Brazil’s CGU releases new report on penalty calculations in Administrative Accountability Proceedings

Brazil’s Office of the Comptroller General (CGU) has published a second edition of a report analyzing the calculation of penalties in Administrative Accountability Proceedings (PARs) – used to hold companies accountable for acts of corruption or other harmful acts against the country’s public administration. The document provides a detailed examination of the criteria, percentages and views that the CGU applied and established in 159 decisions based on Law No. 12,846/2013 (the Brazilian Anti-Corruption Law), systematically outlining the severity of fines and the weight given to aggravating and mitigating circumstances. This initiative is part of the CGU’s institutional commitment to transparency, making the application of anti-corruption legislation more uniform and predictable.

The report shows that companies prosecuted in the fiscal year prior to the opening of a PAR were subject to a fine calculation base varying between 0.1% and 11% (excluding taxes) of their gross annual revenue, with an average of 3.1%. Upon calibrating the calculation according to minimum and maximum limits established in the Anti-Corruption Law, about 75% of the fines the CGU imposed resulted in an effective rate of 7% of the company’s gross revenue (excluding taxes). While these percentages do represent significant financial sums, the CGU has clearly adopted a moderate stance, given that the cap for penalties can reach up to 20% of gross revenue. In doing so, it has sought to balance the deterrent effect of the penalties it sets without making it unfeasible for companies to continue operating.

Concurrent unlawful acts (identified in 61% of cases) and the tolerance or awareness of unlawful acts by senior management (86.8% of cases) were among the most common aggravating factors that led to stronger penalties. When identified, the latter resulted in an average increase of 2.5% to the fine calculation base, while the repeated or ongoing unlawful acts resulted in an average increase of 1.5%. These factors reinforce the importance of companies having a robust, structured compliance system with autonomy, adequate resources, and support from management – one that is both capable of preventing unlawful conduct and promptly detecting and remedying any deviations.

The report also highlights the concrete benefits of adopting effective corporate integrity programs. Cases where the company was able to demonstrate it had effectively implemented a compliance program saw a reduction in fines of approximately 39%. This data reveals a significant incentive for adopting continually improving integrity policies, processes and procedures. With that said, effective integrity programs were only identified in 11.3% of cases, suggesting there is still plenty of room for integrity culture to strengthen and develop in Brazil, especially in unregulated sectors or those with companies less exposed to peer pressure to adopt such practices. In light of Decree No. 11,129/2022, corporate integrity programs can mitigate penalties by up to 5% of gross revenue, provided they meet the CGU’s criteria.

Essentially, the CGU’s report consolidates relevant empirical data on how the provisions of the Brazilian Anti-Corruption Law have been applied. More than merely a technical document, the report is a strategic tool both for the country’s public administration (to improve penalty-related practices) and for the private sector, which now has concrete information to assist in strengthening integrity culture, following best practices and reducing exposure to legal, regulatory and reputational risks.

For more information on this topic, please contact  Mattos Filho’s Compliance & Corporate Ethics practice.