As we continue our weekly series on the Seven Elements of an Effective Compliance Program, we move into a critical safeguard that organizations often overlook: Due Care in Delegation of Authority.

In Week 1, we established the foundation clear compliance standards and procedures.
Week 2 focused on leadership and oversight, emphasizing the importance of strong governance.
Now, Week 3 shifts toward a practical and often underestimated risk: who you choose to trust with authority inside your organization.

This element is not just paperwork, not just HR’s responsibility, and not merely a formality. It is a core requirement that helps prevent misconduct before it starts.

What Is “Due Care in Delegation of Authority”?

In simple terms, this element requires organizations to avoid assigning significant decision-making power to individuals who have a known history of unethical or illegal behavior.

That includes roles involving:

  • Signing contracts
  • Managing finances
  • Overseeing hiring
  • Handling sensitive information
  • Making operational or compliance-related decisions

The idea is straightforward:
If someone has demonstrated a pattern of misconduct, they should not be placed in a position where they could harm the organization.

Regulators expect organizations to take reasonable steps to ensure that individuals with authority are trustworthy, competent, and aligned with ethical standards.

Why This Element Matters

Delegating authority without proper vetting is a direct threat to any compliance program. One wrong hire, one poorly supervised manager, or one employee with unchecked discretion can create:

  • Legal consequences
  • Financial losses
  • Safety risks
  • Damage to reputation
  • Regulatory violations
  • Loss of trust with customers, partners, and employees

Compliance failures often trace back to one root cause: the wrong person was given the wrong authority.

This element helps prevent that.

What Regulators Expect to See

Regulatory guidance is clear:
Organizations must demonstrate that they take proactive steps to ensure that individuals in key roles do not pose a known compliance risk.

This does not mean perfection is required—only that the organization took reasonable precautions.

That includes:

  • Documented hiring procedures
  • Background checks appropriate to the level of responsibility
  • Internal controls around sensitive authority
  • A clear understanding of who holds discretionary power and why

If a violation occurs, regulators will ask:
“Should this person have been placed in that role?”

Your answer—and your documentation—must show that you exercised due care.

What This Looks Like in Practice

A company that successfully implements Element 3 will:

1. Perform background checks based on the sensitivity of the role

For example, someone responsible for financial decisions may require financial background screening, while someone with access to sensitive information may require additional verification.

2. Maintain internal controls that limit the risk of misconduct

This includes checks-and-balances such as dual approvals, spending limits, or separation of duties.

3. Avoid delegating authority to individuals with known histories of unethical behavior

This includes red flags such as fraud, harassment, safety violations, criminal activity, or prior compliance issues.

4. Document the vetting process

Documentation is essential. If it isn’t recorded, regulators will assume it didn’t happen.

5. Review authority levels periodically

Roles evolve. Responsibilities change. A review ensures controls stay aligned with risks.

These practices protect the organization while promoting a culture of integrity.

Strong Delegation Builds Strong Compliance

Good compliance isn’t only about detecting problems, it’s about preventing them.

Careful delegation ensures the right people hold the right responsibilities. It also reinforces the idea that authority is earned and maintained through ethical behavior.

When employees know that leadership takes delegation seriously, it strengthens the compliance culture. People become more aware of accountability and more careful with their own actions.

Key Action for Organizations This Week

Implement and document a formal vetting process for anyone in a position of substantial authority.
This includes background checks, internal controls, and a clear record of how responsibilities are assigned.

This single step can dramatically reduce compliance risk and strengthen every other element of your program.

What’s Coming in Week 4

Next week, we’ll look at Effective Communication and Training, an essential component that ensures employees understand the rules and know how to follow them.