From left to right: Jose Rizek, Rizek Abogados; Marta Colomar, Diaz, Reus & Targ; Karlo Torres, MoneyGram International; and Neyde Correia, Globenet

Companies need compliance policies and third-party checks to avoid data security breaches and corruption

Robust compliance policies, the development of ‘risk maps’ and ongoing staff training will help businesses lessen the impact of security breaches originating in third parties

It is vital that businesses in Latin America have stringent internal compliance policies – and also carry out thorough due diligence of vendors and suppliers in other countries – in order to minimise the risk of data security breaches and corruption.
The priority for companies should be risk assessment, including for example, the development of heat maps that show what the main risks are in which jurisdictions, attendees at an event hosted by The Latin American Lawyer – with international law firm Diaz, Reus & Targ – heard in Miami. This enables companies to prioritise what action they will take in the event of a breach – this is especially important if the risk is directly linked to applicable US laws. However, understanding local concerns should also be a priority in order to minimise the risk of breaking laws and regulations in jurisdictions where the company is operating.
Having a robust compliance policy, while also plotting the level of risk in different areas, in addition to ongoing staff training, will help businesses lessen the impact of security breaches originating in third parties. Meanwhile, multinationals need to transfer their culture of compliance to third parties “from day one”, event participants heard. Gary Davidson, partner at Diaz, Reus & Targ, said senior executives in businesses should take responsibility for leading the way when it comes to developing a culture of compliance. “It should start at the top,” he added. “Senior management must cultivate a culture of compliance for the effective implementation of the programme.” Marta Colomar-Garcia, administrative managing partner at Diaz, Reus & Targ, said: “Multinationals should align compliance with risk management, addressing local issues in different regions, countries or areas.”
Some in-house counsel who participated in the event recommended conducting detailed due diligence with third parties, vendors or local partners. It was also recommended that company lawyers and compliance officers should make sure compliance policies and procedures from headquarters are properly explained when training local partners. Colomar-Garcia said training and testing are key to a successful compliance programme and companies should invest properly in employee training. “When allegations of corruption arise, the internal investigation must be credible and efficient” said Michael Diaz, global managing partner of Diaz, Reus & Targ.  
Furthermore, lawyers and executives in the headquarters of multinationals should understand the potential risk and compliance issues they face in the foreign jurisdictions where they do business. Diaz said that, in the case of Latin America, companies are often doing business with the government, which requires obtaining licenses and permits – this in turn presents a higher risk of being asked for bribes, and therefore violating US regulations.
In addition, multinationals should be aware of certain red flags when signing contracts, such as when the local partner or vendor does not want to sign a compliance clause, or prefers to use their own code of conduct and regulations instead. This is remarkably common in certain jurisdictions in Latin America, when family-owned businesses are dominant, participants said. Sometimes screening and monitoring third parties is the only way to assess risk when doing business in a foreign country, explained Colomar-Garcia.

Preventing corruption
When a potential, or actual breach is detected, companies need to react immediately and efficiently, said Davidson. There should be a response at both local and management level, so leadership can cooperate, while at the same time keeping the business running, added Colomar-Garcia. In such situations, external counsel in high-risk jurisdictions have a key role to play in helping multinationals with third party due diligence and ‘know-your-partner’ policies to prevent potential corruption.
External counsel can also play an important role in the immediate aftermath of a breach or potential threat. According to Neyde Correia, regulatory and compliance counsel at Globenet, it is extremely useful for law firms to have a list of third party providers specialised in public relations and crisis control. “Thinking about the reality of small and medium-size companies that do not have a corporate relations or PR department, being able to have quick alternatives to assist on those fronts is definitely useful,” she said.
External law firms can also provide a prompt assessment and develop a preliminary actions plan in the case of a breach, says Correia. Attendees heard that, as time is of the essence when companies are in crisis mode, having a law firm able to provide a risk assessment, as well as forms and templates for action plans that can be easily adapted to the situation, is very useful, she added.

Event: Reality bites – Third party risk in Latin America
Location: Miami
In collaboration with: Diaz, Reus & Targ

Companies need compliance policies and third-party checks to avoid data security breaches and corruption

Garcia-Sicilia

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The Latin American Lawyer is a bimonthly digital magazine, published by Iberian Legal Group, available in Spanish and Brazilian Portuguese. It represents the main source of information in the legal business sector in America Latina. The digital magazine – and its portal – address to the protagonists of law firms and in-house lawyers. The magazine is available for free on the website and on Google Play and App Store.

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