Corporate Compliance: The Latest Frontier for LPO
Agencies like the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in the US, and the Financial Conduct Authority (FCA) in the UK, along with a plethora of other regulators, are policing corporate conduct with ever-increasing voracity.
The implications for the future are significant, including an expanding role for LPO. Compliance no longer simply requires instituting appropriate policies and procedures. In order to stay one step ahead of regulatory enforcers, it is essential to demonstrate these policies will be adhered to proactively. It also serves corporations well to try to anticipate the compliance programs they will need to meet changing regulatory obligations in the months and years ahead. With all of this to think about, efficient and cost-effective compliance processes that meet the regulatory requirements of today—and those of tomorrow—are a business essential.The development of sophisticated LPO compliance offerings has occurred in tandem with the maturation of the LPO industry itself. LPO-based compliance solutions are often characterized as enterprise-wide endeavors rather than singleservice transactional engagements. To achieve compliance, regulations increasingly demand both quantitative and qualitative reporting, as well as regular audits. This requires collaboration between the key constituent stakeholders, namely corporate legal, compliance and the internal audit, accounting and/or finance departments. Global LPO providers are stepping in and facilitating this collaboration by providing end-to-end managed services and support. The programs they provide offer much more than merely labor arbitrage and include process reengineering, multi-lingual support and enabling technologies. As corporations struggle to ensure their systems, processes and policies are compliant with the Foreign Corrupt Practices Act (FCPA), UK Bribery Act, Dodd Frank, anti-money laundering and data privacy legislation, LPO providers are leveraging their global delivery platforms and process transformation know-how to assist their clients in evaluating current compliance initiatives, implementing new ones and even consolidating jurisdiction-specific processes into global compliance programs.
Third-Party Due Diligence In the midst of ongoing legislative changes, third- party due diligence support for know your supplier (KYS) and know your customer (KYC) initiatives have emerged as perhaps the premier LPO compliance offerings. Outsourcing third-party due diligence tasks to LPO providers allows the business to understand and accurately budget, on a predictable basis, the full cost of ensuring third-party compliance.
The financial services industry for example, is increasingly looking to LPO providers to help meet their anti-money laundering requirements. This includes outsourcing elements of the customer onboarding process, with LPO providers undertaking research and analyzing data pertaining to politically exposed persons, negative news searches, source of wealth determination, high-risk jurisdictions or any other red-flag issues. The outputs from this process can range from basic red-flag indicator reports to much more detailed reports where high risks have been identified, including in-depth profiling of the corporation, directors, shareholders or other relevant entities. Once again, the value-add the LPO industry brings to the table is marshalling resources with the domain expertise needed to comprehend the forces driving the demand for compliance programs. The combined research, analytics, multi-lingual and general legal capabilities of top-tier LPO providers make them the logical port of call for this type of support.
Greater vigilance by anti-corruption regulators is also increasing the liability associated with third-party suppliers, which, in turn, is driving the outsourcing of compliance work. In connection with FCPA or other anti-corruption legislation, outsourced compliance support can include the design, distribution, assistance in completion, and collection of surveys of a company's global supply chain. This can be further supplemented by supplier response fact-checking and red-flag analysis. The skillset required by the LPO resources engaging with third-party suppliers calls for not only an understanding of the anti-corruption laws in play, but also the interpersonal skills necessary to facilitate successful interactions with third-parties who may be wondering why they’re being asked to jump through hoops beyond the normal supplier selection process.
With “global” being the operative word, those LPO providers that offer multi-lingual capabilities are even better placed to assist corporate clients with anti-corruption compliance certification of their global supply chain.When all of this information is finally obtained, it needs to be organized, categorized, hosted and maintained in an easily accessible platform. This is where best practices, process improvement and fit-to-purpose technology, an integral element of the LPO offering, can also help.
Contractual Compliance New regulatory changes, mergers, acquisitions and divestitures frequently demand that corporations undertake a comprehensive review of high volumes of contracts to ensure compliance with both internal corporate policies and jurisdiction-specific requirements. These reviews can pertain to any number of issues but some of the most frequently encountered include:
• Ensuring a client’s customer and supplier contracts include appropriate data privacy provisions
• Reviewing International Swaps and Derivatives Association (ISDA) agreements to ensure compliance with the European Market Infrastructure Regulation (EMIR)
• Ensuring compliance with contractual notice and consent obligations pertaining to change of control and assignment, in connection with an acquisition or divestiture.
LPO providers are able to provide teams of onshore and offshore lawyers and support staff to not only review these contracts and ascertain whether they are compliant, but also aid in remediation as needed to render them compliant. This remediation activity can include reaching out to third parties to obtain informed consent to a change in control of ownership, or negotiating an amendment to a contract to ensure compliance with a specific piece of legislation. As with other key areas of support in compliance LPO, having access to a global pool of multi-lingual, legally trained resources provides the corporation with a huge value-add in the arena of contractual compliance.
Regulatory Compliance Research and Gap Analysis Multi-national corporations are responsible for staying abreast of, and complying with, changes in the law in every jurisdiction in which they operate. It’s a never-ending challenge for businesses in highly-regulated fields. Monitoring changes in regulatory requirements is another area of legal compliance that is now routinely outsourced to LPO providers.
Compliance professionals and in-house counsel know their business better than anyone and are keenly aware of both the issues that are most important to them and the kinds of legal changes they need to look out for. But tracking these legal issues in a systematic way can be a fairly rote, time-consuming process. By contrast, LPO providers can efficiently track, research and summarize current and pending statutes and regulations in multiple countries across the globe. In essence, the LPO provider is mapping a given organization’s regulatory universe. In non-English speaking countries, this requires the ability to locate and understand legislation in the local language. Here again, global LPO providers with multilingual and dual-qualified legal resources are able to deliver a valuable service.
Once the regulatory universe has been charted, it can serve as a foundation for making informed corporate compliance decisions. LPO providers can then go a step further and perform a gap analysis wherein they analyze a corporation’s existing compliance programs to determine their adequacy and alignment with the mapped- out regulatory universe. Any inadequacies or red flags pertaining to existing compliance programs can then be highlighted for remediation.
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