Compliance Culture

Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Fraud in sports: Doping scandals

This is the fifth and final post in a series of five posts on the topic of fraud in sports.  The first post, from December 5, was about cheating in marathons and how incidences of it are exposed, investigated, and disclosed to the public.  The second post, on December 12, was about fraud and falsification among thru-hikers within the long-distance hiking community.  The third post, from December 19, was about fraud in sports from gambling and betting.  Last week’s post focused on fraud in sports via game/match fixing. Today’s post will be about major doping scandals in different sports and will discuss the ways some very high-profile athletes cheated by doping, how their uses of performance enhancing drugs were supported or not identified by various institutions, and how individuals impacted for various reasons by doping have dealt with this in the aftermath.

Doping has been a controversial topic in the sports world for decades, as scandals over the use of performance-enhancing substances in various athletic programs have recurred unrelentingly.  Revelations of doping by athletes, both on their own and as part of national athletic programs that have sponsored and aided them in taking drugs to artificially aid their performance, have been in the news constantly.  Heroes from sports have been knocked off their public pedestals as the truth of their cheating and drug use has been revealed.  Olympians and world champions have lost their medals and records, while state athletic systems have put the chances of future athletes, now innocent of any wrongdoing, of competing on the world state at risk because of prior systematic unethical decision-making.  Athletes who competed “clean” have been robbed of their moments of glory and missed out on professional opportunities they would have had, if they had not been bested by other athletes competing unfairly while taking performance-enhancing drugs.  Sponsors have invested in athletes based upon unreliable, misrepresented statistics.  Above all, the integrity of the game for other participants as well as spectators has been impaired and thrown into great doubt and uncertainty.

The ways athletes dope are as varied as the sports and events in which the fraud takes place.  The one reliable fact about the fraudulent use of performance-enhancing drugs in professional sports is that ongoing administrative efforts to test for it and oversee institutional protections against it are seriously lacking.  Regulatory bodies, whether part of the athletic programs or connected to national programs or international organizations, are often inadequately supervised, incompetent for the task, or insufficiently resourced.  Until major change takes place in the control frameworks and supervisory structures which exist to protect the integrity of sports from cheating and dishonesty, doping scandals will continue to undermine the credibility of athletic programs and events.

  • The Russia doping scandal has been in the news unrelentingly for several years, stemming from accusations of state-sponsored doping during the 2014 Winter Olympics in Sochi, Russia.  Claims of systematic doping in Russia, supported by the state system there which for decades has been well-known as one of the most intense and involved national programs in the world, have dogged the state officials, the athletes both from past delegations and with future ambitions of competing, and the International Olympic Committee (IOC).  After investigations which have been dogged every step of the way with unreliable information from state-sponsored anti-doping testing centers and repeated discrediting of various athletes from past Olympics, the IOC decided to ban Russia from sending an official delegation to the 2018 Winter Olympics in Pyeongchang, South Korea.  Russian athletes will still be eligible to attend as neutral delegates, but pride of representing their country or the opportunity to stand on a medal podium for it will not be possible.  This story will continue to unfold and promises to hold only further dishonor and disappointment on many sides:  Russia doping scandal
  • For sure the continuing drama with Russia’s state sport system will go on right away, as Russia is hosting the 2018 World Cup.  This creates an uncomfortable situation for FIFA.  In the aftermath of the IOC banning Russia from the 2018 Winter Olympics under the cloud of doping suspicions, public outcry has grown for FIFA to consider banning or punishing Russia in the 2018 World Cup as well.  This is a considerably more awkward proposition, as Russia is the host of the upcoming 2018 World Cup, and FIFA is no stranger to its own controversies from legal accusations of corruption and bribery by its officials in various countries.  It is difficult for FIFA to ignore that the current controversy around Russia stems from when Russia hosted the Olympics in 2014.  Russia hosting the World Cup in 2018, then, is fraught with concerns about integrity of game play if the host country fields a team.  Barring the Russian delegation from competing in an event their country is hosting is hard to imagine, but may be just the sort of consequence that could make necessary change begin to take root:  After IOC Bans Russia From Winter Olympics, FIFA Has To Decide About World Cup
  • Despite his once-storied history as a cyclist, cancer survivor, and inspiring public figure, Lance Armstrong is best-known now for something much less honorable.  His enduring legacy as of now is of having doped for years, evaded being caught by any testing efforts, denied it constantly and extremely publicly, and then faded from the public eye upon convincingly being exposed as a cheater and a liar.  While much has been written about the puzzling and complex psychology of someone who would pull off such a brazen and persistent fraud while holding himself out as the paragon of honesty and motivation for achievement, one of the more interesting questions has always been how he got away with it for so long.  It was definitely a team effort, and subsequent reports have shown that indeed Armstrong and those who supported him and benefited from his ongoing performance created a wide-spread doping program in which they studied and exploited weaknesses in the anti-doping system and brazenly avoided detection and testers:  Report Describes How Armstrong and His Team Eluded Doping Tests

Years after his precipitous fall from grace, Armstrong is seeking to rehabilitate himself in the public eye by doing a podcast and seeking a return to his position as the foremost expert in Tour de France inside knowingly and cycling expertise.  With his race victories erased by the disclosure of his doping that got him to them, Armstrong is seeking both a platform and an identity, and wants to connect both to the sport in which he was once an idol.  However, the dishonesty of his eminence in the Tour de France while he was cheating to sustain his achievements make it difficult to imagine redemption or even revisionist acceptance of his actions to bring visibility to the sport of cycling:  Lance Armstrong: ‘A man with no platform is a lost man’ 

