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Admit It – Your Compliance Program is Not Really “Effective”

Chief compliance officers are heroes.  They labor every day to advance a company’s ethics and compliance program without much recognition, with few resources, and with well-known gaps in their programs.

CCOs live by a credo – they risk-rank and prioritize all their activities (hopefully) on an ongoing basis.  It is a job similar to our cats and dogs chasing their own tails – they will never succeed and rest because once they have achieved something, there is much more work to do to ensure an evolving and successful program.

But let’s have a candid discussion and let’s all take a little truth serum.  I know it is hard and unfair in this era of fake news when dishonesty surrounds us almost every day, but let’s reserve a little space for an honest conversation.

Your compliance program does not meet the requirements for an “effective” program as set forth in the DOJ and OFAC guidance documents, nor does it satisfy best practices.  There, I said it.

I have been to numerous compliance conferences through the years and have been struck by the fact that company compliance officials regularly present their compliance program as just dandy – just a smooth operating machine.  Everyone knows in the room that such claims are not true and somehow we allow this to continue.  Why?

CCOs are fantastic motivators because they believe in what they do.  They know deep down they are living in a land of risks and gaps in their compliance programs.  But they are continuously, with optimism, seeking to advance their program, embrace new ideas and build more effective strategies.  For this, the compliance profession stands out for its leadership and perseverance.   

But that is not the important point that concerns me.  A CCO, however, has to be honest internally with key stakeholders.  Happy talk does not substitute for motivation and realistic appraisal of what needs to be done to advance a compliance program.

A CCO has to speak with honesty and clarity before its board or committee, senior management and key internal stakeholders.  Fudging on the optimistic side of the issues is dangerous and can have serious repercussions to a corporate culture and its commitment to integrity.

I have observed too many board and senior management presentations by CCOs that offer only happy talk – “we are moving forward,” “we are accomplishing our goals.”  The most important part of a presentation is about the weaknesses and priorities that a CCO communicates to leadership and the board.  Without honesty, real issues will not be tackled.

A CCO who brings to the table an honest assessment carries integrity in his/her words.  CCOs need to call it like they see it – when there are deficiencies, admit them, analyze them, and prioritize the mitigation strategies.  When resources are lacking, make sure to point that out.  When technology investment is needed, make it clear why. 

CCOs can easily be bullied by forces that oppose their need for resources, their mission and increased influence.  CCOs have to rise above this and should not alter their opinions just to keep everyone happy, and to avoid ruffling feathers.  A compliance program built on a CCO’s misstatements and omissions will only fail in the long-run.  Such a strategy not only threatens the company’s culture but could easily be a black mark on a CCO’s career.

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1 Response

  1. Mr. Volkov,

    I apologize for, once again, jumping into the fray about ethics & compliance issues. As you know, I have been trying to educate investors about corrupt practices in the 401k industry for almost a decade, and the end of corruption is nowhere in sight. Corruption is systemic in many corporations, and despite what the CCO guys (and gals) set as goals, they will never quite grab the brass ring.

    Regulator’s are playing by the same rules as the corrupt CEO’s and CFO’s.. In 2013, the EBSA produced a “fact sheet” on their Contributory Plans Criminal Project. Their goal was specific…”to combat criminal abuse of contributory benefit plans.” Known as 401k plans, these plan’s hold trillions of dollars in hard working employee’s plans for the future. EBSA claimed a commitment to punishing those who defraud these plans, and after 3 years of investigations, the EBSA was proud to announce they had “restored assets of $3,317,643.” Lunch money for most Corporate CEO’s. These numbers were reached after 623 investigations, 424 referrals to prosecutors, 141 indictments and 72 guilty pleas.

    The criminals included a vending business, a flooring company, a book-keeper in an insurance agency, a small technology company, an adult foster care business, a company that manufactured vacuum bags, a tool and die company, and a home improvement business.

    What amazes me is the fact that the EBSA was PROUD of their “hard earned” efforts… they likely spent millions more than the “restored,” but one known fact was missing… they missed the real target… and they missed it intentionally. Their prosecution bullets simply splattered the dirt around the target, which is what most regulators are paid to do. .

    The corporate giants you try to reach with your words of ethics and compliance fall on deaf ears, because enforcement doesn’t exist. Only when regulators prosecute real criminals and introduce them to prison food will your audience heed your message and elevate the CCO to an important status in their ethics and compliance program.