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December 8, 2022How the world sees corruption
The “bible” regarding a reference in terms of global perceptions of corruption levels is an annual survey conducted by Transparency International.
The last report, dated 2021, contains 180 countries with a famous color scale; the darker the color tones, the worse the perceived levels of corruption in the public sectors of these 180 countries:
As we can easily see, corruption is a global phenomenon. The only part that doesn’t have shades of yellow, orange, and red doesn’t have enough people who can perform the function of public agents subjected to being corrupted.
South America Region & Brazilian Corruption
All of South America is perceived as highly corrupt, according to Transparency International surveys. Brazil shares a less-than-honorable position with Argentina. In this rock bottom of the most corrupt countries in the world, the continent manages to score five more countries (Ecuador, Peru, Bolivia, Paraguay, and Venezuela), with one of them in the Bottom Five:
Brazil has many famous corruption cases, in addition to another plethora of not-so-famous cases. If we add up everything that comes to the media’s attention, perhaps this does not even represent 10% of the existing corruption cases in the country. The most recent and, for the time being, the one with the highest proportion of bribes and deviations is Operation Lava Jato (“Car Wash” Operation).
Since 2014 Brazilian Government, several Political Parties, and significant companies which operate with Petrobras, a state-controlled company, have been under a substantial investigative operation.
The main figures of the Operation at that time were summarized in the infographic, even though these numbers suffered material modifications after each new phase and investigative development.
Besides that, Operation Lava Jato apparently motivates additional efforts to investigate other Brazilian Government actions, which always implicates more political and private business involvement in several schemes related to Fiscal Authorities, other state-controlled companies, international traffic of influence, several schemes regarding bribery of official agents, multiple kickback schemes, etc.
In recent years, the Operation has suffered interminable setbacks. The vast majority of prisoners and condemned have benefited from the nullity of some acts and have returned to freedom. However, the various agreements, which implied the return of billions of reais to the public treasury and the state-owned company involved, did not change.
From a technical perspective, recent events should give rise to an even more critical perception of the country’s high corruption risks.
Due to fraud and corruption, doing business in Brazil is very complex.
If, on the one hand, there are several opportunities over here, on the other one, bribery and fraud could jeopardize it. To succeed, it is mandatory to deal with these risks appropriately.
How I see corruption
I can’t entirely agree with about 90% of what I read in corruption surveys and perceptions. I even have strong criticisms about the study that serves as a parameter to measure corruption worldwide.
Despite several technical and conceptual issues, as a Brazilian and a professional exposed to corruption investigation since the first years of audit practice, it is pretty hard not to have a darker view of the stage of Brazilian corruption.
During my years as an auditor, I had early experience with agreed-upon procedures, with a solid investigative bias, in public affairs.
With less than four years of career, I have already accumulated a qualitative experience in the Pension Funds of SOE, full of intricate problems and with several connections with a dirty game of public power. With twice as much time, I more than quadrupled my experience in this pension fund segment, having the most significant funds of the country in my portfolio, representing more than 85% of the assets of the private pension fund segment, rendering services in the area of annual auditing and a multitude of services required by regulatory bodies, in the areas of benefits, actuarial and asset management.
Due to this experience, I participated in other special projects that occasionally required a more significant effort to deepen analyses with a robust investigative bias. Once again, projects involving SOE, former SOE, privatizations, etc.
Continuing my career as an independent auditor, I had more experience with clients in the oil and gas area, now a little broader, involving relevant players in South America and a lot of corruption. Even one of the most problematic subsidiaries of the top company involved in the Lava Jato scandal had its audit conducted by me a few months before the problems exploded in the media. Knowing things from the inside makes a lot of difference and subsidizes my pessimism about all the frivolity that attenuates the results of these perception surveys.
To be in mind, at that point, Transparency International’s CPI did not recognize all effects of this multiple corruption environment in the Brazilian Index.
This experience in the most problematic subsidiary ended up leading me to assume new responsibilities, and from that moment on, I started to dedicate myself exclusively to corporate investigations, fraud, and corruption, in addition to other services pertinent to the practice, ranging from compliance projects to assist in legal disputes.
If, during my time in the audit practice, I had the perception that the problems were much more significant than what I saw reported in the media and reported in research, in conducting an investigative practice, I came to be sure that everything was much more problematic and complex than what they wanted us to believe.
High doses of impunity fuel Brazilian corruption to the point that it is, to some extent, coveted and disputed. This dispute implies denunciations, sometimes from players who want to take over that space controlled by corruption.
But when denouncing and carrying out investigations, the schemes become known. There is, therefore, the need to sophisticate them; otherwise, the next aspirant to control corruption in that segment will be easy to harm his competitor. An absurd situation in the light of reason, but it is the sad reality, to the point that sometimes I had the misfortune of being invited to business prospecting meetings with a part composed of notorious corruptors wanting to harm others.
In search of true independence
Dealing with all these issues in a Big 4 universe or large consulting firms is a nightmare. There are many conflicting interests, including the budgetary pressures of revenue generation and the level of occupancy of technical staff. In the iNSiGHTS section, I deal with this more appropriately.
The practical result is that with time and my stance of defending elementary issues of professional credibility and fairness, I understood that the risks of association and image were much more significant than occasionally being able to fall below budgeted targets or having an occupation lower than the KPI defined, my life within the environment of large companies has become a martyrdom.
The formal end of this relationship was not caused by technical versus commercial disputes but had to do with intolerance of deviations and fraudulent schemes.
You can’t fight fraud by having double standards.
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