Evolution of COI Disclosure Processes
There is little doubt that addressing both actual and potential conflicts of interest (“COIs”) is a fundamental component of a functioning and effective compliance program. As guidelines issued both in the United States and abroad have repeatedly emphasized, the proper disclosure of potential conflicts serves as a precautionary measure designed to prevent allegations that an employee, agent, or other contractor affiliated with the organization exerted improper influence. Whether such persons utilize their position to gain leverage with foreign government officials or in the context of wholly commercial undertakings, actualized COIs that could have been prevented in the first place are a significant indicator of a weak compliance program.
In the past, disclosures by a company’s employees of COIs were largely manual and required the exchange of a variety of information through a host of media, all of which became information silos. For example, while COIs may have been documented at the parent company level, the very process of collecting information concerning this dilemma became fragmented and parochial—with each subsidiary and affiliate of the company charged with the administration of its own COI process. Faced with this issue, it came as no surprise that a plethora of enforcement actions involving the improper exchange of gifts, entertainment, and hospitality became the norm rather than the exception—especially in the context of civil and criminal cases implicating the violation of the U.S. Foreign Corrupt Practices Act (“FCPA”).
On a number of occasions, the sheer reach of the FCPA on an extraterritorial basis permitted the U.S. government to hold even foreign entities and individuals with little discernible connection to the United States, firmly accountable for their transgressions.
Adoption and engagement as a cornerstone of disclosure programs
The contemporary compliance landscape now all but demands that companies more competently manage COI processes across the board, in a transparent and efficient manner by abandoning woefully insufficient manual processes and empowering employees to participate in the COI reporting process.
While employee participation was, if anything, a mere afterthought when COI processes were in their proverbial infancy, employee buy-in is now considered an indispensable element of overall effectiveness. This principally requires contemporary COI platforms to have intuitive interfaces that result in ease of use, and the ability to interact with the company’s compliance function concerning a potential or actual conflict of interest. Such asynchronous communication located in a single repository eliminates the need for employees to rely on email as the principal means of relaying COI disclosures.
Another critical feature of an effective reporting system is its ability to have appeal across the organization, including in foreign jurisdictions where the company may have various subsidiaries and affiliates. In that vein, a COI management platform should be customized to meet local customs and language preferences. The failure of a contemporary organization to exercise cultural and linguistic sensitivity will inevitable undermine the purpose of the program to begin with.
A forward-facing, employee-centered COI resource must also have advanced integration and reporting capabilities that further reduce the reliance on manual processes. This serves as an additional form of positive reinforcement. Indeed, employees who are already burdened with heavy workloads are loath to take on additional responsibilities, unless there is a clear value proposition. By relying on integrated platforms, a contemporary COI system can seamlessly integrate with a number of enterprise resource management (“ERM”) systems and other adjacent compliance processes to leverage COI data to analyze its applicability to a particular transaction, project or third party engagement.
Additionally, of more relevance to the compliance function is the ability to generate detailed reports concerning the number of COIs collected during the relevant period, the nature of those COIs, and whether the COI was merely theoretical or legitimate. For compliance officers who are burdened with an increasingly complex range of tasks, the ability to generate reports on demand without relying on complicated interfaces or manual inputs further the attractiveness of utilizing a robust COI platform.
Drive full employee engagement rather than stifle it
Tired convoluted manual processes of the past will no longer cut it. Instead compliance teams should consider highly sophisticated systems that rely heavily on feedback from industry and incorporate all of the advanced technological components users throughout an organization frankly expect. Ensure your business can rely on technology with the latest advancements which serve to offer much needed specific relief to a growing area of concern to both regulators and enforcement authorities.
Are you looking to streamline your disclosure processes? GAN Integrity can help you design a tailored solution that meets the needs of your business.
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