Contributed By Von Wobeser y Sierra, S.C
Mexico is signed up to the following conventions:
In Mexico, there is no specific legislation regarding anti-bribery and anti-corruption provisions. However, in 2015, Mexico introduced at a constitutional level the creation of a National Anti-corruption System as a co-ordinating function of different government agencies at all levels of government responsible for the prevention, detection and punishment of acts of corruption. The regulatory structure of the NAS is comprised by seven laws:
Relevant offences are laid down mainly under the above laws described in the FCC and the GLAR.
In June 2017, the Secretary of Public Function (SPF) published a Model of Business Integrity Program which outlines the SPF’s understanding of the best practices companies should follow for purposes of creating and implementing compliance programmes. This serves to interpret the GLAR Article 25.
There have been no key amendments to the national legislation regarding anti-bribery and anti-corruption provisions in 2018. However, on 15 August 2018, Congress declared the validity of the constitutional amendment of transitory Article 16 of the 10 February 2014 constitutional amendment, whereby the procedure for appointing the head of the Fiscalía General de la República (FGR) was amended to prevent the Attorney General in office (the head of the Procuraduría General de la República) from automatically becoming head of the FGR.
Before the approval of this amendment, the Attorney General in office at the time of the passing of the new Organisational Law of the FGR would automatically become the FGR head. This will no longer be the case. Now, once the new OLAGO is passed, the process to appoint the FGR head will be triggered. Thus, the Senate will draw up a list of ten candidates, then it will send it to the President who will create a shortlist of three candidates. The President will subsequently send his three nominees to the Senate and the Senate will have the final word in appointing the new head of the FGR. The creation of the FGR becomes relevant to anti-corruption provisions as it will have a special anti-corruption prosecutor’s office in charge of tackling corruption.
The GLAR and the FCC recognise the following offences in the area of bribery and corruption: bribery, embezzlement, misuse of public resources, misuse of information, abuse of office, abuse of powers, performance under conflict of interest, improper hiring of former public officials, illicit enrichment, influence-peddling, concealment, disobedience, justice obstruction, illicit participation within administrative proceedings, use of false information, and collusion.
Under GLAR Article 52, the offence of bribery takes place where the public official demands, accepts, obtains, tries to obtain – by his or her own means or by third parties – as consequence of his official duties, any benefit apart from his salary as public official. This benefit could be anything of value such as assets, property, the product of a sale with a price below the market price, donations, services, employments, and other illicit benefits for the public official or for his wife or husband, relatives, third parties, co-workers, partners, or entities of which the public official is part of.
From the offering side of the offence, under GLAR Article 66, bribery shall take place where an individual or corporation promises, offers, or delivers any improper benefit to a public official for the performance or non-performance of an act related to his official duties, regardless of the acceptance or reception of the benefit, and regardless of the results obtained. FCC Article 222 also sanctions bribery with a similar typology to the one described under GLAR, which is an administrative statute.
In Mexican law, both the offer and the receipt of a bribe are considered offences. The mere fact of proposing or accepting an unlawful advantage qualifies as an offence (ie, without any requirement that the results expected by the perpetrators actually occur)
The GLAR expressly prohibits public officials from receiving gifts, travel expenses, any gift or anything of value outside of their official compensation. The SPF has underscored in its Model of Business Integrity Program that there is zero tolerance towards gifts, travel and entertainment received by public officials. However, GLAR Article 66 requires corrupt intent for liability to attach with regards to corporations or individuals offering or giving a gift, travel and/or entertainment to public officials. There are no precedents clarifying this apparent inconsistency between the zero tolerance standard expected from public officials and, on the other hand, that expected from corporations and individuals, which apparently admits certain tolerance provided there is no corrupt intent.
There is no specific offence for failure to prevent bribery. However, please refer to 4.1 National Legislation and Duties to Prevent Corruption, below.
Article 108 of the Mexican Constitution provides that public officials are “all the popular elected public officials, all the members from the Federal Judiciary, and all the employees, assistants, or people that perform any charge or position of any nature in Congress, in the Public Federal Administration, or in the Constitutional Autonomous Bodies.”
