9 August, 2022 Chile

Chile seeks to expand corporate liability under new economic crime bill

Compliance - Dispute Resolution

Chile’s senate is considering a bill that would overhaul the country’s corporate criminal liability statute and increase the number of crimes companies can be held liable for.

The bill -first introduced in 2020 by a cross-party group of 10 left-wing, conservative and Christian democrat congress members and senators – has been drawn up to establish a new system to enforce against economic crime and environmental crime, among others, and adopt new related penalties, according to the bill’s senate webpage.

The proposal is commonly regarded as the economic crime bill by local practitioners and suggests Chile incorporates over 100 crimes currently included in various statutes into a new law that will apply to a large range of organisations. Chile’s current criminal corporate liability law came into force in 2009 and at the time included four types of corporate crime: money laundering, terrorism financing, and active and passive bribery.

“An exhaustive expansion of the crimes applicable to legal entities such as companies is being proposed, as well as the expansion of legal entities that may be liable to incur criminal liability, including not only companies but universities, the state, political parties, religious legal entities, among others”, said Francisca Franzani, compliance director at Albagli Zaliasnik in Santiago.

The bill introduces potential corporate liability for a wide variety of conduct. For example, if a forest management company presents a plan based on false information and prepared by an executive, both parties could be held liable. “The bill is very ambitious and all-encompassing in its aims in terms of how it seeks to regulate financial crimes”, said Jorge Boldt, partner at Cariola Díez Pérez-Cotápos in Santiago.

Under the new plans, companies can be held liable regardless of wether they obtained a direct benefit from a crime. The bill also establishes that a legal entity can be prosecuted without the need to prove a corresponding crime by a natural person. Under current laws, Chilean authorities would have to convict a company executive for the business to be charged.

Senators are currently reviewing amendments to the bill. If no changes are made, the bill go to the president for signoff. If it is approved with amendments, the bill will return to the lower house of Congress for approval. Three Chilean lawyers said they werw confident that the bill will become law by the end of 2022.

New sentencing system, more compliance work ahead

If enacted, individuals sentenced under the current plans could face fines, disqualification from practice and prison time or house arrest. Sentences will be set according to the original statutes that established the crimes.

Lawyers say that a constitutional debate could arise over the way in which individuals can appeal against their custodial sentences. Chile’s penal code includes a provision under which such sentences can be replaced or reduced. The economic crime bill establishes a separate, more stringent, system to substitute or decrease custodial sentences, which could cause constitutional questioning, said Rafael Collado, a partner at Ferrada Nehme in Santiago.

“The bill creates, in essence, a parallel penal code to the one the country has for other crimes such as homicide since all the crimes that are included in this bill will be processed and sentenced in a different way. It is a true shift in the way we understand and apply criminal law in Chile”, he added.

Meanwhile, the new bill establishes that companies found guilty of economic crime also face a fine, could have their business licence stripped, be declared unable to participate in public tenders – a significant source of income for many Chilean companies – and even be ordered to shut down.

The bill also creates a completely new fining system, under which the maximum monetary fine for a company found guilty of an economic crime could be up to 174 billion Chilean pesos (some $190 million).

Practitioners expect the bill, if enacted, will substantially increase the demand for related advice in Chile given that every single economic crime added to the bill will have to be accounted for in company compliance programmes.

“This means that there are companies who will have to set up these programmes pretty much from scratch because the compliance risks for businesses are both increasing and changing under the new law”, Carlos San Martín, associate at PPU Legal in Santiago said.

Source: Global Investigations Review

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