The Anti-Bribery and Anti-Corruption Review: Brazil
The awareness of the importance of a culture of compliance in the corporate environment is recent in Brazil and has reflected significant changes in the management of companies. The global trend towards fighting corruption, recent events in the country and the promulgation of legislation dedicated to this issue have made Brazilian companies turn their attention to the need to ensure conformity and integrity while developing their activities.
This culture – already mature in foreign companies, multinationals or those that operate abroad, subject to legislation from other jurisdictions that already foresaw harsh sanctions against corrupt practices in the corporate environment – has evolved considerably in the Brazilian business environment, but there is still a long way to go. Despite the robust normative apparatus, besides the intrinsic ethical imperatives, it is still common to question the validity of creating new internal processes and allocate financial and human resources in developing compliance measures in companies.
In 2013, Brazil's anti-corruption law – Federal Law No. 12,846/2013 (LAC) – was enacted, following commitments made by the country in international agreements, bringing unprecedented mechanism and concepts of accountability of legal entities and the importance of implementing controls by companies in the fight against corruption and other illicit conducts in the corporate environment. By law, legal entities can be strictly liable for the occurrence of harmful acts foreseen in the law, carried out in their interest or benefit, and may be punished by the conduct of their partners, employees, representatives and third parties.
For the first time, compliance programmes (or integrity, as stated in the LAC) will bring benefits provided by law. Besides being an instrument for risk mitigation and accountability, the LAC established the existence of internal compliance mechanisms and procedures as a factor for reducing the calculation of applying sanctions if violation occurs. Federal Decree No. 8,420/2015, which regulated the law, established the parameters of reduction, granting a greater percentage of reduction to companies that have and apply an effective compliance programme, which can result in a decrease of up to 4 per cent in the calculation of the fine to be applied.
What the LAC establishes, therefore, is that the adoption of a properly structured and effective integrity programme may prevent irregularities not only from being committed, but may also grant a higher discount in the administrative sanctions if a violation occurs.
The LAC and its regulating Federal Decree No. 8,420/2015 are the main pieces of legislation regarding compliance matters in Brazil. The LAC is an administrative and civil law that establishes the liability of companies for acts of corruption and other acts against the local or foreign public administration. The LAC is restricted to companies.
It is important to stress that in Brazil, in the vast majority of cases, non-natural persons, such as corporations or other legal entities, cannot be charged with crimes. The exception to this general rule is criminal liability imposed on corporate entities for environmental crimes. Therefore, only individuals are criminally liable for bribery in Brazil.
Domestic bribery: legal framework
i Corporate liability under Brazilian legislation
Individuals and legal entities can be held liable for bribery of public officials in Brazil. Bribery of public officials is regulated under the Brazilian Criminal Code (Decree Law No. 2,848).2 As mentioned above, only individuals can be held criminally liable for bribery in Brazil. The LAC establishes judicial and administrative sanctions for legal entities. The LAC not only covers acts of corruption, but also prohibits other conducts such as fraud in public tenders, for both the national and foreign public administration.
The Brazilian Criminal Code sets forth the crime of active bribery, which is defined as the crime of offering or promising an undue advantage to a public official, in order to influence him or her to perform, hide or delay an official act within the scope of his or her duties. According to the LAC, it is prohibited to promise, offer or give, directly or indirectly, an undue advantage to a national or foreign public official, or a third person related to them.
ii Definition of domestic public official
As set forth in Article 327 of the Brazilian Criminal Code, a 'public official' is any person who, even on a temporary basis or without remuneration, renders services in governmental agencies or entities, and carries out a public function, job or office.
iii Brazilian anti-corruption law
As mentioned above, in 2013, Brazil enacted the LAC, later regulated by Federal Decree No. 8,420/2015, which provides civil and administrative liability of legal entities for conduct against local and foreign public administration. The provisions not only covers acts of corruption, but also prohibits fraud in public tenders, manipulation of contracts, obstruction of investigations and other illicit acts practiced against both national and foreign public administration. It is important to highlight that private bribery is not criminalised under Brazilian legislation.
