Costa Rica strengthens its compliance and anti-corruption regulation

Janelle Christie

BLP Legal - As part of Costa Rica’s process of adherence to the Organisation for Economic Co-operation and Development ("OECD"), various laws have been enacted in order to strengthen the regulatory framework on compliance and anti-corruption. Part of these efforts are reflected in the recent enactment of two new laws that seek to strengthen our country’s commitment to the fight against corruption and conform to high international standards, with special reference to the OECD Anti-Bribery Convention.

Through Law No. 10373 "Reforms to anti-corruption laws to meet the recommendations of the OECD Working Group on Bribery in International Business Transactions", Costa Rica has succeeded in translating the recommendations of the OECD Working Group into a normative framework. In addition, on February 8th, Law No. 10437 "Law on the Protection of Whistleblowers and Witnesses of Acts of Corruption against Labor Retaliation" was published, in order to provide protection to whistleblowers of acts of corruption.

The following is a brief description of the enactments aforementioned:

   I. Reforms to anti-corruption laws to address recommendations of the OECD Working Group on Bribery in International Business Transactions

Law No. 10373 introduces important reforms, additions and repeals to several anti-corruption laws, including the Penal Code, the Code of Criminal Procedure, the Law against Corruption and Illicit Enrichment in the Public Service, the Law on the Liability of Legal Entities on Domestic Bribery, Transnational Bribery and Other Crimes, and the Income Tax Act. In general terms, this new regulation includes changes in terms of the legal treatment of acts related to corruption crimes, covering aspects such as tax non-deductibility, new resources for the investigation of criminal acts, reciprocal legal assistance and extradition, imposition of sanctions, confiscation, among others.

Among the most relevant changes established by Law No. 10373 is the extension of the list of crimes in which the interception of communications is authorized, by allowing the interception of oral, written or other communications, when it involves the clarification of crimes of corruption against the duties of the public function. Additionally, it includes changes regarding the non-deductibility of gross income, including within this category payments for bribes, gifts, remuneration, capital benefits or undue advantages made by taxpayers.

The legislation modifies the functions of the Public Prosecutor’s Office, including the duty to cooperate with the foreign authorities in charge of investigating and determining the liability of legal entities arising from the investigation into the bribery of a foreign public official, the assets obtained as a result of such bribery and false accounting to facilitate or conceal such conduct.

The amendment to Article 123 of Law No. 7786 establishes that the Financial Intelligence Unit ("UIF" in Spanish) of the Costa Rican Institute on Drugs ("ICD") shall be in charge of investigating suspicious transactions that lead to the tracing of assets seized for activities related to the crime of transnational bribery.

This reform also introduces changes to the criminal liability of legal entities, by including the crimes of money laundering and falsification of accounting records within the scope of application of Law No. 9699 – "Law on the Liability of Legal Entities on Domestic Bribery, Transnational Bribery and Other Crimes". The changes in the wording of the fourth article of said Law No. 9699 expand the criminal liability of legal entities by eliminating the qualification "seriously" of non-compliance with the duties of supervision, surveillance and control of their activity. Therefore, the new regulation allows for the interpretation that any breach of the duties of supervision, surveillance and control of its activity, regardless of the level of seriousness, would imply the criminal liability of the legal entity. In view of the non-compliance with the provisions of Law No. 9699, the method of calculating fines is modified by establishing new penalty ranges for small and medium-sized enterprises, and additionally, sanctions are contemplated for criminal acts related to contracting processes both within Costa Rica and abroad.

With regard to the extenuating circumstances of liability, the case of collaboration on the part of the legal entity in the process of investigating criminal acts is defined, establishing that in order for this mitigating factor to be applicable, it is necessary that the new evidence provided by the legal entity is "difficult or impossible to obtain without the collaboration of the legal entity and that it is useful and necessary for the clarification of the punishable acts investigated". On the other hand, it is added as a new mitigating ground of responsibility, that it is proven that the individual perpetrators have committed the crime fraudulently circumventing the models of organization and prevention of crimes.

   II. Law on the Protection of Whistleblowers and Witnesses of Acts of Corruption against Labor Retaliation

The purpose of this Law No. 10437 is to establish effective mechanisms for the protection of whistleblowers and witnesses of acts of corruption at the national or international level, as well as to encourage the reporting of these criminal acts.

Although the legislation provides for protection against complaints filed in the public and private sectors, it should be clarified that the scope of application of the law is with respect to criminal acts that involve influence over public officials or the exercise of their functions, in order to obtain an undue advantage either at a personal or business level; as well as the concealment of assets derived from any of the acts of corruption contemplated in Law No. 10437. Therefore, acts of corruption committed between subjects of private law are not included in the scope of application of this new regulation.

Law No. 10437 introduces a new special jurisdiction for the protection of whistleblowers, as long as the whistleblower complies with the assumptions established in the law. This special jurisdiction may be extended to co-workers, relatives up to the fourth degree of consanguinity or affinity, as well as third parties who are related to the complainant in the same work context and may suffer retaliation as a result of the filing of the complaint.

Some of the special considerations of this regulation are regarding the confidentiality of the information, since it is established that it cannot be considered as a breach of the contractual confidentiality clauses nor will there be liability on the part of the complainant, when the delivery of the information can be considered reasonably necessary to prove the commission of the reported crime. In addition, there is a legal prohibition on including clauses in employment contracts that limit the reporting or testimony of criminal acts in the area of corruption, determining that any clauses in this regard will be null and void.

Employers in the private sector assume a new obligation to establish internal reporting channels when they have more than fifty employees, in order to attend to and follow up on complaints received for the alleged commission of acts of corruption. Reporting channels must be properly identified, easily accessible and offer the possibility of reporting anonymously as well as electronically.

In addition, the regulation introduces other obligations for employers, such as the duty to periodically disclose the content of Law No. 10437, to provide periodic publicity on the means of receiving and following up on complaints, and to guarantee the confidentiality of the identity of the complainant.

Failure to comply with the provisions of Law No. 10437 carries fines ranging from one to one thousand base salaries, without prejudice to the applicable civil or criminal liability.

Janelle Christie, Senior Associate

BLPLegal.com