ILMA Compoundings April 2017 - 14

INDUSTRY RUNDOWN

International Insight
New DOJ Corporate Compliance
Guidance: Insight and Message
By James Eggenschwiler
On Feb. 8, the U.S. Department of Justice (DOJ) published
an essentially unannounced guidance document designed
to provide a realistic view of how its scrutiny will unfold
when it pursues corporate failures in compliance with
federal laws. Any federal laws. The eight-page monograph
covers 11 different topics in a seemingly repetitive style, and
at first reading by the uninitiated might very well produce
a yawn sooner than any other reaction. Buried within its
simplicity, however, is a valuable pre-investigation roadmap that warns businesses that DOJ expects businesses
(regardless of size) to expend considerable thought and
resources to design and maintain highly risk-responsive
compliance programs.
This guidance is intended to apply generally, but its impact
is especially significant (and aimed) in the areas of denied
party, import/export, export controls (including third-party
compliance) and anti-bribery law compliance. This is significantly due to the less concisely defined standard of care needed to ensure compliant behavior. In these aspects of corporate
life, the prohibition is end-result oriented, but the cause of
a particular infraction can take many forms and include unexpected players. The sheer breadth of activity related to the
end requirement can be staggering. Controlling the end result
requires controlling activity that contributes both directly and
indirectly to the prohibited outcome.
PRIOR SIGNALS
DOJ's approach is not new. Many of the topics included
have long been part of its enforcement mindset. The newly
published guidance itself draws from several pre-existing
sources, including the "Principles of Federal Prosecution of
Business Organizations" in the U.S. Attorney's Manual, U.S.
Sentencing Guidelines and DOJ Fraud Section corporate
resolution agreements, among others.
The more finely tuned approach to inquiry and evidence
gathering, though, began in 2015 with the addition of Hui
Chen as the DOJ's full-time compliance expert. Chen hails
from the trenches of corporate compliance in the private

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APRIL 2017

| COMPOUNDINGS | ILMA.ORG

sector and now assists federal prosecutors with development
of evaluation benchmarks that measure the effectiveness of
compliance programs and remediation measures.
Despite its benign appearance, the new guidance carries
Chen's fingerprints. In February 2016, she announced
her ambition to raise the level of corporate compliance to
a point where programs will "demonstrate tangible and
operational shared commitment from the leadership and all
stakeholders." The guidance does not provide direct instruction, but instead reveals the priorities and scope associated
with Chen's ambition through its 119 questions that are
intended to reflect investigative reality.
SALIENT FOCUS: TANGIBLE AND MEASURED
Space here does not allow for a thorough discussion of the
new guidance. More will follow in future articles. Let's start
where the spear is sharpest and most pointed: how the compliance measures actually succeed, and how weak spots have
been thoughtfully improved. If not obvious, this marks a
radical departure from the traditional notions in many facets
of the business community when it comes to denied party,
import, export controls and anti-bribery law compliance.
That is not to suggest that thoughtful and well-written compliance programs are seldom seen. The strongest point of
departure is that the majority are static and typically confirm
continued functionality (to the extent they are reviewed).
Few even attempt to measure effectiveness and impact.
The tangibility aspect applies in two distinct ways. At the
onset, it clarifies that compliance policies and related procedures must be tangible in their function and in their impact.
A policy without related procedures won't pass. Neither will
procedures that spawn activity without measurable impact.
For example, a policy requirement that all transaction
parties be screened for Denied Party status that is joined
to a procedure that all transaction parties be submitted by
Customer Service for inclusion in the screening database
will not meet DOJ's standard expressed by the guidance.
The process of screening, the quality of screening (appropri-
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ILMA Compoundings April 2017

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