Differently from US anti-corruption laws and very similar to the UK Bribery Act, under the LAC, legal entities can be strictly liable (and therefore is not necessarily to demonstrate intent) for prohibited acts committed in their interest or for their benefit (whether exclusively or not). This means that the authorities only need to show that the illegal acts were committed for the benefit or interest of the legal entity. Note also that the LAC provides for successor liability if amendments to the articles of incorporation, transformation, restructuring, merger, acquisition or spin-off of a company occurs.
Besides the statute mentioned above, two other laws contain additional provisions: (1) Federal Law No. 8,429/1992 (the Brazilian Improbity Law), which establishes civil and administrative corporate liability for acts against public law principles, such as morality and legality; and (2) Federal Law No. 8,666/1993 (the Brazilian Public Procurement Law) that establishes rules for public tenders and contracts with the government.
As mentioned earlier, legal entities cannot be held criminally liable, except for environmental crimes. If environmental crimes occur, criminal liability may be imposed on corporate entities when the offence is committed: (1) as a result of a decision of its legal or contractual representative or of its board; and (2) for the company's interests or for its benefit.
iv Penalties under the LAC
Legal entities are prohibited from promising, offering or giving, directly or indirectly, any undue advantage to a national or foreign public official, or a third person related, and to defraud a public tender or public contract, among other illicit conduct. If a violation occurs, the administrative and civil sanctions in the LAC are as follows.
Administrative sanctions are:
- fine of 0.1 to 20 per cent of the gross revenue in the last year prior to the start of the administrative proceeding; if such criteria cannot be used, the fine will range from 6,000 reais to 60 million reais; and
- publication of the condemnatory decision.
Judicial sanctions are:
- prohibition from receiving incentives, subsidies, grants, donations or loans from public agencies or entities and from public financial institutions or institutions controlled by the government, for up to five years;
- loss of assets, rights or valuables representing the advantage or profit, directly or indirectly obtained from the wrongdoing;
- partial suspension or interdiction of the legal entity's activities; and
- compulsory dissolution of the legal entity.
The LAC sets forth a list of factors that will be taken into consideration when applying sanctions, including the seriousness of the offence; the advantage gained or sought; whether the offence was fully or partially completed; the level of damages; and the negative effects produced by the offence.
Regarding individuals, they are subject to criminal prosecution in case of corruption acts. Criminal liability requires evidence of the participation of each individual and of the extent of each one's intent in perpetrating the improper conduct. Therefore, strict liability does not apply to criminal charges.
v Political contributions
According to Federal Law No. 9,504/97, individuals can make political contributions that do not exceed 10 per cent of their gross income. Law No. 9,504/97 allowed companies to contribute to candidates or political parties up to 2 per cent of the company's gross revenue in the year prior to the election. However, this provision was revoked by Federal Law No. 13,165/2015, and companies are no longer permitted to make political contributions.
vi Commercial bribery and facilitation payments
Private bribery is not regulated by Brazilian legislation and facilitation payments are prohibited.
vii Improbity Law and Public Procurement Law
Breaches to the Federal Law No. 8,429/1992 (the Administrative Improbity Law) may result in sanctions to legal entities and individuals whose misconduct results in illicit enrichment of public officials and losses to the public treasury. In its Article 3, the Law extends the sanctions to those who induce or contribute to the practice of the act of improbity or benefit from it in any direct or indirect form. In this sense, administrative improbity proceedings will prosecute the private individual as well as the private legal entity to which they are linked.
Under the Federal Law 8,666/1993 (the Public Procurement Law), companies unduly benefited by any illegal act during a public bidding process are subject to sanctions such as fines, suspension and blacklisting from participating in public tenders or signing contracts with government bodies.
In addition, at a federal level, the Federal Audit Court (TCU) has powers to review public disbursement and violations of public procurement laws.
Enforcement: domestic bribery
If an individual commits a crime of corruption or other crimes set forth in the Brazilian Criminal Code or laws, the state police, federal police and the state or federal Public Prosecutor's Office are the authorities entitled to investigate and prosecute corruption.
