It’s Tax Day here on Compliance Culture!
In honor of the day, check out this selection of links on compliance and regulatory issues in organizational and individual tax practices.
It’s Tax Day here on Compliance Culture!
In honor of the day, check out this selection of links on compliance and regulatory issues in organizational and individual tax practices.
Dirty Money is a documentary series that premiered on Netflix in January 2018. The series focuses on different case studies of corporate corruption. The documentaries delve into the political and cultural causes behind the key events in each case, motivations of the individuals involved, and the way that society has been impacted by these situations, some of which remain under investigation or legal challenge. While all the episodes are interesting to study for general themes of corporate compliance and/or ethical culture and organizational integrity, four of the episodes are especially relevant.
This is the first in a series of seven posts about regulatory compliance priorities and enforcement trends. Today’s post will be about the Commodity Futures Trading Commission (CFTC). On Thursday December 28, the post will be about the Federal Trade Commission (FTC). On Thursday January 4, the post will be about the Securities & Exchange Commission (SEC). On Thursday January 11, the post will be about the Food & Drug Administration (FDA). On Thursday January 18, the post will be about the U.S. Department of Agriculture (USDA). On Thursday January 25, the post will be about the Environmental Protection Agency (EPA). Finally, on Thursday February 1, the post will be about the Federal Communications Commission (FCC).
The Commodity Futures Trading Commission (CFTC) is the US regulator charged with supervisory authority over the futures and option markets. Created in 1974 by the Commodities Futures Trading Act, the CFTC is an independent regulatory agency with the purpose to monitor and protect the markets by prohibiting fraudulent activity or other misconduct and to control against risk from these. In the aftermath of the 2008 global financial crisis and the markets reforms which were implemented during the economic recovery, the CFTC has played a more prominent role in the largely unregulated general derivatives (contracts that derive their value from the performance of an underlying entity, such as an asset, index, or interest rate) and specifically, swaps (derivative contracts where two counterparties exchange cash flows of each other’s financial instruments) markets, to encourage transparency and gradually move toward a more stringent supervisory framework.
The CFTC’s principal mission is to ensure the successful and efficient operations of the futures markets, by keeping competition fair and preventing market abuse or other threats to financial integrity and efficacy. As the futures markets and particularly the derivatives and swaps markets are very international, the CFTC collaborates heavily with international partners and oversees a huge variety of diverse financial institutions and service providers, including exchanges, clearing houses, dealers, and commodity pool operators.
The CFTC has often been seen as the smaller, less powerful or prominent cousin agency to the Securities and Exchange Commission (SEC). However, as the CFTC refines its position within the financial regulatory landscape of the global markets and within the US economy, certain issues and emphases have emerged which distinguish the CFTC.
Be sure to check back next week for a round-up on FTC regulatory compliance.
The task of a compliance officer is not to “set it and forget it.” Apart from planning and advising on risk management strategies, and monitoring business implementation of the attendant policies and procedures, compliance professionals must remain vigilant about the potential for violations. Internal compliance violations can run the causal gamut – they could be because of internal controls failures, unwitting omissions due to lack of awareness, or outright misconduct and malfeasance.
Compliance officers should approach an investigation into a compliance exception thoughtfully and with careful preparation. If the planning for or administration of the investigation is flawed from the beginning then the investigation results will not be reliable. In many fields, such as scientific research, planning investigation tactics and strategy is a discipline all of its own, demanding special expertise in statistical methodology standards.
For purposes of the internal investigations of compliance officers, a common-sense approach, focused on fairness and transparency, can take the place of technical expertise in conducting informal internal investigations that will still generate reliable and meaningful results. Compliance professionals should keep the following fundamental themes in mind when designing an investigation effort:
Compliance officers who consider the above suggestions in planning their own investigation strategy will be focused on obtaining neutral, credible information. They will communicate clearly and engage stakeholders supportively. Enforcement actions stemming from the investigation efforts will be pro-active and productive. With these approaches, compliance officers can establish credibility and effectiveness in conducting internal investigations.
This is the third of a three-part series profiling whistleblowers in different industries. The first of these posts was on October 24 and focused on the financial services industry, including Julius Baer and PricewaterhouseCoopers. Last Tuesday’s post covered whistleblowers in the pharmaceutical industry, with stories of exposing corporate fraud in the manufacturing and marketing processes at companies like Eli Lilly and GlaxoSmithKline.
Today’s post, the final in this set, will look at whistleblowers from prominent historic cases of business fraud or miconduct in major US corporate organizations. The actions of these individuals in speaking up to expose unethical or illegal business practices led to major media attention, legislative and regulatory scrutiny, legal actions, and deep review of corporate cultures of the organizations. In some of these cases, deep societal debate about or change of previously accepted practices and standards was kicked off by the information exposed by whistleblowers.
