05 / 08 / 23

Some considerations of outsourcing compliance investigations to law firms

MEXICO CITY, MEXICO, August 2nd, 2023 – Let’s start from the premise that any serious compliance program must include an internal investigation guideline that properly helps to inquire, resolve, transparent, disclose, and report the results of concerns and reports from employees, clients, and suppliers that have been expressed through reporting channels. In some cases, these reports may have been made through a hotline, open-door processes, or direct communication with integrity, audit, or ethics committees, depending on the type or size of the organization you collaborate with.

Investigation guidelines should present a clear and accurate classification of the reported incidents, define the roles and responsibilities of the internal departments or functions involved, and map out the internal and external investigation procedures, including coordination with other areas. Also, they should also establish guidelines for interviews, documentation, and evidence that will be used as means of proof. Additionally, the guidelines must define who will review the investigation report, to whom it will be reported, how the documents will be archived, as well as retention periods and confidentiality rules.

Concerns and reports received through institutional channels are important indicators of an organization’s compliance culture maturity. The resulting investigations play a crucial role in ensuring compliance with laws, regulations, and internal policies.

In this context, the question arises: Is it advantageous to outsource investigations to law firms? In this article, we will explore some benefits of outsourcing compliance investigations and provide recommendations for organizations considering this approach.

Among the advantages we find are the following:

  1. Risks with legal or reputational impact: many organizations define in their investigation guidelines the need to use external law firms in investigations when they represent a significant risk to the legal or reputational impact of the organizations, alternatively, this may be the case when a previous internal investigation has been conducted, but it’s detected that it wasn’t handled correctly, for example, due to a conflict of interest. Therefore, involving a specialist in the investigation process is preferred, as they can detect impacts in various contexts and implement preventive and proactive actions to measure and control them effectively.
  2. Experience and objectivity: Law firms specialized in compliance investigations possess extensive knowledge of legal and regulatory frameworks. Their experience allows them to navigate complex situations, interpret laws accurately, and conduct thorough investigations. Additionally, external lawyers bring an impartial and fresh perspective to the process, avoiding potential conflicts of interest that internal investigators may face.
  3. Independence and impartiality: Outsourcing investigations to law firms ensures an independent and impartial evaluation of the organization’s compliance practices. External lawyers are not influenced by internal politics or personal relationships within the organization, enhancing the credibility and integrity of the investigation process.
  4. Optimization of resources: Conducting compliance investigations internally requires significant time and resources. By outsourcing these investigations, organizations can leverage the resources and expertise of external law firms, relieving the burden on internal teams. This allows internal staff to focus on their day-to-day responsibilities while ensuring that the investigation receives the attention it deserves.
  5. Access to specialized tools and techniques: External law firms often possess advanced tools, methodologies, and technologies specifically designed for conducting compliance investigations. These resources enable external lawyers to gather, analyze, and present evidence more effectively, leading to more accurate and comprehensive findings.

In case the compliance program or the audit, ethics, or integrity committees of the organization include in their investigation guidelines the option of using law firms for compliance investigations, I recommend considering the following points:

  • Selecting an experienced law firm: 

It’s essential to choose a reputable law firm with a proven track record in integrity and compliance investigations. Factors to consider include the firm’s experience, industry knowledge, and experience in similar cases. To ensure the law firm’s reputation aligns with the principles of integrity of your organization, conducting due diligence before you engage is crucial.

  • Define objectives and criteria:

Organizations should establish clear objectives, criteria, and expectations when outsourcing compliance investigations. This ensures alignment between the organization and external lawyers regarding the desired outcomes and the scope of the investigation. Criteria may be based on various factors, such as the size or impact of the legal and reputational consequences, the financial loss if any, the position, or organizational level of those involved in the investigation, etc.

  • Evaluate cost-benefit: 

Conduct a thorough cost-benefit analysis to determine whether outsourcing compliance investigations is financially viable for the organization. Consider the potential long-term benefits, such as the reduction of reputational risks and the improvement of compliance practices.

In conclusion, while there’re pros and cons to outsourcing compliance investigations to law firms, the benefits of their experience, objectivity, and independence often outweigh the considerations. By carefully selecting reputable law firms and establishing effective communication channels, organizations can ensure thorough and impartial investigations that enhance compliance practices and mitigate potential risks.

The full article was made in collaboration with Lexlatin, and you can find the original article in Spanish herein:  LexLatin | Compliance: ¿Cuándo externalizar investigaciones a firmas de abogados?

All the information placed in this article and the rights of distribution belongs to @Lexlatin.

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José Gerardo Vázquez