Courtesy of AlixPartners

A majority of companies in a recent survey reported being exposed to a heightened risk of corruption in Latin America and China.

The sixth annual global anti-corruption survey from global legal consulting firm AlixPartners found that 90 percent of companies operating in Latin America, and 94 percent of companies operating in China, reported their industries are exposed to corruption risk.

More than a third of the companies said they believe their operations in these jurisdictions have lost business in the past year due to situations involving a competitor making illicit payments to a government official.

The survey polled more than 275 corporate counsel, legal and compliance officers representing more than 20 major industries globally.

Charlie Laurence, managing director of AlixPartners in New York, told Corporate Counsel, “Historically, China has been a big risk issue. But one of the key things that jumps out at me in this survey is the emerging of Latin America as even more of a risk. More than half of the most recent [corruption-related] enforcement actions have been from Latin American countries.”

He conceded that many of the enforcement actions are being driven by cases that grew out of the massive scandal involving Brazilian construction conglomerate Odebrecht SA and what has become known as “Operation Car Wash.” That bribery scandal has expanded to more than 13 companies, including Brazil's state-run oil company, Petrobras, and has reached as high as the Brazilian presidency.

Laurence said the survey shows that it's vital for general counsel to understand the risk of using third-party vendors, which is how most bribe money is handled. The report said that in 2017 and 2018, all but two of the U.S. enforcement actions under the Foreign Corrupt Practices Act involved improper use of a third party or other agent.

Another lesson for general counsel, Laurence said, is to take extra precautions in conducting due diligence when acquiring another company.

“What you don't want to do is acquire the problem,” he said.

The report said businesses continue to face strong FCPA enforcement activity due to increased international cooperation, as in the Brazilian scandal. And it said companies are increasingly challenged by changing regulations around the world, most notably the General Data Protection Regulation in the European Union, which went into effect in May.

The survey also said:

• In addition to China and Latin America, in-house counsel are concerned about growing risks in Russia, Africa and the Middle East. Some 31 percent of respondents said Russia is a place where it is impossible to avoid corrupt business practices, while 27 percent said Africa is.
• About 11 percent more respondents this year said the Middle East has “significant” corruption risk than said this in the 2017 survey.
• Some 44 percent of respondents said their companies have pulled out or delayed an acquisition due to corruption risks, up 7 percent over the prior year.