2017 Q1 SME Update: Global Anti-bribery, Anti-corruption – Latin America Increases Regulation

By Amy Greenstein

Over the past few years we have seen bribery and corruption in Latin America transition from being “business as usual” to being very risky business.

Some of the tailwinds causing this increased enforcement and legislation include (1) continued FCPA investigations and settlements by the U.S. DOJ and the SEC in Latin America (Teva, Olympus, Biomet, etc.), (2) multiple corruption scandals in Latin America over the past year (Panama Papers, “Operação Lava Jato”/Petrobras, Eletrobras, Embraear), and (3) increased cooperation among enforcement authorities both within Latin America (e.g. Argentina and Brazil cooperate regarding Operação Lava Jato) and also among other countries globally (e.g., US and Brazil cooperate to investigate and settle Embraer).

Brazil, Colombia and Mexico are among the countries that are taking the lead to develop new and/or enhanced anti-bribery and anti-corruption (ABAC) enforcement regimes.  The Brazil Clean Company Act, The National Anti-Corruption System (SNA) of Mexico and the Transnational Corruption Act (TCA) of Colombia are similar but also have their own unique elements.  In some ways, these laws are more far reaching than the FCPA – for example, foreign and domestic bribery as well as active and passive bribery are illegal.  However, the laws fall short in other areas such as requiring accurate books and records (as the FCPA does).  That being said, in the aggregate, these laws do share some common elements with the FCPA including: (1) holding legal entities strictly liable for the actions of their employees; (2) leniency agreements or credit for a compliance program, cooperation and self-disclosure; and (3) whistleblower protections (in Mexico only).

Another similarity with the FCPA is Brazil’s non-binding guidance, CGU Guidelines, that clarifies the expectations for compliance programs under the Clean Companies Act.  The guidance is organized around five key pillars that are considered to form the basis of a compliance program. These pillars are:

(1) Senior management’s commitment and support;

(2) Designation of a specific department responsible for handling compliance Issues;

(3) Risk assessments;

(4) Corporate compliance policies, SOPs and guidelines; and

(5) Continuous auditing and monitoring of the compliance program.

While Brazil’s guidance is similar to that found in the U.S., it also includes noteworthy aspects to consider.  First, companies are expected to monitor corporate goals to ensure that they are not pressuring employees to meet commercial targets at the expense of compliance.  Effective books and records are also expected to be kept (but not required as they are in the U.S.) and should contain business rationale documentation for hiring third parties, including the calculation of price agreements, fair market value and justification for payments above the market value.  The guidance also notes whistleblower hotlines and the ability to track complaints, which provides greater transparency and credibility to internal investigations.  Additionally, internal investigations are highlighted as a useful tool to stop wrongdoing as well as to trigger remedial actions and cooperation with authorities.

On a related note, Brazil created the Pro-Etica Program, which evaluates and approves companies’ compliance programs and efforts to prevent corruption.

The above aspects of the CGU Guidelines are more detailed and robust, in many ways, than the U.S. and U.K. guidance, which begs the question: could the CGU Guidelines be the new baseline for ABAC compliance programs?  It may be early to be asking this question as the Clean Company Act is a very new law and its enforcement, including adherence to the CGU Guidelines, has yet to be seen.  That being said, we should take note of the CGU’s Guidelines as they are quite prescriptive and could serve as a useful guide to develop and enhance ABAC compliance programs.