Day: January 29, 2024

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31 Days to More Effective Compliance Programs

31 Days to a More Effective Compliance Program: Day 29 – Strategic Considerations for Implementing AI in Compliance

Implementing AI in compliance requires strategic considerations and decision-making. Understanding the impact of AI, maintaining an inventory of tools, considering cost efficiency and risk avoidance, involving all business sectors, and utilizing AI for better data usage are key factors to consider. Balancing exploration and rules, as well as selecting the right AI tools, are challenges that need to be addressed. By carefully navigating these considerations and challenges, companies can leverage AI to enhance their compliance programs and stay ahead in an ever-evolving regulatory landscape.

 Three key takeaways:

1. What are the key factors that impact these strategic considerations for implementing AI in compliance?

2. Compliance professionals need to stay updated with the latest AI developments and trends, which requires continuous learning and keeping abreast of industry news and insights.

3. Understanding the impact of AI, maintaining an inventory of tools, considering cost efficiency and risk avoidance, involving all business sectors, and utilizing AI for better data usage are key factors to consider.

For more information on Ethico and a free White Paper on top compliance issues in 2024, click here.

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Adventures in Compliance

The Return of Sherlock Holmes – Leadership Lessons from The Empty House

Welcome to a review of all the Sherlock Holmes stories that are collected in the work “The Return of Sherlock Holmes.” It is a collection of thirteen detective stories written by Sir Arthur Conan Doyle, marking the reappearance of the brilliant detective Sherlock Holmes after his apparent death in “The Final Problem.” The collection spans various intriguing cases and mysteries that Holmes and his loyal friend Dr. John Watson tackle. Today we take up the Adventure of the Empty Room and mine it for leadership traits for the CCO and compliance professional.

In the world of compliance, where ethical standards are of utmost importance, there are valuable lessons to be learned from the iconic detective Sherlock Holmes. In an episode of the podcast “Adventures in Compliance,” host Tom Fox explores the principles embodied by Holmes in the story “The Final Problem” and how they can serve as a guide for compliance professionals. “The Final Problem” features Holmes’ continued confrontation with his arch-nemesis, Moriarty, through Moriarty’s acolyte, Colonel Sebastian Moran. It showcases Holmes’ continuous learning, persistence, adaptability, attention to detail, and teamwork. These principles can be applied by compliance professionals to maintain ethical and legal standards in their organizations. Join Tom Fox in this episode of The Adventures in Compliance as he delves deeper into how the methods of Sherlock Holmes can be applied to uphold ethical standards in the world of compliance.

 

Key Leadership Traits from Sherlock Holmes for the Compliance Professional

  1. Adaptability.
  2. Problem-Solving.
  3. Attention to detail.
  4. Persistence.
  5. Teamwork.
  6. Leadership Presence.
  7. Continual Learning.

Resources:

The New Annotated Sherlock Holmes

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All Things Investigations

All Things Investigations – Mike DeBernardis on The SAP Enforcement Action

Welcome to the Hughes Hubbard Anti-Corruption & Internal Investigations Practice Group’s podcast, All Things Investigation. In this podcast, I was joined by HughesHubbardReed partner Mike DeBernardis to discuss the recently announced FCPA enforcement action involving SAP.

Mike DeBernardis is a seasoned expert in the field of FCPA enforcement, with a specific focus on SAP enforcement action and the critical role of compliance programs. Drawing from his extensive knowledge of corruption schemes in various countries and the role of third-party intermediaries in these activities, DeBernardis views the SAP enforcement action as a pivotal case study that underscores the importance of robust compliance programs and proactive remedial actions. He commends SAP for their significant investment in their compliance program and their willingness to alter their business practices, such as severing certain third-party relationships and high-risk conduct. DeBernardis believes these actions reflect a commitment to business integrity and serve as a valuable lesson for companies navigating complex investigations. Join Tom Fox and Mike DeBernardis as they delve deeper into this topic on this episode of All Things Investigations.

Key Highlights:

  • SAP’s Corrupt Third-Party Intermediaries and Enforcement Action
  • The Power of Cooperation and Remediation
  • DOJ’s Emphasis on Cooperation and Technology

Resources:

Hughes Hubbard & Reed website

Mike DeBernardis on LinkedIn

Categories
Corruption, Crime and Compliance

FCPA 2023 Year in Review

For the Justice Department and the SEC, 2023 was a slow year in FCPA enforcement. Despite promises of aggressive enforcement, the DOJ and the SEC failed to achieve increases in FCPA enforcement. The DOJ and the SEC issued no blockbuster enforcement actions or settlements. The SEC’s number of enforcement actions was steady and eclipsed its 2022 number by one. Equally significant was DOJ’s reduction in individual criminal prosecutions, thereby raising legitimate questions as to its ability to deliver on its promise of aggressive enforcement against individual FCPA violators. Despite a slower enforcement year, DOJ dedicated significant resources to the issuance of new policy statements encouraging voluntary disclosures, incentivizing clawbacks, elevating compliance programs, and offering new safe harbors for mergers and acquisitions.

In this episode, Michael Volkov reviews FCPA enforcement in 2023 and outlines new compliance trends in the anti-corruption field.

  • Clear Channel’s former Chinese subsidiary, Clear Media, was charged with bribery violations involving expensive gifts, entertainment, and travel given to influence contract renewal negotiations with Chinese government officials.
  • Clear Media engages in deceptive practices, such as falsely documenting payments to cleaning and maintenance companies to fund illegal payments. They used oral agreements, omitted gift recipients, and created false invoices and tax records to disguise payments through shell company intermediaries.
  • Senior executive complicity was another trend observed in the cases discussed. In some instances, senior executives were aware of the bribery schemes but either turned a blind eye or actively participated in the misconduct.
  • Internal audits conducted from 2012 to 2017 identified deficiencies, red flags, and indicators of bribery within Clear Channel. However, the company failed to take aggressive remedial actions to address these issues.
  • Clear Media resisted internal auditors and even provided false information, hindering the detection and resolution of bribery-related problems.
  • Despite these challenges, Clear Channel cooperated extensively with the investigation. They promptly shared relevant facts, produced necessary documents, and facilitated interviews with current and former employees.

