One of the areas articulated in the 2019 Guidance was around payments and payroll. For the both the compliance professional and the corporate payroll function, there is a significant role to play in the operationalization of a corporate compliance program. The Evaluation of Corporate Compliance Programs – Guidance Document (2019 Guidance) was replete with references to payment and its critical nature to any best practices compliance program. This includes references to payments to foreign officials, payments to third parties and hiding bribes in payments to distributors.
The 2019 Guidance begins with an admonition to stop wasting time on low hanging fruit when there are much higher risks in your business operations. It stated: Risk-Tailored Resource Allocation – Does the company devote a disproportionate amount of time to policing low-risk areas instead of high-risk areas, such as questionable payments to third-party consultants, suspicious trading activity, or excessive discounts to resellers and distributors? Does the company give greater scrutiny, as warranted, to high-risk transactions (for instance, a large-dollar contract with a government agency in a high-risk country) than more modest and routine hospitality and entertainment? The 2019 Guidance then drills down into the payment and payroll system, stating: Appropriate Controls – How does the company ensure there is an appropriate business rationale for the use of third parties? If third parties were involved in the underlying misconduct, what was the business rationale for using those third parties? What mechanisms exist to ensure that the contract terms specifically describe the services to be performed, that the payment terms are appropriate, that the described contractual work is performed, and that compensation is commensurate with the services rendered?
Taken together, these questions may not seem particularly new, innovative, or even something different from what payroll currently does for an organization. However, the 2019 Guidance , clearly demonstrates the role of payroll in compliance. The 2019 Guidance requires that payroll not only form a part of any best practices compliance program, but when it comes to the specific subject matter expertise, payroll is on the front lines of any attempts to prevent, detect, and then remediate anti-corruption compliance violations.
Three key takeaways:
- Payroll can be a key prevent and detect control.
- The Evaluationspecified the tying of the corporate compliance function to the corporate payroll function.
- Offshore payments remain a key indicator for a red flag.