Whistleblowers have been the impetus behind some of the most explosive and powerful disclosures of corporate fraud and malfeasance in recent history. Companies once admired and viewed as financial stalwarts have been shown to have deeply unethical business practices and a concerning lack of organizational and employee integrity below the surface. In an economy and culture which is increasingly dominated by large corporate interests, trust in and credibility of these major institutions is critical for the public. When this is violated by inaccurate disclosures, dishonest accounting practices, or fraudulent business arrangements, consumer and markets confidence is greatly impaired. Whistleblowers therefore perform an invaluable function in making the often personally difficult and professionally costly decision to stand up for the protection of these values when observing misconduct from within their organizations.
This is the second of a three-part series profiling whistleblowers in different industries. This started with October 24’s post looking at the financial services industry, including UBS, HSBC, and Citigroup. Today’s post will be focused on the pharmaceutical industry, looking at whistleblowers who exposed fraudulent sales and marketing practices, ethical issues in the development and research phase, and more. The third and final post in this set on next Tuesday will be about whistleblowers who exposed high-profile corporate fraud in major companies such as Enron and General Electric.
Whistleblowers in the pharmaceutical industry make an important contribution to protecting consumer safety when they come forward to raise concerns about business practices in their organizations. Corporate misconduct in this industry has direct impact on patient care and individual health. Therefore the actions of whistleblowers can serve to not only shed light on fraudulent or abusive actions by organizations or individuals within them, but also to prevent future harm to scientists and researchers working in the business, third party partners within their supply chain, and end-user consumers.
The process for creating, manufacturing, and distributing pharmaceutical products is long and complex, with many decision points where individuals may make choices in a narrow ethical frame or a limited context which prevents them from seeing the consequences of unethical actions or even the existence of better possible choices. Whistleblowers can help to demystify this process and illuminate for public scrutiny the problems in the design of the system that may cause good people to make bad decisions.
Check back next week, Tuesday November 14, for the final post in this three-part feature on whistleblowers in historical events. Next Tuesday’s post will discuss individuals who exposed fraudulent business practices in landmark cases of corporate fraud and bad business practices.
This is the first of a three-part series profiling whistleblowers in different industries. This starts with today’s post, focused on the financial services industry, describing events where whistleblowers came forward to expose misconduct in investment banking, wealth management, and accounting. Tuesday November 7th’s post will cover the pharmaceutical industry, including AstraZeneca, Pfizer, and more. The post for Tuesday November 14 will be about whistleblowers who exposed high-profile corporate fraud in diverse companies such as WorldCom and Archer Daniels Midland.
Whistleblowers in the financial services industry have sparked reform for investor protection and shed light on the often secretive or mysterious culture within banking organizations, where trouble can be hidden from competitors and the public alike, as cultural problems deepen inside the organization completely unchecked by controls or encouraged by business strategy.
Individuals like the above speaking up about misconduct they suspect or observe in the financial services industry have brought much-needed exposure and change to business practices. They have also often been punished, fired, criticized, or doubted for their bold decision to expose wrongdoing by their employer and/or colleagues. The 2009 US Dodd-Frank Wall Street Reform and Consumer Protection Act, which was intended to promote transparency and prevent fraud in the financial services industry, now prohibits retaliation against whistleblowers and expands the powers of the Securities and Exchange Commission in order to provide for other protections and rewards for whistleblowers who speak up about corporate malfeasance. Nonetheless, whistleblowers in the US continue to face retribution for their actions, and in Europe they remain open to legal liability in addition, as their disclosures break laws that some may say are designed to enable the concealment of other fraudulent or illegal practices.
Check back in two weeks, on Tuesday November 7, for the second post in this series of three about whistleblowers in historical events. Next Tuesday’s post will discuss individuals who exposed fraudulent business practices in the pharmaceutical industry.
Whistleblowers are people who speak up to expose information or activities indicating wrongdoing by individuals, departments, or organizations. They may reveal this information internally, such as to a supervisor or to a designated business unit or hotline. They may also reveal it externally, such as to regulators, supervisors, or the media. Corporate cultures should enable employees to have the courage and compulsion to act as whistleblowers in situations where it may be necessitated.
The role of the whistleblower is extremely important in raising the legal, ethical, and compliance standards of organizations. Having a corporate culture in which this reaction to wrongdoing is promoted is, in and of itself, crucial for developing a controls framework which prevents and addresses misconduct effectively.