For violations of the LAC, the highest authority of the relevant agency or entity of the executive, legislative and judiciary branches is allowed to investigate the matter and impose administrative sanctions. The Office of the Federal Comptroller General (CGU) has authority to investigate, process and sanction illegal acts set forth in the law that are committed against a foreign public administration. At the federal executive level, the CGU will also have concurrent authorisation to initiate administrative proceedings against legal entities and audit the proceedings handled by other authorities. In the case of judicial sanctions, the entities may follow the procedure established by the Brazilian Class Action Law, set forth in Law No. 7,347/1985.
In addition, the LAC allows the public administration to sign leniency agreements with legal entities that violate such law, provided they effectively collaborate with the investigation, and that the collaboration results in: (1) identifying those involved in the violation, when applicable; and (2) rapidly obtaining information and documents proving the illegal acts under investigation.
Furthermore, Federal Decree No. 8,420/2015 specifies that implementing or improving an existing compliance programme according to the 16 parameters mentioned below may also be included among the obligations of a company wishing to enter into a leniency agreement.
The leniency agreement does not exempt the legal entity from its obligation to redress damages caused. However, it reduces the fine by up to two-thirds, and exempts the legal entity from making the condemnatory decision public and from the prohibition to receive incentives, subsidies, grants, donations or loans from public agencies or entities and from public financial institutions or institutions controlled by the government, from one to five years. According to the LAC, leniency agreements may also cover violations under Articles 86 to 88 of the Brazilian Public Procurement Law.
2020 covid-19 pandemic scenario
As a reaction to the World Health Organization declaration of the covid-19 pandemic in March 2020, the public federal, state and municipal administration passed decrees and provisional acts to soften legislation given the exceptional situation faced worldwide.
The first major change was brought under Provisional Measure No. 928 (MP 928), imposed by the federal government, providing for actions to deal with the public health emergency. MP 928 established that judicial deadlines will not run in relation to accused and prosecuted private entities sued in administrative proceedings as long as the pandemic prevails. The limitation period for applying administrative sanctions – provided in the Anticorruption Law (Law No. 12,846/2013), the Law of Civil Agents of the Union (Law No. 8,112/1990) and other rules applicable to public employees – has been suspended.
In May 2020, Provisional Measure No. 966 (MP 966) changed the legal regime of liability of public agents for actions and omissions in acts related to the pandemic. Public agents responsible, directly or indirectly, for measures to combat the covid-19 pandemic, including economic ones, can only be punished in the civil and administrative spheres if they act or omit with intent (with intention) or gross error. Legal protection also extends to the 'technical opinions' of public officials, as long as they have acted in good faith.
In order to encourage donations from individuals and companies to strengthen the fight against the pandemic, the federal government published Federal Decree No. 10,314/2020, which allows the government to receive donations of goods, services or technology, assuming charges or duties in exchange (such as transport logistics). The regulation amends Federal Decree No. 9,764/2019, which allowed donations to be made by any natural or legal person, national or foreign, in a regular situation in the country, but without any charges to the government. With the inclusion of this new type of donation, legal entities and individuals will be able to establish conditions, such as requiring the beneficiary to bear the logistics costs.
On 28 April 2020, the CGU launched the booklet 'Good Practices of Integrity in Public-Private Relations in Times of Pandemic', guiding companies in operations carried out with the public sector in the course of the pandemic. The document emphasises the importance of promoting transparency and integrity in public–private relations, in addition to directing the main inspection actions that will be prioritised after the normalisation of the situation faced by the country. The booklet is divided into the topics 'orient, register, disseminate, monitor, report and preserve your image', providing guidance and suggesting guidelines to be followed by companies.
The financial sector is particularly vulnerable to the current crisis, in this sense, the COAF (Council for the Control of Financial Activities) reinforced the importance of diligent control to mitigate risks, particularly those related to fraud. The COAF published a list with the main warning signs it detected in this crisis period, such as contracting third parties with no previous bidding and overpricing, the receipt of public funds for the purchase of equipment or supplies to fight the pandemic with immediate transfer to third parties with no apparent financial relationship and transfer of funds to public agents by companies that received payments resulting from administrative contracts.
