We break down Circular 1/2016
The State Attorney General's Office has published the long-awaited Circular 1/2016, which provides the criteria for interpreting the new regulations on the criminal liability of legal entities introduced by Organic Law 1/2015, which amends the Penal Code and specifically outlines the "rules of the game" or instructions that our prosecutors must take into account when assessing the effectiveness of the compliance prevention model or planincompanies, which, after the reform, is configured as an exemption from criminal liability.
Thus, and without prejudice to taking into consideration the circumstances of each specific case, the Circular provides that the Public Prosecutors observe the following general guidelines to assess the effectiveness of these models:
a) Compliance programs must be written, clear, precise, and effective. The mere existence of a program, however comprehensive, is insufficient; its suitability for preventing the specific offense committed must be demonstrated. To this end, an assessment of the program's content in relation to the infraction must be carried out. Therefore, organizational and management models must be perfectly adapted to the company and its specific risks.
b) must be taken with simply copying and pasting compliance programs, under the assumption that this automatically qualifies the company for compliance, because it does not. It is not uncommon in other countries for companies to simply copy programs developed by others in order to reduce costs and prevent their programs from deviating from industry standards. This practice raises serious concerns about the suitability of the adopted model and the company's genuine commitment to preventing criminal activity.
c) The prosecutors must analyze whether the prevention model expresses a corporate commitment that truly deters criminal conduct. The Circular expresses its concern here about merely cosmetic models, whose sole objective is to evade prosecution when what they should be pursuing is “promoting a genuine corporate ethical culture.”
d) Having a compliance program should not be interpreted as an automatic exemption from criminal liability. Therefore, certifications issued by evaluation and certification companies or associations attesting to the quality of the prevention system do not prove its effectiveness nor do they replace the assessment that falls to the judicial body.
e) Any effective model depends on “the unequivocal commitment and support of senior management to instill a culture of compliance throughout the rest of the company.” If those ultimately responsible for it fail to comply, or if they directly or indirectly reward or incentivize employees who do not, it can hardly be considered effective.
f) “Corporate responsibility must be more stringent in cases where criminal conduct primarily benefits society.” Therefore, legal entities may be required to ensure that the hiring or promotion of the offending individual adheres to protocols and procedures that guarantee high ethical standards in the recruitment and promotion of managers and employees. Only those actions carried out by the individual under the guise of the corporate structure, solely for their own benefit or that of third parties, and which are likely to provide the entity with some direct or indirect benefit, will be excluded from the criminal liability of the legal entity.
g) The prosecutors will attach special value to the discovery of crimes by the company, so that, once the criminal conduct has been detected and brought to the attention of the authority, they must request exemption from punishment, as evidenced not only of the validity of the model, but also its consistency with a corporate compliance culture.
h) Although the commission of a crime does not automatically invalidate the prevention model, it may be seriously called into question depending on the severity of the criminal conduct and its extent in the company, the high number of employees involved, the low intensity of the fraud used to circumvent the model, or the frequency and duration of the criminal activity.
i) “The prosecutors will take into account the corporation’s past behavior.”Thus, the firmness of the response in previous situations must be valued positively, and the existence of previous or pending criminal proceedings, even if they refer to criminal conduct different from that being investigated, “or previous sanctions in administrative proceedings,” must be valued negatively.
(j) Regarding the Compliance Officer , the Circular states that this must necessarily be a body within the legal entity (although compliance tasks may be carried out by other bodies or units other than the specific compliance unit). The essential requirement is that there be a supervisory body overseeing the overall functioning of the model, and the various activities involved in the compliance function may be outsourced. If this body fails to fulfill its oversight obligations, the legal entity will in no case be exempt from criminal liability.
k) Regarding small businesses, the Public Prosecutor's Office has already indicated that it will exercise extreme caution in bringing charges against them, given that their organizational structure cannot be compared to that of more complex companies. These smaller businesses will be able to demonstrate their ethical commitment by adapting the formal requirements to their own size, thus proving their culture of regulatory compliance beyond the literal wording of the law and consistent with the less stringent accounting, commercial, and tax requirements these companies also face.
Olga García
Civil/Criminal Area
Àmbit Assesor
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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