FCC Article 222 bis provides that the penalties provided for the commission of a bribe shall also be applicable regarding bribery of foreign public officials.
Please note: Mexican legislation does not recognise bribery between private parties as an offence.
The offence of embezzlement is provided under GLAR Article 53, and FCC Article 223. The GLAR definition, which is very similar to the FCC’s, provides that a public official perpetrates the offence of embezzlement when he authorises, requests or performs certain acts for the use or appropriation of public resources, when not provided in law or when the appropriation is against the law.
Misuse of public resources
The offence of misuse of public resources is provided under GLAR Articles 54 and 71, which state that a public official perpetrates the offence of misuse of public resources when he authorises, requests or performs acts for the assignment or deviation of public resources when not provided in law or when the use of public resources is against the law. Also, an individual may perpetrate the offence of misuse of public resources when “he performs acts appropriating, improperly using or diverting public resources, when by any reason such individual had access to them and is able to manage, administrate or receive them."
Misuse of information
The offence of misuse of information is provided under GLAR Article 55, which states that a public official perpetrates the offence of misuse of information when he acquires any benefit for himself or for his wife, relatives, or third parties, as a consequence of privileged information obtained as a result of his official duties.
Abuse of office
The offence of abuse of office is provided under GLAR Article 57, which states that a public official perpetrates the offence of abuse of office when he performs an act without enough powers, or with enough powers but acting in benefit of himself or third parties in detriment of another party.
Performance under conflict of interest
The offence of performance under conflict of interest is provided under GLAR Article 58, which states that a public official perpetrates the offence of performance under conflict of interest when he intervenes, as a consequence of his official duties, in the attention, study, or issuance of a judgment or resolution regarding the matters in which he cannot participate because of a conflict of interest, or because there is a legal restriction in that regard. People acting under conflict of interest shall report the situation to their immediate superior.
The offence of improper recruitment is provided under GLAR Articles 59 and 72. A public official perpetrates the offence of improper recruitment when he authorises any recruitment or appointment, of whoever is: (i) restricted by law, (ii) unable to take up the employment or position within public service, or (iii) disqualified from participating in public procurement. Also, individuals and corporations may perpetrate the offence of improper recruitment when they recruit a former public official who left office within a year of the official’s hiring and who has privileged information acquired by means of his public service which directly allows the official’s employer to benefit from the information in order to have an advantage over its competitors.
The offence of illicit enrichment is provided under GLAR Article 60, and FCC Article 224. A public official perpetrates the offence of illicit enrichment when he or she misrepresents his or her declaration of assets or interests with the purpose of concealing, respectively, such official’s increase in his or her patrimony or the use of goods or services that may not be justified.
The offence of influence-peddling is provided under GLAR Articles 60 and 68, and FCC Article 221. A public official perpetrates the offence of influence-peddling when he or she uses his or her position in order to incite another public official to perform, delay or omit to perform an act for the conferment of an improper benefit for him or her or for a third party. Individuals and corporations may perpetrate the offence of influence-peddling when using their influence, economic or political power over any public official in order to obtain a benefit or advantage for themselves or for third parties, regardless of the acceptance or reception of the benefit, and regardless of the results obtained.
The offence of influence-peddling encompasses related offences such as the exchange of influence on the decision-making for an undue advantage.
The offence of concealment is provided under GLAR Article 62, and FCC Article 400. Under the GLAR, a public official perpetrates the offence of concealment when certain acts or omissions that could be considered as offences come to the official’s knowledge, and he or she deliberately tries to hide them. The FCC provides that individuals may also perpetrate the offence of concealment when:
The offence of disobedience is provided under GLAR Article 63. A public official perpetrates the offence of disobedience when he fails to respond, actively delays or with no valid justification denies information or requirements ordered by the authorities.
Obstruction of justice
The offence of obstruction of justice is provided under GLAR Article 64. A public official perpetrates the offence of obstruction of justice when he or she fails to start an investigation even though certain acts or omissions that could be considered as offences come to such official’s attention. Also a public official perpetrates the offence of obstruction of justice when the public official initiates an investigation on the grounds of non-existing offences.
