct, violative of the Act, is used “to obtain or retain business or secure an improper business advantage” which can cover almost any kind of advantage, including indirect monetary advantage even as nebulous as reputational advantage. As everyone knows, the FCPA prohibits payments to foreign officials to obtain or retain business or secure an improper business advantage. Nevertheless, many US companies view franchisees as different from other types of more direct sales representatives, such as company sales representatives, agents, resellers or even joint venture partners, for the purposes of FCPA liability. 

I believe that such an analysis is misguided as the DOJ takes the position that a US company’s responsibilities extend to the conduct of a wide range of business venture partners, including franchisors. It does not take too great a leap of imagination to see that a franchise relationship could be contained within this interpretation. It does not take too many legal steps to see that a franchisee’s actions can impute FCPA liability to a US franchisor. 

There are other factors, unique to the franchise relationship, which would point towards FCPA liability of the US franchisor. A US franchisor’s intent and the degree of control it exercises over its overseas franchisees’ operations are factors the DOJ/SEC might consider in determining whether to pursue a FCPA case against a franchisor for bribes made by one of its foreign franchisees. It is always in the financial interest of a US franchisor for its franchisees to be successful businesses. Additionally, most US franchisors require its overseas franchisees to use the same company name for branding. Of course, not only the initial franchise fee but the franchisee’s monthly royalty payment roll up into the books and records of a franchisor so that might well catch the attention of the SEC if there is a FCPA books and records violation. 

Most franchisors have thorough financial vetting requirements before allowing any person or business to become a franchisee. However, how many of these same businesses perform FCPA compliance due diligence on their prospective overseas franchises? How many US franchisors have FCPA compliance training programs? How many evaluate, on an ongoing basis, the FCPA compliance and program of their overseas franchisees? How many US franchisors have a compliance hotline or other reporting mechanism for any compliance violations made against their franchisees? 

Victor Vital and Jessica Parker-Battle, writing in the Franchise Law Journal, Winter 2012 Issue, in an article entitled “Implications of the Foreign Corrupt Practices Act for International Franchising”, identified several different types of franchising models, all of which demonstrate potential FCPA risks. 

The direct-unit franchising model is perhaps the most commonly used model in the United States in which a franchisor sells one of its units at a time and has direct involvement with the franchisee. There is no third party involved in the operations between the franchisor and franchisee. Therefore, it is the franchisor's responsibility to handle training, marketing, supplies, and other support to the franchisee. Here the FCPA exposure is direct. 

The area development franchising model is used where the franchisor contracts with an area developer who operates multiple local franchises in a specified geographic area. It may or may not be exclusive. The area developer will have a contract agreement with the franchisor and then separate agreements with the area franchises. Here the FCPA exposure is both direct and indirect. 

The master franchising model is typically the most used model in international franchise expansion. It generally revolves around a master franchise agreement between the US based franchisor and a master franchise agreement in a specific geographic territory. This master franchisee then contracts with third-party sub-franchisees within the specified territory. Typically, the US-based franchisor will have no contractual relationship with the international sub-franchisees. The master franchisee acts as the franchisor in the local market recruits, trains, and provides other support in the local area on behalf of the US franchisor. Here the FCPA exposure is both direct and indirect. 

The authors believe that a franchisor may not have direct involvement in conduct prohibited by the FCPA, as there may not be the requisite corrupt intent required under the statute. However, I believe unless a franchisor has an adequate compliance program in place, a franchisor may well find itself in the shoes of Frederick Bourke and sustain a finding of conscious indifference. 

Three Key Takeaways

  1. Consider the different types of international franchise agreements to help assess your compliance risk.
  2. There are no reported FCPA enforcement actions involving international franchisors, yet.
  3. Franchisors must conduct thorough research in both the foreign market they hope to enter and on their potential franchisees. 

