Compliance Management - Avoiding Penalties and Fines

When the term compliance management is read, many people first think of legally compliant behavior and adherence to rules. That being said, ethical and moral aspects such as value management, acting with integrity and honesty also form the basis of effective compliance management and are often neglected to be taken into account. Compliance came to be due to the large number of new directives, laws and resulting measures that are to be implemented in companies. When it comes to the new directives and laws, the Supply Chain Act and the EU Directive on the provision of information are currently of particular importance

In order to ensure legally compliant and fair conduct on the market, necessary measures are brought together and controlled as part of a compliance management system. The aim of effective compliance management is to minimize risks from which fines, claims for damages or reputational damage may be incurred. For example, in the event of non-compliance with the requirements of the Supply Chain Act, antitrust violations, data protection violations or discrimination, your company can quickly face high fines, penalties or claims for damages. With compliance management, your company uses organizational and supervisory measures to ensure that applicable laws are observed.

The Importance of Duties Delegation

In this context, the delegation of duties in particular is a component that should not be neglected. Since it is impossible for management to take care of all regulations and issues on its own, these duties are delegated to appropriately competent specialist personnel. With effective and appropriate compliance management, the various duties and the associated processes are interlinked. The delegation of duties and control within the framework of compliance management are important components for minimizing civil and criminal liability risks for management, executives and other employees with control duties. In the event of non-fulfillment of obligations pursuant to § 130 OWIG (German Administrative Offences Act), fines of up to € 5 million, for example, may be imposed on legal entities and associations of persons pursuant to § 30 OWIG (German Administrative Offences Act) in the event of a negligent criminal act. Section § 30 OWIG states (text excerpt):

“(1) Where someone acting

1. as an entity authorized to represent a legal person or as a member of such an entity,
2. as chairman of the executive committee of an association without legal capacity or as a member of such committee,
3. as a partner authorized to represent a partnership with legal capacity, or
4. as the authorized representative with full power of attorney or in a managerial position as procura-holder or the authorized representative with a commercial power of attorney of a legal person or of an association of persons referred to in numbers 2 or 3,
5. as another person responsible on behalf of the management of the operation or enterprise forming part of a legal person, or of an association of persons referred to in numbers 2 or 3, also covering supervision of the conduct of business or other exercise of controlling powers in a managerial position, has committed a criminal offence or a regulatory offence as a result of which duties incumbent on the legal person or on the association of persons have been violated, or where the legal person or the association of persons has been enriched or was intended to be enriched, a regulatory fine may be imposed on such person or association.

(2) The regulatory fine shall amount

1. in the case of a criminal offence committed with intent, to not more than ten million Euros,
2. in the case of a criminal offence committed negligently, to not more than five million Euros.

Where there has been commission of a regulatory offence, the maximum regulatory fine that can be imposed shall be determined by the maximum regulatory fine imposable for the regulatory offence concerned. If the Act refers to this provision, the maximum amount of the regulatory fine in accordance with the second sentence shall be multiplied by ten for the offences referred to in the Act. The second sentence shall also apply where there has been commission of an act simultaneously constituting a criminal offence and a regulatory offence, provided that the maximum regulatory fine imposable for the regulatory offence exceeds the maximum in accordance with the first sentence.”

Conclusion

Minimize liability risks related to organizational & supervisory duties by implementing compliance management. This is not only beneficial for you, but also for your managers and employees and protects your company from profit skimming, fines and reputational damage.

Text written by Saskia Rotterdam