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Localizing Compliance Programs in Latin America

Localize [1]The compliance programs for Latin American subsidiaries of foreign companies often consist of translated versions of the program used at headquarters, without any (or just minor) adaptations. Oftentimes, this practice has the potential to negatively impact the ability of the program to operate at optimum levels and can lead to problems.

Here are five practical steps that companies can take to maximize the efficiency of their compliance programs in Latin America.

Address local risks. Companies doing business in Latin America should take a risk-based approach and pay particular attention to certain areas that are often problematic. The following three areas (which by no means are exhaustive, and may vary from country to country) have traditionally been the sources of compliance issues throughout the region:

1) tax systems in Latin America are costly and time-consuming. Corruption issues often arise when companies try to expedite this process, reduce costs and obtain favorable tax treatment;

2) obtaining licenses and permits in Latin America is often bureaucratic and time-consuming. In general, throughout Latin America, construction, operational and environment approvals involve many different agencies. Procedures are complicated and expensive. Given these issues, some companies might feel pressure to pay bribes to pass inspections and obtain and expedite approvals;

3) Throughout Latin American, except for very few specific situations, governments can only purchase goods and contract services through public biddings designed to ensure equal conditions for all bidders. Such procedures usually have strict and formal rules. Oftentimes, compliance issues arise in the context of public procurement. Companies operating in Latin America should have specific controls to prevent and detect compliance issues in these areas.

Respond to local legal requirements. Companies should make sure that their compliance programs take into consideration local legal requirements to which their subsidiaries are subject. For example, as highlighted in the recent regulations on Brazil’s Clean Companies Act (see more about the regulations here [2], here [3] and here [4]) one of the elements of compliance programs is “specific procedures to prevent fraud and illicit acts within tender processes, the execution of administrative contracts or in any interaction with the public sector, even it is intermediated by third parties, such as the payment of taxes, inspections, or obtaining authorizations, licenses, permits and certificates”. Companies’ current anti-bribery compliance programs that have been designed to prevent bribery may not cover such aspects and need to be updated.

Adapt to the local cultures and realities. Frequently, companies forget to adapt the program to the local culture. For instance, oftentimes, training materials consist of translated versions of the materials used at headquarters, without any adaptations. These materials often do not consider local contexts and can fail to connect to participants. For example, a hypothetical in which a public official is taken to a baseball game may seem odd in Brazil or Argentina. Adapting this example to taking an official to a game of the Libertadores Cup (South America’s premier international soccer tournament) could make this part of the training seem more tangible and immediate. Similarly, many companies use the same threshold for gifts, presents and entertainment across the board. They should take into consideration that in certain jurisdictiona, such thresholds would be perceived as disproportional or lavish.

Adapt compliance-related clauses. In Latin America, enforceability of compliance-related clauses is often extremely difficult, time-consuming, and costly. The main reason is that usually the clauses of Latin American subsidiaries consist mainly of translated versions of the clauses used by their foreign headquarters. Such clauses often disregard best practices in contract drafting in the legal systems in which the subsidiaries operate and miss local risks that could be addressed. As a result, the enforceability of such clauses are often problematic and their content is often incomplete. Practical steps to help companies maximize their compliance-related clauses in Latin America can be found here [5], here [6] and here [7].

Use local language. Companies should prepare the compliance policies and provide training and training materials in the local language. The use of local language will not only allow employees to understand the content of the policy and training (many people in the region do not speak English or other foreign languages). Even when employees speak English, local language helps increase understanding and avoids misunderstandings.

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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