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 27, 2017

Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories, including: 

  1. Hui Chen details the failings of ISO 37001 on her blog, Hui Chen Ethics. Kristy Grant-Hart responds in the FCPA Blog. Henry Cutter summarizes the two positions in WSJ Risk and Compliance Journal. For additional perspective, see Tom’s blog post from February in the FCPA Compliance Report.
  2. DOJ convenes working group to boost corporate cooperation. See text of speech here.
  3. What is compliance contagion? Ben DiPietro reports in the WSJ Risk and Compliance Report.
  4. How IBM is using Big Data in FCPA compliance. See article in Just Anti-Corruption (sub. req’d)
  5. Transparency International UK has a new online tool to provide businesses with practical and in depth guidance on tackling bribery and corruption. See article by Rory Donaldson in the FCPA Blog.
  6. Matt Kelly considers the intersection of compliance and harassment in Radical Compliance.
  7. Astros come home tied 1-1 with the Dodgers. Will they close things out in Houston?
  8. Join Tom’s monthly podcast series on One Month to a More Effective Compliance Program. In October, I consider compliance with business ventures such as in the M&A context, joint ventures, distributors, channel ops partners, teaming agreements and all other manner of business venture. The fourth week I take a deep dive into compliance for different types of business ventures. This month’s sponsor is the Volkov Law Group. It is available on the FCPA Compliance Report, iTunes, Libsyn, YouTube and JDSupra.
  9. The Everything Compliance gang recorded a podcast at the 2017 Compliance and Ethics Institute, with special guest Roy Snell sitting in for Mike Volkov. The podcast went up Thursday October 26th and you can check it out here.
  10. AMI SVP Eric Feldman is speaking in Houston on November 2, at 1:30. If you are in Houston, please plan to join us. For more information see the GHBER website for details and registration.
  11. Jay previews his overdue Weekend Report.
Oct 26, 2017

Many compliance practitioners generally view distributors as a part of their third-party risk management program, with most of their attention to the pre-contract phase of the risk management process. Typically, most of the efforts are spent on due diligence with less on managing the relationship after the contract is signed.  However, many facets of a corporate relationship with a distributor are closer to those of other business venture partners. 

One of the issues in any compliance program is the compensation paid to a business venture partner as FCPA exposure arises when companies pay money - either directly or indirectly - to fund bribe payments.  In the traditional intermediary scenario, the company funnels money to a business venture partner, who then passes on some or all of it to the bribe recipient.  Often, the payment is disguised as compensation to the intermediary, and some portion is redirected for corrupt purposes.  

When companies grant distributors uncommonly steep discounts, bribes can result either: 1) because the distributor is instructed by the company to use the excess amounts to fund corrupt payments; or 2) because the distributor pays bribes on its own, without the express direction or implicit suggestion from the company to do so, to gain some business advantage. The 2012 FCPA Guidance, it noted that common red flags associated with third parties include “unreasonably large discounts to third-party distributors”.  The distributor enforcement cases offer lessons to combat the scenario, which is where legitimate companies require assistance.  

How can risk that distributors present be managed?  One mechanism is to install a distributor discount policy and monitoring system tailored to the company’s operational structure.  In virtually every business, there exists a range of standard discounts granted to distributors.  Under the approach recommended here, discounts within that range may be granted without the need for further investigation, explanation or authorization (absent, of course, some glaring evidence that the distributor intends use even the standard cost/price delta to fund corrupt payments).  

Where the distributor requests a discount above the standard range, however, the policy should require a legitimate justification.  Evaluating and endorsing that justification requires three steps: (1) relevant information about the contemplated elevated discount must be captured and memorialized; (2) requests for elevated discounts should be evaluated in a streamlined fashion, with tiered levels of approval (higher discounts require higher ranking official approval); and (3) elevated discounts are then tracked, along with their requests and authorizations, to facilitate auditing, testing and benchmarking.  This process also works to more fully operationalize your compliance regime as it requires multiple and increasingly upper levels of management involvement, approval and oversight.    

Capturing and Memorializing Discount Authorization Requests           

Through whatever means are most efficient, a discount authorization request (“DAR”) template should be prepared.  While remaining mindful of the need to strike a balance between the creation of unnecessary red tape and the need to mitigate risk, the DAR template should be designed to capture a given request and allow for an informed decision about whether it should be granted.  Because the specifics of a DAR are critical to evaluating its legitimacy, it is expected that the employee submitting the DAR will provide details about how the request originated (e.g., whether as a request from the distributor or a contemplated offer by the company) as well as explain the legitimate justification for the elevated discount (e.g., volume-based incentive).  In addition, the DAR template should be designed to identify gaps in compliance that may otherwise go undetected (e.g., confirmation that the distributor has executed a certification of FCPA compliance). 