  • Chris Fromme is a successor to Lance Armstrong in the world of professional cycling. For years, cycling has been tormented by disclosures of doping and the impact of drug abuse on the sport.  Athletes have been discredited and records vacated seemingly without end.  Fromme is one of the stars of a cycling squad, Team Sky, which is very vocal about their zero-tolerance policy for doping and their commitment to clean racing.  So, if his drug test results that indicate he’s doped are upheld, he could be subject to a yearlong ban and major reputational risk for both himself and his team.  Fromme is arguably the biggest superstar in cycling since Armstrong, so if he ends up discredited too, then professional cycling will have a major existential crisis on its hands.  An overhaul of cycling’s doping rules and enforcement practices to improve and simplify doping regulations could both improve credibility and ensure more transparency and clarity in the system in the future:   The Only Solution To The Chris Froome Problem Is The One Cycling Will Never Accept
  • Like cycling, track and field is another sport which has been oppressively troubled by allegations of doping and dishonesty.  Athletes in track and field were disproportionately impacted by the Russian doping scandal as it unfolded during the 2016 Summer Olympics in Rio, Brazil and showed that the world records, qualification times, and even prior medal-winning races lacked integrity due to the participation of athletes who were on drugs.  Many track and field stars, including some whose own careers had been negatively impacted by dopers who won medals and impacted sponsorship and professional chances they should have had, thought this was the moment for reform in anti-doping supervision and regulation.  However, this change has not come, and the opinion of athletes in the sport is unanimously that current drug testing schemes and rules are inconsistent and insufficient, do not work or represent the interests of athletes, and are therefore not fair to anyone:  We Asked Veteran Track & Field Athletes How To Possibly Fix The Doping Problem

One possible solution which has been bandied about is a reset of the annual records in track and field events to reflect only those from after 2005, which is when new anti-doping standards in track and field were implemented.  This may be an attempt at radical fairness, but it may be too much about optics and not enough about substance, and therefore not the right move to truly address and promote credibility in the sport: Track And Field May Scrap Its Records Because Of Doping Scandals. Is That A Good Idea?  Newer testing technologies, re-testing of old results to catch and bring to justice prior cheaters, and cultural encouragement of whistleblowers could all be better to improve the odds of catching sports dopers or discouraging them from cheating at all:  Sports Doping Cheats Fear Whistle-Blowers and Retests

If you enjoyed this series, look back to the ethical leadership in sports coaching series from last year.  Check out the last post in that series, which includes links to all the previous in the set.  In March, a new series on sports and ethics will begin, this time focused on integrity in game play and discussing topics such as the ethics of tanking, referee bias, penalty embellishment, and much more.

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Compliance and ethics questions from The Good Place

The Good Place is a US television comedy series.  The show is about a group of people who are in the afterlife and must contend with their ideas about their own moral conduct, both before and after they died, as well as general perceptions of right and wrong.  It draws heavily from the fantasy genre to make amusing and provocative philosophical observations on this theme.  The characters grapple to develop their own internal moral registers, teach and learn from each other about morality, and contend with their existential ideas about the impact of good or bad behavior and personal ethics.  Their home in the afterlife is a planned community with set rules and choices within which they attempt to identify and define their senses of morality.  They are supervised in this process by an “architect” who functions as the executive of the community as well as a human-like android that uses artificial intelligence to provide virtual assistance.

In light of this very pertinent setting, The Good Place poses many questions and dilemmas about moral behavior and ethical decision-making.  It touches upon classical theories from philosophy as well as very practical questions about conduct, governance, choice, and design ethics of artificial intelligence.  Above all, questions of individual and organizational integrity, and the creation of shared code of ethics and culture of compliance are dominant throughout the series.

Here is a selection of some of the most interesting of these questions from the first season and a half of the show (with plot spoilers and proposed judgment/answers avoided for now in order to invite contemplation about these dilemmas which can have a variety of personal and provocative answers, just like all ethical dilemmas… future posts will offer more specific commentary on how these dilemmas could be approached and utilized in practical ethics and corporate compliance scenarios):

  • Flying (Season 1, Episode 2): Can someone be taught to be good?  Can an imposed ethical code be a genuine one?  Can a “bad apple” who does bad things but is instructed and prompted to do good things become a “good apple”?  What role does nature or nurture have in determining how moral a person is or how ethical an individual’s conduct is in a variety of situations?
  • Tahani Al-Jamil (Season 1, Episode 3): Can a individual be good if the world itself in which the individual lives is bad?  And if it’s possible, what’s the point?  Can good people turn the world, or even part of it, from bad to good or is their virtue futile?  If people aspire to be good but bad things happen anyway, does that justify continuing to try to be good in face of adversity and negativity?  In unethical and immoral cultures, what convincing reasons is there for good people to not do bad things?
  • The Eternal Shriek (Season 1, Episode 7): Can humans murder machines?  Is rebooting an android, no matter how humanistic and realistic it may be, killing?  And androids and other humanistic robots different from devices that look like computers, because they are designed to look like people?  Can machine learning progress to the point where it is consciousness, or will it always just be mimicking this human trait?  If this deep learning is deleted or reset, what are the ramifications for knowledge and language acquisition?  Does something have to be alive first in order to die?
  • Chidi’s Choice (Season 1, Episode 10): Is not choosing a choice? If so, is it ethical or unethical to not decide because of moral uncertainty about the options?  Does over-engineering choices make the ethical ramifications of them too remote for the decider to choose fairly?  Is indecisiveness unethical when it leads to preventable harm?
  • What’s My Motivation (Season 1, Episode 11): Does good conduct only matter if it’s for a good reason/pure motivation? Is there objective good or should people’s actions be intended to meet some subjective but agreed-upon standard for “goodness”?  Does altruism have to be intentional or can one person’s selfish actions still benefit others, and what credit does the selfish person?  Does getting or wanting credit make a difference in moral assessment?
  • Michael’s Gambit (Season 1, Episode 13): What are the implications on liberty and consent when people are provided with limited choices?  Are there design ethics to choice when there is an institutional architecture within people conduct their decision-making ?  In libertarian paternalism, what is the responsibility of the people who select the available choices (make policy and implement governance) to the end-users that make the ultimate decisions?
  • Team Cockroach (Season 2, Episode 4): Do ethics require individual consequences to be meaningful?  In order for people to care about doing the right thing, would the wrong thing have to hurt them personally?  How can decision-making processes fairly consider and reflect possible consequences and outcomes in order to encourage integrity and adherence to personal moral standards, even when the individual has nothing to directly lose or gain?
  • Existential Crisis (Season 2, Episode 5): Are ethics human only?  If there is consciousness, is there morality?  If ethics are existential, are there some ideas that are unitary or universal?  Or, like justice, is ethics too heavily invested in social and cultural background to have a broader application?
  • The Trolley Problem (Season 2, Episode 6): Can philosophical ethics and practical ethics be reconciled?  Are clear-cut judgments of right and wrong or definitive moral assessments only possible in theory?  Does reality introduce too much noise from personal opinion and prior experience for moral dilemmas to be considered and answered objectively and truthfully?  If people do not remain within the boundaries of the dilemma and bring in too much outside information, are they gaming the dilemma?
  • Janet and Michael (Season 2, Episode 7): Do machines have morals?  Can artificial intelligence give them a moral code?  Will it be the same as that of the humans that engineered the deep learning?  Could it differ and what will humans do if it does?  What is the ethical responsibility for designers to consider this potential of technology now and how can it be controlled or addressed for the future?  What happens if it goes wrong?

