In recent years, changes to the landscape of corporate risk due to intensification of public scrutiny and evident tightening of foreign anti-corruption laws (“FACL”) and their enforcement in North America, the UK and Europe, have prompted companies subject to such regulations1 (“Subject Entities”) to be seriously focused on adopting and implementing rigorous internal policies, practices and compliance procedures in order to protect themselves against accusations of bribery and/or corruption of foreign public officials.
FACL do not apply to Latin American or other foreign companies unless they have certain nexus with a FACL jurisdiction. Nevertheless, FACL may still have serious indirect business implications for Latin American companies.
A Subject Entity may be liable under applicable FACL for the conduct of its third party agents or intermediaries such as brokers, advisers, government relations experts, contractors, distributors and suppliers. Furthermore, a Subject Entity may also be liable under FACL for breaches by its foreign subsidiaries overseas. Therefore, in considering conducting business with Latin American and other foreign companies (“Local Partners”) such as entering into partnerships, agency agreements, supply agreements, general investments or mergers and acquisitions, as a matter of practice, Subject Entities are now conducting (and are expected to conduct) serious due diligence processes with respect to their potential or current Local Partners in order to identify “red flags” and potential risks that may trigger liability for them under FACL as a result of their relationships wPartners for, or seek to be acquired by, Subject Entities should be ready to meet the expectations of such Subject Entities who are subjected to very strict anti-corruption/bribery standards under FACL in their own local jurisdictions.
Whether or not Latin American businesses have compliance practices in line with FACL requirements will be likely a critical fact to be considered by Subject Entities at the time of choosing whom they conduct business with, especially in those areas or countries identified as having a high risk of corruption2 .