On August 17, 2023, Chile enacted Law No. 21.595, known as the “Economic Crimes Law.” This groundbreaking legislation responds to social unrest and perceptions that white-collar crimes were not adequately penalised. After three years of rigorous debate in Congress, President Gabriel Boric signed the law on August 7, 2023, marking a significant shift in the nation’s legal landscape.

Background and Motivation

Chile’s social and political turbulence in recent years motivated the Economic Crimes Law. Public dissatisfaction arose from the belief that the legal system favoured white-collar criminals, allowing them minimal consequences. The new law aims to correct this imbalance with stringent penalties and a broader scope of offences considered economic crimes.

Key Aspects of the Economic Crimes Law

  1. Expansion of Economic Crimes: The law categorises offences into four main categories:
    • First Category: Includes insider trading, fraudulent share sales, and private sector corruption.
    • Second Category: Covers crimes committed by individuals in business roles or for a company’s economic benefit, such as environmental violations, tax evasion, and intellectual property infringements.
    • Third Category: Pertains to crimes involving company officials, including bribery, fraud, and embezzlement.
    • Fourth Category: Encompasses money laundering and asset concealment associated with economic offences.
  2. Stricter Penalties and Sanctions: The law introduces a new regime of penalties for individuals and entities involved in economic crimes. Key changes include:
    • Elimination of Substitution Penalties: For severe economic crimes, substitution of imprisonment with less severe penalties is generally eliminated.
    • Introduction of Fines: Fines are calculated based on the offender’s income, ensuring proportionality to the crime’s economic impact. Severe offences can incur fines up to 400 days of income for companies.
    • Increased Responsibility for Executives: Company executives and directors can now be personally accountable for a wider range of infractions, with harsher penalties for decision-makers.
  3. Corporate Liability: The law significantly expands corporate criminal liability. Over 300 offences can now trigger legal repercussions for companies, including environmental crimes, computer fraud, and misappropriation of professional secrets. The liability framework extends to state universities, political parties, and religious entities.
  4. Environmental Crimes: A new Penal Code section addresses environmental offences, aligning criminal and administrative regulations to protect the environment. Stringent penalties for pollution and environmental damage are treated as economic crimes when benefiting a company.
  5. Preventive Measures and Compliance: Companies are encouraged to adopt crime prevention models to mitigate risks. An effective model can exempt a company from criminal liability if it includes risk assessments, secure reporting channels, and regular independent evaluations.

Implications for Businesses

The Economic Crimes Law demands companies operating in Chile reevaluate their compliance programs and internal controls. The broadened scope of criminal liability and severe penalties require businesses to ensure robust mechanisms to prevent and detect economic crimes. This legislative change aims to enhance corporate governance and accountability, strengthening Chile’s legal and regulatory framework.

Key areas of focus for businesses include:

  • Review and Update Compliance Programs: Ensure compliance programs align with the new legal requirements. Regular risk assessments and updates to internal policies and procedures are crucial.
  • Training and Awareness: Employees at all levels should understand the new law and its implications. Regular training sessions can help prevent inadvertent violations.
  • Enhanced Monitoring and Reporting: Implement robust monitoring systems to detect and report suspicious activities promptly. Establish secure channels for whistleblowers.
  • Legal and Financial Preparedness: Prepare for potential legal and financial repercussions by setting aside funds and resources to handle investigations and penalties.

In Summary

Law No. 21.595 represents a transformative change in Chile’s legal approach to economic crimes. By imposing stricter penalties and expanding the scope of criminal liability, the law addresses societal demands for greater accountability and justice in the economic sphere. For businesses, navigating a stringent regulatory environment and ensuring comprehensive compliance is essential to avoid severe penalties

360 Law Services in Chile can assist businesses in navigating the new Economic Crimes Law by providing expert legal advice and compliance solutions. They can help companies review and update their compliance programs, offer employee training on the new legal requirements, and establish robust monitoring and reporting systems. Additionally, 360 Law Services can support businesses in preparing for potential legal and financial repercussions, ensuring they have the necessary resources and strategies to manage investigations and penalties effectively. With their expertise, companies can enhance their corporate governance and maintain regulatory compliance in Chile’s evolving legal landscape

Key Takeaway Points

The key takeaway points from the blog:

  1. Enactment of the Economic Crimes Law: Chile enacted Law No. 21.595, the “Economic Crimes Law,” on August 17, 2023, to address white-collar crime inadequacies.
  2. Motivation: The law responds to social unrest and public dissatisfaction with perceived leniency toward white-collar criminals.
  3. Expansion of Economic Crimes: The law categorises offences into four main categories, including insider trading, environmental violations, and money laundering.
  4. Stricter Penalties and Sanctions: The law eliminates substitution penalties for severe crimes, introduces income-based fines, and increases responsibility for executives.
  5. Corporate Liability: Over 300 offences now trigger corporate criminal liability, extending to state universities, political parties, and religious entities.
  6. Environmental Crimes: A new Penal Code section aligns criminal and administrative regulations for better environmental protection.
  7. Preventive Measures and Compliance: Adopt crime prevention models to potentially exempt your company from criminal liability if you implement them effectively.
  8. Implications for Businesses: Businesses must reevaluate compliance programs, ensure employee training, enhance monitoring and reporting systems, and prepare for legal and financial repercussions.
  9. Summary: The law aims to enhance corporate governance and accountability by imposing stricter penalties and expanding the scope of criminal liability, responding to societal demands for justice in the economic sphere.

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