The Colombian Legal Landscape Concerning Corruption

Introduction

In recent years, the significance of due diligence activities and anti-corruption measures within private business endeavours has markedly increased. Globally, there is a prevailing shift towards regulatory frameworks, both at the national and international levels, that mandate businesses to engage in self-regulation and self-reporting. Consequently, companies are increasingly compelled to establish internal systems designed to assess and mitigate the risks associated with involvement in corruption, money laundering, terrorist financing, and other illicit activities. As a result, entrepreneurs and foreign investors are confronted with the necessity of adapting to a business environment that demands the evaluation of a country’s compliance levels with international transparency standards, an assessment of the country’s regulatory landscape regarding the prevention of corruption, money laundering, and terrorist financing, and an evaluation of their own capacity to adhere to due diligence and anti-corruption efforts in any business engagement.

This article provides an overview of the current normative and transparency landscape in Colombia. Within these pages, the reader will find a summary of the latest international indices and evaluations pertaining to Colombia’s performance in these areas as well as a concise yet comprehensive compilation detailing the country’s recent initiatives aimed at enhancing its prevention, detection, and prosecution systems and programmes.

Corruption: a public and private concern

Corruption is a political, economic, and social phenomenon that concerns states and business people as it occurs in both public institutions and the private sector. Therefore, the potential damage that this behaviour presents to the legitimacy of democracy and the economic development of a country has required nations to maximise their efforts in the creation and implementation of legal instruments that allow them to prevent, control, and punish public and private corruption.

For their part, business corporations have focused their efforts on developing sustainable and secure endeavours. This requires that the ecosystem in which their activities take place is as transparent as possible. As a result, the culture of corporate integrity is the new language of business.

To follow ethics and transparency laws and frameworks, business people have a duty to self-regulate and develop their business activity within ethics and transparency, which means that they must continuously assess the threats, risks, and vulnerabilities of their business ecosystem. Companies are obligated by national and international laws to exercise due diligence procedures prior to the beginning of any business activity as well as to engage in periodical due diligence reviews. These activities require that companies assess and evaluate their compliance with the general system for the prevention and prosecution of public and private corruption, in which each state and, above all, the members of the OECD are interested.

All this is part of a global risk prevention strategy in which the principles of precaution and prevention dominate the culture of integrity.

Colombia has increased its efforts to improve its prevention, detection, and prosecution systems and programmes. This country has based its strategy on considering the fight against public and private corruption a matter of as a public policy. In this regard, the challenge – from the point of view of criminal law – has been the current and future normative development of the criminal liability of the corporate legal person. However, some of the new provisions are ambiguous and require a pronouncement by the Constitutional Court to ensure legal certainty.

Furthermore, from the point of view of supervision, oversight, and control, the normative development has been oriented towards more governmental entities such as Superintendencies of the Financial, Transport or Vigilance and Security sectors, developing specific prevention rules for their supervised companies and having important sanctioning powers to make them effective.

Aspects to consider by business people and companies

It has become customary for nations to incorporate entities within their organisational structure dedicated to supervising, monitoring, and controlling high-risk sectors. Companies within these sectors frequently undergo assessments to gauge that they comply with minimum standards of a certain country, compelling them to implement their own risk management mechanisms under the threat of sanctions against natural and juridical persons. Moreover, as a development of large company’s compliance systems, it is customary to assess not only the future obligations the company may acquire in its new endeavours, but also certain country’s general anti-corruption system to make informed decisions beforehand.

In consequence, before engaging in business in a country, investors, entrepreneurs, and other business people should meticulously examine certain factors. It is imperative to ascertain the presence of regulatory bodies such as supervisory authorities, the existence of mandates compelling companies to institute corruption, money laundering and terrorist financing prevention programmes, and the robustness of the legal framework addressing corruption and related offences. Evaluation of the system’s efficacy is crucial. That is, scrutiny extends not only to the existence of a legal framework but, most importantly, to its actual efficacy and application in practice.

Concerning a country’s detection mechanisms, companies often consider various factors before embarking on new business endeavours. These factors include the investigative powers of the state, the culture of citizen reporting, the capabilities of financial intelligence units, and the effectiveness of surveillance and supervision entities in detecting corruption patterns.

In the realm of prosecution mechanisms, the expansion of criminal law has led to the inclusion of new specific offenses, the attribution of criminal liability to juridical or corporate legal persons, and the imposition of economic sanctions for insufficient or absent compliance programmes. Companies may assess the effectiveness of prosecution by examining metrics such as the percentage of convictions obtained.

However, entrepreneurs and investors cannot hope to review these aspects independently. Indeed, an individual assessment can be time-consuming, costly, and subject to bias. That is why specialised international organisations have undertaken numerous studies to provide evaluations. These evaluations not only offer a comprehensive overview of different states but also highlight deficiencies in prevention and prosecution systems. They pinpoint areas or situations requiring greater attention or effort to enhance the efficiency of efforts towards mitigating the phenomenon.

Colombia’s anti-corruption system

How do specialised international organisations evaluate the current landscape in Colombia? Here, the authors consider and consolidate the measurements corresponding to:

• 1. the Corruption Perception Index;
• 2. the Rule of Law Index;
• 3. the 2018 GAFILAT report; and
• 4. Transparency International’s 2022 report – in 2022, Transparency International released the report “Exporting Corruption 2022: Assessing enforcement of the OECD Anti-Bribery Convention”.

1. The Corruption Perception Index, published annually by Transparency International (a non-governmental anti-corruption organisation) presents the perceived levels of corruption in the public sector in 180 countries. This report compiles the opinion of experts, business people and public sources of information and measures the perception of corruption on a scale of 0 to 100, where 0 corresponds to perception of high instances of corruption and 100 to perception of instances of corruption.

In 2023, The CPI revealed that many countries have failed to effectively reduce corruption in the public sector. Colombia has maintained a score of 39 points out of 100 for three consecutive years, which shows the current stagnation of the anti-corruption system.

2. The Rule of Law Index is a study conducted by the World Justice Project (WJP) which measures compliance with the notions of the rule of law in 142 countries, based on the experiences and perceptions of the public and of experts. The “rule of law” is a fundamental principle in governance that emphasises the supremacy of law and the equality of all individuals before the law. It implies that everyone, including government officials and institutions, is subject to and accountable under the law. The rule of law involves adherence to established legal processes and requires not only the codification of rule of law principles but also the absence of corruption, the compliance of all entities – public and private – with regulations, and the effectiveness of the criminal justice system. Therefore, these three aspects are among the eight categories that the Rule of Law Index measures.

This Index places Colombia in 103rd place, with a score of 0.38 out of 1, on a ranking of the least to the most apparently corrupt nations. The executive branch scored 0.39 out of 1, the judicial branch scored 0.55 and the military and police forces scored 0.49, in a scale where 1 indicates a total absence of corruption. Notoriously, the legislative branch appears with the lowest score: 0.09. This means that there is little or no implementation of rule of law tools that allow for the eradication of corruption.

With regards to regulatory compliance, Colombia has not achieved an effective implementation and application of its own Regulations and international recommendations provided by organisations such as de FATF (Financial Action Task Force) and the UN. Therefore, in this indicator it obtained a score of 0.52 out of 1 and was ranked 63rd on a ranking of the most compliant to the least compliant nations.

As for the rating of the effectiveness of Colombia’s criminal justice system, a score of 0.34 out of 1 was obtained, placing it in 115th place in a world ranking of most effective to least effective criminal justice systems.

3. In November 2018, GAFILAT (Financial Action Task Force of Latin America) published the mutual evaluation report of the Republic of Colombia, through which it presented the country’s level of compliance with the 40 FATF recommendations. There, corruption was considered the second most problematic factor in business making. The report also revealed how corruption and extortion undermine the activities of the courts, which compromises the fight against drug trafficking and other crimes.

4. In 2022, Transparency International released the report “Exporting Corruption 2022: Assessing enforcement of the OECD Anti-Bribery Convention” which seeks to rate the performance of the world’s leading exporters – 47 countries in total – in the fight against transnational bribery.

The report revealed the opening of three investigations and the conclusion of one sanctioned case related to transnational bribery in the country. Despite this important milestone, it revealed that Colombia can be classified as a country with limited enforcement against acts of bribery of foreign public officials in attention to the lack of public access to the central registry of beneficial owners, lack of legislation on whistle-blower protection, insufficient reporting channels, among others. Despite this, it stands out that it is among the countries that since 2018 have improved their level of compliance and that in 2022 strengthened its legislation against corporate liability for corruption offences as will be seen below.

With respect to this report, it should also be noted that in 2022 there was another sanction against a company for transnational bribery and that Law 2195 of 2022 specified the entities with access to the Single Registry of Beneficial Owners (RUB), which is under the responsibility of the Tax and Customs Directorate (DIAN) and is currently operating.

All the above demonstrates that there are major challenges to achieve better results in the implementation of public policies, in the regulatory framework and in the effectiveness of the criminal prosecution system.

Colombia’s regulatory framework and its effectiveness

In this chapter, the authors address Colombia’s anti-corruption regulatory framework and its effectiveness in its enforcement considering that the conclusions reached in the studies presented are based precisely on the existence of administrative and criminal regulations in the country and the effectiveness of their application.

Colombia has a very abundant and robust regulatory universe in the preventive and repressive spheres. Some even consider that there is over-regulation. However, this is not very clearly reflected in effective application.

The criminal code (Law 599 of 2000) contains 44 criminal offences against public administration and three that directly punish private corruption in different modalities. Several of these provisions have incorporated international anti-corruption treaties such as the United Nations Convention against Corruption, the Inter-American Convention against Corruption and the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of the Organisation for Economic Co-operation and Development (OECD).

In addition, Law 1474 of 2011 – considered the Anti-Corruption Statute – Law 1712 of 2014 and Law 1778 of 2016 were enacted, which establish the liability of legal entities for acts of transnational corruption, among others.

In the administrative area, it is worth mentioning the Circular 100-000011 of 2021 issued by the Superintendence of Companies, which obliges its supervised companies to have Transparency and Business Ethics Programs (PTEE) for the prevention and management of the risk of corruption and transnational bribery. Also, the Circular 058 of 2022, issued by the Legal Secretary of the Mayor’s Office of Bogota, contains instructions for the designing and implementation of PTEE by corporations, associations, foundations, and other non-profit entities under the supervision of the Mayor’s Office. The Financial Superintendence of Colombia, through the Circular Externa 008 of 2023, requires the entities under its supervision to implement an Internal Control System to prevent and mitigate the occurrence of acts of corruption. Other Superintendencies also have their own regulations for their sector.

As it should be, failure to comply with the rules described above leads to heavy penalties and sanctions that are undoubtedly intended to persuade those who intend to violate them. The penalties for crimes against public administration can be up to 18 years’ imprisonment, in addition to the reduction of judicial benefits in the application of penalties and the increase of fines.

In relation to the impact on companies, they may also suffer serious consequences when crimes are committed using its structure and for their benefit, and when they fail to correctly apply the regulations that oblige them to prevent and adequately manage the risk of corruption and bribery. Article 91 of Law 906 of 2004 (Code of Criminal Procedure) establishes the possibility of suspending the legal personality of an entity during the investigation of a criminal proceeding with the possibility of making the measure permanent in the event of a conviction against the person related to the organisation. For their part, Superintendencies have the power to review compliance with their regulations on the matter and to impose sanctions in the event of failure to do so. Likewise, there are regulations that prevent companies sanctioned for corruption from having public contracts and relations with the government.

In the area of criminal prosecution, from 2019 to the present 2023, about 155,000 criminal reports have been filed for crimes against public administration, which is a very relevant figure. Such a high volume of complaints affects the capacity of the Attorney General’s Office to investigate and achieve better results.

Notwithstanding the high volume of complaints in five years, the figures exposed by the Colombian Attorney General’s Office have been showing substantial improvements in the decrease of complaints occurring year after year. Indeed, in 2019 there were a total of 37,698 reports alleging the occurrence of crimes constituting public corruption, while up to November 2023 there have been 24,311 of them. This show that Colombian society is acquiring a comprehensive understanding of the importance of integrity culture in business and that preventive regulations are having better effects.

It is also worth noting that within the five crimes with the highest number of criminal reports in the past five years, there are not many of those that can significantly affect the economy of a country and the state’s assets, such as different types of embezzlement, corruption in acquiring and executing public contracts and bribery. On the other hand, among the crimes with more criminal news are violence against public servants and abuse of authority by arbitrary or unjust act. In relation to private corruption, it is noteworthy that the number of criminal reports is much lower, with 882 in the past five years for the crime of private corruption and insider trading.

Even though there is a considerably lower number of crimes constituting private corruption, the complexity of the investigations determines that the progress of the processes to reach final sentences is not desirable, since 90% of the cases are still under investigation.

This scene shows that in Colombia there is a robust regulation in terms of prevention and prosecution, but that the results of its effective application must be improved. Precisely this situation led to the issuance of Law 2195 of 2022, which adopts new measures regarding transparency and fight against corruption in the hope of achieving better results.

This means that the country has been improving its policies aimed at the integrity of the actors in the economic circuit and has achieved some remarkable results in the effective prosecution of crimes. However, it still has a long way to go.

Law 2195 of 2022 and the criminal liability of legal entities

Law 2195 of 2022 constitutes an effort of the Colombian government to strengthen the regulations in the fight against corruption and to offer more and better alternatives for its effective prosecution. The purpose of the law is to “adopt provisions aimed at preventing acts of corruption, to strengthen the articulation and co-ordination of state entities and to recover the damages caused by such acts in order to ensure the promotion of a culture of legality and integrity and to recover citizen trust and respect for the public.”

This set of provisions includes measures to strengthen the liability of legal entities for acts of corruption and includes the events of integration of joint ventures or consortiums, as well as its extension to branches of foreign companies, industrial and commercial companies of the state, mixed economy companies and non-profit entities domiciled in Colombia when the following are corroborated.

• The existence of an enforceable criminal conviction or standing principio de oportunidad (a form of non-prosecution agreement) against any of the company’s administrators or officers for the commission of crimes against public administration.
• That the penalised company has benefited or sought to benefit, directly or indirectly, from the commission of the punishable conduct.
• That the company has consented to or tolerated the commission of the punishable conduct, by action or omission, considering the application of its respective risk controls.

In terms of risk management, the third element is very important because in the presence of a complete compliance programme, properly designed and with effective controls, even if a corrupt situation materialises (commission of a crime and the company benefits from it), the company could be absolved of any liability – administrative for the time being – as long as the absence of consent or tolerance of the criminal act can be proved.

This is consistent with the requirement of Article 9 of the same Law, for all companies subject to surveillance, inspection, or control of any Superintendence to adopt transparency and business ethics programmes and with the respective requirement for these governmental entities to issue the rules that provide guidelines on such programmes.

On the other hand, the rule contained in Article 8 of this law has been much discussed, since it allows the administrative sanctioning power to be exercised regardless of the date of commission of the offence by the administrators and officers, which would imply an unconstitutional retroactive application of the sanctioning powers to times when the rule did not exist. Such circumstance will surely be subject to some pronouncement by the Constitutional Court to ensure legal certainty.

It is also necessary to call attention to the requirement incorporated in Colombian legislation to identify the final beneficiaries of the companies and operations, to remove the corporate veil that sometimes does not allow to know who is behind as beneficiary of an operation. Colombian legislation regarding the identification of beneficial owners is strict and very robust, even in comparison with other states. The Tax Statute establishes that beneficial owners are natural persons who, directly or indirectly, own five percent (5%) or more of the capital or voting rights of a legal entity and/or benefit in the same percentage from its assets, yields or profits. According to this definition, those who apply due diligence activities must conduct such activities in order know the beneficial owners of their counterparties, who, based on paragraph 4 of Article 12 of Law 2195 of 2022, are obliged to provide such information.

Conclusion

The article presented the Colombian context in the fight against the political, social, and economic phenomenon of corruption and the most recent regulatory efforts to strengthen the regulatory framework in this area. Although Colombia has not improved significantly in some of the latest international indexes that measure important aspects of this issue, its extensive regulation, and recent laws such as 2195 of 2022 show the efforts made by the state to prevent the occurrence of public and private corruption and to prosecute both natural and legal persons who seek to take advantage of this scourge.

Although there are significant opportunities for improvement in relation to the effectiveness in the prosecution and punishment of acts constituting public and private corruption, it is clear that the number of criminal reports of acts against the public administration and acts of corruption among individuals has decreased in the country, which demonstrates the deterrent power of Colombian regulations, their effectiveness in preventing the occurrence of such acts and the strengthening of society’s understanding of the importance of the culture of integrity in business.

Colombia still has a long way to go to reduce corruption rates and improve the effectiveness in the prosecution of acts constituting corruption. However, the regulation that today obliges most of the entities supervised, inspected and/or controlled by supervisory entities has led to the implementation of systems to prevent and manage the materialisation of this risk within companies.

In this sense, those who intend to invest in Colombia can rest assured that it is a country concerned about fighting corruption and in continuous strengthening of the mechanisms it has, to reduce the occurrence of this phenomenon. However, as with any business activity and in all countries of the world, the risk is always present and its reduction to zero is impossible. For this reason, it is appropriate that anyone seeking to invest in the country should do so under the expected practices for a diligent business person by applying robust compliance systems that allow an effective management of corruption risks to which it may be exposed, even without being obliged to do so based on Colombian regulations.