Evaluation of Corporate Compliance Programs
Yesterday at the Annual Ethics and Compliance Initiative Conference, Assistant Attorney General Brian A. Benczkowski delivered the keynote address to participants at the conference. During his speech, Assistant Attorney General Benczkowski announced the release of an updated version of the Department of Justice Criminal Division’s Evaluation of Corporate Compliance Programs. The updated version was created to “better harmonize the prior Fraud Section publication with other Department guidance and legal standards” said Bencskowski. He stressed that “[e]ffective compliance programs play a critical role in preventing misconduct, facilitating investigations, and informing fair resolutions.”
The guidance was announced as part of DOJ’s “broader efforts in training, hiring, and enforcement” to improve corporate conduct. Bencskowski noted that the DOJ cannot use a “rigid formula” to assess the effectiveness of corporate compliance programs because criminal investigations are all different. Instead of a strict formula, the updated guidance directs prosecutors to make an individualized determination of the compliance program in each case.
The guidance document directs prosecutors to consider three fundamental questions when evaluating a compliance program: (1) is the program well-designed; (2) is the program effectively implemented; and (3) does the compliance program actually work in practice.
In determining whether the program is well-designed, the guidance discusses the “hallmarks” of well—designed programs, which include, risk assessment, company policies and procedures, training and communications, confidential reporting structure and investigation process, third-party management, and mergers and acquisitions.
In determining whether the program is effectively implemented, the guidance advises that effectively implemented programs include a commitment by senior and middle management, autonomy and resources, and incentives and disciplinary measures.
Finally, in determine whether the compliance program works, the guidance directs prosecutors to evaluate whether the program has a capacity for improvement, periodic testing and review, investigation of misconduct, and analysis and remediation of underlying misconduct.
The full guidance document can be found here.
The purpose of the guidance is to give prosecutors more direction and to incorporate the rest of DOJ’s standards. Let’s see if it works!