Administrative Fines Loom for Companies That Fail to Meet Risk and Compliance Management Obligations

The Argentine government has recently introduced new laws that impose administrative fines on companies that fail to meet risk and compliance management obligations, as part of a broader effort to prevent money laundering and financing terrorism.

Failure to Establish Proper Systems Can Lead to Consequences

According to regulatory bodies, failure to establish proper risk and compliance management systems can lead to breaches of administrative, civil, and criminal regulations. Companies found guilty of such failures may face fines, suspensions, and disqualifications.

Criminal Liability Unlikely

While there is no specific provision for criminal liability in cases of risk and compliance management deficiencies, companies that fail to meet these obligations may still face indirect consequences, including loss of access to benefits such as “exception from penalties” and “reduction in penalties.”

Liability of Senior Management

Senior management and governing bodies may also face civil liability if they fail to establish proper risk and compliance management systems. This can lead to legal action by shareholders, stakeholders, or the company itself.

Administrative Consequences

Regulatory agencies, such as the Argentine Central Bank, Securities Commission, and Financial Information Unit, have the power to impose administrative sanctions on senior management for breach of regulations setting forth risk and compliance management obligations. These sanctions typically include fines, suspensions, and disqualifications.

No Corporate Compliance Defence

Currently, there is no specific corporate compliance defence under applicable laws and regulations. However, companies may be able to reduce penalties if they establish a proper control and supervision system before the breach occurred, return any undue benefits obtained through the crime, and demonstrate subsequent good behaviour.

Recent Cases

As these laws have been recently enacted, there are currently no leading cases regarding their enforcement. However, authorities are taking into account various factors when imposing sanctions on individuals or entities subject to their power.

Government Obligations

In a surprising move, government agencies and state-owned enterprises do not have special risk management obligations under current regulations. However, the federal administration has approved a code of ethics for public officials that includes anti-corruption compliance obligations.

Conclusion

With these new regulations in place, companies would be wise to review their risk and compliance management systems to avoid potential administrative fines and other consequences.