When it comes to FCPA training, should companies train their employees and third parties on-line or in-person? As it turns out, both approaches, employed together, make your overall compliance program complete.
In the Attachment Cs to deferred prosecution agreements, the U.S. Department of Justice calls for “periodic training for all directors, officers, and employees, and, where necessary and appropriate, agents and business partners.” But the Department does not indicate the nature of such training. In practice, there are upsides and downsides to the two strategies.
On-Line. On-line training has several clear advantages. It makes the prospect of training thousands of employees economically feasible. On-line programs are easy to translate into foreign languages to target local audiences. Farzad Barkhordari of Click 4 Compliance tells how on-line programs also allow companies to obtain certifications from employees, helping to show that they reviewed all relevant FCPA compliance materials. In contrast, attendees at in-person training might miss important issues when they step out of a session to take a call or use the facilities. On-line training helps remove any potential defense that a culpable employee might put forth based on missing part of the lesson.
In-Person. Despite the advantages to on-line training, in-person training from qualified professionals is sometimes essential. By training in-person, companies can customize approaches to ensure policies are internalized by staff. Dialogue in sessions helps flesh out complicated issues. Employees can ask questions and get specific feedback. The company sends a strong message that it is serious about compliance. It shows its program is not just about checking boxes. As a result, employees tend to take compliance more seriously.
In-person training also allows the company to obtain important feedback on the effectiveness of the program and on dynamic areas of corruption risk. The Watts Water enforcement action reveals that the improper payments in the company’s China subsidiaries were discovered only after conversations took place in an in-person training session conducted on-site. Had the company not conducted on-the-ground training, such liabilities might very well have been missed.
The downside to in-person training is that it is never as cheap as an on-line program. Moreover, to do it effectively, cases like Orthofix show that trainers should be multilingual, which is not always easy to find.
The Morgan Stanley declination is instructive on the dynamics at play in training. Garth Peterson, the former managing director for real estate of Morgan Stanley’s China operations, who was sentenced to 9 months in U.S. federal prison for conspiring to evade the firm’s internal accounting controls, in an interview commented on the ineffectiveness of pre-recorded trainings:
[I]nstead of actually listening, all you have to do is say, “Garth Peterson’s on the phone,” and they check the box that says, he’s complied. And then you either quietly hang up, or you just put your phone aside and you do your other work. That was the culture. And– you know, that’s not right, but that’s the way it worked.
So, because I can’t even really remember about what courses I took and whatever, and I genuinely don’t think I ever took a course in the FCPA at Morgan Stanley, despite whatever nonsense they’ve shown to the government. It just wasn’t in my head, and it wasn’t in other people’s head.
But then you have to ask yourself, if it’s obviously not working because people are acting– in ways that show that they have low to zero, FCPA consciousness, then maybe those training programs and e-mails are not enough.
Despite Mr. Peterson’s statements, the Department found that Morgan Stanley had employed both on-line and in-person training of its China operations. Had the firm only put forward on-line or telephonic training, Mr. Peterson’s comments might carry more weight. But evidence of in-person training appears to have undermined his positions.
Take-Aways. At the end of the day, the best programs are the ones that utilize both on-line and in-person training. On-line training is a basic expectation for all employees. In-person is done less frequently but still in a periodic way. In-person training is also brought to bear in areas of particularly high risk.
There are some instances where there is simply no substitute for in-person training. If a company must remediate a prior compliance failure, face-to-face instruction is key. If a company must integrate an acquired company into its current program, in-person training makes the process quicker and more effective.
Ultimately, if the DOJ or SEC is asking questions about compliance, a company will want to be able to demonstrate that it has made a sufficient effort to educate its employees on its program. This requires a combined strategy.
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