Chief Compliance Officers Uneasy

Justice Department policy creates uneasiness for CEOs and chief compliance officers as they face being held personally liable for ensuring the efficacy of their company’s compliance programmes.

A new Justice Department policy, focused on improving its standing within companies, is causing concern to many chief compliance officers. The new policy is set to leave them wide open to criminal prosecution. However, the aim of the policy is actually to give a voice to compliances officers and make the resources and information required to assure the effectiveness of the company’s compliance programme more readily available.

It was used for the first time in May this year in a settlement agreement with the commodities business, Glencore PLC. However, lawyers have said that the policy may bring with it some inadvertent consequence. They also say that, although it provides compliance officers leverage, it’s not in the most positive way. Instead, it is like the equivalent of handing them an anvil rather than a hammer.

Brian R. Michael, partner at law firm, Morrison Foerster, said,

“I think it could make a compliance offer’s job really difficult. It runs the risk of creating a lot of resentment and friction between chief compliance officers and other senior executives.

Brian further said,

“The CEO is not going to look kindly on a COO who is not willing to sign this thing, particularly if the CEO or other senior executives think they ought to be able to.”

Who does the policy apply to?

The new policy is being applied to any businesses that are in the process of resolving claims of criminal misconduct. Companies are usually required to improve their compliance programmes and be willing to accept enhanced oversight over a period of several years. Once the period of time has elapsed, the CEO and CCO must personally confirm the company’s compliance programme is fit to identify and avoid breaches in the future.

Assistant Attorney General, Kenneth Polite, said that this new policy was not intended to have the sole purpose of punishing, but many lawyers and CCOs have disagreed. What will happen if CCOs certify their compliance programmes now, but later on violations are uncovered? The answer is not clear, and this is from whence the unease stems, not to mention the limitations that most CCOs face on a daily basis in the natural course of their jobs.

Chief compliance officers need not feel uneasy

Even though CCOs are required to ensure their businesses are taking the applicable measures to ensure that workers are not breaking the law, their influence within the business is generally less than that of other senior executives, especially when it comes to budgets and business decisions. Oftentimes, the compliance programmes they look to implement are not adequately funded - among other systemic issues. The Justice Department, however, is focusing on making certain changes as well as looking to implement a set of new policies to ensure those in the most senior positions within companies take compliance seriously.

Compliance officers don’t need to feel uneasy though. They have the ability to refuse certification. In reality, this new policy could be the very resource needed to ensure compliance officers get the clout they need to ensure their company’s compliance programmes are in tip top shape. Though some are concerned that refusing certification could hamper the relationship with the CEO and other executives.

Setting compliance officers up for success

A Justice Department spokesperson said that certification confirms a company’s commitment to take its compliance obligations seriously – this inevitably sets compliance officers up for success.

Even with the seemingly positive outcomes of the new policy, there are still negatives and serious concerns. We’ll have to watch and wait to see the policy being applied in future cases…

Keeping up to date with the latest regulatory changes around the world is crucial to successful compliance programmes.

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