What Is a Monitorship?

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What a Monitorship Is and How It Prevents Corporate Compliance

TL;DR

  • A monitorship is an independent oversight arrangement often imposed after corporate misconduct.
  • It ensures a company complies with legal, ethical, or regulatory reforms.
  • Monitorships are frequently required as part of Deferred Prosecution Agreements (DPAs).
  • The goal is to prevent future violations and rebuild trust with regulators and the public.
  • They are costly and complex, but can allow companies to avoid criminal conviction.

What It Is

A monitorship is a period during which a company operates under the supervision of an independent third-party (monitor)—usually appointed by a court or government agency—to assess and report on its compliance with laws or settlement terms. The monitor is not a company employee but an external expert, often a lawyer or former regulator, who reviews practices, recommends reforms, and reports progress to authorities.

Why It Matters

Monitorships are central tools for corporate accountability, especially after wrongdoing like bribery, fraud, or sanctions violations. They aim to ensure lasting compliance improvements rather than mere punishment. For companies, accepting a monitor can preserve their ability to operate, maintain contracts, and avoid debarment or prosecution.

How It Works / Key Concepts

  • Appointment: The monitor is chosen by agreement between the company and government or court approval.
  • Scope: Defined in the settlement or DPA, detailing what systems, controls, or policies must be evaluated.
  • Duration: Typically 18 months to 3 years, depending on the severity of the misconduct.
  • Reporting: The monitor provides periodic reports to authorities on company progress and compliance gaps.
  • End of monitorship: Once the company demonstrates sustained compliance, the monitor is discharged.

Examples / Use Cases

During a monitorship, organizations can implement significant changes to ensure compliance and prevent future issues.

  • HSBC (2012): Entered a DPA for money-laundering failures and operated under a five-year monitorship.
  • Volkswagen (2017): Agreed to a U.S. monitor after emissions fraud (“Dieselgate”) as part of its DPA.
  • Airbus (2020): Monitored under a global anti-bribery settlement with multiple jurisdictions.

Understanding the implications of a monitorship is crucial for companies to navigate the compliance landscape effectively.

Limitations and Risks

  • Monitorships can be expensive—costing tens of millions in fees and implementation expenses.
  • They can create tension between monitors and management over access, scope, or findings.
  • Critics argue that some monitorships lack transparency and can effectively function as extended punishment.
  • However, when well-designed, they promote lasting ethical reform and improved governance.

A monitorship is a common requirement arising from a Deferred Prosecution Agreement (DPA). However, DPAs have their own turbulent history. Read more here.

FAQ

  • Is a monitorship the same as a DPA? No. A DPA is a legal settlement deferring prosecution; a monitorship is one of its possible compliance terms.
  • Who pays? The company under supervision pays for the monitor’s costs and fees.
  • Can a company refuse? Usually not, if the monitorship is part of a DPA or court order. Refusal could risk prosecution or breach of settlement.
  • Are monitorships public? Some reports are public, but many details remain confidential between the company and regulators.

Sources

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