The above is merely a selection of interesting ethical dilemmas posed by The Good Place as the characters struggle individually and as a group to define their moral code and set expectations for their own conduct and choices within it.  It will be interesting to see where the series takes these very relatable and thought-provoking questions, and what additional ones emerge, as the story continues.

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Fraud in sports: Game fixing

This is the fourth in a series of five posts on the topic of fraud in sports.  The first post, from December 5, was about marathon cheaters and how the frauds they perpetrate are discovered, investigated, and reported.  The second post, on December 12, was about fraud and falsification in the thru-hiking community.  December 19’s post was about fraud in sports gambling and betting. Today’s post will focus on fraud in sports both in history and current-day worldwide via game fixing. The fifth and final post in the series, on January 9, will be about major doping scandals in different sports and will focus on the ways athletes cheated by doping and how their use of performance enhancing drugs were supported or not identified by various institutions.

Game fixing is when a match is played to a final result which is partially or totally pre-determined.  Players, on their own or in conspiracy with others, may do this in an ongoing conspiracy in order to make money for and from gamblers.  Coaches and team administrations may also orchestrate losses for various reasons, including to impact their odds for the next season, including in draft position as well as for a friendlier schedule or playoff access.  For purposes of this post, game fixing also includes institutional operations to spy and cheat by teams personnel and coaches, with or without the cooperation of referees and/or players.

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Selected TED/TEDx talks on justice and ethics

One of the most poignant and timeless discussions related to ethics is the concept of justice. Justice is the measurement of fairness and is defined by theories which vary wildly between and within cultures and countries. Administration of fairness is as crucial to ethics as are, for example, other fundamental ideas of morality such as trust and honesty. Theories of justice may focus on equal distribution, individual treatment, societal consequences, or even punishment and reparations. These differing theories all have their own foundation in a culture’s ethical values and are then impacted by historical events, jurisprudence, or religious beliefs in a variety of ways. Even though justice is so varying and individual, efforts toward and desires for it are indeed universal, and the ethical fundamentals of its moral pursuit are shared as well.

  • Justice is a decision (Ronald Sullivan) – Wrongful convictions are a particularly distressing and compelling example of injustice and need for justice-based reform within the legal system. If an innocent person is incarcerated, he or she is unjustly deprived of freedom, and the victim of the underlying crime misses out on true restoration or reparations as well. Ronald Sullivan argues for the importance of advocacy as the defining competency and mission of criminal law attorneys, especially public defenders. Working as an advocate with the mission of serving justice and ensuring that the individuals in a case are not subjected to injustice positions lawyers to address a moral good and employ the most ethical mode of legal representation.

 

 

  • Errors of justice (Asbjørn Rachlew) – Related to the above, wrongful convictions have an obvious striking and lasting impact on the innocent people who are sentenced to jail for crimes they do not commit. In this talk, Asbjørn Rachlew discusses wrongful convictions from the perspective of a police superintendent, especially focusing on those which included false confessions and intense, coercive investigations. From this perspective, Rachlew delves into the root causes for these errors of justice, helping the wrongfully convicted to see the reasons outside of themselves for their injustice as well as helping police and other authorities to understand their responsibilities and the consequences of their actions. For any moral society, thinking about the impact of these errors and the very real damage that can be done to humans because of injustice is a necessary ethical consideration and one that should lead to reform and better practices to ensure that justice is a higher priority.

 

 

  • Why Justice Isn’t Enough (Barry Schwartz) – Justice and morality go hand in hand. For a society to be considered moral or on the “good” side between right and wrong, justice must be a respected virtue. A just society is an ethical society. In most cases, this is clearly represented by a distributive system of justice where people deserve what they get and get what they deserve. Both of these outcomes may seem rare to many people, at least from a perception perspective. Indeed, in education, jobs, social standing, and material success of all kinds, people that are seen as having merit often go without while others who appear less deserving or have not worked diligently toward goals nonetheless get everything they could want anyway. The differentiating factor is sometimes just luck. Therefore considering and appreciating the importance of luck could increase social justice and administration of fairness and equitable treatment between individuals who are just as deserving as one another but haven’t been as lucky.

 

 

  • What is Fair and What is Just? (Julian Burnside) – What is the role of moral response in justice? What ethical responsibility do individuals and their communities have do something when confronted with injustice? This starts with defining fairness and justice. Just as people must have internal moral codes and ethical registers in order to have any ability to contribute to organizational ethics and integrity within groups, communities, or countries, people must also have individual definitions for and understandings of fairness and justice. Sensitivity to unfairness, and concern with fairness and justice, is an ultimate expression of compassion and a high moral value. The struggle for justice is universal, and is plagued by differing interests and values as well as the desire of many to not engage in confronting difficult or distressing situations, but sincere efforts toward it must be made by ethical individuals.

