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The Current State of Compliance in Brazil: More Regulatory Guidance Needed

Salim Saud Neto (pictured right) is a Partner at Saud Advogados, in cooperation with Hughes, Hubbard & Reed LLP. Salim has over 15 years of experience in large law firms throughout the Americas, including Rio de Janeiro, São Paulo, New York, and Houston. In the past, he has advised major corruption and compliance cases, conducted internal investigations, assisted clients in connection with Congressional Investigations, developed and implemented compliance programs and advised clients on general compliance matters.

Salim is also a Lecturer on several topics relating to compliance, including hosting webinars on the Petrobras Car Wash Scandal since its inception, and has participated in various seminars as a Lecturer. He is a Professor and leads the compliance program of the prestigious University Fundação Getúlio Vargas (FGV).

Recently, Ethisphere’s Aarti Maharaj had the chance to interview Salim on the current state of compliance in Brazil.

Q: Compliance is relatively new in Brazil; can you tell us more about your program?

The overwhelming interest in Compliance is indeed new in Brazil, because quite a number of companies have been implementing compliance programs and have been concerned about its international reach. The problem is that only after implementing a program that companies realize there’s a lack of talent in the market. Very few professionals have had compliance experience and most universities or schools have offered programs focused on compliance or corporate governance. Most recently, however I have seen that Rio de Janeiro and Sao Paulo have started developing compliance programs. I have also noticed that there is a strong demand and a lot of interest in the second year of these compliance education programs. I personally coordinate the compliance program of Fundação Getulio Vargas in Rio de Janeiro.

To help drive the profession forward, I have also created an association called, Rio Compliance, where we meet regularly to discuss a host of compliance-related topics and challenges to benchmark and discuss some of best practices in the field. This group was formed by lawyers and compliance officers and we allow students to attend our meetings—as delegates— who listen and take note of the discussions and concerns in this area. By doing this, we could raise awareness of the importance of this profession. What differentiates Rio Compliance from others is we create the opportunity to share experiences openly and provide help to other members.

Q: What are some factors that are keeping Compliance Officers in Brazil up at night?

In the compliance field, there are very few official guidelines on what are appropriate measures, guidelines and enforcement. There are a lot of uncertainties in this area as well. What we are trying to do to is set up guidelines based on the needs of the market, based on what compliance officers have identified as relevant.  For instance, now we are working on setting up guidelines on risk assessments.  The Office of the Comptroller General (CGU) issued regulations describing what should be addressed in a risk assessment, but the regulations are not as detailed as the market would need and we are trying to document the best practices throughout the market.

Q: Why is there a need for compliance now in Brazil?  

Until the enactment of regulations, a number of domestic companies have had a concern about ethics.  While the approach to compliance as a company tool to prevent fraud and violations of the law has been mostly a concern of companies subject to foreign jurisdictions with notable domestic exceptions, now all companies are realizing the importance of compliance.  In addition, a new culture of enforcement is driving the market towards implementing effective compliance from top to bottom. Moreover, their is growing awareness by companies and people in Brazil that ethical values matter and slowly, companies are starting to understand the true value of robust compliance.

Q: How will politics shape Brazil’s future in compliance? 

Politics will have some influence but should not control it all.  It is politics that generated what we have seen so far.  In 2013, there were massive demonstrations with several demands, including more ethical governments.  It was as a reaction to the demonstrations that the Clean Companies Act was approved. So, politics did indeed play a role in creating a culture of compliance. But, looking ahead, I don’t think politics could ever lead to non-compliance, or take a reverse step because society is paying a close attention to corruption.

Q: Given the current economic climate in Brazil, what advice do you have for companies looking to implement effective compliance programs?

The first step are risk assessments. You cannot implement a strong compliance program if you don’t know the risks. It is important to continuously assess risks and that’s a requirement of the regulations, anyhow. One of the risks compliance officers should consider are reputational risks.  As to reputational risk for lack of compliance, the main risk we see is with companies dealing with third parties. Most people think that bigger risks are for people within their companies, but dealing with third parties, vendors, sometimes suppliers, and more specifically agents and law firms can also compromise a company’s risk exposure.

Upcoming event:

Ethisphere’s 2016 Latin America Ethics Summit is happening on June 8-9 in Sao Paulo, Brazil. Meet and network with Salim Saud Neto and learn more about risk assessments in Brazil. Many industry leaders along with other members of the C-suite and leaders across industries and geographies will assemble to advance corporate integrity and performance. For more information about this exclusive event and to register, click here. 

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