Corruption is not an issue that’s confined to any one country or part of the world. It takes place virtually everywhere and authorities are cracking down on the practice by penalizing companies and lawmakers who run afoul. Recent electronic invoicing legislation and eAccounting reporting will bring further transparency to fraud as the legislation takes full effect in 2015.  With these new tools, the Mexico SAT is armed with a unique ability to detect tax evasion and expected penalties and criminal action are expected to rise.

The only way countries will shed their malfeasance reputation is with reduced corruption activity. Latin America has a ways to go, as a major crime sweep has netted dozens of companies and officials who have allegedly flouted the law.

Late last year, Mexican authorities revealed that a multifaceted investigation led to the uncovering of a tariff-evasion ring, involving nearly two dozen customs officers, approximately 200 companies and 50 foreign firms, Spanish international news agency EFE reported.

“Nearly 150 Mexican companies are accused of evading tariffs, after an investigation by authorities that started in June 2013.”

When the ring was reported to the public in a news conference, Aristotles Nunez, head of the finance secretariat’s SAT tax agency said that all told, $113 million worth of illegal transactions had been performed over the investigation period, which began in June 2013. Additionally, $37 million of tariffs and import fees had gone unpaid, which is the equivalent of 500 million pesos. Tariffs are taxes paid on imported goods, which bring in millions of dollars every year that governments can use for public services.

Nunez also noted in the press conference that these schemes weren’t confined to any one corner of the world, as 53 firms combined – including the U.S., Panama, China, Singapore and South Korea, among others – were all engaged in corruption activities, mainly tariff evasion. The jackpot, though, was in Mexico, where 144 companies were caught red-handed.

EFE reported tax authorities confiscated 85 bank accounts as part of the probe, and filed more than 150 corruption complaints.

Corruption investigations are identifying where these crimes are taking place most often.
Corruption investigations are identifying where these crimes are taking place most often.

Corruption investigations the new normal?
This broad-based investigation into corrupt practices may be the new normal. In other words, the inquiry likely wasn’t a one-time thing. Professional services firm Ernst & Young noted that the U.S. Securities and Exchange Commission as well as the U.S. Department of Justice are going after companies that engage in this activity with greater vigilance in 2015, applying the necessary pressures to compel organizations to implement the type of compliance strategy that roots out corruption wherever it lies.

Scott Lewin, Invoiceware International CEO, indicated that an effective compliance strategy is what allows firms to govern themselves. And in Latin America, this means transparency and control over electronic invoicing and fiscal reporting processes.

“With many of these governments now arming themselves through mandated electronic invoicing and tax reporting requirements, multinationals need to be taking a look at the risk and exposure their current systems and processes expose them to,” said Lewin.

While there isn’t any one country or country that has a monopoly on corrupt practices, Latin America is one region taking control through automation and big data. And these tools are working, based on the frequency with which investigations have led to charges. Venezuela, Paraguay, Ecuador, Guyana and Bolivia have the highest index rating on PricewaterhouseCooper’s Corruption Perception Index.

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