International Fraud & Asset Tracing 2024 Comparisons

The enactment in August 2023 of Law No 21,595 on Economic and Environmental Crimes changed the way Chilean legislation dealt with fraud claims. Even though legislation is still spread among different special regulations targeting various areas, the Chilean Penal Code now establishes a general definition of fraud, which contemplates the following core elements:

• false representation – the defendant must have generated a misleading representation of the circumstances to the victim;
• error – the victim must have a false representation of reality as a result of the false claims made by the defendant;
• property disposition – the victim must have executed an act of asset disposition because of the false representation of reality; and
• economic damage – the act of economic disposition must have generated economic damage to the victim.

This represents a paradigmatic change in the regulation of fraud, which was previously only defined casuistically. This new definition allows the fundamental structure of fraud claims to be interpreted more clearly, settling many of the discussions that existed on the matter. For example, the new legislation expressly refers to obtaining financial gain as a motive for these criminal offences, making it clear that the intent to obtain a profit is a core element of fraud claims.

There are several offences that constitute fraud claims, such as:

• bankruptcy fraud;
• fraudulent delivery;
• malicious subscription of a document;
• misappropriation;
• breach of trust; and
• incompatible negotiations.

The category of false statements covers a wide variety of crimes, which can be broadly divided into two categories, depending on whether the statements are made in public or private documents. Likewise, each of these categories can be subdivided into cases of:

• material falsehood;
• ideologic falsehood;
• falsehood by concealment; and
• malicious use of a falsified document.

The penalty for each offence is determined by reference to the multiple hypotheses of falsehoods committed by a public officer in a public document.

In Chile, misappropriation does not come under the category of fraud, instead being found in Article 470 No 1 of the Criminal Code. The offence consists of the appropriation or distraction of money or movable property that has been received in deposit, administration, commission or any other title that creates an obligation to return the goods.

Furthermore, the making of false payments and conspiracy are not considered fraud in Chile.

The bribery of an agent would most likely fall under the category of private-to-private corruption. A claimant could present a criminal complaint pursuant to Articles 287 bis or 287 ter of the Criminal Code, which punish either:

• the director, administrator, employee or agent that accepts or requests a benefit, for them or a third party, to favour or for having favoured the hiring of an offeror; or
• the third party that gives, offers or consents to give a benefit to the director, administrator, employee or agent, so that they favour or for having favoured an offeror over others.

A bribe that is made not to favour an offeror but to act or omit conduct in the course of duty could constitute a different offence, such as breach of trust or misappropriation.

Parties who assist or facilitate the fraudulent acts of another could be accused of participating in the offence of the defendant, which is conduct generally punished by the Criminal Code. The law states that authors, accomplices and accessories-after-the-fact are all criminally liable. Accomplices are considered such if they:

• do not execute the conduct;
• do not force or induce the author to act; and
• are not part of a previous arrangement to commit the offence but facilitate the means through which it will be committed or co-operate with the execution of the crime.

In turn, they will be considered accessories-after-the-fact if, without participating in the perpetration of the crime or its preparations, they:

• know of the circumstances;
• take advantage of the situation to benefit from the crime;
• hide or destroy the means with which the crime was committed;
• aid in the escape of the culprit; or
• protect the wrongdoer.

An exception exists for the spouse, civil cohabitant or relatives up to the second degree (ie, parents and children) of the defendant, who cannot be punished for such conduct. However, a counter-exception applies if they profit from the crime.

Despite the above, assisting a third party’s fraud could be considered an independent offence. This is the case for a breach of trust, which takes place when partnerships are established with the sole purpose of infringing the social order, good customs, people or property. Thus, if an association is created to commit any kind of fraud, and one of the participants is the sole executor, the accessory to the fraud could be a co-author of unlawful association (ignoring potential issues with concurrent offences).

Moreover, if the third party assists by receiving the fraudulently obtained assets, whether such party is an accomplice, an accessory-after-the-fact or the author of an independent crime would depend on the nature of that possession. The last circumstance could be a case of handling stolen goods or money laundering, depending on the facts.

The general limitation periods in the Chilean system depend on the nature of the criminal offence, as follows:

• crimes that are punished with perpetual incarceration have a 15-year period to exercise the criminal action;
• other crimes have a ten-year period;
• misdemeanours have a five-year period; and
• offences have a six-month period.

