Webb - Lei anticorrupção

Anticorruption law – open your eyes and do your part

Aug 20, 2014

There is a global movement against corruption – which, aside from being an ethical problem, has a high impact on economic issues. The global cost of asset diversion, corruption and financial report tampering is close to 5% of corporate revenues and involves expenses with fines and legal fees. More relevant still is the image loss: the loss in confidence brought by bad reputation is incalculable. But how can we then protect ourselves from the risks of involvement with acts of corruption?

Though corruption is an important public issue, we must acknowledge corporate responsibility in cases involving bribes and kickbacks. It is the companies’ and the government’s duty to firmly act to prevent, identify and remedy cases involving fraudulent schemes and corruption. Focusing on that responsibility, Brazil enacted the anticorruption Law 12.846. According to the government, the new law is an opportunity to align Brazilian companies to the best economic practices in the world and to place them on equal terms in the competition for better deals.

The main novelty of the law is that, regardless of the employee who committed the corrupt act, the company will also be liable to some extent. Fines can reach 20% of the annual gross revenues. The same rule applies to service outsourcing which involves negotiations with public institutions. If one of the suppliers of products or services should corrupt a public servant on your behalf, your company can also be punished even with no direct fault. The question remains: how is it possible to protect the company from acts of fraud and corruption?

Here are some quick tips:

  • Adapt to aggressive efforts against fraud and corruption. Be rigorous and attentive. Never think bribery is rare and your company and suppliers are free from that risk.
  • Develop your own actions of prevention, which should include clear and well communicated programs, with constant training and monitoring.
  • Create an anonymous channel for whistleblowers. Consider any type of illicit scheme: with the public system, your suppliers or just personal gains schemes. Every fraud hurts the corporate image in some way.

When there is third-party involvement, whether with suppliers, service providers or partners, one must be more careful still. Although your company has its own program against fraud and corruption, it is also necessary to guarantee that your suppliers will be aligned to your practices. To that effect, follow some recommendations:

  • Evaluate the risk of the operation for which you are engaging suppliers. Interaction with public institutions is an activity involving a significantly higher risk.
  • Know your suppliers. Check their website, their client list, their email domain and their physical address; scan the company’s name on the Internet and be suspicious of any association with fraud and corruption schemes.
  • Have a certification process for new suppliers, in which you will check information, documents, facilities, and their capability to provide a given product or service.
  • Know the real value of what you are purchasing and be suspicious whenever you see a large deviation. Compare your suppliers’ prices to the market. Are you paying a fair price for the product or the service received?
  • Use technology solutions to document all your supplier deals: contract clauses, attached documents, names of the people involved and paid values.
  • Monitor your company’s financial transactions with your suppliers and any business partner – values, timelines and even the involved individuals. Even though corporations are still held responsible in corruption cases, it is important to know that effective, well structured compliance programs may serve as mitigating circumstances and prevent huge fines or lessen the pain of an even higher fall – bad reputation.