Corporate Compliance, Ltd.

Q: What makes a compliance programeffective?
A: The "Seven Steps"

The hallmark of an effective program to prevent and detect violationsof law is that the organization exercised duediligence in seeking to prevent and detect criminal conductby its employees and other agents. Due diligence requires at a minimumthat the organization must have taken the following 7steps:

Each of these 7 steps correspondsto a particular compliance mechanism. Click on the footprints to see how.

  1. The organization must have established compliance standards and proceduresto be followed by its employees and other agents that are reasonably capableof reducing the prospect of criminal conduct.
  2. Specific individual(s) within high-level personnel of the organizationmust have been assigned overall responsibility to oversee compliance withsuch standards and procedures.
  3. The organization must have used due care not to delegate substantialdiscretionary authority to individuals whom the organization knew, or shouldhave known through exercise of due diligence, had a propensity to engagein illegal activities.
  4. The organization must have taken steps to communicate effectively itsstandards and procedures to all employees and other agents, e.g. by requiringparticipation in training programs or by disseminating publications thatexplain in practical manner what is required.
  5. The organization must have taken reasonable steps to achieve compliancewith its standards, e.g., by utilizing monitoring and auditing systemsreasonably designed to detect criminal conduct by its employees and otheragents and by having in place and publicizing a report system whereby employeesand other agents could report criminal conduct by others within the organizationwithout fear of retribution.
  6. The standards must have been consistently enforced through appropriatedisciplinary mechanisms, including, as appropriate, discipline of individualsresponsible for the failure to detect an offense. Adequate discipline ofindividuals responsible for an offense is a necessary component of enforcement;however, the form of discipline that will be appropriate will be case specific.
  7. After an offense has been detected, the organization must have takenall reasonable steps to respond appropriately to the offense and to preventfurther similar offenses - including any necessary modifications to itsprogram to prevent and detect violations of law.

Need additional information about compliance programs?

Questions or comments? Contact us:

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Corporate Compliance, Ltd.
152 Kentview Drive
Carmel, NY 10512
Telephone: (845)225-6822
Fax: (845)225-3930

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Text copyright 1997by William J. Richmond and Michele C. Petitt. Graphics copyright March1997 by Michele C. Petitt andthe Village Web Smiths. The Fraud Detector is a Trademark of CorporateCompliance, Ltd. The Anvil and Keyboard Logo is a Trademark of The VillageWeb Smiths.
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