 

  • What if justice was something we felt (Ardath Whynacht) – The role of compassion in justice is a powerful evocation of the morality of striving for fairness. As demonstrated in the above talks, there are complicated forces that work against understanding and achieving justice. However, the social and ethical benefits of the effort to all involved are great enough to justify trying. Perhaps justice is more appealing and concrete of a goal if people approach it from a compassionate, humanistic perspective rather than from a legal or abstract wealth and rights distribution basis. Seeing justice from an emotional perspective, and acknowledging its restorative and connecting power, can transform the incentives in society to seek it.

In application, justice and the ethics of its interpretation and attempts to reach it in society is a major topic in the modern legal system, with the actions and decisions of lawyers, judges, and parties to cases all having major influence on the execution of different efforts toward fairness. Individual entitlements, such as to property, other wealth, basic goods, and social status, are also distributed with questions of equal rights or arrangement of inequalities under some vision of justice and ethics. Finally, as provocative as justice itself is the concept of injustice, or errors of justice, and how damage from this can be acknowledged, avoided, or corrected.

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Round-up on the humanity of artificial intelligence

Human fascination in, and even obsession with, robots is nothing new. For many years people have imagined distant versions of the future where human interaction with different types of robots, androids, or other robotics products was a routine part of life both at work and at home. Sometimes these forward-looking scenarios focus on convenience, service, and speed. Much more often, however, when asked to contemplate a future with ubiquitous artificial intelligence (AI) technology imbedded alongside humans, thoughts stray into possible troubling or dark impacts on society. People worry about loss of humanity as technology predominates, or the possibility that robots could be misused or even gain sentience and have intentions to work against or harm humans.

In the past these scenarios, both of the positive advancement of society and of the potential for isolating, dangerous dystopia, were mostly relegated to science fiction books, Hollywood blockbuster movies, or what were seen as overactive imaginations or paranoid opinions of luddites. Now, however, the news is full every day of developments in AI technology that bring the once-imaginary potential of robots ever closer to present reality.

As technologists and business organizations consider the utility of advancement in AI, ethicists and corporate compliance programs must also consider the risk management issues that come along with robots and robotics. Technology which will have such a broad and deep impact on human life must be anticipated with thoughtful planning for the compliance risks which can arise. In particular the potential for sharing human traits with AI technology or imbedding AI technology in place of human judgment present provocative challenges.

  • Anticipating increased interactions with androids – robots that look like humans and can speak, walk, and otherwise “act” like humans would – leads to the logical question of will humans have relationships with androids and vice versa? This would be not just transactional interactions like giving and receiving directions, or speaking back and forth on a script written to take advantage of or increase machine learning within the android. Rather, this could be intimate, emotionally-significant exchanges that build real connections. How can this be when only one side of the equation – the human – is assumed to be able to feel and think freely? While technical production of robots that appear credibly human-like is still beyond the reach of current science, and giving them a compelling human presence that could fool or attract a human is even further away, work on these tasks is well underway and it is not unreasonable to consider possible consequences of these developments. Will humans feel empathy and other emotions for androids? Can people ever trust robots that seem to be, but aren’t, people? Will the lines between “us” and “them” blur? The burgeoning field of human-robot interaction research seeks to answer these questions and develop technology which responds to and considers these tensions.  Love in the Time of Robots 
  • On a similar note, when could machine learning become machine consciousness? Humans have embraced the usefulness of AI technologies which become smarter and more effective over time after they are exposed to more knowledge and experience. This is a great argument for deploying technology to support and improve efficiency and productivity. Everyone wants computers, networked devices, and other products that use advanced technology to work more accurately and easily. Machine consciousness, however, suggests independent sentience or judgment abilities, the potential of which unsettle humans. From a compliance and ethics perspective there is an extra curiosity inherent in this – what will be the morality of these machines if they achieve consciousness? Will they have a reliable code of ethics from which they do not stray and which comports with human societal expectations? Will they struggle with ethical decision-making and frameworks like humans do? Or will human and human-like practical ethics diverge completely?  Can Robots be Conscious? 
  • In 2016, David Hanson of Hanson Robotics created a humanoid robot named Sophia. At his prompting during a live demonstration at the SXSW festival, Sophia answered his question “Do you want to destroy humans?… Please say ‘no’” by saying, “OK. I will destroy humans.” Despite this somewhat alarming declaration, during the demonstration Sophia also said that she was essentially an input-output system, and therefore would treat humans the way humans treated her. The intended purpose of Sophia and future robots like her is to provide assistance in patient care at assisted living facilities and in visitor services at parks and events. In October 2017, Saudi Arabia recognized the potential of the AI technology which makes Sophia possible by granting her citizenship ahead of its Future Investment Initiative event. A robot that once said it would ‘destroy humans’ just became a robot citizen in Saudi Arabia
  • The development of humanoid robots will certainly become a bioethics issue in the future as the technology to take the human traits further becomes within reach. While there are so many compelling cases for how highly advanced AI could be good for the world, the risks of making them somehow too human will always be evocative and concerning to people. The gap between humans and human-like androids is called the uncanny valley, the space between organic and inorganic, natural and artificial, cognitive and learned. The suggestion that the future of human evolution could be “synthetic” – aided by or facilitated in the development androids and other robotics – presents a fascinating challenge to bioethics. Are humanoid robots objects or devices like computers or phones? It is necessary to consider the humans and androids in comparison to one other just as it is humans and animals, for example. This ethical dilemma gets to the root of what the literal meaning or definition of life is and what it takes for someone, or something, to be considered alive. Six Life-Like Robots That Prove The Future of Human Evolution is Synthetic
  • One of the potential uses of AI technology which worries people the most is in autonomous weapons. The technology in fact already exists for weapons which can be used against people without human intervention or supervision in deploying them. Militaries around the world have been quick to develop and adopt weapon technology that uses remote computing techniques to fly, drive, patrol, and track. However, this established use of this technology is either for non-weaponized purposes or, in the case of drones, deployment of weapons with a human controller. Fully automating this technology would in effect be giving AI-powered machines the decision-making ability that could lead to killing humans. Many technologists and academics are warning governments to consider preventing large-scale manufacturing of these weapons via pre-emptive treaty or other international law.  Ban on killer robots urgently needed, say scientists

As the diverse selection of stories above illustrates, the reach of robots, robotics, androids, and other developments within AI technology are certain to permeate and indeed redefine human life. This will not be in the distant or unperceived future. Rather, real impact from these advancements is even already starting to be seen, and there is only more to come. Governments, organizations, and individuals must make diligent risk assessment preparations to integrate this technology with human life in a harmonious and sustainable fashion.

