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Law360 (April 13, 2020, 2:22 PM EDT) --
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| Isabelle De Smedt |
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| Mark Knights |
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| Michael Strauss |
This is the optimal climate for corruption. And now is when companies find out if their compliance programs will withstand the challenges this crisis poses. Later is when regulators may decide their programs did not.
The COVID-19 pandemic is precisely the circumstance in which top-down commitment to anti-corruption compliance matters. That commitment is being and will be tested. As the U.S. Department of Justice put it:
The effectiveness of a compliance program requires a high-level commitment by company leadership to implement a culture of compliance from the top.[1]
In assessing whether and to what extent to charge criminal conduct, prosecutors are told to:
examine the extent to which senior management have clearly articulated the company's ethical standards, convey and disseminated them in clear and unambiguous terms, and demonstrated rigorous adherence by example.[2]
It is therefore of critical importance that, amid this pandemic, senior management coordinate with compliance personnel to affirm that all implemented compliance controls remain in place and are followed and to identify potential gaps resulting from the pressures of this crisis.
Because, however, the usual course for identifying and remedying compliance gaps has likely been disrupted by COVID-19, calculated adjustments should be made so as to stay the course. For example:
- Compliance teams should increase their interactions with compliance liaisons situated throughout the world. This enhanced contact will help compliance departments affirm company commitment to compliance while also providing insight into the new compliance challenges companies are facing at the local level as a result of COVID-19.
- Third-party due diligence must continue without missing a beat, especially as companies are enlisting the services of new vendors in response to supply chain deficiencies. To keep the review process a priority for businesses, compliance departments must keep it efficient. If, for example, a compliance team is not using a software tool to collect and generally assess information from third parties, then consider providing business teams with standardized third-party questionnaires in a digitally fillable format.
- Delays in, or complications with, securing a regulatory approval or permit are practically certain in this climate. Compliance departments should understand the global landscape of their businesses' projects, determine if those projects have experienced delay or encountered administrative roadblocks, and identify any local orders, actions or memoranda that temporarily suspend technical or conventional filing requirements in favor of online submissions.
- Annual risk assessments and internal investigations should proceed notwithstanding the logistical difficulties posed by travel restrictions and stay-at-home orders. For now, compliance should dedicate its efforts to completing a fulsome document and data analysis, which, in many cases, will help streamline interviews past the usual preliminary administrative or process-focused questions and into more substantive information. Remote, desktop interviews of employees should occur only if timing does not permit delaying that aspect of the assessment or investigation until in-person, on-site interviews are possible. The ability to assess credibility, demeanor and the local business environment is critical to understanding ABAC risk.[3]
COVID-19 also underscores the importance of anti-corruption training. The pressure to more quickly meet demand, complete a construction project or obtain government approvals is mounting. At the same time, because of travel and social restrictions, the ability to have onsite oversight over these activities is diminishing.
Companies are therefore relying on their personnel to make the right decisions in this precarious corruption climate. And to be confident in that reliance, companies need to have confidence in their employees' ability to recognize problematic conduct and to respond to and report it according to company compliance protocols.
When making charging decisions, DOJ prosecutors are told to "examine whether the compliance program is being disseminated to, and understood by, employees in practice in order to decide whether the compliance program is truly effective."[4]
Companies thus must continue their efforts to educate their employees on the corruption risks unique to their businesses and should consider providing renewed training focused on the areas of increased risk that their businesses may be encountering as a result of the pandemic. While that already should have been a priority before COVID-19, its importance cannot be overstated now.
Whether and to what extent COVID-19 becomes cover for corrupt practices remains to be seen. The virus's global spread is distracting and destabilizing, and it creates the type of conditions where misconduct can thrive. Companies will be best served through this trying time by protecting the well-being of their compliance policies and procedures.
And although companies may need to adjust existing practices to account for the challenges posed by COVID-19, any adjustments must assist in accomplishing the same ultimate aim — they should not eliminate a specifically tailored compliance control in favor of expediency. If and when misconduct does come to the attention of regulators, the outcome may well turn on whether a company's compliance program was agile enough to meet and respond to these challenges.
Isabelle De Smedt and Mark Knights are partners, and Michael Strauss is an associate at Nixon Peabody LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs at 9 (April 2019).
[2] Id.
[3] One anecdotal example we hear time and again that helps demonstrate why on-site risk assessments and internal investigations are so important is the instance when corruption-related misconduct happens while such an assessment or investigation is underway; see also supra n.1 at 2 (advising prosecutors to assess whether companies have specifically analyzed the risks posed by the worldwide "location of [their] operations.").
[4] See supra n.1 at 5.
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