FCPA Compliance and Ethics Blog

August 29, 2012

NYPD Community Policing as Model for Your FCPA Compliance Program

For those of you who do not know Scott Moritz, you should take an opportunity to do so. I first met Moritz (virtually) through his article in the FCPA Blog, entitled “Risk-Based Compliance”. In this post, Moritz looked at the language of Opinion Release 08-02 (the “Halliburton Opinion Release”) in the context of the risk based approach of which the Department of Justice (DOJ) approved Halliburton’s proposed acquisition of Expro. These risk based concepts were used by the UK Financial Services Authority (FSA) in its January, 2009, settlement with Aon. Moritz is a retired FBI special agent, with over 25 years of complex investigative, forensic accounting, regulatory compliance and law enforcement experience. He is now a Managing Director for Global Investigations & Compliance at Navigant Consulting.

I have had the opportunity to speak with Moritz on a couple of webinars, jointly author papers with him and hear him speak at leading Foreign Corrupt Practices Act (FCPA) conferences. I can assure you that he knows his stuff. Recently Moritz published yet another piece in his continuing education for the rest of us compliance practitioners in the area of risk based assessments. In an article entitled “Walking a Beat to Reduce Corruption”, Moritz analogized  “the concept of community policing that has been used to reduce crime in many major cities across the world” in his innovative approach of “a growing corporate culture of mutual transparency that is having a very positive effect on overall awareness regarding anti-corruption” for third party due diligence under both the FCPA and UK Bribery Act.

Moritz talked about community policing in the context of new thinking which holds that more “successful third-party anti-corruption programs depend upon effective two-way communication between the company and its third parties.” He advocates that companies “engage directly with third parties to build trust” and to communicate a company’s ethical values to both those third parties in its Sale and Supply Chains. The starting point for any trust is communications. He believes that for a compliance program to be truly effective, “it must create communication channels between compliance, its internal clients within the organization and the third parties whose actions could lead to corruption liability.” This communication should begin by making a company’s key employees, whose responsibilities include engagement with third parties i.e. business sponsors, “to the potential risks of these commercial relationships, how to recognize them, what they may mean in terms of their continuing compliance obligations and how to convey this information to the third parties in a way that is not construed to be offensive in any way.”

One of the most important roles of these business sponsors is to take the message of compliance to the company’s third party representatives. Many companies will have this first message be the company’s FCPA compliance questionnaire but Moritz advocates it is “the business sponsor’s responsibility to explain the company’s third-party anti-corruption program, the rationale behind it, to emphasize the mutual benefits of the relationship and to serve as the company liaison going forward. That initial conversation should also highlight the fact that the vast majority of such steps result in a strengthening of the relationship between the company and its third parties.”

This business sponsor should stress at least three key factors. The first is that the company lives by its anti-corruption values and those are embedded in its anti-corruption, FCPA Compliance Program and the questionnaire is a necessary part of that Compliance Program. Second, that your company’s Compliance Program is similar “to those in place at an increased number of organizations and it would be reasonable to expect it to be part of the process whenever their company engages with a global company.” Third, that by asking for what may seem as unusually sensitive information, it is not a lack of trust but that the request “actually signals the importance of the relationship and the company’s willingness to make a substantial investment in it to ensure that any issues that may be out there are put to rest at the outset thereby eliminating any future barriers to the relationship between the parties.” Concluding this section Moritz opines that by “Spending a fair amount of time setting the tone will provide a solid foundation for the relationship going forward.”

So how does this relate to a community policing program? At least as the theory is practiced by the New York Police Department (NYPD) it is based upon the precept of the “broken window theory” whereby if a window is allowed to be broken and stay broken it sends a signal that no one in the neighborhood cares about crime and this in turn leads to more crime. The NYPD took to having more foot patrols so that the officers could build trust in the neighborhoods which they were assigned, rather than driving around in squad cars. This signaled to the community that the police cared and many neighborhoods responded with actions, such as fixing broken windows, which showed they cared as well.

Moritz concludes his article by noting that “business sponsors act as the cops on your beat”. Just as community policing fosters two-way communication between the NYPD and the community; the business sponsor can effectively take the place of these police officers who are walking a beat in a community. The “business sponsors are on the front lines of your anti-corruption program building long-term relationships that are critically important components of your anti-corruption program and your commercial success as a whole.”

I found the Moritz piece quite interesting and continued his long line of thoughtful, best practices and leading edge commentary. I would add that a key is the business sponsor, your selection and training of this employee is a critical element. I commend the full Moritz piece to you.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

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