In Chile, the legal regulation regarding the recovery of property misappropriated or induced by fraud is deficient. In fact, there is no comprehensive legislation dealing specifically with this topic.

However, victims of fraud may use the general tools available according to Chilean law for victims of crime seeking restoration, which can be sought in either a criminal procedure or a civil procedure. Either way, it is important to keep in mind that civil and criminal liability are independent of each other: if the right to exercise civil actions is extinguished, this does not mean that the right to exercise criminal actions is similarly extinguished, and vice versa.

One can seek to recover goods or proceeds, or both. There are some differences in the treatment the law dispenses for each of these scenarios based on who exercises the right, which will determine whether this can be done in a criminal procedure, a civil procedure or either of the two (but never in both).

Concerning objects that were taken from a victim through fraud and that were seized during the criminal investigation, it is possible to request the restoration of these assets through a simple application to the criminal court that is hearing the case. However, this simple restoration action can be problematic in cases where it is not possible to establish that the asset clearly belongs to the victim or where the asset has been transformed by the fraudster into another asset.

A special regulation exists for stolen or fraudulently obtained goods, according to which such goods may be delivered to the owner or lawful possessor at any phase of the procedure, once their right has been proven and the value of the object has been established. Otherwise, the owner must wait until the court deems it necessary. An exception to this applies in the case of secret investigations for money laundering, in which all of the above does not apply as long as the secrecy has been decreed.

Whether or not proceeds or property that represent the proceeds of the original fraud can be recovered depends on their nature. Where the proceeds of the fraud are such that they would have been lawfully obtained by the owner if the fraud had not made it impossible for them to access the gains, or where the proceeds are the equivalent of the material value of the object, there could be a loss of earnings or profits that would sustain a compensation claim.

For example, if the defendant obtains the ownership of shares in a company through fraudulent claims, and because of that perceives the utilities they produce, the victim could then sue for compensation, regardless of whether or not the defendant has spent those proceeds on another good. In the presented case, since it is the victim suing the defendant, they could exercise their right before the criminal court that is hearing the criminal matter or before the competent civil court, but once they do so the possibility to concur with the other jurisdiction is lost. If the person suing is not the victim of the crime, or if the defendant is not the person being prosecuted for the crime, these claims must be presented before the competent civil court.

A classic issue presented by money laundering is when funds that represent the proceeds of fraud have been mixed with other funds. In an effort to contain this phenomenon, Chilean law consecrates different alternatives so that the courts can issue measures to prevent assets that have an unlawful origin from being mixed with legal transactions. For example, a judge could decree a prohibition on transferring, converting, disposing of or moving funds or other goods during a certain period, without giving notice to the parties concerned. For a sentence, the law establishes a confiscation penalty in these kinds of cases.

Finally, it is important to mention that Law No 21,595 on Economic and Environmental Crimes introduced a new regime regarding the confiscation of profits, covering the possibility of confiscating everything obtained as a consequence of the crime, and such imposition even when there are no convictions for those responsible.

There are no particular rules of pre-action conduct in relation to fraud claims.

To prevent a defendant from dissipating assets or secreting them to avoid the consequences of a judgment, Chilean legislation provides a variety of precautionary measures to protect the economic interests of the victim, which can be requested by the victim or the prosecutor.

Precautionary measures extend to any act that ensures or protects the claim deduced or the favourable sentence that could be pronounced. These measures operate in rem, since they include things such as:

• the seizure of the item and its deposit;
• the designation of a financial controller; or
• a prohibition on celebrating any kind of act or contract with respect to certain goods.

There is also the possibility for the judge to create an ad hoc precautionary measure, but in such specific case it is necessary for the claimant to offer a cross-undertaking in damages.

In these cases, no court fees are payable for suspending the measure.

If the defendant does not comply with the judicial order, they could be prosecuted for contempt, which could incur a punitive sentence of 541 days to five years in prison.

In general, the law does not require the claimant to offer a warranty to insure the defendant against potential damages they may suffer because of the precautionary measure. However, Chilean criminal procedure does impose a procedural burden on the claimant to present a civil lawsuit up until 15 days before the preparatory hearing of the trial, or alongside the claimant’s private indictment or in adhesion to the public prosecutor’s indictment. In this way, the law ensures that the claims that sustain the measure are, at least, serious enough to justify its imposition.

In the case of third parties, since these are measures that have in rem effects, they apply to any individual that may wish to act upon the goods affected by the measures.

