[Fraud Deterrence] For its compliance program to be effective, an organization must promote the program through appropriate incentives for compliance.

The statement is correct. A fundamental component of an effective compliance and ethics program is its consistent promotion and enforcement throughout the organization. This dual approach involves not only disciplinary measures for non-compliance but also positive reinforcement through appropriate incentives for adhering to the program. Incentives, which can include performance bonuses, promotions, or public recognition, serve to motivate employees, demonstrate the organization's commitment to its ethical standards, and embed compliance into the corporate culture, thereby enhancing the program's overall effectiveness.

Stating this is "False" would be incorrect because it would ignore a key tenet of modern compliance program design, as codified in influential frameworks like the U.S. Federal Sentencing Guidelines for Organizations (FSGO). A program that relies solely on punitive measures without also providing positive incentives for compliant behavior is considered incomplete and less effective at fostering a proactive culture of ethics and compliance.

1. Association of Certified Fraud Examiners (ACFE). (2023). Fraud Examiners Manual

International Edition.

Section 4.405

The U.S. Federal Sentencing Guidelines for Organizations: This section outlines the seven minimum requirements for an effective compliance and ethics program. Requirement (6) explicitly states: "The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures..." This directly supports the necessity of incentives.

2. U.S. Sentencing Commission. (2021). Guidelines Manual.

§8B2.1. Effective Compliance and Ethics Program

subsection (b)(6): This is the primary source document for the guidelines referenced by the ACFE. It states that an effective program requires consistent promotion and enforcement "through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures..." This confirms that incentives are a mandatory consideration for a program to be deemed effective under these influential guidelines.

3. U.S. Department of Justice & U.S. Securities and Exchange Commission. (2020). A Resource Guide to the U.S. Foreign Corrupt Practices Act

Second Edition. (This guide is widely used in university law and business courses and outlines the government's perspective on compliance).

Chapter 5

"Guiding Principles of Enforcement

" Hallmarks of Effective Compliance Programs

p. 64: The guide details the hallmarks of an effective compliance program

which prosecutors evaluate. Under the section "Incentives and Disciplinary Measures

" it states

"A compliance program should be promoted and enforced consistently... through appropriate and clear disciplinary procedures... and positive incentives

such as personnel evaluations and promotions

financial awards

and public recognition." This reinforces that both incentives and discipline are critical components.