Evaluation and Authorization of DARs 

Channels should be created to evaluate DARs submitted.  The precise structure of that system will depend on several factors, but ideally the goal should be to allow for tiered levels of approval.  Usually, three levels of approval are sufficient, but this can be expanded or contracted as necessary.  Ultimately, the greater the discount contemplated, the more scrutiny the DAR should receive.  Factors to be considered in constructing the approval framework include the expected volume of DARs and the current organizational structure.  The goal is to ensure that all DARs are vetted in an appropriately thorough fashion without negatively impacting the company’s ability to function efficiently. It also mandates the operationalization of this compliance issue into multiple disciplines within your organization. 

Tracking of DARs 

Once the information gathering, review and approval processes are formulated, there must be a system in place to track, record and evaluate information relating to DARs, both approved and denied.  This captured data can provide invaluable insight into FCPA compliance and beyond.  By tracking the total number of DARs, companies will find themselves better able to determine where and why discounts are increasing, whether the standard discount range should be raised or lowered, and gauge the level of commitment to FCPA compliance within the company (e.g., confirming the existence of a completed and approved DAR is an excellent objective measure for internal audit to perform as part of its evaluation of the company’s FCPA compliance measures).  This information, in turn, leaves these companies better equipped to respond to government inquiries down the road. 

Rethinking approaches to evaluating distributor activities is but one of the ways that the increased number of enforcement actions, 2012 FCPA Guidance and Justice Department’s Evaluation of Corporate Compliance Programs document have provided insight into how the government interprets and enforces the FCPA.  This information, in turn, allows companies to get smarter about FCPA compliance.  With a manageable amount of forethought, companies who rely on distributors can create, install and maintain systems which allow them to spend fewer resources to more effectively prevent violations.  Moreover, these systems generate tangible proof of a company’s genuine commitment to FCPA compliance, by more fully operationalizing this aspect of their compliance program.   

Many companies have been involved in FCPA enforcement actions because of distributors. This sales side channel does not receive the focus equal to that of commissioned sales agents. Yet it can present an equally large compliance risk. By using this DAR approach, you will have created a well-thought out process which will operationalize your compliance program around distributor compensation, in a manner which documents your decision-making calculus. 

Three Key Takeaways

  1. The creation of well-thought out process which operationalizes your compliance program around distributor compensation, in a manner which documents your decision-making calculus is key.
  2. Require multiple levels of approval for an out of range distributor discount.
  3. Tracking distributor discounts globally make your company more efficient. 

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 26, 2017

In this episode, we report from the SCCE 2017 Compliance and Ethics Institute, which was recently concluded in Las Vegas. We are joined by Roy Snell, the President of SCCE. We all relate some of our highlights of this year's events and look at some of the most recent compliance and ethics stories which caught our collective eyes. Rants will return in our next episode. 

The members of the Everything Compliance panel include:

  • Jay Rosen (Mr. Monitors) – Jay is Vice President, Business Development and Monitoring Specialist. Rosen can be reached at rosen@affiliatedmonitors.com.
  • Mike Volkov – One of the top FCPA commentators and practitioners around and is the Chief Executive Officer (CEO) and owner of The Volkov Law Group, LLC. Volkov can be reached at mvolkov@volkovlawgroup.com.
  • Matt Kelly – Founder and CEO of Radical Compliance and can be reached at mkelly@radicalcompliance.com.
  • Jonathan Armstrong – Rounding out the distinguished panel is our UK colleague, who is an experienced lawyer with Cordery in London. Armstrong can be reached at armstrong@corderycompliance.com.
  • Special guest in from the bullpen on this episode was Roy Snell, President and CEO of the SCCE.

 

Oct 25, 2017

One area not usually considered around your business ventures is the financial health of the joint venture partner, teaming partner, strategic partner or any other type of business partner or relationship which might occur in a business venture. It turns out such an oversight may have some significantly ramifications for an accurate picture of a business venture partner. The financial health of a business venture partner as not only a key metric but also a key tool which allows a more robust assessment prior to contract signing and in managing the relationship after the contract has been signed. 

