Compliance & Integrity: The Essentials simply explained

"Compliance" and the corresponding essentials are fuzzy terms for many people. Rightly so. After all, they refer to "conduct that complies with laws and regulations". But: What does that actually mean?

Compliance refers to adherence to laws, regulations and internal policies, while Integrity reflects a company's ethical behavior and moral responsibility. Together, they form a strong foundation for responsible corporate governance.

However, compliance and training on compliance-relevant topics is becoming increasingly difficult due to new legal guidelines (e.g. the Whistleblower Protection Act; Supply Chain Act). To meet these challenges and maintain the trust of customers, investors and the public, compliance and integrity need to be well understood and backed up by appropriate processes, tools and awareness initiatives.

In this article, we look at the essentials of compliance and integrity. In addition: How can you facilitate compliant behavior and prevent violations?

Compliance Essentials at a Glance

Compliying with Regulations

The minimum requirement for companies is to comply with relevant regulations. This avoids legal consequences and reputational damage and is the first step towards ethical business practice and constructive business relationships.

Data and Information Security & Confidentiality

Specific measures to protect sensitive data include the need-to-know principle, strict compliance with the GDPR, and information classification. These safeguards protect confidential and personal information and reduce data protection risks and compromise of internal business-critical data.

Preventing Money Laundering & Other Illegal Activities

With the help of appropriate control mechanisms, transaction monitoring systems and well-trained personnel, companies can identify and report money laundering activities at an early stage and avoid or contain a compliance violation. This not only helps to avoid legal consequences, but also protects the company itself from abuse through criminal activities.

Employees Protection & Non-Discrimination

Equal treatment and the protection of employees against discrimination are an important part of compliance. The General Equal Treatment Act (German abbreviation: AGG) requires companies to protect their employees from discrimination, harassment and unfair treatment. In addition, equal treatment creates a positive working environment and promotes an inclusive, diverse and respectful work environment.

Interactions With Customers & Business Partners

Compliance-conformant behavior as lived within the company should also apply toward customers and business partners. This includes, for example, ethical standards relating to contracts, agreements and transparent business practices in order to minimize the risk of fraud, corruption and other criminal business practices and to build long-term relationships based on trust.

Insider Trading & Tips

Companies should establish clear policies and procedures for dealing with insider information to avoid conflicts of interest and illegal actions. Insider trading refers to trading in shares on the basis of non-public information and is prohibited by law. This makes insider trading an absolute no-go and violates the integrity of the company and the capital market as a whole.

Donations & Sponsoring

Donations and sponsorship are not wrong per se. What matters is the correct way of handling them: By managing donations and sponsoring in a transparent and responsible way, companies strengthen their reputation and prevent potential conflicts of interest. This also minimizes the risk of undue influence or corruption. Speaking of conflicts of interest...

Conflicts of Interest: A Common Problem in Professional Life

While money laundering and corruption are strictly prohibited, conflicts of interest and benefits are considerably less straightforward to deal with in individual cases.

Generally, a conflict of interest arises whenever the judgment of a decision-maker is impaired. On this basis alone, there is already a risk of undue influence.

Typical examples:

Employees from the HR department prefer family or acquaintances in recruiting
An executive accepts invitations to Champions League matches from potential business partners.

Compliance Basis: inner compass to handle conflicts of interests

In addition, secondary activities of employees, financial interests of management and the acceptance of benefits have to be critically assessed. These situations can already influence objective action and decision-making and thus contradict the principles of compliance and integrity.

When it comes to benefits, the gray area becomes even more opaque. Here, ideally, one has to rely on an internal policy on benefits and, alternatively, on a pinch of common sense. But here, too, there are very clear no-go's, such as cash or cash equivalents or favors for or from business partners.

Your Compass for Benefits at a Glance:

Usually unproblematic	Review required	Usually prohibited
Gifts of little value (e.g. pens)	Higer value gifts in kind (e.g. wine, electronics, clothing)	Cash or equivalent (cash checks, gift cards, vouchers)
Business Lunch (during working hours)	Dinner invitations (within reasonable limits)	Extravagant hospitality / invitation without business reference
Specialized event with exclusively business-related topics	Mixed event: Business with a certain (not predominant) share of entertainment	Entertainment event (without reference to the presentation of our products and services)

Beware of special regulations for public and elected officials or representatives:

As a rule of thumb, individuals from public administration, state-owned companies, or from politics and the judiciary may not any receive gifts, invitations, etc. Such benefits can quickly be regarded as attempted bribery and thus be punishable by law.

If in doubt, please always contact your compliance officer.

So, How to Prevent Compliance Traps?

In the effort to combat compliance vulnerabilities, companies have a variety of measures at their disposal that can help organizations embed compliance and integrity in all areas of their business.

Code of Conduct

A Code of Conduct is developed on the basis of the legal foundations and translates them into everyday business, for example through concrete standards and expectations of behavior for all employees. A code of conduct thus serves as a guideline for compliant behavior in everyday business and promotes ethical and lawful conduct.

Compliance Trainings for Employees

Training courses such as our compliance training are an efficient solution for giving your employees the necessary legal and risk awareness. This equips them with the knowledge they need to ideally avoid or recognize potential risks and respond appropriately. In this way, you minimize violations and promote a company-wide compliance culture.

Internal Controls & Compliance Management Systems

Internal compliance controls (e.g. dual control principle) and the recording of compliance-relevant processes in systems support the identification, monitoring and minimization of risks and serve as evidence of a company's compliance measures. In addition, a compliance management system supports employees in evaluating compliance-relevant incidents by providing clear guidelines and a framework for action for implementation in everyday life.

Implementation of a Whistleblower System

Under the Whistleblower Protection Act, larger companies must set up secure reporting channels for whistleblowers and treat incoming tips confidentially. As a result, whistleblowers remain anonymous if they wish and do not have to fear any reprisals to their person or workplace. Establishing a whistleblower system enables employees and external parties to report violations or suspected cases anonymously. This can contribute to the early detection of misconduct and promote a transparent and trusting compliance culture.

Why is Compliance Training so Important?

Ignorance is no excuse. That's why compliance and all its nuances must first be understood. The best reach the necessary level of compliance aeareness is through a training course that presents complex issues and legal jargon in an understandable way and provides concrete recommendations for action in day-to-day work. After all, it is only when there is an understanding of compliance requirements that they can be adhered to and lived by, and potential abuses can be quickly discovered and prevented.

And that pays off. And not just through legal security - after all, you want to avoid penalties in the first place. But a strong compliance culture also ensures a productive working environment and a trustful cooperation with customers, partners and investors.

Reasons enough to address compliance and the proper awareness of your employees around behaving with integrity and confidence. Training like our IS-FOX Compliance Training equips them with the knowledge they need to understand compliance requirements and make ethical decisions. And all without jargon and incomprehensible theory, but with fun and concrete recommendations for action.

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Compliance & Integrity

The Essentials - simply explained