Entities and Individuals in the Crosshairs Understanding Key - - PowerPoint PPT Presentation

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Presenting a live 90-minute webinar with interactive Q&A

Mexico's New Anti-Corruption Laws and Implementing Regulations: Private Entities and Individuals in the Crosshairs

Understanding Key Provisions, Ensuring Compliance and Mitigating Legal Risks

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUESDAY, NOVEMBER 8, 2016

Matteson Ellis, Member, Miller & Chevalier, Washington, D.C. Diego Sierra, Partner, Von Wobeser & Sierra, Mexico City, México

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July 2016 Anti- Corruption Legislation in Mexico: Going Beyond FCPA Compliance

Diego Sierra Partner Von Wobeser & Sierra dsierra@vwys.com.mx

5

Matteson Ellis Member Miller & Chevalier mellis@milchev.com

Bribery risks- Mexico

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16 17 20 16 17 14 14 10 18 19 22 24 19 19 17 16 72 89 98 100 105 106 103 95

20 40 60 80 100 120

2008 2009 2010 2011 2012 2013 2014 2015

Corruption Perception Ranking by Transparency International Mexico United States United Kingdom

Bribery risks- Mexico

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Source: Fraud and Corruption Survey in Mexico, KPMG 2008. Casar, María Amparo, México: Anatomía de la Corrupción.

Companies subject to FCPA Actions based

• n Mexico Activities

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Mexico’s new anti- corruption laws and implementing regulations

• May 27, 2015. Constitutional amendments on anticorruption

matters were published in the Official Journal.

• The reform creates the National Anticorruption System

(“NAS”), a coordinating “agency” between authorities of all levels of government competent in prevention, detection and sanctioning corruption.

• July 18, 2016. President Peña Nieto enacted Anticorruption
• legislation. Noteworthy, the General Law of Administrative

Responsibilities enters into force in July 2017.

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New Legislation Amendments to Existing Laws General Law of National Anti- Corruption System Organizational Law of the Federal Public Administration General Law for Administrative Responsibilities Organizational Law of the General Attorney’s Office Organizational Law of the Federal Administrative Law Tribunal Federal Criminal Code Law of Audit and Rendering of Accounts

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National Anticorruption System

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Prevention Detection

Sanction Administrative Offenses and Corruption

Auditing

Accounting for Use of Public Funds

Determines coordination mechanisms between the authorities at all levels (federal, state and municipal) of government regarding:

General Law of the National Anticorruption System

In force July 19, 2016

National Anticorrup tion System Coordinat ing Committe e

Managing Committee

• f

NationalA uditSystem

Representati ves of State Anticorrupti

• n Systems

Committee

• f Citizen

Participati

• n

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General Law of the National Anticorruption System

13

General Law of the National Anticorruption System

NAS

ExecutiveSecretariat

Internal Control Bodies with in government agencies

Government Agency Executive Commission

TechnicalSupport Agency of the NAS CoordinatingCommittee

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General Law of the National Anticorruption System

15

General Law of the National Anticorruption System

Designs, promotes and evaluates anticorruption policies Implements mechanisms and principles for collaboration with audit and control authorities Issues annual report containing progress and results

• f implementation of

anticorruption policies and programs Requests information from public institutions about compliance with national anticorruption policies Implements National Digital Platform (“NDP”) where anonymous reports will be uploaded for investigation. (NDP to include list of companies and/or individuals sanctioned for corrupt acts.) Determines coordinating mechanisms between the National and the State Anticorruption Systems

Coordinating Committee

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General Law of the National Anticorruption System

 Involves 5 citizens appointed by the Senate based on their contributions to fighting corruption  Their mandate will last for five years  Responsible for liaising with social and academic organizations

Committee

• f Citizen

Participation

Ministry of PublicService

Superior Auditor of theFederation Local Audit Agencies Local Secretaries of PublicService

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General Law of the National Anticorruption System

• Interagency coordination mechanism between the responsible bodies for government

audit in the various levels of government.

• Will determine collaboration actions and mechanisms between its members.
• Managing Committee involves representatives of Superior Auditor of the Federation,

Ministry of Public Service and 7 members of the Local Audit Agencies.