A business venture partner which is in a weakened financial position can come back to damage your business in a variety of ways. Obviously, a company which is under financial strain is more susceptible to cutting corners to obtain business. You can almost begin to see the fraud triangle forming at this point and a rationalization for committing a FCPA violation forming in the mind of a business venture partner. 

But it is more than simply being open to potentially illegal conduct such as violating the FCPA to get business. Cyber security is a very hot topic and will continue to be so for the foreseeable future. A company that, at the beginning of a working relationship, maybe onboarding or the due diligence procurement event, one may do a series of checks from a compliance and info security perspective and that company looks fine, it gets green lit and it comes on board as a business venture partner. Over time, if that business venture partner is weakening in its financial condition, the chances are likely that they are going to begin under-investing in maintaining the quality of their cyber security program. Over time, a business venture partner of your company may induce increased risks for a cyber security breach, because that business venture partner is weakening and are not managing the financial condition of it on an ongoing basis. This might lead to a catastrophic failure such as with Equifax where the miss a leading indicator of that cyber security problem, fail to implement a software update or patch then it is too late. It has the impact to effect revenue, effect reputation and indeed your ability to do business together moving forward.   

A database of financial health is important because “traditional risk management has focused more on protecting downside risk and detecting downside risk is being able to understand where a company or a partner exists on a spectrum of risks that can be from poor to really good, and that means a user of our data is in a position to be able to do more than just protect from a company’s failing for one reason or another, but be able to align with the strongest partners and that creates resiliency and a business venture partner ecosystem”. 

This is considering your third parties in much broader manner which allows a more robust assessment of their strengths and weaknesses. The financial health of a business venture partner may tell you how well that business venture partner will perform. Such information can be useful to you for business planning, particularly around strategic risk. Understanding the financial viability of third parties, be they traditional vendors, business partners, or even fourth parties, can help you meet your compliance requirements, maintain operational stability, through the avoidance of business disruption and support business continuity initiatives. Even better, you can cut through siloes to develop risk management strategies across multiple business functions. 

This moves compliance into the business process cycle, creates greater efficiencies and at the end of the day, more profitability. This type of approach allows the compliance function to demonstrate solid return on investment going forward. It also allows compliance to cut through many corporate siloes including such disciplines as business development, supply chain or procurement, manufacturing and finance. 

Continuous improvement through monitoring of ongoing financial health is a tool where technological solutions can have an impact. Understanding the financial viability of third parties can help the compliance practitioner meet the Department of Justice (DOJ) requirement to more fully operationalize a compliance program. It can also lead to more and better operational stability and with that ever-sought increase in corporate profitability. As compliance moves into the business process, this type of review should become part of your compliance toolkit going forward. 

Three Key Takeaways

  1. What is the financial health of your business venture partners? Do you even know?
  2. Poor financial results can open a business venture partner to engaging in risky behavior.
  3. Financial health monitoring is a key tool in maintaining ongoing monitoring of business venture partners. 

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 25, 2017

In this episode, I consider the book Multipliers: How the Best Leaders Make Everyone Smarter,  by Liz Wiseman, co-authored with Greg McKeown about the various types of leaders. They focus two different types of leaders, Diminishers and Multipliers. Multipliers are leaders who encourage growth and creativity from their workers, while Diminishers are those who hinder and otherwise keep their employees’ productivity at a minimum. The authors give what they consider to be solutions and guidance to the issues they bring up in the book. 

The book’s basic thesis is that multipliers increase, often exponentially, the intelligence of the people around them. They lead organizations or groups that are able to understand and solve hard problems rapidly, achieve their goals, and adapt and increase their capacity over time. On the other hand, diminishers literally drain the intelligence, energy and capability from the employees or team members around them. They lead groups that operate in silos, find it hard to get things done, seem unable to do what’s needed to reach their goals. 