It reveals that, at this point, there is an immediate need for a risk (re)assessment by companies. In this case, new measures must be adopted or existing measures must be updated to the new scenario, to mitigate the various dangers that a crisis could bring. The compliance department must adopt extraordinary controls to monitor the programme's conformity and reinforce its controls mainly in relation to: (1) donations to public agencies; (2) public contracts, agreements and partnerships, especially when arising from emergency contracts; (3) adequacy of accounting records; and (4) control mechanisms for employees and third parties, given that they are exercising their activities outside the company, when applicable.
Other recommended measures are periodic reports to senior management (and in certain cases to investors) and the establishment of a crisis committee to address the issues, which must be multidisciplinary and include the compliance expert.
With the pandemic, a surge in corruption and fraud cases, involving public expenses with the fight against covid-19, has developed into numerous police investigations involving state and municipal governments. Operation Placebo has been the most prominent in national media, targeting Rio de Janeiro's state governor Wilson Witzel.
The operation was based on two investigations conducted by the Operation Car Wash task force in Rio and by the Public Ministry of Rio de Janeiro. Both relate the name of the governor of Rio, Wilson Witzel, with businesspeople and managers involved in diversions of resources destined to fight the pandemic in the state. In addition, other operations were conducted in various states such as the State of Acre Operation Off-Label and in Pernambuco Operations Casa de Papel, Bel Masqué and Apnea. All operations targeted fraud and corruption cases within the public health administration, involving arbitrary bidding waivers, overbillings of medical equipment and embezzlement.
In the latest unfolding of the operations, Wilson Witzel, was removed from office for 180 days on 28 August 2020, as determined by the Brazilian Superior Court of Justice. The measure is part of Operation 'Tris in Idem', which is searching six states and the federal district and attempting to arrest 17 people, including Witzel's political party president, Pastor Everaldo, former Rio State economic development secretary, Lucas Tristão, and the former mayor of Volta Redonda, a major city in the Rio de Janeiro state, Gothardo Lopes Netto.
Foreign bribery: legal framework
Individuals and legal entities can be liable for bribery of foreign public officials in Brazil. Bribery of foreign public officials is regulated under the Brazilian Criminal Code (Decree Law No. 2,848)3 for individuals, and the LAC for legal entities (administrative and civil liability). This Law not only covers acts of corruption, but also prohibits acts such as fraud in public tenders, for both national and foreign public administration.
The Brazilian Criminal Code defines the crime of active bribery in an international commercial transaction as an individual offering or promising undue advantage to a foreign public official or to a third party to influence him or her to perform, hide or delay an official act related to an international commercial transaction.
Under the LAC, it is forbidden to promise, offer or give, directly or indirectly, an undue advantage to a national or foreign public official, or a third person related to them.
In Brazil, foreign public officials are those who, even temporarily and without compensation, hold a public position, job or office in government agencies and entities, or in embassies of a foreign country, as well as in legal entities controlled, directly or indirectly, by the government of a foreign country, or in international public organisations. Public international agencies and entities, diplomatic representations of foreign countries, legal entities controlled, directly or indirectly, by the government of a foreign country, and international public organisations, are considered foreign public administration, according to the LAC.
The consequences of bribery of foreign public officials are as follows.
- For the individuals involved: Under the Brazilian Criminal Code, individuals who commit acts of corruption in international commercial transactions can be subject to penalties of a fine and up to eight years of imprisonment.
- For the company or legal entity: Under the LAC, legal entities can be subject to administrative and judicial penalties:
- Administrative: a fine of 0.1 to 20 per cent of the gross revenue in the last year prior to the start of the administrative proceedings; if such criteria cannot be used, the fine will range from 6,000 to 60 million reais; and publication of the condemnatory decision.
