There is no overarching regulation of the investigations and proceedings dealing with the regulation and punishment of companies but there is a multiplicity of proceedings and ad hoc configurations for each enforcement agency. An immediate consequence of this is the frequent duplication of inquiries and sanctions from agencies of the same or a broadly similar nature.
In Chile, infringements defined as ‘crimes' by law are dealt by the Public Prosecutor's Office, the agency that handles with investigation and prosecution before criminal courts. As a principle, legal liability is strictly individual and is not applicable to collective structures such as companies, but to natural persons who have participated in the infringement. Nonetheless, an exception to this societas delinquere non potest principle was introduced in 2009 with the enactment of Law No. 20,393, which established for the first time in Chile the criminal liability of legal persons for - at present - a limited number of crimes (bribery, money laundering and the financing of terrorism).
Alternatively, a heterogeneous range of non-criminal infringements can be found in different laws that entrust enforcement to diverse special agencies. In this group, it is relatively common for the respective agency to be entitled not only to investigate, but also to impose sanctions. In contrast with criminal procedures, the civil agencies are also generally entitled to prosecute and sanction legal persons as well as individuals. Such entities are usually designated as superintendencies and form part of the government (unlike the Public Prosecutor's Office, which is an autonomous entity that does not depend on the government).
Among the most relevant active agencies in recent years we can mention the Superintendency of Securities and Insurance, the Internal Revenue Service in taxation issues, the National Economic Prosecutor, along with the Court for the Defence of Free Competition in antitrust matters and, most recently, the Environment Agency and the environmental courts, which have been fully operative since 2013.
All these agencies are subject to different statutes and proceedings when it comes to investigating and sanctioning infringements to the laws of the areas where they have authority and they also have different investigation powers.
In recent years there has been a trend to broaden special powers available to some of these agencies, as their powers have been insufficient in certain cases and are limited when compared to those available to the Public Prosecutor's Office. For example, when special powers were granted in 2009 by means of Law No. 20,361 to the National Economic Prosecutor, which has the authority, upon court approval, to execute dawn raids, seize goods, and wiretap conversations.
There is also a bill that has been recently approved by the Congress by means of which the Superintendency of Securities and Insurance will be replaced by a new entity called the Financial Market Commission, which shall have new and broader investigation powers, similar to those available to the National Economic Prosecutor, including the ability to request that bank secrecy is lifted. This law is expected to enter into force in the course of 2018.
Prosecution of crimes in Chile is, in general, not influenced by political agendas or domestic priorities. This is mainly due to the fact that, as already mentioned, the Public Prosecutor's Office is an autonomous entity independent of the government. Furthermore, the National Public Prosecutor is elected by the executive, legislative and judicial branches of the state. Agencies in charge of civil enforcement have different relationships with the government, but as they have less autonomy than the Public Prosecutor's Office, they are more vulnerable to political influence. This has led, for example, to a public discussion about the convenience of granting more autonomy to the Chilean tax authority, which has been very active over the last year in connection with the prosecution of alleged tax fraud in connection with several prominent cases of irregular funding of political campaigns.
An interesting phenomenon in connection with investigations of corporate conduct is the assumption that - particularly in certain areas - for the system to be more efficient, suspects must collaborate with agencies and find a quick remedy to the generated conflict. Evidently, as there is no legal obligation to actively collaborate, this is only relevant when the suspects have incentives to collaborate such as the exemption from or at least mitigation of sanctions. Instruments such as leniency programmes, self-reporting and implementation of internal compliance programmes may be seen as forms of cooperation with the authorities with underlying incentives.
The system developing from the new laws has also allowed the emergence of a broad scope for the development of efficient rights and possible judicial defences.
Individuals that are targets of prosecution by the administrative authorities or the public prosecutor have many options, not only to prove their innocence, but also to find an agreed solution to the conflict.
No clear guidelines exist as to the approach that corporations should take in response to illegal or criminal behaviour. There are only a few special regulations in some areas establishing certain reporting duties.
As a result, it cannot be stated that as a general rule corporations are compelled to report activities that may be prosecutable by state agencies. Nevertheless, the judicial and legal systems are gradually providing incentives to encourage self-reporting as part of internal corporate policies. The incentives basically consist of an exemption from liabilities or leniency regarding sanctions.
