Like the rest of the world, Mexico is focused on the response to Covid-19. And yet we’re continuing to see important anti-corruption and compliance developments, that must not go unnoticed amidst this crisis, such as the following:
First, the United States, Mexico and Canada Trade Agreement, or USMCA, has been ratified by the Canadian Senate in March, completing the ratification process by the three signatory countries. This is highly significant, given that the parties to the agreement now have a common understanding on anti-corruption and compliance in Chapter 27 of USMCA.
Accordingly, once the world resumes normality — whatever that new-normality will be after this watershed crisis — the parties to the agreement will presumably shift their attention to enforcing it in its terms. Of particular importance is the commitment of the parties’ prosecution entities to cooperate and coordinate in matters related to the application of their anti-corruption laws. As stated in a previous post, international cooperation will prove to be one of the most important forces driving anti-corruption prosecution and enforcement in Mexico the next few years.
Second, last month the Prosecution Bureau Specialized in the Combat of Corruption, which forms part of the Federal Prosecution Office (FGR), also submitted in writing its first Annual Report to the Senate of Mexico. Covid-19 prevented the live attendance of the head of such prosecution entity to the Senate. According to the report, three things must be foremost in the mind of companies, management, boards and shareholders:
- The FGR expressly vows to focus in the prosecution of crimes of corruption committed by companies, to end with their impunity and that of its agents and representatives, and commits to the creation of a specialized area solely dedicated to corporate corruption.
- The FGR also aims to develop guidelines for the evaluation of corporate compliance programs of companies under criminal investigation, which will be a highly significant development in and of itself.
- The FGR intends to submit modifications to several laws related to combatting corruption to strengthen its prosecutorial rights and effectiveness, such as: the Federal Criminal Code, the National Code of Criminal Procedures, the Anti-Money Laundering Law and the National Asset Forfeiture Law. These reforms aim to give the FGR greater power and jurisdiction over money laundering and corrupt offenses particularly with respect to corporations, protection of whistleblowers, special settlement procedure guidelines in corruption matters, use of technology in investigations, enhanced surveillance and investigation protocols, and most importantly to define clearly what the standard for compliance is required from companies which is now ill defined in the law.
This Annual Report is of the highest importance and has gone mostly unnoticed, understandably so, in the current Covid-19 crisis. Despite the urgent survival priorities of the present moment, companies should also consider in the longer view that Mexico continues to develop its institutions and tools to combat corruption and therefore compliance programs must not be abandoned as they are essential to protect and defend the company in a potentially more adverse environment of heightened enforcement.
Third, the application, enforcement and prosecution of the anti-money laundering law has taken a more vigorous stance since 2019, both for financial and non-financial entities. Last month, the Financial Intelligence Unit and the Tax Revenue Service (SAT) have issued a joint communication requesting that all parties involved in Vulnerable Activities set forth in article 17 of the Federal Anti-Money Laundering Law document any facts that may cause a delay in the presentation of Notices of Vulnerable Activities so as to be in a position to request the SAT for an authorization to implement a Self-Correction Program in respect of activities conducted since March 2020 and until the preventive measures determined by the Government of Mexico as a result of Covid-19 are lifted.
When we return to normalcy we can expect anti-money laundering enforcement to continue to be one of the key drivers of anti-corruption prosecution and enforcement in Mexico.
Fourth, the Federal Commission of Economic Competition (COFECE) announced that in order to help avoid that supply chains are disrupted or that supply is artificially restricted and prices of goods and services increase, it will not pursue collaborative arrangements between economic agents which, in the present context, are necessary to maintain or increase supply, meet demand, protect supply chains, avoid shortages or hoarding of goods, and which are not intended to foreclose competitors and will take into consideration that the current circumstances could result in price increases. The COFECE determined that such increases should be an individual and independent decision of each company.
The COFECE will also keep under review the markets where it observes indiscriminate price increases, in order to rule out the existence of undue barriers or agreements between competitors that result in such increases. Otherwise it will initiate an investigation procedure to prosecute and sanction the economic agents involved, since in the present circumstances any agreement between competitors that affects competition would be considered as particularly serious.
Lastly, the COFECE will expeditiously carry out merger review proceedings leading to synergies and to increased production capacities, in order to meet in a timely and adequate manner the needs of the population arising from this health emergency.
As serious and destructive as the Covid-19 crisis is proving to be, it too shall pass. Meanwhile, companies and compliance professionals must remain one step ahead of Mexico’s continuing wave of enforcement.
Luis Dantón Martínez Corres, pictured above right, is the partner leading the Compliance, Anti-Corruption and Investigations practice of the Mexico-based law firm, Ritch Mueller. He can be contacted here.