A report by Baker & McKenzie, a corporate compliance practice, reveals that some of the leading risks impacting companies doing business in Latin America spans from conducting business with the government to internal investigations and third-party screening and monitoring.  The impact of these risks are expected to intensify in the coming years as new anti-corruption laws in Latin America start taking shape by ushering a new era of accountability.

Internal investigations remain a big issue. According to the report titled “Spotlight on Latin America:Seven Compliance Challenges and How To Overcome Them,” when corruption comes to light, companies should not assume that firing employees involved will resolve the problem.  

Often, confusion occurs when there’s a disconnect between departments. For example, when internal audit, financial and legal departments carry out their own investigations instead of working together to resolve the problem.

Whistleblowing remains a tough issue to tackle due to cultural differences, the report said. In Latin America, whistleblowing is seen as “disrespecting authority” and in many cases employees prefer to address issues directly with their managers instead of taking their concerns to the headquarters.  If a company does not have the right controls in place, they run the risk of facing additional enforcement actions. In 80 percent of whistleblower cases the SEC has prosecuted to date, most concerns are raised internally at first.

Implementing a whistleblower hotline may seem like a check-the-box item, but to truly make this mechanism effective, a company should categorize and direct whistleblower tips.  Many large companies filter through tips and direct them to either ethics and compliance or an appropriate internal committee, but tips that involves serious financial and FCPA allegations are taken to an outside firm for investigation. 

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