One example of regulations that contain incentives to encourage self-reporting can be found in Law No. 20,393, which establishes criminal liability of legal entities. According to such law, self-reporting may constitute a mitigating circumstance in the event it is performed by the legal representatives of the company before prosecution is initiated. The law also allows the public prosecutor to enter into deferred prosecution agreements with legal entities, where the prosecution is suspended and eventually dropped if the defendant agrees to submit itself to certain conditions, such as, for example, the payment of a certain sum of money or to provide a particular service to the community.
In the field of antitrust enforcement Chilean law considers leniency mechanisms in cases of collusion, by means of which the party coming forward can apply for a reduction and even an exemption of administrative and criminal sanctions when certain conditions are met, such as, among others, the immediate cessation of the illegal conduct and the submission of reliable and useful information that can be used by the National Economic Prosecutor's Office as sufficient proof to file a claim before the Court for the Defence of Free Competition. A total exemption from administrative and criminal penalties is only available to the first involved party submitting its application for leniency.
The National Economic Prosecutor performs the assessment of leniency mechanisms in accordance with a procedure outlined in the Internal Guidelines on Leniency in Cartel Cases, published in March 2017, which aims to provide legal certainty to whoever wishes to obtain leniency benefits and to limit the authority's discretion when assessing any proposals for leniency.
In environmental matters, applicable legislation also establishes benefits to encourage self-reporting, consisting in the reduction of or exemption from applicable fines, subject to certain conditions, among them to propose and fulfil a programme to mitigate or eliminate the environmental adverse effects of the activities of the business that are in violation of environmental regulations.
Customs laws also encourage self-reporting, which, in respect of certain infringements and provided that all customs duties are paid, exempt the offender from the initiation of an administrative enforcement proceeding.
The Tax Authority has also encouraged and issued special rules for self-reporting in certain specific circumstances.
Recently, Law No. 21,000, which establishes the creation of the new Financial Market Commission, foresees a leniency mechanism, similar to the one that exists for cartel cases. According to such mechanism self-reporting of infringements to securities regulations implies a reduction of up to 100 per cent of the applicable fine. The first person coming forward may benefit from a reduction of up to 100 per cent of the applicable fine in cases where there is more than one offender involved and up to 80 per cent when he or she is the sole responsible person. Subsequent offenders may only benefit from a reduction of up to 30 per cent of the applicable fine, provided they deliver important additional information on the case. As violations to securities regulations may in certain cases not only be subject to civil enforcement by the securities supervisory authority, but also to criminal enforcement by the Public Prosecutors' Office, the law also provides for a mitigation (but not exemption) from criminal liability, which is only available for the first person self-reporting an infringement that also constitutes a crime.
ii Internal investigations
Despite the development of internal investigations in terms of enforcement and judicial practice in recent years, the practice has not become widespread in Chile. The lack of legal culture in this area and the absence of precedents as to the confidentiality of findings, as well as whether they are covered by professional privilege, have led in several cases to agencies and prosecutors seizing documents produced within the scope of internal investigations. Although internal investigations conducted by outside legal counsel should be, in fact, protected by privilege, it is not unusual for companies to conduct investigations internally rather than seeking assistance from outside counsel. In the absence of clear legal rules, it is arguable whether privilege covers the activities of other internal personnel, such as auditors or compliance officials. Until case law clarifies the extent of privilege in Chile, internal investigations should perhaps better be conducted by lawyers - preferably third parties - to improve protection of the confidentiality of the investigation and its findings.
Within the scope of these investigations, statements from the individuals directly involved are usually essential; however, it is important to stress that these statements must be given on a voluntary basis by the persons involved, as they are not obliged to cooperate or submit evidence. Therefore, any participation in interviews or handing over of information must be done freely; and with the understanding that the investigation is for the benefit of the company, not for the personal defence of the individuals being interviewed or providing the information, unless the lawyer also assumes the personal defence of this person. In order to avoid future conflicts of interest it should be made clear that all the information that the interviewee may provide will belong to the client (the company) and will be privileged for its exclusive benefit.
The witness may request professional legal assistance at any moment, otherwise the investigation may be invalidated.
The gathering of publicly accessible documents belonging to a company must be differentiated from documents that fall under the control or possession of a company's employee. This is particularly the case when documents or files are stored in individuals' e-mail accounts or computers assigned to them in the normal course of business. At least in principle, e-mails or documents contained within databases - even when the hard drives belong to the company - may not be accessed by the company or its counsel without the individual's consent. Furthermore, it is possible that accessing such documents without the holder's consent may expose investigators to criminal liability.