- Judicial: prohibition from receiving incentives, subsidies, grants, donations or loans from public agencies or entities and from public financial institutions or institutions controlled by the government, for up to five years; loss of assets, rights or valuables representing the advantage or profit, directly or indirectly, obtained from the wrongdoing; partial suspension or interdiction of the legal entity's activities; and compulsory dissolution of the legal entity.
Associated offences: financial record-keeping and money laundering
Federal Law No. 9,613 of 1998 (the AML Act), as amended by Law No. 12,683/2012, increased prosecution for money laundering crimes in Brazil. This regulation establishes a stricter criminal regime for the crime of money laundering, broadening its scope and establishing additional sanctions on different parties who participate in money laundering schemes. The AML Act no longer restricts the crime of 'money laundering,' to the prior occurrence of one of the crimes previously described in Article 1 of the AML Act. Hence, the list of predicate offences has been extinguished and this concept now encompasses any criminal offence, including misdemeanours and, notably, tax evasion crimes. These measures were designed to prevent the misuse of the financial system for illicit actions described in this law. It also requires legal entities to identify its customers and to maintain updated records of any transaction, as well as the duty to report any transaction that seems related to crimes referred to in this law. In case of omission, entities may be subject to administrative penalties for non-compliance.
The AML Act is based on the Financial Action Task Force Recommendations that identify three phases of money laundering crimes: (1) placement; (2) layering; and (3) integration of assets originating from crime. Even if money laundering crimes are related to a prior criminal offence, the proper authorities may investigate money laundering acts and initiate a criminal lawsuit even before the prior criminal offence has received a definitive ruling from the courts. It is important to stress that money owners may be held criminally liable alongside anyone who facilitated the use, acquisition or retention of criminal property on behalf of another person. Individuals who work for an entity used directly or indirectly for money laundering may also be held liable if they had knowledge of the scheme.
On the other hand, some corporations and individuals, including financial institutions, brokers (currency or stock exchanges), insurance, credit card companies, leasing and factoring companies, gold, jewelry, arts and luxury items dealers, real estate agents and several others, have a legal duty to establish anti-money laundering and terrorism financing policies and to report all suspicious activity to the authorities.
The same law created the COAF, an agency that is now subordinate to the Central Bank of Brazil and currently named the Financial Intelligence Unit (UIF). It is responsible for the regulation and investigation of transactions suspected of money laundering. The UIF has the power to impose administrative penalties. Law No. 12,683/2012 broadened the number of individuals and legal entities that are obliged to inform suspicious activities to the UIF. Some entities such as stock exchanges, commodities exchanges, derivative exchanges, banks, securities brokers and dealers, insurance companies and factoring companies must pay special attention to suspicious transactions in relation to money laundering rules and inform the UIF of transactions that violate money laundering laws. Moreover, any transaction conducted with those entities involving assets that can be converted into currency exceeding 10,000 reais must be reported to the UIF.
The Central Bank has published specific rules regarding money laundering prevention. For example, it has issued rulings in order to enhance the Anti-Money Laundering and Terrorist Finance system in Brazil. These rules were enacted in accordance with the recommendations of the Financial Action Task Force (FATF), the inter-governmental body created to promote the development of international policies to combat money laundering and terrorism financing. Brazil has been a member of FATF since 2000.
Enforcement: foreign bribery and associated offences
Even though it is not common, we have seen criminal cases involving the prosecution of individuals for foreign bribery and administrative procedures against companies for acts of foreign bribery.
International organisations and agreements
Brazil is a signatory to the United Nations Convention against Corruption, the Inter-American Convention against Corruption and the OECD Anti-Bribery Convention, though it is not a member of OECD.
In addition to the provisions of the Anti-Corruption Law and the Federal Decree No. 8,420/2015, several other bills advance in this matter by offering advantages to companies with effective compliance structures in place.
Most Brazilian states have already implemented the Anti-Corruption Law through local laws or decrees that benefit the effective application of the Law at the state level - and the issue is under discussion in other states that have not yet done so.
