Latin America’s Compliance “Circle of Trust”

This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.

Successful compliance officers in Latin America regularly say that the most important lesson for effective compliance is to establish positive relationships with business units in a company. Patrick Henz, the Primetals Technologies Compliance Officer for the Americas, describes the need to establish a “circle of trust.” Weatherford’s Global Ethics & Compliance Director, Marco Padilla, similarly explains the relationship as one that must be built on confidence, where employees feel that they and their company will be better off if they disclose an issue than if they do not. Thus, he says, a compliance officer must be a “trusted business partner.” Compliance works best in Latin America when relationships are collaborative, not static.

If, on the other hand, the compliance officer is seen as a threat, the compliance function runs the risk of breaking down. Employees will not seek out guidance when there is an issue of potential compliance significance. Even worse, they might choose to hide certain transactions to avoid potential scrutiny, even if the transactions are entirely legitimate, undermining a culture of transparency. There can also be a backlash effect, where employees prone to criminal acts feel more compelled to actually engage in them due to the wall that exists between a company’s rule-enforcing employees and its business-generating personnel.

If unaddressed, the divide can even grow into hostility. In one situation, an outsider from the United States was brought into a Mexican company to build compliance measures and began his work with a two-day “introduction” workshop on anti-corruption laws. The trainer spoke only in English and showed no interest in establishing a personal rapport with the employees. On day two, the employees showed up wearing Mexican soccer team jerseys. When the trainer asked if Mexico was playing that day, the employees laughed. They had worn the jerseys as a display of defiance to the out-of-touch newcomer, who many associated with “Yankee Imperialism,” an historical attitude toward aggressive United States intrusion in Mexican affairs. This small episode illustrates that, in Latin America, local norms must be acknowledged if a compliance officer wants to break the ice. Without showing respect, compliance will falter.

Compliance officers need to become trusted advisors and partners of the business units. They need to be seen as resources for guidance and support. How does one build this circle of trust in Latin America? Here are two strategies that tend to work well:

Make the Personal Touch. Some compliance officers in the region go out of their way to make the personal touch. They have personal sit-downs and have coffee with employees and make site visits to company units away from headquarters. They might also do so with business partners by scheduling in-person visits in which they describe in detail the company’s compliance program. They might explain to the third party the nature of indirect liability to demonstrate why the very existence of the engagement is a risk factor. Making a personal effort to explain the laws and trends behind compliance facilitates a cooperative relationship.

One compliance officer in the region tells the story about how keeping her office door wide open with a bowl of candy on her desk results in regular drop-bys from colleagues who wish to chat, which serves to strengthen the compliance function. Another tells how his in-person meeting with one employee actually inspired the employee to make a presentation on ethics at the local university. In Latin America, face-to-face engagement can go a long way.

Ensure Empowerment. Red tape is a common feature of Latin American business, and it is all too easy for a compliance officer to fall into the trap of being perceived as merely another formality. One way that companies avoid this perception is by empowering compliance officers in a meaningful way. Rather than serving as one more checkpoint in a company bureaucracy, compliance can be given a leadership voice in the organization. Compliance officers can make determinations on when policy violations occur. They can be given the ability to stop a high-risk transaction from going forward, or at least be provided a strong voice to influence executives who make the final call.

Mr. Padilla explains, “There is a saying in Mexico that one must place blind trust in three people in life: your doctor, your mechanic and your lawyer. Nowadays you need to add your Compliance Officer to the list.”

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