Finally, companies need not share or submit the results of internal investigations to the state agencies, especially when the investigation has been conducted by outside counsel and is privileged; however, the provision of such records may justify the mitigation of an eventual sanction, especially in the context of Law No. 20.393, which recognises the amelioration of possible sanctions if the company under scrutiny improves its internal systems and compliance rules.
In the absence of almost any legal regulation, whistle-blowing is so far not a relevant issue in Chilean legal practice. Of course, it is not uncommon that in the context of enforcement actions and especially of criminal prosecution, individuals that are targets of investigations may decide to cooperate with the enforcement agency or the prosecutor in order to obtain more lenient treatment of their cases. The Criminal Procedural Law allows prosecutors to enter into agreements with the defendants in criminal cases, where these agreements are normally approved by the relevant criminal court. However, rather than a specific policy promoting whistle-blowing as part of the enforcement activity against corporations, this is a general statute applicable to, in principle, all criminal cases of any nature. In fact, the only limitation on these settlements is determined by law for cases where the possible sanction on the defendant exceeds five years in prison in the case of conviction.
There are no legal provisions, at least for the private sector, to protect whistle-blowers from retaliation, so the response of a company confronted with whistle-blowing from an employee will depend on its internal policies. However, since in recent years, at least in large - particularly multinational - companies, the implementation of compliance programmes has been increasingly growing, it has become more common for companies to have specific whistle-blowing policies.
In the public sector, Law No. 20,205 introduced certain provisions aiming to protect whistle-blowers that hold a public office when reporting crimes or administrative infringements to the competent authorities. However, these provisions are very limited as they only refer to public officers and only consider the suspension of the ability to apply certain disciplinary measures against such persons for a period of up to 90 days after the investigation initiated by the report of the whistle-blower has ended. The whistle-blower may request that his or her identity and the information that he or she provides are kept confidential.
i Corporate liability
Corporations are generally only liable for their acts within the civil and administrative spheres. Exceptionally, they are also criminally liable when they are involved in specific acts.
The civil liability of legal entities arising from acts committed by their employees is fully recognised in civil legislation. In order to enforce the aforementioned, the following conditions must be fulfilled:
a in the course of committing an illegal act, harm has been inflicted on a third party;
b there is a direct cause and effect relation between the individual's behaviour and the damage; and
c such damage is attributable to the negligence or intent of the agent.
The damage committed by the agent is attributable to the organisation of which he or she is an employee if the harm might have been prevented by the organisation had it carried out the expected level of diligence; the specific ‘degree' of diligence that would release the organisation from liability is a matter of judicial interpretation, but there is a good chance that proper implementation of mechanisms to prevent illegal acts may lead to exemption from liability.
The administrative system of liability of legal entities is simpler. Given that the regulation specifically applies to corporations, they may be held liable. Thus, companies are subject to the sanctions that the legislation provides without requiring discussion on how the acts of the employees compromise the liability of the respective legal entities.
In connection with criminal liability, since Law No. 20,393 on Criminal Liability of Legal Entities entered into force in 2010, companies can be held criminally liable in connection with certain illegal acts committed by their agents. Hence, corporations may be investigated by the public prosecutor and be criminally sanctioned provided that:
a such illegal conducts consist of certain specific crimes defined by law;
b they are carried out by owners, controllers, representatives, key officers or any person conducting management or supervisory functions in such company or by individuals working under the direct supervision of any of the aforementioned persons;
c these acts have been performed for the direct benefit or interests of the company; and
d the behaviour of the agents or representatives occurred because of a defect or failure in the company's mechanisms of control and supervision.
In connection with the first-mentioned criteria, in the Chilean legal system criminal liability of legal entities is restricted only to certain offences committed by their agents. As a consequence, the possibility of enforcing this kind of liability is currently rather limited, but there have been and still are some attempts to broaden the scope of the offences that allow a company to be held criminally liable.
The first of the offences that may trigger the criminal liability of legal entities is bribery. Under Chilean law any individual is punishable for bribery when offering or consenting to offer higher fees than those to which public officials are entitled according to their position or an economic benefit to a public official in consideration for (1) performing or for having performed an action that they are obliged to pursuant to their duties; (2) not performing or not having performed or performing or having performed an action infringing their duties; or (3) for committing certain corruption crimes. Bribery of an international foreign official may also trigger criminal liability of a legal entity when committed by one of its agents. Commercial bribery is not a crime under Chilean law, although there is currently a bill being discussed in Congress that aims to change this situation.