In any case, it is worth noting that in criminal proceedings it is only possible to request these measures once the prosecutor has pressed formal charges against the defendant, which could be too late. In these cases, the public prosecutor might also seize assets with a judge’s order, and these objects may be subject to the penalty of confiscation in the final ruling.

Chilean law does not contain a special procedure requiring a defendant to disclose their assets. However, in the context of a criminal procedure, typically during the investigation there could be proceedings aimed at finding the assets of the defendant – for example:

• asking the competent institutions to inform the public prosecutor’s office of the existence of certain goods, usually under a registration regime (whether movable goods such as cars, or real estate, banking products, etc); or
• asking institutions that keep a registry of transactions to disclose them, depending on their nature (for instance, the internal tax system could report the existence of assets based on taxes paid).

This disclosure does not distinguish between assets held in the name of the defendant and those held by nominees on the defendant’s behalf.

There are no sanctions if the defendant does not provide the information about their assets. The defendant does not need to give a cross-undertaking in damages.

In addition to the precautionary measures mentioned in 2.1 Disclosure of Defendants’ Assets, which could indirectly serve to preserve evidence, the prosecutor always has the option of mandating the police to ask the defendant to permit the entry and search of their property, or, if not given, to ask the judge for authorisation to do so forcefully.

The prosecutor could also request the judge to authorise the seizure of objects and documents related to the investigated facts – ie, those that could potentially be affected by a confiscation penalty and those that could be used as evidence.

The claimant is not permitted to search documents at the defendant’s residence or place of business. However, as previously mentioned, the prosecutor may always request the needed information from the defendant; if not given willingly, the judge can always request the seizure thereof. In such cases, since this will be a motivated decision by the court, it is necessary for the prosecutor to justify the need for the measure when presenting the request.

The measures mentioned in 2.2 Preserving Evidence also apply to third parties, with the exception that the law includes the possibility of requesting the court to give notice to the third party before asking directly for the authorisation of the court to seize evidence forcefully, so that said party may hand over the objects or documents willingly.

A procedural order such as those mentioned previously could be requested without notice to the defendant when the knowledge of the measure could endanger its success or effectiveness. In such cases, the prosecutor will have to justify the necessity of the secrecy of the measure, which will always be in place for a determined period.

There are several ways for victims to seek redress, whether in the criminal procedure itself or in a posterior civil procedure based on the finished criminal procedure.

Exercise of the right to ask for damages, as described in 1.5 Proprietary Claims Against Property, is not the only way of seeking redress. A victim could also negotiate directly within the criminal procedure in the context of a reparatory agreement, which may be promoted only in cases in which the interests affected are of an economic nature or where the crimes are among those listed by law. These agreements entail the involvement of the victim and the defendant only, who can agree to any kind of compensation they deem fit. Once the defendant fulfils the agreement, the court will dictate the definitive dismissal of the case.

The prosecutor’s office may also satisfy the redress sought by the victim. In the context of a conditional suspension of the procedure, the prosecutor may choose to impose the compensation of the victim as one of the conditions, whether this be through a payment or by any other kind of suitable condition. In these cases, the prosecutor is not obliged to ask for such a measure, though it is not an uncommon practice.

Please see 1.5 Proprietary Claims Against Property regarding the interplay between civil and criminal jurisdictions.

In Chile, a judgment may not be obtained without the dutiful intervention of the defence and the presence of the defendant.

There are no special rules regarding plea agreements in fraud claims. The general rule in Chile is that a guilty plea to any indictment does not relieve the prosecutor of their burden of proof. The closest mechanism is the abbreviated procedure, which entails a recognition by the defendant of the facts and the information of the investigation that sustains such facts. This is not equivalent to a guilty plea, although practice has led to this procedure being something similar, since the prosecutor’s office will usually negotiate with the defendant, using as a transaction value that they refrain from discussing any of the charges and its details.

An abbreviated procedure only applies if the prosecutor is asking for a penalty not greater than five years in some cases and ten years in others, and if the defendant, in knowledge of the facts of the indictment and the information of the investigation, agrees to the procedure freely.

It is possible to file lawsuits against “unknown” fraudsters in Chile. Criminal complaints can be filed against either a specific individual or whoever turns out to be responsible.

Please see 2.2 Preserving Evidence and 2.3 Obtaining Disclosure of Documents and Evidence From Third Parties regarding the rules that compel witnesses to give evidence consisting of documents and objects.

