Effective Compliance & Ethics Programs Reduce Federal Fines by up to 95%

Last year, the U.S. Sentencing Commission released a set of guidelines for fines assessed to organizations found responsible for federal offenses. The guidelines specify that companies with an “effective compliance and ethics program in place,” including those supported by a third party service provider, can qualify to have their fines reduced by up to 95%.

Culpability Scoring System

Having a supply chain transparency program can help companies uncover and prevent malpractice, corruption and unethical sourcing throughout a company’s value chain.

The U.S. Sentencing Commission has implemented a culpability scoring system that is used to determine the amount a company is fined. The culpability score can be reduced to zero by having an effective compliance and ethics program in place, and by fully cooperating in investigations. The fine range for a culpability score of zero results in the fine being reduced by 80-95%.

Non-compliance or failure to adhere to regulations can lead to companies being assessed expensive fines and penalties. For example, under the Foreign Corrupt Practices Act (FCPA), high-profile companies paid a total of $882 million in fines and penalties just this year. The ten most expensive settlements over time totaled $4.65 billion. In worst cases, criminal offenses can result in companies’ complete divestment of net assets. Even allegations can lead to expenses relating to supply chain investigations and rehabilitating malpractices. As companies face complex sets of guidelines and regulations set forth by state, federal and international entities, third party vendors can help gain clarity on regulations and achieve transparency throughout their supply chains to prevent malpractice and damaging federal fines.