Illicit participation within administrative proceedings
The offence of illicit participation is provided under GLAR Article 67. A public official perpetrates the offence of illicit participation within administrative proceedings when such public official actively participates in administrative proceedings notwithstanding a prohibition order against such participation. Whoever participates in administrative proceedings on behalf of someone who is expressly prohibited to do so may also perpetrate this offence.
Use of false information
The offence of use of false information is provided under GLAR Article 69. Corporations and individuals may perpetrate the offence of use of false information when they file false or altered information or documents, that simulate compliance with administrative proceedings’ rules and requirements, in order to obtain a benefit, authorisation or advantage, or in order to damage a third party.
The offence of collusion is provided under GLAR Article 70. Individuals may perpetrate the offence of collusion when they execute acts in company of one or more individuals or companies in order to obtain an improper benefit or advantage in public procurements within all levels of government.
Also, under GLAR Article 70, if an intermediary performs acts of collusion to obtain a benefit on behalf of the individual or company that instructed the intermediary to do so, both the intermediary and the company or individual shall be prosecuted for acts of collusion.
See above, 1.2.1 Bribery.
There are offences relating to inaccurate books and records under the securities laws. Under the Securities Market Law (SML) articles 376 and 383, directors, officers or individuals may be subject to penalties that could be up to prison from two to ten years, if they record false information in the company’s books and records, or if they fail to include any relevant information regarding the accounting of the company or the increase or decrease of their assets or liabilities. Also, under SML articles 36, 46, 153, 368 and 369, companies and their representatives may be subject to penalties if they provide false information within the securities market. However, this only applies to companies that list their securities or issue debt by means of the stock exchange. Public markets in Mexico are very limited and underdeveloped. Hence, the real application of these rules is restricted only to those participants in public markets.
Furthermore, Mexican law also punishes the crime of “falsification of documents” under FCC, Article 243.
Please refer to 1.2.1 Bribery.
Please refer to 1.2.1 Bribery.
As general rule, the GLAR has a geographical reach limited to Mexico. However, Article 70 provides that collusion has an extra-territorial reach to international business transactions. Thus, when investigating collusion, Mexican authorities shall be able to request information from foreign authorities regarding the investigated facts. Criminal law also has extraterritorial effects for purposes of prosecuting foreign bribery in international business transactions.
Under GLAR Article 24, corporations can be held liable for all the offences contained therein if the offences are committed by individuals that act on their behalf to directly or indirectly obtain benefits for the corporation.
Regarding criminal liability for offences in the area of bribery and corruption, under Article 11 bis of the FCC, corporations could be held liable only for the offences of bribery, influence-peddling and concealment.
Both individuals and companies can be held liable for the same offence. In an M&A context, it is not clear whether successor entities could be held liable for offences incurred prior to the acquisition. However, in our experience we have found post-acquisition liability in target entities and have successfully mitigated liability by means of co-operating with the Mexican authorities in revealing the findings of the previous wrongdoers. Thus, we have successfully mitigated the acquiring entities' potential exposure to corporate criminal liability and found the Mexican authorities to be very receptive to the acquiring entity coming forward with findings of wrongdoing of the previous management. In this context, relevant factors for successful co-operation and reduction or relief of sanctions are proving that the successor entity has an internal compliance programme for prevention of crimes, providing material, timely and relevant information regarding the corresponding facts and proposing reparation of damages to the corresponding authorities.
The guidelines for determining the rules for corporate prosecution and the criteria that would be considered for the imposing of sanctions would depend entirely on the corresponding law-enforcing authority.
For the GLAR offences referred herein, the term for enforcing liability is seven years as of the following day from the commitment of the offence or as of the following day from when the offence ceased. There are no precedents interpreting the GLAR statute of limitations. As to the offences from the FCC, it varies on a case-by-case basis.
Under the GLAR, the main defence towards corporate administrative liability is having a robust compliance programme. This can be found under GLAR Article 25.
