Containment of administrative and legal responsibility | KPMG | MX

Legal compliance: containment of administrative and criminal responsibility of legal entities

Containment of administrative and legal responsibility

It is up to the private sector to design and implement internal mechanisms to prevent and mitigate administrative infringement.

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With the General Law of Administrative Responsibilities (LGRA, for its acronym in Spanish) entering into force on July 19, 2017, and the National Code of Criminal Procedures (CNPP, for its acronym in Spanish) in force since 2016, new surveillance, prevention, detection and information obligations are imposed to private companies which can also be subject to administrative or criminal responsibilities.

 

In this context, it is now up to the private sector to design and implement effective policies and internal mechanisms of real application to prevent and mitigate the engagement of a company in the execution of acts linked to a serious administrative infringement, or even its connection to a criminal process.

 

To which companies in the private sector do the provisions of the LGRA and the CNPP apply?

 

Both the LGRA and the CNPP are applicable to all companies in the private sector, since all are subject to administrative or criminal liability. Notwithstanding the foregoing, the causes of responsibilities are different:

 

Administrative responsibility

When individuals who act in the name or representation of the legal entity, pretend to obtain benefits for such legal entity through the performance of illicit conducts that links them to serious administrative infringements.

 

Criminal responsibility

When a member or representative of a legal entity commits a crime with means provided by such entity, so that it is effectively committed in name, representation or for the benefit of the legal entity.

 

Integrity Policy of Legal Entities

In order to achieve an effective implementation of this mechanisms, it is advisable for the companies to set legal compliance objectives, which is not an ambiguous term since for that very target do the compliance management systems exist, which may be generic (applicable to the surveillance of a regulatory framework) or specific (applicable to a concrete activity or a regulatory segment).

 

As a part of a CMS we could consider the Integrity Policy, which in terms of the LGRA should include at least the following documents and processes:

 

  1.  Organization and procedure manual that specifies roles and responsibilities
  2. Conduct code published and socialized
  3. Adequate and effective systems of control, surveillance and auditing, as well as reporting systems
  4. Adequate training systems and processes
  5. Human resources policies tending to avoid the incorporation of individuals that could generate a risk to the integrity of the company
  6. Mechanisms that ensure at all times the transparency and publicity of their interests

 

The Permanent Surveillance Body

On the other hand, it is important to specify that for CNPP purposes it is also necessary for the companies to have a Permanent Surveillance Body, which may be internal or external and will be in charge of uphold the compliance and follow-up of the internal crime prevention policies. However, in case of being internal, it is important to design or harmonized the corporate governance policies necessary to ensure that such corporate body is invested with independence and impartiality in the exercise of its functions.

 

Contingencies

In the event that the administrative or criminal liability of a legal entity is determined, the legal consequences may include, among other, the following:

  1. Fines of up to approximately $113'235,000.00 pesos
  2. Suspension of activities or temporary disqualification to participate in public works for a period starting from three months up to six years
  3. Seizure of instruments, objects and products
  4. The dissolution of the company

 

A multidisciplinary approach

It is needed a multidisciplinary approach to meet different corporate compliance needs of companies, designing the instruments, systems and policies that are in line with the regulatory administrative, criminal or both frameworks.

 

A service approach with this characteristics implies the work of professionals of Legal and Forensic practices, as well as specialists from KPMG global network with vast experience in compliance, comprised in different phases from preliminary analysis or diagnosis of gaps to support in design Integrity Policies, manuals and other documents necessary to fulfill these new legal obligations and monitoring tasks.

 

To know more about the services we can provide you, please contact us.

 

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