Resources:

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group

Categories
FCPA Compliance Report

FCPA Compliance Report – Karen Woody on Officers Duty of Oversight

Welcome to the award-winning FCPA Compliance Report, the longest running podcast in compliance. In this episode, Tom Fox welcomes Professor Karen Woody and they take a deep dive into the Segway case from Delaware.

The bottom line is that proving bad faith and breaching the duty of oversight remains a challenging task. The conversation delved into the fiduciary duties of directors and officers, specifically the duty of care and the duty of loyalty. The duty of care requires fiduciaries to be well-informed about material information and exercise prudence in decision-making. On the other hand, the duty of loyalty necessitates undivided interests towards the corporation, with no conflicts of interest or self-dealing.

The duty of oversight, derived from the landmark Caremark case in 1996, is an extension of the duty of loyalty. It requires the establishment of information reporting systems and compliance programs to inform senior management and the board about potential issues. There are two prongs to bring a duty of oversight claim: the systems or information prong and the red flag prong. The former focuses on the absence or ineffectiveness of systems, while the latter deals with the conscious disregard of red flags.

However, proving bad faith and breaching the duty of oversight is a high bar to clear. The Caremark standard is challenging to meet, and most cases are dismissed on a motion to dismiss. The recent Segway case, following the McDonald’s case, indicated a pushback against lowering the bar for officers compared to directors. The interpretation of the duty of oversight remains stringent, emphasizing the need for strong evidence of bad faith.

The conversation concluded by acknowledging the importance of context and the specific facts of each case. While there has been a slow march of weakening the Caremark standard in some cases, the facts in those instances were particularly egregious. The recent cases discussed in the episode did not exhibit the same level of egregiousness, leading to a retraction and a reaffirmation of the high bar set by the Caremark standard.

Resources:

Karen Woody on LinkedIn

Tom Fox

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For more information on Ethico and a free White Paper on top compliance issues in 2024, click here.

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Daily Compliance News

Daily Compliance News: January 29, 2024 – The From Russia With Love Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee and listen to the Daily Compliance News. All from the Compliance Podcast Network. Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • Massive corruption scandal was uncovered in Ukraine.  (CNN)
  • Trump wants amped up trade war with China. (WaPo)
  • Removing friction in companies. (FT)
  • Avon is still doing business in Russia. (BBC)

For more information on Ethico and a free White Paper on top compliance issues in 2024, click here.

Categories
Blog

Strategic Considerations for Implementing AI in Compliance

What are some of the strategic considerations for implementing AI in compliance? What are the key factors that impact these strategic considerations for implementing AI in compliance, exploring the tradeoffs, challenges, and importance of considering the impact on decision-making.

The first consideration is understanding the impact of AI on the company. AI can affect a company in various ways, from internal operations to the products or services it sells. It is crucial for compliance professionals, CEOs, and compliance functions to take a high-level perspective and identify all the ways AI can impact their organization.

The second consideration is maintaining an inventory of all tools used. This can be challenging, especially when a company uses a mix of homegrown and commercially available tools. However, understanding the tools being used in different parts of the company is essential for fully comprehending the privacy and regulatory risks involved.

The third consideration is understanding the tools for cost efficiency and risk avoidance. Companies need to evaluate the value and usage of AI tools regularly. This evaluation helps in balancing the necessary provision of tools with rigorous data security and risk minimization practices. It also ensures cost efficiencies by avoiding redundant tools and optimizing their usage.

The fourth consideration is involving all business sectors in AI discussions. AI implementation should not be siloed within compliance or any specific department. It requires collaboration and participation from various stakeholders, including the board, operations, and compliance teams. Bringing everyone together in an AI working group or team allows for a holistic and strategic approach to AI implementation.

The fifth consideration is utilizing AI for better data usage in compliance. AI enables compliance professionals to analyze trends and patterns in data effectively. This goes beyond simple automation and moves towards predictive analytics. By leveraging AI, compliance programs can enhance their effectiveness and stay ahead of potential risks.

While implementing AI in compliance brings numerous benefits, there are tradeoffs and challenges to consider. One tradeoff is the need to balance exploration and innovation with rules and regulations. Companies should encourage employees to explore and experiment with AI tools but within a safe environment and with clear guidelines. This ensures that AI is used to benefit the company without causing harm.

Another challenge is the selection of AI tools. With the rapid pace of AI development, companies must carefully evaluate and choose the right tools. The wrong choice can lead to wasted resources and missed opportunities. It is crucial to consider factors such as reliability, controls, and the ability to retrieve data if needed.

The impact of AI implementation on compliance cannot be underestimated. Compliance professionals need to stay updated with the latest AI developments and trends. This requires continuous learning and keeping abreast of industry news and insights. Subscribing to relevant sources, such as AI-focused publications or news platforms, can help compliance professionals stay informed.

Implementing AI in compliance requires strategic considerations and decision-making. Understanding the impact of AI, maintaining an inventory of tools, considering cost efficiency and risk avoidance, involving all business sectors, and utilizing AI for better data usage are key factors to consider. Balancing exploration and rules, as well as selecting the right AI tools, are challenges that need to be addressed. By carefully navigating these considerations and challenges, companies can leverage AI to enhance their compliance programs and stay ahead in an ever-evolving regulatory landscape.