ARGENTINA: Recent Compliance Trends

As new President Milei gets to grips with the State machinery, compliance risks and corporate liability in Argentina are still sourced more in foreign laws and market incentives than in domestic criminal or administrative enforcement.

Milei’s initial decisions focused on deregulation of several sectors of the economy, including the disentangling of opaque administrative and financial structures – for example, unaccountable public funds, federal–state distribution of resources, privileges benefiting sectors dominated by one or two local companies – that are expected to foster competition and transparency. Nevertheless, the relevant legal framework for anti-bribery, anti-money laundering and compliance has not changed. It includes:

• corporate criminal liability for corruption, money laundering and other financial crimes;

• incentives for corporates and individuals to co-operate with authorities;

• an administrative infrastructure dealing with corporate risk management; and

• compliance soft guidance for the private sector.

The market still awaits strong signs of enforcement by criminal authorities. More than six years after the entry into force of the corporate liability regime for corruption, no company has been punished, and the General Attorney’s Office has still not shown (at least publicly) a special interest in its enforcement (ie, by issuing guidance to public prosecutors).

Beyond that, sporadic recent court decisions:

• reinforced the message that money laundering could end up in corporate criminal punishment even when the company had not been subject to the proceeding (Criminal Cassation Court, Báez, Lázaro Antonio y otros s/ encubrimiento y otro, 24 February 2021);

• upheld leniency agreements for co-operating defendants against constitutional challenges (Criminal Cassation Court, De Vido, Julio Miguel y otros s/ recurso de casación, 30 November 2020);

• in the first court decision dismissing the charges against a company accused of bribery, stressed the importance of internal whistle-blowing mechanisms and corporate investigations as incentivised by the law (Criminal Court of Mendoza, Fiscal contra Van de Loo Ojeda, Nicolás y Stroyproject Weather Modification SA p/ cohecho, 29 November 2022); and

• upheld the first civil forfeiture adopted in a case of corruption (Civil Court of Appeals of Mendoza, MPF c/ L LA y S CV, 7 May 2021).

Moreover, according to public news, the first corporate leniency agreement was signed in September 2022, exempting a local subsidiary from punishment in exchange for information about bribe takers and the money trail. Slowly, these court decisions are shaping the contours of a local jurisprudence in compliance and corporate liability for corruption and money laundering.

Administrative regulations have timidly contributed to the adoption of compliance policies and procedures by local businesses, at least at a formal level – for example, by requiring compliance programmes for certain state contractors and/or the uploading of such programmes to a state-run compliance registry (the Registry of Integrity and Transparency of Companies and Entities) or, in certain industries, to inspection services overseen by the government agri-food supervisory authority (Servicio Nacional de Sanidad y Calidad Agroalimentaria, or SENASA).

However, substantive compliance practices and corporate investigations in Argentina have been mainly driven by the legal risks derived from the transnational enforcement of foreign laws (eg, the US Foreign Corrupt Practices Act (FCPA)) or the incentives placed by market players. More than 14 multinational companies were subjected to FCPA enforcement actions for bribery or books and records infringements by their Argentine businesses. Together with the increasing extraterritorial enforcement in other jurisdictions, this raised the compliance bar from “globalised” market players, thereby strengthening private-to-private compliance requirements to operate in Argentina.

In the authors’ recent experience, compliance concerns have expanded remarkably (both in scope and detail) not only for financial institutions, but also for investors, business partners, and auditors – triggering a varied and challenging array of proceedings aimed at identifying, investigating, remediating or compensating past compliance-risky behaviour in order to approve transactions and financial statements. This is increasingly happening in the context of M&A, as well as to fulfil lending agreements, debt to equity transactions, or financial certifications – to name the most frequent instances in which businesses need to deal and comply with conditions set by private stakeholders. Market-driven compliance requirements have boosted internal investigations in Argentine subsidiaries of multinational companies and, more and more, in family-owned Latin American business groups with access to foreign markets. Unlike court decisions, these instances remain in the private domain and do not create case law for guiding other companies in similar situations.

As the new administration attempts to pass market-friendly reforms directed at attracting direct-foreign investment, including the privatisation of state-owned enterprises, compliance needs will naturally increase. This is particularly the case in historically risky sectors that are strategic to the Argentine economy – ie, the oil and gas and other extractive industries, including Argentina’s lithium reserves (which encompass around 10% of world reserves), the renewable energy industry, the infrastructure surrounding the exploitation of Vaca Muerta shale fields, and the agribusiness sector.

Corporate investigations have also been triggered in recent years by the huge growth of cyberfraud, whereby victim companies need not only to conduct a forensic investigation but also to understand whether an insider may have been part of the fraudulent scheme. Other growing company concerns, such as ESG (particularly gender-based discrimination, workplace mistreatment, and modern slavery), also account for visible growth in internal investigations work.

Argentina is also in the process of updating aspects of its AML/CTF regime to comply with FATF recommendations and avoid downgrading to the so-called “grey list” in the upcoming 2024 evaluation. Most probably, a new offence of mass destruction weapons proliferation will be adopted, a beneficial ownership registry will be created, and the list of gatekeepers will be expanded to include lawyers acting on behalf of clients in certain transactions and – most importantly – virtual assets service providers (VASPs). Together with the fintech sector, VASPs and other technology start-ups have implemented state-of-the-art compliance programmes in recent years (even beyond local regulatory requirements), owing to market players’ demands to mitigate AML/CTF, international sanctions, and Export Controls’ regulatory risks.

Finally, the current government – with its capitalist, globalised worldview – has committed to deepen Argentina’s efforts to access the OECD, thus continuing a process that began under former President Macri���s administration. As such, both the market and the political landscapes seem to be aligned on the path to strengthening and deepening the legal and institutional framework towards stronger enforcement as well as organisational compliance practices in the private sector.