Introduction

As a compliance officer, I know first-hand how challenging it can be to navigate compliance emergencies such as regulatory fines, suspension of company activities, freeze on company accounts by regulators, misrepresentation of your company’s status by foreign regulatory agencies or any unwanted and negative action taken by a regualtor against your company.

When I started my compliance career, I wished I had a guide that would walk me through the necessary steps to take in case of a compliance emergency. That’s why I decided to write this guide — it’s definitely one of the most personal guides I have ever written.

In this guide, I will share the step-by-step process that I have found to be effective in responding to compliance emergencies. By following these steps, you can minimize the impact of the emergency and mitigate the risks involved. So whether you’re a new compliance officer or a seasoned professional, this guide will provide you with valuable insights on what to do in case of a compliance emergency.

Here’s a step-by-step guide on what to do in case of a compliance emergency:

1. Gather all relevant information

The first and most critical step in responding to a compliance emergency is to gather as much information as possible about the situation. Don’t panic, take deep breaths and focus on understanding the issue thoroughly. This includes understanding the scope of the issue, the timeline of events, the potential impact on the company, and any regulatory requirements. Take the time to investigate the matter thoroughly and ensure that you have a good grasp of the situation before informing senior management. Remember that they will ask tough questions that you can only answer with a comprehensive understanding of the situation. While time is of the essence, it’s essential not to rush this step hastily. You need to be as thorough and accurate as possible to make informed decisions moving forward.

Tip: If you have a contact in the regulatory agency in question, now is the time to reach out to gain a better perspective.

2. Notify senior management

Once you have gathered enough information, the next step is to notify senior management as soon as possible. It’s crucial to do this promptly to ensure that they are aware of the issue and can support you in taking appropriate actions. When notifying senior management, it’s important not to cast blame or focus on what could have been done differently in the past. Instead, focus on explaining the issue, the information you have gathered, your next steps, and potential actions you want to carry out. It’s also essential to project confidence and allay fears of the management team.

If your management team has better working relationships or “connections” with regulators, it may be beneficial to ask them to start unofficial talks towards resolution. The meeting with senior management should be short and to the point. Don’t allow yourself to be dragged into a long meeting to apportion blame or argue about past actions. Remember, time is of the essence, and you must use it wisely. At this point, a written report is not necessary, but it’s essential to have a clear plan of action and potential solutions to the issue.
Tip: At this stage the issue should be disclosed on a need-to-know basis alone. Remember that you want to avoid panic and exaggerated rumors being spread across the company or the ecosystem.

3. Engage legal counsel

In the event of a compliance emergency, it’s crucial to engage legal counsel as soon as possible. If you have been served with any court papers or legal notices, forward them immediately to your legal counsel. A written report can be helpful in helping external counsel better understand the situation. Once engaged, legal counsel can advise on the situation in more detail and help fine-tune the action plan.

Legal counsel can also advise on potential liability and the best course of action to minimize risk. They can also provide guidance on any regulatory requirements and potential penalties. It’s essential to have legal counsel involved to ensure that all actions are in compliance with applicable laws and regulations.

Remember that legal counsel should work hand in hand with the compliance team throughout the process. Communication between the two parties should be ongoing to ensure that all actions are consistent with the company’s policies and procedures.

Tip: If the matter has a potential negative public perception, then the external counsel will work with the compliance team, in-house legal team, and the marketing/growth team to draft a public statement. It’s crucial to be proactive and be the one informing the public to mitigate any negative impact on the company’s reputation.

4. Conduct an internal investigation

After engaging legal counsel, the next step is to conduct an internal investigation. This investigation is essential to identify the root cause of the compliance emergency and determine the scope of the problem. The Compliance team can work with the HR department to inform the entire company about the ongoing information. The information to be shared should be those that would aid the internal investigation and allay the fear of the employees. (A town hall is preferred to answer any questions that may come up)

It’s important to be thorough in your investigation, but also ensure that it’s conducted in a timely manner. The investigation team should include members from the compliance team, legal counsel, and any relevant departments or stakeholders.

