On May 3, the U.S. Sentencing Commission announced that it sent to Congress on April 30 significant changes to the federal sentencing guidelines for organizations, which could lead to a new era of corporate compliance. They will take effect November 1, unless Congress disapproves them during the 180-day review period. The Commission stated that the changes strengthen the criteria an organization must follow to create an effective compliance and ethics program and to mitigate an organizationâ€™s punishment (including fines and terms of probation) for criminal offenses. Having an effective compliance program thatâ€™s designed to detect and prevent violations of law is one of several factors that can be used to adjust an organizationâ€™s punishment.
The sentencing guidelines define â€œorganizationsâ€ to include corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, unincorporated organizations, governments, and non-profit organizations. Thus the amendments have far-reaching implications applying across industry lines.
The Commission first promulgated organizational sentencing guidelines in 1991. The compliance program component has been a vital part of them since. Included in them are seven minimum requirements to be used to test the effectiveness of a compliance program. As the Commission noted, it was federal government's first attempt to articulate such broad-based standards, and they have become became the industry standards against which most organizations measure their compliance programs.
The seven minimum requirements are:
- assignment of high-level personnel to oversee the compliance function;
- written standards and procedures;
- due care in the delegation of discretionary authority;
- effective communication of standards and training;
- monitoring, auditing, and reporting;
- enforcement and discipline; and
- response, prevention, and modification.
The Commission's amended guidelines provide enhanced incentives for organizations to create or improve meaningful compliance and ethics programs, report violations, cooperate in criminal investigations, discipline responsible employees, and take steps needed to prevent and detect criminal conduct by their employees and agents.