Peruvian firms look up to Chile, seeking advice on how to prevent corporate crime

Source: El Pulso

On January 1, 2018, Peru will usher in a law governing the administrative liability of companies that will make them liable to sanctions for bribery, asset laundering and financing of terrorism if found guilty of those crimes. Although this discussion has been dragging on for years, the Odebrecht affair gave it the necessary tailwind. This is why companies are looking up to Chile, seeking advice on how to protect themselves from regulations that could potentially lead to their breakup.

“The Odebrecht affair is no doubt the biggest case, but by no means the only one. This is why we must act intractably and immediately at all levels to stem the rot of corruption.” The message was loud and clear. Some media outlets even went so far as to say it was the strongest made by any Latin American president against corruption. This past January 7th, Peruvian president Pedro Pablo Kuczynski (PPK) banged on the table. He addressed the country and zeroed in directly on the officials and companies embroiled in graft. The disclosure, in December 2016, that the Brazilian construction firm had paid over US$29 million in kickbacks in Peru alone between 2005 and 2014 felt like a sledgehammer.

Against this backdrop, the administration announced several decrees to make companies’ administrative liability more extensive. Although Peru’s efforts to be admitted to the OECD had led in 2014 to begin discussions about regulations to make companies directly liable for crimes, this legislation – which came into force in 2016 – only made reference to cross-border bribery, since the OECD required member countries to sanction companies that paid off public officials abroad. Now, however, given the rising tide of corruption scandals shaking the regional landscape, those regulations were found lacking. PPK announced an expanded spectrum of prosecutable offenses, adding bribery generally, asset laundering and financing of terrorism. And he also set a date: the new legislation would be effective as from January 1, 2018. And the machine started moving, moving across its national borders.

Chile has had similar legislation in place since 2009, and several companies have already felt its full weight, such as Ceresita and Salmones Colbún, in addition to the indictments of Penta and Corpesca. It should then come as no surprise that we felt a knock on the door from our Peruvian neighbors. Several Peruvian companies have already contacted Chilean lawyers to gain a better understanding of this problem and create crime prevention models, since having a certificate and model in Peru would exempt companies from liability in any judicial proceeding. “The concern we have seen among Peruvian companies is about how to design and implement crime prevention models. Starting from scratch, as Chile did, isn’t easy,” said Felipe Divin, Regulatory Risk and Corporate Governance Director for Deloitte.

In 2014, BH Compliance Executive Director Susana Sierra – who has certified dozens of Chilean companies – delivered a presentation before the Peruvian Congress on the Chilean experience. BCP Abogados partners Matías Balmaceda y Francisco Cox – vastly experienced in this subject, with over 60 companies as clients – did likewise in several parallel instances. This year, they even forged an alliance with one of Peru’s leading law firms, Loli & García Cavero Abogados, presently part of Rebaza, Alcázar & De Las Casas. BH also closed an alliance a month ago with García Sayán Abogados. In 2014, by contrast, this issue was not relevant and companies saw this as a distant threat – it would not happen to them.

However, everything changed once the Odebrecht affair blew up in late 2016. “Although there were lots of corruption cases in Peru, with Odebrecht it was the first time it happened with a company this big, a peer for all intents and purposes, which changed the way our perspective on this,” Sierra explained. Cox said that heightened concerns “were a blend of Odebrecht and PPK, which drove anticorruption measures with January 1st as the kickoff date, and which led activity to peak.” Sierra said Odebrecht was similar to la Polar, as far as the effects were concerned. “The Chilean law saw the light of day in 2009, and lay mostly dormant until the La Polar affair exploded in 201. With Odebrecht it was much of the same.”

Since then, the phone has been ringing off the hook. “We have been contacted by Peruvian companies and by the Deloitte Office in Peru, who want to replicate the Chilean experience since Law 20393 was enacted back in 2009,” Divin explained.

Sierra already implemented a pilot with three Peruvian companies, which presently hold certification: SSK (a Sigdo Koppers subsidiary), Indumotora and Banco de Crédito del Perú (BCP). “Previously, I used to go to the companies, and today it is the other way around. Now they call us, ask us to meet with them, and then my agenda is full before you know it,” Sierra said.  In the meantime, Balmaceda explained that they had worked on two or three specific proposals. “Companies know that something will be up in January,” he said. Cox also stressed that several clients have contacted them because they have overseas operations and, besides the fact that new legislation will be in force in Peru, there is international bribery (cross-border assets) that, if people with ties to the parent corporation are found to have engaged in it, could spill over to Chile as well. “This opened our eyes in terms that this isn’t a local thing, that we have to go beyond our borders,” he explained.

Today, Peruvian companies are busy doing some serious housekeeping, drafting procedures and thus getting ready for the shape of things to come.

Doubts about the exempting factor

In Chile, having a crime prevention model and a certificate to back this up does not provide a safe harbor when it comes to facing proceedings, so much so that Corpesca was indicted notwithstanding its existing model. The Peruvian case is different. Interest in certification is greater, because it would leave companies off the hook, a measure criticized by local criminal law experts. “A perverse incentive could be created for companies to whitewash with ‘paper’ certificates and models,” Balmaceda says. “This could encourage companies to keep models in the drawer just in case,” Sierra adds.

In Deloitte they explained that, to launch a formal inquiry, the Securities Market Superintendence must issue a technical report on the implementation and operation of the prevention model. In fact, Cox underscored that – no matter if you are told that the certificate will provide exemption – the prosecutors will ultimately check in the models are bona fide or not, as is the case in Chile.

Besides this, opinions do converge on one point: There is greater awareness among companies and boards of directors. Corruption is not so remote, it could happen to any company irrespective of how immune it feels. Although there is still ground to be covered – experts feel that more intensive cultural change is called for, with the Prevention Officer ranking at par with the board of directors –, things are already moving along and will not stop for the foreseeable future.