[1]This guest post is from Tony Ji, a student at Harvard Law School who worked as a Summer Associate at Miller & Chevalier in the Summer of 2017.
The past few years seem to offer scant reasons for optimism in the fight against corruption in Latin America. Given the slew of corruption scandals, it is tempting to conclude that corruption has become worse and more widespread in the region. However, a February 2017 report [2] (hereinafter the “Report”) by Kevin Casas-Zamora and Miguel Carter at the Inter-American Dialogue sounds a more positive tone. Their report credits institutional reform and changing social attitude for bringing more corruption to light. Improving corporate compliance may be another positive development in addition to the progress discussed in the Report.
Starting with statistic evidence. According to the Report, measures for both real and perceived corruption levels have shown no systematic deterioration in Latin America in the past five years compared to the preceding five-year period. So why does there seem to be a sudden outbreak of corruption scandals when overall corruption has remained relatively constant?
The surge in scandals, the Report argues, is attributable to increased public sector transparency, more powerful enforcement against corruption, rising public intolerance, and new means of social mobilization. The Report further suggests that pro-transparency, pro-accountability legal and institutional reforms in the past decade supplied new tools and normative standards to the fight against corruption, thereby increasing the likelihood of public investigations. If these views are true, the recent surge in corruption scandals may carry a silver lining: it may be the fruit of years of institutional development and transformation of public opinion which have made it harder to hide graft and get away with impunity. As The Economist puts it, “It is a common paradox: the world often becomes aware of corruption when someone is doing something about it. That leads people to conclude that things are getting worse when they are, in fact, getting better.” (The Economist, June 4, 2016)
Standing alone, none of the factors suggested in the Report would seem to have been sufficient to trigger the anti-corruption storms sweeping across the region. For example, more government transparency would yield more information to detect potential graft, but may not lead to more prosecutions without enhanced capacity and independence of prosecutorial and judicial institutions. The combination of pro-transparency reforms and social media made dishonest acts easier to uncover and disseminate. Social media also augmented the public’s intolerance of graft through effective social mobilization. But without meaningful enforcement, no tangible gains could have been made in bringing the corrupt individuals to justice. It is the convergence of all these factors that drove the recent surge in corruption scandals.
So what happens after the curtains are drawn in the current dramas? Will corrupt businesses simply quit dealings with political leaders but revert to more mundane forms of misconduct? To ensure long-lasting gains in the fight against corruption, it is equally important to have preventive measures in place on the supply side of corruption. Corporate compliance programs can be an important complement to the public sector reforms featured in the Inter-American Dialogue Report, which mainly target the demand side.
According to Miller & Chevalier’s 2016 Latin America Corruption Survey [3] (“Miller & Chevalier Survey”), an increasing number of Latin American countries are following the lead of the U.S. and the U.K. to promote anti-corruption compliance programs. Brazil’s Clean Companies Act offers credit in penalty calculations for companies that can demonstrate compliance programs. Chile’s Corporate Criminal Liability Act provides a safe harbor for companies that adopt a compliance program before the commission of the offense. Colombia’s Law 1778 (the Transnational Corruption Act) recognizes the existence of a compliance program as a mitigating factor in the calculation of sanctions by the enforcement authority.
More and more companies in Latin America are adopting anti-corruption measures in the face of legal incentives and market pressure. The Miller & Chevalier Survey shows a steady increase in the percentage of respondents whose companies have taken steps to reduce corruption risk (77% in 2008; 85% in 2012; 87% in 2016). The most common measures among the Survey respondents include anti-corruption policies (82% in 2016), procedures for gifts, travel and entertainment for officials (71% in 2016), and anti-corruption training (70% in 2016). Due diligence policies for third parties have gained prominence in recent years as companies try to manage indirect risks arising from their relationships with third parties – a growing enforcement area of the U.S. Foreign Corrupt Practices Act (“FCPA”).
The effort to root out corruption requires participation from all actors. In addition to the roles of governments, civil societies, and citizens covered in the Inter-American Dialogue Report, companies must also fulfill their responsibilities to conduct honest business. Recent developments in corporate compliance programs will likely complement the institutional reforms in the public sector and shift in public opinion in turning the corruption tide in Latin America.
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