The last several months brought forth major reforms to Brazil’s anti-corruption regulations and enforcement environment, including in the way that Brazilian companies are expected to enhance their compliance programs.
“Over the past year, Brazil’s anti-corruption enforcement has remained active and has evolved in important ways,” said Michel Sancovski, a partner at Mayer Brown in its São Paulo office. Among recent changes, regulatory authorities have introduced stronger regulations that promote corporate governance and general compliance expectations in the private sector, he said.
For example, the Office of the Comptroller General (Controladoria-Geral da União or “CGU”), Brazil’s anti-corruption enforcement authority, recently highlighted the launch of its Brazil Pact for Business Integrity and its Pró Ética program as “major milestones that demonstrate CGU’s commitment to promoting business integrity.”
“These initiatives aim to engage companies from different sectors in adopting ethical practices, reinforcing the importance of integrity as a fundamental value for the country’s sustainable development,” the CGU said.
Normative Ordinance No. 160 describes the core objectives of the “Brazil Pact for Business Integrity.” One objective is to encourage companies “to develop an organizational culture against corruption and in favor of socially relevant issues, such as sustainable development and respect for human and social rights,” the ordinance states. The CGU’s Secretariat of Private Integrity (SIPRI) will oversee companies’ adherence to the pact.
The focus on integrity programs by Brazil’s regulatory authorities comes at a time when the CGU announced a “historic milestone,” initiating a record 76 administrative enforcement proceedings (Processos Administrativos de Responsabilização or “PARs”) in 2024. According to the CGU, this number surpassed its previous record of 73 PARs initiated in 2020. Many PARs result from illicit acts of corruption or fraud in public tenders and contracts, the CGU said.
New Term of Commitment
Another major development that occurred in 2024 was the CGU’s introduction of a new “Term of Commitment” (“Termo de Compromisso”) as an alternative to summary judgments and leniency agreements regulated under Brazil’s Anti-Corruption Law (Law No. 12,846/2013).
A legal entity can enter a leniency agreement by providing information and evidence on corruption violations if such cooperation helps identify other individuals and legal entities involved in the illicit activity. In return, the legal entity may be able to receive a reduced fine and exemption from additional penalties.
Normative Ordinance No. 155, issued by the CGU in August 2024, describes the requirements for entering the “Term of Commitment.” The ordinance maintains that a commitment term cannot be entered into when a leniency agreement applies.
To be eligible for the commitment term, the legal entity must satisfy specific requirements, including:
- Acknowledging responsibility for the conduct under investigation;
- Ceasing involvement in the activity;
- Responding to requests for information about the case, as it’s known to the company;
- Remedying the damage caused;
- Surrendering the amounts gained from the illicit acts;
- Withdrawing any existing legal activity; and refraining from any new claims.
While a legal entity must acknowledge responsibility for the conduct, it’s not required to admit guilt. “By eliminating the need for a confession, companies can avoid legal and commercial risks associated with admitting guilt,” said Eloy Rizzo, a partner in the corporate investigations group at Demarest in its São Paulo office.
“Additionally, we have observed that public officials are feeling more comfortable requesting undue advantages,” Rizzo added. “As a result, it is crucial for companies to be prepared to handle such requests.”
Another new feature under the commitment term is the possibility of the CGU conditioning the execution of the commitment term on the legal entity’s commitment to adopt or improve its compliance program.
The commitment term is “generally viewed as a positive for companies, as it allows companies to amend irregularities and improve their integrity programs and internal controls without facing condemnatory decisions in lengthy and costly PARs,” said Marcel Ribas, a partner at Mattos Filho in its São Paulo office.
“This option is also particularly beneficial for companies that do not qualify for leniency agreements or lack information to aid CGU investigations,” Ribas added.
Additional benefits of a commitment term remain similar to those of summary judgements, including a reduced fine for mitigating factors, isolated application of the penalty without the decision being published, and exclusion from the National Register of Punished Companies (CNEP). Sanctions that restrict participation in public contracting may also be mitigated.
Conversely, non-compliance could result in severe sanctions, including being hit with early maturity of unpaid installments and the execution of the full amount of the fine, discounting fractions already paid, according to the ordinance.
Additionally, reputational damage could result, since non-compliant legal entities will be registered in the CNEP. “Being listed in CNEP can damage a legal entity’s image, operational capacity, and its ability to secure future business opportunities, particularly in public contracts,” Sancovski said.
