{"id":5814,"date":"2023-10-26T10:50:28","date_gmt":"2023-10-26T13:50:28","guid":{"rendered":"https:\/\/www.interactsolutions.com\/?p=5814"},"modified":"2026-01-28T12:00:39","modified_gmt":"2026-01-28T15:00:39","slug":"compliance-in-history-age-of-fraud-and-stricter-laws","status":"publish","type":"post","link":"https:\/\/www.interactsolutions.com\/en\/compliance-in-history-age-of-fraud-and-stricter-laws\/","title":{"rendered":"Compliance in history: Age of fraud and stricter laws"},"content":{"rendered":"

We have reached the fourth and penultimate publication of the\u00a0Compliance series in history<\/strong>. In this text, you will learn about the main international scandals, the emergence of mandatory compliance, the tightening of laws on corruption, the proposal for models of compliance programs and the implications around the world.<\/p>\n

This article is part of Interact\u2019s Compliance Handbook, a 130-page material that includes the history, conceptual foundations, Brazilian legislation, the main models in the world and how the\u00a0SA Strategic Adviser<\/a><\/strong>
\nmeets these recommendations. The survey conducted by Interact was based on the creation of the\u00a0Compliance & Risk Management<\/a>\u00a0<\/strong>technology solution.<\/p>\n

Check out the previous publications:<\/strong><\/p>\n

First phase: The germination of the area<\/a>
\nSecond phase: The birth of the area<\/a>
\nThird phase: Money laundering era<\/a><\/p>\n

Topics in this article:<\/h3>\n

International scandals
\n<\/a>Watershed
\n<\/a>Punitive guidance
\n<\/a>Brazilian adequacy
\n<\/a>Program templates
\n<\/a>The most severe law in the world
\n<\/a>UK Bribery Act Foreign
\n<\/a>Corrupt Practices Act<\/a><\/p>\n

International scandals<\/strong><\/h3>\n

In that period, Compliance assumed the scale that we know today. Firstly, the fourth phase is marked by a series of international scandals that reinsert the United States into the spotlight of corruption. To exemplify, we list four cases frequently cited in the Compliance literature:<\/p>\n

1 \u2013 Enron case<\/h4>\n

In 2001, the US energy company Enron claimed to have artificially inflated its revenue to hide debts, which hovered around $ 11 billion. Investigations uncovered the manipulation of the Texas energy market and the payment of bribes abroad. In 2007, Enron declared bankruptcy (TONON, 2016).<\/p>\n

At the time, economist Paul Krugman, a columnist for The New York Times, wrote in an article published in Folha de S.Paulo: \u201cThe Enron fiasco is not just the story of a company that failed, but that of a system that failed. And the system did not fail due to carelessness or laziness: it was corrupted \u201d.<\/p>\n

2 \u2013 Worldcom case<\/h4>\n

In 2002, the telephone and data services company WorldCom revealed more than US $ 7.1 billion in \u201caccounting errors\u201d. Instead of recording expenses, the company launched these values \u200b\u200bas investments, artificially increasing its results. Years later, the company recognized the fraud and filed for bankruptcy. At the time, it was the second largest company in the sector in the United States, responsible for half of the internet traffic in the country.<\/p>\n

3 \u2013 Tyco case<\/h4>\n

The company\u2019s former chief executive and chief financial officer were indicted on charges of having collected $ 600 million through extortion schemes involving stock fraud, unauthorized bonuses and counterfeit expense accounts.<\/p>\n

4 \u2013 Adelphia case<\/h4>\n

In the same year, Adelphia, the American television company, considered the fifth largest in the United States, also went bankrupt due to corruption. The broadcaster\u2019s family was accused of embezzling $ 2.3 billion without reporting on the balance sheet and overestimating the company\u2019s results to hide debts.
\n<\/a><\/p>\n

Watershed<\/h3>\n

In this fourth period, the September 11 attacks, a watershed in Compliance, took place. In response to the terrorist acts, the\u00a0USA PATRIOT Act<\/strong>\u00a0was approved. The decree expanded the search and surveillance powers of federal intelligence and enforcement agencies. In the banking system, it imposed a series of restrictions and security measures to combat money laundering.<\/p>\n

The United States has also enacted the\u00a0Sarbanes-Oxley Act (Sarbanes-Oxley Act, acronym SOX)<\/strong>, which establishes sanctions for companies that practice accounting procedures that do not comply with good corporate governance practices. Structured in eleven chapters, it addresses several aspects that make up organizations, particularly in the areas of control (SARCEDO, 2014).
\n<\/a><\/p>\n

Punitive guidance<\/h3>\n

Compliance programs have gained more punitive orientation. Companies now need to have risk assessment programs and internal controls. Before being voluntary, compliance programs started to become mandatory \u2013 \u201cmandatory compliance<\/strong>\u201d (CASTRO, 2016, p. 33).<\/p>\n

