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Compliance Shouldn’t Be Outsourced

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April 2, 2021

There is a business school theory that corporate support functions tend to work like any other monopoly – if they aren’t forced to compete they become inefficient. It seems to work with IT where competition from outside providers puts more tools in the toolbox. It also works for legal, but Richard Cassin, writing in the FCPA Blog, says the compliance function needs to stay in-house exclusively, because competition with an outside provider would devolve into a permissiveness contest. “Compliance is different from other staff groups,” he argues. It helps keep the company and its employees out of legal and ethical trouble. The compliance department needs to be able to say “no.” Competition with outsiders would result in forum shopping in search of a pliable outsider who will say “yes.” The choices between legal and illegal, ethical and unethical are not equivalent and keeping the difference clear is what corporate gatekeepers do.

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