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DOI: https://doi.org/10.34069/AI/2021.45.09.20

How to Cite:

Borys Hrinchenko Kyiv University, Ukraine.

Law Academy", Ukraine.

Volume 10 - Issue 45

/ September 2021

http:// www.amazoniainvestiga.info ISSN 2322- 6307

Compliance, which was a novelty for Ukrainian

businesses decades ago, is now rapidly becoming

an indispensable tool for doing business

following the best international standards

(Karakashyan, 2020). Currently, compliance is

of regulatory civil legal relations in the private

of civil rights and responsibilities to the

participants of these relations, in accordance with

the established norms and rules of conduct of

civil rights) (Kharytonov, Kharytonova,

Kolodin, & Tkalych, 2020).

The relevance of compliance is explained by the

Second, in the narrow sense of its application,

compliance has become indispensable in the

purchase of other people's business, mergers and

acquisitions, and other risky transactions

involving large capital. That is, the use of

compliance is not only a well-established

practice but also an issue of investment security,

reliability of doing business. Thus, the global

spread of compliance is due to globalization

processes that motivate companies to adhere to

organizations such as the EBRD, OECD, UNDP,

USAID. They provide an opportunity for even

small businesses to participate in the

development of their compliance system, to

improve the skills of their employees

In this study, we attempted to analyze the concept

of compliance from a legal point of view to

establish the features of its application in

business in Ukraine and around the world.

The purpose of the study was to analyze the

peculiarities of the application of compliance

from a legal point of view, to take into account

foreign experience, to investigate how

components of corporate compliance, etc.,

conclusions and sources.

In her study, Pererva (2017a) considered

compliance as part of the company's internal

control. The study found a difference between

compliance and internal audit. For example, it is

stated that the internal audit is characterized by

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internal audit are components of the internal

compliance professionals are primarily

concerned with compliance risks, which cover, in

particular, the field of corporate ethics, business

reputation of the entity.

In the article of Pererva, Kobeleva, & Romanchik

(2018), compliance is used to denote the

continuous efforts of the enterprise to comply

with the requirements of legislation, rules,

standards of corporate governance. As a result of

considered as an ideology, a tool of control, the

principles of management.

Kovalishin (2019), in his study, analyzed the

concept of corporate compliance-based on

foreign experience and prospects for its

application in Ukraine. Accordingly, the study

Zadek (2007) reviewed five levels of corporate

responsibility, one of which is compliance. Using

the example of Nike, the author demonstrates

how the company builds a policy of corporate

responsibility from denying the facts of the

offense to higher standards of ethical business.

The author concludes that compliance with the

rules of ethical business is an important factor in

the success and profitability of the company, a

necessary criterion for its activities in our time.

reporting do not reflect the quality of the audit

and compliance. From this, the authors conclude

that the application of more rigorous statistical

and textual analytical methods, in particular,

content analysis, should overcome these

shortcomings and demonstrate real compliance

with large business entities.

Rasche (2010), in his article, criticizes the

standardization of corporate responsibility as a

application of corporate responsibility,

specifics of the situation, i.e., each time should

be individual.

Carroll, Lipartito, Post, Werhane, & Goodpaster

(2012) conducted a thorough analysis of the

development of the institution of corporate

responsibility in the United States. The book

covers the period from 1776 to 2011, thus

demonstrating the theoretical and philosophical

basis of corporate responsibility, which was later

in the form of tables, can serve as a foundation

for research on the history of corporate

responsibility in the United States.

Ghobadian, Money, & Hillenbrand (2015), in

their research, examine the study of corporate

responsibility. They first demonstrate how this

and help make corporate responsibility more

flexible in application.

Arenas & Ayuso (2016), in their work, propose

to consider the institute of corporate social

responsibility in terms of the activities of

multinational companies. The authors note that

typical for this institute measures to improve the

skills of employees in the field of corporate

responsibility, ethics, behavior, as well as an

inclusive decision-making process when the

demonstrate compliance in the form of a system

of measures to comply with the law, rules,

requirements, standards of doing business,

ethical standards. This means that compliance as

a phenomenon is a set of tools aimed at

counteracting negative factors and supporting

positive factors such as brilliant business

reputation, perfect audit, compliance with ethical

standards in the company, non-discrimination,

gender balance, lack of corruption, and more.

Volume 10 - Issue 45

/ September 2021

http:// www.amazoniainvestiga.info ISSN 2322- 6307

compliance officers, etc. Compliance as a

direction of its application, and its varieties, for

example, anti-corruption compliance, financial,

legal, tax, etc. Thus, compliance is a systemic

phenomenon with interconnected elements that

perform specific functions, contribute to the

specific purposes for which compliance is carried

out. In this regard, due diligence was considered

as part of the compliance (namely as a

compliance service), the purpose of its

application and functions were outlined.

compliance. For example, the American and

British legislation is taken into account; the

norms of the Ukrainian legislation in the field of

financial, criminal, civil law are analyzed from

the legal point of view. In particular, the

applicability of criminal law institutions to legal

entities for violating the rules and regulations of

selection of their features and characteristics, as

we do in the part responsible for the concepts and

types of compliance, as well as in the place

devoted to due diligence. Synthesis is used to

summarize information, in particular in the

introduction and conclusions.

(Chubenko et al., 2018). For corporate partners,

a successful compliance check means that your

company can be trusted because it meets business

standards. So, we can make agreements with you,

and you can apply for the title of a reliable

partner.

The International Compliance Association (ICA)

defines compliance as the ability to act following

an order, requirement, set of rules (ICA, 2021).

