New Argentine law on corporate liability and compliance programmes for certain corruption cases
January 2018 | EXPERT BRIEFING | FRAUD & CORRUPTION
Several proposals for new anti-corruption regulations have been made by president Macri’s administration since he took office in December 2015. Some of these have been enacted into law including, for example, the law on access to public information and the law to mitigate penalties for defendants who effectively collaborate with the court during the investigation of certain corruption cases.
The most recent and biggest change was the approval by Congress on 8 November 2017 of a new law making legal entities liable for bribery and other crimes related to interactions with public officials. This law is groundbreaking also because it regulates anti-corruption compliance programmes in connection with specific interactions with public officials, as well as introduces the possibility of legal entities negotiating leniency agreements with the authorities. Therefore, Argentina is embracing new and modern anti-corruption regulation.
This law broadly follows international standards established by the US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, the Brazilian Clean Companies Act and other foreign laws and international treaties. Nevertheless, it not only addresses bribery but also other crimes which may not be covered by the abovementioned laws and the compliance programmes inspired by them.
Enforcement of this law will be challenging as it will require Argentine judges, prosecutors and legal practitioners to deal with new situations, such as considering the effectiveness of compliance programmes, dealing with self-disclosure and cooperation by the legal entities during investigations, and potentially negotiating leniency agreements.
Furthermore, international companies may need to handle a bribery case with the Argentine courts under this new law, while also having to deal with any foreign authorities which may be involved, such as the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC) in case of FCPA breaches, or the Serious Fraud Office (SFO) in case of breaches of the UK Bribery Act.
In any case, companies have a short but useful period of time until this law becomes enforceable to review their operations and compliance programmes in order to ensure that the relevant risks are addressed appropriately.
There are a number of highlights of the new law, as outlined below.
The law makes legal entities criminally liable when the following crimes are committed, directly or indirectly, with their intervention or on their behalf, in their interest or for their benefit: (i) local or international bribery and influence peddling; (ii) negotiations that are incompatible with public office; (iii) illegal payments made to public officials under the appearance of taxes or fees owed to the relevant government agency upon undue request by a public official; (iv) illegal enrichment of public officers and employees; and (v) producing aggravated false balance sheets and reports to cover up local or international bribery or influence peddling.
Penalties include fines ranging from two to five times the ‘undue’ benefit that was obtained or that could have been obtained through the actions incurred in breach of this regulation, the forfeiture of assets obtained through the illegal actions, the suspension or termination of government benefits previously earned by the legal entities and debarment from participating in government bids and contracts or in “any other activity related to the government”.
However, legal entities will be exempted from penalties and administrative responsibility when they self-report a crime set forth by this law as a consequence of internal detection and investigation; they established a proper control and supervision system before the facts under investigation occurred and breaching this system required an effort by the wrongdoers; and they return the undue benefit obtained.
Anti-corruption compliance programmes under this law
The law requires legal entities which engage in certain contracts with the federal government, for example contracts that must be approved by ministers or higher public officials or public service contracts, to implement anti-corruption compliance programmes. However, implementing these programmes is voluntary for entities that do not engage in such contracts.
Having an effective compliance programme may mitigate penalties for the company under this law. If implemented, the programme must be appropriate to the risks, size and economic capacity of the entity. It must also include a Code of Ethics, internal policies to prevent crimes in interactions with the public sector and training. The law sets forth that other elements of the compliance programme, such as appointing a compliance officer, having reporting channels or establishing due diligence procedures for third-party contractors, are voluntary. The law also establishes that further regulation is expected regarding compliance programmes.
Effective collaboration agreements
Legal entities may enter into effective collaboration agreements with the authorities seeking a reduction in penalties. To such end, the entity must disclose precise and verifiable information that is useful for investigating the facts, authors and participants in the crime, as well as for recovering assets.
The agreement must be subject to the following conditions: (i) the legal entity must pay 50 percent of the minimum fine; (ii) the entity must disgorge assets or gains obtained through the illegal actions; and (iii) the entity must abandon in favour of the state those goods that presumably would be forfeited in the event of a conviction.
The anti-corruption landscape in Argentina is evolving rapidly. Not only does this law significantly update Argentine regulation on bribery and other related interactions with public officials, but the courts are also moving quickly in a number of big corruption cases. For example, 2017 saw judges ordering preventive imprisonment of former high-rank public officials, and prosecutors have shown themselves eager to exchange information with foreign authorities on large cross-border corruption cases, even though they have had to contend with the limitations of local regulations, such as being unable to grant immunity to key witnesses who entered into leniency agreements with foreign authorities.
The current anti-corruption fervour is a major reason for those companies subject to Argentine anti-corruption laws to ensure that they meet all applicable laws and regulations. Therefore, it would be wise for these companies to review how the new law impacts their activities and make the necessary amendments to their compliance programmes to follow these standards.
Gustavo L. Morales Oliver is an associate at Marval, O’Farrell & Mairal. He can be contacted on +54 (11) 4310 0100 ext. 2206 or by email: firstname.lastname@example.org.
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Gustavo L. Morales Oliver
Marval, O’Farrell & Mairal