Tag: Venice

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Greetings and Felicitations

Compliance Lessons from Venice – Episode 3, How the Lion’s Mouth Informs Hotlines

Welcome to a short podcast series on doing compliance with a Venetian twist. This week, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. Over the next 3 episodes, we will consider going back to basics in your compliance regime, the use of incentives and consequences to drive a culture of compliance, and how the Lion’s Mouth informs your modern-day whistleblower program. In this concluding Episode 3, we look at how the historical governance of Venice informs modern compliance programs by looking at Venice’s prototype whistleblower program, the Lion’s Mouth.

In this episode, Tom highlights Venice’s early whistleblower systems, symbolized by the lion of St. Mark, and their implications for creating effective and trustworthy hotline programs. This series also offers best practices for setting up and maintaining robust hotline systems to ensure confidentiality, avoid retaliation, and comply with legal standards. You will draw valuable lessons from Venice’s rich history to enhance your organization’s compliance framework.

Key highlights:

  • Historical Context of Venice’s Whistleblower System
  • Best Practices for Hotline Reporting Systems
  • Additional Tips for Effective Hotline Implementation

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Blog

Compliance Lessons from Venice – Part 3: Straight from the Lion’s Mouth and Whistleblower Programs

In the final part of the Compliance Lessons from Venice series, we focus on one of Venice’s earliest tools for addressing misconduct: a reporting system predating modern whistleblower programs. Known as the Lion’s Mouth, this system encouraged citizens to report wrongdoing by placing written complaints in the mouths of lion-head statues stationed around the city. The symbolism is potent: Venice’s emblematic lion acted as a protector, allowing citizens to expose corruption and misconduct while contributing to the Republic’s stability. Check out the companion podcast series on the Compliance Podcast Network.

Today, a robust whistleblower program is one of the most essential components of a best-practices compliance program. The DOJ and SEC have clarified that effective compliance programs must include reliable, confidential, and trusted internal reporting mechanisms. Venice’s Lion’s Mouth reminds the modern-day compliance professional that encouraging transparency and protecting those who speak up has been crucial for centuries. In this blog post, we will explore some best practices for modern whistleblower hotlines and reporting mechanisms, along with insights from Venice’s historical approach.

Venice’s Lion’s Mouth: An Early Whistleblower System

The Lion’s Mouth of Venice functioned as an anonymous drop box where citizens could submit grievances and report misconduct. Initially designed to offer anonymity, this system later required that the complainant’s name be included, balancing confidentiality with accountability. Citizens could report fraud, bribery, and other forms of misconduct, trusting that their submissions would be considered seriously.

The modern equivalent of this system is the whistleblower hotline, an invaluable tool for compliance departments to detect and address issues early. Companies can foster a culture of openness and accountability by enabling employees and stakeholders to report suspicious or unethical behavior without fear of retaliation. This practice is essential for organizations subject to laws like the Foreign Corrupt Practices Act (FCPA), where transparency can mean the difference between compliance and liability.

Key Elements of an Effective Whistleblower Hotline

Building an effective whistleblower system means going beyond merely setting up a hotline. It is about creating a trusted channel that employees feel safe using, knowing their concerns will be handled with discretion and integrity. Here are seven best practices to establish or enhance your whistleblower program, inspired by the Lion’s Mouth and aligned with the DOJ’s most recent guidance from the 2020 FCPA Resource Guide, 2nd edition, and the recently released 2024 Evaluation of Corporate Compliance Programs(2024 ECCP). The 2024 ECCP states, “Another hallmark of a well-designed compliance program is the existence of an efficient and trusted mechanism by which employees can anonymously or confidentially report allegations of a breach of the company’s code of conduct, company policies, or suspected or actual misconduct.”

  • External Management of the Hotline

Many organizations find that outsourcing their hotline to a third party adds a layer of impartiality and anonymity. Employees are often more comfortable reporting through an externally managed system than an internal one. An external provider typically brings specialized expertise in handling confidential reports, ensuring compliance with local laws and regulations. This neutrality encourages employees to come forward with concerns, knowing the system is transparent and managed independently.

