In 2015, Mexico embarked on sweeping constitutional reforms that created the National Anticorruption System, empowering competent authorities at all governmental levels to prevent and fight corruption.
As part of these reforms, in July 2016, several key pieces of legislation were amended and four new laws were enacted – among them the General Law on the National Anticorruption System (GLAR).
This article focuses on the applicability and scope of GLAR, which entered into force in July 2017. We will answer the following questions: (i) may legal entities be held liable? (ii) what types of fines may be imposed? and (iii) are there any mitigating factors?
MAY LEGAL ENTITIES BE HELD LIABLE?
Under GLAR, all kinds of companies doing business in Mexico can be held liable for acts committed by their employees, managers, directors or other persons acting to obtain an improper benefit on behalf of the legal entity, if the acts constitute so-called “serious administrative offenses.” Foreign companies may be also on the hook when doing business in Mexico and when having contact with Mexican public officials.
The following offenses are considered to be “serious administrative offenses” in which a private entity may be considered to be involved:
- Unlawful participation in administrative proceedings when entity is excluded from public procurement
- Influence peddling
- Use of false information
- Improper hiring
- Obstruction of investigation
WHAT TYPES OF FINES MAY BE IMPOSED?
The kind of liability GLAR establishes towards legal entities is administrative liability. The administrative sanctions and administrative procedures provided under the GLAR are independent from the criminal sanctions and criminal procedures that may be applicable under Mexican Criminal legislation.
The administrative sanctions that may be imposed over companies under GLAR are the following:
- Fine of up to twice the benefit obtained, or up to approximately US$6.466 million
- Disbarment from public procurement for up to ten years
- Suspension of activities for up to three years
- Forced corporate dissolution
- Indemnity for damages caused to the public Treasury
In order for the sanctions related to suspension of activities or forced dissolution to be imposed, two elements must be met:
- (i) the private entity must have obtained an economic benefit and
- (ii) it has to be proven that the partners/shareholders, management or surveillance departments of the private entity were involved in the performance of the corrupt practice, or that the private entity has been systematically used to commit corrupt activities.
ARE THERE ANY MITIGATING FACTORS?
GLAR provides the option for legal entities to mitigate liability. These are the factors taken into consideration for mitigating liability:
- Voluntary disclosure
- Cooperation with authority
- Adoption of compliance programs
- Adoption of mitigation measures
For more information please contact:
Eduardo J. Gallastegui Armella
Managing Partner, Mexico City
T +52 55 5261 1807
Maria Eugenia Rios
T +52 55 5261 1800
T +1 212.335.4549