A new law in Chile that expands the scope of white-collar crime is generating a lot of work for lawyers while scaring off investment.
Chile’s Economic Crimes Law, which took effect in September, came in response to the social unrest that rocked the South American country before the pandemic. One of the protestors’ complaints was that those who commit white-collar crimes are not adequately penalized.
Francisca Franzani. Courtesy photo
“This was a paradigm shift,” said Francisca Franzani, a partner at DLA Piper in Chile. “The changes are exponential.”
The law expands the range of criminal offenses for which a company can be held liable and introduces both personal liability for senior leaders at companies and new environmental offenses.
Franzani said that large companies have been the first to take this law seriously, with those operating in the mining, petroleum and energy sectors showing the most concern.
Chile is the world’s top producer of copper, accounting for nearly a quarter of global supply. The country is also a major extractor of critical minerals such as lithium.
The new law holds entities and even individuals responsible for environmental damage caused by business operations. Previously, only water pollution was considered a crime in Chile, though enforcement has been flimsy.
Franzani cautions that companies making acquisitions in Chile will need to conduct deeper due diligence since buyers will be responsible for crimes committed by the sellers.
Rodrigo Albagli, managing partner of Chilean full-service firm Albagli Zaliasnik, said the combination of more regulations, together with the threat of criminal charges for noncompliance, is a “terrible recipe” for a country that has long been a darling of international investors within Latin America.
“Top executives are worried about how responsible they will be,” said Albagli. “This is making us [Chile] much less attractive.”
Franzani is more optimistic about the impact of the law.
Global companies already have robust compliance mechanisms in place, she noted, so they just need those policies to be adapted for the local market.
Down the road, she imagines that Chile’s white-collar rules will be a selling point for investors looking to expand in Latin America.
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Publish date : 2024-09-30 03:50:00
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