Shin Jae Kim (sjk@tozzinifreire.com.br) and Renata Muzzi Gomes de Almeida (rga@tozzinifreire.com.br) are Partners at TozziniFreire Advogados in Sao Paulo, Brazil.
As compliance and ethics professionals, you probably know that an internal investigation is challenging by nature. You must thoroughly understand the issue, quickly analyze the facts and risks, make sure the illicit conduct has stopped, interview the employees, possibly interact with authorities, and develop remediation efforts for the short and long term.
Now imagine you are the compliance professional of a US company with businesses in Latin America, and you receive an anonymous tip that employees are paying bribes in Bolivia, Brazil, and Paraguay. What was already challenging becomes a much more complex procedure as you will now face a cross-border investigation.
The complexity of different perspectives
In such complex cases, planning is key. First, in any cross-border investigation, it is crucial to build the road map of the investigation, understand the risks, and consider the jurisdictions possibly involved. Once a possible irregularity or misconduct is identified, the company should take all the appropriate measures to investigate and identify the details and source of the problem, including the individuals involved and potential flaws in the compliance program. This will also ensure the company has the information and answers it needs should an external investigation be initiated.
The additional layer of complexity within a cross-border investigation arises from a broad range of issues that usually need to be addressed at the start of the investigation and coordinated simultaneously, such as local legislation, cultural considerations, possible language barriers, different data privacy regulations, and ensuring attorney-client privilege in different jurisdictions, as necessary. Because of that, it is common to have cross-border investigations conducted by a local adviser that will be responsible for consistently coordinating all fronts of the investigation, defining strategies, and keeping an independent report line directly with the headquarters. The compliance professional must not let local language be an impediment and should consider the cultural aspects when developing the investigation strategy, and always seek local advisers as required.
Additionally, it is extremely important to remember that different countries have different levels of perception regarding corruption or any other illicit conducts, and that makes cross-border investigations even more challenging. It is almost common sense nowadays that some countries will represent a much higher corruption risk when compared to others. Thus, a global vision of all the countries involved is one of the key points for a successful cross-border investigation.
Another important step to take in the early phase of the investigation is the determination of who from management (local or even international) should be notified of the compliance investigation. This point is crucial because the people who are made aware should also be reminded about the importance of keeping the confidentiality during the investigation and how the breaching of this confidentiality might have impacts on the integrity of the whole procedure. In some countries management may see contacting the subject of an investigation as a courtesy or a polite gesture. It may seem like a basic principle of an investigation, but this is a good example on why understanding local culture is highly relevant in a cross-border investigation.
What’s the harm?
Once the investigating team has made sure of the immediate cease of the illicit conduct, it should discuss strategies to mitigate potential risks that could range, depending on the case, from reputational to civil or criminal liability.
As mentioned, risk areas vary around the globe. In countries with a high risk for corruption, the schemes usually occur with the use of third parties that include public tenders; emergency government procurements; obtaining of licenses, permits, and regulatory approvals; legislative affairs; disguised donations; and in-kind benefits. Understanding these nuances can represent an additional challenge for the investigator, which is another reason having a local adviser is advantageous.
Regarding local laws, it is necessary that the investigation team understands the laws of the countries related to the investigation to identify whether the findings should be considered evidence of illicit acts. This will have a direct impact in the recommendations made to the company.
More considerations
During any investigation, but especially across borders, the unexpected can (and probably will) occur, so it is necessary to have a team capable of quickly adjusting the direction of the initial investigation plan whenever deemed necessary. There are many factors that can change the course of an investigation, including a brand-new law in one of the involved countries and a new fact discovered during an interview.
Also, as previously mentioned, keeping an independent report line directly with the headquarters with a set frequency during the investigation is of the utmost importance. In that regard, periodic reports before the presentation of the findings, remediation plan, and recommendations—also known as the final report—are considered important tools during a cross-border investigation, as they will serve as mechanisms to allow the company to take quick decisions during the process.
Another important issue to consider is the process for data retention and preservation. There are different types of data protection laws around the world, each one with particularities and requirements that make them unique. It is therefore important to assess the relevant jurisdictions and what procedures should be applied to comply with the respective applicable local laws. The compliance professional conducting the investigation must understand the local data protection obligations, which could vary significantly.
Also, when defining the type of data and information to be preserved, the compliance professional ought to look beyond emails and identify which applications and communication tools are commonly used locally. For example, in Brazil, WhatsApp is the most popular choice for personal and business communications. Therefore, if investigating in the country, the professional should plan on collecting and preserving that type of data, while always remaining compliant with local laws.
Wrapping it up
Once the internal investigation has been concluded, the headquarters should be advised on how the findings will be reported: (i) written/oral reports, (ii) in-person/virtual presentations, (iii) detailed memorandums, or even (iv) straight-to-the-point slides.
The investigation team’s knowledge of the local laws involved will be a key point at this moment. The advice to the headquarters varies depending on the country’s labor or data privacy laws; in some jurisdictions, for example, a written report might be legally necessary to prevent labor law issues in cases of disciplinary measures or dismissal of employees. In other cases, written reports being shared from one country to another might violate data privacy laws.
Based on the investigation findings, the company should take immediate measures to ensure that any potential irregularity has stopped, appropriate disciplinary measures have been applied, and the lessons learned from the investigation are used to enhance and improve the compliance program.
Takeaways
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Internal investigations are challenging by nature, but when dealing with cross-border investigations, the procedure becomes much more complex.
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The additional layer of complexity within cross-border investigations arises from a broad range of issues that usually need to be addressed and coordinated simultaneously.
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In such complex cases, planning is key: road map the investigation, understand the risks, and consider the jurisdictions possibly involved.
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Crucial points: who will coordinate, who should be aware of the investigation, independent line of reporting, immediate cease of conduct, and mitigation of risks.
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Understanding the nuances of risks per jurisdiction can represent additional challenges for the investigator, a reason why having a local adviser should always be considered.