Under FCC Article 11, corporations have a liability reduction option of up to one-quarter of the penalty regulated under Article 422 of the Criminal Procedures National Code provided that the company demonstrates that, before the commission of the conduct for which the company is being prosecuted, it had a compliance department focused on preventing the commission of criminal conducts and that previous to or after being accused, the company sought to mitigate the damages caused by the conduct.
Under the FCC, evidence shall not be admitted and shall lack evidential value when it contains false or altered information, when evidence is obtained by illegal means, or when evidence is obtained by means of torture, coercion or attacks against the fundamental rights of third parties.
There are no de minimis exceptions for the above offences.
There are no sectors or industries exempt from the above offences.
Under GLAR Articles 88 and 89, if a corporation or individual perpetrates an offence provided therein and self-reports, it could request a sanction-reduction benefit of 50% to 70% of the corresponding sanctions of the offences incurred.
For the authority to grant the sanction reduction benefit, it would be necessary that the following conditions are met:
Under GLAR Article 78, public officials shall be subject to the following sanctions:
Under GLAR Article 81, individuals that perpetrated the offences provided herein shall be subject to the following sanctions:
Also, under GLAR Article 81 corporations are subject to the following sanctions:
GLAR Article 80 provides the guidelines applicable to the assessment of penalties for public officials, which should take into account:
GLAR Article 82 provides the guidelines applicable to the assessment of penalties for individuals:
For corporate liability, under GLAR Article 25, the company’s integrity policy must be considered by the law enforcement authority for determining the corresponding sanctions.
GLAR Article 25 provides that companies will benefit from reductions of sanctions if they have compliance programmes that comply with the factors therein described. Moreover, under Article 27 bis of the Federal District’s Criminal Code and Article 421 of the Criminal Proceedings National Code, corporations may be held liable when they do not enforce due control processes (eg, when they lack proper compliance programmes) over the people under their authority that perpetrate crimes (including corruption offences). It is understood that corporations do not comply with the implementation of due control processes:
Article 222 of the Criminal Procedures National Code provides that “every individual that is aware of facts that may constitute a crime, is compelled to report it before the Public Ministry, or before any police agent in case of urgency […] if an individual fails to this reporting obligation, he/she would be subject to the corresponding sanctions.” Thus, technically, individuals and/or companies are always compelled to disclose any violation of anti-bribery and anti-corruption provisions of which they become aware. However, the term “corresponding sanctions” is not defined in the Criminal Procedures National Code or in the FCC. Article 14 of the Mexican Constitution provides that authorities cannot impose penalties if they are not expressly established in law. Hence, Article 222 lacks a clear sanction and, therefore, the non-performance of the obligation contained in Article 222 of the Criminal Procedures National Code will not necessarily imply sanctions to the offenders.
Whistle-blower protection programmes in Mexico are not commonly pursued by the Law Enforcing Authorities. In our experience, people prefer to report the corruption acts they are aware of in an anonymous way rather than publicly.
There are no specific incentives for whistle-blowers in Mexico to report acts of bribery or corruption.
There are very few legal provisions that incorporate protection programmes for whistle-blowers. However, the immunity programme in Article 103 of the Federal Economic Competition Law provides that any competitor involved in absolute monopolistic practice may request a fine reduction; the amount depends upon the time of the request compared to other competitors, but may go up to 100%. The Federal Economic Competition Commission will maintain the identity of such competitors as confidential.
The enforcement of Mexico’s anti-corruption provisions has been a constant challenge to the national authorities in the past few years. The SPF, which enforces the GLAR, has started to bring serious charges. For example, in September 2018, the SPF imposed an approximately USD50 million sanction on Odebrecht, plus a debarment from participating in public procurement processes. On the other hand, enforcement of the criminal side of the equation has been very limited due to procrastination from Congress with regard to issuing the Organizational Law of the Attorney General’s Office. In the week of 12 November 2018, the Senate passed a bill to regulate such law. This law includes the incorporation of the Special Anti-corruption Prosecution Agency, which has been part of the Mexican constitution since February 2014. With Andrés Manuel López Obrador having grounded his presidential campaign in fighting corruption, and his coming into office in December 2018, expectations are high and we hope to see enforcement picking up on the criminal side of things.
In terms of administrative liability concerning corruption offences, there are two principal authorities in charge of imposing administrative liability.
The Ministry of Public Function is the authority in charge of investigating improper conducts. Its general powers attributed by law regarding corruption offences are, in essence, the following:
The Federal Court of Administrative Justice is the authority in charge of imposing sanctions regarding corruption offences. Its general powers attributed by law regarding corruption offences are, in essence, the following:
As to corporate criminal liability, there are also two main authorities that participate in imposing liability regarding corruption offences: prosecutors and courts.
Jurisdiction is shared in Mexico between federal and state authorities in both administrative and criminal instances.
This information is not available.
Examples of discretionary mitigation are the following:
However, as mentioned before, the guidelines for determining the rules for prosecution will depend entirely on the corresponding law enforcement authority.
Jurisdiction between authorities is allocated in federal and state matters, depending on: (i) where the conduct took place; (ii) what the conduct being investigated is; (iii) the type of interests involved (federal or state). Also, for criminal matters, there is a catalogue of which crimes shall be prosecuted within federal jurisdiction.
There are two main landmark investigations in Mexico involving corruption: (i) OHL Mexico, and (ii) and Odebrecht.
Odebrecht is a wide-reaching corruption scandal involving USD800 million payments involving the authorities of 14 countries across the world. Regarding Mexico, Odebrecht acknowledged paying USD10.5 million in bribes to the former head of Mexico’s state-owned oil company, Pemex. As of today, Mexico has banned federal institutions and state governments from doing business with Odebrecht SA for the next two years and fined the company approximately USD60 million.
OHL Mexico SAB (OHL) is a company that operates toll roads throughout Mexico. In 2015, OHL allegedly misled Mexican authorities about its projected profits on toll roads when winning concessions. The investigation began after audio recordings were posted on YouTube showing executives discussing pay-offs to judges in exchange for favourable rulings and a free luxury hotel stay for a public official. Even though regulators did not find evidence of fraud, the company was fined for its accounting practices for USD4.10 million by Mexico’s securities regulator (CNBV) and for USD1.4 million by the government of the state of Mexico.
In our experience, the sanctions imposed as a consequence of the offences provided herein are mainly economic fees, detailed in 3.1 Penalties on Conviction, above. However, as mentioned before, sanctions for wrongdoers may go up to suspension of business activities, or even dissolution of a legal entity.
On 1 August 2016, the OECD favourably welcomed the laws comprised in the NAS providing that “The OECD welcomes the laws of the National Anti-corruption System that were approved by the Mexican Parliament on June 16, 2016 and enacted on July 18, 2016, clearing the way for one of the key pillars of Mexico’s structural reform agenda. The promulgation of these laws substantially transforms the anti-corruption architecture of Mexico by putting in place measures that the OECD considers effective.”
The strengths identified by the OECD are the following:
On 15 November 2018, the Mexican Senate approved the organisational law for the FGR in order to regulate FGR’s organisation, functioning and powers. Explanatory statements provide that FGR will be an autonomous institution governed by the principles of justice, transparency, efficiency, and credibility. The creation of the FGR shall comprise the creation of four supporting prosecutorial entities specialised in: human rights matters, electoral offences matters, corruption matters and internal matters.
FGR’s organisational law was approved by 70 votes in favour and 47 against. The 47 senators that voted against the law expressed the view that this law does not guarantee the autonomy of the FGR since the appointment of its head does not contemplate any community participation (as proposed by the civil organisations called #FiscalíaqueSirva (For a functional FGR) and #VamosporMás (Let’s go for more). Also, under this law, the President in office shall be the only one able to remove the head of the FGR from his functions. Thus, FGR is being accused of being another institution subordinated to political power in Mexico. The Mexican House of Representatives (Cámara de Diputados) shall decide in the following months whether FGR’s organisational law shall pass or not. However, since the representatives of MORENA (the President-elect’s political party that passed the law in Senate) also have a majority in the Chamber of Representatives, FGR’s organisational law is likely to pass.