Administrative and Regulatory Consequences for Risk and Compliance Management Deficiencies Under Law No. 27,401

In recent years, the Argentine government has implemented various regulations aimed at ensuring compliance with risk and regulatory obligations within different industries. As a result, undertakings are now facing administrative and regulatory consequences for failure to comply with these requirements.

Consequences for Undertakings

Undertakings may face administrative or regulatory consequences for risk and compliance management deficiencies only if regulations issued by administrative regulatory authorities set forth specific risk and compliance management obligations. For example:

• Non-compliance with resolutions issued by the Argentine Central Bank and the Argentine Securities Commission may lead to financial entities and listed companies facing regulatory sanctions, including:
  • Fines
  • Suspensions
  • Disqualifications
• The National Superintendence of Insurance also has the power to impose administrative sanctions on insurance and reinsurance entities for breach of regulations regarding risk and compliance management, which include:
  • Fines
  • Warnings
  • Suspensions to operate
• Anti-money laundering and anti-financing terrorism regulations provide for administrative fines in case of breach of regulations setting forth risk and compliance management obligations.

Criminal Liability

Undertakings do not face criminal liability for risk and compliance management deficiencies under Law No. 27,401. However, legal entities may have indirect criminal consequences if the risk and compliance management carried out in connection with their integrity program is deficient.

Liability of Governing Bodies and Senior Management

Members of governing bodies and senior management may face:

• Civil liability for breach of risk and compliance management obligations if they fail to establish proper risk and compliance management, as required by relevant regulations and their fiduciary duties.
• Proceedings initiated against them by the legal entity, shareholders, or stakeholders.

Administrative and Regulatory Consequences

Members of governing bodies and senior management may face administrative or regulatory consequences for breach of risk and compliance management obligations if those obligations are established in regulations issued by relevant administrative regulatory agencies. For example:

• The Argentine Central Bank, the Argentine Securities Commission, and the Financial Information Unit have the power to impose administrative sanctions on members of governing bodies and senior management of financial entities, listed companies, or foreign exchange agencies for breach of certain regulations setting forth risk and compliance management obligations.

Corporate Compliance

There is no corporate compliance defense under Regulation ‘A’ 5398 of the Argentine Central Bank, Resolution 38,477 of the National Superintendence of Insurance, or Resolution 606/2012 of the Argentine Securities Commission. Law No. 27,401 establishes provisions that are not considered actual defenses but can be considered as factors to extinguish or reduce penalties.

Government Obligations

Regarding risk management obligations, there are no special rules for government, government agencies, and state-owned enterprises. However:

• Decree 41/1999 of the federal administration approves the code of ethics for public officials working in such administration, which provides compliance anti-corruption obligations.

Conclusion

Undertakings, governing bodies, and senior management must be aware of the administrative and regulatory consequences for failure to comply with risk and compliance management requirements. The Argentine government has implemented various regulations aimed at ensuring compliance within different industries, and those who fail to comply may face severe penalties.