According to studies by Richard Steinberg, addressed in Leandro Sarcedo\u2019s doctoral thesis (2014), the implementation of a compliance program along the lines of SOX can reach high levels of costs. For a company that has $ 5 billion in revenue, it is estimated to spend around $ 4 million. However, the author draws up a list of failures that generated\u00a0values 20 times greater<\/strong>.<\/p>\n

According to the Brazilian Fernando Ribeiro, Head of Compliance at UBS, a multinational bank based in Switzerland, Compliance before the attacks on banks had a mere normative character \u2013 checking whether the institution complies with norms.<\/p>\n

With the attacks, a fundamental question arose:\u00a0do you know your client?<\/strong>\u00a0After all, all actions, including the terrorist piloting course, were financed by a local financial institution. In other words, terror money went through bank conduits (RIBEIRO, 2018).<\/p>\n

At the international level, ABN Amro, then the largest Dutch bank, was the first financial institution to be framed by regulatory bodies in the United States and to receive a fine of US $ 85 million in 2004. For the American authorities, the subsidiary of the bank had inadequate internal controls. In response, the bank hired additional employees, installed new policies and asked external experts to review the Compliance program. Since then, according to Ribeiro (2018), the 20 largest banks in the world have received about\u00a0US $ 25 billion in penalties.<\/strong><\/p>\n

\n

\"\"<\/p>\n

The headquarters of ABN Amro Group NV stand in Amsterdam, Netherlands, on Friday. Feb. 21, 2014. ABN Amro, the state-owned Dutch bank preparing to sell shares to the public, said fourth-quarter losses widened 24 percent as economic woes in the Netherlands forced it to set aside more bad-loan provisions. Photographer: Jasper Juinen\/Bloomberg<\/p>\n<\/div>\n

Brazilian adequacy<\/h3>\n

At the national level, Brazil launched an articulated program among more than 60 organs and entities to fight corruption. Created in 2003, the\u00a0National Strategy to Combat Corruption and Money<\/strong>\u00a0Laundering is the main Brazilian articulation network for the arrangement and discussions on combating corruption and money laundering. The participating bodies comprise the Executive, Legislative and Judiciary Powers at the federal and state and, in some cases, municipal levels, as well as the Public Ministry.<\/p>\n

This network joins efforts with Brazil\u2019s adherence to the\u00a0United Nations Global Compact<\/strong>, which calls on companies to align their strategies and operations with 10 universal principles in the areas of Human Rights, Labor, Environment and Anti-Corruption. It is currently the largest corporate sustainability initiative in the world, with more than 13,000 members in almost 80 local networks, covering 160 countries. Of this amount, approximately 700 signatories are Brazilian.<\/p>\n

Corruption was also the theme of the\u00a0United Nations Convention<\/strong>\u00a0in 2006, which established an international framework among member countries in combating the entire network that surrounds the theme of corruption. As a consequence, the legislation of the signatory countries was adapted in the years following the approved parameters. In 2006, the\u00a0National Monetary Council<\/strong>\u00a0issued Resolution 3,380, which provides for the implementation of the operational risk management structure. In 2008, Bill No. 3,443 was passed, approved three years later, which renewed Bill No. 9,613 of 1998 on preventing and combating money laundering.<\/p>\n

\"\"<\/p>\n

United Nations Convention, Geneva. Photo: Elma Okic \/ ONU
\n<\/a><\/p>\n

Program templates<\/h3>\n

In 2005, the\u00a0Basel Committeepublished the document Compliance and the Compliance Function in Banks<\/strong>, which sets out, in principle, the recommendations on the Compliance function. In the following year, a revision of the Committee QR-014 of the Australian Standard AS 3806 was published. It was recently transformed into\u00a0ISO 19600.<\/strong><\/p>\n

According to Candeloro (2012), this model has been widely used in forums for discussing the structuring of Compliance programs, as it highlights that they will be different for each institution, due to the following factors:<\/p>\n

\u2022 jurisdiction in which the institution operates;<\/p>\n

\u2022 corporative culture;<\/p>\n

\u2022 operating market;<\/p>\n

\u2022 regulatory environment;<\/p>\n

\u2022 characteristics and complexity of products and services;<\/p>\n

\u2022 size of the institution;<\/p>\n

\u2022 resources used by the Compliance area;<\/p>\n

\u2022 methodologies used, degree of commitment and support from senior management.<\/p>\n

The most severe law in the world<\/h3>\n

The period ends with the creation of what is considered today as the most severe anti-corruption law in the world: the UK Bribery Act. In force since 2011, it applies to both public service and companies based in the United Kingdom or doing business in the region. Compared to the United States\u2019 FCPA, both penalize bribery of foreign civil servants.
\n<\/a><\/p>\n

UK Bribery Act Foreign<\/h3>\n