Brazil, the “B” in BRIC, is the latest of the emerging markets to signal to multinationals that the global corporate citizen is responsible for ethical businesses practices. After nearly four years of debate, the Brazilian National Congress passed, and Brazilian President Dilma Rousseff signed, Law No. 12,846, the Brazilian Clean Company Act (CCA), which took effect on January 29, 2014. Previously, Brazil had no specific law that held corporations accountable for the corrupt actions of their employees, agents and intermediaries.
Brazil followed the BRIC countries of China and Russia which, in previous years, had implemented anti-corruption laws. Each also had toughened its nation’s associated regulatory and enforcement measures in 2013. In addition, India passed the Lokpal Anti-Corruption Bill in 2013, further strengthening its anti-corruption laws, while continuing the struggle to pass other anti-corruption legislation that has been hanging around for years.
Some have asked whether this type of change can be realized in countries where the suggestion of questionable business practices have made international headlines; whether this new and more black and white way of transacting business can become the new norm. This skepticism will subside only when we begin to witness effective and aggressive enforcement — which seems to be happening now.
But, before we look at these actions, let’s briefly recap Brazil’s CCA and associated new anti-corruption regulations, and distinguish them from the U.S. Foreign Corrupt Practices Act (FCPA). The CCA applies to Brazilian companies and all subsidiaries as well as the Brazilian subsidiaries of foreign companies and includes temporary and de facto Brazilian entities. Generally, the CCA prohibits the bribery of public officials, defined in the Act to include promoting, offering or giving, directly or indirectly, an improper benefit to a public agent, or from financing such conduct; but it differs from the FCPA in that it is not limited to acts involving foreign officials. In addition, practices that could make competitive bidding processes for public contracts less competitive (bid rigging), or fraudulent conduct affecting the public procurement process, are forbidden by the CCA.
The CCA is largely comparable to the U.S. FCPA, but contains several notable differences:
- The CCA applies to corporations, foundations and associations, but not to individuals who are subject to Brazil’s Criminal Code.
- The Act does not impose corporate criminal liability.
- It imposes strict civil and administrative liability and does not require that corrupt intent be proven.
- The burden is on the corporation to prove that the bribe did not result in any economic advantage to the corporation.
- There is no exception for facilitation payments.
- There is no “books and records” provision.
- The law extends beyond bribes to cover fraud in public procurement, bids and contracts.
- Financial penalties are severe and may be up to 20 percent of the company’s annual gross revenue, without a clear upper limit. However, self-reporting and cooperation with authorities may result in a leniency agreement that reduces the fine imposed.
- Harsh administrative sanctions such as mandatory corporate dissolution, suspension of business activities and the barring of government incentives for one to five years augment the imposition of civil fines.
- The law specifically provides credit for compliance programs.
- Importantly, certain CCA terms are yet to be defined, e.g., “public agent,” while others are broadly defined, e.g., “foreign public administration,” making application difficult to ascertain at State-owned entities and companies where foreign governments exert control.
The new anti-corruption regulations address critical questions about the administrative procedures for imposing corporate liability and assessing fines. Significantly, the regulations discuss the criteria for determining fines, evaluating compliance programs and entering into leniency agreements. In addition, while the legislation does not contain a “books and records” provision, the regulations indicates that the accuracy and completeness of the books and records will be key factors in evaluating compliance programs. 
Brazil’s Recent Enforcement Activity
In late 2014, Brazilian authorities conducted raids in association with an alleged scheme involving Petrobras, a State-owned oil entity, and associated construction and engineering companies. Twenty-three people were arrested including a Petrobras senior executive and 19 construction company executives. More recently, additional investigations were launched concerning the potential involvement of numerous current and former leading Brazilian politicians. So, why is the Petrobras investigation so significant? Because in the past 14 years Brazil has investigated only five anti-corruption cases.
What Does This Mean for You and Your Anti-Corruption Compliance Efforts?
The CCA, its new related regulations and the uptick in enforcement all underscore the need for Brazil’s anti-corruption rules to be taken seriously by multinationals. The differences between the CCA and the FCPA are significant. The CCA’s strict and joint liability provisions increase exposure for multinationals, encouraging management to actively conduct a fresh review of existing compliance guidelines and practices, revisit employee training and refresh due diligence on agents.
Recent actions suggest that Brazil is heading in a new direction. Accordingly, your compliance planning and programs must consider and make provisions for the nuances and differences of operating in the new regulated Brazil.
 Brazil, Russia, India, China: “BRIC.”
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