This report provides a summary of the key aspects of Law No. 21595, published on August 17th, 2023, which systematizes economic crimes and environmental offenses, amends various legal provisions defining offenses against socio-economic order, and adjusts the applicable penalties (the «Law»). As is evident from this document, the Law encompasses various areas of law, including Criminal, Labor, Environmental, Competition, and Compliance, among others. Therefore, it is essential to give it a holistic interpretation and application, enabling both individuals and companies (including their Directors and senior Executives) to achieve comprehensive compliance with the regulations.
OBJECT OF THE LAW
The primary purpose of the Law is to prevent the commission of so-called economic crimes (colloquially known as «white-collar crimes») by systematizing them and adjusting the sentencing system, creating a special statute for these offenses. Importantly, the Law aims not to impose stricter penalties on those committing such crimes but to incentivize individuals and companies to adopt measures outlined in the law and other legal frameworks, thereby reducing economic criminality. In the case of legal entities, this objective is sought through imposing greater requirements, ultimately necessitating them to have an effective internal compliance system. Additionally, the Law introduces new environmental offenses and illicit acts related to the breach of business secrets, abusive corporate agreements, labor exploitation, among others.
B. SYSTEMATIZATION OF ECONOMIC CRIMES
The Law categorizes economic crimes under a special penal framework.
FIRST CATEGORY: These crimes are always considered economic crimes, regardless of the circumstances. The Law deems these crimes as protecting legal interests of such significance that they are always classified as economic crimes, irrespective of any other factors. Examples include violations of regulations in the Stock Market, the Banking System, Competition Law, etc.
SECOND CATEGORY: Crimes are classified as economic when committed within the scope of an entrepreneurial role or when they benefit a company (whether economically or not). This category encompasses offenses with a financial aspect, even when not necessarily economic in nature. Examples include computer crimes, unfair administration, etc.
THIRD CATEGORY: Crimes are deemed economic when committed within the scope of a public function, whether a company has involvement in their commission or benefits as a result (whether economically or not). This category pertains to offenses committed by public officials, with corporate involvement occurring when someone, while holding a position or function within a company, participates as an author or accomplice in the offense. Examples include public document forgery, bribery, etc.
FOURTH CATEGORY: Crimes of money laundering and receiving stolen property are considered economic crimes when the underlying offense is categorized as economic under the previous three categories.
C. KEY CONSEQUENCES OF AN OFFENSE BEING CATEGORIZED AS ECONOMIC
The Law introduces a new method for determining penalties and a new system of aggravating and mitigating circumstances:
✓ A new regime for the application of alternative penalties is established, making them more restrictive (e.g., community service is excluded for economic crimes). The objective is to ensure that custodial sentences are served effectively.
✓ «Effective cooperation» is regulated as a mitigating circumstance of criminal responsibility.
✓ Every economic crime entails a mandatory pecuniary penalty corresponding to the duration of custodial or liberty-restricting sentences. The daily value considers the convicted individual’s income and, in exceptional cases, their assets, which is determined by the competent judge.
✓ Confiscation of gains is introduced, which can be applied even when a conviction has not been handed down against the offender.
✓ Special disqualifications are created. For example, disqualification from holding public positions or roles (in companies subject to supervision by the Commission for the Financial Market or state-owned companies or those in which the state holds a majority interest) for a period of 3 to 10 years, or disqualification from contracting with the State, which can be imposed indefinitely.
D. AMENDMENTS TO CORPORATE CRIMINAL LIABILITY LAW
Among the most relevant amendments introduced by the Law in this regard are:
✓ Expansion of the catalog of crimes for which a legal entity can be criminally liable.
✓ Changes to the penalty structure and criteria, introducing new aggravating and mitigating factors. The Law includes rules for the execution of penalties and additional financial consequences in cases of company division, merger, or dissolution.
✓ Expansion of the types of legal entities that can be criminally liable to include universities, political parties, and religious legal entities of public law.
✓ The Crime Prevention Model becomes a fundamental element for both corporate protection and liability assessment. An autonomous person must be designated to oversee this model, which must contain effective crime prevention measures, including avenues for reporting and internal sanctions for non-compliance.