  • Detailed Information Collection

A hotline should support collecting detailed information from the first report to the resolution stage. By maintaining a consolidated record of each complaint, compliance teams can analyze data trends across departments, locations, and types of issues reported. This visibility helps the organization proactively identify and address potential risk areas, ensuring the compliance team has a complete, chronological view of each complaint to support thorough investigations and better decision-making.

  • Compliance with Data Retention Policies

With data privacy regulations such as GDPR, it is essential to ensure that all whistleblower reports adhere to the company’s data retention and privacy policies. Hotlines should offer secure, report-only access to data, ensuring that information is stored correctly and compliant with regulatory requirements. This reduces the risk of sensitive data breaches and ensures compliance teams can retrieve reports for future audits or legal inquiries.

  • Inspiring Employee Confidence in the Hotline

A hotline will be ineffective if employees lack confidence in it. Retaliation, or the perception of it, can quickly destroy trust in a whistleblower program. Employees should feel assured that they can report concerns without fear of retaliation and that their complaints will be handled fairly and objectively. The hotline should offer privacy, allowing employees to file reports from locations outside of their immediate workplace or chain of command. These features create an environment where employees feel safe and protected when reporting misconduct.

  • Support from Subject Matter Experts

A hotline is only as effective as the follow-up on each report. Once a complaint is entered, it’s crucial to ensure that subject matter experts or designated compliance officers address it promptly. Ignoring or delaying response times can damage trust in the hotline. Additionally, under the Dodd-Frank whistleblower provisions, there’s a short timeframe for internal resolution before an employee can seek benefits under the program, making prompt attention to complaints a legal and ethical priority.

  • Litigation Support and Document Retention Tools

A well-configured hotline should offer tools to meet the legal requirements for document retention and protect whistleblower submissions as attorney work product or under attorney-client privilege, if applicable. Implementing these legal protections within the hotline system mitigates potential legal risks and strengthens the organization’s ability to defend its actions should litigation arise. Outsourcing these functionalities to a third-party provider can save costs and ensure compliance with all necessary legal protections.

  • Direct and Transparent Communication with Whistleblowers

Employees need to feel their voices are heard at the highest levels of the company. A hotline that allows for direct, private, and anonymous communication with compliance officers gives employees confidence that their concerns are receiving appropriate attention. This visibility signals that the organization values transparency and accountability, even when uncomfortable. Providing employees with status updates on their reports can also reinforce trust in the system.

Additional Tips for Maintaining an Effective Whistleblower Program

Building a whistleblower program that employees trust requires ongoing effort. Here are a few additional considerations for making the program effective and trusted across your organization:

  • Publicize the Hotline. Ensure all employees know the hotline’s existence, how to use it, and the protections in place. This can be achieved through regular training, informational posters, and reminders from senior management.
  • Encourage Reporting Without Fear of Retaliation. It’s crucial to communicate a zero-tolerance retaliation policy and enforce it when necessary. When employees see that the company protects and respects whistleblowers, they’re more likely to trust the system.
  • Analyze and Act on Data Trends. The absence of certain reports may indicate areas where employees feel unsafe or unwilling to report. Use hotline data to understand the company’s culture and identify areas where additional support or training may be needed.

Lessons from Venice’s Lion’s Mouth for Today’s Compliance Programs

The Lion’s Mouth system exemplifies the importance of giving citizens, whether in Venice or within a modern corporation, a way to report misconduct. Venice’s willingness to create a system where concerns could be voiced without fear of reprisal, while imperfect, reflects an early understanding of the importance of accountability and transparency. Today, we see this principle in the FCPA’s guidance and the DOJ’s endorsement of anonymous reporting mechanisms as part of effective compliance programs.

In designing an effective whistleblower program, compliance professionals should remember that it’s not just about setting up a hotline but building trust. An effective system enables employees to raise concerns in a protected, confidential, and responsive environment, contributing to a culture where transparency and integrity are valued and protected.

