Anti-Corruption in Venezuela

By Maria Fernanda Zajía*, Jesus Davila* and Ignacio Duque* (Baker McKenzie Venezuela)

1. Domestic bribery (private to public)

1.1       Legal framework

Bribery of public officials is regulated under the Law against Corruption, published in the Official Gazette No. 6.155 dated 19 November 2014 (the “Anticorruption Law”), which partially amended the Anticorruption Law published in the Official Gazette No. 5.637 of 7 April 2003.

1.2       Definition of bribery

According to the Anticorruption Law, there are different types of bribery:

(a) Concussion (qualified extortion) – This crime is committed when a public official, abusing his or her functions, induces someone to give or promise, to him or her or to another person, a sum of money or any other undue benefit or gift.

(b) Improper passive corruption (bribe) – This crime is committed when a public official, as a result of a certain act related to his or her functions, receives or accepts a promise, for him or her or for others, of retribution or other benefits not due to him or her. The person giving or promising the retribution or benefit shall also be subject to criminal liability.

(c) Proper passive corruption (bribe) – This crime is committed when a public official, with the purpose of delaying or omitting an act corresponding to his or her functions or performing an act contrary to his or her functions, receives or accepts money, a promise or other benefits, directly or indirectly. In this case, the penalties corresponding to this crime will also be imposed on: (i) the person who receives the money, promise or other benefits on account of the public official, if any; and (ii) the person who gave or promised the money or other benefits.

(d) The crime of proper passive corruption shall be aggravated in the following circumstances:

(i) When the object of the act of corruption is to confer public employment, subsidies, pensions or honours or to cause the public official to agree to sign contracts related to the administration to which the official belongs

(ii) When the object of the act of corruption is to favour or cause any harm or damage to any of the parties in an administrative, criminal, civil or any other kind of procedure or lawsuit

(iii) When the act of corruption is committed by a judge who renders a judgment of deprivation of freedom exceeding six months

(e) Inducement to corruption – This crime is committed by a person who, without achieving his or her objective, insists on persuading or inducing a public official to commit any of the crimes of corruption.

(f) Agreement with contractors – This crime is committed when a public official who participates by reason of his or her position in the entering into of an agreement or other            transaction, negotiates with the interested parties or intermediaries for a specific result to ensue, or uses any manoeuvre or ruse for this purpose. The person with whom the official agrees to give or promise the wrongful money, benefits or gifts will also be subject to criminal liability.

1.3       Definition of public official

Article 3 of the Anticorruption Law establishes that the following persons qualify as public officials:

(a) Those invested with public functions, permanently or transitorily, remunerated or ad honorem, whether by election, appointment or contract granted by competent authorities, serving at: agencies of the republic; of the states, territories and federal dependencies; districts, metropolitan districts or municipalities; national, state, district and municipal autonomous institutes; public universities; the Central Bank of Venezuela; or of any entities that exercise public powers

(b) Directors and administrators of civil and commercial companies, foundations, civil associations and other institutions created with public funds or managed by any of the persons mentioned in Article 4 of the Anticorruption Law, or when the aggregate of contributions in a year, from one or several of these persons, represents 50% or more of its budget or net worth; and the directors appointed to represent such bodies and entities, even if the participation of the Venezuelan government is less than 50% of the capital or net worth of such civil and commercial companies, foundations, civil associations or institutions

For purposes of the Anticorruption Law, directors and administrators are persons who:

a. perform functions such as direction, management, supervision, control or audit;

b. participate with the right to speak and vote in committees for procurement, bidding, contracts, business, donations or of any other nature, whose actions could jeopardize public assets; who manage or are custodians of warehouses, workshops or deposits, and in general, decide upon the receipt, provision and delivery of personal property to the entity or agency for consumption;

c. are responsible for transactions using the entity’s or agency’s funds deposited in bank accounts;

d. represent the entity or agency having the authority to confer obligations on the agency;

e. can make commitments on behalf of the entity or agency or authorize the pertinent payments; and

f. adopt measures having an impact on individuals’ sphere of rights or obligations, or on the powers and duties of the state.

The provisions of the Anticorruption Law apply to the persons abovementioned even when they perform their duties or carry out their activities outside the territory of Venezuela.

