LATAM Airlines is among many Latin American companies currently facing heightened compliance risks. Credit: Carlos Yudica/Shutterstock.com

Early in the COVID-19 pandemic, when Rogeria Gieremek, global head of compliance for LATAM Airlines, was asked whether the carrier could make a donation without passing through compliance, the Brazil-educated lawyer says her response was: "No, but I can do it for you in two hours."

The COVID-19 pandemic has unfolded like a high-stakes game of chase for compliance officers in Latin America and their outside legal counsel, who say they must stand firm in a region prone to corruption and fraud, even in the best of times.

The crisis began with a noticeable drop in alerts to possible misconduct as companies acclimated to remote work. That lull was quickly followed by a flurry of urgent requests to fast-track donations, purchases and contracts—challenging compliance managers to keep business flowing with the appropriate checks and balances.

"This context can create opportunities for more risky practices," said Rita Motta, a Brussels-based counsel with Latham & Watkins who has extensive experience in Brazil and other Latin American countries.

Motta hosted a webinar Thursday to discuss the evolving landscape for compliance officers and lawyers who specialize in oversight and investigations in the region. All agreed that policies and monitoring must continue, albeit at an expedited pace amid severe business disruption and heightened demand for results.

Heloisa Ferraz, an associate at Brazilian law firm Pinheiro Neto Advogados, recounted how she and colleagues recently performed due diligence on a contract in half a day, at the request of a client. Before COVID-19, clients would have allowed as much as a week to conclude a similar task.

Brazil is a bit ahead of the curve within Latin America on compliance matters, having enacted a slew of regulations in the wake of the Operation Car Wash probe unveiled more than six years ago. That investigation uncovered illicit payments to government officials by construction firm Odebrecht that resulted in arrests across Latin America.

"We have instructed our clients that due diligence cannot be forgotten," Ferraz said. "Compliance has to be embedded in everything—all the procedures that a company takes."

Good and Bad Apples

Bianca Pietroforte, global compliance manager and counsel for processed food firm Mondelez International, said she believes most employees act in good faith but that they're very concerned with hitting their numbers, especially as global economic conditions worsen. Employees may feel their jobs are at stake, she said, on top of feeling pressured to make fast decisions. They also may be under the impression that internal monitoring is lower, or that the level of tolerance for missteps is higher.

Mondelez, the maker of such snacks as Ritz crackers and Cadbury chocolates, sought to correct errant behavior early in the pandemic by gently reminding employees that compliance officials are available to help them put out fires. "We don't want to take shortcuts," Pietroforte said.

Juliana Rodrigues, compliance director for the Americas at global beauty products firm Coty, also saw a need to remind employees of compliance obligations. At first, she said, internal hotlines went silent as employees feared widespread layoffs. Unfortunately, she has also seen an increase in fraud during the pandemic, she said.

"During crises like this is when people get very, very creative—not for the good, for the bad," Rodrigues said.

While Rodrigues sees a need to be more flexible with the rules during a crisis, she says companies must still adhere to policies and conduct risk assessments as often as possible. "At the end of the day, we have to protect the company," she said.

A report released in May by the Lawyers Council for Civil and Economic Rights, part of the Cyrus R. Vance Center for International Justice, warned that the COVID-19 health crisis has paved the way for more abuses across Latin America, particularly in government procurement.

Much of Latin America scored poorly in Transparency International's 2019 Corruption Perceptions Index. The anti-graft group concluded that political leaders in the region often act in their self-interest, at the expense of the citizens they serve.

The 2020 Latin America Corruption Survey, conducted before to the pandemic by Miller & Chevalier Chartered and 14 partner firms, showed that corruption is perceived as a significant obstacle to doing business in the region. Just over half of the nearly 1,000 compliance officers, senior executives, directors and in-house lawyers surveyed at local and multinational firms said they saw corruption as a major barrier, up 10 percentage points from 44% in the last survey, which was released in 2012.

Still, there are signs that watchdog groups remain vigilant and that authorities, especially in Brazil, are determined to uphold oversight.

Patricia Marques, regional compliance counsel for South America at TechnipFMC, a U.K.-based services firm for oil and gas projects, said it's time to reinforce compliance integrity as a core belief of companies.

"We're going through a crisis. We all have our financial objectives and we want to achieve them, but not at any cost," Marques said.

On the Bright Side

In-person investigations are hindered by the current reality, as are dismissals.

Meanwhile, compliance managers have also seen a need to relax policies on, for instance, charitable donations while meticulously documenting atypical authorizations in case those are questioned down the road. Third-party intermediaries represent a particular risk, they say.

Flexibility is essential as risk assessments change monthly during these uncertain times. On the bright side, compliance managers see more widespread use of technology tools allowing for closer monitoring and better use of analytics.

Daniel Dominguez, a Washington, D.C., partner at Latham & Watkins whose practice focuses on internal investigations and enforcement actions by entities such as the U.S. Securities and Exchange Commission, suggests that compliance managers "go back to basics" to focus on high-risk areas as organizations seek to move faster.

As they put out fires, he recommends viewing COVID-19 as an opportunity to show that compliance can be responsive and agile to help individuals within companies achieve goals without slowing down operations.