compliance in speech bubble

To Prevent and Detect

Compliance programs exist for the purpose of protecting against misdeeds, and the most effective programs are those that exist within a culture of ethics. Michael Volkov discusses the truism that a company’s culture and its compliance controls are mutually reinforcing.

I do not think there is much disagreement on the basic purpose of an ethics and compliance program. After all, one of the primary sources for compliance programs continues to be the United States Sentencing Guidelines, which very clearly affirm the stated purpose of a corporate compliance program.

To play devil’s advocate for a minute, let’s consider the following: the United States Sentencing Guidelines are just what they say: guidelines for criminal sentencing of a corporation. It is not the “be all, end all” of corporate compliance guidance.

And where does the importance of an ethical culture fit in? Well, an ethical culture is perhaps the best control a company can implement as a way to “prevent and detect” compliance issues.

I do not intend to repeat myself (though that is precisely what I am about to do), but companies with ethical cultures have lower rates of employee misconduct, lower rates of employee turnover, increased productivity and overall improved financial performance. Hopefully, no one will dispute that point (although there may be disagreement as to how to define an “ethical culture”).

While I agree, then, with the import of a compliance program purpose – “to prevent and detect” – I believe the description is a little bit narrowing, perhaps from just a symbolic sense. Although technically, a compliance program dedicated to “prevent and detect” misconduct should, and must, fully embrace the value of an ethical culture, the purpose of a compliance program should reinforce the two critical elements of a successful compliance program: an ethical culture and effective compliance controls.

This sounds nit-picky, but symbols, titles and language can matter when it comes to inspiring and leading corporate organizations. We always look to messaging and the need to motivate employees, and promoting the value of a company’s culture and its ethical principles is an important aspect of this process.

A focus on ethical culture should not in any way diminish the importance of a company’s controls; the design and implementation of such controls is a key function of a compliance program. When corporate policies are viewed as nuisances or something to be circumvented, it can undermine corporate culture and create risks that employees will ignore other controls – sometimes even more important controls.

I guess this all goes back to a key aspect of any corporate compliance program; a company’s culture and its compliance controls are mutually reinforcing. When you promote a company’s culture, you reinforce the importance of compliance with controls, and vice versa; when you enforce the company’s controls, you reinforce the company’s culture. No one disagrees with this basic principle of interdependency.

Going back to our main point here – to prevent corporate misconduct is a proactive perspective, one that forces CCOs to think creatively and communicate important steps to take to instill and promote a corporate culture premised on the company’s values.

That is not in any way intended to diminish the importance of detecting misconduct. Just think of it in this basic way: If employees do not feel comfortable raising concerns about corporate activities, there is no way a company can ever detect misconduct or issues that need to be addressed. No compliance program can ever function properly without the input and observations of employees who feel free to raise concerns and trust the corporate reporting system to address issues they raise.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

Michael Volkov

Michael Volkov

Michael-Volkov-leclairryanMichael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services.  He can be reached at [email protected].  His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.

Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.

Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.

Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.

Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.

Representative Engagements

  • Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.
  • Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.
  • Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.
  • Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.
  • Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.
  • Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.
  • Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.
  • Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.
  • Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
  • Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.

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