Brazil: Bribery & Corruption (2nd edition)

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This country-specific Q&A provides an overview to bribery and corruption laws and regulations that may occur in Brazil.

This Q&A is part of the global guide to Bribery & Corruption. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/bribery-and-corruption-second-edition/

  1. What is the legal framework (legislation/regulations) governing bribery and corruption in your jurisdiction?

    Corruption has been headlined on the Brazilian agenda for the past few years. Despite a robust legal framework, there is a perception that the country faces an endemic scenario.

    From an international standpoint, the country is a party to and has ratified the following internal treaties and conventions all of which have become law in Brazil:

    a. Inter-American Convention against Corruption of March 29, 1996, promulgated through the Decree 4410/02;

    b. the Organization for Economic Cooperation and Development Convention (OECD) on Combating Bribery of Foreign Public Officials in International Business Transactions of December 17, 1997, promulgated through Decree 3678/00;

    c. the United Nations Convention against Transnational Organized Crime of November 15, 2000, promulgated in Brazil through Decree 5015/04; and

    d. the United Nations Convention against Corruption of October 31, 2003, promulgated in Brazil through Decree 5687/06.

    As for the domestic legal framework, the Brazilian Anti-Corruption Law, also known as, Brazilian Clean Company Act (Law No. 12,846 of 2013) sets forth strict civil and administrative liabilities for corruption acts practiced by legal entities.

    In addition, individuals can be held criminally liable for bribery of a public official under the Criminal Code (Legislative Decree No. 2,848 of 1940).

    Notwithstanding, the current legal framework is far more complex and mainly composed of:

    a. Legislative Decree No.2,848 if 1940 (Criminal Code);

    b. Law No. 8,666 of 1993 (Public Procurement Law);

    c. Law No. 8,429 of 1992 (Administrative Misconduct Law) and;

    d. Law No. 12,846 of 2018 (Brazilian Clean Company Act)

    e. Decree No. 8,410 of 2015 (Anti-Corruption Decree).

    At last, there are scattered norms, codes of conduct, and ethics that apply to public officials, i.e., to the individuals to whom gifts, and business courtesies are directed, but these norms are not applicable to individuals who offer the courtesies.

  2. Which authorities have jurisdiction to investigate and prosecute bribery in your jurisdiction?

    A constant conflict that companies who seek to self-disclose face is that fact there are multiple authorities with jurisdiction over the matter.

    The sanctions set forth by the Brazilian Clean Company Act can be persecuted by administrative and/or judicial proceedings.

    Administrative proceedings shall be carried out by the highest authority within each agency or entity of the Executive, Legislative or Judicial Branches, e.g., the Brazilian Ministry of Transparency and Controller’s General Office (“CGU”) the General Counsel for the Republic (“AGU”), which shall act ex officio or upon request.

    Judicial proceedings will result from police investigations and indictments promoted by the Public Prosecutor´s Office, either a federal or state level.

  3. How is bribery defined?

    In the terns of Article 5of the Brazilian Clean Company Act, acts of bribery to the detriment of national or foreign public officials or administrative bodies are defined as:

    I. to promise, offer or give, directly or indirectly, an undue advantage to a public official or to a third party related to him/her;

    II. to demonstrably finance, defray, sponsor or in any way subsidize the performance of the wrongful acts established in this Law;

    III. to demonstrably make use of a third party, either an individual or a legal entity, in order to conceal or dissimulate the entities´ actual interests or the identity of those who benefited from the performed acts;

    IV. with respect to public bidding and government procurement:

    a) to thwart or defraud, through an adjustment, arrangement or any other means, the competitive nature of public bidding processes;

    b) to prevent, disturb or defraud the execution of any act related to a public bidding process;

    c) to remove or try to remove a bidder by means of fraud or by the offering of any type of advantage;

    d) to defraud public bidding processes or bidding-related contracts;

    e) to create, in a fraudulent or irregular manner, a legal entity with the purpose of participating in a public bidding process or of entering into a contract with the public administration;

    f) to gain undue advantage or benefit, in a fraudulent manner, from amendments or extensions of contracts executed with the public administration without authorization in the Law, in the notice of the public bidding or in the respective contractual instruments; or

    g) to manipulate or defraud the economic and financial balance of the contracts executed with the public administration;

    V. to hinder investigations or inspections carried out by public agencies, entities or officials, or to interfere with their work, including the activities performed by regulatory agencies and by inspection bodies of the national financial system

  4. Does the law distinguish between bribery of a public official and bribery of private persons? If so, how is ‘public official’ defined? Are there different definitions for bribery of a public official and bribery of a private person?