(c) Any other person in the cases provided for in the Anticorruption Law

Additionally, Article 2 of the Anticorruption Law states that all individuals and legal entities, public and private, public officials, communes, communal councils, socio-productive associations and base organizations of the popular power, as well as any other forms of popular organizations, are subject to the application of the Anticorruption Law when managing public funds.

1.4       Consequences of bribery

(a) For the individuals involved

  • Concussion – Two years to six years of imprisonment and a monetary fine of up to 50% of the value of the thing given or promised
  • Improper passive corruption – One year to four years of imprisonment, monetary fine of up to 50% of the value of the thing given or promised, and confiscation of the money or objects given
  • Proper passive corruption – Three years to seven years of imprisonment, monetary fine of up to 50% of the value of the thing given or promised, and confiscation of the money or objects given
  • Inducement to corruption – Six months to two years of imprisonment in the case of inducement to improper passive corruption; in the case of inducement to the crime of proper passive corruption, the penalties established for such crime, but reduced in half.
  • Agreement with contractors – Two years to five years of imprisonment; if the purpose of the crime was to obtain money, gifts or wrongful profits given or offered to the official or to a third party, imprisonment from two years to six years and a monetary fine of up to 100% of the benefit given or promisedx

(b) For the company/legal entity

If the commission of a crime is established by a court of law, legal entities may be subject to monetary fines, confiscation of profits and prohibition from entering into contracts with the public sector.
Furthermore, under the Law against Organized Crime and Terrorism Financing, corruption and other crimes against the public patrimony shall be deemed to constitute organized crime (which is subject to harsher penalties) when: (i) they are committed by one person acting on behalf of a company or an association, if the means to commit the crime are technological or cybernetic, or by electronic, digital or computer means, or are related to any other product using scientific knowledge; and (ii) they are committed by three or more persons associated for a certain time with the intent to commit crimes

1.5       Political contributions

According to Article 24.4 of the Law on Political Parties, Public Reunions and Manifestations, published in the Official Gazette No. 6.013 dated 23 December 2010, political parties are obliged not to accept donations or subsidies from: governmental entities, whether autonomous or not; foreign companies or those with headquarters abroad; concessionaries of public works or services; and foreign states or foreign political organizations.

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

There is no specific regulation regarding hospitality expenses. However, under the Anticorruption Law, public officials may not receive or accept gifts or any benefits in order to do or not to do an act.

Meals or receptions are acceptable as long as there is no connection between the meal/reception and the duties and obligations of the government official with regard to the host’s business. A meal or reception that is reasonable in cost and provided as a courtesy without corrupt intent is not likely to be considered by a Venezuelan judge as an unlawful acceptance of a benefit. Venezuelan law does not establish a specific value limit for meals offered to a public official for such offer to be considered an act of corruption.

Gifts, on the other hand, are not acceptable, except gifts of nominal value (e.g., a bottle of wine, a box of chocolates or candies) customarily given during traditional celebrations, such as Christmas and New Year’s Eve. Offering of cash or any other gift should be avoided. There is no legal provision in Venezuela imposing gift value limits.

2. Domestic bribery (private to private)

2.1        Legal framework

Private bribery is regulated, in similar terms, under the Anticorruption Law and the Organic Law on Fair Prices, published in the Official Gazette No. 40.787 dated 12 November 2015 (the “Fair Price Law”)..

2.2        Definition of private bribery

This crime is committed when a person, either directly or through a mediator, promises, offers or grants directors, administrators, employees or collaborators of companies, partnerships, associations, foundations or organizations, any kind of benefit or advantage in exchange for favours or benefits either for himself or herself or for another person vis-à-vis others, thus failing to perform his or her obligations with regard to the acquisition or sale of goods or the provision of services.

Likewise, the directors, administrators, employees or collaborators who personally, or through third parties receive, accept or request such benefit or advantage, will also be subject to criminal liability.

2.3        Consequences of private bribery

(a) For the individuals involved – Two years to six years of imprisonment

(b) For the company / legal entity – Suspension from the Sole Register of Persons that Engage in Economic Activities (RUPDAE)

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

There is no specific regulation regarding hospitality expenses.

3. Corruption of foreign public officials

3.1       Legal framework

Bribery of foreign public officials is regulated under the Anticorruption Law.

3.2       Definition of corruption of foreign public officials

Anyone who personally, or through third parties, promises, offers or conveys to a public official of a foreign state, directly or indirectly, any object of commercial value or other benefits, favours, promises or advantages, in exchange for an action or omission from the foreign official while exercising his or her public functions related to a commercial, economic or any other kind of transaction, commits this type of crime.

