ICC Commercial Crime Service

Proactive Partnership Leads Battle Against Corruption

Guatemala’s corruption environment is under scrutiny. Authorities have revealed that corruption has been, and is, present in almost every sector of the country’s economic and political activity. Guatemala’s high impunity rate (99.7 percent in 2015, according to the Attorney General’s Office) in corruption cases stimulates the growth of corruption.

However, substantial progress is being made.

‘Crusade’ Against Corruption

The UN´s International Commission Against Impunity in Guatemala (“CICIG” in Spanish), in cooperation with a renewed Attorney General’s Office, have led a crusade to fight against corruption at every level, and dismantled entrenched criminal networks. This shows how an independent and technical organization, such as CICIG, in cooperation with the AG’s Office, can contribute to the improvement of transparency and accountability to strengthen the country’s institutions, including the courts and Tax Administration, and strengthen the rule of law. Their decisive and proactive strategy against corruption, armed with the use of technology and forensic capabilities, have enabled them to investigate, locate and take relevant actions against corruption in each of their respective fields. This has also had a positive impact on Guatemala’s financial health. In fact, in June 2016, Moody’s Investors Services announced the change in outlook on Guatemala’s ratings to stable from negative, and affirmed the Ba1 government bond and insurer ratings.

Risky Business

But, given this commitment to battle corruption, foreign businesses face a wide series of risks, including political/economic instability and increased regulatory uncertainty from local branches exposed to fraud and corruption activity. They face being subject to administrative review of local operations and criminal investigations for tax evasion, money laundering, trading in influence, and environmental pollution, among others. Additionally, foreign businesses that engage in corrupt acts may be subject to administrative sanctions, as well as the forfeiture of any assets that are related to the commission of corrupt acts. These risks are independent of potential breaches of international regulation and compliance, such as FCPA and the UK Bribery Act.

Analyzing Guatemala’s most recent corruption scandals, authorities have discovered that a substantial part of the country’s corruption agents are located in business sectors involved in public contracting – niches where politicians charge illegal fees for the allocation of significant services offered by government agencies. These sectors include construction, technology, pharmaceutical, natural resources, communications and food services. Therefore, public procurement is the umbrella where foreign business sectors would be most vulnerable as of this date.

Ensuring Compliance with Anti-Corruption Standards

To protect that vulnerability and avoid violating Guatemala’s corruption rules, foreign companies need to engage proactive strategies and implement firm anti-corruption standards. These strategies include enhanced due diligence procedures to thoroughly identify counter parties, clients, third-party service providers, etc. Standards must be based on strict governance and compliance rules, and must be enforced, sanctioned and reviewed periodically as to assess, evaluate and respond to risk exposure to fraud, money laundering and corruption.

Given the current environment in Guatemala, if they follow the rules, businesses can be sure they won’t get caught in the corruption dragnet.

The author acknowledges the contribution of Juan Andrés Marroquín and Emanuel Callejas to the article.

Rodrigo Callejas leads the insolvency and asset recovery practice at the Guatemalan law firm Carrillo y Asociados. His experience includes coordinating and obtaining recognition and enforcement of foreign judgments and recognition of cross-border insolvency processes before local, US, and European authorities. He is also lead multi-jurisdictional Latin American counsel for one of the largest international asset recovery/bank liquidations in history – the $5.5 billion Stanford International Bank (Antigua) Ponzi scheme.





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