Editors

Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Bill Steinman
Contributing Editor

Huge social agency becomes unlikely compliance leader

The Mexican Social Security Institute (IMSS) has defied conventional wisdom to become a leader in reforming the country’s anti-corruption efforts. The giant agency historically lacked an effective compliance program, with many responsibilities left to the functioning of internal controls — an audit-related system with no power to remedy operational compliance gaps.

The IMSS employs close to 500,000 people, provides healthcare to 60 million citizens, and spends over $50 million per day. It relies on the public procurement processes to handle the efficiency and operation of the Mexican healthcare system. Private entities often used gaps in ithe IMSS’s internal controls to bypass proper compliance practices, as became clear from recent FCPA enforcement actions involving Orthofix and Teva Pharmaceutical Industries Ltd.

Global companies sometimes knowingly used distributors to obtain contracts by inflating costs and circumventing their gifts and hospitality policies with no government supervision and, as the enforcement actions show, sometimes with assistance from public servants and government instrumentalities.

Today at the IMSS, there is a new compliance program that seeks to monitor and audit all internal processes and ensure that compliance information and feedback flows properly throughout the agency. More importantly it’s using a new whistleblower hotline which will ensure anonymity and no-retaliation.

Although new, the IMSS’ program has already used information from a whistleblower hotline to deal with a fraudulent prescription scheme and the illegal issuance of medical disabilities designations. The new compliance program has also led to the discovery of significant policy breaches involving several international companies that had improper contacts with public servants.

On another level, the new IMSS compliance program also works to remind public servants of their compliance obligations and enhances the message that activity will be closely monitored and any sense of impropriety wont’ be tolerated.

In the past, public servants in Mexico took advantage of the lack of internal controls to orchestrate illicit schemes. The new compliance program at the IMSS is designed to hold public servants responsible by reducing information gaps, thereby bringing accountability on a national scale.

The IMSS is also working with the American Chamber of Commerce and the International Chamber of Commerce to promote the compliance agenda and coordinate efforts with the private sector, to help local and international companies update their compliance programs, and those of their supply-chain companies, to match the IMSS’s new compliance requirements.

One new feature of the IMSS program are contract recitals, stating that anyone awarded a contract has an obligation to ensure the effectiveness of its compliance program and collaborate in any audit that the IMSS may request.

The IMSS is also seeking international enforcement agencies to execute MOUs for the sharing and transmission of information to ensure that this time that international companies and their suppliers from outside Mexico are properly monitored for compliance offenses that occur in other countries.

The IMSS’s new compliance program is an important step a end decades of fraud and abuse in public works in Mexico, and send a message to the private sector that if they want to work in Mexico, their compliance programs need to reflect international best practices.

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Christian Leo Varelas is a dual qualified solicitor (Mexico and the UK) with LLM degrees at Vanderbilt University and Queen Mary University as well as an MBA at University of Greenwich. He has practiced at international law firms in litigation, corporate law and compliance. He designed, implemented and monitored compliance programs in different sectors and is currently the Head of the Compliance Coordination at the Mexican Social Security Institute. He can be contacted here

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