Moving the Compliance Needle in Latin America

In a recent interview of Paul Hastings’ Nisa Gosselink-Ulep, we posed the question: can the imposition of monitorships and “leniency agreements” move the compliance needle in Latin America?

Petrobras, Braskem, Odebrecht, Stericycle and other U.S. style compliance and regulatory actions continue to be more commonplace across Latin America in the past decade. This has led to a tectonic shift in the implementation of leading industry compliance program overhauls following significant investigations and prosecutions. Some have included the use of legal tools such as monitorships and deferred prosecution agreements. While the imposition of a “leniency agreement” or compliance monitor may not be welcome news, done correctly, they can deliver long term benefits.

Nisa has served a part of compliance monitoring teams for Latin America-based organizations and has advised organizations that are operating under a monitorship.

Nisa offered these insights. Monitorships are often seen as being very intrusive and costly, but they can be a real catalyst for meaningful long-term change. To make a monitorship successful, the company has to start at the very beginning and identify a monitor candidate who has the right experience and approach to compliance programs. That practical experience can be the difference where an organization moves from simply enduring a monitorship and running out the clock to deriving a substantial, long term organizational benefit.

Monitorships can provide a clear framework and a timeline for companies to enhance and stress test their compliance programs to see if they’re working. One of the biggest benefits of a monitorship, although painful, is the collective focus and support from the entire company. From the very top to the very bottom, when people are focused on the monitorship, they understand that something is happening and they’re focused on compliance in a way that doesn’t usually happen under business as usual circumstances.

When a company is under a monitorship, it is inherently “business unusual”. But that added element of pressure and focus can drive lasting change. Out of necessity, everybody’s working collectively and focused on making the compliance program better and stronger.

This can help companies drive a cultural shift towards a genuine commitment to ethical conduct. And employees really start to understand that they have a collective responsibility. Outside the compliance team is where the real change needs to happen. As employees start thinking about how their actions impact compliance and that what they do is important, you start to see that reflected in improved testing and monitoring data and employee survey responses. And then it begins to extend beyond the compliance enhancements, and can be seen in stronger financial and accounting practices. When the hard lessons of monitorships and leniency agreements start to give rise to improved control processes across the board, the organization naturally becomes more resilient.

Monitors bring really useful information and proven processes into these embattled organizations because they have seen firsthand what has worked at other companies. Organizations that open their minds to the positive aspects of what a monitorship is supposed to do – drive positive change – recognize that the monitoring team can serve as a kind of  benchmarking resource which can give guidance and information about the type of practices that have enabled other organizations to successfully move past a crisis. The type of organizational focus and allocation of resources that only occurs in times of crisis can supercharge an organization’s ability to make meaningful, measurable improvements to their business practices and by extension, the ethical culture.

Nisa and I bonded over the joint belief in the benefits of monitorships and deferred prosecution agreements because of our having experienced these amazing organizational transformations firsthand.

To hear more insights from our discussion with Nisa and how to move past the crisis toward lasting compliance reform, listen to whole discussion here.