Focus on prevention to weed out wrongdoing at the root, rather than on dealing with the end results of criminality. That was the message delivered by Assistant Attorney General Kenneth A Polite Jr in a speech to the American Bar Association on white collar crime on March 3.
His call to action was to: “Craft and implement effective compliance programs that can detect misconduct. Push to create a culture of compliance. Empower ethical employees.”
He told delegates that the US Department of Justice (DOJ) has unveiled “significant changes” to its Evaluation of Corporate Compliance Programs (ECCP) to this end. These focus on how the DOJ will consider a corporation’s approach to “the use of personal devices as well as various communications platforms and messaging applications” when conducting criminal investigations.
Under the revisions, the DOJ will look at how an organization has tailored its policies to govern the use of messaging applications in a way that is specific to its “risk profile and specific business needs”.
The DOJ has also said that it will be looking to see that all business-related electronic communication “can be preserved and accessed”. It will also be looking into the bring your own device policies of firms.
And it will want evidence that firms are being proactive in the communication and execution of those policies. That will involve assessing how well companies are communicating their e-communication policies to employees, and whether they are enforcing them consistently.
No more face value
In the speech, Polite added that the Department will no longer be conducting investigations “at face value”. If a company does not produce communications from third-party messaging applications, DOJ prosecutors will dig deeper, asking whether the company is able to access third-party communications, where these communications are stored, and whether they meet applicable privacy and local laws.
Polite said that the DOJ does not just want to understand what happened when investigating criminal activity, but why it happened, and whether it will happen again.
Individual accountability was highlighted by Polite as “one of the most pressing challenges we face”. The DOJ wants to hold individuals to account for their action – or inaction – so it will now assess how compensation systems contribute to compliance.
Under the revised ECCP, DOJ prosecutors will also explore how a firm’s compensation structure and consequence management “contributes to the presence – or lack – of an effective compliance program”.
Polite noted that there have been “substantial revisions to the ECCP about clawbacks and the use of personal devices and other communication platforms”, which look to recognize their importance and also provide transparency around how prosecutors will consider them within investigations.
He announced a three-year pilot program for organizations surrounding compensation for corporate compliance. The program has two main pillars:
- It requires that corporate compliance programs should include compensation-related criteria as part of any criminal investigation; and
- Fine reductions will be introduced for companies that claw back compensation from those who engaged in wrongdoing.
In essence, the DOJ will reward organizations that actively tackle and enforce their corporate compliance policies through punitive remedial measures. The goal of the new pilot is “to ensure that the company uses compliance-related criteria to reward ethical behavior and punish and deter misconduct”.
Where companies assist the DOJ with their investigations, the DOJ may issue further fine reductions if they are found to have in place a “program to recoup compensation and uses that program.” This will expand not only to those who are responsible for the wrongdoing, but also to any supervisor who knew, or was “wilfully blind” to wrongdoing.
Compensation and compliance
Given the already-turbulent regulatory landscape, Polite acknowledged that some may ask why the DOJ is making these “significant changes” now. His said: “there is no better time”, adding: “Are we to shy away from the problems posed by the increased use of new ways to communicate in our personal and professional lives? Are we to ignore the problems posed by companies that fail to recognize the clear connection between compensation and compliance?”
Acting now means that firms will start to revise their policies sooner, whistleblowers may feel empowered to report wrongdoing, or compliance professionals may feel better equipped to advocate for more resource. If firms heed the DOJ’s warnings now, then wrongdoing could be prevented, or indeed remedied, faster.