Once the investigation is complete, the team should prepare a report detailing their findings, conclusions, and recommendations for action. The report should be shared with senior management and legal counsel to help guide their decision-making process.
Tip: It’s important to note that the internal investigation should be conducted with the utmost care and in compliance with all applicable laws and regulations. Legal counsel should be consulted throughout the investigation to ensure that all actions are appropriate and do not create any additional liability for the company.

5. Communicate with regulatory agencies

After engaging legal counsel and conducting an internal investigation, it’s important to communicate with any relevant regulatory agencies. This should be done as soon as possible, and any set deadlines for communication should be strictly adhered to. If your company’s activities are regulated, it’s recommended to be proactive and inform your primary regulator of the ongoing situation. This communication should include a description of the issue, the steps being taken to resolve it, and any potential impact on customers or the public.

If the issue involves a different regulatory agency, the company should write to that agency and explain the situation, as well as any steps being taken to remediate the issue. In any communication with regulatory agencies, it’s important to be transparent and provide all relevant information. It’s also important to be proactive and keep the agency informed of any updates or developments related to the issue.

Tip: I would recommend consulting with legal counsel before any communication with regulatory agencies to ensure that all legal requirements are met and to minimize any potential liability for the company.

6. Implement remedial measures

Based on the results of the internal investigation and in consultation with legal counsel, the Compliance team should develop and implement remedial measures to address the compliance issue. These measures may include policy changes, additional training for employees, or other actions to prevent similar issues from arising in the future. It is important to ensure that the remedial measures are effective and proportionate to the severity of the issue. Additionally, you should establish a timeline for implementing these measures and communicate this timeline to relevant stakeholders, including regulatory agencies.

If necessary, the company should also consider conducting a follow-up investigation or audit to ensure that the remedial measures are being properly implemented and are effective in preventing future compliance issues.

Tip: Document all remedial measures taken and maintain records of these actions for future reference. These records will be useful in demonstrating to regulatory agencies or other stakeholders that the company is taking the issue seriously and is committed to compliance going forward.

7. Monitor and report progress

After implementing remedial measures, the company should establish a process to monitor and report progress to senior management and regulatory agencies, as appropriate. This may involve regular meetings or written updates to stakeholders on the status of the remediation efforts. It is important to ensure that progress reports are accurate and comprehensive, and that any setbacks or challenges are promptly reported and addressed. This ongoing monitoring and reporting process demonstrates the company’s commitment to compliance and can help to build trust with regulatory agencies and other stakeholders. Also it is important to continuously review and update the company’s compliance policies and procedures to ensure that they remain effective and up-to-date with changes in regulations or business practices.

Conclusion

Facing a compliance emergency can be a daunting task for any compliance officer. However, by following the steps outlined in this guide — gathering all relevant information, notifying senior management, engaging legal counsel, conducting an internal investigation, communicating with regulatory agencies, implementing remedial measures, and monitoring and reporting progress — you can effectively manage the situation and work towards a positive resolution.

Remember to stay calm and avoid panicking. Take deep breaths and approach the situation with a clear head. By acting quickly and decisively, and by working collaboratively with legal counsel and other stakeholders, you can minimize the impact of the compliance emergency and ensure that the company remains compliant with applicable laws and regulations.

Above all, remember that compliance is an ongoing process that requires diligence and attention to detail. By continuously reviewing and updating your company’s compliance policies and procedures, you can help to prevent future compliance emergencies and promote a culture of compliance throughout the organization.

So take a deep breath and know that you are equipped to handle whatever compliance emergency comes your way.

Article written by: Adedoyin Adesina

Source: https://medium.com/@adesinadedoyin/what-to-do-in-a-compliance-emergency-a-practical-guide-for-compliance-professionals-8abac79126d1