Q&A: Mitigating fraud and corruption in Latin America


Financier Worldwide Magazine

February 2019 Issue

FW moderates a discussion on mitigating fraud and corruption in Latin America between Rodrigo Cunha at AB InBev, Michel Sancovski at Tauil & Chequer Advogados in association with Mayer Brown LLP, and Pablo J. Miranda at Siemens S.A.

FW: How would you describe the level of fraud and corruption across Latin America? How has the prevalence of these activities developed in recent years?

Cunha: Undoubtedly, we all have seen an increase in cases related to fraud and corruption, particularly involving the public sector, in countries like Brazil, Peru and Mexico. However, my view is that the level of enforcement, rather than an increase in fraud and corruption, is what is moving the needle in the uptick of cases. In Brazil, for example, the Lava Jato (Car Wash) operation has exposed years, if not decades, of endemic corruption and, as the investigation and its ramifications unfold, the perception is that the level of corruption has increased, but I believe that the authorities are simply holding the responsible parties accountable for what has been common practice for many years.

Miranda: The level of fraud and corruption in Latin America needs to be categorised, regardless of the country or sub-region, into multinational companies, small- and medium-sized entities (SMEs), local communities, public sector and state-owned entities (SOEs). The corruption perception level within the region’s main cities and the degree of efficiency from regulators and law enforcement must also be considered. This breakdown is very important if we are to better understand the root causes of white-collar crime and develop strategies to fight it. Some figures are available on these categories through surveys of major companies, corruption perception in regions and law enforcement results at a national level, but other numbers will be available in the future, such as the digitalisation of detailed law enforcement information and its degree of success, thanks to the initiatives of academia and non-governmental organisations (NGOs), and funding from the private sector. Unfortunately, we still have poor or incomplete information on SMEs, and the matter has been addressed by the B20 anti-corruption task force. Regulatory efforts in some Latin American countries are moving in the right direction to drive the fight against corruption. However, it is still difficult to reach SMEs under the national guidelines without the support of NGOs and international companies. Additionally, the lack of initiatives to raise the ethical bar in remote communities, as well as the low level of effort devoted to ethics in academia and generally in civil society, might be a roadblock for future improvements.

Sancovski: Instances of fraud and corruption in Latin America in recent years have remained high. Awareness of that corruption, however, has increased – as a direct result of the intensification of enforcement actions, arising from recent investigations in Brazil and throughout the region, such as ‘Operation Car Wash’, and their various ramifications. This can be seen in Transparency International’s Corruption Perceptions Index. Though perception of corruption in Latin American countries is higher, this does not necessarily mean that corrupt activity has increased.

Though anti-corruption regulations have increased significantly in Latin America, those efforts have not been homogeneous across the region.
— Pablo J. Miranda

FW: Have any recent, high-profile cases of fraud or corruption caught your attention? What made these cases noteworthy and what do they tell us about the potential risks of conducting business in Latin America?

Miranda: High-profile cases in Latin America in recent years have shown that the consequences for natural persons and legal entities, as well as the emerging responses for markets, public officials and civil society have improved the current efforts to tackle fraud and corruption. The Odebrecht case, in particular, has been very important in helping to understand the dynamics of corruption in Latin America and its effect on a significant sector in the region such as infrastructure. Law enforcement outcomes have differed among jurisdictions and therefore the ethical culture in each market is being shaped at different speeds. A positive outcome that the scandal brought about was a higher awareness of fraud and corruption among industry peers, the general public and the whole value chain.

Sancovski: Operation Car Wash and all of its ramifications are certainly the most paradigmatic example of recent anti-corruption enforcement cases. Although the operation began in Brazil, evidence has surfaced showing the scheme acting in other Latin American countries, such as Peru, Ecuador and Argentina. The operation has investigated a corruption scheme involving Petrobras, one of the largest oil & gas companies in the world, several construction companies, as well as political parties and politicians. For instance, a notorious Brazilian construction company investigated in the operation disclosed to the Peruvian Congress the payment of bribes to politicians totalling US$29m. Investigative collaborations between Brazilian and Peruvian authorities have already revealed the involvement of four former Peruvian presidents in the case, making them targets in the international ramification of the operation. Spurred on by Operation Car Wash, there is a movement to highlight unlawful corporate conduct throughout Latin America. This movement is important for all Latin countries as it gives anyone who intends to conduct business in the region a cleaner and more transparent environment, making the market more attractive to prospective foreign investors. Businesses looking to conduct strategic transactions in Latin America must be mindful of the high risk of corruption in the region and the increase of enforcement.

