How to Have an Effective
Business Compliance Program

Francis J. McCormick, CGFM, CFE, CFC serves as the Security Manager of Public Service Enterprise Group Inc., and was the featured speaker at a Chapter training meeting. He cited the Crime Control Act of 1984 which established hallmarks that have revolutionized the responsibility and action of organizations with regard to fraud detection and reporting.

Highlighting the changes in corporate defendant criminal liability, Mr. McCormick notes this Act reformed federal sentencing, established the United States Sentencing Commission and reviewed organizational crimes. The goals of the US Sentencing Commission are to provide just punishment, adequate deterrence, incentives for organizations to maintain a system to prevent, deter and report fraud. To accomplish these goals, the Act provides restitution to victims, divests organizations of assets and provides appropriate fines for the severity of the offense.

The hallmarks of an effective business compliance program start with standards and base fine is derived by factoring the pecuniary culpability score of the minimum and maximum procedures to reduce crime with oversight by a high level individual of the organization. Communication of the policies and procedures to all employees with consistent enforcement and internal controls should prevent similar reoccurrence. It was the Commission of Sponsoring Organizations that first instituted internal control mechanisms and changed irregularities into the term fraud.

Mr. McCormick outlined seven hallmarks for an effective compliance program:

• Hallmark #1 - Assessment of risk followed by establishing policies and procedures for internal controls. Set standards and integrity for employees and vendors. Obtain certification statements pertaining to compliance with your company's policies and procedures. Monitor and audit compliance programs to insure effectiveness.

• Hallmark #2 - Establish a high level officer as the Ethics Officer. The Senior Vice President and General Counsel serves in this position at PSEG.

• Hallmark #3 - Due Diligence must be maintained. Pre-screening and due diligence of potential employees by obtaining letters of reference, checking prior employment and verifying credentials and education is essential to maintaining an honest workforce. Supervisors and mangers must enforce proper use of company assets. All accusations of wrongdoing must be investigated and follow-up provided.

• Hallmark #4 - Communicate all policies and procedures to all employees and agents of the company. Regular and repetitious reaffirmation of integrity can be promoted through training sessions and internal newsletters. PSEG publishes a booklet called Standards of Integrity and a brochure promoting the telephone hotline called, Integrity Line, which is supplied to all employees.

• Hallmark #5 - Utilize internal controls to monitor and audit the system. Establish a hotline, keep an allegations log, attempt to identify fraud during regular audits.

• Hallmark #6 - Consistently enforce standards. Determine appropriate level of discipline for each offense.

• Hallmark #7 - Take necessary steps to prevent similar occurrence in the future. Implement internal auditor recommendations. Retrain employees on the proper procedures. Always take attendance at training programs. Issue control bulletins which identify control enhancements to reduce the likelihood that fraud will occur in that area in the future.

In conclusion, there is no one way to be in compliance with the federal sentencing guidelines. Many of these elements may already be in place. The objective of an effective compliance program is to deter criminal activity and thereby avoid indictment.