Susana Sierra is CEO of BH Compliance, which gathers real-time evidence about a corporate compliance program’s performance using Blockchain.
Today, various Latin American countries are updating their corporate crime laws, imposing more requirements on companies in order to reduce their occurrence and toughening sanctions. These changes are in line with those announced this year by the U.S. Department of Justice (DOJ) to strengthen corporate criminal law enforcement, and to encourage companies to invest in a culture of compliance.
For multinationals with operations in Latin America, it is very important to be informed of the compliance changes being carried out in the region.
Mexico, Colombia, Peru, Argentina and Chile have already implemented legislation that regulates the criminal and administrative liability of companies. Some like Peru and Chile continue to further modify and improve such legislation. For example, Chile’s promulgation in August of the Economic and Environmental Crimes Law grouped more than 200 crimes into a single statute and made environmental violations criminal offenses.
However, Latin America is a vast and diverse region. Customs vary from country to country, and doing business requires paying attention to different local realities. The pandemic made things more complex since some countries put the fight against corruption on the back burner to prioritize overcoming the health crisis.
Compliance officers and business leadership with operations in Latin America should follow six steps to prevent employees from being involved in situations that may have legal and/or reputational consequences.
1. Apply the same standards everywhere.
Companies that expand into Latin America may wrongly believe they should turn a blind eye to practices or behaviors that they would not accept in the United States. For example, if they are not willing to pay a bribe in the United Kingdom, why would they do so in Latin America?
In the hyper-globalized world, no company or organization with global reach can settle for different standards of governance. An act of corruption committed in a subsidiary 10,000 kilometers away will sooner or later end up affecting the reputation of the parent company. Doing things correctly may not deliver tangible results in the short term, but in the long term, the company will build an image of reliability and transparency. At the same time, they will serve as role models for other companies.
2. Acknowledge local idiosyncrasy.
Nor should we fall to the opposite extreme. I have heard cases in which the parent company demands unreasonably strict adherence to its compliance program in the different countries where it operates, ignoring cultural differences and pretending that things are done in each country the same. It is absolutely fine to set limits on what is acceptable or not within a company and its subsidiaries to avoid acts of corruption.
Still, two further recommendations arise from this: First, make sure to adapt your compliance program—within reasonable parameters—to the reality of each country so that it can be fully adhered to. And second, make sure to permanently monitor its correct implementation in accordance with the local idiosyncrasy, preferably hiring someone who knows it well. This can be useful in aspects such as invitations to lunches or dinners, travel or corporate gifts to authorities and clients.
3. If you are going to include something in your compliance program, stick to it.
It is difficult to implement a good compliance program if you do not believe that you will ever need it. Generally, the greatest risks of falling into illegalities or bad practices come from operational areas and are facilitated by the lack of cross-checks and supervision throughout the line.
It is no use having a heavy manual if it is kept in a desk drawer. Allowing each area to be managed on its own in a laissez-faire culture is a recipe for disaster. It is essential that all the provisions of the compliance program are effectively complied with.
4. Turn compliance into the carrot and not only the stick.
The compliance program should not be perceived merely as a stick, but also as a carrot that stimulates a culture of good practices. To achieve this, the company should not manage its different departments and subsidiaries as a set of islands disconnected from each other.
On the contrary, it must be a central part of the incentive and compensation programs for executives and workers, so that they will become actively involved in its fulfillment. And vice versa: Bad behavior must be punished, demanding the return of bonuses or compensation from those who violate the company’s rules or have committed crimes.
5. Exercise due diligence in your relationships with third parties.
A good compliance program must consider the relationships established with third parties. This is especially important for those who operate in other countries and are not always fully familiar with the local context.
Companies are now responsible for all actors with whom they do business, forge alliances, subcontract or interact. It is no longer acceptable for a company to turn a blind eye while benefiting from the bad practices or crimes committed by another company with which it has dealings. Whether it is a real estate agency whose contractor employs people with ties to drug traffickers, or a client who makes illegal transactions, criminal liability now also falls on the company.
As it is impossible to simply trust everyone, due diligence on everyone with whom you will interact in Latin America is imperative. Not only that: Periodic evaluation, constant monitoring and the generation of evidence regarding how you have protected yourselves in your relationships are essential to defend yourselves in the event of an investigation.
6. Control your sensitive information.
The current massive use of messaging applications such as WhatsApp or Telegram means that no organization is completely safe from their misuse to send sensitive data. In case of an investigation, the ability to demand access to those communications, collect them and present them if required will be key. Prosecutors will evaluate the level of cooperation with the investigation and the effectiveness of the compliance program in obtaining that information.
A good compliance program can be life insurance for companies if it is embedded in the organizational culture as a way of doing business, rather than being seen as a mere set of written rules and procedures.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
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