Latin America Anti-Corruption Report

The LCCER experts have conducted a regional study on the current anti-corruption legislation and law enforcement in Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, Panama and Peru.

The countries were reviewed under the following eight aspects:

1) Existing anti-corruption legal framework;

2) Anti-corruption preventive policies and practices for the public sector;

3) Corruption in the private sector;

4) Reporting channels and protection of whistleblowers;

5) Strength and independence of anti-corruption (law enforcement) agencies;

6) National and international cooperation and coordination;

7) Participation of civil society and academia;

8) Access to information.

1. Chile - score 7.86

The country with the highest score of the LCCER experts has established quite an effective anti-corruption legal framework, including anti-corruption standards for the public sector and criminal, administrative and civil liability for corruption; it has provided the possibility to mitigate sanctions against legal persons for corruption crimes in the event that they take the necessary preventive anti-corruption measures; furthermore, Chile has granted sufficient independence to the law enforcement and anti-corruption bodies in the prevention, investigation of and prosecution for corruption offences (although, certain political pressure is still exerted on these bodies) and has ensured a high level of transparency of and accessibility to the information on the public administration.

However, Chile has not made any considerable progress in engaging civil society in the fight against corruption: besides the initiation of several cases, in fact, it does not participate in the detection of corruption offences; the domestic channels for reporting such infringements function ineffectively; there are no legal provisions on the protection of whistleblowers and economic incentives for reporting.

As a consequence, the LCCER gives Chile the following recommendations for increasing the effectiveness of its fight against corruption:

Promote legislation on the protection of whistleblowers and establish mechanisms that encourage the reporting of acts of corruption;
Promote formal mechanisms for civil society participation in the design and implementation of anti-corruption policy;
Establish ultimate beneficiary ownership registries in accordance with international standards and best practices.

2. Argentina – score 5.95

The authors of the report believe that Argentina has quite a solid legal framework for the prevention of and the fight against corruption, which incorporates 38 legal acts and other provisions, including standards and codes of conduct for the public and private sectors. However, some legal acts need further refinement: for instance, Law of 1 December 2017 No. 27.401 “Criminal Liability of Legal Persons” does not provide for the link between the type of legal entity, its size or type of activity and the elements that it must implement in developing a compliance programme.

Law enforcement is equally insufficient: certain laws remain a dead letter; there are no conditions to ensure the independence of law enforcement officers responsible for investigating and prosecuting corruption cases with no effective mechanisms for interaction and coordination between different law enforcement agencies; what is more, the officers of these bodies are under-qualified. Additionally, the domestic legislation does not provide for the mechanisms that would encourage the participation of civil society in the fight against corruption and the measures to support investigative journalists; there are no effective mechanisms for reporting corruption offences.

At the same time, Argentina stands out among other reviewed countries for the high degree of transparency of information about officials and private sector organisations held liable for infringements of the anti-corruption and public procurement legislation.

The LCCER experts conclude their analysis by making the following recommendations to Argentina on how to renew its efforts in the fight against corruption:

Strengthen the mechanisms of ethics in the public sector and regulations aimed at ensuring integrity in the public administration;
Propose and promote mechanisms for the appointment of judges that would guarantee political independence of the judiciary;
Undertake efforts aimed at clearly delineating the duties of legal persons in connection with the development of anti-corruption programmes, particularly with regard to situations involving cooperation with authorities and self-reporting;
Promote mechanisms for strengthening anti-corruption authorities also by preventing political interference, modifying the appointment process, allocating adequate financial and human resources, providing necessary equipment and organising staff training;
Encourage the creation of coordination mechanisms among anti-corruption authorities;
Promote legal mechanisms for civil society participation in the design and implementation of anti-corruption public policy;
Establish mechanisms to disseminate information among the general public and civil servants about available databases on the accountability of public bodies;
Promote the establishment of beneficial ownership registries in accordance with international standards and best practices.

3. Peru – score 5.86

The authors of the report assert that Peru’s anti-corruption legal framework is one of the strongest in the region. However, the effectiveness of the fight against corruption is hampered by the lack of political will and barriers in procedural rules such as the abuse of preventive detention and the immunity of senior public officials.

The anti-corruption legislation regulating the private sector is also quite solid; it covers both the application of anti-corruption standards to private entities and their obligation to adopt prevention measures.

The functioning of reporting channels supported by the provisions on the protection and reward of whistleblowers, the publication of information concerning public officials, including their asset declarations, bodies and public procurement can be effectively used to timely detect corruption offences. Civil society can contribute to the development of anti-corruption policy by participating in the discussions and activities of the High-Level Anti-Corruption Commission (Comisión de Alto Nivel Anticorrupción).