Cunha: The most high-profile case has been the Car Wash operation as it has exposed the biggest corruption scandal in Brazil, if not in the world. The investigation has been ongoing for several years and has seen hundreds of convictions of powerful businessmen and politicians, including the former Brazilian president, Luiz Inacio Lula da Silva. The investigation has also strengthened the resolve of judges and prosecutors, who are now on a ‘crusade’ against corruption. While it does not necessarily increase the risk of conducting business in Brazil or in Latin America, it may increase the level of scrutiny of business operations in Brazil and other countries in the region, especially those with heavy governmental involvement, such as infrastructure and energy.

FW: To what extent are you seeing increased regulation and stronger enforcement across Latin America, in an effort to fight fraud and corruption?

Cunha: We have seen some interesting developments when it comes to regulations. Brazil, Mexico and Argentina have enacted specific anti-corruption laws to implement what the 1999 Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention requires. In addition to stronger regulation, I would also note the high level of enforcement in different countries in the region, as well as more involvement from the population, such as an increased use of social media as a tool to expose fraud and corruption in different levels of government.

Sancovski: Besides passing more stringent legislation, Brazil has focused on investigative operations for stronger enforcement. Other Latin American countries also have recently taken steps toward increased regulation. Mexico has put into force the National Anti-corruption System, created by the constitutional reform of 2015, and passed several laws, including the General Law of Administrative Liabilities, which reinforces individual and corporate liability. Argentina has enforced the Argentinean Anti-corruption Law and, more recently, established new guidelines concerning third-party due diligence. Chile too has broadened and tightened its anti-corruption legislation. Furthermore, cooperation among authorities, particularly with Brazilian authorities, has been increasing over the past few years and has been key to speeding up investigations and reaching settlements with companies.

Miranda: Though anti-corruption regulations have increased significantly in Latin America, those efforts have not been homogeneous across the region. Some South American countries are leading the way, developing more sophisticated mechanisms to support their local anti-corruption regulation and law enforcement efforts. In general, we can see a remarkable outcome to fight money laundering and cartels in Colombia, as well as a very interesting anti-bribery development regarding the Lava Jato case in Brazil and the ‘Notebook’ case in Argentina. Central America and the Caribbean are still struggling to advance these topics and several South American countries have delayed the implementation of anti-corruption mechanisms and law enforcement measures. Finally, we cannot underestimate the efforts made through international organisations and international companies which, through collective action initiatives, are voluntarily paving the way for improvements in integrity across markets and regions, as well as the deliverables from the anti-corruption task force from B20 activities in Germany and Argentina. They are definitely shaping the strategy of fighting corruption and are extending guiding efforts and future contributions from governments.

Companies and their executives need to be aware of the full spectrum of compliance risks surrounding every part of their organisation.
— Michel Sancovski

FW: How are companies responding? Are concerted efforts being made to adapt policies and procedures to drive greater awareness, heighten internal controls, encourage whistleblowing and generally improve prevention of fraud and corruption?

Sancovski: Companies have generally directed increased efforts to implement and review compliance programmes, in accordance with their own internal characteristics, the particularities of their activities and the markets in which they operate. This includes drafting and reviewing internal policies, providing periodic training, heightening internal controls, disclosing the existence of a hotline and improving the internal and external communication of the compliance programme. Special attention should be given to Brazil because of the high number of legal entities making compliance a top priority – not only because of strong enforcement, but also due to the potential reduction of applicable penalties provided by Brazilian anti-corruption law for companies with an effective compliance programme, as well as a market requirement that certain players only do business with companies with an effective compliance programme in place. There have also been efforts made by some companies to establish compliance as a culture, aiming to create common sense among the company’s body, not just a set of policies and rules. This is where the effective training of managers, officers and employees has an important role to play. Companies must realise that they need to provide guidance as to what it is to be compliant and how to achieve compliance.

