The Brazilian Ministry of Transparency and Comptroller-General of the Union (CGU) released, on 9/14/18, its Practical Guide for Evaluation of Compliance Program in PAR (“Manual Prático de Avaliação de Programa de Integridade em PAR”). The ostensive purpose is to guide the entities of the Executive, Legislative and Judicial Powers in charge of initiating and deciding on Administrative Liability Proceedings (PAR). By means of a PAR, authorities assess the liability of a legal entity investigated for the practice of illegal acts under the Clean Company Act (Law 12846/13).
The existence of compliance programs is one of the items taken into account as an extenuating factor in calculating the fine applicable in face of misconducts under Law 12846/13. In this context, the new CGU Guide seeks to provide technical uniformity and to avoid discrepancies in the analysis made by the different entities when assessing compliance programs of companies investigated in a PAR.
Although the Guide does not have binding force due to its own nature, companies are encouraged to observe its standards and methodology. The Guide presents standards for the assessment of compliance programs, methodology of analysis and of fine calculation, as well as procedural aspects to be considered, including template documents to be used. It also provides an Assessment Spreadsheet, which can be used by the legal entities to present their own compliance mechanisms. The relevant points of the Guide are briefly discussed ahead.
- When and how to present the Compliance Program?
The Guide recommends that the legal entity investigated in a PAR demonstrate conformity of its Program when submitting its first written defense. It also recommends that such entities have opportunities to submit eventual further updates.
Annexes II and III of the Guide provide, for these purposes, respectively, templates of Profile Report and of Conformity Report, respectively.
- Who evaluates the Program in the PAR and when is it assessed?
The Program is evaluated by a Commission for Administrative Liability Proceedings (CPAR) or by public servants specializing in compliance, where these exist. The percentage of fine reduction, however, is at exclusive discretion of the CPAR. The assessment of the Program is to be made when drafting the final report. The Program, however, shall only be assessed if it is able to impact the fine’s value, i.e.: (i) if the fine rate has already reached a value equal to or lower than zero, the Program cannot further reduce the fine; or (ii) if, on the other hand, the advantage received is higher than 20% of the gross revenue in the last financial year, there is no need to evaluate the Program, since the amount of the fine shall correspond, in such case, to the value of the undue advantage received.
- What are the evaluation standards?
Currently, there are standards provided for in art. 42 of Decree 8420/15, in state or
federal district laws ruling on compliance matters and in CGU Ordinance 909/15.
The Program must be adequate, for instance, to the company’s profile, it must not be merely formal, it must be efficient to mitigate the risk of misconducts and it must exist prior to the occurrence of the investigated conduct.
- How to evaluate the Program?
The Guide provides an Assessment Spreadsheet in its Annex IV, detailing the parameters of Decree 8420/15 (arts. 41 and 42) and of CGU Ordinance 909/15, as well as guidelines for reaching the fine reduction percentage and explanations of the methodology suggested. The Spreadsheet contains (i) preliminary questions related to the legal entity’s profile and to the misconduct investigated in the PAR; and (ii) 3 sets of questions aimed at identifying the existence, application and effectiveness of the measures in the Program under evaluation. The sets of questions proposed by the Guide are:
- Organizational Compliance Culture (COI);
- Mechanisms, policies and compliance procedures (MPI); and
- Actions of the legal entity concerning the misconduct (APJ).
The Guide contains clarifications on the assessed items and also examples of evidence of the items in each set of questions. The percentage of reduction applied as result of the Program’s assessment will correspond to the result of the following calculation, which is made directly in the Spreadsheet:
Percentage of reduction = [ (COI x MPI) APJ ]
The new CGU Guide is a very useful practical tool for the entities in charge of initiating the PAR and evaluating compliance programs. For the private sector, it represents an important source of objective aspects to be considered in a PAR, serving as well as a milestone for the elaboration and update of the materials that integrate the companies’ compliance programs.
The Comptroller-General of the Union (CRG) and the Secretariat of Transparency and Corruption Prevention (STPC), both entities within CGU, elaborated the Guide. The full content is available only in Portuguese at the CGU website, through the link http://www.cgu.gov.br/Publicacoes/etica-e-integridade/arquivos/manual-pratico-integridade-par.pdf.
The Anticorruption Compliance team of Azevedo Sette Advogados is available for further clarifications on this matter.