Despite the positive aspects highlighted in the report, the fight against corruption in Peru is hindered by a considerable political dependence of anti-corruption and other law enforcement authorities, especially regarding the procedures for appointing judges, prosecutors and heads of anti-corruption agencies, and the lack of specialized training of the officers of these bodies: the authors of the report, in particular, stress that since Law No. 30424 “On Administrative Liability of Legal Persons for Foreign Bribery” was adopted in 2018 there have been no relevant investigations due to the fact that law enforcement officers do not possess the necessary knowledge.

In order to enhance the effectiveness of Peru’s anti-corruption action the experts recommend the following:

Strengthen the mechanisms of public ethics and the regulations on integrity of public bodies;
Strengthen anti-corruption agencies, in particular, by allocating adequate financial and human resources, organising staff training and providing technology and equipment;
Develop and ensure the use of such appointment mechanisms that guarantee judicial political independence;
Establish a beneficial ownership registry in accordance with international standards and best practices.

4. Brazil – score 5.67

In spite of the fact that Brazil has improved its legal framework and law enforcement, the authors of the report stress that the domestic anti-corruption standards are not sufficient. For instance, most civil servants are entitled to participate in commercial and other organisations, whereas this information is not subject to disclosure; moreover, only general restrictions such as non-participation in political activities are imposed on the members of the judiciary.

The anti-corruption provisions regarding the private sector have also been criticised by the LCCER experts: the document underlines that the domestic legislation does not provide for an explicit obligation of organisations to adopt corruption prevention measures, and the latter are assessed only when the sanctions against the organisation for corruption offences are determined*. Besides that the Brazilian legislation does not provide for criminal liability of legal persons for corruption, and the companies that have been held liable in the framework of administrative or civil proceedings can seek a considerable penalty reduction in exchange for a disclosure of relevant information on corruption offences.

The experts also wonder why the law provides for the channels for reporting corruption offences but does not regulate in any way their proper functioning, and how civil society participates in the fight against corruption if there are no formal mechanisms for its interaction with authorities. What is more, although the country has a system that permits to request public bodies to provide information, the access to the data concerning the public officials and companies held liable for corruption offences is restricted.

At the same time, Brazil guarantees considerable independence of law enforcement and anti-corruption bodies from political pressure; there are mechanisms for cooperation and coordination in the area of prevention, detection, investigation and prosecution of corruption offences, including the agreements between the Prosecutor General’s Office (Procuradoria Geral da República), the Federal Court of Accounts (Tribunal de Contas da União) and the Ministry of Justice and Public Security (Ministro da Justiça e Segurança Pública) on technical cooperation, Public Prosecutor’s Office (Ministério Público Federal) and the Comptroller General of the Union (Controladoria-Geral da União) on the exchange of information; there are also working groups responsible for examining specific anti-corruption matters. The authors of the report stress, however, that the country lacks political will which is a prerequisite for effective law enforcement and high-ranking politicians often abuse their power to protect their political allies.

Based on the outcome of the analysis, the experts make the following recommendations on how to enhance the effectiveness on the fight against corruption in Brazil:

Promote the legislative processes limiting presidential pardon and enforcing corruption-related decisions before they become final;
Create a system of public declarations of interest statements for public officials of all branches of government and other autonomous bodies;
Promote legislation providing for criminal liability of legal persons involved in acts of corruption and establish bans against companies for having accounts outside corporate books and books with unidentified transactions;
Promote regulations providing for whistleblower protection, as well as to establish mechanisms that encourage the reporting of acts of corruption;
Promote legislation aimed at establishing beneficial ownership registries in accordance with international standards and best practices.

5. Colombia – score 5.60

Colombia’s legal framework incorporates at least 15 legal acts; however, the authors of the report stress that their effective enforcement is hampered by the lack of political will to counter corruption and a high degree of political influence on anti-corruption bodies.

Additionally, some legal provisions are not clear enough, for example, in certain cases the obligations and prohibitions imposed on companies by different authorities can contradict each other, which also affects law enforcement.

The channels for reporting corruption offences that constitute a key mechanism for engaging civil society in the fight against corruption do not function effectively enough due to the absence of provisions on the protection of whistleblowers and relevant incentives.

On the positive side, the authors of the report point out the publication of the information on public officials and organisations including the cases of their liability, transparency of public procurement, and the maintenance of the beneficial ownership registry.

The experts conclude their analysis with the following recommendations:

Strengthen the mechanisms of public ethics and integrity of government authorities;
Undertake efforts to inform legal persons about their anti-corruption obligations by clearly establishing the applicable regulations;
Promote legislation to protect whistleblowers and establish mechanisms that encourage reporting of acts of corruption;
Prevent political interference in the activities of anti-corruption agencies, including by changing the appointment processes of government officials;
Strengthen anti-corruption agencies, in particular, by allocating adequate financial and human resources, organising staff training and providing technology and equipment;
Put the existing beneficial ownership registries in line with international standards and best practices.