The second crime that may trigger the criminal liability of a legal entity is money laundering. In the case of money laundering, the individual to be sanctioned is the person who (1) in any way, hides or conceals the illicit origin of specific goods, knowing that they come, directly or indirectly, from the commission of other specific offences, or (2) acquires, owns or uses the aforementioned goods for the purpose of profit, being aware, on their receipt, of their illicit origin.
The third and last offence is the financing of terrorism; Chilean law punishes those who, by any means, directly or indirectly, request, collect or supply funds for the purpose of committing terrorist offences.
The fact that these offences must have occurred due to a failure or defect in the control or supervisory mechanisms in order for companies to incur liability is steering them towards effective systems of self-regulation. These are developed through prevention programmes provided in Article 4 of the aforementioned law; the major significance of these programmes is that, even though their implementation is not mandatory, their existence and certification by the Superintendency of Securities and Insurance reduces the possibility of companies' criminal liability through a presumption of diligence, which works in their favour.
There appears to be no reason why companies and individuals cannot be defended by the same lawyer. Any conflicts of interest should be resolved under the rules provided by the Bar Code of Ethics (if the lawyers are members of the Bar) or by the criminal judge pursuant to Article 105 of the Criminal Procedure Code.
The usual sanction against a company is a monetary fine. All administrative procedures provide a financial penalty to be applied against legal entities. The fines that may be imposed have gradually increased in the case of all regulations, and the trend has also been adopted by state agencies such as the Superintendency of Securities and Insurance, the National Economic Prosecutors' Office and the Environment Agency, which now allow higher fines than ever before.
Companies that require certain licences to operate or must be registered with certain supervisory bodies may also lose their licence or be deregistered (for example, banking licence). However, this kind of sanction has only been applied on very few occasions and in cases of very serious violations to sectorial regulations.
Although a fine is the usual sanction for companies, the recent legislative changes dealing with criminal liability of legal entities have allowed the emergence of new sanctions in criminal matters. Law No. 20,393 provides that companies may be punished with the following penalties:
a dissolution of the legal entity or cancellation of their legal status;
b a temporary or permanent ban on entering into contracts with state entities;
c total or partial loss of tax benefits or absolute ban on receiving these for a certain period;
d monetary fines; and
e secondary penalties as described in Article 13:
• publication of details of the sentence in the Official Gazette or any other means of national circulation, at the expense of the company;
• seizure of the product and all goods, effects, objects, documents and instruments involved in the commission of the crime; and
• whenever an offence involves investment of resources by the legal entity of an amount higher than the income it generates, imposition of a further penalty of an amount equivalent to the investment, to be paid to the Treasury.
Recently some of the penalties that were introduced in case of criminal liability of companies have also been included as sanctions in civil enforcement cases. This has been particularly the case of the temporary ban on entering into contracts with state entities, which has been included this year as a sanction in cartel cases.
iii Compliance programmes
As previously described, the undertaking of compliance programmes is encouraged by Law No. 20,393 (and is unique to it), for the purpose of not only being exempt from liability, but also to mitigate it. The existence of these prevention models or programmes is a factor that may release the company from its liability. For these purposes, the law sets forth certain parameters that these compliance programmes should include. The minimum elements that are required according to such law are:
a the identification of the activities or processes of the company, whether habitual or sporadic, in whose context the risk of commission of the offences that can trigger the criminal liability of the legal person emerges or increases;
b the establishment of specific protocols, rules and procedures that allow persons involved in the above-mentioned activities or processes to execute their tasks in a manner that prevents the commission of the relevant offences;
c the identification of administrative and auditing procedures related to financial resources of the company, that allow the entity to prevent their use to commit any of the offences to which such law refers to; and
d the existence of internal administrative sanctions, as well as procedures for reporting or pursuing the pecuniary responsibility of any person that violates the prevention system.
The companies may have their compliance programmes certified by accreditation entities registered before the Superintendency of Securities and Insurance.