Wiseman breaks multipliers into five disciplines in which they differentiate themselves from diminishers. The first is the Talent Magnet, who attracts and optimizes talent; the second is the Liberator, who creates intensity that requires an employee’s best thinking; next is the Challenger who extends challenges by having others do the hard lifting so that they can stretch themselves; next is the Debate Maker who facilitates a debate between his or her team which leads to a decision improving a process or issue; and finally is the Investor, who instills ownership and accountability with his/her employee base. Interestingly Wiseman believes that multipliers increase efficiency and productivity by two times. 

Diminishers also break down into five different prototypes. They are the Empire Builder, who is only interested in collecting very talented people around themselves so that they look good; next is the Tyrant, whose name is almost self-disclosing but ruins all those around them with their insistent criticisms; next is the Know-it-all who give directives simply to showcase how much they know limiting what their teams can achieve to what they themselves know how to do. This means the team must try to deduce, literally in the dark, the soundness of the decision instead of executing it; and finally, there is Micromanager, who generally believes they are only person who can figure something out and approach execution by maintaining ownership, jumping in and out of a project and reclaiming responsibility for problems which they have delegated. Diminishers usually reduce efficiencies by up to 50%. 

Some of the specific techniques Wiseman discussed were to identify not only what the skills are for those on your team but also what comes easily and natural to them. By doing so you can more effectively utilize their talents in implementing a compliance regime. Interestingly you can get employees to stretch through a technique Wiseman calls ‘supersizing’ which is the situation where you give someone a task that may be “one size too big” but allows them to grow into it. 

Mistakes are going to happen in any implementation. The same is true when you are operationalizing your compliance program. To overcome this Wiseman suggests a couple of leadership strategies. The first is to talk up your mistakes within the team for debriefing and analysis. The second is to actually make room for mistakes (think of a sandbox) where your team can experiment, take some risks and recover from the mistakes. 

I found her next point fascinating, which was to lead by asking questions. As a law student I was drilled by the Socratic method so asking questions is something I am quite comfortable with going forward. Basically, every question is answered by another question. Her technique of leading with questions works with all five categories of multipliers. The reason it is so successful is that people are smart, the not only want to get things right but they want to build and eventually they will figure out how to do it. It is not simply a case of getting out of their way. It is about guiding them with your expertise to come up with not only the right answer but a solution which will work. If you take this approach of leading by asking questions, you not only guidance the functional unit but you get greater buy-in to the entire concept and process as it becomes their process. 

I heartily recommend Wiseman’s techniques to you and her book for your library on leadership. Multipliers: How the Best Leaders Make Everyone Smarter,  can be purchased from a variety of online sites, including Amazon.com.

Oct 24, 2017

One area not often considered by the CCO as a key part of any compliance regime is the corporate Controller. The Controller generally has the responsibility to accurately record and report the financial transactions of the company, to design, implement and execute the financial processes and controls of the company to be both effective and efficient, and to safeguard the financial assets of the company. Some of the compliance responsibilities of the Controller include: (1) Designing and implementing internal controls that impact ethics and compliance risks; (2) Accurately recording the financial transactions of the company; and (3) Preventing and detecting fraudulent activity. All of this means, in practical terms the Controller is both being the keeper of the books and records and the implementer of internal controls. Moreover, while many of these internal controls would most probably be viewed financial internal controls, there are additional internal controls which are not financial in nature. 

Russ Berland, the Chief Compliance Officer at Dematic has noted, “Those guys live really in the battle zone. They are constantly looking at financial transactions. They’re evaluating them. They’re figuring out where things go within the books and records. They are implementing the processes that should be keeping fraud from happening; keeping bribery and corruption from happening.” 

This means that not only can the Controller be one of the compliance function’s strongest corporate allies, the role of a Controller by its nature works to operationalize compliance. This is because to implement the appropriate internal controls around compliance, the Controller must know the specific requirements of the FCPA, know what kinds of issues are likely to come up that might create a risk of bribery and corruption, all leading to an appropriate understanding of the appropriate compliance internal controls to implement. 

This is most particularly true around offshore payments, which are generally defined as payments made to a location other than the home domicile of the party or the location where the services where delivered. If a Tunisian agent who performs services in Dubai asks for payment in a location other than Dubai or Tunisia, that would qualify as an offshore payment. If you train people who are in the Controller’s group on this issue, “all of a sudden you’ll get someone in the Controller you will pick up the phone and call compliance and say ‘Hey, we just saw a request for a payment to this guy in this Middle Eastern country and we’re just not sure what it’s for.’ That’s where the controls are really working, as opposed to that person just really dealing with it on an administrative level instead of keeping your antenna up.” Those are the types of communications, when properly documented, demonstrate that your compliance program is operationalized into the fabric of the organization. 

