Anti-Corruption in Mexico

By Reynaldo Vizcarra-Mendez* and Jonathan Adams* (Baker McKenzie Mexico)

1. Domestic bribery (private to public)

1.1       Legal framework

Bribery of public officials (cohecho) is prohibited under the Mexican Federal Criminal Code, Article 222. State criminal codes have similar prohibitions. The new General Law of Administrative  Responsibilities, which will come into effect in July 2017, establishes significant administrative penalties for substantially the same offenses.

1.2       Definition of bribery

Bribery can be committed both by public servants who solicit or receive a bribe and by private individuals who offer or pay to corrupt a public servant. The Federal Criminal Code sanctions:

The public servant who, directly or indirectly, solicits or receives unduly for the public servant or another person, money or any other gift, or accepts a promise, to do or refrain from doing any just or unjust act in relation to the public servant’s functions; and

Whoever spontaneously gives or offers money or any other gift to any of the persons described in the foregoing paragraph, to cause any public servant to do or refrain from doing any just or unjust act related to the public servant’s function.

1.3       Definition of public official

The Mexican Federal Criminal Code has a broad definition of public servant, and it includes any individual that has an employment, position or charge of any type in the central Public Federal Administration; Mexico City; decentralized organisms; government majority-owned companies; organizations or entities that have been assimilated to these; public trusts; autonomous Constitutional organs; Federal Congress; Federal Judiciary or Mexico City Judiciary; or that handles federal economic resources. The provisions also apply to state governors, local legislatures and magistrates in local tribunals.

1.4       Consequences of bribery

(a) For the individuals and corporate entities involved

The Mexican Federal Criminal Code establishes the same penalties for public officials as for persons that corrupt public officials. The penalties are the following:

  • Up to 14 years in jail
  • A fine of up to approximately USD 3,2009999
  • Removal from public office, if applicable
  • Up to 14 years of prohibition from exercising public functions

(b) For legal entities

As of June 2016, the Mexican Federal Criminal Code establishes direct criminal liability for legal entities. Crimes that may be committed by legal entities include bribery, influence-peddling, fraud, obstruction of justice, money laundering, environmental crimes, tax fraud and securities violations.

The Criminal Code for Mexico City (formerly known as the Federal District) recently implemented criminal liability for corporate entities. The element of intent is imputed to the company if it can be shown that an individual who acted on the company’s behalf had the requisite intent.100 Penalties can be based on daily company profits commensurate with the prison time to which an individual would have been sentenced for the same crime, with 920 days of profits to be assessed for each year of prison sentence that would have corresponded had the crime been committed by an individual.101

For activities that are analogous to criminal bribery, there are also administrative sanctions in the public procurement context for individuals as well as companies.102 The penalties are as follows:

(i) For individuals

  • Fines of up to approximately USD 275,000, or 35% of the value of the contract, whichever is greater
  • Debarment for up to eight years

(ii) For companies

  • Fines up to approximately USD 7.3 million, or 35% of the value of the contract, whichever is greater
  • Debarment for up to 10 years


Starting July 2017, the General Law of Administrative Responsibilities establishes fines as high as the equivalent of USD 6 million for conduct that generally corresponds to the same definition as criminal bribery.

1.5       Political contributions

Foreign persons may not participate in politics in Mexico.103 Parties and independent candidates must disclose all income by source (which must be legal) and all expenditures. Strict spending limits apply to political campaigns.104

1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Federal Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Whether a hospitality expense could be considered bribery will need to be determined on a case-by-case basis, taking into account all the facts and circumstances surrounding the case.

2. Domestic bribery (private to private)

2.1       Legal framework

Domestic bribery is not specifically proscribed by Mexican law, although an employee who receives a bribe from a third party could at least theoretically be liable for fraud or theft and be terminated from employment.

2.2       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Federal Criminal Code does not establish quantitative or qualitative limitations on hospitality expenses. Rather, the determination of whether a gift or hospitality would fall under the definition of bribery would depend upon the intent of the individual providing it.

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is prohibited by the Mexican Federal Criminal Code, Article 222 bis.

3.2       Definition of corruption of foreign public officials

Corruption of a foreign public official is defined as purposefully giving, directly or indirectly, anything of value to a foreign public official, in order to influence him or her to act or refrain from acting in relation to functions inherent to his or her position, for the purpose of obtaining or retaining an undue business advantage.

3.3       Definition of foreign public official

The law defines a foreign public official as any person holding public employment, commission, or office in the legislative, executive or judicial branch, or in any public entity, including state-owned companies, of a foreign state, and any official of an international organization.

 3.4       Consequences of Corruption of foreign public officials

(a) For the individuals involved

  • Up to 14 years’ imprisonment
  • Fines of up to approximately USD3,700
  • Up to eight years of prohibition of contracting with any federal public authority


(b) For the legal entity

  • Fines of up to USD3,700
  • Dissolution of the legal entity
  • Up to eight years of prohibition of contracting with any federal public authority

For activities that are analogous to criminal bribery of foreign public officials, there are also administrative sanctions in the public procurement context for individuals as well as companies.105 The penalties are as follows:

(a) For individuals

  • Fines of up to approximately USD 275,000, or 35% of the value of the contract, whichever is greater
  • Debarment for up to eight years

(b) For companies

  • Fines of up to approximately USD 7.3 million, or 35% of the value of the contract, whichever is greater
  • Debarment for up to 10 years

3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Criminal Code establishes neither quantitative nor qualitative limitations on hospitality expenses. Rather, the determination of whether a gift or hospitality would fall under the definition of bribery would depend upon the intent of the individual providing it.

