As part of our look at the trends and tools that finance pros should be thinking about in 2024, we spoke to Adam Turteltaub, chief engagement and strategy officer for the Society of Corporate Compliance & Ethics and Health Care Compliance Association, about what compliance risk might look like in the next 12 months, what organizations should be investing in, and what happens if the economy goes south.
This interview has been lightly edited for length and clarity.
What do you see as the big trends in compliance that finance professionals should be paying attention to in 2024?
Greater complexity and faster changes…especially issues like sanctions risk, which end up having AML implications, too. I think AI, both good and bad. It can help the organization run its business better, but by the same token, it has tremendous potential to get the business in all kinds of trouble, because people still don’t understand what the technology can do. The technology doesn’t understand right and wrong, it just understands how to take an equation and apply it or an algorithm and apply it.
One of the things, in general, all organizations need to think about is the growing internationalization of enforcement. While the US government has historically been one of the strongest enforcers of corporate behavior, we’re seeing things expanding dramatically. When it comes to issues like privacy, Europe leads in this area. And they’re not alone, there’s privacy laws all over the world.
Who knows what’s going to happen next in the US, when it comes to things like supply chain issues. That’s also coming out of Europe. The German supply chain laws are likely to be followed by an EU wide law about supply chain particularly focused on human rights issues, such as modern slavery and human trafficking.
One of the things that business always needs to expect but never does is that ethical expectations keep rising, the standards for behavior keep increasing. And business is forever catching up with the behaviors that were okay for thousands, or hundreds of years, doesn’t necessarily mean it’s always going to be.
How do you see organizations, broadly speaking, investing in compliance in 2024?
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Compliance is going to be under a lot of scrutiny, just like everything else is, whether the recession comes or not. Businesses expect it to and are scrutinizing their budgets. Compliance, like every other part of the organization, is going to justify the dollars that are allocated to it.
What’s ironic is when the economy tends to turn down, and when layoffs are happening, or budgets are tightening, is when compliance risk goes up. Organizations need to recognize the fact that when times are tough, people are going to be tempted more than ever to cheat to get to the numbers. That’s when you need a stronger compliance function, not a weaker one.
Where do you see compliance risk going in 2024?
One, sanctions will continue to be a growing risk area. And secondly, I do think supply chain issues are going to grow ever more important as organizations are being asked to look more closely at their vendors and all the practices of their suppliers.
Most of the laws accrue liability to the buyer at the top of the food chain, if you will. And more and more of them are going to find themselves having to answer questions about suppliers, many of them longtime suppliers, and how they were not aware of practices that government and the public doesn't find acceptable.
The big question is, what will the US enforcement picture look like? There’s been what’s been perceived as a lull in enforcement action at the DOJ. We hear a lot that there is a lot in the pipeline and a lot of settlements may come out, and we are coming up at the end of the year where a lot of times, companies want to get them resolved so they can get them off their books.
The other thing I have to say is every time the economy starts to slow down is when the big scandals start emerging. We have to see, when there is a slowdown, does the stuff that’s been hidden under the carpet start to show?