Local regulations regarding corruption, bribery and money laundering in the region fall short of international standards, with more companies needing to implement compliance programmes
Corruption, bribery and money laundering problems remain the key concerns of clients operating in Latin America, according to a new survey.
Research conducted by The Latin American Lawyer found that 53 per cent of lawyers in the region highlighted corruption and bribery as the biggest compliance-related risk clients face. Meanwhile, 15 per cent of respondents said money laundering was the primary concern.
Juan Carlos Tristan, an associate at BLP in Costa Rica, said local laws related to such issues are – in some countries – yet to reach international standards. For economies highly dependent on the US market, it is critical to understand and comply with US anti-corruption and anti-bribery regulations, he added. Tristan also highlighted the importance of implementing anti-corruption compliance programmes and incorporating anti-corruption clauses into contracts with third parties.
A number of countries have implemented or are in the process of implementing anti-corruption laws. In the summer of 2016, Mexico passed sweeping anti-corruption reforms that involved changing constitutional articles and drafting new laws. Guadalupe Hernández, Mexico-based general counsel for Latin America at pharmaceutical multinational Perrigo-Gelcaps, believes the reforms will represent a massive challenge for Mexican companies that have not yet been subject to international regulations such as the Foreign Corrupt Practices Act (FCPA). Hernandez says this will also be an opportunity for law firms that can advise on the implementation of new laws. For clients, creating a compliance department and having solid compliance policies in place will help with them avoid penalties, Hernandez added.
In Brazil, where several bribery schemes – which have had a huge political impact – have been uncovered during recent years, combating corruption has become critical. According to Marcos Ludwig, senior counsel at Veirano Advogados, anti-bribery and anti-corruption has become a “key feature of most legal due diligence reviews in both national and especially cross-border M&A”. He added that there is a growing demand for legal advice related to internal investigations and white-collar criminal defence.
Colombia has also stepped up anti-corruption efforts and, earlier this year, the country enacted its first foreign bribery law, known as the Transnational Corruption Act. The implementation of this law, as well as recent data privacy regulations, has meant an increase in work for law firms in Colombia, says Catalina Jiménez, associate at OlarteMoure in Bogota. Jiménez added that Colombian law firms will also benefit from increased demand for advice on risk management and enforcing codes of ethics such as AFIDRO, which sets out good practice for the pharmaceutical industry.
Nearly half (48 per cent) of participants in the study said demand for compliance-related advice is growing with the majority of companies planning to adopt compliance initiatives. This is good news for law firms – both national and international – which have been increasing their compliance capabilities in recent years. For example, Squire Patton Boggs in Miami hired the former director of compliance from Starwood Hotels and TozziniFreire in Sao Paulo has also recruited a compliance and white collar crime specialist.
However, there are currently barriers that are restricting the profitability of compliance as an area of practice for law firms. Most lawyers working in private practice who responded to the survey identified a need to raise awareness of compliance among clients. Rafael Picasso, partner at Estudio Echecopar, a member firm of Baker McKenzie in Peru, said clients need to be “convinced that compliance is necessary”. Meanwhile, an in-house lawyer at a multinational operating in Central America said that “every company needs to acknowledge that compliance is a need in order to remain competitive”. The respondent added that the onus was on law firms to ensure that clients understand why compliance is a requirement.
Picasso also said clients should be more proactive in the adoption of compliance programs, a view echoed by Christophe Dubois, partner at DS OVSLAW, who added that businesses should adopt compliance policies that are based on the company’s practical experience. Mauricio Salas, partner at BLP in Costa Rica, said clients “need to go beyond a compliance manual and effectively train their team and their suppliers”.
Nearly 90 per cent of respondents said their law firm had implemented internal compliance procedures, with the trend largely attributed to stricter regulations at home and abroad as well as client pressure. Many clients now demand that law firms have a compliance policy, including certification of FCPA compliance. Enrique Möller, partner at Integra Legal (an affiliate of EY) in Guatemala, said all of his firm´s international clients demand FCPA compliance certification. He added that clients operating in the region should understand local and international regulations applicable to the market, perform a health check of the organisation – with regard to compliance procedures, registrations and documents – and follow up on any recommendations that come out of the health check.