✓ Delivery of false information or approval of documents containing false information: This offense applies to managers, administrators, or senior executives of a public company who, in the reports, balance sheets, or other documents intended for shareholders, third parties, or the authorities, as required by law or applicable regulations, submit or approve false information concerning material aspects of the company’s legal, economic, and financial situation.
✓ Establishment of offenses related to professional secrecy and trade secrets: An offense is committed when an employee, in the exercise of their role and under an obligation of confidentiality arising from their employment with the affected company or any company they have provided services to, reveals or allows access to another person’s trade secret without the legitimate owner’s consent, or accesses a trade secret by improper intrusion with the intent to disclose it or gain economic benefit from it.
E. AMENDMENTS TO THE LAW ON JOINT-STOCK COMPANIES
The offenses specified in Article 134 and 134 bis of the Joint-Stock Companies Law are considered economic crimes, including:
Providing false information to experts, accountants, auditors, and Directors or senior Executives, including information contained in the financial statements, balance sheets, or other documentation required by law.
Abusing a majority position on the board of a Joint-Stock Company to adopt an abusive agreement for the benefit of another, either economically or not, at the expense of other shareholders and without the agreement benefiting the company.
F. CREATION AND SYSTEMATIZATION OF NEW OFFENSES
✓ Environmental Offenses: These offenses are incorporated into the Penal Code under the heading «Offenses Against the Environment.» Among these offenses is evasion of the Environmental Impact Assessment System when its submission is a legal requirement. Penalties are imposed for those who knowingly avoid submitting their activities for an environmental impact assessment when required. Offenses include discharging pollutants into maritime or inland waters, extracting inland waters (surface or groundwater) or maritime waters, depositing pollutants into soil or subsurface, whether inland or maritime, dumping soil or other solids in wetlands, extracting components from soil or subsurface, and releasing pollutants into the air. These criminal responsibilities apply to both natural and legal persons. In addition to offenses categorized as attacks against the environment, the law regulates other types of environmental offenses included in various special laws. For example, concealing or providing false information in an environmental assessment process, project fragmentation, etc.
✓ Labor Offenses: The Law introduces new employer obligations in terms of crime prevention, while also reinforcing or toughening sanctions for potential non-compliance in the payment of worker contributions and salaries. Notable provisions include:
Payment of a salary that is manifestly lower than the minimum monthly wage, exploiting the worker’s need, inexperience, or inability to discern.
Establishment of new offenses relating to social security contributions. An employer who, without the worker’s consent, omits withholding or remitting a worker’s social security contributions, or declares to social security institutions that they will pay a taxable or gross income lower than the actual amount, reducing the amount of contributions to be withheld and remitted, will be subject to a custodial sentence.
In labor matters, there is also a significant amendment to Law No. 20393 on corporate criminal liability. It establishes as a prerequisite for criminal liability that the offense committed by a natural person has been favored or facilitated by the ineffective implementation of an adequate crime prevention model. The law sets out new requirements for a crime prevention model to act as an exemption from liability, including:
a) Identifying activities and processes that involve risk.
b) Protocols and procedures for preventing and detecting criminal conduct.
c) Secure channels for reporting and internal sanctions for non-compliance.
d) Informing workers of protocols, procedures, and internal sanctions.
e) Internal regulations must be explicitly included in the respective employment and service contracts of all employees, workers, and service providers of the legal entity, including their top executives.
False information delivery or approval of documents with false information: This offense applies to managers, administrators, or senior executives of a Joint-Stock Company who, in the reports, balance sheets, or other documents intended for shareholders, third parties, or the authorities, as required by law or applicable regulations, submit or approve false information concerning material aspects of the company’s legal, economic, and financial situation.
Establishing offenses related to professional secrecy and trade secrets: An offense is committed when an employee, in the exercise of their role and under an obligation of confidentiality arising from their employment with the affected company or any company they have provided services to, reveals or allows access to another person’s trade secret without the legitimate owner’s consent, or accesses a trade secret by improper intrusion with the intent to disclose it or gain economic benefit from it.
G. EFFECTIVENESS OF THE LAW
The provisions of the Law will generally take effect on the date of publication in the Official Gazette, i.e., on August 17, 2023. Exceptionally, a deferred entry into force is established for certain matters. In the case of amendments to Law 20393 on corporate criminal liability, these will come into effect on the first day of the thirteenth month following their publication, i.e., on September 1, 2024.