Daniel Soares (dsoares@ulhoacanto.com.br) and Fernanda Freitas (ffreitas@ulhoacanto.com.br) are Partners at Ulhôa Canto Advogados in Rio de Janeiro, Brazil.
Although the U.S. Foreign Corrupt Practices Act (FCPA) completes 40 years of anti-bribery enforcement worldwide by US authorities, the fight against corruption has just begun in Brazil, and the challenges seem to be impossible to overcome. Based on recent data obtained by a survey carried out by Transparency International, a nonprofit organization that researches the perception of public sector corruption in more than 180 countries, there is no good news for Brazil.
Brazil’s fall
According to the 2017 edition of the Corruption Perceptions Index released by Transparency International, Brazil fell down 17 positions in the global ranking as compared to its previous score in 2016. Brazil moved from the 79th to the 96th place, where it stays with Colombia, Panama, Peru, Indonesia, and Zambia. The score achieved by Brazil dropped from 40 to 37 on a scale that can reach 100 points for “very clean” countries. The significant decrease in Brazil’s score is only smaller than the one experienced by Liberia and Bahrain in this last survey. As a general statement, Transparency International recognizes that more than two-thirds of the researched countries scored below 50 with an average score of 43 points, which evidences a poor performance and weakness in the battle against global corruption. However, for Brazil, it should not be an excuse or a consolation prize.
The Corruption Perceptions Index is the most complete tool to measure corruption worldwide, and it is referenced by all major public and private investors to drive and support their investment decisions and country risk assessment. Considering the recent political turmoil, including the impeachment of the second president in the last 20 years and the conviction and imprisonment of a former one — among other events concerning governmental authorities, as well as several scandals involving the largest companies operating in Brazil — the moment for a change is now, and actions are needed on an urgent basis.
The framework already in place
Is Brazil ready for such a move? From a legal perspective, there are significant advances in the Brazilian legislation and jurisprudence. In 1998, Brazil enacted an anti-money laundering regulatory regime to which several amendments and updates have been added to make it stricter and more accurate. Money laundering has been a systemic issue in Brazil, which has an impact not only within the country but also abroad. Sophisticated schemes involving public and private funds sustain the financing of terrorism; the smuggling of drugs, weapons, and goods; as well as activities carried out by criminal organizations. The purpose of the new legislation is to address these problems and provide the authorities with more effective means to curb this industry of crime.
For obvious reasons, the anti-money laundering legal framework that existed was not enough to cover all aspects of bribery and corruption regarding government officials and public entities. It was necessary that a law be created — with a broader scope similar to the FCPA — that imposes administrative liability on legal entities for acts of bribery and corruption and introduces compliance in the agenda of all organizations dealing with the Brazilian government at all levels (i.e., federal, state, and local) and any foreign public administration as well.
In 2000, Brazil joined and ratified the “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions” issued by the Organisation for Economic Co-operation and Development (OECD), another important step toward the adoption of more effective actions against bribery and corruption that was aligned with broadly accepted regulatory standards. Brazil renewed its firm commitment before the international community to adjust its domestic legislation with the signature of the “United Nations Convention against Corruption” in 2003 (but only ratified by a presidential decree in 2006).
These international agreements brought a commitment to Brazil: a deep reflection of the gaps in the country’s legislation with respect to corruption, bribery, compliance, relationships with governmental bodies, and other related matters. After the conclusion of this careful review, Brazil agreed to approve laws that would fill these gaps and to apply the lessons learned from the OECD and UN conventions.