Compliance in Brazil – Project on Anti-Crime Bill*
In the international anticorruption context Brazil dropped nine positions in the Corruption Perceptions Index 2018, published by Transparency International, the third consecutive annual drop and the worst score of the country since 2012 – noting that the Brazilian Anticorruption Law was enacted in 2013.
On February 4, 2019, the Minister of Justice and Public Safety, Sérgio Moro, announced the Anti-Crime Bill will be sent to the National Congress. The Bill proposes legislative changes in several laws1 to set forth measures against corruption, organized crime and crimes committed with serious violence to individuals.
One of the important proposed changes is related to the execution of penalties for crimes of active and passive corruption. In case the Bill is approved, the initial regime of the penalty for crimes of active and passive corruption2 will be the closed regime, unless the improper advantage or the appropriated asset is of small value, or the circumstances of the crime3 are favorable to the offender. In addition, the judge may establish a minimum period for the execution of the penalty in initial closed or semi-opened regime, before the possibility of progression of the penalty.
The Bill also includes the possibility of entering into transaction, agreement or conciliation in lawsuits arising from Law No. 8,429/1992 by means of collaboration or leniency agreement, term of conduct adjustment or a term of cessation of conduct, in accordance with the rules established by Law No. 12,850/2013 and Law No. 12,846/2013 .
Another important change is the inclusion of the whistleblower into Law 13.608/2018, which provides for the receipt of complaints and the reward for information that benefit police investigations. In short, the Bill proposes that the Union, States, Federal District, Municipalities, autarchies, foundations, public companies and private and public joint stock companies should have an ombudsman and correction unit to receive complaints. The whistleblower will be protected against retaliation and will be exempted from civil or criminal liability.
The Bill has already been amended to meet the demands of governors and the minister of the Federal Supreme Court, Mr. Celso de Mello, but continues to be subject to severe criticism by a commission made up of twenty, including six former state ministers. The referred commission intends to monitor some threats via setbacks in human rights achievements made under the 1988 Federal Constitution.
The Bill is currently being reviewed by the House of Representatives after being suspended by its President, Mr. Rodrigo Maia, who made an order to determine that the package of measures of hardening sentences and fighting crime needs to be analyzed, within 90 days, by a working group.
*Legal Notice Article provided by VPBG, Brazil. A strategic alliance with Dentons.
Tip of the Month: The Smoking Gun
Internal investigations occasionally find “a smoking gun”: evidence that is embarrassing, negative, or extremely damaging to a company’s position on a compliance matter. This evidence may be discovered before/after it is requested or there is a legal obligation to preserve/produce documents. The company’s initial reaction may be a desire to suppress, not produce, or even destroy the evidence. There are serious ethical and legal risks in this approach, which will be discussed in later tips. This month's tip addresses some practical consequences. In today’s electronic world, it is extremely difficult, if not impossible, to destroy/hide evidence. You should assume someone, somewhere has a copy. Courts/arbitrators/regulators also look very unkindly on evidence not produced. You substantially increase the risk of penalties and much higher penalties by not producing. Our “tip” is that when a “smoking gun” is discovered during internal investigations, it is safer to discuss with your counsel how best to explain/defuse damaging evidence, rather than risk ethical, legal, and practical consequences for failing to produce. You may also want to consider an early settlement before you are obligated to produce evidence.
On January 31 France, Germany and the United Kingdom announced the establishment of INSTEX SAS (Instrument for Supporting Trade Exchanges) – which is a special purpose vehicle aimed at facilitating legitimate trade between Europe and Iran.
The aim is to preserve the economic provisions of the JCPOA conditioned upon Iran’s full implementation of its nuclear-related commitments and to support legitimate European trade with Iran, focusing initially on the sectors most essential to the Iranian population – such as pharmaceutical, medical devices and agri-food goods.
The Governor of Central Bank of Iran (CBI) Abdolnaser Hemmati had announced on March 20 that a mechanism similar to INSTEX has been registered. The mechanism - called "Special Trade and Finance Institute" (STFI) - is necessary to make the European INSTEX operational.
The UK plans to reform the Companies Register in an aim to increase the transparency of the company ownership, as well as protecting personal data to prevent fraud. This initiative will serve two purposes: protect companies from fraud by making it clearer who is setting up, managing and controlling companies and will implement more guarantees to safeguard the personal data of business owners and ensure the accuracy of the register. The reforms to be introduced are a response to more than 10.000 complaints from people concerned about their personal details, including concerns involving fraud and misuse of personal data. Some of the most relevant changes include, improving the accuracy of the register by letting companies check their information before its entered into the register, protecting personal information to avoid its misuse for criminal purposes and improving the detection of possible criminal behavior.
Anti Money Laundering
The Directive (EU) 2018/1673 of 23 October 2018 on combating money laundering by criminal law (the so called 6th AML-Directive) contains minimum rules concerning the definition of criminal offences and sanctions in the area of money laundering. The requirements of this directive need to be implemented by EU member states by 3 December 2020 and the 5th AML-Directive needs to be implemented by 10 January 2020. Companies should be attentive to changes in 2019 to their national legislation and adjust their AML-Compliance accordingly. The extent to which it entails changes (in the different Member States) remains to be seen, but requirements could change in the beginning and end of 2020.
New antitrust risks: digital economy/digital markets
The German Competition Authority (“Bundeskartellamt”) and European Commission focus on antitrust risks in the digital economy. The Digitization and the growth of online commerce create new antitrust risks, for example with regard to price comparison platforms. Companies should review their antitrust compliance with regard to their behavior in the digital markets and integrate Digital Antitrust into their compliance management systems.
On April 4 2019 the European Commission published a valuable report for companies to review on competition policy and digitization entitled "Competition Policy for the Digital Era".
Compliance Management Systems
Code reform 2019: Revised German Corporate Governance Code enters into force in June 2019
The German Corporate Governace Code is being reformed. It is expected to enter into force in 2019 and a final draft is expected to be released in May. The reform will make the new code more relevant, clear and more compact. A key innovation is that the 'comply or explain' principle is complemented by the 'apply and explain' principle. Also relevant to companies is the specification of the independence requirements regarding shareholder representatives on the Supervisory Board and a re-statement of the rules regarding Management Board remuneration.
The changes apply to listed corporations and corporations with access to capital markets pursuant to sect. 161 para. 1 sent. 2 of the German Stock Corporation Act (“Aktiengesetz”). Corporations whose securities are not publicly traded are also encouraged to follow the Code. They have to amend their declaration of compliance with the German Corporate Governance Code (CGK).