This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
This post was also co-authored by Alice Hsieh, an Associate at Miller & Chevalier.
On February 2, 2016 Colombia’s President enacted Law 1778, known as the Transnational Corruption Act (TCA), the country’s first foreign bribery law. The law helps Colombia meet its commitments under the OECD Anti-Bribery Convention. It bolsters the country’s enforcement regime and creates corporate liability for bribes paid abroad. It also establishes explicit credit for companies with adequate anti-corruption compliance programs in place in calculating penalties for both domestic and foreign bribery violations. The law applies to Colombian companies, including the Colombian subsidiaries of non-Colombian companies registered to do business in the country.
Here is what you need to know about the TCA.
Article 2 of the TCA creates corporate liability when (1) a director, employee, contractor or shareholder (whether or not they have the legal authority to bind the entity) (2) gives, offers or promises (3) to a foreign public official (4) directly or indirectly (5) money, any other good with monetary value or any other benefit or prerequisite (6) in exchange for the official to perform, omit or delay any act related to the exercise of the official’s functions (7) in relation to international business transactions. Under Subsection 3 of Article 2, liability will not attach when the “conduct was performed by a shareholder that does not control the legal entity.” For purposes of shareholder liability, control is defined under Colombian corporate law as 51 percent ownership or more, or contractual abilities to direct the company.
The law creates administrative liability for corporate entities engaged in a prohibited act, as defined above. Corporate liability is not criminal, an approach that is consistent with the approaches taken in many other Latin American countries, including Brazil. Latin American legal systems often do not support the notion that corporate entities can undertake criminal acts, since many hold the view that companies cannot themselves form the mens rea necessary to commit crimes. Instead, the designers of the TCA chose to establish administrative liability with harsh penalties. In particular, under Article 5, companies can be sanctioned with monetary penalties up to 200,000 times the minimum monthly wages of Colombia, which equates to approximately US$45 million. In addition, Article 5 provides that companies can be debarred from contracting with the Colombian government for up to 20 years and debarred from receiving government subsidies or incentives for five years. Enforcement actions are made public.
Under Article 30 of the TCA, individuals can face criminal liability, including between nine and 15 years imprisonment and considerable fines, when they give, promise or offer to a foreign public official, for the individual’s own benefit or that of a third party, directly or indirectly, any money, object of financial value or any other benefit or profits in exchange for committing, omitting or delaying any action related to the exercise of the official’s functions and in relation to international business or international transaction.
Some might argue that, given the absence of criminal liability for companies, the TCA does not meet OECD standards. In particular, Article 3 of the OECD Anti-Bribery Convention provides that signatory countries must ensure that, in the case of applying non-criminal penalties to companies, the penalties are “effective, proportionate and dissuasive.” The maximum penalty of US$45 million under the TCA might not be viewed as meeting this standard. Other countries’ blockbuster penalties for foreign bribery often exceed this amount. Moreover, the fact that penalties are capped might mean that companies will simply build into their cost of doing business a potential fine. On the other hand, the TCA’s designers argue that, within the Colombia context, the penalty level is considerable and is the type of consequence that companies will take seriously. They also highlight that, with administrative rather than criminal liability, under Colombian law the burden of proof is lower, akin to a strict liability standard, which makes it easier for authorities to establish violations.
Colombia’s Superintendencia de Sociedades (“Supersociedades”), the regulatory body that oversees all companies domiciled in Colombia, is the only authority with jurisdiction to enforce the law. Under Articles 20 and 21, it has the power to request information from companies, compel testimony and fine companies that do not comply. Article 28 of the TCA also establishes information-sharing mechanisms within Colombia whereby prosecutors are required to forward evidence to Supersociedades if, in the course of investigating an individual, they come across bribes paid to benefit a company. Supersociedades will also forward to prosecutors any evidence of individual liability they obtain.
Supersociedades faces certain challenges in its responsibilities under the TCA. For example, it lacks investigative powers to search and seize property and pursue wiretaps and other forms of surveillance, although it can coordinate with federal prosecutors for investigative support. Also, historically, Supersociedades investigations have focused on accounting-related issues, and investigating and proceeding against acts of corruption is something new. Enforcers are currently taking steps to build internal capacity to address corruption-related matters and have created a special operations group to focus on TCA violations.
Under Article 19, companies can reduce or avoid penalties when they self-report. To be eligible to receive no penalty, they must meet two conditions: First, they must come forward before Supersociedades initiates its own investigation, and second, they must come forward before the contract at issue in the bribery has been performed. If these conditions are not met, penalties can still be mitigated up to 50 percent when offenses are disclosed after their performance.
Article 7 of the TCA establishes aggravating and mitigating factors for purposes of penalty calculation and lists anti-corruption compliance as a specific mitigating factor. Supersociedades is currently taking steps to improve its ability to assess the compliance practices of companies for purposes of extending mitigation credit. The TCA provides that Supersociedades will have six months, until August 2016, to publish compliance guidance that details its compliance expectations and methods of assessment.
Article 35 of the TCA amends prohibitions for companies related to domestic bribery of “the public administration” under the country’s Anti-Corruption Statute. It permits Supersociedades to apply the same level of penalties as for foreign bribery to companies that make improper payments to local officials, but only after a criminal conviction against a legal representative or director of the company has already been secured. Most notably, companies that can demonstrate effective compliance programs will be eligible for mitigated penalties. This modification will undoubtedly work to bolster the interest of local companies in anti-corruption compliance, even when local companies are not engaged in international business.
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