In January 2020, Federal Law No. 13,964/2019 (the Anti-crime Package) began its enforcement, bringing innovative measures in whistle-blowing practices within the public administration. It is now mandatory for public bodies to create whistle-blowing channels for receiving complaints, including direct administration agencies – augmenting the public bodies with a a mechanism that is already recommended for private companies and already mandatory for indirect administration (public companies and mixed-capital companies under the State-Owned Law).
The Law brings provisions on retaliation against the whistle-blower, prohibiting things such as arbitrary dismissal, unjustified alteration of functions, imposition of sanctions and other types of reprisal. The Law addresses retaliation against whistle-blowers as a serious disciplinary offense. The agents that engage in this conduct may be subject to dismissal of the public service, and, in addition, the whistle-blower may be doubly compensated for any material and moral damage.
In addition, the Anti-crime Package provides in its Article 4-C Section 3, the possibility of retribution to whistle-blowers in up to 5 per cent of the amount recovered by the state if the information provided results in the recovery of losses by crimes against the public administration.
The pioneering initiative of the state of Rio de Janeiro in State Law No. 7,753/2017, made mandatory the existence of compliance programmes at companies entering into contracts with the state administration. The example was followed by the federal district in Law No. 6,112/2018 and the states of Rio Grande do Sul (State Law No. 15,228/2018), Amazonas (State Law No. 4,370/2018) and Goiás (State Law No. 20,489/2019).
Federal Law No. 13,303/2016 (the State-Owned Companies Law) provides for the legal status of state-owned companies, government-controlled private companies and their subsidiaries, within the union, the states, the federal district and municipalities. In this regard, the State-Owned Companies Law contains provisions on the modernisation of the management of state-controlled companies, seeking to inhibit the political influence on their administration with rules regarding corporate governance, compliance and transparency in their activities.
Converging on the importance of compliance, there are several bills that deal with the subject. Bill No. 429/2017, recently approved by the Senate and awaiting approval by the House of Representatives, determines the creation of an integrity programme for political parties. According to the proposed text, parties will have to provide an integrity programme in their statutes that should contain a set of internal mechanisms and procedures for control, audit and incentive to report irregularities.
Furthermore, the Bill registered under No. 435/2016 in the Senate proposes modifications to Article No. 7 of Federal Law 12,846/2013 to require not only the implementation of a compliance programme, but also its certification by a manager designated solely for the compliance system. Other propositions should also be mentioned: (1) Bill No. 7,149/2017 determines that companies that enter into contracts with the Federal Public Administration must implement a compliance programme; and (2) Bill No. 303/2016 proposes the implementation of a compliance programme by the states, municipalities and the union so these entities can receive transfers of resources.
The legislative movement represents a trend to impose stricter regulation on companies that want to contract with the government. Integrity in commercial relations and public contracting are no longer optional in Brazil.
Other laws affecting the response to corruption
Besides the LAC and the Brazilian Criminal Code, additional federal laws contain provisions that affect the response to corruption:
- the Brazilian Improbity Law establishes civil and administrative corporate liability for acts against public law principles, such as morality and legality;
- the Brazilian Public Procurement Law establishes rules for public tenders and contracts with the government;
- Federal Law No. 13,709/2018 (the Data Protection Law) governs rights and obligations related to the processing of personal data (i.e., information related to an identified or identifiable individual) and good practices, and creates a national data protection authority, among other topics. It will enter into force in 2020; and
- the State-Owned Companies Law provides for the statute of state-owned and state-controlled companies and their subsidiaries, aiming to modernise the management of public companies and avoid corruption, creating distance from political influences, as mentioned above.
The LAC and its regulating Federal Decree No. 8,420/2015 are the main pieces of legislation regarding compliance matters in Brazil. The LAC establishes that the highest authority of the damaged public entity of the executive, legislative and judiciary has competence to investigate and impose administrative sanctions under the LAC. The CGU has authority to investigate, process and sanction illegal acts set forth in the LAC that are committed against a foreign public administration. At the federal executive branch level, the CGU also has concurrent authority to initiate administrative proceedings against legal entities and audit the progress of proceedings handled by other authorities.
