General Requirements

For a compliance training system to work effectively, the leadership team must commit. If the leaders embrace the organization’s goals and culture, the entire team will be more effective. Leaders should understand the relevant laws and know how to manage risk. Further, they should understand how lowering risk levels can lead to a company’s positive reputation, lessening the potential for penalties or lawsuits.

Without good leadership, the company may be vulnerable. The regulatory landscape may change, which could bring further problems. Leaders should give clear guidance with regard to all compliance matters.

Besides commitment, the leadership team must implement the training effectively. Our team recommends creating logs to measure the following key objectives of compliance training:

1. Do all staff members understand their compliance responsibilities?
2. Does everyone understand how the compliance program reduces risk?
3. In what ways does the compliance program minimize potential legal liability?
4. How does the compliance program protect the company’s reputation?
5. In what ways does the compliance program encourage integrity in the corporate culture? 

Compliance training should cover internal regulations as well as external laws. Good leaders will understand the importance of identifying areas at high risk for non-compliance. They would then prioritize resources to document a strategy showing sensible controls. A good compliance system is like a good defense, providing leaders with confidence that they could respond to an investigator’s questions.

After covering the high-risk areas, leaders should create systems to show their commitment to good corporate citizenship. For example, the company may develop policies to show the business’s position on:

• Customer service standards,
• Anti-harassment,
• Anti-discrimination,
• Anti-sexual harassment,
• Conflicts of interest,
• Code of ethical conduct,
• Client confidentiality,
• Health and safety issues,
• Reporting protocols, and
• Issues particular to the business’s industry. 

We encourage leaders to bring the training to life with human stories and interactive exercises. The business may build a stronger case of showing its commitment to compliance by designing quizzes that measure what each participant learned. By making those participant responses a part of each employee’s file, the company can build a stronger case of its commitment to compliance.

When employees earn their livelihoods from contacting clients over the phone, for example, leaders may want to include training exercises that profile dangers associated with the FTC’s Telemarketing Sales Rule and the Do Not Call List. The FTC regularly brings cases against small, medium, and large organizations if their investigations reveal a violation of FTC rules. The FTC’s website highlights how those investigations have led to injunctions, fines, asset freezes, and massive judgments against business leaders that profess ignorance of how they were violating rules, regulations, or laws.

Consider the FTC case against Sanctuary Belize. In that case, a real estate developer used television commercials to advertise a 14,000-acre community in Belize. The commercials attracted viewers with images of crystal-clear water, palm trees, and white-sandy beaches. Those commercials induced people to visit the company’s website. The website brought attention to what the developer called “a world-class marina” and other amenities at the project. Consumers that wanted to learn more would fill out a lead-capture form on the website, expressing interest in speaking with one of the developer’s sales reps.

Telemarketers would contact the prospective buyers to schedule appointments. They would show a computer screenshare of the property and respond to questions from the consumers. If the consumer expressed interest, the telemarketer would coordinate a tour of the property in Belize. When consumers saw the property in Belize, they would make a decision on whether to purchase property in the development.

Using that technique, the developer entered into contracts with consumers, selling more than 1,000 homesites in his massive development. Sales surpassed $100 million.

The Federal Trade Commission launched an investigation, conducting an undercover call with the developer. Investigators at the FTC went through the entire telemarketing pitch. Although they never visited the property in Belize, they built a case to accuse the developer of deceiving consumers. The FTC alleged that developer deceived consumers with coordinated misrepresentations.

As a result of those charges, investigators from FTC stormed the developer’s offices in Irvine, California. They seized computer records, all scripts, and other evidence to build a case. They began an investigation that turned telemarketers, managers, and leaders into either witnesses, subjects, or targets of their investigation. A lawsuit in federal court resulted in an asset freeze. Litigation expenses soared to several million dollars. In the end, a federal court issued a judgment in excess of $100 million. Further, the court placed enormous sanctions on the defendants, placing an earning cap of $5,000 per month on certain defendants; that earning cap would last a lifetime, or until the FTC fully recovered the full $100+ million judgment.

Had the company made a bigger investment in documenting the story, as well as its commitment to compliance training, the company’s leaders may have had a better defense against FTC allegations that they were operating a scam.