It has been more than a decade since the Brazilian Law N.º 12,846/2013 (Brazilian Anti-Corruption Law) established the strict liability of legal entities for unlawful acts against national and foreign public administrations. Initially, there were doubts about the extent to which the law would be enforced in Brazil. However, the landmark Operation Car Wash firmly established its authority, recovering over BRL 20 billion (approximately $3.3 billion) and leading to the arrests of high-ranking executives and notable Brazilian public figures over the course of its seven-year investigation.
In the years following Operation Car Wash, Brazilian authorities sought to adapt and strengthen the country’s anti-corruption framework. Key developments included the enactment of Federal Decree No. 11,129/2022 (Federal Decree), which replaced the previous Federal Decree No. 8,420/2015 of the Brazilian Anti-Corruption Law.
The Brazilian General Comptroller’s Office (Controladoria-Geral da União, or “CGU”), the internal oversight body of the Brazilian Federal Government, has been working proactively to coordinate anti-corruption efforts in collaboration with both domestic and international authorities. As part of its initiatives, CGU launched the “Compliance Program: Guidelines for Private Entities” (Programa de Integridade, Diretrizes para Empresas Privadas) in 2015, providing valuable guidance on the concept of corporate compliance programs in line with the Brazilian Anti-Corruption Law and its regulations.
To maintain its proactive approach and address the evolving anti-corruption landscape in the country, CGU published an updated version of these guidelines in October 2024, called “Compliance Program: Guidelines for Private Entities Vol. II” (Programa de Integridade, Diretrizes para Empresas Privadas Vol. II).
Recently, in December 2024, Decree No. 12,304/2024 (Decree) was introduced to regulate Brazilian Law No. 14,133/2021, commonly referred to as the Brazilian New Procurement Law. In force since April 2021, this law includes provisions requiring organizations doing business with the Brazilian government to design and implement effective corporate compliance programs.
Brazil’s efforts were recognized in 2014 when the country achieved a good position in Transparency International’s Corruption Perception Index (CPI). However, it has lost 25 positions so far and recorded its worst score and lowest position in the history of CPI 2024 (the country scored 34 and ranked 107th out of 180 evaluated nations).
Transparency International (TI) and the OECD Working Group on Bribery (OECD Working Group) have openly criticized the country’s ability to enforce the law, hold legal entities accountable and promote international cooperation.
Federal Decree was enacted in July 2022 replacing the former Federal Decree N.º 8,420/2015 of the Brazilian Anti-Corruption Law. This decree brought some changes regarding the evaluation of corporate compliance programs, particularly emphasizing the need to demonstrate the commitment of the senior leadership by allocating appropriate resources to the compliance program.
It also highlighted the importance of conducting comprehensive due diligence before engaging with high-risk third parties, such as brokers, consultants, sales representatives, and politically exposed persons, and before granting donations or sponsorships.
Additionally, it increased from 4% to 5% of the fine reduction factor if the legal entity demonstrates the existence of an effective corporate compliance program at the time violates the Brazilian Anti-Corruption Law.
CGU launched its corporate compliance guidelines to offer guidance on designing corporate compliance programs that align with the requirements of the Brazilian Anti-Corruption Law. While CGU guidelines were issued as non-binding and did not create rights or guarantees in potential legal proceedings, they were well received by the compliance community. This positive response can also be attributed to CGU’s role as the government entity responsible for evaluating corporate compliance programs under the Brazilian Anti-Corruption Law within the Federal Executive Branch.
For those who may recall, the Brazilian Anti-Corruption Law was enacted establishing that the highest competent authority within each agency or entity of the Executive, Legislative, and Judicial branches is responsible for initiating and adjudicating administrative proceedings to hold legal entities accountable for unlawful acts against public administration, whether domestic or foreign. For instance, in terms of municipalities, Brazil has more than 5,500, which means that each has the authority to enforce the Brazilian Anti-Corruption Law within its jurisdiction. Therefore, CGU, as a designated authority, offers a unified approach for evaluating corporate compliance programs at least within the Brazilian Federal Executive Branch.
In addition to the support of senior management through the adequate allocation of resources to the corporate compliance program as determined in the Federal Decree, CGU emphasizes the importance of establishing a clearly defined management and control structure within every legal entity, regardless of size or complexity. This structure should include well-defined roles and responsibilities that are accessible to all stakeholders. CGU highlights that effective corporate governance not only ensures organizational integrity but also requires the maintenance of accurate books and records.
While CGU is not introducing a new concept regarding the importance of corporate governance and accurate record-keeping, it does impose heightened compliance scrutiny on non-publicly traded companies in the country, as the Brazilian Anti-Corruption Law applies to all types of legal entities. According to official Brazilian government data, as of December 2024, over 21 million legal entities are registered there. Of these, nearly 14 million are sole proprietorships, followed by approximately 7 million limited liability companies (LLCs). Publicly traded companies account for merely 200,000 of the active legal entities registered in the country. Although CGU’s guidelines are not legally binding and do not provide rights and guarantees in potential legal proceedings, its emphasis on corporate governance and accurate books and records contributes to enhanced transparency and security when conducting business with non-publicly traded companies in Brazil.