The implementation of a compliance programme is not mandatory under the LAC. If a violation occurs, the entity's compliance programme will be assessed by the enforcement authorities and may be considered a mitigating factor for a fine. The existence of a compliance programme does not eliminate civil or administrative liability for legal entities, but it can reduce sanctions on them.
Federal Decree No. 8,420/2015 provides guidance on what can be considered an effective compliance programme. According to this Decree, a compliance programme must be customised and structured to each legal entity and its activities. This provision is important and solidifies the understanding that there are no 'off-the-shelf' compliance programmes. Furthermore, the Federal Decree No. 8,420/2015 establishes 16 parameters against which a compliance programme will be evaluated:
- commitment by the legal entity's senior management, including board members, proven by their clear and unequivocal support for the programme;
- standards of conduct, code of ethics, policies and integrity procedures to be applied to all employees and administrators, regardless of their position or role;
- standards of conduct, code of ethics and integrity policies extended, when necessary, to third parties (e.g., suppliers, service providers, intermediaries and other associates);
- periodic training on the compliance programme;
- periodic analysis of risks to implement necessary adjustments to the compliance programme;
- precise accounting records that reflect all transactions of the legal entity;
- internal controls that assure that reports and financial statements of the legal entity are readily prepared and trustworthy;
- specific procedures to prevent frauds and illicit acts within tender processes, in the execution of administrative contracts or in any interaction with the public sector, even if intermediated by third parties, such as the payment of taxes, subjection to inspection, or obtainment of authorisations, licences, permits and certificates;
- independence, in structure and authority, of the internal department responsible for enforcing the compliance programme and monitoring its compliance;
- channels to report irregularities, openly and broadly disseminated among employees and third parties, and mechanisms to protect good-faith whistle-blowers;
- disciplinary measures enforced against those found to have violated the compliance programme;
- procedures that assure the immediate suspension of irregularities or detected infractions and the timely remediation of the damages caused;
- proper due diligence conducted prior to engaging third parties and, depending on the circumstances, monitoring of third parties such as suppliers, service providers, intermediaries, and other associates;
- verification, during a merger, acquisition or other corporate restructuring, of irregularities or illicit acts, or the existence of vulnerabilities in the legal entities involved;
- continuous monitoring of the compliance programme to ensure it remains effective at preventing, detecting and otherwise addressing wrongful acts described in the LAC;4 and
- transparency surrounding donations to candidates and political parties made by the legal entity.
Another factor considered when applying sanctions is 'the cooperation of the legal entity with the investigation of the offence'. Federal Decree No. 8,420/2015 sets forth that penalties may be reduced by 1 to 1.5 per cent, regardless of a leniency agreement, if the entity had cooperated with the authorities.
As mentioned above, there is no specific legal requirements to implement codes of conduct, policies, procedures, corporate protocols and whistle-blowing channel, but the adoption of compliance measures effectively represents a relevant benefit to the entity in case of a violation. In addition, the CGU has published material related to the LAC and to Federal Decree No. 8,420/2015. Those materials include a guideline to assist companies in developing and improving a code of conduct, policies and instruments according to the parameters set forth in Federal Decree No. 8,420/2015, a manual providing guidelines on the calculation of penalties imposed by the LAC and a manual about conflicts of interest.
There have been recent discussions and developments to unify the competence of public authorities to enter into leniency agreements with legal entities. On 6 August 2020, a cooperation agreement was signed between the Office of the Federal Comptroller General (CGU), the Office of the Attorney General (AGU), the Federal Supreme Court and the Federal Audit Court (TCU) and the Ministry of Justice. The agreement formalises a multi-agency information-sharing scheme and dictates that leniency deal negotiations are to be handled solely by the CGU and AGU, which resembles the actual leniency system practices in the United States.
Under the new system, the signatory agencies will share with the other institutions the information and documents provided by the collaborating company. However, the agreement establishes that the CGU and AGU will have exclusivity over the execution and negotiation of leniency agreements pertaining to the Anti-Corruption Law, with consideration to cases where the facts are subject to the TCU's jurisdiction; the agencies will forward necessary information to estimate the resulting damages.
