What compliance officers should know about their legal liability in the event of corruption investigations
Interview with Philippe Montigny, President of ETHIC Intelligence
Can compliance officers be questioned during a judicial investigation into an act of corruption?Several compliance officers have indeed been questioned by authorities during judicial investigations and have even been subjected to personal investigations. Authorities naturally try to determine what exactly the compliance officer was aware of in any given corruption allegation.
Whether at headquarter or subsidiary level, compliance officers commonly wonder what their judicial responsibilities would be in the event of an investigation into an alleged act of corruption.
To what extent are compliance officers legally liable for acts of corruption?
A compliance officer’s legal liability in a case of transnational corruption depends on the judicial provisions of each country involved as well as on the compliance officer’s hierarchical position within the company. Does the case involve the chief compliance officer or a compliance officer and, if the latter, is the individual responsible for compliance on a full-time or part-time basis? Without going into detail on legal proceedings or on the compliance officer’s position within the company’s hierarchy, it is still possible to identify critical situations a compliance officer could be confronted with and the decisions he will have to make in anticipation of a judicial investigation. Assuming that he or she was not involved in committing the corrupt act, a compliance officer can be confronted with three possible situations: (1) he/she considers that a potential corruption risk is not taken seriously enough; (2) he/she discovers an act of corruption committed in the past which all evidence suggests is over; (3) he/she discovers an act of corruption which is not over.
What should a Compliance Officer do if he/she considers that a potential risk for corruption is not taken seriously enough?
In the discharge of their function, compliance officers are confronted with corruption risk and it is their duty to ensure that the preventative measures in place are applied and respected. They may be called upon to give their opinion on, for example, the hiring of a sales agent. Compliance officers are rarely the ultimate decision makers, but they can provide input on whether or not the risk of corruption has been accurately evaluated and whether or not preventative measures are appropriately adapted to the risk. Compliance officers who find that their concerns are not heard or respected must bring the subject to the attention of their superiors and detail their concerns so that when a decision is taken it is done so with all the facts available.
What should a Compliance Officer do if he/she discovers a past case of corruption which all evidence suggests is over? What is his/her responsibility?
More than any other employee, the compliance officer must report any case of fraud to which he/she has been witness. He/she must immediately inform his/her company’s legal director. He/she must also seek to discover the conditions which made the fraud possible and propose improvements to anti-corruption procedures in order to preclude future occurrences of fraud. A compliance officer’s legal liability may be limited in the event that: *the company’s rules were respected; *he/she has undertaken due diligence whilst carrying out his/her mission and hasn’t been negligent or turned a blind eye.
But if the compliance officer discovers an act of corruption in process, what must he/she do? Could he/she be held liable for it?
It is indeed possible that, in the exercise of his/her functions, a compliance officer discovers an act of corruption either on the verge of being committed or during its commission; for example, at the time a payment is being made. This is, needless to say, the most critical situation as judicial authorities will seek to discover whether the compliance officer was involved in any way in the offense. In order to prove the contrary, it is imperative that the compliance officer take all measures in his/her power to stop the offense immediately. If he/she is unable to do so (which is more than likely) he/she must immediately alert superiors who are in a position to stop the offense. However, it is important to note that the compliance officer is responsible for more than just supplying information; he/she must also ensure that the offense has been stopped definitively. If involving his superiors is not effective, he/she is legally obligated to signal the problem to more senior levels within the company – up to, if necessary, the CEO and/or the audit committee.
Are compliance officers more legally exposed than other positions within the company?
No. The compliance officer holds a function which could appear legally exposed, but which, upon closer inspection, is no more exposed than any other position of responsibility. Other managers also risk being questioned for acts that were not committed by them per se, but which were committed under their hierarchical responsibility. In short, compliance officers will always be able to limit their liability by carrying out their functions appropriately and by carefully documenting their decisions and actions; this way, they will be in a position to explain their reasoning to authorities in the event of a corruption investigation.
23 January 2012
Contact Philippe Montigny: firstname.lastname@example.org
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