Moreover, CGU takes a step further providing a range of practical examples of violations of the Brazilian anti-corruption framework that go beyond the payment of undue advantages. Among these examples are (i) the purchase of reports containing confidential information extracted from the Brazilian Federal Revenue’s internal systems, (ii) obstructing oversight activities through the alteration of product formulas and labels, as well as fraud in laboratory testing, and (iii) irregularities in guarantees offered in credit operations with state-owned banks.
CGU also recommends key performance indicators (KPIs) to support the requirement for continuous monitoring. For example (i) the number of employees trained on the company's compliance policies during the year, (ii) the average time (in days) taken to conduct internal investigations, (iii) the percentage of business partners hired without following the compliance due diligence process, and (iv) the percentage of action plans defined by internal and/or external audit that have been completed.
Lastly, this new CGU guideline embraced the growing consensus that compliance programs should encompass environmental, social, and governance (ESG) topics, as can be observed in the Decree (as discussed below).
On December 9, 2024, Decree was introduced to regulate the Brazilian New Procurement Law establishing parameters for assessing corporate compliance programs specifically in the following cases (i) high-value government contracts, defined as those exceeding BRL 200 million (approximately $32 million), (ii) tiebreak scenarios, when one or more bidders submit a declaration confirming the existence of a corporate compliance program, and (iii) the reinstatement of companies sanctioned under the Brazilian Anti-Corruption Law.
Decree took effect on February 7, 2025 – 60 days after publication. It applies to high-value contracts involving the Brazilian federal government and any agreements executed by the Brazilian state and municipal public administrations that use financial resources voluntarily provided by the federal government.
However, Decree does not designate a specific authority to evaluate the corporate compliance programs of the legal entities subject to the Brazilian New Procurement Law. Instead, it states that it is up to the federal body to determine the government agency or entity that will be responsible for assessing compliance programs. For the second time, this lack of a unified authority intensifies concerns about the consistent application of anti-corruption guidelines for those operating in Brazil.
In this regard, there is an inconsistency with the standards of the Federal Decree. By defining a corporate compliance program as a set of internal mechanisms and procedures aimed not only at preventing corruption but also at mitigating social and environmental risks associated with the organization’s activities and protecting human rights (collectively known as ESG), the Decree broadens the scope and increases the risk factors for organizations seeking to do business with the Brazilian government.
While this aligns with the growing demand of stakeholders for stricter adherence to ESG standards by organizations, the lack of clear regulations for these parameters and the absence of specific authorities to oversee the matter undermine the effectiveness of these evaluation criteria. The Decree’s limited scope of application further challenges its potential positive impact.
In any case, the absence or failure to provide evidence of an effective corporate compliance program in the specific cases mentioned above may result in penalties imposed on the bidding company. These penalties may include: (i) a warning, (ii) a fine ranging from 1% to 5% of the contract value, (iii) disqualification from bidding and contracting with public administration, or (iv) a declaration of ineligibility to bid or contract with public administration – which could impact other public contracts as well.
The introduction of new anti-corruption regulations and guidelines in Brazil may represent a step forward in combating corruption. However, their ultimate effectiveness is uncertain.
In 2023, the OECD Working Group published the Phase 4 Report on Brazil (Report) evaluating and making recommendations on the country’s implementation of the OECD Anti-Bribery Convention. Although the Report complimented CGU’s initiatives in combating corruption, it also highlighted significant concerns, particularly the legal controversies surrounding Operation Car Wash. These included a perceived lack of independence during the last years of the operation and allegations of political bias among law enforcement agents, as well as in controversial decisions issued by the Brazilian Supreme Court.
Almost a year later, the criticism remains unchanged. TI openly criticized Brazil's leadership role in the G20 Anti-Corruption Ministerial Meeting held in October 2024. While the countries members of G20 ratified a Ministerial Declaration underscoring the importance of strengthening integrity in both public and private sectors as a central part of “building a just world and a sustainable planet,” – in G20’s official statement, TI highlighted the ongoing failure of G20 leaders, including Brazil, to prioritize anti-corruption initiatives in their own countries by enabling illicit financial flows.
Furthermore, Brazil is facing economic challenges, with the Brazilian Real depreciating by more than 20% over the past year. There may be opportunities for international investments. However, the lack of clear and consistent enforcement of anti-corruption measures presents additional risks for potential investors. The Brazilian government must take significant steps to fight corruption effectively, ensuring that the progress achieved during Operation Car Wash was not in vain.
