Anti-Corruption in Chile

By Leon Larrain* and Sebastian Doren* (Baker McKenzie Chile)

1. Domestic bribery (private to public)

1.1       Legal framework

Bribery of public officials (cohecho) is regulated under the Chilean Criminal Code, Articles 248 to 251 ter.

1.2       Definition of bribery

The Chilean Criminal Code sanctions any public official who:

  • requests or agrees to receive fees greater than those applicable to the office he holds, or an economic benefit in his or her or a third party’s benefit, in consideration for performing or having performed an act within the purview of his or her office;
  • requests or accepts an economic benefit for his or her own or a third party’s benefit, in consideration for refraining or having refrained from performing an act pertaining to his or her position, or for the execution of an action in contravention of his or her statutory duties; or
  • requests or accepts to receive an economic benefit, for his or her own or a third party’s benefit, in order to commit certain other special public official crimes (i.e., embezzlement, crimes against individuals’ constitutional rights, etc.).

Any person who offers or agrees to offer an economic benefit to a public official who performs any of the abovementioned actions is also punished under criminal law.

1.3       Definition of public official

Article 260 the Chilean Criminal Code defines “public official” for criminal purposes in Chile:

Whoever holds a position or a public duty, either in the Central Administration or in semi fiscal, municipal, autonomous institutions or companies or in organisms created by the state or state dependent, even if they are not appointed by the Chilean president (Presidente de la Republica) and even if they do not receive a state salary, qualifies as public official.

A functional concept of public official is established (as understood by the Supreme Court in its decision in 1958 and more recently in 2008) that covers numerous situations not contemplated by the strict application of the Administrative Statute.

1.4       Consequences of bribery

The maximum penalty for domestic bribery is imprisonment of up to three years and a fine from half up to three times the amount of the benefit requested or accepted.

Temporary or permanent disqualification from holding public posts is also possible.

For the company / legal entity

  • Dissolution of the legal entity or cancelation of its legal capacity
  • Temporary or permanent prohibition from executing acts and agreements with state institutions
  • Partial or complete loss of fiscal benefits, together with the complete prohibition to receive said benefits during a specific period
  • Fines for the treasury’s benefit
  • Ancillary Penalties – TThe law establishes that the following ancillary penalties may be applied in addition to those previously detailed: publication of an abstract of the ruling in the Official Gazette or in another newspaper that is published nationwide; confiscation of any products derived from the crime, as well as confiscation of other assets, objects, documents and instruments pertaining to the same; and in those cases in which the felony involves making an investment that exceeds the legal entity’s income, the deposit of a sum equivalent to such investment in an account held by the treasury.

1.5       Political contributions

Political contributions are regulated under Law 19.884. In the case of an opened election process, there are thresholds depending on the authority being elected.

Foreign persons or entities cannot make political contributions.

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

Neither law nor regulations establish a specific monetary threshold.

Article 64 N°5 Law 18,575 expressly states that actions that consist of “requesting,” “making someone promise” or “accepting” gifts, advantages or privileges of whichever nature, either for the public official or for third parties, especially contravene the Public Integrity Principle.

It also states that official and protocol gifts, as well as gifts recognized by custom as courtesy and expressions of politeness, are exempted from the prohibition.

Examples of gifts recognized by customs as courtesy and expressions of politeness are not set out by the law. Still, some regulations clarify their scope to some extent. For instance, the Guide of Transparency and Honesty of the State Administration, issued by the General Secretariat Ministry of the Presidency last January 2008 (the “Guide”), has explained the prohibition of Article 64 N°5, stating that it is an ample prohibition that not only covers the material dispense of a gift but that also extends to any kind of advantages, such as discounts to acquire a product; scholarships for the public official or his or her family members; paid invitations (events, banquets, travels, etc.); and receptions or special treatments (e.g., discounts more beneficial than those granted to the general public). The Guide summarizes the concept by stating that it embraces whatever could compromise the public official’s spirit to benefit the one promising or handing the gift or favour. The Guide also stipulates that receiving or requesting economic advantages as those described may be deemed beyond an administrative infringement and be considered a bribery criminal offense.

2. Domestic bribery (private to private)

As opposed to other jurisdictions, Chilean criminal law does not contemplate a criminal offense description regarding advantages granted to private sector business associates in the context of contractual negotiations. Thus, in principle, we believe that such conduct remains currently unpunished from a strict criminal law perspective in Chile. (On 30 January 2007, the United Nations Convention against Corruption was published in the Official Gazette. Pursuant to its Article 21, bribery in the private sector could be dealt with in the future.)

Nonetheless, such a conduct could be deemed as an unlawful competition practice, where Law N° 20.169, published in the Official Gazette of 16 February 2007, in its Article 3, broadly defines an unlawful competition act as any conduct contrary to bona fide or fair customs that by illicit means aims toward deviation of the customers from a market agent (see Article 3 of Law 20,169). Should a third party feel affected by an unlawful competition act pursuant to the law, it could file a claim before a civil court to request the termination or prohibition of the act or the conclusion of the effects produced by the act, and possibly seek compensatory damages. In certain cases, a fine could also be applied.

