Anticorruption compliance and investigations in Argentina

August 2016 | EXPERT BRIEFING | FRAUD & CORRUPTION

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Recent developments show an embryonic enhancement of the fight against corruption in Argentina. Companies should follow these developments closely and adjust their compliance programmes and internal investigations protocols accordingly.

Anticorruption environment

Argentina is ranked 107 in the 2015 edition of Transparency Internationals’ Corruption Perceptions Index, a similar position to those obtained in previous editions of this index. Argentina ranks well below other Latin American countries like El Salvador, Panama and Brazil.

This index shows a high perception of corruption in Argentina that creates challenges for international companies, since bribery in Argentina could trigger breaches of local and foreign regulations (e.g., US FCPA, UK Bribery Act, Brazil Clean Companies Act).

Fortunately, with the proper knowledge and preparation, these risks can be adequately addressed to minimise potential contingencies and operate according to international standards.

New authorities

Mauricio Macri took office as president of Argentina on 10 December 2015. He was the opposition candidate and is now leading the country after more than 12 years in which Nestor Kirchner and Cristina Kirchner were the heads of state.

Among other decisions, Macri appointed former Congresswoman Laura Alonso as head of the Anticorruption Office. This agency is in charge of overseeing the application of public ethics regulations to public officials in the federal government and in recent years it was increasingly involved in anticorruption investigations.

Alonso announced that the agency will seek amendments to current anticorruption legislation (in fact, the agency already presented bills to Congress) and will improve its resources to be in a better position to investigate. President Macri publicly stated that the Anti-Corruption Office and all other government agencies, as well as the courts, should actively fight corruption irrespective of who is involved.

Challenging regulations and proposed amendments

Argentine regulations set many standards that are substantially different from those of foreign anticorruption regulations such as the US FCPA, the UK Bribery Act and Brazil’s Clean Companies Act. For instance, there are material differences in the liability of companies in cases of corruption, the consequences of implementing a compliance programme, the benefits of self-disclosing and collaborating with the authorities, treatment to whistleblowers, privacy, evidence and privilege rules, as well as bribery defences and exceptions.

A proper understanding of local anticorruption regulations is important as a potential defence against prosecution under foreign regulations (e.g., FCPA) and to avoid actions that, although compliant with certain foreign regulations, could be in breach of local laws (e.g., facilitation payments).

The current authorities are proposing new anticorruption regulations to introduce corporate liability and asset recovery in cases of corruption, enhanced transparency in government information, and benefits for those who, after engaging in corruption, decide to actively collaborate with the authorities in investigations. At the time of writing, these bills are being drafted and negotiated by relevant parties.

Additionally, in line with the above, Argentina made the following commitments during its participation in the 2016 London Anticorruption Summit where over 40 countries discussed ways to fight corruption: (i) improve beneficial ownership mechanisms; (ii) strengthen the national government agencies specialised in the prevention and investigation of the binomial corruption-money laundering; (iii) enforce and ratify international conventions in cooperation and mutual legal or judicial assistance in the seizing, identifying, recovery and confiscation of assets derived from corruption and money laundering; (iv) persecute public-private corruption, domestic and transnational, through a legal regime of criminal liability for the legal entities; (v) promote the introduction of new prosecutorial tools such as the witness, collaborator or whistleblower with the aim of facilitating the detection, investigation and criminal prosecution of corruption crimes; (vi) promote the creation of a database containing information on juridical persons who commit acts of corruption; and (vii) promote expeditious mechanisms for administrative cooperation, exchange of information and mutual evaluation between anticorruption bodies.

Although it is uncertain when and how these commitments will materialise, it is clear that they are in line with the proposals for new regulations made by the government.

Furthermore, the goal to punish legal entities for engaging in corruption is already established by the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which was adopted by Argentina through law No 25,319 in 2000 and this is a relevant point considering that President Macri announced that Argentina will seek joining the OECD as a full member.

New enforcement

Since January, 2016, several anticorruption investigations that also involve money-laundering and other crimes have been revamped by the courts. Some of these investigations reached high ranking officials who left office in December 2015 and some individuals who are accused of being figureheads.

Moreover, an investigation on 100-plus companies in connection with corruption actions derived somehow from the Car Wash operation in Brazil was recently announced. However, since the investigation would be at an early and secret stage, there is little information about it yet.

Strong journalism

During the last few years, more than a few journalists have devoted a lot of time and resources to investigating cases of corruption. They reached outstanding results in regard to uncovering the involvement of public officials and private sector entities and individuals in actions of corruption. In some big cases, the prosecutors have investigated after the journalists disclosed their findings on the front page of the newspapers or on television.

Therefore, the risk of media exposure and the consequent reputational damage is higher than ever in Argentina.

Lessons from practice on compliance programmes and internal investigations

Anticorruption compliance programmes and internal investigations protocols should carefully balance local and foreign regulations. In this regard, companies should closely follow the proposed amendments to Argentine anticorruption regulations and the trends of enforcement of some foreign regulations. For example, in regard to Argentina, the SEC and the DOJ have imposed FCPA penalties on companies and individuals in more than a dozen cases of bribery where Argentine public officials were involved.

Third-party contractors are the key corruption risk factor. Therefore, strong compliance due diligence and training are especially advisable.

Companies that have already been subject to anticorruption investigations by the authorities often have more robust compliance programmes and internal investigations protocols.

Local subsidiaries should prepare in advance on how to handle reports by whistleblowers and internal investigations, from interview techniques to delicate legal aspects such as privilege, privacy and digital evidence.

Individuals most of the time underestimate their potential liability and that leads them to make regretful decisions. Training should emphasise that not only the company but also the individuals involved in cases of corruption may face liability. This is often a major deterrent for any improper actions, particularly when being subject to an anticorruption investigation is harsh, even if the individual is acquitted in the end.

Situations that look like corruption often only involved breaches of other regulations, such as customs laws, tax laws and forgery of public documents.

Isolated analyses of partial facts lead to decisions that often backfire. It is essential to run appropriate investigations to determine the scope of the situation under review before reaching final conclusions.

In order to handle the anticorruption compliance challenges described above, it is vital to have experienced individuals running the compliance and legal departments of the company, and also input from experienced external advisers who can assist in preventative measures as well as in handling crises.

Gustavo L. Morales Oliver is an attorney at Marval O'Farrell Mairal. He can be contacted on +54 11 4310 0100 or by email: glo@marval.com.

Gustavo L. Morales Oliver

Marval O'Farrell Mairal