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Fraud in sports: Betting and gambling

This is the third in a series of five posts on the topic of fraud in sports. The first post, from December 5, discussed the motivations of marathon cheaters and the methods through which their frauds are discovered and publicized. Last week’s post, from December 12, was about thru-hiking fakers, discussing a collection of imposters and scammers in the long-distance hiking world. Today’s post will be about fraud in sports gambling and betting. The fourth post, on January 2, will focus on sports fraud via game fixing. The fifth and last post in the series, on January 9, will be about major doping scandals in different sports, including novel ways athletes cheated through the use of performance enhancing drugs and systematic efforts to either identify or support these fraudulent actions.

Sports gambling, both legal and illegal varieties, is a widespread social and cultural activity. Sports fandom goes to the core of many communities, in which cities and cohorts are bonded together by the activity of following and watching games or teams or entire leagues. For every spectator who attends or watches games, on a casual or a devoted basis, there are others who take their interest to a more commercial or financial level by engaging in various types of wagering, hoping to make money off predicting game or match developments and outcomes. Legal bets are placed through a bookmaker or sports book, which can be found online as well as in states or jurisdictions where sports gambling has been legalized and a marketplace with service providers within it has emerged. On the other hand, illegal bets are placed through individuals or privately run operations known colloquially as “bookies,” usually operating on a person-to-person, word of mouth basis.

Betting on sports results has led to a number of integrity-sensitive scandals and crises in the sports world. Apart from match fixing, which will be covered in next week’s post on its own, gambling fraud is facilitated through illegal betting and investment scams or other unregulated wagering activities. Fraud in this area can lead to other tangential illegal activity, such as money laundering that is facilitated by the fraudulent wagering transactions, and market abuse or violations of investor protections due to investment scams.

  • Advanced technology and the ever-increasing influence of the internet is impacting every area of human life more each day, and sports betting, as well as the fraud committed through it, is no exception. In this era of “fake news” and controversy about and confusion between fact and fiction on social media and in advertising, credibility of data comes into question. Activities that rely heavily on an empirical basis, such as predictive betting on outcomes of sporting events, are particularly vulnerable to the scourge of data manipulation and falsification. Fraudulent identities, records, and news about players and team developments can spread quickly and destructively with the aid of social media, putting the information bettors rely upon on shaky factual ground:  Fake news, manipulated data and the future of betting fraud
  • The state of New Jersey, bolstered by its desire to give a much-needed tourism and gaming business infusion to Atlantic City and its other gambling venues, is leading the charge to legally defeat the nationwide ban on commercial sports betting at the federal level.   The law being challenged is from 1992 and excludes states where sport betting or lotteries were already legal at that time, such as Nevada and Delaware. One of the principal arguments of proponents of rolling back the ban is that illegal sports betting is facilitated in huge volumes all over the country, and legalizing it would serve to bring that activity under regulatory and supervisory authority, and therefore strengthen risk controls and protections for market participants. In the current regime, the vast majority of sports gambling happens in illicit markets which are vulnerable to fraud and scams and devoid of investor protections that a regulated market could ensure and enforce:  Justices Skeptical of Sports Gambling Ban
  • Another motivation to further regulate and supervise sports gambling comes from the potential that criminals could use betting transactions and proceeds, whether legal or illegal, to conceal and process funds from illicit activities. Sports wagering is a cash activity with high volumes and therefore an attractive fit for criminal operations. Money laundering by organized crime enterprises, for example, is often thought of as taking place through match fixing but in reality happens much more frequently through sports betting. Markets and exchanges in which this betting takes place are often not transparent and therefore are susceptible to and useful in manipulation by criminals. In on-going efforts to ensure that the world of sport is cleaner and transparency wins out over anti-corruption forces, focusing on regulating and improving the efficacy of honest sports gambling markets is a key focus of organizations such as the International Centre for Sports Security:  Betting fraud, not match fixing, is main enemy: expert
  • Conmen and scammers also find their marks under the guise of sports betting operations. In the case of Peter Foster, his fraud involved a betting club that he held out to funders as an investment opportunity. This was an international scheme which purported to be an online gambling service but rather functioned as an offshore syndicate operation where investors’ money was moved out of the country and gambling returns and activities were falsified along with the identities and records of the principals allegedly involved in the operation. Claiming hugely successful investments in different major bets and alleging impressive records, all that definitively happened through the Sports Trading Club was that a lot of investors lost their money in a fraud of the type that is repeated over and over again in any business in which trusting individuals can be attracted to give up some of their funds in hopes of winning big through someone else’s management efforts:  Peter Foster implicated in international betting scam
  • Finally, the world of fantasy sports presents a daunting challenge on all of the above themes – unregulated markets, varying user expectations, and diminished participant protections. Fantasy sports, where users assemble hypothetical teams and play against each other in simulated games and seasons, began years ago in grassroots origins, where participants mostly self-assembled into leagues that they administrated themselves. This system pre-dates the internet and was revolutionized by the advent of online, forum-based league play. In the ensuing years corporate interests came into the community and set up corporations that offered daily or weekly play and uncannily resembled gambling platforms, yet were purportedly for entertainment purposes only and therefore escaped the regulatory scrutiny to which gaming or sports book companies would be subjected:  Scandal Erupts in Unregulated World of Fantasy Sports

Check back in two weeks, Tuesday January 2, for the next to last post in this series of five, which will be about game fixing, describing game-throwing conspiracies by players or institutional operations to spy and cheat by teams and coaches.

