This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
Lots of eyes are on Mexico right now, given the country’s efforts to develop a new National Anti-Corruption System, the opening up of its energy sector to foreign investment and the reality of corruption risk that persists for business there, making attention to anti-corruption compliance of continued importance. It is fitting that two reputable actors in Mexico – PwC and FTI Consulting – have recently published new and helpful data related to the prevalence of corruption risk in the country.
The following data can help companies when developing business and compliance strategies on the ground. It can be used by compliance personnel when training employees in the country. It can help educate global executives who are making their first forays into Mexican business about the nature of bribery risk there. The findings:
2000-2015 Latin America Anti-Corruption Enforcement Results
PwC’s Forensic Services team analyzed FCPA settlements over the last 15 years involving Mexico and other Latin-American countries, which included 46 country-specific cases. It published the results in September 2015, finding the following:
- Mexico was the Latin-American country involved in the highest number of FCPA settlements. Mexico was involved in 12 cases, followed by Argentina (eight cases), Venezuela (seven), Brazil (seven), Honduras (two), Panama (two), Ecuador (two), Costa Rica (two), Colombia (one), Bolivia (one), Haiti (one) and the Bahamas (one).
- 67 percent of the Mexico FCPA cases involved illicit payments made through business partners, such as joint venture partners, sales representatives and distributors who interacted with government agencies on behalf of the prosecuted companies. Half of these business partners were sales agents.
- 25 percent of the Mexico FCPA cases involved the giving of gifts, entertainment or travel to government officials as part of the bribery scheme.
- 25 percent of the Mexico FCPA cases involved the use of fictitious vendors or invoices. By creating or accepting false invoices, businesses sought to justify improper payments to government officials. This included false invoices submitted directly to companies by government officials to support illicit payments or the creation of shell companies to funnel the payments.
- 25 percent of the Mexico FCPA cases involved manipulation of a company’s payroll process to make improper payments. For example, companies included ghost employees on the payroll to create a way of transferring funds to officials, or they hired a relative of an official as a way of influencing the official.
- 17 percent of Mexico FCPA cases involved control deficiencies in a company’s treasury processes, such as checks issued to an employee who cashed the checks and used the funds to bribe an official.
- 17 percent of Mexico FCPA cases involved overpricing for goods and services and using the extra funds to pay kickbacks as the method of bribery.
From FTI Consulting
2015 Corruption Survey
In December, FTI Consulting Mexico published survey results related to perceptions and experiences with government corruption in Mexico. The survey was based on interviews with managers and executives from 565 companies operating in Mexico. It was the second year in which the survey was conducted. The following results were notable.
- There was an increase in negative perceptions of corruption at all levels of government in Mexico: in 2014, 43 percent of business leaders said that all levels of government were “equally corrupt.” This year, the figure was 76 percent.
- Approximately one in five business leaders reported at least one incident in the last year in which public officials requested money to facilitate or issue paperwork, perform an official function or participate in or win a public contract.
- In 2014, 45 percent of respondents considered it “necessary or very necessary” to participate in corruption schemes to do business with the government at local or national levels; in 2015, 21 percent expressed the same sentiment. Small companies tended to face greater risk, with 37 percent saying that they had experienced corruption incidents.
- Only 39 percent of respondents consider reputation (integrity and/or honesty) to be the most important factor when selecting a partner or supplier.
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