Cross-border Investigations

Cross-border investigations

Businesses with international operations must overcome a unique set of challenges when dealing with compliance issues and cross-border investigations. Coordination of efforts across multiple jurisdictions, cultural and language barriers, and differing labor, privacy, and compliance legal frameworks are some of the obstacles that may be encountered by companies tasked with conducting internal investigations and compliance-related due diligence.

Nonetheless, cross-border investigations are on the rise and multinational businesses must be prepared to confront these and other challenges they may encounter. From the start of an investigation to determining and implementing remediation efforts, understanding the process can help avoid critical mistakes.

Hogan Lovells’ Latin American investigations guide was prepared by experts from across the region to provide a snapshot of the rules, regulations, and best practices in 10 jurisdictions in Latin America. The guide is not intended to provide or supplement legal advice. Its aim is to deliver a meaningful assessment of this topic and to assist the reader in navigating the complexities surrounding these issues.

Start of a cross-border investigation

Complaints or allegations made by company memployees are a common trigger for cross-border investigations. These claims may involve parties, events, or both from different jurisdictions and can be subject to simultaneous investigation by agencies in more than one country.

Effective intake procedures should have a global outlook and take into account cultural sensitivities. An initial assessment of the facts may require analysis of criminal, civil, privacy, and regulatory concerns in all jurisdictions involved.

The next step in undertaking a cross-border investigation is to consider whether local support is needed. Under some circumstances, a well-versed in-house legal department may suffice. However, moutside counsel or other external resources may be necessary, depending on the breadth of the investigation and the issues in question. Once a team of professionals has been assembled, strategies to address data privacy concerns, whistleblower protection, preservation of evidence, and disclosure to local law enforcement and regulatory authorities, among others, can be devised.

Another matter to be considered at the onset is the extent to which a company is legally permitted to inquire into allegations of misconduct, including limits to a company’s ability to engage in the investigative process and to process and review mpersonal data in the course of an investigation. Once these determinations have been made, disclosure of the investigation to third parties may be required, including to labor unions, insurance companies, shareholders, and local authorities.

In Latin America, there is a broad range of approaches to these matters. The manner in which a company conducts itself at the initial stages can set the tone for the remainder of the investigation and minimize risks and liability.

Investigation and due diligence

Once the investigative phase begins, companies should implement a short-term action plan that ensures that any ongoing criminal or unlawful conduct is immediately stopped. The preservation of evidence or data should be a priority, especially where this is required under local law. An analysis of the availability of the attorney-client privilege across the jurisdictions involved should be undertaken so as to preserve and maximize any protections available to all parties.

The number of countries that have enacted privacy laws in Latin America is on the rise, thus regulations addressing data privacy should be considered at the investigative phase of a cross-border investigation. These laws tend to have a number of common elements, including requirements addressing notice, consent, processing of sensitive data, conservation of data integrity, and retention. In some countries employees can refuse to cooperate with employerled inquiries or requests. They should be taken into account when conducting interviews, collecting evidence, reviewing private employee information, and transferring data. Given the proliferation and expansion of data protection regimes across the region, it is strongly advised that data privacy counsel be consulted to ensure compliance with this rapidly evolving field of law.

Next, the right of participation by third parties, including labor unions and local authorities, should be assessed. Again, the range of legal requirements in this regard is broad. Alerting management, investors, and shareholders may be required under local law. Moreover, providing timely notice to insurance carriers before, during, or after an investigation may be necessary to preserve coverage.

An understanding of local law is crucial throughout all phases of a cross-border investigation, and the investigative phase is no exception. Employee interviews and data collection are often highly regulated activities. Failure to abide by the rules that govern these situations can lead to serious consequences.

The end of the investigation

Once the fact-finding stage of a cross-border investigation has been completed, a company will likely need to create a long-term action plan that includes the implementation of remediation measures. Next steps may also include, but are not limited to, sanctioning employees, addressing oversight weaknesses, evaluating internal investigation protocols, and updating company records. Deadlines must be strictly observed to avoid waiver, such as when imposing employee disciplinary actions. In some countries, remediation efforts will determine whether a company is charged with a violation and, if so, the extent of culpability and penalties imposed.

Another question that should be addressed after the investigative phase is complete is whether a detailed investigation report should be produced or not. This is linked to the question of privilege. If inhouse counsel produces an investigation report, this report may not be privileged in some Latin American countries. However, even if outside counsel produces the report, it may only have limited protection if it enters into the custody of the company. This question should be addressed accordingly.

Finally, recovery efforts may be undertaken as the last step. Once the parties liable for misconduct have been identified and disciplined, sanctioned, or prosecuted, an opportunity to recover some of the company’s losses may become available, under some circumstances.

Conclusion

Cross-border investigations are complex endeavors. Issues can arise at different stages of an investigation and addressing them quickly and effectively is key to their successful resolution. It is not necessary to know all the answers from the onset, but it is important to understand that retooling domestic processes for a multi-jurisdictional investigation is likely not an appropriate response. Minimizing risks requires a targeted approach that takes into account the fundamental cultural, legal, and business differences involved. We hope that Hogan Lovells’ Latin American investigations guide is helpful in understanding some of these issues and provides a useful starting point for a reader looking to become more familiar with the different approaches present in the region.