Honoring Venice’s Legacy in Modern Whistleblower Programs

As we close out our series on compliance lessons from Venice, it is fascinating to reflect on how this unique city-state has influenced governance, law, and compliance even today. The Lion’s Mouth may have been a primitive mechanism by today’s standards, but its spirit lives on in the whistleblower hotlines that empower employees to report wrongdoing and hold their organizations accountable.

By providing a trusted platform for employees to raise concerns, compliance professionals can create a culture where doing the right thing is supported and valued. The message is clear: just as Venice’s Lion symbolized protection and justice, a well-constructed whistleblower system should stand as a testament to an organization’s commitment to ethics, transparency, and accountability.

Thank you for joining me in this special series on compliance lessons from Venice. These insights remind us that the best compliance practices are sometimes rooted in history and that we can learn from past innovations to create a safer, more ethical future.

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Greetings and Felicitations

Compliance Lessons from Venice – Episode 2, The Arsenale and Creating a Culture of Compliance

Welcome to a short podcast series on doing compliance with a Venetian twist. This week, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. Over the next 3 episodes, we will consider going back to basics in your compliance regime, the use of incentives and consequences to drive a culture of compliance, and how the Lion’s Mouth informs your modern-day whistleblower program. In episode 2, we see how Venice used financial and non-financial incentives and consequence management to create a culture of compliance in Venice’s largest business operation, Arsenale.

The Arsenale district in Venice was known for its shipbuilding prowess from the 1200s to the 1400s. By examining how Venice managed its critical shipbuilding workforce through both incentives and discipline, Tom draws valuable parallels to modern corporate compliance programs. He highlights that Venice implemented job security and compensatory incentives to promote loyalty while enforcing strict non-compete clauses and severe punishments for leaking state secrets. Tom emphasizes the importance of balancing positive incentives with clear disciplinary actions, aligning this historical example with contemporary guidance from the DOJ and SEC. These principles support recognizing compliance efforts through promotions, bonuses, and acknowledgments, which can foster ethical behavior and improve overall organizational integrity.

Key highlights:

  • Arsenale and Incentivizing Compliance
  • Historical Context and Compliance Insights
  • Punishments and Incentives in Venice
  • Modern Compliance Practices

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Greetings and Felicitations

Compliance Lessons from Venice – Episode 1, Doing Compliance the Old Fashioned Way

Welcome to a short podcast series on doing compliance with a Venetian twist. This week, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. Over the next 3 episodes, we will delve into the fundamentals of your compliance regime, explore the use of incentives and consequences to foster a culture of compliance, and explore how the Lion’s Mouth influences your contemporary whistleblower program. In episode 1, we explore the timeless methods of Venice’s construction as a metaphor for effective compliance programs.

Tom looks at some of the essential requirements laid out by the DOJ and SEC for a functioning compliance department, emphasizing the importance of having adequate resources, headcount, and expertise to address compliance issues promptly. Drawing parallels with Venice’s use of a block-and-tackle pulley system, Fox underlines that sometimes old-fashioned methods can effectively meet modern compliance needs. Join us in episode two as we discuss the Arsenale and how to incentivize compliance in corporate culture.

Key highlights:

  • The Importance of Compliance Resources
  • Centralized Assistance and Guidance
  • Expertise and Availability in Compliance

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Blog

Compliance Lessons from Venice – Part 1: Doing It the Old-Fashioned Way

Welcome to a journey through compliance with a Venetian twist. Paired with the podcast series Compliance Lessons from Venice, running this week on the Compliance Podcast Network, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. In this first part, we explore the importance of staying grounded in the fundamentals and, as Venice shows us, the value of “doing it the old-fashioned way.”

Lessons from Venice’s Historic Construction

One of Venice’s unique characteristics is its resistance to change. The city is seemingly untouched by the fast-paced innovations of the 21st century. Just as Venice has retained its unique charm, with materials brought in via boats and moved through a basic block-and-tackle pulley system, a compliance program requires a solid, reliable foundation. There is no cutting corners or relying solely on the latest technology; it’s about creating structures that work effectively within the constraints of the environment.

Look at Venice’s construction methods. They may seem archaic, with building materials transported by boat and lifted by hand to upper floors because there’s no room for cranes or heavy machinery. Yet, they work. And just as Venice requires time-tested systems to manage its challenges, compliance professionals must remember that the most effective compliance programs start with well-resourced, accessible basics.

