Anticorruption enforcement gathers momentum in Mexico
February 2020 | SPECIAL REPORT: CORPORATE FRAUD & CORRUPTION
Financier Worldwide Magazine
February 2020 Issue
Many things changed over the course of 2019 in Mexico. The new government, which was inaugurated in December 2018, came on the back of a landslide election that gave the new president not only a clear mandate for change, but also the necessary votes to have a legislative majority both in Congress and in the Senate.
His main political messages during the campaign were to fight corruption, to reduce impunity, to have an austere government and to provide a social net for the poorest Mexicans. The success of this political offer resulted in a concentration of power in the president not seen since the 1970s when Mexico was ruled by a de facto state political party.
Expectations on the anticorruption front continue to be immense, and in 2019 the new government took several steps to advance its anticorruption agenda. The purpose of this article is to highlight the key developments that are having an impact on anticorruption enforcement, compliance and investigations in Mexico, and which will be essential elements to understand what will unfold in 2020.
Some necessary background
Since 2014, Mexico has been steadily implementing the constitutional and legislative changes to adopt a new Sistema Nacional Anticorrupción or National Anticorruption System (SNA), which encompasses the creation of the institutions to investigate and prosecute corruption. It includes many key features that are compatible with international practices and institutions, such as criminal and administrative liability for corporations, the ability to enter into legal agreements akin to deferred prosecution agreements (DPAs), plea bargains and structured settlements, and the appointment of independent prosecutors, both at the state and federal levels.
Simultaneously, Mexico has made major changes to its criminal procedural system in recent years. In 2015, the country moved from a mostly written process into an oral procedure with ‘opportunity criteria’ to benefit collaborators, and which includes new alternative resolution mechanisms and abbreviated procedures. Changes to criminal procedures continue to be learned and digested nationwide by practitioners and enforcers.
In recent years, Mexico has fallen several places in the Transparency International Corruption Perceptions Index to its current position of 138 out of 180 countries, with a score of 28 out of 100, and with corruption scandals dominating the media and creating the social unrest that led to the election results of 2018.
This prior foundational work and prevalent social mood helped provide a framework and offered support to the new government in its anticorruption efforts.
Completing institutional changes
In December 2018, the Procuraduría General de la República (PGR) or Attorney General’s Office, was transformed into an autonomous prosecuting entity, the new Fiscalía General de la República (FGR) or new Chief Prosecutors Office. This change is not merely a cosmetic one but has required a complete overhaul and reengineering of the top federal prosecuting office to redefine areas, responsibilities and mission. Much of this work is still ongoing as the FGR continues to hire personnel and develop the institutional capabilities required to achieve its objectives.
The country’s first chief prosecutor and first specialised anti-corruption chief prosecutor were appointed in January and March of 2019, respectively, for a term of nine years, a previously unseen tenure for prosecutors. With the appointment of the first specialised anti-corruption chief prosecutor, the amendments to the Federal Criminal Code grouped under the section named ‘Crimes Arising from Corrupt Situations’ became effective, which include bribery, intimidation, abusive exercise of authority, influence peddling, embezzlement of public funds and illicit enrichment.
These changes and appointments are key to the SNA coming alive and entering enforcement mode, as these are the prosecutors who will build anticorruption cases and bring bad actors to justice.
Enforcement actions in 2019
A year into this government we can state that the enforcement of anticorruption laws has changed significantly, as well as that of other closely related laws, such as anti-money laundering laws.
We must give a special mention to the new role of Mexico’s Unidad de Inteligencia Financiera (UIF) or Financial Intelligence Unit, which is the part of the finance ministry tasked with combatting and preventing money laundering, and which has a new proactive enforcement policy. In contrast with the past, the UIF was unusually active in 2019, investigating and freezing accounts related to corruption investigations. It has provided the FGR with information on its first major cases, such as the action against the former head of the national oil company PEMEX, and the chairman of Altos Hornos de México, in a related high-profile case which involved the use of Odebrecht offshore accounts for the alleged payment of bribes, with wide political repercussions.
Furthermore, the FGR and the new first specialised anti-corruption chief prosecutor, as of December 2019, have announced that they are working on the investigation of 680 new criminal cases related to corruption. The effects of the 680 investigations to date will continue to make ripples and add to the high-profile prosecution cases already made public.
Private sector concerns with new laws
Amid these new enforcement realities, a major element of concern for the private sector throughout 2019 was the passage of laws which create a greater risk of prosecution, such as the inclusion of a new list of crimes that now may be subject to mandatory preventive prison sentences and which include crimes of corruption or tax evasion, which are now linked to organised crime. There is greater concern in this regard given that the new criminal procedure system was based on the opposite philosophy and lowered the bar for admission of criminal claims to reasonable indication of the possible commission of a crime. Also, a new Asset Forfeiture Law, which provides a civil process, independent from the criminal process, and which can swiftly result in the forfeiture and sale of the assets, has added to the concerns.
New trade agreement includes anticorruption chapter
Also, the new US, Mexico and Canada Trade Agreement (USMCA), which was finalised in December 2019, includes in Chapter 27 a whole section on anticorruption and compliance. The countries have agreed to cooperate and exchange information to support the enforcement of the anticorruption laws of the three countries and to support the adoption of compliance programmes for the companies of the trading block. This cooperation, and good will efforts, will likely result in greater awareness of compliance and greater coordination in anticorruption enforcement actions in the region.
Compliance to take centre stage in private sector efforts
All of the above has resulted in a greater awareness and concern among companies to adopt, develop and improve their compliance programmes, so that they can have elements to provide in their defence and prove their good faith and conduct. Companies that take these early signs of changes to heart and develop effective compliance programmes will create a strategic competitive advantage over the rest. We are beginning to see compliance gain momentum and the need to provide quality advice on these matters has spurred top law firms in the country to offer these services.
Conclusion
The coming years will be crucial for Mexico in the fight against corruption. 2020 will be a pivotal year in corporate criminal investigations and enforcement. It will be a year when Mexico solidly joins the regional and global wave of anticorruption enforcement, investigations and compliance.
Luis Dantón Martínez Corres is a partner at Ritch Mueller. He can be contacted on +52 (55) 4165 7104 or by email: ldanton@ritch.com.mx.
© Financier Worldwide
BY
Luis Dantón Martínez Corres
Ritch Mueller
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