FCPAméricas Blog
Anti-Corruption Compliance Programs for SMEs: What Brazil Has to Say
9.22.2015
Anti-corruption compliance programs are good for companies for several reasons. Among other things, they help prevent, detect and remediate wrongdoing; protect shareholders; add value to the image of the company; and can be an important mitigating factors in many countries when authorities determine which sanctions they will apply (if any) and the level of the sanction. More recently, they are becoming a competitive advantage for obtaining work (some companies are now only contracting with third parties, even small ones, that have compliance programs in place). They are also an advantage for attracting investment (in Brazil, under the Brazilian Clean Companies Act, parent, controlled or affiliated companies and consortium members can be jointly liable for illegal acts; as a result, compliance programs have become an important tool for investors to mitigate risks).
In Brazil, based on data from the Brazilian Micro and Small Business Support Service (SEBRAE), 99% of companies are small businesses. They represent, approximately, 25% of the country’s GDP, 52% of all jobs (not considering informal work) and 30% of the purchases of the Brazilian federal government. Given the reach and importance of small and medium sized enterprises (SMEs), it would make sense for authorities to seek to engage them in anti-corruption compliance efforts.
In the United States, FCPA enforcement agencies have different compliance expectations for SMEs, with less formality, as described in further detail here. In Brazil, the approach is similar – Brazilian authorities are not required to take into consideration all compliance expectations when evaluating the compliance program of a micro or small business (defined, respectively, as entities with annual gross revenue of up to R$ 360 thousand and R$ 3,6 million – approximately U$ 94 thousand and U$ 940 thousand) (for further information about compliance programs under Brazil’s Clean Companies Act see here, here, and here – CGU is also about to publish a handbook with further guidance on compliance programs). On September 10, 2015, SEBRAE and the Office of the Comptroller General (CGU) issued Ordinance 2.279/2015 detailing compliance measures that will be taken into consideration when evaluating compliance programs of micro and small business.
Given the importance of compliance programs for SMEs, on August 31, 2015 the United Nations Global Compact in Brazil organized a workshop in São Paulo about implementation of such programs, with participants from companies of different sizes, and representatives of CGU and SEBRAE. CGU and SEBRAE are developing initiatives for SMEs to assist such entities in developing and implementing programs with reaches that are proportional to their profiles. The conference participants and I suggested various options to consider for developing and implementing anti-corruption compliance programs at SMEs:
Demonstrate tone at the top. One of the most important elements of an effective compliance program is top-level commitment. Those at the top of an organization are in the best position to foster a culture of compliance. While in larger organizations top-level management often demonstrate commitment to compliance indirectly (e.g., written statements to employees, overseeing the compliance program), in a smaller entity, face-to-face conversations with employees and personal involvement in the development and implementation of anti-corruption policies and procedures should take place.
Use free e-learning tools. When available and appropriate, free training options can make sense. The UN Global Compact and the UN Office on Drugs and Crime offer a free e-learning tool in multiple languages. The tool uses six interactive learning modules of about five minutes each to further the audience’s understanding on anti-corruption. The tool should be targeted to everyone who acts on behalf of a company.
Engage sectorial entities. While a small company may not have financial resources to develop certain compliance features, it may encourage other entities in its sector to develop compliance initiatives that can benefit the entire sector (e.g., development of a code of conduct and training materials).
Use of public databases for due diligence. Databases of public data are important sources of information and many of them can be checked for free. Before engaging a third party, SMEs may consider checking, for example, the list of debarred and suspended companies kept by CGU.
Hotlines. An effective compliance program should include a mechanism to allow an organization’s employees and others to report suspected or actual misconduct. The creation of an email account, telephone, or mailbox dedicated to receive such reports can be cheap and effective.
Internal controls. While many SMEs may not have resources to have a SAP system or internal audit function, they can still have internal controls in place. This can, for example, requiring riskier transactions (e.g., engaging a third party that will interact with government officials) to be approved by more than one manager.
Compliance networking. Many anti-corruption compliance events these days have no or nominal cost. These can be good opportunities for SMEs to exchange ideas with counterparts and larger companies. Cost-effective measures often arise from such interactions.
Compliance courses. While many SMEs may not have resources to use external resource to assist them with the development and implementation of a compliance program, they may have funds to pay for an employee’s tuition at a compliance course. The employee can then put in practice what he or she learns.
One of the most important things for SMEs is to demonstrate steps taken to implement and develop meaningful compliance mechanisms. A documented record of these efforts will be essential if issues arise down the road.
The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.
© 2015 FCPAméricas, LLC
Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor
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