Miranda: If we focus on multinational companies, efforts are being made to adapt to the enhanced regulatory environment and companies are going to greater lengths to protect themselves. Sectors like energy, healthcare and oil & gas are driving this change, but there is still a long way to go if the changes are to have a material impact on a national level. However, if we take a look into SMEs, the picture is completely different because the implementation of ethics programmes, more developed internal controls, awareness and communications, whistleblowing and forensics are generally not mandatory and are implemented at the discretion of management.

Cunha: Those companies which have been investigated and prosecuted are struggling to improve their compliance programmes and controls in order to continue operating. We have seen commitments to beef up compliance resources in settlements with regulators in Latin America and in the US, so we expect these companies to invest significantly in improving business conduct and controls in order to continue operating. For other companies, there is a clear signal that the playing field is being levelled. As a result, once-tolerated business practices will no longer be accepted as common practice and there will be a higher standard of expectation of compliance processes and controls going forward.

FW: In your opinion, do senior executives need to be more proactive when it comes to addressing the fraud and corruption risks their company faces? What more needs to be done?

Miranda: Above all, senior executives need to show consistency between tone from the top and daily actions. It is very easy for the majority of them to deliver strong speeches about ethics during ‘town halls’, but it is more difficult to follow through when faced with challenging ethical decisions. Additionally, senior management participation in disciplinary or ethics committees is critical for setting the bar for ethical standards.

Cunha: We often see senior executives who are far removed from the compliance agenda in their companies. We all agree a company needs to have a specific team and set of resources to put a compliance programme in place and to investigate potential misbehaviour, but it is not enough. Employees really understand compliance and ethics when senior leaders abide by and support the rules. The best way to do this is to involve senior leaders in key compliance decisions so they can become part of the programme and engaged in making it trickle down through the organisation. It also facilitates controls and rules to be implemented as the need for them is aligned with the senior leadership at the outset.

Sancovski: Top management must set the ‘tone at the top’. They must demonstrate commitment to and full support of the company’s compliance policies. That means not only behaving ethically and complying with internal policies, but also giving special attention to remediation and the application of sanctions in the event of a violation or wrongdoing by any company member. We have seen some deficiencies and flaws in the way companies handle the remediation process and the application of sanctions. Secondly, a key factor in that point is the risk assessment. Companies and their executives need to be aware of the full spectrum of compliance risks surrounding every part of their organisation, that is: assess all risks and verify where the greater potential for problems lies, according to their industry, geographic situation and client relationships. After doing so, they must effectively address each of these risks through the compliance programme, assuring its proactivity by monitoring and auditing all risky activities. This would be another step for an effective compliance programme. We have seen many companies anxious to put a compliance programme in place, but without a risk assessment the compliance programme could be considered an ‘off-the-shelf’ programme and thus rendered ineffective. Finally, it is crucial that senior and middle management creates an environment where employees feel safe from retaliation when it comes to reporting unethical behaviour and that the report will be kept strictly confidential. There is no sense in creating a whistleblowing policy or incentive when the whistleblower does not have assurance as to the confidentiality and integrity of the hotline and the investigation process.

Once-tolerated business practices will no longer be accepted as common practice and there will be a higher standard of expectation of compliance processes and controls going forward.
— Rodrigo Cunha

FW: If a report of suspected fraud or corruption surfaces, what steps should a company take? What advice can you offer on responding to a red flag and carrying out an internal investigation where necessary?

Sancovski: Firstly, when a reason to suspect fraud or corrupt activities surfaces, companies must act promptly to ascertain the facts. This preliminary analysis must consider each jurisdiction involved in the allegation and all potential applicable laws. Secondly, it is important to fully access all the facts, sources and documents available and, where applicable, start an internal investigation. In certain cases, it is advisable for companies to retain external counsel in order to conduct an independent internal investigation which will guarantee full confidentiality and impartiality – not to mention the protection provided by the attorney-client privilege. Companies must consider including external counsel from the outset of the investigation as it may be necessary to self-disclose the issue to authorities. Lastly, upon completion of the investigation, including ascertaining the facts and completion of the remediation process, it is important to review the compliance programme and try to identify where it might have failed in preventing that specific red flag, and adjust the company’s policies to that potential risk.