    The Brazilian legal framework has not adopted the concept of corruption in the private sector or commercial bribery.

    Nonetheless, there is a broad concept for public officials. Public official is anyone who works for any level, branch of agency of the government or entity owned by the government. This concept is extended to anyone who works for a private company that is retained to provide a public service.

    Under the Brazilian Criminal Code, a public official as one who, whether temporarily or officially, with or without remuneration, holds a public position, job, or duty. In addition, paragraph one of Article 327 extends the definition of a public official to include whoever performs work in a position, job, or function in a quasi-governmental company, and whoever works for a private outsourced company contracted to carry out an activity that is typical of the Brazilian Public Administration.

    Additionally, a foreign public official is the one who, even transitorily or without remuneration, holds a position, job or duty in governmental entities or diplomatic representation of a foreign country. Further, a person is held equivalent to a foreign public official when holding a position, job, or duty in companies directly or indirectly controlled by the public administration of a foreign country or in international public organizations.

  5. What are the civil consequences of bribery in your jurisdiction?

    Administrative sanctions and fines determined by judicial proceedings must be considered as independent and separate fines.

    The administrative sanctions establish fines of 0.1% to 20% of the offending entity’s gross revenues in the fiscal year prior to the initiation of the enforcement proceedings (but never less than the advantage obtained).

    The judicial sanctions may be applied cumulatively with those established as administrative sanctions and consist of: forfeiture of assets, rights or other values obtained as a result of the wrongdoing; partial suspension or interdictions of corporate activities; compulsory dissolution of the legal entity and debarment, which includes the prohibition from receiving incentives, subsidies, grants, donations or loans from public financial institutions for at least one year to a maximum of five years.

  6. What are the criminal consequences of bribery in your jurisdiction?

    Under Brazilian laws and regulations, criminal responsibility applies exclusively to individuals. Thus, with the exception pertaining to environmental crimes there is no corporate criminal liability.

  7. Does the law place any restrictions on hospitality, travel and entertainment expenses? Are there specific regulations restricting such expenses for foreign public officials?

    Regarding the provision of gifts and business courtesies to public officials in Brazil, the laws and rules are not clear or restrictive. However, many Brazilian companies, adopting a conservative approach, follow the rules and guidelines regarding gifts and business courtesies set forth in the High Administration Code of Conduct, which applies to the most senior public officials in Brazil as detailed below.

  8. Are political contributions regulated?

    As of 2016, in accordance with the Federal Law No. 13.165 of 2015 only individuals can make political contributions (apart from self-contributions from the candidate and political party). Contributions from legal entities are no longer permitted.

  9. Are facilitation payments regulated? If not, what is the general approach to such payments?

    No. Brazilian laws or regulations do not discipline facilitation payments. Nonetheless, they are not excluded from the concept of improper advantage provided for the by Criminal Code and Clean Company Act. No public official may receive payments other than those provided for in Brazilian law, especially regarding the performance of his or her professional activities. Brazilian laws do not allow any kind of compensation or anything of value to be provided to government officials in order to induce or compel them to comply with his or her obligations.

    Thus, any type of payment to an official to facilitate any activity would clearly be an act of active corruption by the party requesting the facilitation and/or passive corruption by the public official requesting the payment under Articles 316, 317 or 333 of the Criminal Code.

  10. Are there any defences available?

    No. Under the Brazilian Clean Company Act companies can be strictly liable for prohibited acts committed in their interest or for their benefit. To establish a strict liability violation, authorities need only demonstrate that a prohibited act occurred. Proof of intent or knowledge from the company or any individual is not required. This particularity aims to incentivize the investigation and prosecution of acts of corruption.

    Mitigation factors will be discussed in the following questions.

  11. Are compliance programs a mitigating factor to reduce/eliminate liability for bribery offences in your jurisdiction? Please identify any guidance indicating what features a compliance program should have in order to provide an effective defence/mitigation.

    The Decree No. 8,410 of 2015 determines that the existence of an effective compliance program is a mitigation factor for the calculation of the applicable penalties. The prosecuting committee will examine in accordance to the parameters determined by the same Decree and may reduce the pecuniary penalty from 1% to 4%.

