New Compliance Rules on Financial Institutions
Regulation on compliance issued by the Central Bank and alteration in the Congress of the rules of administrative sanctioning process in the sphere of the Central Bank and CVM
Notorious and growing concern with compliance subject and its developments has been innovated by normative ruling which increases the provisions of the Anti-Corruption Law and respective Regulatory Decree. Resolution n. 4.595 of 2017 edited by the Brazilian Central Bank – Bacen, specifically provides for adoption of compliance program applicable to financial institutions. On the other hand, Law Project – PL n. 8.843 of 2017, approved by the Chamber of Deputies and now referred to the Senate, when dealing with the administrative process punishment within the scope of Bacen, brings limits to the commitment term over severe misdeed in comparison to Provisional Measure – MP which was in force until then.
PL 8.843/17 derives from MP 784/17, which was issued on June 7th of current year and lost its effectiveness on Oct 19th given its non-voting in Congress. The MP’s text had been criticized by Prosecutors and the opposition in Congress, and was also scope of Unconstitutionality Declaration – ADIn before the Supreme Court upon the argument of deliberating over criminal and procedural matters, as well as containing a provision that ensured Bacen the possibility of absolute secrecy in the adjustment of leniency agreements and commitment terms signed with financial institutions, as well as the possibility of non-compulsory confession of the infraction committed by transgressors. On its turn, PL 8.843/17 text was harmonized and improved in its course over Chamber of Deputies, granting Bacen the prerogative to conclude the commitment terms only limited to its administrative sphere of action and, therefore, excepted the criminal sphere of investigation of illegal activities.
Among the innovations introduced after deliberation in the Chamber of Deputies, it was limited the possibility of confidentiality of commitment terms signed with Bacen, and it is now clear that its competence is limited to the rules which fulfillment falls in the scope of Bacen. It was expressly excepted the hypothesis of commitment term for serious infractions, introduced in its article 4th, which are: those that may cause liquidity or insolvency risk to the financial institution, or undermine the stability of the national financial system. In addition, it introduces the obligatory payment of a monetary penalty for the conclusion of the term and not only requires its clear publicity, as it reiterates the duty of communication to the Public Prosecutor and other competent agencies, although it may remain confidential during the proposal phase of the commitment term by the financial institution with the Central Bank and until the final stage of the administrative proceedings.
Term “leniency agreement” was expressly suppressed and replaced by the term “administrative agreement”, clearly delimiting jurisdiction in criminal matters, but keeping the essence of leniency, with the possibility of extinguishing the administrative punishability of Bacen’s competence, or reduction of penalties over 1/3 to 2/3 in the event of effective, full and permanent cooperation, which results in the identification of others involved and obtaining information and other documents that evidence the misconduct.
On its turn, Bacen Resolution 4.595, issued on August 28th, 2017 requires the implementation of effective compliance policies by December 31st for financial and similar institutions authorized to operate by the Bacen, including microentrepreneur credit companies and credit unions. This legislation adhere to the provisions of Bacen Resolution 4.567/2017, which had already obliged financial institutions to implement Reporting Channels to be used for reporting misconduct.
Among other provisions, Bacen Resolution requires that the compliance policy be approved by the Board of Directors and, in the case of credit unions, also by the General Meeting, showing to be in line with one of the basic principles of compliance: ‘tone at the top’ and with article 42, ‘I’ of Decree 8.420/15, which regulates the Anti-Corruption Law. Resolution also includes on its Article 5th other compliance concepts integrated into current legislation and originally edited under international rules that gave rise to compliance: FCPA and UK Bribary Act, being these principles essential to the implementation of any effective compliance policy, such as: independence of compliance officers in relation to top management, with clear delimitation of their position and functions in the organizational structure, in particular, being clearly segregated from the internal audit functions, in addition to the allocation of adequate personnel with necessary training and experience; adequate measures to ensure independence, such as adequate allocation of resources and free access of the compliance officer when performing of their duties; and, the provision of appropriate communication channels with directors, board of directors and audit committee, in order to report the results identified by the compliance area.