2) compliance with internal rules.

website of the All-Ukrainian Integrity and

Compliance Network (UNIC), compliance is an

internal control system that allows you to manage

compliance risks, including bringing companies

and top management to justice (UNIC, 2021).

Researchers have their understanding of

compliance. For example, it means:

a) a system of protection of business and its

b) a set of functions aimed at compliance with

c) a tool to reduce risks in the management of

compliance, non-compliance with legislation,

regulations, rules, standards of supervisors,

industry associations, self-regulatory

organizations, codes of conduct, etc. (Pererva,

2017b; Kovalishin, 2019). Failing these risks can

lead to the application of sanctions, financial,

reputational losses.

Compliance usually applies to:

are:

1) combating money laundering and terrorist

2) compliance with the law;

3) information security (protection of personal

4) counteraction to fraud, corruption;

5) compliance with ethical conduct, etc.

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1. Rule-based approach. In this case,

2. Risk-based approx. This approach is subject

liability is the case of Dollar S.S. Co. v. the

United States in 1939, in which the company was

prosecuted for dumping debris from aboard its

ship by a member of the crew (Oded, 2013).

Another example is the case of United States v.

Hilton Hotels Corporation of 1972, where the

court ruled that documents governing the

company's internal activities could not be

grounds for release from liability (Oded, 2013;

Kovalishin, 2019). Subsequently, the Watergate

law, the Foreign Corrupt Practices Act (FCPA),

was passed in 1977. Currently, its effect extends

to:

1) American companies whose shares are listed

2) American business structures in the United

3) individuals, officials, and residents of the

Corporate compliance and liability are

interrelated. Compliance with the law and

minimization of offenses are in the field of view

of compliance. In the case of corporate

not committed on behalf of the entity but within

the authority of the entity's official (indirect

responsibility) (Laufer, 1999; Kovalishin, 2019).

The formation of such legal practice was

influenced by the doctrine of respondeat superior

(Latin "responsible senior"), according to which

the principal is responsible for the actions of his

control, which will include monitoring,

investigation, and reporting of compliance

deviations. In this regard, Arlen & Kraakman

(1997) proposed a model of corporate

responsibility, which establishes a severe penalty

for detecting business violations for non-

compliant businesses, and in the case of an

offense that has been duly documented by the

sanction can be significantly mitigated, which

conflict of interest policy, whistleblowing policy,

fair competition policy, etc.

Compliance is often associated with due

diligence (DD). This concept refers to the

procedure of thorough decentralized verification

of a potential counterparty in a contractual

relationship (Spedding, 2009). It is carried out on

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company (Kobeleva, 2020). This procedure is

and acquisitions (M&A), IPOs (public offerings

of securities on the stock exchange), assessment

of the company's investment attractiveness,

commercial lending, purchase of the real estate,

lending, sponsorship, or free financing

(Kuzmenko, 2020). Also in the literature, you

can find the understanding of due diligence as

checking the business entity for integrity and

reliability, "checking the required reliability",

"necessary diligence", "thorough research",

DD is an individual procedure because each time

it pursues a specific goal set for specialists in its

implementation by the customers of the

procedure, which are divided into three groups:

1) investors;

2) creditors;

consolidation of large enterprises. As the number

of transactions of such entities began to grow in

proportion to the expansion of their activities, the

risk of hiding critical information for

counterparties has increased (Kuzmenko, 2020).

Among the types of due diligence, financial,

legal, and tax are most often mentioned

(Virchenko, 2017). Such a classification is

possible due to the criterion of the subject of

subject of assessment needs to comply with the

law, verify its reputation, adhere to the code of

ethics, corporate governance standards, etc. Tax

due diligence is less narrow in its scope of study

and focuses on whether the auditee has complied

with the tax procedure.

Kuzmenko (2020) provides a typology of due

diligence depending on:

In English law, due diligence is often replaced by

and representations), for violation of which there

is a clear liability in the form of damages

(Tomsinov, 2015; Budylin, 2016; Sannikova,

2016; Kuzmenko, 2020). However, in Ukrainian

law, this institution has not become

unambiguous, so it has not taken root, and

entrepreneurs use personal guarantees with little

interest, as they worry about their assets, turning

to other types of collateral (Kuzmenko, 2020).

currently invalid regulatory act of the National

Bank of Ukraine, compliance was defined as an

activity to comply with the requirements of

legislation and internal procedures (Kovalishin,

2019). At the same time, the current Guidelines

for Improving Corporate Governance in

Ukrainian Banks (Decision No. 814-rsh, 2018)

The tasks for which the recommendations were

created include (Resolution No 98, 2007):

1) ensuring effective banking management;

2) making agreed on decisions;

3) increase of responsibility;

4) avoidance of conflict of interest;

5) promoting the disclosure of information and

6) increasing the reliability of banks;

is responsible for monitoring compliance with

the code of ethics. The recommendations also

contain a definition of compliance risk. This

means the risk of legal sanctions, financial losses,

or loss of reputation due to non-compliance with

the requirements of Ukrainian legislation,

regulations, internal regulations and rules,

standards of self-regulatory organizations

applicable to the bank.

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have a devastating effect on a bank's position and

sense, reputational risk is a negative change in

the perception of the bank by its stakeholders

(Andersen, 2020). However, predicting

reputational risks is not as easy as initial

operational and material risks, so spending large

amounts of money on regulating and anticipating

reputational risks is not always justified, and the

politicization of reputational risks by regulators

negatively affects confidence in the banking

system as a whole.

divisions of the bank, which carry out an

objective and independent assessment of the

bank's activities, ensure the accuracy of

reporting, fulfillment of its obligations by the

bank. In addition to the compliance unit

(compliance control unit), the control units