Another alternative would be that a party deemed affected by the conduct could seek an indemnification pursuant to the general regulations of extra contractual liability pursuant to the Chilean Civil Code.

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is regulated under the Chilean Criminal Code, Article 251 bis.

3.2       Definition of corruption of foreign public officials

It is a criminal offense to:

  • offer, promise or give an economic or other benefit to a foreign public official, for such public official or a third party’s benefit, in order for the foreign public official to act or refrain from acting, for the purpose of obtaining or retaining for him or herself or for another party any business or unfair advantage in the course of international business transactions;
  • offer, promise or give such a benefit to a foreign public official as consideration for past performance of such an action or omission; and
  • consenting or agreeing to give or provide such a benefit.

3.3       Definition of foreign public official

Pursuant to the Chilean Criminal Code, Article 251 ter., a foreign public official is a person who:

  • holds a parliamentary, administrative or judicial position in a foreign state, whether appointed or elected;
  • performs public duties or functions for a foreign state, whether in a public entity or a state-owned company; or
  • is an official or agent of a public international organization.

3.4       Consequences of corruption of foreign public officials

The maximum penalty is imprisonment of up to five years and a fine from one to two times the amount of the benefit requested or accepted; if the benefit is not of economic nature, a fine of up to 1,000 UTM (approximately USD 70,700 at the current exchange rate).

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

There is no limitation established in the law.

4. Facilitation payments

The Criminal Code does not make any reference to so-called facilitation payments.

However, facilitation payments are not allowed, and would likely be considered domestic bribery.

5. Compliance programs

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

Pursuant to Law 20.393 published in the Official Gazette on 2 December 2009, and which “establishes criminal liability for legal entities arising from certain felonies of money laundering, terrorism financing and bribery of public officials,” the existence of a compliance program, named in the law as “Crime Prevention Model,” may serve to eliminate or mitigate the criminal liability for legal entities (please note that receiving of stolen goods (receptación), was added to the list of base felonies by Law 20,931, dated 5 July 2016).

5.2       Absence of a compliance program as a crime

The absence of a crime prevention model may give rise to criminal liability for a legal entity as such program is one of the concurrent requirements for legal entities. Indeed, the legal offense corresponds to what legal doctrine defines as “organizational flaws” imputation forms.

5.3       Elements of compliance program

Article 4 of Law 20.393 sets forth a minimum legal standard for a prevention model, which, besides the appointment of a prevention supervisor, shall at the very least contain the following elements:

  • Identification of the entity’s activities or processes, whether regular or sporadic, within the context of which the risk of the felonies mentioned in Article 1 (money laundering, terrorism financing and bribery) being perpetrated is either created or increased
  • Establishment of specific protocols, rules and procedures that allow the individuals who take part in specific activities and processes to program and execute tasks or labours, in a manner that prevents the perpetration of crimes
  • Identification of the management and audit procedures of financial resources that allow the entity to prevent their use in the crimes described by the law
  • Existence of internal administrative penalties, as well as of other procedures to report and prosecute the financial liability of the parties that breach the crime prevention system

6. Regulator with jurisdiction to prosecute corruption

The Chilean legal system does not have a specific regulator with exclusive responsibilities to prosecute corruption. Any public prosecutor could start a corruption investigation. However, the Chilean system has a Specialized Anti-Corruption Unit that assesses public prosecutors in the legal, financial and accounting areas. During the last years, the Public Prosecutor Office has increased enforceability of the Law, and thus there have been numerous entities prosecuted; in some cases, entities prosecuted have avoided trial by alternative termination solutions implying significant payments.


Baker McKenzie Ltda. Avenida Andrés Bello
2457, Torre Costanera, piso 19
Providencia, Santiago
Chile

Leon Larrain

Leon Larraín leads the Corporate M&A group of the Santiago office. His practice includes corporate, mergers and acquisitions, banking and finance, real estate and securities. He graduated from the University of Chile Law School (Licensee in Juridical and Social Sciences, LL.B.) and was admitted to the Chilean bar in 1980. He also took a course on tax law at the University of Chile Law School in 1985-1986. Leon graduated from the Harvard Law School where he attended an International Tax Program (ITP) in 1989-1990, as well as Harvard Negotiation Workshop (PIL) in 1997. Leon was a consultant with the Harvard Institute for International Development (HIID) for tax reform in Bolivia in 1991, and customs reform in Perú in 1991-1992. He was also Chilean correspondent for Tax Notes International.

Additionally, he is a conciliator at the Center for Settlement of International Investment Disputes (ICSID) in Washington, DC, having been appointed by the Chilean government.

leon.larrain@bakermckenzie.com

Tel: +56 2 2367 7041

Baker McKenzie Ltda. Avenida Andrés Bello
2457, Torre Costanera, piso 19
Providencia, Santiago
Chile

Sebastian Doren

Sebastian Doren advises local and multinational clients on criminal litigation. He specifically handles cases dealing with fraud against his clients and the financial/banking system, as well as anti- counterfeiting. He also helps client companies set their compliance programs and perform internal investigations. Much of his practice proceedings have been against Chilean Customs and administrative offices.

sebastian.doren@bakermckenzie.com

Tel: +56 2 2367 7065