On the other hand, the anti-corruption section of Brazil's MPF on 10 August 2020 released a technical note opposing the new system and withdrawing from the agreement. The enforcement agency said the cooperation agreement will not improve cooperation but rather harm the performance of each of the signatory agencies. The section also claimed that the deal is unconstitutional as it limits the scope of its anti-corruption enforcement as given in the federal Brazilian Constitution.
Previously, in May 2020, the MPF released a Technical Note on the terms of adhesions or subscriptions of individuals in leniency agreements signed with the public body. The document was prepared by Permanent Commission for Advising Leniency and Plea Bargain Collaboration with a view to guiding the actions of prosecutors in negotiations involving people connected to companies that entered into leniency agreements with the MPF and safeguarding equality in granting benefits.
For this reason, the Technical Note established guidelines on the possibility of extending benefits to individuals, in order to ensure greater predictability regarding their legal situation, as well as engender greater security to the cooperation link necessary to fight corruption in the country. In this way, the benefits system can even be extended to the criminal sphere, since the criminal classifications of the illicit conduct of the individuals involved imply in different personal responsibilities.
Outlook and conclusions
Even though the LAC has no mandatory provision for the implementation of a compliance programme, some states have regulations that require companies to implement compliance programmes when contracting with the public administration depending on a certain threshold. It is a strong trend towards the requirement of a compliance programme when contracting with a public entity.
Additionally, in January 2019, the National Bank for Economic and Social Development (BNDES) published Resolution No. 3,493/2018, which amended the rules of contracts signed by the bank. Therefore, the BNDES began to require its financial agents to prove, whenever requested, the adoption of procedures aimed at complying with rules to prevent money laundering and terrorism financing. Furthermore, it also required financial agents to prove the adoption of a compliance programme, policies and procedures aimed at preventing and combating corruption, fraud and other irregularities foreseen in legislation, in particular in the LAC and its changes in the applicable regulations and in the policies and norms of the BNDES.
Therefore, the lack of a compliance programme may impede the company's participation in public transactions. In those circumstances, consult local regulations to verify whether there is any need to adapt the compliance programme to meet the local requirements.
Another entity that followed the trend in Brazil is the Brazilian Securities and Exchange Commission (CVM). In 2019, the CVM published Rule No. 607/2019 regulating its sanctioning activity and establishing that any public-held company with an effective compliance programme may have reduction in their fines. The text provides that 'the effective adoption of internal mechanisms and procedures of integrity, auditing and incentives to report irregularities, as well as the effective application of codes of ethics and conduct within the legal entity' are mitigating circumstances in the new administrative process, reducing the penalty by up to 25 per cent.
Furthermore, another initiative, called Pró-Ética and created by the CGU, aims to promote the voluntary adoption of compliance measures by companies, through the public recognition of those that, regardless of the size and industry, demonstrate that they are committed to implement measures aimed at the prevention, detection and remediation of acts of corruption and fraud. In summary, companies provide information and documents to the CGU regarding the compliance measures that were adopted. At the end of the process, companies that reach a certain score are considered 'Pro-Ética companies', and the information is later disclosed to the public.
Another point of attention is that, although not provided by criminal law (because there is no strict liability in criminal matters) it is increasing the understanding that compliance officers may face personal liability for corporate irregularities as a result of their absence or omission in performing their duties. Based on the 'in fact control theory', even though an individual committed no active crime, he or she may be considered liable if he or she (1) had control over the perpetrators who perpetrated the illicit act and (2) could have prevented the crime. Even with no direct action, the individual – such as a compliance officer that could have frustrated a crime, but failed to carry out his or her activities or acted with reckless (negligence, malpractice, omission, etc.) making the crime possible – may be held criminally liable. In Brazil, there is no decision regarding compliance officers' liability for corporate wrongdoing yet; however, the matter has been a frequent topic of discussion among legal experts and enforcement authorities.