The DOJ’s Emphasis on Resources and Accessibility

The DOJ echoed similar values when outlining the foundational elements of effective compliance in the 2020 FCPA Resource Guide, 2nd edition, and the recently released 2024 Evaluation of Corporate Compliance Programs (2024 ECCP). Compliance isn’t about building an impenetrable wall of policies and procedures. Instead, it’s about creating a support structure that employees can rely on to address their needs and clarify their doubts.

In 2012, in the Pfizer Deferred Prosecution Agreement (DPA) and Enhanced Compliance Obligations, the DOJ highlighted the need for a compliance department to maintain “significant resources” dedicated to its anti-corruption and ethics functions. In practice, this means having policies in place and ensuring these policies are actively implemented and that the compliance department remains a resource employees can turn to for guidance and clarity. Likewise, the DOJ’s original FCPA Resource Guide from 2012 emphasized the importance of having systems that foster compliance and a centralized function that employees can contact when questions arise.

Venice teaches us that the old-fashioned way, ensuring accessibility and resource allocation, may seem basic, but it is also foundational. Every organization, no matter its size, needs people dedicated to compliance who are both available and empowered to respond to inquiries and provide guidance. The 2024 ECCP is clear that headcount matters, stating that a compliance program should have “sufficient resources, namely, staff to undertake the requisite auditing, documentation, and analysis effectively.” If your compliance function lacks adequate staffing, your program’s integrity is compromised before it even starts.

Ensuring There is Someone to “Answer the Phone”

For compliance to work, there needs to be someone at the other end ready and able to “answer the phone.” This is not just a metaphor; it represents the importance of having an accessible and approachable compliance team that employees can contact for help. If your employees are uncertain about compliance requirements but can’t get an answer because the compliance department is understaffed or unresponsive, your organization risks creating a culture of indifference or confusion.

Mike Volkov, another veteran in the compliance field, often warns against a “Dr. No” compliance function, a department known for obstruction rather than support. If compliance professionals become unapproachable or unavailable, it creates an environment where employees may hesitate to seek guidance, increasing the risk of non-compliance. Just as Venice’s pulley systems rely on someone physically there to operate them, your compliance department needs people actively involved and available.

Consider this scenario: It is a Friday afternoon, and an employee urgently needs clarity on a compliance policy before engaging with a third-party vendor. If the compliance department is a ghost town, the employee is left to make judgment calls, risking misinterpretation and potential non-compliance. Ensuring availability isn’t just about headcount; it’s also about building an infrastructure of responsiveness so there’s always someone qualified and ready to help.

Building Compliance Expertise: Beyond Just Numbers

But more than simply answering the phone is required. The compliance function needs a knowledgeable team offering real-time, accurate, and practical guidance. The 2016 DOJ FCPA Pilot Program stressed the importance of expertise in the compliance function, and that has been brought forward in the 2024 ECCP, stating “those responsible for compliance [should] have: (1) sufficient qualifications, seniority,  and stature (both actual and perceived) within the organization”. Not only should compliance practitioners be present, but they must also possess the knowledge and understanding required to answer complex queries effectively.

Compliance professionals who need more expertise risk giving complete or correct advice. This lack of expertise in the compliance department can erode trust in the program and lead to risky decision-making. Sometimes, the basics are most easily overlooked. We may get caught up in strategic initiatives, technology, and risk assessments, but a compliance program can truly function with a well-staffed, knowledgeable team to implement the essentials.

Drawing from Venetian Basics for your Compliance Program

Venice’s construction methods may be basic, but they serve a purpose. Sometimes, simplicity works best, especially when it is supported by reliability and consistency. The same is true in compliance. A well-resourced, well-trained team that handles daily queries is far more effective than an elaborate system that leaves employees confused or unsupported.

Venice reminds us that while modernization and innovation are important, there is immense value in sticking to the basics. Your compliance program does not need to be flashy; it needs to be effective. Compliance means providing employees with clear policies, support when they have questions, and a well-organized system that encourages ethical decision-making.