Moreover, the CGU often initiates PARs concurrently with other authorities’ criminal and civil investigations, which can “significantly increase the potential legal and financial consequences for legal entities facing multiple investigations stemming from the same violation,” Sancovski added. These risks only make it more important for companies to have their compliance programs in order.
New Integrity Program Guideline
In October 2024, the CGU published Volume II of the “Integrity Program Guideline for Private Companies” (“Manual Programa de Integridade: Diretrizes para Empresas Privadas”). The CGU said that Volume II complements Volume I by better aligning with new regulatory changes that came into force after publication of Volume I in 2015.
For example, Decree No. 12,304/2024, which was issued in December 2024 and regulates Brazil’s Public Procurement Law (Law No. 14,133/2021), created a new mandate that legal entities that engage in large-scale public bids (when the estimated value of the initial contract and amendments exceeds BRL 239,624,058.14) must implement an integrity program.
Additionally, the CGU said the updated integrity program guideline better aligns with today’s market expectations concerning good environmental, social, and governance (ESG) practices. Through the updated integrity program guideline, the CGU stresses that companies should have more than just anti-corruption practices in place, but also ESG practices designed to prevent, detect, and remedy human rights and environment violations, as well as harassment and discriminatory practices.
As with Volume I, the CGU encourages Brazilian companies to consider the guideline as they reevaluate and improve their integrity programs, as these are the elements the CGU will be paying close attention to. However, it’s important to stress that the CGU said it does not want companies to interpret the guideline as prescriptive. Rather, the “elements that make up an integrity program are dynamic, interdependent, and subject to continuous improvement,” the CGU said in the guideline.
The guideline highlights in greater detail the following elements of an integrity program:
- Governance structure: A corporate governance structure, represented by the board and members of the C-suite, that “plays a fundamental role in promoting integrity in the company.” The management and control structure should be “well-outlined, with clearly defined attributions and responsibilities accessible to stakeholders.”
- Senior management commitment: The support and commitment of senior management in creating a culture of ethics and integrity in the company is “the basis of an effective integrity program.” This is exemplified by hiring leaders with no past ethical violations, basing performance goals on management’s commitment to the integrity program, and filling senior management positions with those who have knowledge about topics related to business integrity, and allocating appropriate level of resources to the program.
- Risk management and risk assessments: Performing a proper risk assessment enables the company to adopt the most appropriate measures to mitigate its highest risks and, thus, allocate its resources more efficiently. Pertaining to ESG practices, the CGU recommends in the integrity program guideline that companies incorporate mapping their environmental risks, especially if they intend to engage in government contracting.
- Code of Ethics: A Code of Ethics should address the company’s “zero tolerance” for corruption and fraud, respect for human rights and environmental considerations, and clearly prohibit harassment, discrimination, and the exploitation of child labor and slave labor, among other stated policies described in the guideline.
- Communication and training: Communication and training should address content in the Code of Ethics, how to access whistleblower reporting channels, and examples of risks that apply to specific job roles, for example. Companies also should use different training modalities, “such as educational videos, with more comprehensive training, both online and face-to-face,” according to the guideline.
- Accounting controls and audit procedures: The implementation of robust and reliable procedures for accounting records is essential to prevent and mitigate fraud and corruption risks. At a minimum, this should include “segregation of duties and define approval levels for revenues, expenses, and asset movements, as well as alert mechanisms to identify non-standard expenses and revenues,” the guidance states.
- Third-party due diligence practices: When conducting due diligence on third parties, companies should take into account violations regarding human rights and environmental damage, in addition to past fraud and corruption activity. Hiring third parties committed to a culture of integrity in the conduct of their business should be a priority, the guideline stresses. The guidance further recommends including in third-party contracts a clause that requires the third party to certify compliance with human rights and environmental laws.
- Whistleblower reporting channel: Companies should implement a whistleblower reporting channel, available in Portuguese, that is “easily accessible” to internal and external audiences, including an online reporting channel. This channel should clearly be for the purpose of reporting integrity violations, such as corruption and fraud, harassment, and human rights violations (not to be confused with a customer service line).
“Companies are expected to update their compliance programs to align with these new requirements, ensuring that they have adequate resources and systems in place to detect and prevent corrupt practices,” Ribas said. “This may involve revising existing policies, increasing staff training, and investing in new compliance technologies.”
“As the regulatory and enforcement landscapes continues to evolve,” Ribas concluded, “companies must be prepared to adapt and respond to new challenges and opportunities in integrity practices.”
