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Staff Compliance: More Money is Paid for a Higher Position

Posted in Internal Controls, Markets Compliance on March 12, 2024
Staff Compliance

First, defining the criteria to be considered when assessing a particular person for staff compliance is necessary. There are no perfect people, but there are those who have already managed to “work” and leave such an imprint, which may negatively affect the company’s image in the future. Here, a person doesn’t have to say and answer about themself. It is necessary to consider dry data and independently assess them to determine potential risks.

Staff Compliance

Staff Compliance: Level of Positions

The higher the position is, the more attention is paid to the person. Do not spend resources on the line staff and do not apply the same in-depth criteria of inspection to all employees without exception.

To understand which level of checking to apply, such as low, medium, or high, the following needs to be answered:

  • Does this person have a high level of position?
  • Is there a significant volume of powers and responsibility?
  • Will this person have access to a trade secret?
  • Will this person have access to the valuable property?
  • Will the company have production or other significant difficulties if this person does not turn up to work tomorrow and disappears somewhere?

It is unnecessary to be a talented Human Resources, or HR, to understand that if the answer to all questions is “Yes,” then checking must be intensified. If there is at least one “Yes,” the average checking will be enough. If “no,” the surface, a light version of checking will do.

The issue of access to a trade secret is particularly sensitive, as the technology of erasing memory has not been invented yet, and people can quit and continue traveling in the market.

To introduce the practice of impartiality and a risk-based approach, it is recommended to implement the “Policy of Checking,” which defines the requirements for candidates and the criteria of associated risks that may disqualify candidates for a particular range of positions. Then we will look more broadly at the problematic issue and move away from the usual HR patterns of staff assessment.

The criteria to be considered while building your portrait of a future or current employee are as follows:

First is the Criminal Past and Lawsuits

The existence of criminal or other lawsuits against a candidate for a position or a current employee rightly raises the employer’s concerns. But the existence of an active or closed lawsuit indicates risks directly to the company itself.

It is necessary to assess the existence of such records by applying the analysis of the essence of these cases. If an administrative process resulting from a minor accident should not create a potential danger to the company, then a criminal case is a serious risk.

Do not also forget about the requirements of the legislation of Ukraine for candidates for certain positions:

  • In the field of financial and banking institutions, it imposes a direct prohibition on the existence of outstanding or not removed in the manner prescribed by the law convictions for intentional crimes, crimes in the sphere of economic and official activities.
  • In the field of medicine, there is a prohibition on the existence of an outstanding or not removed in the prescribed manner conviction for committing a moderate, serious, and especially serious crime or a crime related to illegal drug trafficking.
Staff Compliance

Second is the Digital Portrait of a Person

It has long become clear if there is no “I” on the internet, there is no “I” in real life. If a person neglects digital hygiene, it is toxic. It is valuable information that will allow you to understand who is who quickly. If, on the contrary, a person does not have social and professional accounts, they are ghost on networks. It may also indicate that something is wrong and there are some reasons to hide information.

It happens that high-level executives or those who want to take such a position do not have personal accounts on social networks. Or their accounts are closed and contain very little information. But at the same time, a circle of their close people, such as family members and friends, independently and without coercion, post many interesting things on the internet that can tell the lifestyle and character of the employee.

Staff Compliance: a Politically Exposed Person or PEP

Politically exposed persons are persons who, under their positions, are endowed by the state with broad powers that incur certain corruption risks and, accordingly, the risks of laundering proceeds from crime.

For Ukraine, the concept of a PEP is relatively new. Still, there is already a well-established practice of control over such individuals, including the one based on the recommendations of the FATF and general world practice.

It should be understood that not all PEPs are fraudsters and are involved in money laundering or terrorist financing. The status of a PEP itself incurs only a trigger of increased attention. The special rules of control over the transactions, lifestyle, and parity of earnings and expenses are applied to such persons.

The same rules, sometimes in a lighter version, are applied in practice to PEPs and members of their families and close relatives.

The Sanction List, Base “Myrotvorets,” Terrorism

Until 2014, the problem was not relevant. Still, under the war conditions, special attention should be paid to a person who may have something to do with the companies subject to sanctions and originating from Russia, the base “Myrotvorets,” or even be associated with terrorist activity.

The financial monitoring rules of transactions to combat money laundering and terrorist financing have been strengthened for several years. The FATF recommendations have been implemented in Ukrainian legislation, and legal norms have been adopted to avoid terrorist financing. While monitoring a person, you can also use the sanction lists of individuals and legal entities available in the public domain on the internet.

In Ukraine, a decision of the National Security and Defense Council adopted such a list and was approved by the President’s order. In addition, it is recommended to use the US and EU sanction lists. Although the individuals included in such lists are not always terrorists, the presence of an employee included in such a list can cause irreparable damage to the reputation of the company and subsequently lead to economic losses.

Staff Compliance

Active Entrepreneurial Activity

If the “Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations” turns red from records about a person, this is valuable information.

There are two options: either the candidate has an entrepreneurial flair and has already managed to establish many companies and register as an individual entrepreneur several times, or they have been involved in fictitious schemes and acted as a nominal owner. Attention should also be paid to the companies – maybe you were visited by a direct competitor?

In any case, if a person has been an active entrepreneur, they will only stay short and come up with a new business.

Final Thoughts

“It takes less time to do things right than it does to explain why you did them wrong.” This adage is a cautionary statement for organizations that choose to compromise on employee compliance in their internal processes and procedures and then repent. Compliance should be at the heart of a company’s policies and procedures. Companies that ignore the compliance component when developing corporate regulations risk incurring unnecessary penalties and retention, both of which are costly to their finances and reputation.