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A new compliance standard for non-for-profit corporations, foundations, and trade associations

Felipe von Unger V.,  January 15, 2024

Alessandri Law - The recently enacted Law No. 21,595, known as the Economic Crimes Law, has rightly generated intense study and debate in the legal and business community. This is not only because of the substantive novelties it brings – partly addressed in this previous column – but also because of the risks it creates for the different organizations. It sounds paradoxical, but this regulation on the prevention of undesired conduct committed in a business context generates, at the same time, risks that must be duly managed. And among the entities that are impacted by its content and risks are certainly non-for-profit corporations, foundations, and trade associations (all together, also "Associations").

It is true that even before the existence of the Economic Crimes Law, the Associations were exposed to eventual criminal liabilities. This, by application of Law No. 20,393, which subjects to this kind of liability all legal entities of private law (which the Associations are). However, in this aspect, the Economic Crimes Law not only expands the scope of the aforementioned Law No. 20,393 by including additional legal entities, but also extends the list of crimes for which they can be criminally prosecuted. Specifically, it makes the Associations eventually liable, among others, for the crimes contained in Articles 1, 2, 3 and 4 of the Economic Crimes Law, "whether or not they are considered as economic crimes by that law". And, as has been abundantly pointed out, the criminal offenses referred to in such articles amount to more than 230.

What has been said above undoubtedly represents a radical change for the Associations and their corporate risk management, by demanding from them a professionalization that escapes from the somewhat naive vision with which we often look at this kind of entities. In addition, the Economic Crimes Law itself, with all its special regime of attribution of liability and determination of penalties and sanctions, is itself applicable to non-for-profit corporations, foundations and trade associations. That is to say, the Associations and the people working in them – except those that according to Law No. 20,416 have the character of micro or medium size enterprises – may not only be criminally prosecuted, but also be subject to the aggravated statute established by means of the Economic Crimes Law. Nothing less.

Of course, the innovations introduced by the Economic Crimes Law arise in the midst of certain circumstances, which help to understand and value them in their complexity. There are political ones – or judicial ones, if you prefer – on which we will not dwell here. And there are legal ones, meaning the set of other rules that directly or indirectly also affect the Associations. Think, for example, of the new Law No. 21,634, which modernizes the Public Procurement Law, Article 1 of which makes the provisions contained in Chapter VII – new – of the Public Procurement Law, on probity and transparency, applicable to all Associations that receive transfers of public funds in which an agency of the State Administration participates in their administration or management. Or in the opinion of the Office of the Comptroller General of the Republic No. E370752N23, by means of which the comptroller entity states that "it is appropriate to include in the bidding rules an evaluation criterion referring to whether the bidders have integrity programs that are known by their personnel. In the case of direct contracts, this matter should be mentioned in some of the contractual clauses". Or the Guide on Trade Associations of the National Economic Prosecutor’s Office.

The impact of the Economic Crimes Law on each Association will depend on many factors (whether it contracts or receives contributions from the State, the use of its assets, whether or not it receives contributions from private parties, whether it brings together competitors, among others). However, notwithstanding the distinctions that can be made on the basis of a good risk matrix, it is an undeniable fact that they must adopt practices and models that help them manage the risks associated with their operation, to avoid incurring in crimes and being criminally prosecuted for them.

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