The Compliance Function: An Overview

Abstract

The compliance function consists of efforts organizations undertake to ensure that employees and others associated with the firm do not violate applicable rules, regulations or norms. It is a form of internalized law enforcement which, if it functions effectively, can substitute for much (although not all) of the enforcement activities provided by the state. Together with its close cousins, governance and risk-management, compliance is an essential internal control activity at corporations and other complex organizations. This paper will examine the following topics: the analysis of compliance within a general theory of enforcement; the development of the compliance function; the concept of internal control; the distribution of the compliance function among control personnel; oversight obligations of directors and executives; compliance programs and policies; internal investigations; whistleblowers; criminal enforcement; compliance outside the firm; and business ethics beyond formal compliance.