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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.
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May 29, 2018

One new and different item was laid out in the Evaluation of Corporate Compliance Program, supplementing the Ten Hallmarks of an Effective Compliance Program from the 2012 FCPA Guidance. This was the performance of a root cause analysis for any compliance violation which may led to a self-disclosure or enforcement action. Under Prong 1-Analysis and Remediation of UnderlyingMisconduct, the Evaluation states: 

What is the company’s root cause analysis of the misconduct at issue? What systemic issues were identified? Who in the company was involved in making the analysis?  

Were there prior opportunities to detect the misconduct in question, such as audit reports identifying relevant control failures or allegations, complaints, or investigations involving similar issues? What is the company’s analysis of why such opportunities were missed?  

The new Department of Justice (DOJ) FCPA Corporate Enforcement Policy brought forward this requirement for a root cause analysis with the following language: 

Demonstration of thorough analysis of causes of underlying conduct (i.e., a root cause analysis) and, where appropriate, remediation to address the root causes. 

Initially you need to understand the difference between a root cause analysis and a risk assessment. Obviously, you would perform a root cause analysis after an incident occurs so to that extent it is reactive rather than proactive. The site Thwink.org has defined root cause analysis as:

The purpose of root cause analysis is to strike at the root of a problem by finding and resolving its root causes. Root cause analysis is a class of problem solving methods aimed at identifying the root causes of problems or events. ... The practice of root cause analysis is predicated on the belief that problems are best solved by attempting to correct or eliminate root causes, as opposed to merely addressing the immediately obvious symptoms.

Well known fraud investigator Jonathan Marks, in an interview with the author, defines a root cause analysis “is a research based approach to identifying the bottom line reason of a problem or an issue; with the root cause, not the proximate cause the root cause representing the source of the problem.” He contrasted this definition with that of a risk assessment which he said “is something performed on a proactive basis based on various facts. A root cause analysis analyzes a problem that (hopefully) was previously identified through a risk assessment.”

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