Ana Carolina Baraldi Pereira de Mello
Lawyer at Marcos Martins Advogados
Compliance is a set of internal integrity mechanisms, audits, incentives to report irregularities, effective application of a code of conduct, policies and guidelines with the aim of detecting and remedying deviations, fraud, irregularities and illegal acts against the public administration in general. So, in a nutshell, compliance is a corporate governance and liability risk prevention measure. The very translation of the word from English to Portuguese, conformidade, sums up its definition well.
In Brazil, the topic has recently gained prominence due to federal police operations involving corruption of public officials and money laundering in various sectors of the economy.
In fact, Brazil’s anti-corruption law – Law No. 12.846/2013 – is relatively new. However, the pioneering legislation on the subject, the Foreign Corrupt Practice Act (FCPA), dates back to 1977.
The FCPA was born in the USA, against a backdrop of regulatory problems and crises in the financial system, which needed stricter control, also due to terrorism. Later, in 2010, the Antibribery Act was introduced in England. The English legislation is even more severe than the American one, as it considers criminal practice and accountability not only in relation to the public agent, but also in relation to the private agent. These laws influenced the creation of Brazilian law.
But how important is compliance within institutions and how can it be used as a tool for strategic litigation management?
Companies implement compliance programs as a tool for security and long-term competitive advantage.
The implementation of a well-structured compliance program, in addition to avoiding the practice of criminal acts and, consequently, being held responsible for them, which undoubtedly represents a reduction in costs, generates other competitive advantages, among which the following stand out: strengthening the institution’s image; increasing credibility; better international competition; the possibility of identifying demands and acting to prevent the cause in order to reduce litigation by modifying procedures and training, which results in a reduction in liabilities.
A good compliance program must adopt a preventive model and reach all areas of the company, and in order for it to achieve its objectives there must be commitment to its implementation from the board of directors to outsourced workers.
It is common for the compliance area to be linked to the legal department, precisely because it involves compliance with regulations. However, compliance must be able to act independently in order to guarantee enforcement, which includes well-executed investigations with clear and effective sanctions, as well as constant procedural improvement.
Compliance’s preventive action must identify the company’s bottlenecks, i.e. the issues that generate demands. In this context, it is important to use compliance as a litigation management tool. By way of example, if the company finds that it has several labor claims on a specific subject, such as overtime or bullying, it is up to compliance to align the training of its managers in order to avoid such practices and even penalize the perpetrators, provided that after due investigation and that the sanction applied is provided for in the code of conduct. Or, if the company finds that it is being sued over issues involving civil liability for a certain product or service made available on the market, the compliance area must take action in terms of quality and risk analysis, in order to remedy the problems found and, consequently, avoid the massification of claims.
Likewise, in all areas of the company, compliance must act preventively. However, in cases where there is already a lawsuit, whether administrative, tax, civil, criminal or labor, it must detect the problem and act to remedy it, as well as to prevent the unwanted practice from recurring, by reviewing procedures and training.
Thus, through the data and indicators collected during its implementation, compliance can and should be used as a litigation management tool, identifying the main disputes the company faces, the origins of the problems that led to the claims, recurrence, costs, success, among other elements, in order to result in improvements that will certainly have a positive impact on the company’s financial results.
Marcos Martins Advogados is able to advise its clients on the implementation of best governance and compliance practices in order to ensure the integrity of organizations.
