New rules on anti-corruption matters increase the potential penalties for all private entities doing business in Mexico, whether Mexican or foreign.
The Mexican General Law on Administrative Responsibilities (GLAW), which went into effect on July 18, 2016, sets forth new prohibitions on wrongful administrative conduct and sanctions applicable to private entities doing business in Mexico. This means that private entities interfacing with local, state or federal Mexican government officials will be bound by new and stricter anti-corruption rules.
Likewise, as of June 2016, the Federal Criminal Code and the National Code of Criminal Procedure now impose on private entities criminal liability for felonies committed by anyone acting on their behalf.
The GLAW applies to all private entities in Mexico, whether domestic or foreign, that commit a major administrative violation in connection with, or related to, a government official at the federal, state or local level.
Private entities should note that these administrative violations are separate and distinct from the criminal penalties that may arise in accordance with Mexican criminal law.
Private entities will now be sanctioned when their legal representatives, acting on behalf of the private entity, commit a major administrative violation with the intent to obtain, through the commission of the violation, any type of benefit for the private entity.
Sanctionable administrative violations include the following: bribery, illegal participation in administrative procedures, influence peddling, forgery of documents or information, obstruction of investigative powers, complicity, embezzlement, improper hiring of former government officials and violations committed in special cases, such as bribery carried out by candidates in elections, members of electoral campaign teams or leaders of public unions.
The potential sanctions that could be imposed on private entities include the following:
I. Economic penalties up to (a) twice the amount of the benefits obtained or (b) 1,000 to 1.5 million times the daily value of a measurement unit, which has a current daily value equivalent to $73.04 Mexican pesos (approximately $4.05 U.S. dollars);
II. Temporary ban on participation in public bids or execution of government agreements for three months to eight years;
III. Suspension of activities;
IV. The dissolution of the entity; and
V. Payment of the damages caused to the federal, local or municipal public treasury, or to the public entities’ assets.
Private entities will be sanctioned regardless of the responsibility of individuals who act on behalf of the sanctioned private entities.
Integrity Policies Manual
To mitigate the administrative and criminal responsibilities of private entities, the authorities will take into account if the private entities have in place written integrity compliance policies. These policies, which may be contained in an organizational manual, a code of conduct, or an audit system, among other measures, must comply with the requirements set forth in the GLAW. Therefore, in order to implement integrity compliance policies, private entities should carry out a multi-disciplinary process coordinated by the legal advisor of the entity, with the support of the human resources and the IT departments, among others.
Likewise, as of June 16, 2016, private entities can be held criminally responsible for the commission of felonies in Mexico by anyone acting on their behalf.
At the federal level, these are some of the most important felonies for which private entities may be held liable:
I. Felonies under the Federal Criminal Code:
(i) domestic terrorism;
(ii) international terrorism;
(iii) illegal use of installations destined for air transportation;
(iv) crimes against public health;
(v) influence peddling;
(vii) falsification and alteration of currency;
(viii) fraud; and
(ix) operations undertaken with illicit resources.
II. Felonies under special laws:
(i) tax fraud or evasion;
(ii) crimes regarding intellectual property;
(iii) crimes regarding stock exchanges or the stock market; and
(iv) crimes committed concerning hydrocarbons.
Private entities will be held criminally liable for acts committed on their behalf, on their account, for their benefit or through the means that they provide when, in addition, it has been determined that the private entity failed to exercise sufficient control over persons acting on their behalf. Likewise, criminal responsibility of private entities will not be negated when these are transformed, merged, acquired or split-up.
The criminal responsibility of a private entity shall not be eliminated by means of its apparent dissolution when its economic activity continues and the identities of its clients, suppliers or employees, or the most relevant part of all of the above, are being maintained.
Listed below are the sanctions that may be imposed on private entities in connection with the commission of any of felonies described above:
I. Economic penalties;
II. Confiscation of instruments, objects or products concerning the felony;
III. Publication of the criminal judgment against the private entity;
IV. Dissolution of the entity; or,
V. Any other sanctions provided under the criminal law.
Prior to these amendments, under Mexican Law, private entities could not be held administratively or criminally liable for corrupt acts committed on their behalf by their directors or employees.
Overall, this is an extraordinary change for private entities interfacing with Mexican government officials. We are available to advise clients on how to prevent these sanctions and implement preventive measures. Please contact us if you would like more information.