DOJ Official Urges Companies to Update Compliance Programs
Commentary by Mayling Blanco
Nicole M. Argentieri, Principal Deputy Assistant Attorney General for the Criminal Division, announced the latest DOJ efforts to strengthen corporate compliance programs; she highlighted updated resources on AI, whistleblowers and compensation clawbacks.
Speaking at the Society of Corporate Compliance and Ethics 23rd Annual Compliance & Ethics Institute, Ms. Argentieri introduced key updates to the Evaluation of Corporate Compliance Programs ("ECCP"), a DOJ resource used to assess the strength of corporate compliance systems. She pointed to the March 2023 directive by Deputy Attorney General Lisa Monaco, which urged companies to mitigate AI-related risks, stating that DOJ prosecutors will now assess how companies manage AI technology within their compliance frameworks. Specifically, Ms. Argentieri said that the updated ECCP formalized that ask by providing consistent guidelines to evaluate whether companies have conducted AI risk assessments and implemented controls to prevent "criminal schemes enabled by [AI]," such as falsified approvals and automated documentation fraud.
Also incorporated in the updated ECCP, Ms. Argentieri highlighted the DOJ's new whistleblower awards program, which is intended to encourage employees to report misconduct. She said the DOJ will closely examine whether companies foster a "speak up culture" and have policies to protect whistleblowers from retaliation. The updated ECCP includes questions designed to assess whether compliance officers have access to the data and resources necessary to evaluate the effectiveness of their programs.
On the DOJ's Compensation Incentives and Clawbacks Pilot Program, Ms. Argentieri reported that nine companies across five industries—including tech, finance and crypto — entered into resolutions with the government in which they agreed to incorporate compliance metrics into employee compensation systems. She said that these measures "reward ... [ethical] behavior and deter misconduct" by tying bonuses to compliance performance. Ms. Argentieri cited the case of a company that received a 45 percent reduction in its criminal monetary penalty for withholding bonuses from employees implicated in Foreign Corrupt Practices Act violations. Similarly, she cited a case in which a company earned a 40 percent fine reduction for clawing back compensation from culpable employees and defending those actions in court.
Ms. Argentieri contrasted the proactive efforts of these companies with other companies that delayed cooperation and failed to discipline employees quickly. She emphasized that the DOJ rewards urgency and meaningful cooperation, pointing to a decision not to prosecute a company that voluntarily disclosed potential FCPA violations, promptly terminated the employees involved, and imposed compensation penalties.
Ms. Argentieri urged companies to make the necessary investments in compliance programs and to act quickly when misconduct is discovered. She warned: "Call us before we call you."
Commentary
Companies should review this important update to the ECCP to reassess not only their business use of AI, but the risks those technologies may present. The DOJ is urging companies to make sure that their compliance programs are keeping up-to-speed with the technology. AI may represent a different kind of risk than others a company may face, and thus, may present yet-unknown challenges, but that should be no deterrent to heeding the DOJ's call. As the Deputy Assistant Attorney General made clear: don’t wait until the DOJ calls you to conduct that assessment.
On the clawback front, the DOJ appears to be following a more reactive approach. That said, a company that uncovers misconduct, or may suspect misconduct, should be prepared to recoup or withhold compensation from culpable actors. Moreover, the speech suggests that companies should be prepared to defend their actions in court—no doubt a costly and reputationally risky expectation.