United States: Understanding The DOJ's Updated Guidance On Corporate Compliance Programs

In Short

The Situation: On April 30, 2019, the U.S. Department of Justice ("DOJ") released an updated version of its guidance document, "Evaluation of Corporate Compliance Programs," in an effort to "better harmonize" the document with other DOJ materials and provide more detail around the government's approach to analyzing compliance programs.

The Development: The updated guidance provides new insight into the topics DOJ believes to be important when evaluating the effectiveness of a corporate compliance program.

Looking Ahead: The 2019 guidance demonstrates DOJ's increasing focus on corporate compliance and an emphasis on compliance programs that apply a risk-based approach and are continuously improving.


On April 30, 2019, the DOJ released an updated version of a guidance document titled "Evaluation of Corporate Compliance Programs." The original version of this guidance was first released in February 2017. The updated 2019 guidance offers new insight into the factors DOJ considers important when evaluating the effectiveness of a company's compliance program.

This guidance retains much of the same substance as the 2017 version, but it includes more detailed explanations of the compliance topics on which DOJ is focused, additional factors and questions DOJ considers in evaluating a compliance program, and a reorganized structure. While the 2017 version was billed as a list of sample topics and questions that DOJ "has frequently found relevant in evaluating a corporate compliance program," the 2019 guidance is described as a tool "meant to assist prosecutors in making informed decisions" about the effectiveness of a corporate compliance program for purposes of determining an appropriate resolution.

The 2019 guidance demonstrates DOJ's increasing focus on corporate compliance and provides an accompanying set of expectations as to what DOJ believes a compliance program should be doing to prevent and detect misconduct. In this guidance, DOJ emphasizes the importance of a risk-based approach to compliance and continuous improvement of corporate compliance programs.

2019 Guidance in Brief

The guidance reformulates the key topics DOJ examines in evaluating a company's compliance program around three questions:

  • Is the compliance program "well designed"?
  • Is the program "implemented effectively"?
  • Does the compliance program "work in practice"?

Well Designed: The 2019 guidance—quoting the Justice Manual § 9-28.800—defines a well-designed compliance program as being "adequately designed for maximum effectiveness in preventing and detecting wrongdoing." DOJ believes a well-designed program should accomplish these ends through the communication of a clear message of compliance along with well-integrated policies and procedures.

The guidance identifies sample topics DOJ will evaluate to determine whether a compliance program is well designed, including the nature, extent, and effectiveness of a company's:

  • Risk assessment;
  • Policies and procedures;
  • Training and communications;
  • Confidential reporting structure and investigation process;
  • Risk-based, third-party management process; and
  • Due diligence in mergers and acquisitions.

Implemented Effectively: Next, the guidance asks: Is the compliance program purely a paper program or is it being "implemented effectively"? To answer this question, DOJ will examine the following sample topics:

  • Senior and middle management's commitment to compliance;
  • The compliance function's autonomy and resources; and
  • Incentives for compliance and disciplinary measures for noncompliance.

Works in Practice: While acknowledging that no compliance program can detect all misconduct, DOJ expects that a program that "works in practice" should be generally effective in preventing and detecting misconduct. The factors DOJ will evaluate under this category include:

  • Continuous improvement and evolution of the compliance program to address changing compliance risks;
  • Periodic testing, auditing, and review of the compliance program, internal controls, and compliance culture to determine their effectiveness;
  • Effective detection of, and response to, misconduct;
  • Investigations that are appropriately staffed and sufficiently funded to thoroughly investigate and document suspected misconduct;
  • The thoughtfulness of the root cause analysis to understand misconduct; and
  • Thoroughness and effectiveness of remediation to prevent future misconduct, including examining and improving any identified compliance weaknesses.

Other Recent Compliance Guidance

DOJ's 2019 guidance was followed on May 2 with the publication of "A Framework for OFAC Compliance Commitments" by the Department of the Treasury's Office of Foreign Assets Control ("OFAC"). Like the DOJ guidance, OFAC's Framework encourages risk-based compliance programs and evaluates these programs based on "five essential components of compliance: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training."

Observations

DOJ's updated guidance on corporate compliance programs should be viewed as the next step in the U.S. government's march toward increasingly more proscriptive compliance programs. This march began with the United States Sentencing Guidelines § 8B2.1 on "Effective Compliance and Ethics Program," which led to the government's use of corporate monitors as part of pleas and other resolution agreements with companies. This was followed by the compliance-oriented guidance in DOJ's and SEC's 2012 "A Resource Guide to the U.S. Foreign Corrupt Practices Act," and then the 2017 version of DOJ's guidance document. It now culminates with DOJ's recently updated guidance and OFAC's Framework.

Despite the growing government input on compliance programs, DOJ's new guidance—similarly to past government guidance—leaves it to corporate management and boards of directors to make the tough decisions about the design, resource allocation, and implementation of compliance programs. While that may be the "right" place to leave that responsibility, DOJ and other regulators retain the advantage of evaluating the "reasonableness" of those decisions with perfect 20-20 hindsight when problems occur.


Two Key Takeaways

  1. The guidance indicates that DOJ is increasingly focused on how companies shape and implement their compliance programs.
  2. The guidance indicates that DOJ is prioritizing the following key components in its evaluation of a corporate compliance program:
    • Regular risk assessments and continuous improvement of and updates to the program based on lessons learned; and
    • Appropriate tailoring of the program based on an up-to-date risk profile of the company (including size, industry, geographic location, and regulatory environment);
    • Engagement and education on compliance issues by senior and middle management, the board, and key "gatekeepers."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions