We invite you to read the column written by our partner, Antonio Rubilar, on the Economic Crimes Law in the public sector.
The law imposes on the private sector a direct criminal liability of legal persons, but does not establish the same for public entities as a whole, where the criminal liability falls rather on the official.
The law on economic crimes has represented an important change in the regulation of this type of offenses among companies, increasing the number of actions for which legal entities and executives can be punished, while at the same time increasing the penalties. And, although much has been said about its impact on companies, little has been said about what is happening in the public sector.
The law does not apply directly to tax institutions as legal persons, since offenses in the public sector, such as tax fraud or embezzlement, are already covered by other regulations, such as the Penal Code. However, although it does not establish a criminal liability regime for public institutions as such, it does provide for sanctions for individual public officials.
Therefore, there is a key difference: for the private sector, the law imposes direct criminal liability on legal entities and obliges companies to implement crime prevention models to build mitigating and eventually exonerating factors. In the public sector, on the other hand, although there are probity requirements, criminal liability is not established for public entities as a whole, but rather falls on the public sector.
On the other hand, while companies are obliged by the new law to implement a compliance program to prevent economic crimes, this does not apply to the public sector, even though it must adhere to principles of probity and transparency. Self-regulation in the public sector, and external regulation (via the Comptroller General of the Republic and audits), are the key. But this does not follow the same model as the Law.
However, there are public institutions to which the measures established by the new regulation will apply, because they are legal entities under the law, and others that will not (ministries, for example). But in the case of state-owned companies, autonomous legal entities that do have legal personality, it will be more debatable and equally advisable to adopt compliance policies.
In this context, the public sector faces two main challenges. First, the strengthening of control systems, because the system of review and prevention, internal control and auditing must be improved to improve detection and prevent the commission of economic crimes. Secondly, continuous training on ethics, crimes, transparency and detection among all those who are part of the public sector.
In conclusion, the Economic Crimes Act provides a strict and clear framework for private companies, generating a standard that could inspire greater integration of compliance policies in the public sector. Although the public sector has control mechanisms, the current regulations still present an asymmetry in the requirements and criminal liability between the two sectors.
Strengthening auditing and control practices and fostering a culture of integrity and transparency in all institutions is essential to reduce the gap and ensure that the public interest is duly protected. Ultimately, the effective application of these principles in both sectors will be a key step towards greater citizen trust and a fairer and more transparent economy.
Letter written by:
Antonio Rubilar | Partner | arubilar@az.cl