4. Facilitation payments

The Federal Criminal Code does not recognize the concept of facilitation payments and therefore does not establish any exception to its prohibitions on this basis.

5. Compliance programs

5.1       Value of a compliance program to mitigate/eliminate the criminal liability for legal entities

The Mexican Federal Criminal Code does not recognize a compliance program as an instrument to mitigate or eliminate liability for the crime of corruption. However, the recently updated Criminal Code of Mexico City provides that a compliance program may be an attenuating factor in assigning criminal liability to the company.106

5.2       Absence of a compliance program as a crime

Neither the Mexican Federal Criminal Code nor the newly updated Criminal Code of Mexico City recognizes the absence of having a compliance program as a crime.

5.3       Elements of Compliance program

(a) Legal framework

The Mexican Federal Criminal Code does not recognize or regulate the elements of a compliance program. The Criminal Code of Mexico City does not contain detail on the characteristics of the program that would be an attenuating factor in determining criminal liability.
However, the General Law of Administrative Responsibilities, which will come into effect in July 2017, establishes the following elements of a compliance program that will mitigate liability, potentially as an affirmative defence:

  1. A clear and complete organizational and procedures manual that clearly defines the functions and responsibilities of each part of the company, and specifies clearly the chains of command and leadership for each corporate structure
  2. A code of conduct that is duly published and made known to every person in the organization and that has systems and mechanisms for effective implementation
  3. Adequate and effective control, monitoring and audit systems that ensure compliance on a continuous and periodic basis throughout all of the organization
  4. Adequate whistleblowing systems both for internal reports and for reporting to authorities, as well as disciplinary processes with clear and specific consequences for those who act contrary to internal standards or to Mexican legislation
  5. Adequate systems and processes for training on ethics standards
  6. Human resources policies to avoid hiring people who could be a risk to the integrity of the company; these policies must not enable discrimination on the basis of ethnicity, nationality, gender, age, disabilities, social status, health status, religion, political opinion, sexual orientation, marital status, or any other basis that compromises human dignity or curtails human rights and liberties.
  7. Mechanisms to ensure transparency and publication of interests (avoiding conflicts of interest) at all times.

(b) Recommended practice

Knowledgeable Mexican legal counsel recommend that legal entities adopt a robust compliance program as a defence strategy to prevent criminal liability for its employees and reputational damage for itself.

6. Regulator with jurisdiction to prosecute corruption

Mexican law establishes the Secretary of Public Administration to investigate, punish administratively and recommend prosecution of corruption. Any public prosecutor may begin a corruption investigation and indict a suspect. In 2014, the Attorney General of Mexico created a special prosecutor’s office to handle corruption matters. Under the new National Anti-Corruption System, a new anti- corruption prosecutor is due to be named in early 2017.


99 All US dollar amounts are calculated using a MXN 22 to USD 1 exchange rate. – Back
100 Criminal Code for the Mexico City, Art. 27bis. – Back
101 Criminal Code for Mexico City, Art. 38bis
102 Federal Law to Prevent Corruption in Public Procurement (2012). – Back
103 Article 33, Political Constitution of the United Mexican States. – Back
104 General Law on Electoral Institutions and Procedures (2014).
105 Federal Law to Prevent Corruption in Public Procurement (2012). – Back
106 Criminal Code of Mexico City, Art. 27quintus(c). – Back


Baker McKenzie Abogados,
S.C. Edificio Virreyes – Piso 12, Pedregal 24
Lomas Virreyes / Col. Molino del Rey
Mexico

Reynaldo Vizcarra-Mendez

Reynaldo Vizcarra is the national managing partner of Baker McKenzie’s Mexico offices and the founding partner of its Compliance practice. He has singled out the Compliance practice to remain most actively involved during his administrative tenure. As such, he provides leadership on most of the investigations and consultations handled by the Mexican Compliance practice.

His extensive background in investment and infrastructure projects in the tourism and real estate sectors, along with extensive experience working on the privatization processes of ports, airports, as well as telecommunications and insurance companies, gives him a unique perspective on the transactions that most concern clients in the anti-corruption space.

In this regard, he has also provided consulting services to companies in connection with public work biddings, contracts and acquisitions involving federal government agencies, all recognized as “hot spots” for potential corruption.

reynaldo.vizcarra-mendez@bakermckenzie.com

Tel: +52 55 5279 2908

Baker McKenzie Abogados,
S.C. Edificio Virreyes – Piso 12, Pedregal 24
Lomas Virreyes / Col. Molino del Rey
Mexico

Jonathan Edward Adams

Jonathan Adams is an anti-corruption and corporate compliance lawyer who heads Baker McKenzie’s Compliance Practice Group in Mexico. He has extensive experience in corporate, pharmaceutical and compliance law, having worked seven years in the US and 13 in Mexico and Central America.

Jonathan combines a US-based perspective on legal implementation and compliance issues with years of on-the-ground experience in Latin America. He works closely with client commercial teams to implement innovative solutions to legal challenges. He is admitted to practice law in Mexico and two US states.

Jonathan advises national and multinational clients from various industries on compliance issues in Mexico and other Latin American jurisdictions. His work focuses on internal investigations in government-related corruption cases and employee white-collar crime. With substantial experience as in-house and external counsel, he has participated in negotiations to access historically restricted sectors of government procurement and in the establishment of compliance policies for interactions with healthcare professionals and health-sector government officials.

Jonathan also assists clients in investments and transactions across Latin America.

jonathan.adams@bakermckenzie.com

Tel: +52 55 5351 4128