Corporate Compliance Failures That Lead to Federal Scrutiny

These days, federal regulators in all walks of the industry are fixated on one thing: corporate compliance. The message is plain — if you can’t prove you’re playing by the rules, have your books in shape and the right kind of internal controls in place, you’re opening yourself up to an inquiry, a penalty, or worse, a hit to your name. And as the watchful eye of the law grows, so does the onus to do things by the book.

Agencies work closely with organizations in healthcare, finance, pharma, government contracting, and beyond. For the most part, you can trace a compliance problem back to some form of weak oversight, ineffective internal controls, or a failure to recognize risks within the organization.

Why Corporate Compliance Failures Are Increasing

In many cases, it’s a matter of a firm valuing top-line numbers or a quick turnaround over the hard work of due diligence. And as an operation scales up and becomes more of a tangle, you can’t be surprised if risk management starts to slip. There are plenty of signs of it:

• A weak compliance program
• Employees who haven’t been properly trained
• Inaccurate financial reporting
• Leadership that lacks proper oversight
• Insufficient auditing
• Ignoring employees who report compliance concerns
• Growing too fast without the right checks and balances

Sometimes a company won’t even know it has a problem until an outside investigator has already begun reviewing the situation.

Common Types of Corporate Compliance Failures

Compliance can fall apart in a number of ways, be it through some form of financial impropriety or just not heeding the rules of the trade.

Inaccurate reporting is a case in point. Regulators won’t put up with a company reporting numbers that don’t add up or withholding what it should be disclosing. And for those in an industry where the rules are strict, if you’re not in line with federal requirements, you can count on the authorities to be watching you more closely.

There are the ones with no real system to identify fraud or suspicious billing activity, and the ones that let employee complaints about unethical behavior go unaddressed. In healthcare, if your billing practices fail compliance reviews, you can expect regulatory attention.

How Federal Agencies Detect Compliance Problems

There are a number of ways federal agencies will make sure you’re in the clear. They can go over your files, put you through an audit, or act on something an employee has come to them with. Here is what tends to set off an inquiry:

• Suspicious financial transactions
• Unusual billing activity
• An audit with compliance deficiencies
• A whistleblower
• Inconsistencies in financial reporting
• A violation of a government contract

And when employees are uncertain about reporting something, they may well contact a whistleblower lawyer first.

Industries Where Compliance Failures Happen Most Often 

You can put it down to the kind of work they do: if an industry is handling public money or anything as delicate as private data, you can be sure the regulators are on top of them. Take healthcare, for instance. We don’t have to look far to find probes into how Medicare is being billed or a patient’s records. Then there’s banking and finance, where you don’t have much room to argue with the rules.

Government contractors, especially in defense, are subject to close review of how they handle public contracts. And for the drug makers and medical suppliers, it’s all about how they price, market, and get reimbursed.

What Happens When Corporate Compliance Fails 

There’s no room for error here. If you don’t hold up your end of the bargain, you’re looking at some heavy fallout: we’re talking investigations, fines, and, on the odd occasion, civil or criminal charges. It can cost you a government contract or put a dent in your good name. And let’s be honest, even when you walk away with no charges on your record, just being put through an inquiry is enough to throw you for a loop.

How Businesses Can Reduce Compliance Risks

You can keep trouble at bay with a well-put-together program. For one thing, you have to be certain your team is on top of the policies and rules. Then there’s the matter of running regular audits; it’s better to spot an issue now than to have it become a legal headache down the line. And don’t forget to put in place a way for your people to come to you if they see something they can’t put their finger on. 

It has to start with leadership: management must be accountable for the company’s culture.

Conclusion

Whether you’re in finance or a hospital, if you want to reduce legal risks and maintain strong regulatory standing, you have to maintain effective compliance systems and be able to support your business practices with proper documentation.