While Brazil has led the way in both anti-corruption legislation (the Clean Companies Act) and anti-corruption enforcement (Operation Car Wash), many South American countries and Mexico have stepped forward over the past few years and created their own anti-corruption legal regimes.
These changing regulatory landscapes stem from significant investigations and enforcement actions that every compliance practitioner should consider when enhancing third-party anti-corruption compliance. An in-depth look at some key developments follows.
Argentina: Article 27, 401, enacted in 2016. The Argentina anti-corruption law is similar to Brazil’s Clean Companies Act in many respects—it covers not only international but also domestic corruption; it employs some severe penalties, with fines ranging from two to five times the benefit sought or received; and, while it does not have specific compliance requirements, a company can avoid liability under the Act if it (i) self-reports to the government, (ii) has a compliance program before the incident underlying the legal violation occurred; and (iii) returns the undue benefit, or profit disgorgement.
Colombia: Law 1778, enacted in 2016. Colombia’s anti-corruption law, the “Transnational Bribery Act,” created corporate administrative liability for foreign bribery. The law applies to Colombian companies, including Colombian subsidiaries of non-Colombian companies registered to do business in the country. The penalties can be steep for violating the Act, as companies could be sanctioned with monetary fines up to approximately U.S. $55 million and face debarment from contracting with the Colombian government. Individuals may also encounter criminal liability, including between 9 to 15 years imprisonment and considerable fines. The Act also established credit for those companies with adequate anti-corruption programs that did not lay out effective elements of a compliance program. A company can avoid liability if it self-reports before the government opens an investigation or if it self-disclosed before it began performance under the contract procured via corruption.
Mexico: National Anti-Corruption Systems, enacted in 2016. Under Mexico’s National Anti-Corruption System, corporate entities can be held liable for “serious administrative offenses” such as bribery, collusion in public bid procedures, influence peddling, wrongful use of public resources, and wrongful recruitment of ex-public servants. The law also includes acts of third parties. Penalties can range up to twice the amount of the benefit received, reaching approximately U.S. $6 million; debarment of up to 10 years from public contracting; suspension of activities up to three years; or dissolution. The law mandates the coordination of anti-corruption and other controls bodies at all levels of Mexican government. From the compliance program perspective, the law provides mitigation for companies with compliance programs in place. Individuals and companies can reduce penalties when self-reporting conduct and cooperating with authorities. Finally, non-domestic companies desiring to do business with Mexican state-owned petroleum company Pemex and other state-owned enterprises must have anti-corruption compliance programs.
Peru: Law 30424, enacted in 2018. Peru makes illegal both the offering and paying of bribes (active bribery) and the receipt of bribes (passive bribery). The penalties for corporations include 2 to 6 times the amount of the benefit received or the expected benefit. The criminal penalties for individuals can range from eight years for paying a bribe to 15 for government officials who receive a bribe. The law mandates the equivalent of a chief compliance officer—that being a person who is in charge of prevention of corruption in an organization, who is appointed by the highest administrative body of the company, and who can exercise the compliance function autonomously. The law also has distinct specifications for compliance programs, including the following elements: identification, evaluation, and mitigation of risks related to the offenses covered by this law; internal reporting procedures; communication and periodic training; and continuous evaluation and ongoing monitoring of the compliance function.
Significant investigations and enforcement actions
Argentina has been enthralled with “The Notebook” corruption scandal, named for eight notebooks kept by the driver of a close advisor to the Minister of Federal Planning under the prior Kirchner(s) regimes from 2003-2015. These notebooks documented at least seven years of elaborate corruption schemes involving senior officials in Argentina’s government that detailed bribes of up to $200 million paid to key figures in the Kirchner(s) administrations.
Meanwhile, Chile—whose anti-corruption law was passed in 2009—and Mexico have both been moving toward an enforcement action against construction giant Odebrecht. Odebrecht CEO Marcelo Odebrecht was arrested in 2015 in connection with an investigation into a bribery scandal involving oil giant Petrobras. If both of these investigations can be resolved, they’ll add significant cache to the anti-corruption efforts not only in both countries, but also the entire region.
The bottom line for compliance practitioners is they should be ramping up their compliance efforts in South and Central America, as the regulators seem to be actively enforcing their new anti-corruption regimes and aren’t about to let down their guard.