Regulatory & Compliance | Corruption in Brazil
over time, among other factors. Where
applicable, the fine must also be proportionate
to the contract secured or attempted by the
offending entity. On the other hand, the amount
must be reduced if the company cooperated with
the authorities (including by self-reporting) and
compensated damages and, most significantly,
if it had established and implemented an effective
compliance programme (as discussed below). In
any case, entities receiving monetary penalties
must publish this outcome in a newspaper of
general circulation and on their website, and
must also post it in plain sight at their offices.
â– Civil sanctions result from a lawsuit filed
i ndependent ly f rom t he a d m i n ist rat ive
proceed ing. Closely fol low ing the OECD
guidelines, they include: (i) disgorgement of
prof its and proceeds of the of fence;
(ii) suspension or revocation of the commercial
license; (iii) judicial winding-up order; and
(iv) debarment from participating in public
procu rement or f rom receiv i ng publ ic
benefits, funds, or aid.
Under the law, courts
must resort to compulsory dissolution only
in extreme circumstances, where an entity was
recu r rently used to f u r ther or faci l itate
misconduct or was incorporated as a front to
conceal its ultimate beneficiaries.
Effective compliance
programmes: a roadmap
Consistent with global anti-corruption standards,
to be considered strong and ef fective an
integrity programme should include the following
elements: (i) an appropriate tone at the top;
(ii) written standards of conduct, codes of
ethics, integrity policies and procedures (as
communicated to all directors, employees, and
where required, third parties); (iii) periodic
compliance training; (iv) periodic risk assessments
and corresponding updates to the compliance
programme; (v) accurate bookkeeping; (vi) strong
financial controls; (vii) specific procedures to
prevent fraud and other misconduct in connection
with public tenders and any dealings with
public authorities; (viii) an independent and
st r uc t u re d c ompl ia nc e f u nc t ion ; (i x) a
whistleblower mechanism open to employees and
third parties, as well as whistleblower protection
measures; (x) disciplinary measures for engaging
in unethical conduct; (xi) mechanisms ensuring
prompt discontinuation of misconduct and
timely remediation of damages; (x ii) due
diligence for third parties (including agents,
ser v ice prov iders and business partners);
(x i i i) ba ck g rou nd check s a nd e x posu re
assessments prior to mergers, acquisitions and
other restructuring activities; (xiv) continuous
monitoring and improvement of the compliance
programme; and (xv) transparency surrounding
donations to political parties and campaigns.
I n a sse ssi n g t he se c r it er ia , Bra z i l ia n
enforcement authorities will be more or less
strict, depending on the size and complexity of
the investigated company or group, as well as
the nature of their business activities.
Ethical Boardroom | Summer 2015
Leniency agreement:
the Brazilian plea bargain
Mirroring the strategy of other enforcement
agencies (such as the Department of Justice in
the US or the Serious Fraud Office in the UK) the
Brazilian system strongly encourages offending
companies to cooperate with the authorities to
resolve corruption charges. The difference here
is that the law does not afford the possibility of a
deferred prosecution agreement, only authorising
a type of settlement that necessarily includes an
admission of guilt: the ‘leniency agreement’.
This Brazilian version of a
plea bargain must be
negotiated directly with the
government authority in charge
of the administrative proceedings.
By cooperating, companies may
be able to reduce the monetary
f ine by up to two-thirds, as
well as avoid debarment from
public procurement or funding.
However, by express prov ision,
entities within the same group or family
will only benefit from the deal to the extent that
they all sign it and comply with its conditions.
To qualify for a leniency agreement, besides
pleading guilty, companies must immediately
cease the misconduct, fully and continuously
cooperate with the investigations and enforcement
proceedings and provide information and
documents that prove the offence and identify
other wrongdoers. The authorities may also
require corporations to implement or enhance
their internal controls and compliance programme
and impose any other conditions to ensure that
the agreement is effective.
The role of compliance:
prevention pays
These rules show that Brazil’s anti-corruption
approach is heavily focused on deterrence, as
they give clear incentives for businesses to invest
in compliance and prevention.
In and of itself,
the strict liability standard induces companies
to raise their level of diligence and care in order
to reduce bribery risks. Corporations are also
specifically encouraged to detect and prevent
violations, because repeating an offence or
allowing it to continue over time will inevitably
lead to larger fines. But even more directly, the
law explicitly provides for lighter sanctions where
a strong integrity programme is in place,
instantly rewarding companies that make serious
efforts to comply with the law.
Notably, corporations should not wait for
problems to arise before making essential
a dju s t ment s , a s t hei r opt ion s a f t er a n
enforcement action begins are not necessarily
cost-effective.
Leniency agreements, for example,
while potentially reducing the amount of fine,
carry risks that must be weighed on a case-bycase basis by any company under investigation.
In particular, they require an admission of guilt
that may transcend the charges settled with the
administrative authority and lead to further
consequences in court, including significant civil
sanctions against the company and criminal
sanctions against its employees.
On the other hand, adopting
robust internal controls is a
safer and more predictable way
to reduce risks. If resources are
limited, in light of Brazil’s business
culture and newly improved legal
framework, the following measures
in particular should be prioritised:
â– Risk assessment
Companies should identify
their main areas of risk under the
new law (especially related to bribery,
corruption and conflicts of interest)
through a thorough review of their
operations, including with respect to staff,
third parties, joint ventures, and activities
involving interaction with public officials
â– Internal culture and controls
As company personnel adapts to the new
anti-corruption rules and enforcement
reality, management should set the tone to
ensure an internal culture of compliance.
This includes adopting written policies
that clearly prohibit violations, as well as
investing in effective communications,
training, and internal controls
â– Third party due diligence Third party
relationships are an area of high risk in
many countries and Brazil is no exception,
particularly considering the strict liability
standard. Therefore, companies should
implement a rigorous due diligence
process and review historical relationships
with agents and joint venture partners,
including through a full background check
and a careful assessment of any red flags
related to the relationship (such as lack of
commercial purpose, offshore payments,
or unusually high fees)
These actions may not provide a universal
solution, but they can greatly strengthen a
company’s integrity mechanisms and generally
reduce liability exposure.
While adapting to
Brazil’s enhanced compliance environment may
be challenging and will require gradual changes,
businesses should take this as an opportunity
to proactively review and improve their controls.
Considering the risks and costs at stake, it pays
to prevent.
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