Anti-Corruption Efforts to the North and South

What do Canada and Brazil have in common?  If you said, “recent aggressive ramp up in anti-corruption efforts,” you’d be right.  But what makes this all the more interesting is that these efforts are largely being driven by outside forces, not the governments themselves.

Canada

If we look to the North, you’ll recall that 2011 was a wakeup alarm for Canada after public chastisements from international compliance watchdogs.  In March of that year, Canada’s anti-bribery law, the Corruption of Foreign Public Officials Act (CFPOA), was criticized by the OECD for limited jurisdiction, insufficient numbers of investigators and weak penalties.  In May of the same year, Transparency International suggested that Canada lagged behind other developed countries, identifying it as one of 21 countries undertaking "little or no enforcement" of their anti-bribery legislation. 

Those rebukes prompted Canada to appoint the Royal Canadian Mounted Police (RCMP) the exclusive authority to lay charges for CFPOA and boosted its anti-corruption program.  It’s clear that additional dedicated resources to anti-bribery enforcement are having some impact.  Two recent headline cases, SNC-Lavalin and Griffiths Energy International Inc., point to increased seriousness on the part of the Canadians when it comes to enforcing the anti-corruption law.  Those close to the proceedings suggest that this year will be a milestone for Canadian enforcement with close to 40 active investigations ongoing.

In a noteworthy action on June 19 of this year, Canada continues to overcome handicaps to CFPOA by closing some troublesome “loopholes” in the original statute.  This legislative action passed through both the Senate and the House of Commons without amendment and significantly enhances the ability of Canadian authorities to prosecute offenders.  The changes include:

1. Elimination of the facilitation payment exception
2. Expansion of jurisdiction based on nationality
3. Maximum sentence of imprisonment increased from 5 to 14 years
4. A new books and records offense, punishable by up to 14 years’ imprisonment
5. Application of CFPOA to include non-profit organizations

Brazil

Brazil has emerged as a global economic powerhouse with a flourishing economy, but corruption and bribery continue to plague the country – and could undermine future growth. In response to the cancer of corruption, Brazilian lawmakers signed off last week on anti-corruption legislation giving the government authority to fine companies involved in bribery and bid-rigging up to 20 percent of their annual revenues.

It would be a mistake, however, to assume that the new law is simply a response to economic needs. This wasn’t just a technocratic solution to a governance problem. Brazil has had strong economic growth for more than a decade and, in the past, that wasn’t enough to motivate real reform. So what changed?

The main change has been Brazil’s own citizens. They have always been frustrated by bribery and corruption, but they reached a breaking point earlier this year. Tens of thousands of organized protestors took the streets of the country’s largest cities, decrying corruption and government inaction against it. The citizens of Brazil deserve the credit for making the new historic law possible.

The proposed anticorruption legislation is now in the hands of President Dilma Rousseff. President Rousseff has made the fight against corruption a central theme of her administration, and will almost certainly sign the proposed legislation into law this week. Once signed, the new law will take effect sometime in mid-January 2014 – 180 days after it is published in Brazil's Official Gazette.

Key provisions of the proposed Brazilian legislation include:

1. An absolute prohibition of bribery of government officials – both of Brazilian officials and non-Brazilian public officials
2. New penalties and sanctions – fines up to 20 percent of the previous year’s gross revenue of the company or legal entity
3. New corporate liability – corporations – including any non-Brazilian companies with a physical presence in Brazil or who sell directly via an agent into the country – will be subject to civil liability if they fail to prevent bribery by their employees and agents
4. Incentives for implementing effective compliance programs – along with the new liability comes a new set of incentives for companies to implement compliance program
5. Strong self-disclosure incentives – having a compliance program is necessary, but not sufficient, for receiving amnesty

Having an effective compliance program can result in partial, or even full, amnesty for bribery acts carried out by employees or agents of the company.If the company discovers an act of bribery carried out by an employee or agent, but does not disclose this to Brazilian authorities, they will receive no credit for having a compliance program.

Some critics have suggested that the new law will not be vigorously enforced, and that Brazilian authorities are more interested in satisfying their OECD treaty obligations than cracking down on corruption. These critics are wrong. I’ve spoken with compliance professionals based in Brazil and they understand how important it will be to have regulatory harmony with other anti-corruption laws, e.g. the U.S. FCPA and U.K. Bribery Act. Furthermore, the OECD will assess the new law’s impact and satisfying the treaty obligations will require better enforcement.

Truly the new law will be a historic step in Brazil’s fight against corruption, and reason for compliance professionals globally to cheer.

Call to Action for Organizations

Smart business leaders and compliance professionals with operations in Canada or Brazil should review, and possibly update, their anti-corruption compliance policies to ensure that they’re in line with these recent developments.  An effective compliance program should include, at a minimum, the following:

• Standards that apply to employees and agents about responsible business conduct, including bribery and corruption related concerns
• A high level person in charge of ensuring the standards are followed
• A plan for regularly training and communicating the standards to employees and agents
• A plan for how the company will respond to allegations that the standards were violated, including disciplinary actions
• A system for assessing the risk confronting employees – based on their job functions, qualifications, etc. – and how those risks should be mitigated, including when employees are being considered for employment or a promotion
• A system, such as a hotline, that allows employees and other stakeholders to anonymously report suspected instances of misconduct or ask questions
• A plan for periodically assessing the company’s compliance efforts and risks, making adjustments as necessary

The anti-corruption-related legal and regulatory changes in Canada or Brazil alone would be reason enough for most companies that do business internationally to implement robust compliance programs. But these developments taken together – and in the wider context of the U.S. FCPA, U.K. Bribery Act and the OECD Convention – demonstrate that there really is no excuse for inaction.