Written by Ian Cardenas, Lawyer
Chile’s legal landscape has undergone a significant transformation with the enactment of Law N° 21.595, also known as the Economic Crimes Law, which was recently published in the Official Gazette. This reform, considered one of the most important changes to the Penal Code and other special laws, introduces new categories of crimes and imposes stricter penalties on both individuals and legal entities.
Major Changes for Individuals
The new Economic Crimes Law introduces an innovative and more rigorous system for classifying and punishing economic crimes committed by individuals:
- Classification of Economic Crimes: The law groups over 200 economic crimes into four categories. These include crimes related to securities markets, tax crimes, environmental violations, cybercrimes, and fraudulent mismanagement of corporate assets.
- Differentiated Sentencing System: A harsher sentencing system has been introduced, particularly for individuals in higher or intermediate positions of authority within a company. Those in more responsible roles are likely to face more severe penalties.
- Elimination of Alternative Sentences: The possibility of serving a sentence through supervised release has been removed for economic crimes, increasing the likelihood that convicted individuals will serve actual prison time.
- Day-Fine System: Fines are now calculated based on the convicted person’s daily income. As a result, individuals with higher incomes will face larger fines, while those with lower incomes will pay smaller amounts.
- Asset Seizure Without Conviction: The law allows for the seizure of illicit gains even without a prior conviction. This ensures that individuals are deprived of the financial benefits obtained through criminal activities.
Criminal Liability of Legal Entities
One of the most disruptive aspects of Law N° 21.595 is the expanded criminal liability for legal entities:
- Expanded List of Crimes: The law significantly broadens the range of crimes for which a company can be held criminally liable. Previously, about 20 crimes were included, but now this list covers over 200 crimes, including financial, tax, and money laundering offenses.
- Broader Application Scope: In addition to private and state-owned companies, the new framework includes universities, political parties, and religious entities as potentially liable for economic crimes.
- Crime Prevention Models (MPD): One of the most important changes is the need for companies to implement adequate crime prevention models (MPD). The absence of an effective MPD not only fails to exempt the company from liability but may also be considered an aggravating factor.
- Certification of MPD is No Longer Sufficient: Previously, certification of crime prevention models was enough. Now, the law requires periodic evaluations by independent third parties to ensure the MPD is effectively implemented.
Supervision of Legal Entities: Regulation N° 97
Published on September 26, 2024, introduces the role of a supervisor for legal entities as a preventive and corrective measure under Law N° 20.393 on Criminal Liability of Legal Entities. This regulation outlines the supervision process and the responsibilities of both the supervisor and the entity under supervision.
- Appointment of the Supervisor: The court will appoint an individual as a supervisor, who must meet strict competence and experience criteria and must have no conflict of interest with the supervised entity. The supervisor will ensure that the entity implements, improves, or strengthens its crime prevention systems.
- Obligations of the Entity: The legal entity under supervision must provide all necessary information to the supervisor and allow access to its facilities and employees. Non-compliance with these obligations can result in sanctions, such as prohibiting the entity from entering into contracts involving its assets.
- Duration and Powers of the Supervisor: Supervision can last between six months and two years, depending on the case, and the supervisor has broad powers to intervene in the entity’s crime prevention system. In extreme cases, the court may order the replacement of the entity’s board members or even appoint a provisional administrator.
Impact on Businesses
The implementation of this law and its accompanying regulation represents a significant shift for businesses in Chile. The extension of criminal liability to a broader range of crimes, along with the mandatory requirement for companies to have effective crime prevention models, creates a new compliance landscape. The introduction of court-appointed supervisors adds an external layer of oversight, ensuring that companies are taking crime prevention seriously.
Non-compliance can lead to severe sanctions, including the inability to contract with the state, substantial fines, and, in extreme cases, the dissolution of the legal entity. Companies must carefully review their internal policies and adapt them to this new framework to mitigate legal and reputational risks.
Conclusion
Law N° 21.595 and its regulations significantly transform the treatment of economic crimes in Chile. Both individuals and legal entities must adapt to a much stricter framework, where crime prevention and corporate criminal liability are now more critical than ever. Implementing effective crime prevention models and ensuring proper supervision will be crucial for the future operations of organisations across the country. If you are concerned about complying with these laws, get in touch with our experienced team today to discuss if your internal policies need to be adapted to the new framework to minimise legal and reputational risks and promote good corporate governance.
Harris Gomez Group METS Lawyers ® opened its doors in 1997 as an Australian legal and commercial firm. In 2001, we expanded our practice to the international market with the establishment of our office in Santiago, Chile. This international expansion meant that as an English speaking law firm we could provide an essential bridge for Australian companies with interests and activities in Latin America, and to provide legal advice in Chile, Peru and the rest of Latin America. In opening this office, HGG became the first Australian law firm with an office in Latin America.
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