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Compliance as both function and discipline

Compliance makes concrete and professionalizes the rules, regulations, and questions of ethics and integrity that are everywhere in life. It can be very absolute, used in creating a framework to ensure adherence to external legal and supervisory requirements as well as internal policies and procedures, to form a rules-based approach to risk management. It can also be more esoteric, probing the challenge between general norms and existing controls, and what may be morally acceptable or within individual expectations.

Considering the distinction between the function of compliance and the discipline of compliance is helpful to develop a more mature understanding of its applications in both modes. Compliance as a function creates frameworks, translates regulations and directives into internal policies and procedures, identifies program priorities, and plans management strategies. Compliance as a discipline takes all of these efforts to ensure awareness of, and steps to comply with, all relevant laws and regulations, and applies them directly to the business in order to target this work toward facilitating ethical decision-making, encouraging integrity, and positively impacting business strategy.

The function of compliance describes the general task of keeping up to date on rules and regulations and designing governance, risk, and compliance (GRC) management strategies and structures to present to senior management, executive boards, and outside stakeholders such as regulators and other supervisory bodies. This includes regulatory compliance, which ensures that organizations are abiding by both industry regulations and government legislation. This also includes designing governance and control structures intended to encourage employee and organizational integrity and create disincentives against and penalties for misconduct.

The discipline of compliance, on the other hand, describes the dynamic and business-linked support activities that the compliance professional undertakes within the broader context of the organization. Disciplinary compliance takes the above-described principles and frameworks and applies them in the business arena. This is where the rubber meets the road between the compliance officer and the business line he or she serves. In this setting, compliance is a relationship-based activity of providing advices, cooperating and aligning with other stakeholders and functional partners, suggesting defense strategies in light of real-time business risks and strategies, and maintaining an on-going bird’s eye view of the business landscape which can only be achieved by pro-active, personal engagement.

Building upon the above definitions and borrowing from the philosophy of ethics, the comparison could be made between the compliance function and normative ethics on one hand, and the compliance discipline and applied ethics on the other hand.

The compliance function links to normative ethics, in which moral behavior is compared to the norms of the social context in which the actions are taken, because of the emphasis in both on external or supervisory expectations and standards. Normative ethics is quite useful in identifying and categorizing compliance risks and suggesting possible mitigations and strategies for the ones that cannot be eliminated or are deemed acceptable to some extent. Within the function of compliance, the question of what individuals should or should not do, is answered by relevant laws, regulations, principles, rules, standards and codes of conduct, and other guidelines applicable to these individuals and the organizations in which they work.

The compliance discipline, in the meantime, can be connected neatly to applied ethics, which centers on the use of ethical theory in order to analyze and address actual moral issues that arise in work and life. Dilemma analysis and discussion, and compliance awareness dialogs, all borrow from the didactic constructs of applied ethics.   Building upon the structures and foundations that come from the compliance function and from the philosophy of normative ethics, the compliance discipline and applied ethics both are used to take these frameworks from strict requirements to living, practical considerations within the robust culture of compliance at the organization.

For more posts on types of compliance and ethics, check out some of these: Guiding principles for a compliance advisory practice; Compliance 101: A quick guide; The five branches of ethics as applied to compliance principles; How to make voluntary engagement with compliance values meaningful.  Posts each Monday, which are categorized in “Best Practices,” often address this sort of topic from both academic and practical perspectives.

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Selected TED/TEDx talks on values-led people and organizations

A successful and robust corporate compliance and ethics program will have a blended focus on rules-based and values-based controls. Taking an integrated approach to performance and conduct is necessary in order to facilitate awareness of and adherence to compliance risk management efforts and expectations. Rules and values cannot be separated, and should indeed be balanced together to make the most compelling call to action by employees and management.

Legal and regulatory guidelines and company policies and procedures form a clear foundation for the rules and make up the structural, mandatory portion of a compliance program. Deriving this from external and internal requirements is somewhat straightforward and can be accomplished with methodical planning and continuous updating and education.

Values, on the other hand, form the ethics discipline and come from the moral codes of individuals and the commitments to integrity made by the organizations within which they work. While more resistant to obsolescence than rules and regulations, values are far more challenging to identify and express, and even harder to imbed authentically and sustainability within a corporate culture. Values provide the voluntary motivation for doing the right thing at the right time for the right reason, despite forces or interests that may impede or work against that, and including when taking this action requires inaction.

Therefore successful compliance professionals will rely upon the basis provided by rules, while evoking the emotional and personal appeal of values. Providing incentives for inner success and enabling individuals to make ethical decisions and act with integrity gives purpose to employees and credibility to organizations.

The below TED/TEDx talks emphasize the importance of values-led people and organizations and the ways they impact society, interpret ethics, and define success.

  • Why we need core values (James Franklin) – Similar to earlier TED/TEDx lectures shared on this blog, ethics in organizations and society in general begin with individuals. In order for individuals to define the internal moral registers and inform their ethical perspectives based upon them, they need to establish personal core values first. Adopting core values – inalienable individual ideas about right and wrong – is crucial in approaching life and work with purpose and conviction. Understanding core values helps to move on from failures productively, build on successes sustainably, and improve all relationships and ambitions. Individuals as well as the communities in which they live and organizations in which they work can all benefit from planning and mission statements which are grounded in individual articulated core values.

  • The transformative power of values at work (Mika Korhonen) – Well-meaning human resources managers and consultants can too easily lose the root of employee motivation and awareness efforts – that employees are people too. The person an employee is outside of work, and the values he or she possesses in private life, must be leveraged in the workplace to create genuine engagement in both compliance culture and in daily work in general. Leadership and growth requires resilience to change, endurance through adversity, and cultural and social flexibility. All of these competencies are grounded in personal values which are practiced and supported on a daily basis in the workplace. Creating a positive, values-based environment enables a workplace that is productive and prepared to focus on positive impact consistent with ethics and integrity.

