Q. What are StoneTurn’s primary areas of focus in Brazil and South America-at-large?
A. From our base in São Paulo, we are focused on helping organizations and their counsel, or legal advisers, to operationalize compliance and address complex investigative challenges using forensic technology, eDiscovery and data analytics in Brazil and throughout Latin America.
Q. According to FCPA Tracker, Brazil currently has the highest number of open FCPA investigations in the world. How is StoneTurn helping Brazil national companies implement more effective anti-corruption programs?
A. As evidenced by recent investigations in Brazil, developing and adopting compliance procedures and internal controls do not guarantee full compliance with the law; this can only be corroborated through vigilant testing. Oftentimes, companies investigated for violations of the anti-corruption laws such as the Clean Company Act in Brazil, as well as FCPA, did in fact have robust compliance programs.
Nonetheless, their failure to enforce and test measures and controls to optimize effectiveness undermined the credibility of the programs and placed those companies in greater jeopardy of receiving severe punishment. Therefore, the existence of a corporate compliance program is no longer satisfactory; companies must prove these programs are complete and effective through periodic and sufficient testing.
We are helping Brazilian companies, as well as multinational companies located in Brazil, to perform gap analyses to identify and assess potential vulnerabilities that could lead to anti-corruption violations, and then assist with the design and implementation of an effective anti-corruption compliance program. In cases in which a compliance program is already implemented, our professionals test the design and operating effectiveness of the program and assist companies to implement the remediation actions resulting from the testing.
We also help companies to develop successful proactive transaction monitoring programs using data analytics to create key risk indicators of corruption, and data tests to identify risk indicators. This helps management to identify and appropriately investigate and document the response to suspicious transactions.
Q. What piece of advice would you give to multinational companies considering investment in a Brazil-based organization?
A. Companies considering investing in Brazil should perform an appropriate compliance due diligence related to FCPA aspects, as well as compliance with Clean Company Act in Brazil (law 12,846 / 2013), to minimize risk of future financial losses and reputational problems for investors.
Recently, I’ve seen fewer investors really concerned with performing a proper compliance due diligence, which should be the first step of any M&A due diligence process, to focus on the potential of fraud and corruption that could impact closing the deal.
Brazil has unique characteristics when it comes to the political-economic environment, cultural aspects and way of doing business. Now more than ever, knowing your target investment is an obligation for any company that wants to invest in Brazil.
Q. What role does data play in proactive compliance efforts (i.e., transaction monitoring) and in FCPA investigations?
A. Data analysis is essential on the preventive side, such as on transaction monitoring, as well as in the detective side, identifying data anomalies of business trends that are indicative of potential misconduct.
With increasing data volume and its complexity, the creation of dynamic visual models makes it possible to extract key insights and draw qualitative conclusions for both investigations and risk analysis in compliance efforts.
Q. What are some of the greatest challenges in rooting out bribery and corruption in the region?
A. I believe certain aspects that need to come together in order to minimize the risks of corruption, are:
- Judicial system working appropriately, which means that crimes that are uncovered and proven through due legal process must be punished.
- Adoption of public policies aimed at preventing and combating corruption. Better laws can improve the efficiency of the criminal justice system and increase the transparency and predictability of relations between the public and private sectors, reducing incentives and opportunities for corrupt practices.
- Eliminate the influence of party politicians in the recruitment of executives in state-owned companies (e.g., scheme at Petrobras).
- Freedom of the press and access to information are also essential, thus, the population is also able to play its supervisory role.
- The private sector must implement mechanisms of internal control and accountability that make it difficult to pay or receive bribes.
Some Latin American countries, including Brazil, have shown improvements in some aspects mentioned above. However, there is still a long way to go.