Venice in Italy is one of the most beautiful cities on earth. It is also unique from environmental, architectural, and historical standpoints, attracting thousands of tourists annually.
Beyond the Gondolas, this city was a forerunner in compliance. It was a major ship-building center during the mid-1200s, and during this time, it laid the foundations for modern compliance as we know it today.
This article is based on the FCPA Compliance Report podcast, run by the award-winning host, Tom Fox. In this post, we will explore Venice and how its many facets can translate to compliance lessons for organizations today.
Historical Context of Venice’s Compliance Strategy
Venice was a powerhouse of trade and commerce during the medieval period. Its strategic location in the Adriatic Sea made it a commercial hub for the exchange of goods between Europe and the East. The Venetians, keen on maintaining their economic dominance, developed a sophisticated system of laws and regulations to manage trade, shipbuilding, and commerce.
Many of these laws and regulations are the basis of the FCPA compliance concepts emphasized by the Department Of Justice (DOJ) and the Securities and Exchange Commission (SEC). Organizations can learn from Venice’s compliance strategy to adhere to current regulations.
Let’s look at the important elements that are relevant even today.
Key Elements of Venice’s Compliance Strategy
Employee Hotline
The Lion of St.Mark is a prominent symbol in Venice and led to the adage “Straight from the lion’s mouth.” Also, Venice had its own hotline reporting system where citizens could report misconduct. Citizens could write their concerns on a piece of paper and drop them in the mouths of lion statues placed around the city. Though it started as anonymous, later citizens were asked to write their names
Compliance Lesson
Today, the FCPA requires companies to have a hotline to address concerns, as a part of the compliance process. Also, the DOJ and SEC require an internal hotline to empower employees to report violations anonymously without fearing retaliation. Moreover, organizations are encouraged to use third-party service providers for hotlines because they tend to be impartial and bring in external expertise. The organization is also responsible for maintaining data security and privacy.
Incentives and Punishments
Arsenale District was the hub of shipbuilding, repair, and maintenance from the mid-1200s to the mid-1400s. It was the major commercial enterprise of the city during medieval times and contributed greatly to the growth and fortunes of the city. It is estimated that this economic activity employed about 12,000 people, or 10% of the country’s workforce.
Given this importance, shipbuilding techniques were guarded as intellectual property. To protect these secrets, the Venetians put together a list of rewards and punishments. Merchants and shipbuilders who adhered to regulations were rewarded with privileges. Also, injured workers were given disability payments while in the event of death, the family was compensated with money and/or jobs.
Conversely, those who violated regulations faced severe penalties, including fines and imprisonment. In particular, skilled workers were not allowed to leave the city for fear that they would start working in neighboring cities for higher wages.
Compliance Lesson
Implementing a system of incentives and consequences can motivate employees to comply with organizational policies. Rewards for compliance can include bonuses, promotions, and recognition. On the other hand, violations should be met with appropriate disciplinary actions to deter misconduct. A combination of both incentives and disciplinary action is one of the best practices of compliance, and the DOJ highly recommends this approach to organizations. Such practices can make compliance an integral part of everyday operations.
Dedicated Resources for Compliance
In Venice, much of the building work happens the old-fashioned way. The required construction blocks are shipped by boat and they are hauled on top of a building using a pulley system that has been in place for many centuries. No modern equipment like a crane is conducive because the ground level is submerged in water. This means Venice is heavily dependent on knowledgeable and experienced workers who know how to use the pulley system by hand to transport the required materials. More importantly, an adequate number of dedicated resources is necessary to get the job done.
Compliance Lesson
In 2012, the DOJ established that the compliance department must have adequate resources. Organizations must have a robust compliance program and resources to continuously evaluate the existing processes and update them as needed to meet the FCPA guidelines.
Also, organizations must provide adequate training to employees to meet the FCPA compliance requirements. Such measures are necessary to ensure that the compliance requirements are understood and followed at all levels.
Moreover, the compliance team must consist of experts who can answer the questions that come into the office through hotlines or email. They should also be knowledgeable to provide the necessary evidence to support their statements.
Risk Assessments
The merchants of Venice constantly adapted to new products based on the market demands. In a recent trip to Venice, Tom Fox noted that many street vendors had moved from selling purses and trinkets to selfie sticks. He opined that these vendors were able to understand the risks of their business and move quickly to tap into new opportunities
Compliance Lesson
As the risks increase for modern organizations, it’s important to improve and strengthen the audit and compliance procedures to minimize the chances of risks. They must continuously perform due diligence and appropriate audits to identify risks earlier, thereby providing greater time for mitigation and remediation.
Moreover, organizations can use risk assessments to evaluate the impact of entering new geographies or introducing new products. The DOJ and SEC look into the measures that an organization takes to assess the risks it faces. For example, Walmart got into compliance issues for paying bribes to the Mexican government to set up its business in Mexico.
Another aspect is quality control. Organizations must regularly evaluate and audit their product quality to ensure compliance with established standards. This quality check is all the more important for food items.
Personal Relationships
Venice is well-known for its Gondolas. The Gondoliers or the ones managing the Gondolas have healthy lungs and are physically fit to navigate through the crowded canals. They also add a personal touch to the service they offer.
Compliance Lesson
The Chief Compliance Officer (CCO), like the Gondolier, must get down and interact with the people to build a strong compliance program that balances employee needs with compliance requirements. Also, the CCO must understand the organization’s culture and diversity, and create a compliance program accordingly. The organization must even have the guidelines in local languages for easy understanding.
Bottom Line
Venice’s compliance strategy in the medieval period laid the foundations for modern compliance practices. Modern organizations can learn valuable lessons from Venice’s compliance strategy. More importantly, these lessons can come in handy for FCPA compliance.