Boards and management should make use of recent expanded guidance from the US Department of Justice to ensure that their compliance programs are considered “effective” if and when an investigation arises. Companies should affirmatively answer three fundamental questions in evaluating a compliance program:
The Department of Justice (DOJ) doubled-down on emphasizing corporate compliance programs with new guidance from the Criminal Division Fraud Section with the “Evaluation of Corporate Compliance Programs” (Criteria). This document, released February 8 without much fanfare, contains a long list of benchmarks that DOJ says it will use to evaluate the effectiveness of an organization’s compliance program. The Criteria may publicize the factors Hui Chen, the Criminal Division’s 2015 compliance counsel hire, uses to evaluate compliance programs. The Criteria also provides practical guidance on how organizations can evaluate their compliance programs. This document operationalizes DOJ’s Principles of Federal Prosecution of Business Organizations (knows as the “Filip Factors”), which stated that the existence and effectiveness of a corporation’s preexisting compliance program is a factor that the DOJ will review in considering prosecution decisions.
The Guidance contains 11 topics that shift the analysis among examining how the alleged misconduct could have occurred, the organization’s response to the alleged misconduct, and the current state of the compliance program. One entire category, titled “Analysis and Remediation of Underlying Misconduct,” has an obvious focus. But, the other categories contain questions that touch on each of the three themes. For example, the “Policies and Procedures” category asks questions about the process for implementing and designing new policies, whether existing policies addressed the alleged misconduct, what policies or processes could have prevented the alleged misconduct, and whether the policies/processes of the company have improved today. Other categories examine the company’s historic and current risk assessment process and internal auditing, training and communications, internal reporting and investigations, and employee incentives and discipline. DOJ also discusses management of third parties acting on behalf of the company and, in the case of a successor owner, the due diligence process and on-boarding of the new company into the broader organization. (more…)
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