The Anti-Corruption Office of Argentina has recently submitted to the Argentine Congress a bill (“Anti-Corruption Bill”) that provides for the criminal liability of legal entities for corruption offenses against public administration and foreign bribery. The purpose of the Anti-Corruption Bill is to encourage legal entities to prevent the commission of corruption-related crimes through the implementation of integrity programs and cooperation with authorities to achieve greater law enforcement effectiveness.
The implementation of an adequate compliance program may prevent the legal entity from being held liable under the Anti-Corruption Law. The Anti-Corruption Law generally describes the most relevant elements that the compliance program must cover. Sanctions applicable to legal entities involved in corruption activities will include fines ranging from 1% to 20% of the gross revenues obtained by the company in the year prior to the offense, suspension of their activities and use of their trademarks and patents, loss or suspension of government benefits; prohibition from participating in public tenders or any other government-related activity; and even the cancellation of the legal entity’s legal capacity. Legal entities may also be fined when the illegal act has been committed by related third parties, such as suppliers, agents, or distributors.
The controlling shareholder of the legal entity will be jointly liable for the payment of the financial penalty. In cases of mergers and acquisitions or corporate restructurings, the successor entity will be responsible for corrupt acts committed by the legal entity, unless an appropriate due diligence procedure was followed prior to the merger or acquisition.
The Anti-Corruption Bill provides that it will come into force 180 days after its publication in the Official Gazette. If the Anti-Corruption Bill is enacted, it will become even more important for legal entities doing business in Argentina to:
(i) have an adequate compliance program;
(ii) oversee the anti-corruption programs implemented by their business partners;
(iii) carry out a serious anti-corruption due diligence process when conducting mergers and acquisitions in Argentina.
We will keep you informed about the progress of the enactment process of the Anti-Corruption Bill.
Anti-Corruption Bill in Argentina
Summary of Key Provisions
– Legal entities are liable for criminal offenses against public administration and foreign bribery when such acts: (a) are committed directly or indirectly in their name, interest, or benefit; (b) result from inadequate control or supervision by the legal entity; and (c) are carried out by: (i) owners, shareholders, or partners with influence in the entity’s decision-making process; or (ii) any of the entity’s lawyers, representatives, directors, managers, or employees; or (iii) any of their representatives in business association contracts, agency, concession, or trust agreements.
– The legal entity is also liable for unlawful acts committed by suppliers, agents, distributors, or other commercial partners related to the legal entity if the entity has not implemented due diligence procedures to verify the integrity and reputation of third parties and business partners, both before and during the business relationship.
– The legal entity will not be liable when there is evidence that the representation invoked by third parties is false or that unlawful acts were committed exclusively in the interest or benefit of such third parties or business partners.
– Control and supervision by the legal entity will be deemed adequate under the law if, prior to the commission of the offense, the legal entity had a compliance program in place.
– The compliance program must be aligned with the specific corruption risks, size, and economic capacity of the legal entity: it should be adequate to prevent, detect, correct, and report any corruption offense to the relevant authorities.
– The compliance program must include, among others, the following elements: (a) a code of conduct or policies and procedures applicable to directors, managers, and employees; (b) specific policies and procedures to prevent illegal acts related to public tenders and bids, administrative contracts, or any other dealings with the public sector; (c) where appropriate, the code of conduct and policies will also apply to third parties or business partners; (d) periodic training programs for directors, managers, employees, third parties, and business partners; (e) periodic corruption risk analyses to adapt the compliance program accordingly; (f) senior management support for the compliance program; (g) internal hotlines to receive reports, also available to third parties; (h) a non-retaliation program to protect whistleblowers; (i) an adequate internal investigation system that imposes effective sanctions in cases of policy or code of conduct violations; (j) due diligence procedures to verify the integrity and reputation of third parties and business partners, both before and during the business relationship; (k) due diligence procedures established for mergers, acquisitions, and corporate restructuring processes; (l) periodic supervision and evaluation of the compliance program; and (m) appointment of a compliance officer to develop, coordinate, and review the compliance program.
– The majority shareholder or holding company will be jointly liable for the payment of financial penalties imposed on the local legal entity and for compensating damages caused by the corrupt acts of the local legal entity.
– In mergers, acquisitions, and corporate restructuring cases, the successor is responsible for corrupt acts committed by the legal entity. The successor will not be liable if an adequate due diligence procedure was followed before the merger, acquisition, or restructuring process, and corrective measures were adopted to prevent similar offenses.
– Sanctions imposed and investigations carried out against individuals do not affect procedures conducted under the law.
– The following sanctions may be imposed on legal entities found guilty of corrupt acts or conduct: (i) fines ranging from 1% to 20% of gross revenues obtained in the year prior to the offense; (ii) suspension of activities and use of trademarks and patents (maximum suspension of ten years); (iii) publication of the ruling in the Official Gazette and newspapers; (iv) loss or suspension of government benefits; (v) disqualification from participating in public tenders or any other government-related activity (maximum suspension of ten years); and (vi) cancellation of the legal entity’s legal capacity.
– To determine the amount of the sanction, the following criteria will apply: (a) the rank and position of executives, employees, and officials involved in the unlawful act; (b) whether the unlawful act was committed directly by owners, executives, or board members, or through representatives, attorneys, or suppliers; (c) the nature, size, and economic capacity of the legal entity; (d) the seriousness of the corrupt act or conduct; (e) the possibility that the sanction may harm the community or a public service; (f) the existence and scope of the legal entity’s compliance program; (g) the self-reporting of the corrupt act to the authorities by the legal entity; (h) the cooperation of the legal entity with authorities to investigate and clarify the alleged unlawful act and the measures taken thereafter, including the willingness to mitigate or repair the damages caused.
– The sanction will range from 10% to 20% of the legal entity’s gross revenues from the previous year if any of the following conditions apply: (a) the unlawful act was committed by senior executives, or they were aware of it or allowed it to occur; (b) the act caused serious harm to the public, environmental damage, or affected a public service; (c) the act was a continuing or ongoing offense; or (d) in cases of recidivism.
– The sanction will be reduced by one-third to one-half if the legal entity self-reports the illegal act and provides adequate information and evidence to identify the individuals or legal entities involved and to recover funds.
– The Public Prosecutor’s Office and the legal entity have the right to enter into a cooperation agreement aimed at suspending the criminal proceeding. Cooperation agreements are subject to court approval. Under such an agreement, the legal entity must provide useful evidence to clarify the case, identify the person involved in the offense, recover illicit funds and benefits, and comply with the agreement’s conditions. Signing a cooperation agreement does not imply acknowledgment of liability by the legal entity. The agreement remains confidential until court approval, after which it becomes public. If the court rejects the agreement, the prosecutor cannot use the information and evidence provided during the judicial process.
– Under a cooperation agreement, the legal entity agrees to comply with at least three of the following conditions: (a) pay a fine equivalent to 1% of the gross revenues obtained in the year before the illegal act under investigation; (b) return goods or benefits derived from the illegal act; (c) repair damages caused; (d) provide a specific service to the community; (e) sanction those involved in the infringement; (f) implement or improve a compliance program.
– This law will complement the Argentine Penal Code. Its enforcement will be the responsibility of existing criminal courts; no new courts will be created.
– Foreign corrupt practices committed by individuals or legal entities domiciled in Argentina will be sanctioned under Argentine criminal law and this specific law.
– The law will enter into force 180 days after its publication in the Official Gazette.
