Law 21.595: Economic Crimes Regulatory Framework

The new legislation categorizes offenses committed under CMF supervision as first-class economic crimes. Additionally, it incorporates disqualifications for holding managerial positions or any entity derived from decree law No. 3,538, which creates the CMF, or in a state-owned company or one in which the state has a majority stake. Likewise, regarding the confiscation of profits (article 47 of law No. 21.595), regarding exceptions to the exercise of civil action (these being; exception of lack of direct relation between damage and profits, exception of negligent execution, and exception of inadequate execution), for the identification of the defendant's assets, the Public Prosecutor's Office, at the request of the State Defense Council, is authorized to request information from the CMF.

Amendments are introduced to law No. 18.045 in articles 59 to 62 regarding the penalties applied by virtue of the type of offense committed as described in these provisions.

The rules of cooperation with the clarification of the punishable act included in decree law No. 3,538, which creates the CMF, will be considered as mitigating factors for economic crimes.

Among the amendments to the Penal Code, the sanctions and acts carried out under the one that within the two years prior to the issuance of a liquidation resolution referred to in law No. 20.720, which replaces the current bankruptcy regime with the law of business and personal reorganization, or during the time between the notification of a compulsory liquidation lawsuit and the issuance of a resolution, the one who, knowing the poor state of their business, commits the described offenses.

Modifications are introduced to law No. 18.045 in articles 59 to 62 regarding the penalties applied by virtue of the type of offense committed, considering them first-class in addition to the modifications made in the General Banking Law and those of the Law on bank current accounts and checks.

The economic crimes provided for in articles 14 section two, 110, and 160 of the General Banking Law will be classified as second class, provided that the act was perpetrated by reason of one's position, function, or role in the company, when it is for economic benefit or of another nature for a company.

Law No. 21.595 toughens the penalties for those who misappropriate money from social security contributions, that is, retaining workers' funds and not paying health or pension contributions.

It also adds the crime committed by an employer who, without a worker's consent, fails to withhold or pay this worker's provisional contributions or declares to the social security institutions that they pay a taxable salary lower than the actual one.

The regulations impose fines, but also, depending on the amount defrauded from the worker, in the most severe cases, they can be sanctioned with prison sentences of up to 5 years.

Under article 2, in its number 22, articles 19, 23, and 25, 61 bis twelfth paragraph, and 159 of decree law No. 3,500 will be considered second-class crimes, and by article 53 of the new law, the scopes indicated in the modifications to decree law No. 3,500 of 1980, which Establishes a New Pension System, are introduced.

Law No. 21.595, in its first article, number 8, identifies that economic crimes committed with respect to article 49 of the decree with the force of law No. 251 of 1931, from the Ministry of Finance, concerning Insurance Companies, Public Limited Companies, and Stock Exchanges will be identified as first-class crimes with the respective sanctions and fines issued by this regulation.

Regarding the Confiscation of Profits, and for the purposes of identifying the assets of the responsible party, the Public Prosecutor's Office, at the request of the State Defense Council, will be authorized to require the relevant information from insurance companies, this in light of the exceptions to the exercise of civil action; exception of lack of direct relation between damage and profits, exception of negligent execution, and exception of inadequate execution.

The law will require public limited companies to take even greater care of their reports, balance sheets, or other documents that show the legal, economic, and financial situation of the company to eliminate any information that may be considered erroneous or false. Special attention must be paid to the annual report or integrated report of securities issuing companies, as its preparation has become more complicated due to the demands for information on sustainability and corporate governance established by General Rule 461 of the Financial Market Commission. As a result, the CMF will require publicly traded companies to establish a specific policy for transactions with related parties and appoint a person in charge to oversee its compliance. It also highlights the emergence of new criminal risks for the activity of a director and, to a lesser extent, a manager of a company; new crimes of “abusive agreement of the board of directors” (article 134 bis of the Public Limited Companies Law) and “falsehoods in balance sheets and other background information intended for third parties” (article 134 of the same law)

Regarding reorganization, it falls within the first category of crimes given the cases of article 12 and 24 section six of the law of Reorganization or closure of micro and small businesses in crisis, contained in the eleventh article of law 20.416, setting special norms for smaller companies.

Amendment of article 463 of the Penal Code relating to the penalty for those who, knowing the poor state of their business, act unlawfully under Law No. 20.720 within the two years prior to the issuance of the liquidation resolution, or during the time between the notification of the compulsory liquidation lawsuit and the issuance of the resolution.

It also specifies penalties regarding described behaviors in terms of reorganization or liquidation resolution; hiding assets two years prior to reorganization or liquidation, or subsequent resolution; providing false or incomplete information not reflecting the true liabilities or assets in the bankruptcy reorganization or liquidation procedure; in addition to incorporating an accessory penalty of special perpetual disqualification to hold office in certain acts carried out by a supervisor or liquidator in the reorganization process.

