Origins and the Future of the Compliance Profession
Updated: Mar 10
The emergence of the compliance profession faces the challenge of fully understanding what compliance is, the context of its genesis, and the fundamental divergences between local practices across jurisdictions.
According to Michael Josephson[1], one antecedent of compliance that cannot go unnoticed is the signing in 1977 of the Foreign Corrupt Practices Act (FCPA), which imposed responsibility on companies to avoid committing acts of bribery and corruption.
The next antecedent of compliance and perhaps its formal origin as a profession, according to Alison Taylor[2], associate professor at Fordham Law School, New York, dates back to 1987 with the creation of the Federal Sentencing Guidelines for Organizations (FSGO).
The FSGO triggered the policies and procedures as we know them today so that organizations would not violate laws and regulations and would adhere to ethical principles that would safeguard the integrity of the U.S. financial system in light of the events of that decade.
The requirements of the FSGO gave rise to the profession of the compliance officer.
This new figure would be responsible for reviewing or drafting new codes of conduct, policies and procedures, training programs, risk assessments, and establishing whistleblower hotlines.
However, this background prompts reflection on whether the functions currently assigned to the compliance officer, which tend[3] to be more focused on the prevention of money laundering and terrorist financing (ML/FT), also include the prevention of acts of bribery and corruption in organizations, ethics/conduct programs or exposure to international sanctions[4].
The truth is that current regulations in some countries, for example, for credit institutions, establish the minimum functions and obligations of the compliance officer but do not limit their field of action, which opens the door to a holistic approach to financial crimes, corporate law, ethics, and conduct, to mention a few, where compliance officers might face an unexpected burden of workload as their responsibilities increase due to lack of clarity.
Understanding the origins of compliance is the basis for where the future of the profession should be heading, taking as an urgent issue innovation and the digital era that brings with it challenges to the protection of personal data, cybersecurity, and the understanding of new technologies such as blockchain, smart contracts, virtual currencies, among others.
References
[1] Society of Corporate Compliance & Ethics, History of the Integrity, Ethics and Compliance Movement: A cautionary tale for CEOs and corporate directors, Michael Josephson, accessed May 14, 2019. https://assets.corporatecompliance.org/portals/1/PDF/Resources/ethikos/past-issues/2014/scce-2014-01-ethikos-josephson.pdf
[2] Compliance Officer Day, The Future of Ethics and Compliance, Alison Taylor, accessed May 14, 2019. https://www.complianceofficerday.com/future-of-ethics-compliance/
[3] As an exercise, a thorough analysis of the General Provisions referred to in Art. 115 of the Law of Credit Institutions would suffice.
[4] Defined in accordance with International Law, based on the Charter of the United Nations Art. 39 and 41.