Stopping little lies before they become FCPA violations

What makes a fraudster? Indeed what would allow a person to knowingly violate the Foreign Corrupt Practices Act? The Man From FCPA considered these questions when reading a recent New York Times article, which noted that: “people who tell small, self-serving lies are likely to progress to bigger falsehoods.” Most interestingly the research on which the article was based went on to note “the brain appears to adapt to the dishonesty.” This certainly has some very interesting implications for anti-corruption compliance programs.

Academics, such as Kelly Richmond Pope from DePaul University, who consider fraud and fraudsters from the academic research perspective, have been saying basically the same thing for some time. Fraudsters usually start with small frauds and they may even feel uneasy or bad when engaging in such activity. Yet over time, they appear to become more desensitized to the fraud. It thereby becomes easier and easier to commit the fraud. All of this is usually made even more justifiable, when in the FCPA context, the fraudsters justify that their actions are not done for their personal benefit but for the greater good of the company.

All of this has significant implications for your FCPA compliance program. One of the key purposes of internal controls is to detect early signs of fraud in your organization. Internal controls can be used to keep employees from going down the famous ‘slippery slope’ from small lies to larger ones and then to the infinity and beyond of illegal activity. That is why persons who might begin to cheat on their expense reports might warrant counseling or some other form of intervention before their conduct becomes systemic. It might also mean that if an employee has multiple expense reimbursement immediately below or very near the level at which more senior approvals are required, further review and proscriptive action might be appropriate.

After all, a lock is only there to keep an honest person honest. It is not going to stop a hardened or determined criminal from breaking into your house.