CBO Regulatory Compliance & Risk Management 5 — Questions and Answers
Question 1: What is the primary function of the Foreign Corrupt Practices Act (FCPA) for US businesses?
- It restricts foreign companies from operating in the US
- It prohibits US companies from bribing foreign government officials (Correct answer)
- It regulates foreign exchange transactions
- It sets import tariff rates for foreign goods
Correct answer: It prohibits US companies from bribing foreign government officials
The FCPA makes it illegal for US persons and businesses to bribe foreign government officials to obtain or retain business.
Question 2: Under the Fair Credit Reporting Act (FCRA), what must an employer do before taking adverse action based on a background check?
- File a report with the FTC
- Provide the applicant a copy of the report and a summary of rights (Correct answer)
- Obtain written permission from the state labor department
- Notify the background check company within 5 days
Correct answer: Provide the applicant a copy of the report and a summary of rights
Before taking adverse employment action based on a consumer report, employers must give the applicant the report and an FCRA rights summary so they can dispute inaccuracies.
Question 3: Which of the following is an example of a preventive control in a compliance program?
- An audit that detects past fraud
- A monthly variance report highlighting unusual transactions
- Employee training that teaches how to avoid conflicts of interest (Correct answer)
- A post-incident investigation process
Correct answer: Employee training that teaches how to avoid conflicts of interest
Preventive controls are designed to stop a violation or error from occurring, and training is a classic example of this type of control.
Question 4: A business experiences a workplace accident and files a workers' compensation claim. Which risk management technique does workers' compensation insurance represent?
- Risk avoidance
- Risk retention
- Risk transfer (Correct answer)
- Risk elimination
Correct answer: Risk transfer
Workers' compensation insurance transfers the financial risk of workplace injuries from the employer to the insurer.
Question 5: What is 'regulatory arbitrage' in a compliance context?
- Resolving disputes between regulators through mediation
- Exploiting differences between regulatory regimes to gain a competitive or cost advantage (Correct answer)
- Filing compliance documents in multiple jurisdictions simultaneously
- Outsourcing compliance functions to a third-party firm
Correct answer: Exploiting differences between regulatory regimes to gain a competitive or cost advantage
Regulatory arbitrage occurs when a business structures activities to take advantage of gaps or differences between regulatory requirements across jurisdictions.
Question 6: Which element is most critical to an effective corporate compliance program according to the US Department of Justice guidelines?
- A large compliance department with many staff members
- Tone at the top — genuine commitment from senior leadership (Correct answer)
- A sophisticated compliance software platform
- Frequent external audits by regulators
Correct answer: Tone at the top — genuine commitment from senior leadership
DOJ guidance consistently emphasizes that leadership commitment—'tone at the top'—is the most critical factor in whether a compliance program is genuinely effective.
Question 7: A business operating in the EU must appoint a Data Protection Officer (DPO) under the GDPR in which situation?
- Whenever the business has more than 50 employees
- When the business's core activities require large-scale systematic monitoring of individuals (Correct answer)
- Only when the business processes credit card data
- Whenever the business collects any personal data
Correct answer: When the business's core activities require large-scale systematic monitoring of individuals
GDPR requires a DPO when an organization's core activities involve large-scale systematic monitoring of data subjects or large-scale processing of special category data.
CBO Regulatory Compliance & Risk Management 5
What is the primary function of the Foreign Corrupt Practices Act (FCPA) for US businesses?