Tips on corporate compliance enquiries

By Wei Jie, Tiantai Law Firm

Compliance investigation is an inherent requirement for corporate risk management. To enquire into and review the performance of certain staff helps a lot in collecting effective evidence of existing violations and misconduct, and spotting potential risk exposure. An enquiry is an engagement between two parties, and the investigator should be clear of the purpose of the enquiry and make sure that the enquiry process, and the evidence secured, are legitimate and valid.

Limit the scope of informed people. In an internal investigation, to guarantee the smooth progress of the enquiry and the integrity of the evidence, and to pre-empt any possible effect on the business or panic inside the company, the company should limit the scope of people who are informed of the enquiry and assure their duty of confidentiality. Generally, the enquiry issue should only be known to those who organize and participate in the enquiry, and the same should be obliged to keep the issue confidential.

Wei Jie Associate Tiantai Law Firm
Wei Jie
Tiantai Law Firm

Set a goal. When the clues of violations point to certain staff, the company may first screen the evidence and narrow the scope down to specific questions, and conduct one or more enquires. The company can construct the causal links through enquiries, and have some clues about staff responses and attitudes to certain issues, in particular, whether the staff intend to correct the violation and compensate for the loss proactively.

The enquiry can also corroborate the evidence collected and correct the bias, help the company gain a better understanding of other staff, partners upstream and downstream, and other third parties involved so as to spot the potential risk in relation to certain rules.

Know about the person. The company should have full comprehension of the age, education, personality, physical health, family relationship, duty performance, mental health and other basic information of the persons involved. When there is more than one person involved, the order of the enquiry is important. Generally, it is suggested that in-house employees come before external persons.

When making enquiries with in-house employees, the company may start from the insiders and assistants to profile what happened. In this way, some of the evidence can be verified and the company can be more confident about how to approach the main violators. The company can make enquiries with external persons afterwards, if the situation demands, to establish facts and complete the evidence.

Preparation for the enquiry. The aim of an internal enquiry is to press the employee/s to speak the truth by taking advantage of information asymmetry. The legality of the evidence collected should be guaranteed, and the following preparations should be carried out.

(1) Documentation. The documents associated with the violations are the foundation of enquiries. If certain issues need to be confirmed by the subjects of enquiries, copies of relevant documents should be prepared, or electronic versions should be displayed during the enquiry. The original documents should not be displayed before, or put in the hands of, the persons. The main issues and the investigated scope should be laid down beforehand, in case major content is missed.

(2) Enquiry timing. Try to avoid making enquiries at the weekend, and constrain the enquiry to 45-120 minutes. The enquiry may be extended, shortened or suspended as required.

(3) Enquiry place. Choose a quiet, bright and relaxing meeting room, and set up sound and video recorders that function well.

(4) Persons to attend the enquiry. Determine the main enquirer, assistant and note taker, and their respective duties, based on the purpose of the enquiry. The main enquirer will lead the talks and ask preset questions. Lawyers and other professionals may be invited to assist the enquiry, share some of the responsibilities and give compliance support. The assistant may adjust the topics, closely examine certain details and respond to any emergency when necessary. The note taker is responsible for the recording.

(5) Minutes of talks. The note taker should prepare the recording tools in advance and take down the enquirers, enquiry place and time, the basic information of the person to be investigated, the questions and answers, the behaviour and the sentiment of the investigated, and other on-site details. Where audio and video recorders are used, their proper function should be guaranteed. The original audios or videos taken during the enquiry should be associated with the investigating issues and kept in completeness; any changes, tampering or fabrication are not allowed. The recorded material should not be used in other scenarios than the investigation in prejudice of the legitimate rights and interests of others.

Talk skills. When carrying out internal enquiries, the enquirer may preset some questions, and their direction in delving further into an issue is based on the enquiry’s purpose. Open-ended questions may be adopted to clarify obscured facts. A relaxing atmosphere created through peaceful and rational language can also be of help. During the enquiry, the enquirers may encourage the investigated parties to reveal more by nodding or repeating the keywords mentioned by the investigated. If the investigated are hiding something or evading some issues that have been confirmed, the enquirer may remind him/her of the legal risks and apply some pressure in this way. If the investigated is too sentimental or behaving eratically, the enquirer may try to calm them, and consider suspending or terminating the enquiry when appropriate.

Closing the enquiry. When the enquiry is closed, the note taker should sort out the minutes in a timely manner and ensure their integrity and accuracy. The enquirers should confirm the minutes and make a judgment on the nature of the matter, based on the objective evidence, to determine the next step, which may be to follow up with the same investigated parties or make new enquiries with other related persons.

During the internal enquiry, the enquirer may disclose to the investigated party the attitude of the company, leaving enough room for the investigated party to make explanations from his/her own initiative.

Wei Jie is an associate at Tiantai Law Firm


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