Operating the Block-and-Tackle of Compliance

In the first episode of our “Compliance Lessons from Venice” series, we’ve seen how important it is to keep compliance programs grounded in accessible, practical foundations. Just as Venice depends on traditional, hand-operated pulleys to move building materials, compliance programs must rely on consistent human resources—dedicated professionals who are available, knowledgeable, and ready to answer questions.

Doing it the “old-fashioned way” isn’t about resisting change but creating a strong foundation. Compliance programs should be built with the latest innovations, practical, sustainable structures, and accessible resources. Sometimes, returning to these basics can be the most effective way to foster a compliant, ethical culture within an organization.

Join us in the next part of this series as we delve into lessons from Venice’s Arsenale. We will consider the role of culture in incentivizing compliance and ensuring employees are treated with respect. By looking at Venice’s enduring history, we can find timeless principles that strengthen the foundations of any effective compliance program.

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Sunday Book Review

Sunday Book Review: September 22, 2024, Books on Venice Edition

In the Sunday Book Review, Tom Fox considers books that would interest the compliance professional, the business executive, or anyone who might be curious. It could be books about business, compliance, history, leadership, current events, or anything else that might interest me.

In today’s edition of the Sunday Book Review, we look at the four books by on the City of Venice.

  1. The Lover of No Fixed Abode by Carlo Fruttero and Franco Lucentini
  2. Venice by Jan Morris
  3. Venice in Pictures By Martin Gayford
  4. Venice is a Fish by Tiziano Scarpa

 

Resources:

Five Best: Book on Venice in the WSJ

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Sunday Book Review

Sunday Book Review: August 4, 2024, Books on Venice Edition

In the Sunday Book Review, Tom Fox considers books that would interest the compliance professional, the business executive or anyone who might be curious.

It could be books about business, compliance, history, leadership, current events or anything else that might interest me.

In today’s edition of the Sunday Book Review, we look at three new books on Venice, the most magical city on earth.

  • Shylock’s Venice by Harry Freedman
  • A View of Venice by Kristen Love Huffman
  • Venice: The Remarkable History of the Lagoon City by Dennis Romano

For more information on Ethico and a free White Paper on ROI for your compliance program, click here.

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FCPA Compliance Report

Compliance Lessons from Venice – Into The Lion’s Mouth

In Part 3 of this special 3-episode series, we explore how Venice created the first modern hotline and whistleblower reporting system. Whistleblower and hotline reporting systems in compliance programs are crucial tools for organizations, providing a confidential platform for employees to report misconduct. Fox emphasizes the value of using an external hotline system, which offers an additional layer of anonymity and impartiality and can bring specialized expertise that may be difficult to match within an organization.

He also highlights the role of hotlines in collecting detailed information, which can provide greater insight into situations and help protect companies from accusations of negligence or wrongdoing. Fox underscores the need for hotlines to inspire employee confidence, offer on-demand support from subject matter experts, and provide in-built litigation support and avoidance tools. Join Tom Fox in this episode of the Compliance Lessons from Venice podcast to delve deeper into the significance of hotline reporting systems in compliance programs.

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Blog

How the Venetian Republic Invented the Modern Hotline-Into the Lion’s Mouth

It turns out that Venice invented the modern hotline reporting system with their Lion’s Mouth reporting protocol. The symbol of Venice is the Lion St. Mark. The use of this symbol has led to the maxim straight from the lion’s mouth. This adage came because the Republic of Venice had its own hotline reporting system where citizens could report misconduct. A citizen could write down his concern on paper and literally put this message into the mouths of statues of lions’ heads placed around the city. The system was originally set up to be anonymous, but later changed to require that a citizen had to write down his name when submitting a message. I thought about this early form of anonymous reporting and then Hotline reporting and how it portended the hotline system used today to help companies identify compliance issues which might arise under the FCPA or other compliance laws.

Hotline reporting systems play a crucial role in modern compliance programs. They provide employees with a confidential and secure channel to report suspected misconduct or violations of company policies. In a recent episode of the podcast “Compliance Lessons from Venice,” hosted by Tom Fox, the importance and benefits of hotline reporting systems were discussed in detail.