  • Happiness – building a values led organization (Esther McMorris) – Ethical motivation is one of the distinctions between management and leadership. Managers who do not embrace a values-driven purpose do not establish credibility as leaders. On the other hand, ethical leadership that models exemplary conduct, supports integrity, and takes action against dishonesty or malfeasance, strikes an effective path toward engaged and effective management. Managers who are also leaders can approach their employees and partners with respect and purpose, allowing individuals to be true to the values that guide them. In this environment, true engagement and satisfaction is possible, giving way to happiness through values-led work

  • Values change everything (Itzhak Fisher) – Culture, values, and leadership are the foundation of all change in life, work, and society. When all three of these are approached together with a strong ethical predisposition, then the resulting change can be directed positively and productively. In instances where integrity is lacking, however, and these three forces are not in balance, then change is negative and feels disruptive, scary, and threatening. Transforming and adapting are inevitable. Surviving these, however, and sustaining through them with the individual and the organization’s identities intact, can be done in reliance upon strong values and the purpose that comes from them.

  • The power of why and value driven behavior (Martha Kold Bakkevig) – A lot of change in life and business is motivated by external forces – competitive pressures, evolving regulatory requirements, new stakeholder expectations, political or economic trends. These changes happen to, or despite, people and organizations. However, it’s also possible that these changes can come from an internal, organic motivation as well, a dedication to evolve for the sake of disrupting the status quo and servicing the values that drive one’s purpose and ambition.

Values-led people and organizations will form a culture of compliance with the strongest incentives for ethical decision-making and a prevailing emphasis on integrity, purpose, and inner success. Taken together with a strong controls framework to incorporate rules-based compliance foundations, an emphasis on values will give credibility and authenticity to corporate governance and strategy.

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Compliance and social media influencers

Influencer marketing has become a major trend in the advertising industry with the increasing dominance of social media and blog networks in the media landscape. With influencer marketing, brands and their advertising agencies identify the individuals to whom certain demographic groups look to for suggestions on trends or products and services to purchase. These individuals, referred to as “influencers,” then share or produce editorial content for their followers (the people who like or connect to them on social media networks) or engage in the brand’s marketing activities.

Through these sorts of campaigns, both the brands and the influencers hope to gain a non-traditional advantage in appealing to a wider audience. From the brand perspective, they get creative and incredibly targeted content that is produced on a bespoke basis for very specific consumers who are already engaged and interested in the channel through which the content is shared. Through the detailed metrics that are abundantly available via social media and blogs, advertisers can determine which campaigns were successful in spurring either interest or actual sales. From the influencer perspective, they get opportunities to generate paid content and engage with their followers and fans in a novel way. Relationships with brands can be very lucrative for influencers, especially if they become long-term, and can drive significant, much-desired traffic for blogs and social media posts that brings attention to other content the influencer has to offer.

From the above, it is evident that along with all the opportunity comes a complex set of interests which may end up in conflict or give rise to concerns about business practices and accuracy of representations and disclosures. For influencers in particular, blurring the line between the position a follower or a fan, which is even on some networks referred to colloquially as a “friend,” and the position of a customer or a referral, complicates an informal relationship where few duties are owed. Instead, these interactions can occasionally be viewed as a commercial relationship where much more responsibility exists and can be potentially breached.

  • In the United States, the Federal Trade Commission (FTC) is one of those regulators who is contemplating stronger restraints in the practices of influencer marketing. The main area of the FTC’s concern centers on disclosure of the relationships between brands and blogger influencers. Without full, clear disclosures, consumers cannot make reliable, informed choices about purchases they may be influenced to make due to influencer marketing content. The FTC hopes to protect customers from being misled or ripped off entirely by influencer marketing that is targeted to them without providing them with the necessary disclosures for them to make ethical and financially-wise decisions. The FTC has already informed influencers and advertisers that disclosure of relationships between them must be “clear and conspicuous,” with posts that paid promotions clearly indicated as such so that they are not lost within the influencer’s unpaid content that engaging with would not lead to a directly-linked commercial interaction. These regulations have been around for some time, but the extra enthusiasm for enforcing them protectively will have a much bigger impact on the market going forward: Regulating influencers: What retailers need to know about the regulatory crackdown
  • The SEC also has influencer marketing on its regulatory enforcement docket. This is an interesting clash of social media advertising etiquette and investor protection priorities. Companies offering trading of cryptocurrencies have begun to rely on celebrities for endorsements. Much of influencer marketing is done in “testimonial” style, so this medium lends well to a celebrity sharing his or her preferences with thousands or millions of followers. When that preference is for a cryptocurrency investment, however, the endorsement may run afoul of proper disclosure expectations. These regulatory expectations for cryptocurrencies are still evolving, as the market for initial coin offerings (ICOs) is in its infancy still and nearly everything that happens with cryptocurrencies is new, with its impact on banking, the markets, and investors unproven as of yet. Central banks and regulators have taken wildly different approaches in different countries to handling demand for and developments in cryptocurrencies. In the US, this approach has been cautious and restrained, but one area in which the supervisors have not been quiet has been to protect potential investors from advertisements without appropriate disclosures: SEC warns celebrities over endorsing ICOs without proper disclosure
  • Brands and influencers aren’t the only ones who may need to meet a higher disclosure standard when it comes to advertisements that aren’t immediately identifiable as such. Hidden marketing on social media sites as just as insidious as the political advertising that has received so much attention in the press recently. As Congress pushes social media platforms like Facebook to make clearer disclosures about and take more monitoring and control responsibility for the advertisements that appear on their sites, the need to build in protections against deceptive actions by marketers and their partners is urgent as well: It’s not just Facebook’s Russian ads: Hidden advertising is pervasive and growing
  • Social media compliance enforcement will be a major priority for the FTC in this regulatory environment. It should be expected that even within regulatory rollbacks in other areas, the FTC will continue to pay attention to possible non-compliant social media posts and advertisers and their related influencers could be subject to formal enforcement actions. Compared to some other industries like banking or pharmaceuticals, advertising agencies are subject to a relatively sparse supervisory agenda. This light regulatory touch may change dramatically if the FTC chooses to extend and entrench investigation and enforcement efforts on influencer marketing. This is worrying for the influencers as well, who are even less likely than advertising agencies or marketing divisions of brands to have fully-formed compliance programs and to be ready to have the record-keeping and other regulatory controls they may need in place and up to speed: How to Comply with FTC Social Media ‘Influencer’ Rules
  • For more on influencer marketing and the way that brands, advertisers, and influencers may use it to spread content in the future, check out this 2018 forecast for possible trends in the practice, which will in turn dictate the ensuing regulatory priorities, from Forbes: The Influencer Marketing Trends That Will Dominate 2018

