Adequate global anti-bribery compliance requires an entity’s mid-level officials to play an important role in determining whether an entity’s internal controls and compliance program are effective. All too often, from a global anti-bribery compliance perspective, mid-level officials overlook or fail to escalate to higher levels reports of compliance concerns that may come to their attention or that they may receive from staff, agents, and others who report to them.
The failure to promptly and properly escalate information relative to compliance concerns may be indicative of inadequate internal controls. Adequate internal controls are required for publicly-held companies subject to the accounting and record-keeping provisions of the FCPA as well as entities subject to the jurisdiction of the FSA in the United Kingdom. The same considerations apply to the adequacy of an entity’s compliance program under the FCPA and UK Bribery Act.
The reasons for the failure to escalate compliance concerns to higher levels can vary. Sometimes, quite legitimately, the mid-level official may not understand or fully appreciate the seriousness of the concerns raised. Other times, the official may seek to cover up what may have occurred to protect his or her status within an entity. Countless reasons may exist as to why pertinent information may not be adequately conveyed to appropriate officials in more senior positions.
The role of mid-level officials in an entity’s system of internal controls and its compliance program is heightened particularly when they are delegated responsibility on a regional or subsidiary level as the primary mechanism for receiving and escalating reports of compliance-related concerns. In many instances, the mid-level officials may also have responsibility for addressing and monitoring compliance concerns.
Removing mid-level officials from having a role in an entity’s system of internal controls and compliance program is not necessarily the answer to this problem. Especially, for larger entities, there is a practical need to delegate responsibility. The key is to, in multiple ways, incentivize these mid-level officials to fully carry out their responsibilities. They must be held accountable and, if necessary, subject to firm disciplinary measures.
In general, more comprehensive training is a critical step in increasing the sensitivity of mid-level officials. But equally critical is the need for policies and procedures to address the role and responsibilities of mid-level officials and to institute appropriate oversight to ensure that mid-level officials are fulfilling their obligations.