Another way to view it is if there is a Controller control for such a scenario which notes the exception and requires the clearance of a red flag through additional investigation, elevation for approval and documentation of the entire process. This is a financial control which acts as a compliance control as well. It strengthens the company’s internal controls to both prevent and detect key compliance risks going forward.  

Another area would on a company’s Vendor Master List (VML). Some obvious internal controls are that no person or business venture partner gets paid unless they are properly on the VML; no person or business venture partner is admitted to the VML unless they have gone through the appropriate level of due diligence, which varies by task, function and country. The Controller can also put internal controls in place to prevent workarounds, which are always a bête noir for compliance. Such t financial controls also include those around the manual check process and your internal requirements for international wire transfers. Finally, even to this day petty cash continues to be a source of funds to fuel bribery and corruption. The Controller is on the front lines for petty cash. 

These issues are usually dealt with internal controls viewed as specific to controlling the outflow of money to business venture partners. These controls are housed in the Controller’s domain and are generally ‘owned’ in a corporation but the Controller’s function. Additional benefits to the corporate compliance function include the retrieval and analysis of financial data and design of internal controls. It allows the compliance function to rely on actual financial expertise rather than “home grown” financial expertise within the compliance department. It extends the compliance function influence through the Controller. Finally, the compliance function is made aware of relevant concerns found by recording transactions, executing internal controls and financial monitoring. 

These benefits are not a one-way street for compliance as a Controller benefits from a closer relationship with the corporate compliance function as well. The Controller can leverage compliance resources. The compliance function can bring its observations and insights from investigations and emerging risks to the Controller. A closer collaboration will broaden awareness of compliance risks which relate to the company’s financial processes. By more fully integrating compliance into the Controller function a more robust picture of enterprise risk emerges, one which encompasses legal, compliance, ethics, internal controls, financial, business and governance risks. 

Three Key Takeaways

  1. CCOs need to integrate the function of the Controller into their compliance regime.
  2. Offshore payments must be flagged for further investigations.
  3. The Controller is both the keeper of the books and records and the implementer of internal controls. 

This month’s podcast series is sponsored by Michael Volkov and The Volkov Law Group.  The Volkov Law Group is a premier law firm specializing in corporate ethics and compliance, internal investigations and white collar defense.  For more information and to discuss practical solutions to compliance and enforcement issues, email Michael Volkov at mvolkov@volkovlaw.com or check out www.volkovlaw.com.

Oct 24, 2017

Tom Fox: Welcome to Episode 4 of Compliance Man Goes Global podcast of FCPA Compliance Report International Edition. In this episode, we will focus on typical myths and mistakes regarding compliance trainings. We will do it in plain language so to say and in the simple game form. Moreover, to make the podcast handy and more appealing we attach respective illustration from the Compliance Man illustrated series, created by Timur Khasanov-Batirov.

For those of our listeners who are not aware about our format, in each podcast, we take two typical concepts or more accurately misconceptions from in-house compliance reality. We check out if these concepts work at emerging jurisdictions. For each podcast, we divide roles with Timur, a practitioner who focuses on embedding compliance programs at high-risk markets. One of us will advocate the concept identifying pros. The second compliance man will provide arguments finding cons and trying to convince audience that that we face a pure myth. As a result, we hopefully will be able to come up with some practical solutions for in-house compliance practitioners.

Myth #1 Compliance training is not an entertainment. It is a very serious thing. Such trainings are about anticorruption, criminal enforcement and consequently could be delivered only by legally trained compliance team members.  Tim, do you agree with this statement?        

Tim Khasanov-Batirov: It is a very typical assumption. Let’s see what pros we have:   

Argument #1.

