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This past November, Deputy Attorney General Sally Yates delivered remarks at the American Banking Association and American Bar Association Money Laundering Enforcement Conference (the “Yates Memo”) regarding the new Department of Justice policy designed to promote individual accountability for those who commit corporate wrongs. Although it is presented as a new policy, the concept and steps mentioned in her memorandum are similar to previous statements and goals expressed by several Department of Justice officials. What appears to be new this time around is the objective of this policy: reach the high level executives with the cooperation from the lower ranking personnel.
Similarly, the United Kingdom’s Financial Conduct Authority also issued a statement regarding individual accountability “starting with Senior Management, and flowing down to staff at all levels.” Martin Wheatley, CEO of the Financial Conduct Authority stated; “This is about the importance of individual decision making and behaviour. We must recognise and learn from cases where decisions are being taken effectively, behaviours are good and firms are building a sustainable culture of responsible behaviour. And we must intervene where this is not happening.”
Here we will offer insight and guidance on how to best handle these types of investigations with these new policies in mind.
First, what is the memorandum about?
The core of this relatively new policy originally issued in September 2015 concerns individual as well as corporate accountability.
The subject of corporate cooperation has garnered a lot of attention. Prior to this new policy, company cooperation was determined on a “sliding scale.” This is no longer the case. For companies to be considered cooperative; they must conduct an independent, thorough, and timely internal investigation. Information provided to prosecutors must be complete and include information regarding all wrong-doers involved, regardless of their position in the company.
What steps should you take next?
We have outlined three broad steps for handling misconduct investigations:
Step 1 – Listening to the Whistleblower
This first step is essential; the company’s reaction to the initial complaint will define the tone and outcome of the investigation. A swift reaction is important. After a complaint is voiced, it is important to report and review the allegation with your general and/or compliance counsel to determine the validity of the statement and the next steps to assume.
When handling a government subpoena it may be preferable to obtain outside legal counsel that has experience in this domain.
In short, companies should demonstrate good faith by taking every allegation seriously.
Step 2 – Drafting an Investigative Road Map
Once the allegations are revealed the credibility and nature of the misconduct needs to be determined. Credibility can be determined via interviews, review of company emails, and other available documents. To evaluate the nature of the misconduct the company must decide whether it violates company policy, the Foreign Corrupt Practices Act or anti-corruption laws. In some cases, appropriate measures must be prompt. It may be advisable to halt any business with the individual or company also involved in the misconduct.
Based on the perception of out-house counsel, including the government’s, it may be recommended to work in conjunction with outside counsel in order to maintain an independent, unbiased and thorough investigation. It is also important to instruct all employees from within the department being investigated to retain all documents, not to destroy any possible evidence, including emails, company records and documents.
Creating and implementing a plan of action is important for two reasons: it helps the company understand the scope and cost of the investigation and government officials see that the allegations are being taken seriously and that appropriate steps are being taken to resolve the alleged misconduct. It would be advisable if the plan included the jurisdiction of the investigation, a list of the individuals that require an interview, and an overview of the documents and data.
Step 3 – Resolution
If the government is involved in the investigation it is important to maintain an open line of communication with them, as well as a good rapport with the company’s point of contact. Providing the company’s investigative plan and informing prosecutors of the progress is essential. When presenting all findings it will be important to include a plan of action. This will help avoid having a similar scenario reoccur in the future. Solutions may include additional training, enhanced policies, and an updated compliance system.
Joseph Jaffe is chief compliance officer and deputy general counsel for Guidepost Solutions. He oversees regulatory compliance issues and assists with legal matters for all of Guidepost Solutions’ offices. Joseph can be reached at email@example.com.