This week, a Committee of Experts met at the Organization of American States (OAS) in Washington, DC to consider the extent to which certain Latin American countries are complying with the OAS’s Inter-American Convention against Corruption [1] (IACAC). Among other things, they discussed [2] the responsibility of the private sector in the fight against corruption. What do FCPA compliance officers need to know about the IACAC?
It Is More Than Just a Treaty. The IACAC is a treaty, and a very important one in the world of anti-corruption. It has the great distinction of being the world’s first international legal instrument to deal with cross-border corruption. It was adopted on March 29, 1996, and entered into force a year later. It has more than thirty member states throughout the Americas.
Perhaps more importantly, the instrument has a peer review body too, called MESICIC, the Mechanism to Follow Up on Implementation of the IACAC. This week’s meeting in Washington was part of MESICIC. The fact that this group exists means that each country’s implementation of the convention is subject to constant evaluation. Experts regularly provide recommendations. This encourages ongoing (albeit gradual) improvement.
MESICIC is now in its Fourth Round of review. Like the OECD Anti-Bribery Convention’s Working Group (described here [3]), it generates periodic reports [4] after on-site visits. Dozens have already been conducted. They are highly detailed and offer extensive technical insights into improvements. It makes sense for the reviews to be so expansive and in depth. The treaty covers a broad range of areas of domestic and foreign corruption, unlike the targeted OECD Anti-Bribery Convention [5] that focuses specifically on foreign bribery in international business transactions.
Various Relevant Provisions. There are various provisions of the IACAC that are relevant to the private sector. Like the OECD Anti-Bribery Convention, the IACAC obligates member states to criminalize foreign bribery (see Article VIII on “Transnational Bribery”). This means that, in essence, the IACAC establishes an additional legal duty, above and beyond the duties created under the OECD, for countries like Mexico, Brazil, Argentina, Chile, and Colombia to enact foreign bribery laws. It also establishes a similar duty for non-OECD participating countries in Latin America. Countries like Peru, Uruguay, and Ecuador are therefore expected to address foreign bribery too. Adherence to these obligations has already been evaluated once by MESICIC in its Third Round review, reported here [6].
In addition, member states are obligated to enact laws that prohibit domestic forms of corruption (see Articles VI and VII). Thus, insofar as a company or its officials might pay bribes to public officials within a Latin American country, it could be subject to that country’s own domestic corruption laws. Moreover, under Article III(10), member states “agree to consider” requiring publicly held companies to maintain adequate books and records and internal controls, much like the requirements under the FCPA’s accounting provisions. Though Article III is purely aspirational (no legal obligation), the MESICIC reviews it too (see a review of accounting provisions in the Third Round [6] review), applying a level of encouragement and pressure.
Leveling the Playing Field. FCPAméricas has discussed [7] how, given agreements like the IACAC, countries are encouraged to do a better job at reforming their anti-corruption laws. In this way, the FCPA does not operate in a vacuum. Yes, improvement is a slow process. Yes, we cannot expect every country throughout Latin America to adopt and enforce robust domestic and foreign bribery laws overnight. But mechanisms like MESICIC show that, little by little, the playing field is being leveled. Countries are incentivized to move in the right direction. Indeed, the FCPA has helped put in motion a series of impressive international developments.
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