##### How does it also affect me if this activity involves plant varieties?

Regarding customs law, the new law enshrines as a second category of economic crimes the offenses contemplated in article 134 subsection five, 168, 169, and 182 of the Customs Ordinance;

1) undue perception of tax refunds, duties, tariffs, and levies;

2) proper and improper smuggling (import, export, and introduction to the general regime from a special regime);

3) maliciously false declaration of origin, weight, quantity of export goods, and material and ideological forgeries of documents related to the above; and

4) customs receipt. Therefore, they will be subject to a new regime of custodial sentences, granting of benefits, and execution and compliance, in addition to associated fines, the extent of their criminal liability is also affected.

Regarding whether the crime can only be committed by an importer or exporter, the general rules of the Penal Code and the special rules of article 8 of law 21.595, which extends liability to those 'who at the time of their intervention had knowledge of the concurrence of the circumstances referred to in those articles,' must be considered, pointing to the four categories of crimes. The new rule requires prior knowledge of one's illicit action to become an author, assuming an objective responsibility where the assessment of conscience gives way to the material verification of the injustice.

From a practical perspective, it is unlikely that a third party collaborating with an importer or exporter would limit themselves to managing the provided documentation to avoid a potential illicit act, without considering other relevant circumstances. This is because the legislator seeks to fully expand criminal responsibility.

It is recommended to implement so-called Crime Prevention Models (which should be reinforced with an adequate risk assessment) not only for legal entities that can be criminally judged according to Law 20.393, amended by Law 21.595, but also for the various operators who directly or indirectly participate in a foreign trade operation, regardless of whether they are natural or legal persons. This is given that the new first subsection of article 4 of Law 20.393 on the Criminal Liability of Legal Persons establishes that criminal liability can be reduced or even extinguished according to the new Law on Economic and Environmental Crimes, provided that the prevention and supervision plans are adequate for the size, industry, income level, and complexity of the organization.

However, as is the case in other industries (such as mining), an importer or exporter, as a legal entity, can propose or even demand that its external collaborators (Customs Agents and others) implement a Crime Prevention Model as a way to reinforce the security and integrity of their operations. Regarding Law No. 19.342, which regulates the rights of breeders of new plant varieties, in its article 44, through article 2 number 19 of the new legislation No. 21.595, it will belong to the second category of economic crimes. In turn, given article 48, article 308 of the Penal Code is amended, which states that anyone who spills, deposits, or releases polluting substances seriously affecting animal or plant health will be sanctioned with the penalties it describes.

The new legislation treats as second-class crimes (economic crimes committed in the exercise of a role, function, or position in a company, or when it is for economic benefit or of another nature for the company) the offenses committed in articles 49, regarding the preparation of a plan based on false certificates or accreditation of a non-existent fact knowing such circumstances, and 50, seeking the purpose of availing oneself of one of the legal bonuses through a management plan based on false background, of Law No. 20.283 on the Recovery of the native forest and forest promotion.

Meanwhile, the law identifies as a third-class crime (economic crime arising from the commission of the act in which someone in the exercise of a role, function, or position in a company intervened, or when the act was committed for economic benefit or of another nature for a company), in its article 40, regarding the certifier who certifies a false or non-existent fact, of Law No. 20.283 on the Recovery of the native forest and forest promotion.

In turn, Law No. 19.913 is amended by article 56 of the new regulations, where the crime is incorporated regarding someone who hides or disguises the illicit origin of certain assets, knowing that they come, directly or indirectly, from the commission of acts constituting article 21 of decree No. 4,363 of 1931 on the Forest Law, on the cutting or destruction of trees and shrubs, and article 11 of Law No. 20,962, which implements the Convention on International Trade in Endangered Species of Wild Flora and Fauna, or, knowing such origin, hides or disguises these assets.

The respective regulations on the use, limitations, and prohibitions on fire are found under article 22, numbers 24 and 25 of Law No. 20.283 on the Recovery of the native forest and forest promotion, as well as in articles 17, 18, 22, 22 bis, and 22 ter of decree No. 4.363, where the latter are framed under the second category, by article 2 number 8 of the new law, of economic crimes in reference to the act that was committed in the exercise of a role, function, or position in a company, or when it is for economic benefit or of another nature for the company. Therefore, it will not be exempt from the new systematization of sanctions and fines in this regard.

Under the new legislation, and its four categories of economic crimes, the use of water, in light of article 280 of the Water Code, which indicates a malicious alteration improperly in the distribution or permission of any water extraction through established intakes or other points of the channels, will be subject to the corresponding sanctions and fines of the second category of crimes (article 2, number 15 of law No. 21.595). Meanwhile, article 48 introduces modifications to the Penal Code regarding the use of water, where illicit acts with their respective sanctions are included in its section on 'Attacks against the environment,' specifically in article 305 (on discharging polluting substances or extracting continental or maritime waters), article 307 (on the extraction of continental, surface, or groundwater infringing rules of distribution and use in any of the mentioned circumstances), article 308 (on serious affectation in maritime or continental waters, surface or groundwater, soil or subsoil, whether continental or maritime), article 311 (where the sanction lies in a fine in the described cases), article 311 quater (explaining that the penalties of this law will be imposed without prejudice to the application of the penalties that correspond for the crime of usurpation), and article 459 (in which the degree of lesser imprisonment is increased from minimum to medium degrees to medium to maximum, in addition to warning that the established sanctions will not apply to those who use water for personal or family consumption in terms of article 56 of the Water Code).