National Audit System

NAS National Digital Platform Assets evolution, disclosure of interests and proof of tax declaration system System of public officials involved in public procurement

Information and communication system of the National Anticorruption System and the National Audit System

Public information system of procurement System for public accusations

• f administrative offenses and

corrupt conducts National system of sanctioned public officials, individuals and corporations

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General Law of the National Anticorruption System

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General Law of Administrative Responsibilities

Into force  July 19, 2017

PreventionMechanisms

• Public officials’ ethics code
• Recommendations from the

NAS Coordinating Committee

• Selection of members of the

internal organs of control of the different government agencies

• Self-regulation mechanisms

including internal control systems and programs

• f

integrity for companies

• Collaborating

agreements with chambers of commerce and business associations in

• rder to bolster an integrity

culture

• Credit for having integrity

programs once companies are under investigation

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General Law of Administrative Responsibilities

Accountability

• Assets evolution, disclosure of interests and proof
• f tax declaration System
• National System of sanctioned public officials,

individuals and corporations

• Assets declaration and disclosure of interests
• System of public officials involved in public

procurement

• Rules of conduct in public procurement
• Public information System of Procurement

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General Law for Administrative Responsibilities

Declaration of assets and disclosure of interests

Subjects: Publicofficials

CoordinatingCom mitte will determine theformatsfordecla rations Informationwill be uploaded in theNational Digital Platform

Declarationswill be published, exceptforthose itemswhosedisclosure mayaffectpublicoficial s’ privacy

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General Law for Administrative Responsbilities Minor Administrative Offenses

Acts or omissions of public officials who engage in:

Nonperformance

• f powers,

functions and commissions.

Failure to report acts

• r omissions that

may result in administrative

• ffenses.

Ignoring instructions

• f their superiors

when they are related to public service. Delay in presentation

• f assets and tax

declaration/ disclosure of interests.

No providing accounts of the performance of their duties.

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General Law for Administrative Responsibilities Serious Administrative Offenses

Acts or omissions of public officials, such as:

Bribery Embezzlement Deviation of public funds Misuse of information Obstruction of justice Abuse of authority

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General Law for Administrative Responsibilities Serious Administrative Offenses

Acts or omissions of public officials, such as:

Acting under conflict of interest Improper hiring

Hidden enrichment/ failure to disclose conflict of interest

Influence peddling Concealment Contempt

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General Law for Administrative Responsibilities

Individual and corporate conduct involved in administrative offenses Bribery Use of false information Influence peddling Improper hiring of former public

• fficials

Wrongful exercise of public funds Collusion Obstruction of powers for investigations Unlawful participation in administrative procedures

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General Law for Administrative Responsibilities

Private offenses by private persons in a special situation

• Candidates for elected
• ffice
• Members of electoral

campaigns

• Members of changing

administrations in the public sector

• Leaders of labor unions

in the public sector Demands, requests, acceptance, receipt or claims to receive any benefit not included in compensation in exchange for granting

• r offering an undue

benefit in the future, were the person to

• btain the position of a

Public Official

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General Law for Administrative Responsibilities

Sanctions against public officials

Publicor private admonition

Temporary disqualificat ion from holding public office

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General Law for Administrative Responsibilities

Fine up to twice the benefit

• btained or up

to USD 608,700 Disqualification from participating in public procurement up to 8 years Compensatory damages and lost profits to the public treasury Sanctions on individuals

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General Law for Administrative Responsibilities

Sanctions on companies

Fine

• Fine up to twice the benefit obtained or up to

USD 6,087,000

Withdrawal

• Disqualification from participating in public procurement

up to 10 years

Damages

• Payment of damages, compensatory damages and lost

profits to the public treasury

Suspension • Suspension of company’s activities for up to 3 years Dissolution • Order to liquidate the company

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Federal Criminal Code Crimes for corruption, committed by private persons

Bribery

Individuals or corporations that give or promise to give, any improper benefit to a public

• fficial to

perform or omit an act related to the official’s duties. Use of false information

Contractors, licensees, assignees and holders of concessions which generate and use false or modified information with respect to incomes

• r profits, when

legally obliged to present such information, when such information is concealed.

Bribe of foreign officials

Individual or corporation that

• ffers, gives,

promises to give money or any other gift to foreign

• fficials in order to
• btain or maintain

undue advantages in the development

• r performance of

an international commercial transaction

InfluencePeddling

Individuals who without being authorized to legally intervene in public affairs, claim to have influence over public officials with powers to make decisions regarding such affairs, and intervene in such affairs to promote the unlawful resolution of such affairs

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Abuse of Authority Wrongful exercise of

• ficial power

Intimidation Influence peddling Public oficial scoalition

Crimes committed by public

• fficials

Federal Criminal Code

Distinctions with the FCPA

32 NAS FCPA Subject persons Individuals, corporations and public officials. Individuals and corporations. Scope Foreign and local officials. Foreign officials. Prohibited acts Administrative offenses committed by public officials and individuals and corporate acts involved in serious administrative offenses. Bribery of foreign officials. Books and records and internal controls failures. Facilitation payments Not allowed. Exception for facilitation or expediting payments made in furtherance of routine governmental action. Strict liability Liability independent from the corrupt intent. Anti-bribery provisions require corrupt intent; accounting provisions approach strict liability.