Furthermore, if a company did not have a compliance programme in place at the time a criminal investigation against it started and it sets up efficient compliance mechanisms before the beginning of a trial to prevent the further commission of some of the offences that led to the liability, such action may constitute a mitigating circumstance.
iv Prosecution of individuals
Liability may be attributed (1) solely to natural persons, (2) solely to legal entities, or (3) jointly to both; it is not necessary to prosecute the natural person directly involved in the commission of the offence in order to impose liability on the company. There is no special provision dealing with the possibility of the same lawyers representing the legal entities and the natural persons involved, and joint representation is common, except when the defence strategies are incompatible; the Bar Code of Ethics and the Criminal Procedure Code are closely followed.
To establish criminal liability of companies, the criteria previously described must be met. On this basis, decisions made concerning the defence of individuals and the same company may present complex problems to be resolved according to the strategic planning of the company and the interests of the individuals.
Should there be a divergence of interests, defences will be incompatible; the Criminal Procedure Code even confers authority on the court to determine this incompatibility and request assignment of new defence counsel. However, there is nothing preventing defences being coordinated or planned in the case of common interests or even preventing the company from paying the lawyers' fees of the individuals being prosecuted.
It is clear that there are circumstances in which this analysis may be hindered. For example, if the company cooperates with an investigation undertaken by the relevant state agencies, in cases where one member of the company is being investigated, the company can neither oblige them nor force them to cooperate. Conversely, taking measures against whistle-blowers may be inconvenient for the company and not recommended in terms of eventual liability arising from labour laws, for example. It may also damage the defence strategy of the company itself.
i Extraterritorial jurisdiction
The rules on criminal liability of corporate entities - as the vast majority of the criminal laws in Chile - are governed by the principle of territoriality (i.e., they are only applicable when the offences were committed in Chile). This principle has certain exceptions in Article 6 of the Organic Code of Courts, but all of them refer to individuals. However, since Chilean courts have jurisdiction in cases of bribery of a foreign public official committed abroad by a Chilean national or a foreign national with residence in Chile, if the bribe was committed in the interest of or for the benefit of the legal entity, criminal liability of the latter may also be pursued in Chile.
Last year a specific provision was introduced in connection with extraterritorial jurisdiction of Chilean courts in antitrust criminal cases (cartels), provided the collusion has an impact in Chilean markets.
In any case, to date there are no relevant precedents where a conduct committed abroad has led to enforcement by Chilean agencies in connection with such conduct. In certain cases, where Chilean companies have been subject to investigations abroad, this has led to agencies in Chile to investigate if such conducts have been also committed in Chile.
ii International cooperation
The Attorney General and the courts, through direct requests as well as international pleas, are in permanent contact with foreign agencies for the purposes of international cooperation. This action is enshrined through various direct cooperation agreements among prosecuting entities as well as international treaties. An example hereof is the cooperation among the Chilean and Brazilian public prosecutors in connection with some potential ramifications of the Lava Jato case in Chile. Cooperation is not only common in criminal prosecution but also between some state agencies such as the Superintendency of Securities and Insurance in securities enforcement procedures and the National Economic Prosecutor in regard to antitrust regulations.
Chile has entered into many bilateral and multilateral extradition treaties. Extradition procedures regularly apply in Chile, and are carried out with the intervention of the Supreme Court.
For an extradition request to be granted, in general, the crime needs to be punishable in both countries, and the prosecution in the requesting country must relate only to the crime for which extradition is granted. The sanction for the crimes for which extradition is requested must exceed one year.
iii Local law considerations
When a crime leads to the application of diverse rules of prosecution, practice says that the domestic authorities must apply domestic law; for those in charge of the prosecution, domestic law is mandatory, it being understood that international treaties signed by the country make them part of the domestic legislation. These treaties have been approved by the domestic legislators provided that said treaties comply with the Constitution. Therefore, special regulations in Chile regarding privilege, banking secrecy, admissible evidence, etc., will govern the matter in Chile.
V YEAR IN REVIEW
As has been the case since mid-2014, when the Penta case came to light, also over the past 12 months the most prominent investigations referred to cases related to irregular funding of political campaigns, which have led to several tax-fraud investigations as well as, in certain cases, to the prosecution of alleged bribery. Many companies (some of them listed) and some of their high-level officers are involved in these investigations as they contributed to political campaigns by other means than those explicitly contemplated by law, in what seems to have been an extended practice in Chile over the past years. Recently in the Penta case the Public Prosecutor's Office closed the investigation and filed a formal accusation against 40 persons, including some companies. However, upon request of several defence attorneys, the investigation was reopened until August 2017. This is the first case of this kind that is expected to go to trial and should set an important precedent for many other similar cases.