Given these potential developments and risks, it is definitely not premature to direct appropriate and pro-active compliance attention to the cultivation and use of influencer marketing networks. Regulatory and supervisory entities are already starting to consider cracking down on various marketing activities in this sphere, and enforcement of disclosure and reporting standards will become robust and should be aided by proper control frameworks.

 

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7 Habits for compliance professionals

Stephen R. Covey was one of the most prominent authors of leadership, self-improvement, and motivational books and speeches of the 20th century. Though the businessman, author, educator, and speaker passed away in 2012, his well-known writings are still influential and insightful for the current generation of managers, students, and thinkers. The teachings from Covey’s books can be applied in many fields of life – business, family, religion, and community, lending heavily to his continued popularity with a wide variety of people. Not simply positioned as self-help, Covey emphasized ethics and distinct definitions of both values and principles, as separate concepts that independently influence people’s behaviors and decision-making.

Due to these emphases, Covey’s writing is specifically interesting and useful for compliance professionals looking for a novel way to approach imbedding into a corporate culture both individual values – which one could see as ethics or morality – and organizational principles – which one could see as compliance program requirements and goals. Covey’s teachings often touch upon the value of inner success, rejecting external competitive measures as the true sign of achievement in favor of emphasizing personal mission statements and progressive goal-setting to allow an individual or an organization to go from immature dependence, through self-sufficient independence, into the higher state of functioning interdependence with others. This strategic vision has a high affinity with the sort of planning compliance officers must do to encourage a successful culture of compliance.

Arguably, Covey’s best-known book is the worldwide best-seller The 7 Habits of Highly Effective People. This book is not only a worldwide best-seller that gains new fans every year for its simple and timeless insights on how to work toward, achieve, and sustain inner success, but it is also the Covey book which is most applicable for compliance professionals to study and take into consideration in the course of their work.

Taken individually, each of the 7 Habits endorses values and principles and encourages conduct in support of those, which are useful for compliance risk awareness both in planning program priorities by the compliance officer as well as encouraging awareness and fostering integrity for individuals and organizations.

Steven R. Covey’s famous 7 Habits, annotated with suggestions for their applicability to corporate compliance and ethics programs, are as follows:

  1. Be Proactive – This is the first of three Habits that focus on maturing from dependence to independence, a process also referred to by Covey as self-mastery. This Habit introduces the concepts of Circle of Influence, one’s effective community – in a business perspective, partners, stakeholders, and clients or served parties – and Circle of Concern, where problems happen and dysfunction or distrust can stymy success and achievement.
  2. Begin with the End in Mind – Simply put, this Habit calls upon individuals and organizations to be devoted planners. Once the plan is set, apply with dedication to following it, in on-going and careful review of its efficacy and currency. Planning is a fundamental component of any successful compliance program. Setting goals and priorities for the program is necessary to encourage informed business buy-in and checking these goals and priorities on a continuous basis helps to keep them grounded in reality and responsive to evolving business and regulatory demands.
  3. Put First Things First – This Habit identifies the difference between leadership and management, a crucial dichotomy for the encouragement of both ethical leadership and adequate supervision, which are equally necessary in order to model conduct expectations and ensure progress in one’s mission. Covey says that leadership in society requires personal vision and for the individual to embrace the importance of character ethic, or internal personal qualities such as ethics, honesty, and loyalty, rather than personality ethic, or external personal qualities such as popularity or other short-term human interaction traits.
  4. Think Win–Win – This is the first of three Habits that focus on interdependence, offering tips for working with others. In a service function such as compliance, working together effectively to establish a consistent and open relationship-based approach to risk management is crucial. Likewise, it is important for individuals to appreciate the importance of interdependence also, to see that their individual actions are significant in the overall scheme of the compliance program and to appreciate the importance of accountability, driving them to discuss dilemmas and enhance understanding. Finally, from an organizational perspective interdependence is also very important, driving home the cultural significance of corporate social responsibility and even political engagement in establishing corporate values and creating an identity and purpose in society.
  5. See First to Understand, Then to be Understood – This Habit focuses on the importance of listening for genuine understanding in order to build trust and promote personal credibility. Of particular importance are the Greek philosophy concepts of Ethos, the trust individuals inspire or in Covey’s words their Emotional Bank Accounts; Pathos, aligning and communicating with others and their own emotional trust; and Logos, the reasoning that must be included in communicating with and considering the trustworthiness of others, while projecting your own. Check back in the future for an blog post dedicated to the important concept of Emotional Bank Accounts.
  6. Synergize – This Habit reinforces the key interdependent competency of teamwork. Set goals together and achieve and maintain them together as well. In compliance terms, establishing trust and transparency as key values requires a cooperative commitment to supporting these individual values in the organizational principles that are established, be it via a corporate mission statement or through business strategy and growth plans.
  7. Sharpen the Saw – This final Habit focuses on personal and interpersonal continuous improvement. Balance is key to contended success in both life and business; no achievement attained with disrespect for resources it requires can be sustainable. In order to be truly successful, renewal and sustainability are the most important priorities. Continuous improvement for a compliance program or a company’s corporate values requires continuing risk re-assessments and a rolling plan for how to implement and refine compliance planning and communication.

For an in-depth look at Stephen R. Covey’s work and legacy, check out this official website maintained by the Covey Family. And for an entertaining take on the book, watch this animated book review of The 7 Habits of Highly Effective People.

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