Welcome to our first video blog post on Global Compliance News. In the two videos below, we explain the recent decision by the German Federal Court of Justice on Compliance Management Systems.
On 7 May 2017, the German Federal Court of Justice (1 StR 265/16) ruled that a compliance management system can lead to a reduction of a fine against the company.
There are no strict rules or regulations but companies are generally required to implement a risk-adequate compliance management system to prevent misconduct or even criminal conduct by their employees. If the management fails to implement a compliance management system, the company and the management risk a significant fine. The German Federal Court of Justice now provided some guidance on how to determine the fine:
When determining the fine two issues have to be taken into consideration: Firstly, was there an effective and risk-adequate compliance management system in place before the misconduct took place? Secondly, and this is the most important aspect of the decision, did the management react promptly, identified the gaps in the system and closed them to prevent similar misconduct in the future?
It is to be expected that the decision will have a significant impact on the prosecutorial practice. Therefore, companies and their management must not stop after they have implement a compliance management system but also have to take adequate measures to close any gaps in the system after the misconduct took place.
I described the prerequisites in more detail in my latest article (in German). A free copy can be downloaded for free via this link.