Reed Smith Client Alerts

On June 1, 2020, the U.S. Department of Justice (DOJ) Criminal Division updated guidance for prosecutors to refer to when evaluating corporate compliance programs, building on a previous version issued in April 2019 (which we analyzed in a client alert last year). “The revised guidance on the Evaluation of Corporate Compliance Programs reflects additions based on our own experience and important feedback from the business and compliance communities,” Assistant Attorney General Brian Benczkowski of the DOJ’s Criminal Division said in a statement. The new guidance places specific emphasis on whether a compliance program is adequately resourced and empowered to function effectively, the evolution of compliance programs over time based on a corporation’s risk profile, and the value of data for ensuring compliance program effectiveness. While at first glance this guidance may appear to apply only to companies currently facing DOJ scrutiny, the guidance actually provides important insight for any company using a corporate compliance program to mitigate risk.

I. Background

The “Principles of Federal Prosecution of Business Organizations” in the DOJ’s Justice Manual describes specific factors that prosecutors should consider when conducting an investigation of a corporation, determining whether to bring charges, or negotiating plea or other agreements.1 These factors include “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision” and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.”2

The June 2020 issuance is the third version of the document, with the DOJ having issued guidance originally in 2017 and updating that guidance in April 2019.

The June 2020 version maintains that each corporate compliance program must be evaluated in the specific context of a criminal investigation but provides additional guidance stating that the DOJ makes “reasonable, individualized determination in each case that considers various factors including but not limited to, the company’s size, industry, geographic footprint, regulatory landscape, and other factors, both internal and external to the company’s operations, that might impact its compliance program” (emphasis showing changes). The guidance also focuses on three issues that prosecutors may consider in the course of making individualized determinations:

  1. Is the corporation’s compliance program well designed?
  2. Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively? and
  3. Does the corporation’s compliance program work in practice?3