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Sergio Moro, the judge who spearheaded the Lava Jato (Car Wash) corruption investigation in Brazil and served as justice minister a little over a year – says Lava Jato was a “game changer” for anti-corruption compliance in Brazil. (Photo: Brazil Senate)
Thursday, May 20, 2021
Legal Briefs

Latin America Corruption: Politics Hamper Progress


Moro says Car Wash was a “game changer” for anti-corruption compliance in Brazil.

BY LATINVEX STAFF

Lack of political will and inadequate independence of judges and prosecutors pose the main challenges to implementing anticorruption policies in Latin America, according to a report by the Lawyers Council for Civil and Economic Rights of the Cyrus R. Vance Center for International Justice, The Latin America Anticorruption Assessment 2020.

According to Vance Center Latin America Policy Director Jaime Chavez Alor, the assessment is innovative for following a legal approach to analyze legislative and regulatory efforts, aimed at preventing, targeting and prosecuting corruption. Moreover, “for each of the countries analyzed there are specific issues identified and recommendations in which the legal community can create initiatives to advance or strengthen the legal framework or its implementation.”

Most Latin American countries follow an ex-post facto approach of sanctioning corruption through the criminal system. Preventive efforts to reduce corruption, in both the public and private sectors, are insufficient.

Similarly, important factors to countering corruption, including institutional coordination mechanisms, incentives to file complaints, and rules providing for community engagement and participation in anticorruption efforts are practically non-existent or minimal.

With regard to implementation of the anti-corruption legal framework, both the lack of political will and of independence of institutions represent the main obstacles in preventing, targeting and punishing corruption. In some countries, the lack of political independence of the judiciary and criminal prosecutors, and the need for more human and financial resources essential to countering corruption, are of great concern.

Although there are significant advances in transparency as a mechanism to prevent corruption, only Panama has a registry of beneficial ownership of companies in place and is making efforts to implement it.

The Anti-Corruption Assessment in Latin America 2020 is a regional study involving eight countries (Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, Panama, and Peru), which delineates legal efforts to prevent and combat corruption. Unlike other efforts that focus on measuring corruption or its perception, this study follows a strictly legal approach to analyze legislative and regulatory efforts, in addition to the institutional framework, aimed at preventing, targeting, and prosecuting corruption.

The report addresses the perspective of legal professionals engaged in anti-corruption practice in various sectors, including law firms, businesses, academia, civil society organizations, human rights defenders, and others.

The study addresses for each of the countries reviewed eight aspects that are key to the fight against corruption: public and private sector corruption; complaint mechanisms; whistleblower protection; specialized agencies; institutional coordination mechanisms; civil society engagement and participation; and transparency and access to information.

Argentina

Argentina’s legal framework is generally satisfactory, but its most significant shortcoming involves inadequate regulatory implementation resulting from the lack of (i) political will; (ii) political independence of the anti-corruption agencies; (iii) economic and human resources; and (iv) formal mechanisms for civil society engagement and participation.

Brazil

Brazil’s legal framework has notably improved but, in addition to undue political influence and a lack of political will to effectively implement the anti-corruption legal framework, there is a need to establish corporate criminal liability in connection with acts of corruption.

Chile

Chile’s regulatory framework is generally effective, and the governmental agencies and authorities have the capacity and political independence to implement effectively the anticorruption regime.

Colombia

Colombia shows inadequate implementation due to lack of political will and absence of mechanisms for detecting and preventing corruption.

Guatemala

In Guatemala, the legal framework is deficient and is characterized by significant institutional weakness.Anti-corruption efforts are led by certain individual government officials rather than by institutions.

Mexico

Despite having a solid and comprehensive legal framework, Mexico stands out for a lack of regulatory implementation and reduced institutional capacity. In addition, anti-corruption authorities are subject to political influence.

Panama

Despite being the only jurisdiction that maintains a beneficial ownership registry, Panama displays a deficient legal framework and a lack of institutional capacity and fundamental elements required to combat corruption.

Peru

Peru has one of the strongest legal frameworks, but its implementation is negatively affected by flaws in procedural rules and a lack of political will.

 

MORO: LAVA JATO SPURRED MORE COMPLIANCE

Sergio Moro, the judge who spearheaded the Lava Jato (Car Wash) corruption investigation in Brazil and served as justice minister a little over a year – says Lava Jato was a “game changer” for anti-corruption compliance in Brazil.

In a podcast with Miller & Chevalier attorneys Matteson Ellis and Gregory Bates, Moro identifies “a new spirit of Brazilian companies in relation to integrity policies.”

Moro, who currently is Managing Director with Alvarez & Marsal Disputes and Investigations, explains that, before Lava Jato, companies tended to deny responsibility for corporate offenses and few sought to cooperate with authorities in the context of investigations. He says that in Brazil today, the trend towards corporate integrity programs continues upward.

Data supports Moro’s assertions, Miller & Chevalier says.

The firm’s 2016 and 2020 Latin America Corruption Surveys reveal a marked increase in corporate compliance interest in Brazil since Operation Lava Jato began in 2014. In the 2016 survey, Brazil had the highest percentage of respondents regionwide saying that the importance of preventing corruption for their companies had increased over the last five years, with 81 percent saying yes compared with a regional average of 71 percent. By 2020, while other countries in the region were also beginning transitions toward compliance, Brazil remained near the top, with 80 percent saying the importance of compliance had increased over the last five years, compared with a regional average of 65 percent.

Moro describes Brazilian authorities as having a high degree of sophistication when evaluating corporate compliance programs.

He says that the “effectiveness” of a company’s program is key: “Are the policies consistent? … Do they function in practice?”

He explains that programs must be dynamic and that Brazilian authorities are capable of detecting when compliance is a mere “façade,” what he calls “fake compliance.” He adds that authorities take nuanced approaches when evaluating programs. For example, the level of program complexity expected will depend on the size and nature of the company: “The same cannot be expected from large companies, middle market companies, and small companies.”

Moro says that Operation Lava Jato started an anti-corruption wave in Brazil and in Latin America and “this movement will continue.” He explains that, like Brazil, other Latin American countries have adopted laws establishing corporate liability for corrupt acts. He acknowledges that the movement has suffered recent setbacks, describing those as “a great pity.” He adds, “In my opinion, it is a movement that won’t stop because there exists an international trend.” The hope he expresses for a continued wave is remarkable given that Moro resigned from his position as Justice Minister in 2020, sharply criticizing what he saw as Brazilian President Jair Bolsonaro’s politicization of the Justice Ministry. 


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