As reported on the FCPA Blog on June 7, in the Commerce Department’s announcement of its settlement with ZTE Corporation, it referred to a requirement for ZTE to “retain a team of special compliance coordinators selected by and answerable to” the Commerce Department for ten years.
Earlier, in a May 24 interview on CNBC, Commerce Secretary Wilbur Ross referred to this requirement as “implanting people of our choosing” as a compliance unit. The CNBC headline and interviewer referred to these individuals as “compliance officers.”
While the placement of these individuals may help to ensure that ZTE does not violate sanctions regimes again, let’s be clear — people implanted by the government are neither “compliance coordinators” nor are they “compliance officers.” They are government enforcement monitors and they should be referred to as such.
The action taken by Commerce is dramatically different from the role of the compliance officer as it has evolved in the business world, and also differs from the role of independent monitors often appointed as part of deferred prosecution agreements and other negotiated settlements.
Compliance officers are employed by the corporation and are charged with ensuring that the organization and its employees operate lawfully and according to regulations. Compliance officers manage all seven elements of a compliance program that are described in Chapter 8 of the U.S. Sentencing Guidelines. These elements cover areas as diverse as hiring and training, policies and procedures, investigations, and remediation. Compliance programs focus on preventing, finding, and remediating compliance problems. Some of the most high-profile recent scandals at our universities and businesses would have been greatly minimized had effective compliance programs been in place.
Compliance officers lead the compliance program and are supported by other compliance professionals with a variety of common titles, such as compliance manager, compliance director, and compliance coordinator. A quick check of our own membership of 19,000 compliance professionals found almost 200 people with “compliance coordinator” as their title. And I’d be willing to bet none of them have a role remotely similar to what the Commerce Department has in mind.
Compliance programs and compliance officers are not “answerable” to a government agency. They serve the broad interests of the organization and the public, including a compliance interest that is shared with government agencies. With the ZTE action, this highly successful self-regulatory framework, which began in the United States and is now shared in several other parts of the world, is now potentially at risk. This action potentially blurs the lines between enforcement and compliance professionals in the eyes of boards, leadership, and external stakeholders. It is a disservice to the compliance profession and the business community.
I sincerely hope that this is simply an inaccurate choice of words and that Commerce corrects this in future communications, because referring to government-implanted enforcement monitors as compliance coordinators is wrong. A government agency implanting its own “compliance” unit violates the very logic behind the Sentencing Guidelines and virtually all of the subsequent interpretations of the Guidelines. Other government agencies have steered clear of providing organization-specific requirements for compliance programs, understanding that every organization is different and its compliance program should be customized accordingly.
Wrongdoing certainly needs to be addressed, penalties need to be paid, and internal compliance efforts increased. And, sometimes enforcement bodies need to act with heavy hands, including ongoing auditing and monitoring of corporate compliance efforts. The goal of all these efforts is to ensure compliance, but that doesn’t mean everyone involved should be called a compliance officer. Let’s call them what they are – government enforcement monitors.
Gerry Zack, pictured above, is the incoming CEO of the Society of Corporate Compliance and Ethics and the Health Care Compliance Association. Prior to joining the SCCE and HCCA, he spent more than 30 years providing services involving the prevention, detection, and investigation of fraud, corruption and noncompliance, most recently in the Global Forensics group at BDO. He can be contacted here.