6. Mexico – score 5.51

Mexico has a comprehensive legal framework, reformed in 2016-2017 to create a national anti-corruption system and make uniform the legislation of the 32 federal entities. At the same time, the reform did not address the lack of specificity and definition in relation to some laws and regulations and their insufficient enforcement due to political interference in the activities of anti-corruption authorities.

The authors stress that the country also does not have the necessary legal regulations to counter corruption in the private sector: in spite of the fact that certain anti-corruption standards such as cooling-off periods for former public officials are applied to companies, the only incentive for entities to adopt corruption prevention measures is the possibility to mitigate sanctions for corruption offences.

At the same time, civil society is quite actively engaged in the fight against corruption; citizens can report corruption offences and receive necessary protection in line with the Guidelines for the Promotion and Operation of the Citizens' System Internal and External Alert of Corruption(Lineamientos para la Promoción y Operación del Sistema de Ciudadanos Alertadores Internos y Externos de la Corrupción); public access is provided to the information on public procurement and public officials involved in the procurement process, and on civil servants and companies held liable for violations, which permits to more effectively detect potential indicators of corruption offences. Additionally, the Citizen Participation Committee (Comité de Participación Ciudadana) was established, allowing civil society, academia and other non-governmental organisations to participate in the design of the anti-corruption policy and legislation.

The LCCER experts put forward the following recommendations on how to step up the fight against corruption in Mexico:

Promote regulations on the protection of whistleblowers and establish mechanisms that encourage the reporting of acts of corruption;
Undertake initiatives to promote mechanisms for strengthening anti-corruption bodies against political interference, including by changing appointment processes;
Clarify the mechanisms regulating the participation of the representatives of the non-public sector in the fight against corruption and in the processes of appointment and independent functioning of anti-corruption authorities;
Establish beneficial ownership registries in accordance with international standards and best practices.

7. Panama – score 3.97

Panama’s anti-corruption framework is primarily aimed at criminal law and the prevention of money laundering, which the experts estimate as insufficient for countering corruption. In particular, there are no legal provisions on the prevention of corruption, regulation of conflicts of interest, penalties proportionate to the gravity of offences and anti-corruption measures in the private sector.

At the same time, the enforcement of existing norms is hindered by the insufficient specificity and clarity of some legal provisions and the high degree of political interference in the activities of law enforcement bodies; the possibilities to detect corruption offences are reduced by the lack of the necessary reporting channels and the provisions on the protection of whistleblowers, as well as by the insufficient transparency of the public administration (for instance, public access must be provided to the declarations of officials, although this information is not actually published), while the effectiveness of investigations is reducing due to the lack of the mechanisms that would ensure cooperation among law enforcement authorities and between the latter and civil society.

At the same time, unlike the other reviewed countries that do not have a single source of information about beneficial owners, Panama is creating the relevant registry.

The analysis of the LCCER experts results in the following recommendations on how to enhance the effectiveness of Panama’s fight against corruption:

Strengthen the mechanisms of public ethics and integrity of the authorities of the State;
Promote a legal framework for the prevention of corruption in private sector;
Promote regulations on the protection of whistleblowers and establish mechanisms that encourage the reporting of acts of corruption;
Strengthen anti-corruption agencies, in particular, by allocating adequate financial and human resources, organising staff training and providing technology and equipment;
Propose and promote mechanisms for the appointment of judges of that would guarantee independence of the judiciary;
Create cooperation and coordination mechanisms among anti-corruption authorities;
Promote legal mechanisms for civil society participation in the design and implementation of anti-corruption policy.

8. Guatemala – score 3.89

Guatemala has a legal framework composed of approximately 20 legal acts governing the fight against corruption. According to the authors of the report, however, most of them are outdated and need qualitative update. At the same time, the country lacks the provisions on the fight against corruption in the private sector, whereas the need to adopt measures to prevent corruption offences is mentioned solely in the anti-money laundering legislation.

The existing channels for reporting corruption offences are not fully used, even though there is a reward for whistleblowers amounting to five per cent of the assets confiscated. This is due to the fact that there are no provisions on the protection of whistleblowers. Furthermore, the country does not have the mechanisms ensuring the participation of civil society in the fight against corruption, whereas the public access is provided only to the information on public procurement, which does not make it possible to timely detect the indicators of corruption offences. Law enforcement authorities are subject to serious political interference, which reduces the effectiveness of prosecution for corruption.

As a consequence, the experts make the following recommendations to Guatemala on how to redouble its anti-corruption efforts:

Strengthen the mechanisms of ethics and integrity in the public sector;
Create a system of public statements of interest for public officials of all branches and other independent bodies;
Propose and promote mechanisms for the appointment of judges that would guarantee political independence of the judiciary;
Promote a legal framework for the prevention of corruption in private sector;
Establish ultimate beneficial ownership registries in accordance with international standards and best practices.

*It is necessary to note that in fact Brazil’s legislation does impose the obligation to adopt corruption prevention measures on the legal persons, but it is limited to the organisations that enter in a contractual relationship with the State (see here and here).