Federal Decree 8.420/2015, the long-awaited exec­utive decree issuing regulations under the Anticor­ruption Law, sheds light on questions that can guide companies in adopting policies to mitigate potential risks in their interactions with government agents.

One of the more important matters dealt with in the regulations is the criteria that compliance programs must meet in order to be taken into consideration when determining penalties, as provided for in ar­ticle 7 (VIII) of the Anticorruption Law. The criteria consolidate best practices internationally and, for the most part, are based on the U.S.'s experience in fighting corruption.

According to the regulations, some of the main elements that contribute to an effective compliance program are: senior management's commit­ment to the program, implementa­tion of policies and procedures to mitigate identified risks, which must be reviewed periodically, period­ic training programs, due diligence checks on third party suppliers and prior to concluding corporate trans­actions, and the authority and inde­pendence of the internal structure responsible for implementing the program, which must not only be accessible by channels of communi­cation, but investigate non-compli­ant conduct and impose disciplinary measures, if need be.

If these criteria are met, the compli­ance program can have a significant impact on fines applied under the Anticorruption Law, and both Fed­eral Decree 8.420/2015 and the rules issued by the Office of the Brazilian Comptroller General (CGU – Con­troladoria-Geral da União) establish metrics that can guide authorities in calculating fines.

The Anticorruption Law provides for fines ranging from 0.1% to 20% of an offender's annual gross revenue. The uncertainty generated by this enor­mous range has been attenuated by the new regulations and the rules is­sued by the CGU.

CGU Instruction 1/2015, for exam­ple, states that the term "gross sales revenue" means gross revenue as defined under income tax legislation, less applicable taxes. In order to cal­culate the percentage fine (within the 0.1% to 20% range) based on the offender's gross revenue, the authorities must take a series of aggravating and attenuat­ing factors into account. The attenuating factors can cut up to 10 percentage points off the fine, and compliance programs alone can result in a 4-point reduction. Moreover, if the offender can show that the company's management had no knowledge of the corrupt conduct and had made it clear that corrupt conduct would not be tolerated, and that the offender had not committed an offense of the same nature in the last five years, the fine cannot exceed 10% of gross revenue. A compliance pro­gram that meets all the crite­ria under the regulations can therefore reduce the fine from 10% to 6%, even before taking into consideration ad­ditional reductions for cooperation and spontaneously reporting the offending conduct to the authorities. Clearly, effective compliance programs can represent concrete benefits for the companies that adopt them.

In order to benefit from a reduction in the fine, com­panies must submit a Profile Report, containing a de­scription of the company's internal structure, its inter­action with government agents, and its shareholders, and a Conformity Report, describing in detail how the compliance program functions. Authorities can also conduct interviews and request additional documents.

The CGU recently reformulated its "Pro-Ethics" pro­gram (Pró-Ética). Under the new regulations, com­panies can sign up on an annual basis to have their compliance programs undergo a detailed assessment. Companies whose compliance programs achieve a "passing grade" are entitled to use the "Pró-Ética" seal for one year.

With the recently-issued rules and regulations, the uncertainties surrounding how compliance programs would be assessed have been largely eliminated, and the benefits of the programs are now even more ap­parent. These are challenging times in Brazil, and Bra­zilian authorities are making an effort to change the business culture. Companies that adapt quickly to the new climate will certainly come out ahead.

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