The new regulations, in light of article 2, number 12, indicate that articles 11 (on smuggling of exotic species or subspecies) and 12, first paragraph (on groups or gatherings of people who commit the crime of the preceding article) of law 20.962, which applies the Convention on International Trade in Endangered Species of Wild Fauna and Flora, will be classified as second-class economic crimes.

For companies working with animals under law No. 21.595, regardless of their classification, there is a modification, under article 48 of the mentioned regulations, of the Penal Code in its article 308, whereby anyone who, by spilling, depositing, or releasing polluting substances, or extracting waters or components of the soil or subsoil, seriously affects animal health will be sanctioned with the penalties it describes. There is no reference to decree No. 899 on the ordinance of responsible pet ownership and animal protection, nor to law No. 21.020 on responsible pet and companion animal ownership.

Article 310 bis of the Penal Code is also modified, where, under its point number 5, a serious affectation of one or more environmental components will be understood as the adverse change in any of them, provided that the subject affects species categorized as extinct, extinct in the wild, critically endangered, endangered, or vulnerable.

Law No. 19.913 is modified by article 56, where the crime is incorporated regarding someone who hides or disguises the illicit origin of certain assets, knowing that they come, directly or indirectly, from the commission of acts constituting any of the crimes contemplated in article 11 of law No. 20.962, which applies the Convention on International Trade in Endangered Species of Wild Fauna and Flora; or, knowing such origin, hides or disguises these assets.

Under article 2 of the new regulations, considering number 14 related to environmental components, articles 73 (on the prohibition vested in the engineer or expert who, in no case, may cover current mining claims with the survey), 118 (which obligates the concessionaire to maintain and preserve in place the landmarks placed at the vertices of the claim or the perimeter of the group of surveyed claims together, without altering or moving them, nor can he knock down, alter, or move state landmarks), and 119 (when for some reason one or more landmarks are knocked down or destroyed, the judge, at the request of any adjoining party, will order them to be placed in their proper place) of the Mining Code fall under the designation of second-class economic crime, inasmuch as the act was committed in the exercise of a role, function, or position in a company, or when it is for economic benefit or of another nature for a company.

Under article 2 of the new legislation No. 21.595, in its number 16, articles 36 B (on the description of the punishable act of the public action crime) and 37 (the obligation of every concessionaire, permit holder or license holder of telecommunications services to keep in a visible place within the premises of the station or available to the authority, an authorized copy of the decree, permit or corresponding license) of Law No. 18.168, General Telecommunications Law, are subject to the second category of economic crimes, considering the relevant sanctions and fines.

Law No. 21.595, in its article 2, number 20, indicates that computer crimes contemplated in Law 21.459 will be considered as second-class economic crimes, provided they are committed in the exercise of a role, function, or position in a company, or when they are for economic benefit or of another nature for a company.

The effective implementation of a crime prevention model is a significant organizational challenge, as it is much more complex in terms of crimes related to information assets. To reduce organizational impact and increase compliance culture, it is possible to leverage existing tools, procedures, and controls in organizations, such as their information security policies, from a broad perspective. The above is always aimed at managing risks in the organization and is framed within the modifications incorporated into Law No. 20.393.

Law No. 21.595, in its article 2, number 30, indicates that economic crimes committed under the regulations of No. 21.255, which establishes the Chilean Antarctic Statute, in its article 54 (on crimes against the Antarctic environment), will be identified as second-class crimes provided that the act was committed in the exercise of a role, function, or position in a company, or when it is for economic benefit or of another nature for a company.

The commission of tax crimes within the second category of economic crimes, committed by an individual within a company or for its benefit, is assumed. Without changing the description of the criminal types, the law incorporates into this category some of the existing ones in the Tax Code in relation to tax crimes. In particular, there are three main consequences arising from the approval of the law in question:

a. Tax crimes will be punished as second-class economic crimes, which means that a more severe sanction regime is contemplated when they are considered economic crimes, that is, when the act is committed in a business context.

b. These crimes become part of the criminal liability statute of the legal entity.

c. The current ownership of the criminal action in tax matters is maintained.

The malicious use of invoices or other false documents, tax evasion obtained through malicious or incomplete declarations, the malicious omission of tax declarations, and the concerted facilitation of means for maliciously including false data in tax declarations are some of the criminal types included in this law.

Such a situation could be framed as the crime of bribery as typified in articles 248, 248 bis, and 249 of the Penal Code, or bribery as contemplated in article 250 and 250 bis of the Penal Code, which under the new regulations is being considered a third-class economic crime, with the recipient of the contributions being a public official subject to the entire regime of sanctions and specific penalties in light of their category.