One of the key factors emphasized in the podcast is the need for hotline systems to allow employees to report misconduct confidentially and without fear of retaliation. This is in line with the guidance provided in the FCPA Resource Guide, which states that an effective compliance program should include a mechanism for confidential reporting. By ensuring anonymity and protection, hotline reporting systems encourage employees to come forward with their concerns, leading to early detection and prevention of compliance issues.

One of the benefits of using external hotline systems, as highlighted by Tom Fox, is the increased employee trust. Employees tend to trust third-party providers more than internally maintained systems, as they perceive an extra layer of anonymity and impartiality. External providers also bring specialist expertise that may be difficult to match within an organization.

Another benefit of hotline reporting systems is the collection of detailed information. Information is power, and by gathering and recording information throughout the complaint’s lifecycle, companies gain greater insight into the situation. This allows for more effective protection against accusations of negligence or wrongdoing. Hotline systems should provide consolidated, real-time access to data across departments and locations, along with analytic capabilities to uncover trends and hotspots.

Data retention is another important factor to consider. Hotline systems should meet the company’s data retention policies, especially considering privacy regulations like GDPR. Having a secure and accessible report retention database ensures compliance with data protection requirements and avoids the need for complicated and costly arrangements for storing older reports.

To be effective, hotline reporting systems must inspire employee confidence. Retaliation or perceived unfairness can destroy the effectiveness of internal reporting and poison the company’s culture. Employees should feel that the hotline offers the highest levels of protection and anonymity. It should allow them to bring their concerns directly to someone outside the immediate chain of command or workplace environment, especially when the complaint involves a supervisor or superior. Providing the option to submit reports from offsite locations also enhances participation rates.

Hotline systems should offer on-demand support from subject matter experts. Opening lines of communication can bring new issues to the compliance group’s attention. It is crucial to follow up on reports in a timely manner and avoid sitting on complaints, as this can lead to employee frustration and potential legal risks.

Inbuilt litigation support and avoidance tools are also important features of hotline reporting systems. Compliance with legal requirements for document retention, attorney work product protections, and attorney-client privilege should be pre-configured in the system. Developing these tools in-house can be costly and expose the organization to unnecessary risks.

Direct communication with the persons filing a complaint is another aspect that enhances the effectiveness of hotline reporting systems. It signals to employees that their complaints are being heard at the highest level and reinforces their confidence in the process.

In addition to these key factors, the podcast episode also highlighted the importance of publicizing the hotline, training employees on how to use it, and ensuring no retaliation for its use. Regularly reviewing the data provided by the hotline and identifying any gaps is also crucial for making informed decisions and improving the compliance program.

Hotline reporting systems are essential components of modern compliance programs. They provide employees with a confidential and secure channel to report misconduct, leading to early detection and prevention of compliance issues. By ensuring anonymity, protection, and access to expert support, hotline reporting systems foster employee trust and contribute to a strong compliance culture within organizations. It turns out we do not have Sarbanes-Oxley to thank for the modern hotline system but the Republic of Vencie.

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FCPA Compliance Report

Compliance Lessons from Venice – Arsenale and Corporate Culture

In Part 2 of this special 3-part series, we continue our look at compliance lessons from Venice by reviewing the Arsenale and corporate culture. The Arsenale district in Venice, a significant maritime hub from the mid-1200s to mid-1400s, serves as a fascinating historical example of compliance program implementation. The district was renowned for its innovative shipbuilding techniques, which were zealously guarded as state secrets through strict regulations and severe punishments for violators.

Tom draws parallels between the practices of the Arsenale district and the guidance provided by the DOJ and SEC. He emphasizes the importance of a balanced approach to compliance, incorporating both incentives and discipline. Fox suggests that companies should provide job security, compensation for mishaps, and assistance to families as incentives for employees to remain loyal and compliant, while also using financial rewards, promotions, and acknowledgments as effective tools for driving corporate culture. Join Tom Fox on this episode of the Compliance Lessons from Venice podcast as he delves deeper into the lessons that can be learned from the Arsenale district’s historical example.