Last week, Matt Kelly posted a blog entitled “7 Compliance Items to Watch for 2020” on Radical Compliance. Matt and I recorded two episodes on this topic in our Compliance into the Weeds podcast series. (The episodes will post on January 9 and 16.) I enjoyed reading Matt’s posts and going into the weeds with him so much that I decided to try my hand at such a veiled look into the future for 2020 as well.
Compliance Convergence. In 2019 there were three significant releases of information by the federal government which directly impacted compliance professionals. Two came from the Department of Justice (DOJ) and one came from the Department of Treasury, Office of Foreign Asset Control (OFAC). The DOJ Criminal Division released its Evaluation of Corporate Compliance Programs – Guidance Document (2019 Guidance). OFAC released the Framework for OFAC Compliance Commitments (OFAC Framework), providing guidance for entities seeking to comply with sanctions through a Sanctions Compliance Program. The DOJ Antitrust Division released its Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (Antitrust Guidance). Together with the 2019 Guidance and OFAC Framework, these three documents go a long way in cementing the need for robust and effective compliance for corporations.
More importantly, they all point towards the growing trend of ‘compliance’ for every corporation. 2020 may well be the year where we start a significant move from anti-corruption compliance, anti-trust compliance, trade sanction compliance, anti-money laundering compliance, data privacy compliance to simply compliance. All compliance programs have about eight basic elements in common. Every company needs to not simply understand this and put a program in place but do so in a manner which documents the three components of every compliance program prevent, detect and remediate.
Public/private partnership in anti-corruption fight. Over the past few years, the DOJ has gone far towards laying out real incentives for corporations to help in the fight against the international scourge against bribery and corruption by providing solid and significant credit for self-closure, cooperation, remediation and reimbursement of ill-gotten gains. The 2016 Pilot Program built upon the foundation laid out in the 2012 FCPA Resource Guide. The 2017 FCPA Corporate Enforcement Policy made the DOJ’s default response a declination if the four requirements were met. This Policy has been refined and tweaked over the past couple of years to make even more forceful the DOJ’s drive towards this goal.
For 2020, companies are now fully incentivized to cooperate with the government. Obviously, such cooperation will provide the government with more information on international bad actors in the bribery and corruption space to help break down this international plague. Moreover, in the increasingly fractured world, the fight against corruption is even more important as a security concern.
Data, Data, Data. The DOJ has made it clear that it expects companies to be more robust in their use of data analytics in compliance programs. This means using data to not only detect and prevent illegal conduct but also in the remediation prong of any best practices compliance program as well. The new Antitrust Compliance Evaluation document was the clearest in this mandate when it stated, “Does the company use any type of screen, communications monitoring tool, or statistical testing designed to identify potential antitrust violations?” For the anti-corruption compliance professional, this means you need to incorporate a statistical analysis into your ongoing monitoring to see if there are any anomalies which could be indications of Foreign Corrupt Practices Act (FCPA) violations.
Since at least 2016 in the Securities and Exchange (SEC) FCPA enforcement action involving Key Energy Services, Inc., regulators have been communicating to compliance professionals of the need for increased use of data and data analytics in any compliance program. This past year, Deputy Assistant Attorney General Matthew Miner, said in a speech that the DOJ will inquire whether compliance departments have access to internal data that could help them identify misconduct and whether compliance officers make adequate use of data analytics in their reviews of companies that are under investigation.
Compliance as the Ethical Edge. We have known for many years that companies with more robust compliance programs were most generally better run companies. Ethisphere drove this point home in 2019 with its list of World’s Most Ethical Companies, which found that over the last three years, companies which received Ethisphere’s World’s Most Ethical company designation have outperformed their peers in the S&P Large Cap index by an average of 10.5%. There is also a growing body of academic research by folks such as Paul M. Healy and George Serafeim, in their paper entitled “An Analysis of Firms’ Self-Reported Anticorruption Efforts”, who looked at the issue of not simply profitability of companies who had more robust anti-corruption compliance programs but also what was the positive effect on the companies’ return on equity (ROE) in high risk business environments.
This academic research and other case studies demonstrate the effective compliance programs equates to more efficient business processes and leads to greater profitability. As senior business leaders come to understand this message, they will (properly) see compliance as a business process which can be analyzed and improved through continuous improvement to make companies run more efficiently and at the end of the day more profitably. These companies do not make money because they have a better heart, they are more profitable because they are better run. Finally, all of this ties back to a requirement from the DOJ for continuous improvement of your compliance program.
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