With respect to testimony, witnesses have no obligation to appear nor to give a statement upon attendance before the public prosecutor’s office. However, when arriving at trial, the court will issue a compulsory judicial citation, in which case the interviewee must appear before the court but can withhold the statement.       

Since the enactment of Law No 20,393, the list of offences for which a company can be held criminally liable has been extended several times. Before the enactment of Law No 21,595, companies could only be criminally liable for:

• bribery;
• money laundering;
• financing of terrorism;
• receipt of stolen goods;
• disloyal administration;
• commercial bribery;
• unlawful negotiation;
• misappropriation;
• certain conduct related to water pollution and illegal fishing activities; and
• from December 2022 onwards, computer crimes.

In this regard, Laws No 21,227 and No 21,240 established new crimes in the context of the COVID-19 pandemic, and Law No 21,459 incorporated new offences related to computer crimes – all conduct for which legal entities can be criminally liable.

Despite the above, the recently approved Law No 21,595 on Economic and Environmental Crimes introduces profound changes into Law No 20,393, which will begin taking effect in August 2024. According to this new law, companies are criminally liable for every “economic crime” listed in Law No 21,595, whether they are considered economic crimes by that law or not, which translates into more than 200 offences and exponentially expands the list of imputable offences. Among them, fraud, disloyal administration, unlawful negotiation and misappropriation are worth highlighting.

Regarding all the above-mentioned offences, the public prosecutor may indict both the individual criminal liability of the executive and the criminal liability of the company, but managers are not criminally liable for the sole conviction of the company. In fact, the public prosecutor’s office has no institutional guidelines stating that either individuals or companies must be preferentially prosecuted.

In the reorganisation, merger, acquisition, division or dissolution of a company that is criminally liable for one of the sanctioned crimes, Law No 20,393 provides that the liability for such acts is transmitted to the successor.

As stated in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts, if a company was created with the purpose of being a vehicle for fraud, the ultimate beneficial owners would be criminally liable for unlawful association, as long as they participated in the creation of the organisation.

Another possibility is a charge as an accessory for the corresponding fraud claim, which specifically contemplates the hypothesis of benefiting from the crime.

Money laundering offences could also be relevant, if the ultimate beneficial owner received the profits of the fraud committed within or by the company and then reinvested or spent such unlawfully obtained assets.

Depending on the details of the case, certain conduct could also constitute tax crimes, such as evasion or the fraudulent obtaining of tax returns.

Since the enactment of Law No 21,595, the case of fraudulent directors who exercise control over the company against its interests constitutes the crime of “abuse of majority position” regulated in Article 134 bis of the Corporations Law (Law No 18,046). This article sanctions the adoption of abusive agreements taking advantage of a majority position on the board of directors of a company, or of the status of controller of the company, when the following requirements are satisfied:

• that an agreement is adopted by the board of directors of the corporation;
• that there is a deviation from the interest pursued by the director or controller – that is, the search for personal benefit or that of third parties, whether or not they are people related to the author;
• that the agreement does not report a benefit to the company; and
• that the agreement is “abusive”.

On the other hand, these situations could also be understood as cases of breach of trust, which can be committed by anyone who occupies a position that grants them administrative power over the assets of someone else. In these cases, the conduct consists of infringing the legal obligation to guard the assets of another in a way that goes against the interests of the holder, causing them economic damages. In these claims, it is essential to prove the damages, since the mere contravention of the shareholders’ wishes or directives is not constitutive of a criminal offence.

Finally, shareholders could also bring a criminal complaint for incompatible negotiations, if the conduct of the fraudulent director consists of taking personal interest in a negotiation, act, contract or operation in which they are intervening because of the position they occupy within the company.

There are no rules for facilitating the union of overseas parties in fraud claims brought in Chile, nor do national courts exercise extraterritorial jurisdiction, beyond the general rules (which in any case would require the extradition of the author to be judged in Chile).

There are 12 cases in which a Chilean court may exercise jurisdiction over crimes committed overseas, including the following:

• when the author is either a diplomat or a consul that acted in exercise of their functions;
• in crimes such as bribery, fraud and secrecy violation, among others, when the author was a public servant to the Republic of Chile or was a Chilean citizen offering unlawful benefits to a foreign official;
• in cases of the falsification of national currency or of credit documents issued by public institutions;
• when the perpetrator and the victim are Chilean, and the defendant returned to Chile without being judged in the country in which the crime took place; and
• such cases as agreed upon in international treaties.

According to Chilean law, to serve parties outside the jurisdictional limits, the court that hears the case must direct the corresponding communication (inserting the writings, decrees and necessary explanations) to the judge with jurisdiction in the place where the party that must be served is located, in order to proceed with ordering compliance with the required.

These communications, called exhortos, represent the principle of delegated competence and are regulated in Articles 71, 75 and 76 of the Chilean Code of Civil Procedures.

Depending on the destination of the exhorto, these can be classified as national and international. In the latter case, the procedure for processing the exhorto is more complicated, since the Supreme Court and the Ministry of the Interior must intervene.

There are no alternative ways or services in addition to the exhorto for carrying out or accelerating the procedure for serving parties out of the jurisdiction. On the contrary, exhortos are the only form of communication that allows judicial proceedings to be verified in jurisdictions other than where the litigation is being processed.

The authority to enforce court rulings rests with the same tribunal that issued the decision. For this purpose, the law grants the judge the power to ask for law enforcement to enact their ruling.

In the case of monetary rulings, since a court sentence is a perfect title of credit, one may initiate an enforcement proceeding in which the first act of the court is an execution and seizure injunction. This is a very common and expeditious procedure that seeks to satisfy the debt, whether with a specific good or by the payment of a sum of money (which may be paid directly or may even come from a public auction).

In the case of non-monetary rulings such as the recognition of a debt or an obligation to do something (whether to provide a service or celebrate a contract), there is also the alternative of an enforcement proceeding. If the debtor is not willing to comply, the contract may be celebrated in their stead by the judge; in the case of the provision of a service, this may be provided by a third party at the cost of the debtor.

However, if the party seeks to enforce a private agreement, the procedure available to do so will depend on the nature of the document in which the obligation is set out. If the creditor has a perfect enforceable title to their favour, they may use the previously mentioned enforcement proceeding; if not, they will need to follow the respective procedure to acquire a perfect enforceable title.

The law consecrates the privilege against self-incrimination as a right or a guarantee: whenever answering a question may result in self-incrimination, the defendant may choose to keep silent. The defendant can also choose to give evidence, but may do so without taking the oath. The right to keep silent also applies in the case of witnesses or third parties that could be put in such a position, even if they are not the person being indicted in the procedure.

Legally, no offences may be committed by a defendant exercising their right to silence. However, in some cases (typically claims such as slander or defamation) doing so may be frowned upon by the court.

The only circumstance in which the confidentiality of communications between a lawyer and their client may be violated is if the lawyer is a co-author, accomplice or accessory to the crime.

There are no punitive or exemplary damages in Chilean law. The basic principle for civil liability is that the damages are the condition and the measure of liability, such that no one may be condemned for damages greater than those they caused. However, moral damages have been known to be used as a form of punitive damages, as courts typically place a higher value on the anguish the victim was put into if the perpetrator acted in a particularly reprehensible way.

The general banking law states that the information on deposits received is subject to secrecy and can only be disclosed to the account holder or to people they have authorised.

However, the public prosecutor may ask the judge to lift such banking secrecy if the criminal investigation requires that information. Since this is an investigative measure that infringes the defendant’s right to privacy, the prosecutor must justify the request and the judge must reason their decision accordingly.

Nonetheless, banks may disclose some information without a judicial order or the authorisation of the account holder, but always in a broad sense. For example, a bank may state which products someone has in their portfolio, but it may not disclose the particulars of those products (such as movements, amounts or any other information of that sort).

There is no special regulation regarding crypto-assets, nor there has been a case ruling on these matters. However, since these are assets, they would probably be treated the same as any equity in the context of damages or property loss.

Chilean law is very out of date on issues regarding new technologies and the evolution of juridical traffic in the digital era, though efforts are currently being made to bridge those gaps.

In December 2022, Law No 21,459 incorporated certain computer crimes that were not previously recognised as offences in Chile, including different varieties of hacking, such as:

• the illegal accessing of computer systems;
• interference with the transmission of information;
• attacks on the integrity of data;
• informatic falsehood;
• informatic receiving;
• informatic fraud; and
• the abuse of devices.

Law No 21,521 was published in January 2023, promoting competition and financial inclusion through innovation and technology in the provision of financial services. The effects of this new legislation are yet to be seen, but its promulgation is indicative of the previous lack of recognition of this phenomenon, which certainly applies to cryptocurrencies and their treatment.