3.3       Definition of foreign public official

There is no specific definition of foreign public official in Venezuelan legislation.

3.4       Consequences of corruption of foreign public officials

(a) For the individuals involved – Six years to 12 years of imprisonment

(b) For the legal entity – They may be subject to monetary fines and confiscation. Furthermore, depending on the case, legal entities may be subject to civil, administrative or criminal liability under the Law against Organized Crime and Terrorism Financing if it is deemed that the crime was perpetrated by an organized crime group.

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

There is no specific regulation regarding hospitality expenses.

4. Facilitation payments

Venezuelan law does not recognize so called facilitation payments. Under the Anticorruption Law, public officials may not receive or accept gifts or any benefits in order to do or not to do an act.

5. Compliance programs

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

The Anticorruption Law does not specifically recognize compliance programs as instruments to mitigate or eliminate liability for legal entities before the crime of corruption has been committed. However, legal entities could mitigate their criminal liability if they can prove that they had exercised over their employees due control by means of a robust compliance program.

5.2        Absence of a compliance program as a crime

The Anticorruption Law does not recognize the absence of having a compliance program as a crime.

5.3        Elements of compliance program

(a) Legal framework

The Anticorruption Law does not recognize or regulate the elements of a compliance program. However, certain rules on compliance programs are established in the Organic Law against Organized Crime and Terrorism Financing for regulated entities such as banks and insurance companies, brokerage firms, bingos and casinos, hotels, businesses and tourism centres authorized to conduct foreign exchange operations; foundations, civic associations and other nonprofit organizations; political parties; and public notaries, among others.

(b) Recommended practice

Legal entities should adopt a robust compliance program as a defence strategy to mitigate, or in the case of crimes of corruption committed by the legal entity’s employees, exclude the legal entity’s criminal liability for crimes of corruption.

6. Regulator with jurisdiction to prosecute corruption

In Venezuela, corruption is prosecuted by the Comptroller General’s Office, the Public Prosecutor’s Office and the National Anti- Corruption Body. The latter was created in 2014 with the mission to plan, organize and execute necessary preventative, investigative and operative actions against corruption.


Baker McKenzie SC
Centro Bancaribe, Intersección
Av. Principal de Las Mercedes con inicio de Calle
París Urbanización Las Mercedes Caracas 1060
Venezuela

Maria Fernanda Zajia

Maria Fernanda Zajía has more than 20 years of experience providing extensive legal advice on municipal tax, regulatory matters and corporate compliance. She counsels local and foreign businesses on public bids, exchange control procedures, consumer protection issues, anti- corruption issues and training, and pharmaceutical regulation. She has participated in many of the most complex and significant forceful acquisition measures in Venezuela, and has assisted clients in designing and implementing tailored action plans to protect their investments and to implement preventive actions to improve the legal condition of companies in the case of eventual expropriations.
She also assists clients in the legal analysis of governmental authorizations and approvals for the validity of agreements with Venezuelan government agencies and corporations.

mariafernanda.zajia@bakermckenzie.com

Tel: +58 212 276 5159

Baker McKenzie SC
Centro Bancaribe, Intersección
Av. Principal de Las Mercedes con inicio de Calle
París Urbanización Las Mercedes Caracas 1060
Venezuela

Jesús A. Dávila

Jesus Davila joined the Firm in 2002 and became partner in 2009. Recognized as a leading lawyer in Venezuela by Chamber Latin America and IFLR1000, Jesus has helped clients structure and execute corporate transactions for almost a decade. He frequently advises clients on compliance matters. He also has a strong track record providing insightful advice on corporate and commercial matters related to the areas of antitrust and competition, foreign investment and technology transfer, IT/Communications, and trade and commerce.

jesus.davila@bakermckenzie.com

Tel: +58 (212) 276 5243/p>

Baker McKenzie SC
Centro Bancaribe, Intersección
Av. Principal de Las Mercedes con inicio de Calle
París Urbanización Las Mercedes Caracas 1060
Venezuela

Ignacio Duque

Ignacio Duque focuses on administrative and regulatory matters, with emphasis on pharmaceutical, public contracts and consumer protection regulations. He also has experience in anti-corruption and compliance practices.

ignacio.duque@bakermckenzie.com

Tel: +58 2122765278