    Note that, as previously mentioned, the pecuniary fine ranges from 0.1% to 20% of the offending entity’s gross revenues in the fiscal year prior to the initiation of the enforcement proceedings.

  12. Who may be held liable for bribery? Only individuals, or also corporate entities?

    Both individuals and corporate entities may be held liable for bribery as detailed in Question 1.

  13. Has the government published any guidance advising how to comply with anti-corruption and bribery laws in your jurisdiction? If so, what are the elements of an effective corporate compliance program?

    Article 42 of the Decree No. 8,410 of 2015 sets forth the elements of an effective compliance program, that is, a risk-based and tailor-made program.

    Noteworthy is the fact that, when analyzing the Compliance Program authorities will also consider the entities main traits, e.g., number of employees, market in which it operates, interactions with public sector and others.

    The parameters for assessing its effectiveness, include:

    a. Tone at the top and clear commitment of the upper management;

    b. Standards, policies and codes of ethics and conduct for employees, managers, and third-party vendors;

    c. Period training at appropriate intervals;

    d. Performance of risks assessments;

    e. Proper register of the books and records;

    f. Specific procedures intended to prevent fraud and corruption in the context of bidding for government contracts,

    g. Independence and proper structure attributed to the Chief Compliance Officer and department that is responsible for the Compliance Program;

    h. Adequate due diligence in mergers, acquisitions, corporate restructurings and in dealings with third parties,

    i. Ethics channel or reporting lines for whistleblowers;

    j. Establishing disciplinary measures for violations;

    k. Monitoring and periodic refinement of the program.

    CGU has published an English version of a guide for entities that aims to clarify the concept of a Compliance Program under the Brazilian Clean Company Act and its regulations. This document is intended solely for the purpose of guidance and is available at: http://www.cgu.gov.br/Publicacoes/etica-e-integridade/arquivos/integrity-program.pdf.

    At last, although there are pillars and guidelines available, each program will be evaluated on a case by case basis.

  14. Does the law provide protection to whistle-blowers?

    Federal Law No. 13, 608 of 18 is extremely concise but authorizes states to create their own hotline and provide a toll-free number for reporter who seek to contribute with criminal investigations.

    Moreover, the newly enacted statute requires that all companies that render ground transportation services under a concession must display a sign indicating the existence of the hotline and toll-free number.

    Confidentiality is assured and all federal unites are authorized to determine the compensations that will be provided for those who submit useful information for purposes of criminal investigations. As for the reward, the Act does not specify the amount and attributes competence to the federal unites to determine the compensations that will be granted. Nonetheless, the Act does establish that a cash reward may be provided to those who submit information that solves a crime.

    As of the present moment, no regulations have been enacted.

  15. How common are government authority investigations into allegations of bribery?

    Car Wash Probe has been considered by some as the biggest corruption scandal in history. Authorities are currently and constantly investigating, prosecuting and entering into Leniency Agreements with companies that have pleaded guilty. Investigations into allegations of bribery are part of the Brazilians routine since the outcome of the Car Wash Probe, in March 2014.

  16. What are the recent trends in investigations and enforcement in your jurisdiction?

    In recent years, Brazil has witnessed an outrageous growth of compliance, anti-corruption, investigation and enforcement practices.

    A recent trend relates to Brazil’s anti-corruption fight that resulted in a significant political shift both in the Congress and Presidential figure.

    Moreover, the President-elect has announced Sérgio Moro for Minister of Justice and Public Security as of January 2019. Moro was for a period the main judge and symbol for the Car Wash Probe. Moro has proposed an anti-corruption package that consists of bills and proposed amendments to the Constitution and resolutions for concerns against corruption in both sectors: public and private. The proposals cover both procedural measures aimed at celerity, as well penalties for crimes committed in both sectors.

    Additionally, Car Wash Probe reached its 61st Phase, in which a bank has been dawn raided because of its alleged participation in money laundering schemes. Employees of other banks have also been recently arrested amidst it alleged participation in illicit scheme. Lastly, in June, 2018, a former member of the Federal Police stated to Brazilian newspapers that the material collected during the period in which he was a public investigator would be enough for at least additional 5 years of investigations. There is still a lot to come.