Also on the criminal front, last year was marked too by the proliferation of Ponzi scheme fraud cases where some investment companies attracted investors with the promise of high guaranteed returns that they paid mostly from money raised from new investors. All these cases imply a loss for over 10,000 affected investors in an aggregate amount of allegedly more than US$300 million.
In connection with securities enforcement proceedings, we can highlight two landmark court resolutions. The first one was issued by the Constitutional Court in the context of the Cascadas case. The Court decided that a legal provision allowing the Superintendency of Securities and Insurances to impose a fine of up to 30 per cent of the illegal transaction, without establishing any objective parameters to decide the specific amount was unconstitutional. Even though the decisions of the Constitutional Court only have effect in the specific case they refer to, it is an important precedent that, as a matter of fact, encouraged other persons challenging fines that may be considered excessive, to bring their cases to the Constitutional Court. The new law that creates the Financial Markets Commission, the entity that will replace the Superintendency of Securities and Insurances, has taken into account such constitutional objection, and has improved the penalty system, establishing certain parameters for the assessment of the specific sanction to be applied in a concrete case.
The other decision that also implied a setback for the Superintendency of Securities and Insurances was taken by the Court of Appeals of Santiago, in connection with the La Polar case. The court stated in such case that the fact that the former chairman of such company was sanctioned with a criminal penalty, implies that he could not also be subject to an administrative sanction, for the same facts and for the infringement of the same legal provision. This is the first time that higher courts accepted in a specific case that the double-jeopardy principle may be affected in cases of imposition of parallel criminal and administrative sanctions. This may have consequences in the common practice of duplicity of investigations of the Public Prosecutor's Office and the Superintendency of Securities and Insurances. This case is on appeal before the Supreme Court.
Another relevant ruling in connection with civil enforcement proceedings carried out by state agencies was the final judgment in the Corpbanca case, where the Supreme Court upheld a resolution of the Court of Appeals of Santiago, which overturned a fine imposed by the Superintendency of Banks and Financial Institutions to Corpbanca, based on infringements to certain rules on due process applicable to administrative proceedings, which, so far, the Superintendency had considered not applicable to proceedings carried out by them.
In the context of cartel investigations, in 2017 a case involving price fixing in the tissue paper industry went to trial before the competition courts, where the National Economic Prosecutor requested a fine of approximately US$16 million in respect of one of the involved companies, and the exemption of fine to the company that made use of the leniency mechanism set forth in antitrust law. The company that applied for leniency agreed on the consumer protection front to pay compensation in an aggregate amount of almost US$150 million, to be distributed among every Chilean adult residing in Chile. Such amount is equivalent to 78 per cent of the profits obtained by the company during the 10 years where the cartel was in place. This is the fifth case where a company applied for leniency in the context of antitrust investigations, since such mechanism was introduced back in 2009, proving that it has been an effective measure to expose cartels in Chile.
Last year a new law that deems collusion not only an administrative infringement but a crime was enacted, see Section II.i, supra. The law extended the benefits of leniency agreements to the potential criminal proceeding, granting a reduction in the applicable penalties. On the other hand, such criminal proceeding may only be initiated by a complaint filed by the National Economic Prosecutor once the existence of the cartel has been established by a final judgment of the competition courts. The National Economic Prosecutor is obliged to file such criminal action in cases where the free competition of the markets is seriously affected by illegal conduct.
VI CONCLUSIONS AND OUTLOOK
Over the past years, and particularly the past decade, Chile's legislation on enforcement of penalties against illegal conduct has been undergoing a continuous and profound reformation process. This process has included the incorporation of new crimes as well as the updating of existing felonies, adjusting Chile's legislation to international best practices, particularly in the area of anti-corruption and money laundering. We can highlight, for example, the inclusion of a crime of bribery related to foreign public officials and the approval of the law that establishes the criminal responsibility of legal entities.
In addition, various enforcement agencies have been restructured and in general given more investigative powers.
All these changes and the number and size of cases that have emerged over the past few years have had an important impact and are changing Chile's legal culture from a reactive to a proactive approach.
In particular, the improvement of the description of offences sanctioned under the Criminal Code and the inclusion of new prohibitions, together with the entry into force of the Law on Criminal Liability of Legal Entities, has had an important impact on the perception of the relevance of compliance in companies, particularly in such entities engaged in activities where there is a potential risk of these kinds of conduct.
