The dynamics in the market are increasingly complex, and in this context, it is necessary for companies to implement due diligence procedures or due diligence to suppliers. These procedures are aimed at knowing and investigating the behavior of a person, natural or legal, prior to establishing some type of contractual relationship, in order to identify and mitigate risks that may arise in connection with these operations.
Due diligence procedures have become more and more frequent and have even come to be understood as a fundamental activity in the development of business. However, and without prejudice to its general acceptance in terms of contracting with suppliers, the analysis of the elements that must be considered for an effective implementation is a subject that is usually relegated to an activity to “comply for the sake of compliance”.
Both international organizations and local good practices have established a series of key elements for effective due diligence, which makes it possible to identify risks and use tools for adequate control and prevention. Some of these elements are:
Consider the various possible impacts . By identifying the risks through a comprehensive and complete analysis, we can corroborate that the impacts that these risks entail are not usually one-dimensional, so it is essential to verify what they are, from various perspectives, for example, identifying legal, regulatory, environmental, reputational impacts. , financial, among others.
Evaluate the supplier according to the activities that will be provided . Bearing in mind the line of business and activities that the supplier will carry out for the company, some risks may be more relevant than others, considering that the absolute mitigation of a risk is not effective. This evaluation involves specialized research and analysis regarding the supply chain, identifying the most sensitive issues, specific to each industry.
Define the evaluation standard . An effective standard for evaluating a supplier is to apply the same rules that the company has set for itself. This accounts for the strengthening, on the one hand, of the corporate culture itself, and on the other, of commercial relations with those who are aligned with our interests. This demonstrates the true commitment to Responsible Business Conduct (CER).
Identify conflicts of interest . Different laws sanction acts that could affect the assets of the company, the market or free competition, therefore, the identification of potential or real conflicts of interest is a fundamental aspect to corroborate prior to any contracting, as an essential tool in the procedures. due diligence.
Periodically monitor the supplier . The permanent review requires the evaluation of future risks derived from the commercial relationship, eventual legal changes or internal changes in the company, which require the consideration of new criteria, as occurs, for example, with the appearance of new technologies or the incorporation of new crimes to the catalog of the Law on Criminal Responsibility of Legal Entities.
The application of these elements is decisive when carrying out an adequate review, since its effective implementation will allow a much broader range of risks to be identified and correctly managed, involving environmental, social and governance aspects necessary for sustainable development in the market. current.
During the development of the IBA Latin American Forum, which was held between March 22 and 24 in Cartagena de Indias, Colombia, Compliance Latam (www.compliancelatam.legal), the first continental platform oriented to the compliance ecosystem, gathered in an event for representatives of its members, important legal firms with a presence throughout the continent.
Professionals from Albagli Zaliasnik (Chile), Basham, Ringe y Correa (Mexico), Beccar Varela (Argentina), BLP (Central America), Bustamante Fabara (Ecuador), Ferrere (Uruguay, Paraguay and Bolivia), Miller & Chevalier participated in the meeting. (United States) and Posse Herrera Ruiz (Colombia).
Aligned with the objectives of the platform, the legal professionals of each firm contributed their vision of compliance in the region, the promotion and dissemination of good corporate practices, organizational culture and regulation linked to the sector’s ecosystem.
The Organic Law to promote the Violet Economy within its desire to promote, guarantee and execute the mainstreaming of the gender approach and multiculturalism incorporates into the Companies Law, an unnumbered article after Article 20, through which it provides that all companies species of companies governed by the aforementioned Companies Law, at the time of the formation of their Boards, when they have three (3) or more members, they must observe that for every three members, one of them is female.
For companies and financial institutions regulated by the Companies Law, for the formation of their Board of Directors, the provisions of the aforementioned unnumbered article will apply, considering the selection and qualification rules established in the Monetary and Financial Organic Code and other applicable regulations.
In the case of companies whose Directors require prior qualification procedures in accordance with special sectoral laws, they will be subject to the provisions of said special laws.
The Law does not currently establish a sanction for the case of non-compliance with this provision, nor has any regulation been issued.
On March 6, 2023, the National Economic Prosecutor’s Office (FNE) filed a request with the Tribunal de Defensa de la Libre Competencia (TDLC) against a renowned laboratory convicted of collusion in 2018, which was also forced to implementation of a free competition compliance program .
This requirement is due to the fact that the laboratory executed late and failed to comply with what was ordered by the court, increasing the probability of occurrence of events that contravene the legal provisions on free competition, which may affect customers and/or final consumers.
Specifically, the FNE seeks a declaration of non-compliance with said sentence and the imposition of a fine of 1,100 million Chilean pesos (USD 1.4 million).
This action reminds us that the decisions of the TDLC regarding compliance programs are supervised by the FNE, through the Compliance Inspection division, while said measures imposed by the court are intended to mitigate the risks of infringement of the rules of free competition and prevent the commission of crimes of this nature.
In this sense, although the establishment of compliance programs is voluntary, there are scenarios in which their implementation is mandatory , as was the case of the condemned laboratory. The court defined that the program should contain, as a minimum, the elements established in the FNE’s Compliance Program Guide , however, with respect to certain obligations, the sentence raised the standards suggested by said document. Some of these reinforced standards are the following:
Senior management commitment to the compliance program through the establishment of a Compliance Committee.
The figure of an autonomous and independent Compliance Officer , who ensures respect for the rules of defense of free competition and who reports to the Board of Directors on its mission.
Conducting annual training on antitrust matters for senior executives and the company’s board of directors and others deemed by the compliance officer.
Obtaining statements from the company’s senior executives , indicating that they are not aware of any violation of the laws that protect free competition.
It is important to mention that, although these programs do not constitute an exemption from liability for infringement of the rules established in defense of free competition, they imply other benefits, such as: (I) possible reductions in fines; (II) the early exercise of the compensated denunciation or (III) the possibility of reaching out-of-court agreements.
However, it should be noted that, in the case of compliance programs imposed by the judicial authority, their establishment is not only an obligation, but also an obligation coupled with a sentence, and therefore cannot unilaterally modify the imposed obligations, a matter that the FNE alleges in its request.
The aforementioned case shows us that, although it is extremely beneficial for any company to voluntarily implement a compliance program in free competition matters, its correct adoption is critical for the antitrust authority when it is an obligation ordered by a court . Then, not adopting a serious, credible and effective compliance program can come at a high price.
For more information on these topics, you can contact:
Francesca Franzani | Compliance Group Director | ffranzani@az.cl
Matias Edwards | Senior Associate, Antitrust Group | medwards@az.cl
Constance Delgado | Associate, Free Competition Group | cdelgadov@az.cl
Jaime Viveros | Associate, Compliance Group | jviveros@az.cl
Recently, the Perú Libre Parliamentary Group presented Bill No. 3251/2022-CR, whose purpose is to regulate the responsibility of companies in the Financial System, with respect to computer fraud committed against users of this system in the face of active and fraudulent liabilities, establishing the actions that must be taken and determining the times for the resolution of the cases.
The purpose of said bill is to protect and guarantee active and passive operations carried out by users of the financial system, reducing economic damage and safeguarding good credit reputation.
Among the measures contemplated in the proposed standard, the obligation is prescribed for companies in the financial sector to return the amounts and/or cancel unauthorized operations reported by their users, in any case and no later than the business day following reported the incident. If the company has reasonable grounds to doubt the veracity of the report, it must inform the user and the Superintendency of Banking, Insurance and AFPs in writing, within the same term, attaching the evidence that supports its position, and it is the responsibility of the company to demonstrate that for said operation, all the verification mechanisms were activated that demonstrate that said operation was correctly registered.
