Brazil’s New Anticorruption Law

US companies that conduct business in Brazil, whether a simple export transaction or  something more complex like an acquisition or other investment in a Brazilian entity, should be aware of important recent changes to Brazilian anticorruption law (the Brazil Clean Companies Act, Law 12.846/13, effective January 29, 2014) (hereinafter, “BCCA”) and conform their business practices in order to avoid severe penalties and administrative sanctions.  Further, US companies need to be mindful that any corrupt act they commit in Brazil may not only violate the BCCA, but also may violate US law (i.e., the Foreign Corrupt Practices Act, or “FCPA”) and have consequences at home.  For these reasons, it is more important than ever for US companies that conduct business in Brazil to develop anticorruption programs that ensure compliance with both US and Brazilian law and to incorporate them into their business model.

The following are only a few of the more salient highlights of the new anticorruption law.  The BCCA applies to business organizations, foundations, or associations and foreign companies with an office, branch or subsidiary in Brazil that commit prohibited corrupt acts.  Note that some of the acts covered by BCCA go beyond prohibited “bribery”:

•  Promising, offering, or giving an undue advantage, directly or indirectly, to a public official, or a third person related to the official.
•  Financing, sponsoring, or in any way subsidizing, the performance of bribery.
•  Using another person or entity as an intermediary in order to conceal the company’s real interests or the identity of the beneficiaries of bribery.
•  Obstructing or interfering with the investigations, audits, and the general work of public agencies, entities, or officials.
•  Fraud or any illegal interference with public tenders and government contracts.

“Public official” is defined broadly:  unlike the FCPA, which targets bribery of foreign officials; the BCCA includes bribery of both local and foreign government officials.  Moreover, who constitutes an “official” could include someone who works for the government at practically any level or capacity.  It shifts Brazilian corruption enforcement from its previous focus on individuals, creating for the first time potential strict liability for companies that participate in acts of bribery.  In other words, unlike enforcement under the FCPA, Brazilian authorities do not have to prove that a person or company intended to violate the law – they only need show that a bribe in fact was paid.  Sanctions for violations can be very steep; so companies that ignore or neglect compliance do so at their financial peril.

While numerous similarities and distinctions exist between Brazilian and US anticorruption laws, the need to have “effective” compliance programs is essential to both:  under both the BCCA and the FCPA, the relevant local prosecuting authorities will consider the fact that a company has a solid, comprehensive compliance program when determining what sanctions to impose for any violation of the law.  Further, the penalty provisions in the laws suggest that internal mechanisms and procedures of integrity, effective application of a code of conduct, internal audits, and self-reporting will go the furthest in mitigating the amount of penalties imposed.

HBS maintains a checklist of important elements for companies doing business in Brazil to incorporate into their anticorruption compliance programs, and it has model programs that easily may be tailored to assist a company’s particular type of business in order for it to meet its unique compliance needs.  HBS also is equipped to advise generally with respect to anticorruption best practices, such as risk assessment, standard operating and financial procedures, due diligence safeguards, and specific contract provisions.