FCPAméricas Blog
Reflections on Week of Compliance in Brazil
6.06.2018
This guest post was written by Tom Fox, known as the Compliance Evangelist. It has been cross-posted from the FCPA Compliance and Ethics Blog.
I have finished up my week in Brazil and I wanted to end this week’s Brazil focused blog posts with some final thoughts and observations on the country’s burgeoning compliance scene. It truly was a week of revelations for me. I started going to Brazil back in 2007 when I held my last corporate position to do Foreign Corrupt Practices Act (FCPA) internal investigations. My employer at the time was under a Deferred Prosecution Agreement (DPA) for FCPA violations and we were one of the very few companies who even had a compliance program in place.
My most recent trip was back in 2015 and at that time I would have said that Brazilian compliance was five years behind the US. Nascent but growing. However, in 2018, the Brazilian compliance scene is incredibly dynamic and I would put it only a step or two behind the US compliance scene. The impact of Operation Java Lato (Car Wash) and Odebrecht have opened the eyes of Brazilian businesses that the old ways of doing business simply will no longer be tolerated. This has led to not only growing sophistication around compliance but also a greater thirst for information on compliance best practices.
I attended the LEC 6th International Compliance Congress and the attendance rivaled that of any event in the US, save the annual SCCE Compliance and Ethics Institute. There were nearly 800 in attendance and it was a vibrant and lively scene both inside and outside the meeting rooms.
My talk was on using metrics to both determine and demonstrate compliance program effectiveness. Obviously, this issue has become important over the past few years and with the release of the Department of Justice’s (DOJ) Evaluation of Corporate Compliance Programs (Evaluation) in February 2017 and announcement of the new FCPA Corporate Enforcement Policy in November 2017, such metrics came to the forefront of the US compliance practitioner.
Brazilian compliance practitioners have fully embraced this new metrics approach and were eager to learn more about it. They saw the use of metrics as having far broader implications than simply responding to regulators. They knew that without compliance program metrics, you could not determine the state of your own compliance program. Moreover, without metrics used a in feedback loop, there is no way to test the effectiveness of your risk management system and to improve. While some commentators in the US still resist such process improvements, it was clear to me that the Brazilian compliance community embraces not only the use of metrics but realizes it is the key to both measuring and improving your compliance program.
But even beyond the use of metrics there was a great interest in moving compliance into the business processes arena to help improve business efficiency and profitability. While I have been talking about this for a few years, I spoke with several Brazilian compliance officers who are moving to more fully operationalize their compliance programs through this process approach. One compliance officer told me she was correlating gifts, travel and entertainment (GTE) spend with her business development sales cycle. Through this approach, she was not only making her compliance program more robust but it provided information to the business development folks on the nature, quality and effectiveness of their GTE customer spend.
The next observation was more continent wide than simply Brazil or as Matt Ellis said in my first podcast with him way back when “South America is not a country.” With multiple countries passing anti-bribery/anti-corruption legislation; such Argentina, Peru, Chile and Columbia, there is a much wider appreciation of fighting the scourge of global corruption than in any time in the past. While in the past these efforts have been led largely by American lawyers, now there is a deep talent pool in Brazil who can fan out literally across the continent to help to provide compliance consulting and guidance. Obviously, Brazilian prosecutors have much more experience than their South American counter-parts after the huge cases involving Petrobras, Odebrecht/Braskem, J&F, Rolls-Royce and Embraer. But it is more than simply prosecutorial know-how, coupled with the political will to enforce the law.
It is also an understanding of the nuts and bolts of compliance, which is something near and dear to the heart of the Compliance Evangelist. The prosecutors in those countries will need an education in and an understanding of what constitutes a best practices or effective compliance program. Companies in those countries will certainly need assistance in how to design, create and implement effective compliance programs. I think this home-grown compliance expertise and talent in Brazil may well be utilized on a continent-wide basis, rather than the exclusive reliance on US expertise and talent.
There has also been an explosion in compliance due to Brazilian prosecutions for corruption. This is a phenomenon I have observed in the energy industry in Houston where the business response to the uptick in FCPA in the first decade of this century was to institute compliance programs, literally up and down the business chain. In Houston this meant that if you wanted to do business in the energy space, you had to have a compliance program in place; from the largest multi-national down to the $15 million one product software company. This increase in compliance was self-imposed and self-policed in the industry. Now in Brazil, if you want to do business with Petrobras, your organization must have a compliance program in place.
This has also been true for those companies desiring to do business with government industries. Here the Odebrecht enforcement action was seminal in driving government contracting functions to require the bidders to have compliance programs in place. Literally up and down the continent, companies are installing compliance programs not simply as a business differentiator but as a business requirement. Certainly, drawing from the US experience, if compliance is a requirement to do business in your industry, companies will put such programs in place.
One final observation is the passion and youth of the compliance profession in Brazil. Many compliance practitioners I spoke to took positions in compliance literally right out of college and university as their first job. They want to make things better and not allow a return to doing business through bribery. Yet in addition to this passion is the age of many of the senior compliance practitioners in Brazil. There are some top compliance practitioners who are in their 30s and 40s. They were given assignments early in their careers to do an investigation or handle a compliance related matter and they are now some of the most experienced compliance practitioners in their country.
It was a great week of meeting and interacting with a wide range of compliance practitioners in Brazil. It was great to see not only our profession in such a growing and dynamic state but also see the regulators driving the legal end of the equation by aggressively prosecuting those who engage in bribery and corruption.
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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Comments
August 30th, 2018 at 3:05 pm
Tom, thanks much for making the time to come to Brazil and share with us your deep and robust compliance knowledge. I would also like to thank you for your kind words with respect to the evolution of compliance in Brazil within the last years. It is rewarding to hear that you felt this atmosphere during your this last visit. We will the same and we will keep working hard to keep raising the bar!