Michael Fawlk and Lorena Cobiella
An otherwise well designed compliance program may not be effective to detect and prevent misconduct if it lacks resources and authority. These are elements that can transform a “paper” program into an effective compliance program.
Under resourcing a compliance program can be costly. Toll Holdings recently agreed to pay more than $6 million to settle claims of US sanctions violations. OFAC identified almost 3,000 potential violations over a six year period with a value of approximately $48 million. This, despite the fact that Toll had a sanctions compliance policy. Unfortunately, Toll’s compliance program, personnel and controls failed to keep pace with the complexity of its growing business. The key as far as resources are concerned is to ensure that these are appropriately calibrated to the size and complexity of the business or other operations, such as those of an NGO.
Is your compliance team sufficiently supported with resources - budget and suitably experienced staff - to fulfill its responsibilities including to monitor, document, report, analyze, investigate, train and communicate regarding the program? What is sufficient will, of course, depend on the size, structure and risk profile of the organization. More advanced organizations take a long term view to attracting suitable talent, including by ensuring that compliance staff have opportunities to progress and develop their careers both within in the compliance function and the wider organization.
Do those charged with leading and implementing the compliance program have sufficient autonomy and authority? We recommend that organizations carefully consider this when deciding on the reporting line of the most senior compliance person (Chief Compliance Officer or Head of Compliance) and where that position is situated in the actual and perceived hierarchy. This calls for consideration of the position of the leader of the compliance function and the message that it sends to the organization as a whole regarding the organization’s leadership’s commitment to compliance. How does this compare with other functional heads within the organization? Does the leader of the Compliance function have direct and unfiltered access to the Board of Directors or the Chair of the Audit Committee? If not, why not?
There are many questions to consider in getting this right - in the sense that the program is adequately resourced and sufficiently independent to be effective. But with careful thought and a candid assessment of perceptions and the complexity of operations, they can be answered in a way which is transformative for the organisation and its future.
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