Obviously, the training should cover anticorruption matters based on corporate rules, local and applicable extra-territorial legislations (like FCPA, for instance). Referring to relevant enforcement cases from the specific industry is vital to make training close to reality. Should we have as trainers only lawyers from compliance team? I would say, yes. Lawyers are expected to know and naturally are close to such things as legislation, corporate rules and alike;

Argument #2.

Now let’s discuss if compliance training could be delivered in entertaining form. As we remember, Tom, may be 10 years ago compliance trainings were supposed to be dull and lengthy. They were so to say the best cure to fight insomnia. Now we have the opposite situation. In attempt to be modern, we have appealing, funny and entertaining compliance shows. The problem is that the content of training in many such cases become something secondary after the form of delivery;

Thomas:  I think, Tim that there are some cons here as well: 

Argument #1 is about having only lawyers as compliance trainers.

I believe for some audiences’ deep knowledge of regulations is not needed. This might be a case for instance when audience should understand just basic rules. Therefore, you can deploy HR team or non-lawyers from compliance department to conduct session for the staff. Moreover, lawyers tend to train employees as if they were talking to other lawyers, which is usually not the case for compliance and ethics training.

Argument #2 is about entertaining. I think the best way is to define what specific matters should be communicated and what are the best ways to do it for the target group. The answer on how to do training basically depends on corporate culture. I think the main test is whether compliance practitioner can deliver the message or no matter in what form.        

Tim: Tom, I agree with you. As we have started to talk about trainings maybe we can refer to the topic of their evaluation or as you might say in the US, their effectiveness?    

Tom: Good idea, Tim. We can formulate the next concept or maybe misconception in the following way: 

Myth #2“Do not complicate things, there is no need to evaluate compliance trainings. It is just about communicating the rules”. Tim, will you agree with this concept?  

Tim: I strongly disagree with this concept. 

To start with, training will be evaluated by participants informally. If compliance training is about rules which are irrelevant to participants or compliance session is not tailored per audience people will notice that. This situation is depicted in Episode 3 of Compliance Man comics series. Unfortunately, it is a typical problem of global companies. It looks like that: there is a requirement to conduct compliance training for local personnel using standard presentation from the HQ.  A local compliance officer conducts this training. Formally, everything is fine. In reality, participants understand nothing.

Even if you are not fan of training evaluation or it does not work in your situation for some reason here is a tip. First, do the homework and learn about the department for which you are going to conduct training. Talk to key managers to explore specifics of department’s activity, which are relevant to topic of compliance training. This will help you to tailor the session for that audience. I also strongly recommend engaging supervisor of this unit to be your co-speaker at the training session. People will follow what their boss it is telling them to do. In our case that will be compliance requirements.    

What are your views on necessity to evaluate compliance training, Tom?

Tom: I have some thoughts, which might look controversial at first sight but hopefully could be of value to compliance practitioners:

The first thing is about illusions. As you fairly depicted in Compliance Man Illustrated the feedback or evaluation of the training will pop up anyway. It will be communicated among personnel informally.   Probably you will never learn about it. Another situation, which comes to my mind. If there is colleague from compliance team or Legal man (as in the Illustrated series) who supports you he will tell you that everything was just perfect. This could be illusion as well.          

Argument #2.

Having said all that, be sure that if you are going to evaluate the training you must formulate very specific questions to avoid general answers from participants of no practical value. Some companies demand to identify the name of the participant in the training evaluation survey. Obviously, in this case you will not get impartial answers.   

But this evaluation of effectiveness is critical as the regulators, literally from across the globe, are now focusing on your compliance training program’s effectiveness. This means you must not only design appropriate questions but also test the questions and responses in a way which gives you real answers. Of course if these questions show your training is not effective, you must use that same information to revise your training so that it is effective.      

Tim: Agreed, Tom. As key takeaways from today discussion, I think we can mention the following:

  • Compliance training should not be of formal and irrelevant to audience nature. Find ways to tailor your session so your messages will be delivered and appreciated by the audience.

Thomas: Fair enough, Tim. It looks to be a practical tip. Tom Fox and Tim Khasanov-Batirov were here for you.   Join us for the next episode of Compliance Man Go Global episode of FCPA Compliance Report International Edition.  Let’s bust more corporate compliance myths with us.

1 « Previous 1 2 3 4 5 6 7 Next » 20