In late 2015, the U.S. Department of Justice (DOJ) hired *** Chen as counsel for the DOJ Fraud Section. With the appointment of a new DOJ compliance counsel, the department has signaled its heightened focus on compliance. Here's what CFOs need to know.
1. Chen is a compliance expert.
Before accepting her latest role, Ms. Chen was Global Head for Anti-Bribery and Corruption with British multinational bank Standard Chartered PLC, and earlier worked in compliance for drug company Phizer, as well as Microsoft. From 1991 to 1994, Chen was a federal prosecutor.
2. Chen will evaluate corporate compliance.
According to the DOJ, Chen will be tasked with advising prosecutors on the effectiveness of companies' compliance programs. Chen and the DOJ will also investigate whether corporations have made necessary improvements, such as putting in place new procedures for detecting fraud.
Perhaps equally important, Ms. Chen and her team will help DOJ prosecutors evaluate corporate compliance and remediation measures by developing appropriate benchmarks. According to the DOJ, part of Chen's responsibilities will be to communicate those benchmarks with stakeholders. Of course, U.S. Sentencing Guidelines acknowledge that a company's size is relevant in evaluating the adequacy of its compliance programs, so a number of benchmarks will be needed, as noted by the FCPA Blog.
3. Expect more compliance-related guidance from the DOJ.
The new DOJ compliance counsel has said she will share guidance as she transitions into the role, so you can proactively integrate this guidance into your compliance program. While nobody can define the appropriate compliance benchmarks for your particular firm, it's clear the DOJ is taking compliance more seriously and will anticipate companies doing the same.
4. Compliance communication is key.
As AAG Caldwell asked in her speech (cited above), "[Do] employees have repeated training?" Said training should be focused on educating employees on the rules and the process they should follow when they discover violations of those rules, such as who to contact and how. Clearly communicate compliance policies, and ensure the policies and procedures are understood by all relevant parties. Enforce compliance consistently throughout your company, continually updating your best practices and training employees appropriately.
5. Compliance should participate in leadership decision-making.
On the day after Chen's appointment, Andrew Ceresney, the SEC's head of enforcement, briefly outlined the elements of a bad compliance program. During Ceresney's keynote address at the 2015 National Conference, he said, "[T]he absence of real compliance involvement in company deliberations can lead to compliance lapses" which can result in enforcement actions. Compliance should be seen as a business partner and part of strategy meetings — the views of your compliance employees sought out when appropriate. In short, compliance needs a seat at the table.
6. Compliance must have sufficient resources to perform its function.
Ceresney mentioned in his keynote speech that compliance departments must be given the people and resources they need to do their work effectively. Leadership must provide enough resources for the compliance team to perform their roles, so be sure the team receives adequate funding. As much as possible, the compliance function should be independent and autonomous within your corporate structure.
7. Leadership buy-in is necessary.
Assistant Attorney General Leslie Caldwell spoke to a group of compliance officers and explained, "The department looks closely at whether compliance programs are simply 'paper programs,' or whether the institution and its culture actually support compliance." The new compliance counsel will help the department do just that, said Caldwell. Directors and senior managers must provide strong support for your compliance program. Company leadership must do more than talk about their commitment to compliance — they must show it.
The DOJ is focusing on compliance and the expectation that companies take a more proactive approach to benchmarking their compliance efforts. Knowing the elements of a solid compliance program will help you avoid unwelcome scrutiny from the DOJ.