Distinctions with the FCPA

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NAS FCPA Books and records Not contemplated in legislation. Yes, accounting provisions cover books and records. Corporate liability Yes, corporations can be held liable. Yes, corporations can be held liable. Sanctions Public officials: Public or private admonition; suspension of employment, position or commission; termination of employment; temporary disqualification to hold public office and fine. Individuals and corporations: Fine; disqualification from participating in public procurement; indemnity for damages, compensatory damages and lost profits to the public treasury; suspension of activities and corporate dissolution. Up to USD 2 million per violation (anti-bribery provisions); up to USD 25 million (accounting provisions), plus possible disgorgement of profit.

Distinctions with the FCPA

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NAS FCPA Credit for compliance programs For the imposition of sanctions, integrity policies of the corporation will be considered. Not statutorily, but U.S. Sentencing Guidelines provide credit for compliance programs. Credit for self- disclosure and cooperation Sanctions could be reduced for corporations filing charges for administrative offenses or for cooperating with investigations. Not statutorily, but U.S. Sentencing Guidelines provide credit. Indirect liability Not necessary to establish corrupt intent for administrative offenses. Permits indirect liability for acts of third parties. Statute of limitations Minor administrative offenses: 3 years Serious administrative offenses/ individuals and corporations acts involved in administrative offenses: 7 years 5 years

Distinctions with the FCPA

35 NAS FCPA Jurisdiction Public officials, individuals and corporations acting in Mexico, including foreign companies. U.S. individuals and corporations worldwide; foreign individuals and corporations acting within U.S.; companies listed on U.S. exchanges (U.S. issuers) and their employees acting worldwide; and agents acting on behalf of a covered individual / corporation Enforcement Administrative and criminal. Civil and criminal. Negotiated plea agreements. Settlement agreements permitted under certain circumstances. Corporate settlement agreements are negotiated regularly.

Enforcement of the NAS: OECD Working Group

Findings of OECD Working Group: Follow up to Mexico Phase 3 Report & Recommendations (2014)

• Has no foreign bribery prosecutions or convictions
• Anti-corruption law does not create corporate liability for

foreign bribery without identification or conviction of relevant individual and without proof that the bribery was committed within the means of the corporate entity

• Made meaningful updates to MLA procedures
• Begun training prosecutors in anti- corruption techniques

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Enforcement of the NAS: Committee of Citizen Participation

Committee

• f Citizen

Participation

Leads the Coordinating Committee of the NAS Head of the decision making body of the Executive Department

• f the NAS

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Guarantees independence, effectiveness and impartiality of the National Anticorruption System as organized civil society will be responsible for enforcement

Enforcement of the NAS: International cooperation

Coordinating Committee empowered to take part in international collaboration mechanisms for fighting corruption Mexican authorities must collaborate with international authorities for the strengthening of investigations, share international best practices and fight against corruption

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Enforcement of the NAS: Whistleblower Provisions

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Companies will benefit from potential leniency in administrative sanctions when they self-disclose or collaborate in investigations

Benefit of sanction reduction: Individuals that have perpetrated or participated in a serious offense and confess may obtain a reduction, under certain conditions, of 50 to 70% in monetary penalties imposed and even elimination of debarments imposed

Enforcement of the NAS: Corporate intervention

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Suspension of activities Corporate dissolution

If corporations obtained an economic benefit and participation of the Board of Directors, audit committee or partners is established In those case where the legal entity in question is used to systematically incur in administrative offenses

• r

Compliance Expectations (art. 25 of the GLAR)

Organizational and proceeding manual, comprehensive and complete, in which the roles and responsibilities of each of its areas are defined, specifying the different chains of command and leadership throughout the structure A code of conduct duly published and shared among all of the company’s members, with systems and mechanisms of real application Adequate and effective supervision, audit and control systems to constantly and periodically examine compliance of integrity standards throughout the

• rganization

Adequate reporting systems, both inside the organization and outside with the competent authorities, disciplinary procedures and specific consequences for those who act contrary to the internal regulations or Mexican legislation 41

Required Components of Integrity Policies

Compliance Expectations (art. 25 of the GLAR)

Appropriate systems and processes of training on integrity policies

Human resources policies designed to prevent the hiring of people who can present an integrity risk to the company. These policies under any circumstances shall not authorize discrimination.

Mechanisms to ensure, at all times, the transparency and disclosure of interests.

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A company’s Code of Conduct may reduce the applicable penalty.

Integrity Policies

Compliance Options for Companies

• Collaboration agreements between Ministry of Public

Service and individuals or corporations for the implementation of self-regulation mechanisms taking note of international best practices about control, ethics and integrity in businesses.

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