We have already discussed the issue of Internal Regulations in a previous article (see link), and they usually imply the starting point of any Compliance Program in a company. The name reflects it is a program about “fulfillment” or “obedience”. Therefore, the main question is: “What must be fulfilled?”

The rules of these programs may be broad and may establish a Code of Conduct and Ethics as well as issues of criminal nature, passing through all areas and circumstances that contribute to the daily coexistence in a company. The appropriate way to develop them is from the broadest and most abstract to the most precise rules. For this reason, we recommend working gradually: first, with an Internal Regulation, and then including a Code of Ethics with certain general behaviors; only once this is accepted with a significant average level of compliance, it would be convenient to set more specific rules.  

We will not delve into an exhaustive legal review, but we should clarify that these rules are created by individuals and may entail sanctions for non-compliance; they are compulsory for all the employees of the company and may be applied extraterritorially (generally, in multinational companies). Furthermore, they may regulate on matters such as Rules for Coexistence, Human Rights, Criminal Law, Labor Law, Environmental Law, Civil Law, and Commercial Law. 

Most programs today aim to combat laundering of assets and to prevent other criminal offences in the context of international collaboration against financing of terrorism, drug trafficking and other similar offences. Nevertheless, programs can go much further, and companies definitely know it — there are numerous cases of companies determined to reduce the pollution they produce, maintain recycling programs, work on protocols for prevention of occupational accidents, security measures, Corporate Social Responsibility programs, etc. 

We believe it is extremely useful to highlight the importance of Compliance Programs nowadays, in an increasingly united and global world. These fully developed programs ensure law enforcement and ethical rules for the entire company — and by making it mandatory for every worker, the chances of achieving it are multiplied. Moreover, these days the image of the company is more valued if it has these compliance programs and good average levels of compliance. 

Furthermore, there is a significant expansion of this type of programs, driven by large multinational companies that require other companies related to them to cover certain aspects of these programs. Initially, this was a requirement for branches and subsidiaries, which over time was extended to controlled and controlling companies. The current trend is that several major companies start requiring certain international compliance standards to their entire value chain (including vendors and distributors). This seems a bit harsh on their part, but the argument they usually use is that this ensures a clear competition between all market players and it prevents crimes and contingencies that might have a negative impact at a judicial level and on the image of their companies. 

In addition, the real objective of Compliance Programs is to reduce to the maximum the legal contingencies that may arise in the case their subsidiaries fail to comply with their obligations.  From bribery to a public official to the lack of the necessary security elements for the normal development of the workers’ tasks, the most varied actions or omissions can make the company liable for a judgment for substantial sums of money. This is also part of what is known as Preventive Law (see link to read full article), but already in an advanced stage, probably integrating the provisions in this regard. 

With regard to Compliance Programs, there are different collective actions. They would be a kind of “inter-entrepreneurial” Compliance Programs. The idea is to achieve consensus for a fair and appropriate competition among all market players. It is clear that if a company does not comply with the maximum working days established, pays salaries below the legal minimum, obtains financing from illegal activities, corrupts officials to obtain benefits, and does not pay the corresponding taxes, it will have (when selling) a comparative advantage (although illegally achieved) with respect to the rest of the competitors. These are the type of situations that should be avoided, as well as other maneuvers known as “money laundering”, which provide legitimacy to capital obtained from spurious sources. 

Being a new area of Law, it is evolving much faster than the most traditional areas, but we understand that innovating in such practices is beneficial for companies.  Bearing in mind that the whole business world is tending towards this type of rules, the companies that already have had these programs for several years will get a more well-oiled system than the companies that have just started when this modality becomes “mandatory” due to market demands. 

Should you require any further information in this regard, do not hesitate to contact our Law Firm.


Diego J. Nunes

Attorney at Law

Estudio Nunes & Asoc.