However, due to the novelty of the law, there have not been many cases to date where anti-corruption laws have been enforced against legal entities. So far, no relevant case has faced a real trial (there are only some cases that ended in abbreviated proceedings or deferred prosecution agreements) nor have compliance programmes implemented by companies, which may exempt companies from liability if they are adequate, been tested in such context. Over the coming years, when more cases arise it will be interesting to follow the outcome of such trials and the capability of the public prosecutors to verify the suitability of compliance programmes, as they have no experience in such matters.
Furthermore, new significant legal changes, which will affect the enforcement of corporate conduct, are underway and expected to enter into force soon. For example, the restructuring of the Superintendency of Securities and Insurance, which will change its legal form completely from a Superintendency managed by one person to a collective commission and also strengthen its investigative powers. Such law was enacted in February 2017 and is expected to be fully in force in the course of 2018. Recently a bill was presented to Congress that aims, among other things, to include the banking supervision authority to the newly created Financial Markets Commission. By this means the banking, insurance and securities market supervision will fall under the scope of a sole supervisory body.
On June 2015, as a reaction to some high-profile alleged corruption cases (particularly cases involving irregular funding of political campaigns), a bill was presented for discussion to Congress, proposing important amendments to anti-corruption regulation, including the increase of penalties for bribery and other corruption crimes, amendments to provisions related to bribery of foreign governmental officials, following recent recommendations issued by the OECD, and the regulation and punishment of commercial bribery, which so far is not considered a crime under Chilean law.
In connection with criminal investigations on tax fraud, a bill is currently being discussed in Congress that aims to abolish the discretionary and exclusive power of the tax authority to initiate a criminal proceeding for tax crimes. In Chile the general rule is that the public prosecutor can prosecute any crime, irrespective of the fact that someone files a criminal complaint. One of the few exceptions to this rule exists on the context of tax evasion, allowing the tax authority to choose between collecting taxes and imposing an administrative fine or to file a criminal complaint that allows the Public Prosecutors' Office to investigate such conduct. This model has been questioned, particularly by the Public Prosecutors' Office, and has significantly fed public opinion in connection with the parameters by means of which the tax authority exercises such power, particularly after the authority has in the past chosen to sanction tax infringements - in the context of cases of illegal funding of political campaigns and activities - in administrative proceedings resulting in monetary fines, instead of allowing the Public Prosecutors' Office to pursue the more severe criminal sanctions against the offenders, which include politicians. The outcome of this bill is uncertain, as there are good technical reasons to continue to choose the administrative or criminal proceeding over the tax authority, depending on which is the more efficient way to recover evaded taxes. Another option to solve this controversy is to grant the tax authority autonomy from the government, in order to ensure that decisions are taken strictly independently.
1 Jorge Bofill and Daniel Praetorius are founding partners of Bofill Escobar Abogados.
2 For example, in the context of money laundering, certain individuals are obliged to give notice to the authorities; however, this obligation does not apply to events occurring inside the company, but rather those performed by third parties.
3 This year collusion was reinstated as a crime by means of Law No. 20,945, which conduct can, therefore, also be prosecuted by the Public Prosecutor's Office in case the National Economic Prosecutor files a criminal complaint after the administrative case has ended with the imposition of a sanction.
4 This is expected to enter into force in the course of 2018.
5 Not all public officers but only those subject to the Estatuto Administrativo and the Estatuto Administrativo para Funcionarios Municipales.
6 Article 2314 et seq. of the Civil Code, particularly Article 2320.
7 The list of offences that can give rise to money laundering includes, among others, drug trafficking, bribery, use of confidential information, securities and banking frauds. Recently this list has been added to by offences such as fraud, misappropriation, certain cases of tax fraud and piracy of intellectual property. As this increases the possibilities of application of the money laundering law, indirectly this may also lead to a greater exposure of companies to be criminally liable, as money laundering is one of the felonies that can lead to criminal liability of legal entities.
8 Just to name an example, in antitrust matters, the maximum applicable monetary sanction was increased this year from 30,000 Unidades de Fomento in cartel cases to 30 per cent of the sales of the offender in the period and in the line of business to which the infringement refers or the double of the economic benefit obtained with the illegal conduct. (The Unidad de Fomento is a unit of account used in Chile.) In case it is not possible to establish such amounts, the maximum now can go up to 60,000 Unidades de Fomento.
9 In this particular case the fine imposed by the securities authority was equivalent to approximately US$25 million.