Cunha: Arguably, there are three main components of an efficient investigation-handling process. First, companies need to have a good team which is capable of conducting investigations in the countries where the organisation does business. Second, companies need to have a good helpline system in place. For example, companies must have different channels to receive complaints and a good tool to manage existing cases and the quality and timing of the investigations. Lastly, companies need to have standards for their team of investigators to follow so they can ensure that they have the right approach to the case, depending on the case profile. For example, in complex cases, companies might need to have more detailed investigation and remediation plans and this requires the more senior investigators on the team to take a closer look.

Miranda: First of all, a thorough plausibility check should be made of any allegations and, subsequently, a clarification process should occur in case of red flags. This could be as simple as a short but precise inquiry, or even an extensive investigation involving the use of external experts and electronic data collection. It depends on the risk level, the potential damage, be it reputational, legal, financial, operational or otherwise, and the people involved in the company. When the facts are on the table after professional forensic activity, it is crucial that management takes ethical and lawful decisions to respond to wrongdoing and misconduct in the company. If senior managers are not willing to act, it might be counterproductive to have these kinds of ethics programmes in place, because there would not be a ‘walk the talk’ example to inspire employees. Overall, there must be transparency and fairness in any internal investigation. And there needs to be consistency in the attention and response given to allegations and cases at all levels in the organisation. Additionally, if at any point during the investigation it appears that disclosure to authorities is necessary, then the company should self-disclose and cooperate responsibly with authorities.

FW: What are your predictions for fraud and corruption in Latin America in the years ahead? Do you expect to see continued efforts to stamp out such practices, with growing success?

Cunha: Efforts to rid the region of fraud and corruption will continue, both through increased levels of enforcement and regulation as the democracies in Latin America develop and strengthen their institutions. In addition, there is a general sentiment in the region that corruption needs to be fought and social media has helped to expose all sorts of corruption and fraud cases.

Miranda: Some trends indicate positive improvements in some South American countries due to current regulatory efforts and law enforcement. This may be the case in Brazil, Chile, Colombia and Argentina. The portion of the region containing the highest risk figures might continue to struggle with regulation and law enforcement, until resistance from local stakeholders comes to an end. On the other hand, the current strategy will present serious limitations in the event that SMEs cannot be successfully incorporated into the anti-corruption framework. Looking ahead, compliance-related risk assessments and further anti-fraud management efforts will improve significantly for Latin American infrastructure markets, as well as their corporate compliance requirements. Overall, the topic has been gaining more traction and we hope to see further improvement.

Sancovski: The expectations over the next few years are that acts of corruption continue to surface through investigations and appropriate enforcement, as the scenario in recent years has provoked a greater awareness of the financial and reputational cost that corruption has on a country, companies and society as a whole. The recent fight against corruption has demonstrated that Latin America is eager to become a more transparent region and an attractive destination for foreign investment. As a consequence, it is expected that the anti-corruption compliance practice will continue to grow, as companies are more inclined to do the right thing and establish effective compliance programmes in order to prevent potential risks. With respect to Brazil, the new president, Jair Bolsonaro, has appointed former judge Sérgio Moro – who was the acting judge of most of the lawsuits related to Operation Car Wash – as minister of justice. Judge Moro considers fighting corruption to be essential, which makes it likely that some changes will occur which will see an increase in anti-corruption and compliance laws and regulations.


Rodrigo Cunha is a global ethics and compliance director at AB InBev. Currently based in the company’s HQ in Belgium, he has driven the company’s worldwide compliance agenda in topics such as antitrust, sanctions, anti-corruption and data privacy, as well as in compliance projects involving data analytics. He also has experience in corporate law and M&A, having recently dealt with African corporate legal aspects of the transaction between AB InBev and SABMiller. He can be contacted by email:

Michel Sancovski is a partner at Tauil & Chequer Advogados in association with Mayer Brown and a member of the anti-corruption & compliance practice. He focuses on corporate compliance and anti-corruption matters, and his experience includes advising on anti-corruption compliance cases – taking into account local and foreign laws, coordinating highly complex, major investigations, implementing compliance programmes and assisting with anti-corruption due diligences. He can be contacted on +55 11 2504 4672 or by email:

Pablo J. Miranda is a compliance officer at Siemens S.A., based in Bogotá, Colombia. He can be contacted on +57 (1) 425 3582 or by email:

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