[1]Attention to anti-corruption compliance has grown dramatically in Latin America in the last few years. The trend is fueled by continued robust enforcement of the FCPA against Latin American-based companies, the recognition of compliance programs as mitigating factors in local legal regimes, and the increased willingness of certain local governments to enforce their own anti-corruption laws. This has led to a rise in local compliance know-how in various parts of the region. Communities of attorneys, accountants, investigators, and other compliance professionals are forming quickly in markets like Brazil, Mexico, Argentina, and Colombia.
With this new attention to compliance, some common mistakes are also emerging. The following four were expressed in panel discussions in last month’s inaugural ACI Andean Summit on Anti-Corruption Compliance & Enforcement.
Failing to Localize Global Compliance Programs. When global companies implement the same policies and communication strategies in Latin America as they do in other parts of the world, programs tend to lose impact. People in Latin America commonly describe the need to “tropicalize” programs to make them relevant on the ground. While local practitioners recognize that international norms must be understood and embraced, local context must also be considered during implementation. This means that tone from the top should be displayed in ways that are credible to local audiences. Policies should reference local standards. Local examples of compliance challenges and breaches should be used in trainings. FCPAméricas has discussed ways of localizing programs here [2], here [3], here [4], and here [5].
Underappreciating the Delicate Nature of Internal Investigations. Among Latin American companies still unaccustomed to conducting formal internal investigations pursuant to international standards, misconceptions tend to abound. Both the value of getting to the truth within an organization and the way in which this should be done are often misunderstood. Local actors are gradually learning more about the implications of the failure to investigate properly [6], evidence preservation [7], data protection rules [8], protecting the attorney-client privilege [9], when to use external resources [10], how to establish credibility with enforcement officials [11], and when to voluntarily disclose wrongdoing to the government [12]. Given the delicate and potentially explosive nature of internal investigations, local compliance communities are gaining an appreciation for the importance of doing them correctly, sometimes after making initial mistakes.
Misunderstanding the Compliance Function’s Place within an Organization. Compliance teams are still finding their place throughout Latin America. In many local companies, they are new, and companies are still treating them as add-ons rather than core components of the organization. Executive management is slowing learning where to position compliance teams and how to publicize their new roles. Business units are learning how to interact with them. Recruiters are learning where to find qualified individuals to staff them. FCPAméricas has discussed the proper role of the compliance function here [13], here [14], here [15], and here [16]. The Director of the SEC’s Enforcement Division, Andrew Ceresney, recently proposed [17] the following questions to help companies gauge the effectiveness of the compliance role within their organizations:
- Are compliance personnel included in critical meetings?
- Are their views typically sought and followed?
- Do compliance officers report to the CEO and have significant visibility with the board?
- Is the compliance department viewed as an important partner in the business and not simply as a support function or a cost center?
- Is compliance given the personnel and resources necessary to fully cover the entity’s needs?
Failing to Protect the Compliance Department’s Independence. A compliance unit’s voice within an organization should be independent. If not, the company runs the risk that compliance-related interests will be overshadowed by business ones, at critical times and in critical circumstances, to the company’s ultimate detriment. This lesson is particularly relevant in Latin America, where local economies often expand and contract [18], increasing pressure on businesses to perform, and sometimes merely to stay alive. Intense pressure can cause business leaders to lose site of the fact that compliance is not only a legal necessity, it is good for business [19] too. These situations sometimes put compliance teams on the defensive, trying to convince others of their value within the organization. Local compliance professionals are learning to make the case, demonstrating that a modest investment in compliance upfront can avoid major costs, disruptions, and liabilities in the future.
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.
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