  17. Is there a process of judicial review for challenging government authority action and decisions?

    Yes, there is. Every single administrative action or decision might be challenged by Brazilian courts, in situations in which the enforcers have acted illegally (i.e. unauthorized wiretapping), they have not granted the other party the right to properly defend itself, among others. Courts, however, tend to respect the administrative decisions granted by government authorities and its merits, overruling them only in situations in which the illegality is crystal clear.

  18. Are there any planned developments or reforms of bribery and anti-corruption laws in your jurisdiction?

    There is a vast number of bills under review and analysis of the Brazilian Congress.

  19. To which international anti-corruption conventions is your country party?

    Please refer to Question 1.

  20. Do you have a concept of legal privilege in your jurisdiction which applies to lawyer-led investigations? If so, please provide details on the extent of that protection.

    Confidentiality of the attorney-work product, communications, the inviolability of lawyer´s office and the attorney-client privilege are considered as fundamental rights under the Brazilian Federal Constitution. Thus, the duty of confidentiality is a public matter and must be observed by attorneys and the state.

    The ethical and disciplinary code of the Brazilian Bar Association, Law No. 8,906 of 1994, expressively provides that the confidentiality duty cannot be waived, that is, even by the client.

    Thus, a lawyer-led investigation is covered by the privilege and confidentiality protections. As mentioned above, the confidentiality duty is a public and not private matter.

    Notwithstanding, there are discussions if the same confidentiality and privilege applies to in-house counsel. If the lawyer is the also an executive for the company (scenario that has been recurrent) privilege and confidentiality may not be assured.

  21. How much importance does your government place on tackling bribery and corruption? How do you think your jurisdiction’s approach to anti-bribery and corruption compares on an international scale?

    KLA has received Transparency International at our auditorium. Corruption is now “visible” to all of society but simultaneously anti-corruption efforts have intensified.

    In comparison to other countries, one can say Brazil still has a long way to go. Nonetheless, Brazil has modelled jurisdictions that consolidated “best practices” and the numbers of Car Wash Probe are a proof of Brazilian seriousness in the combat of corruption:

    a) 2476 proceedings have been started;

    b) 754 requests for international cooperation;

    c) 90 criminal accusations against 429 different individuals;

    d) 244 convictions against 159 individuals;

    e) Crimes allegedly occurred involve bribes of BRL 6,4 billion; and

    f) Prosecutors are seeking for indemnification exceeding BRL 13 billion.

  22. Generally how serious are organisations in your country about preventing bribery and corruption?

    In general, there are corporations in the most varied spectrums. Entities that are subject to the FCPA or UK Bribery Act tend to have mature Compliance Programs.

    Brazilian companies are still adapting to a new scenario of enforcement and regulation. Some opt to implement “shelf” programs and other are willing to get out of their comfort zones. In a country were corruption has been considered endemic, changes are intense – both positively and negatively. The speed with which compliance has been absorbed in Brazil is transforming behaviors dramatically. These are real transition times. That which was well tolerated just a while ago is no longer accepted.

  23. What are the biggest challenges enforcement agencies/regulators face when investigating and prosecuting cases of bribery and corruption in your jurisdiction?

    Lack of expertise, resources and legal uncertainties. Entering into a settlement agreement creates an expectation of a clean slate. However, uncertainty looms over agreements as the Brazilian Clean Company Act provides that jurisdiction to several entities to enforce its provisions.

  24. What do you consider will be the most significant corruption-related challenges posed to businesses in your jurisdiction over the next 18 months?

    Ethical maturity. In a context where ethical standards, a compliance culture and the tone at the have not been solidified, it is likely that corruption-related concerns will prevail. Ethical standards have broader scope and applicability than enforcement actions and legal obligations.

  25. How would you improve the legal framework and process for preventing, investigating and prosecuting cases of bribery and corruption?

    The main challenge we have in Brazil nowadays is that politicians have the right to be prosecuted in special courts. For instance, Senators, Members of the lower house, ministers, among several others, have the right to be prosecuted directly before the Supreme Federal Court. The Supreme Federal Court does not have criminal investigations in its DNA, neither has enough staff to analyze all the cases that are under course. Because of that, we have seen several former politicians, money exchangers and executives being convicted as a result of its participation in illicit schemes, but we do not see the same when it comes to politicians still under their mandates. This improvement in our legal framework would be crucial to maintain and expand the fight against corruption, but the main challenge we have is that those politicians with the privilege are the ones entitled to analyze any bill in this sense.