Costa Rica's New Anti-Corruption Law

On June 6, 2019 the Costa Rican Legislative Assembly approved a new anti-corruption law(1). The law is the result of efforts(2) by Costa Rica to join the Organization for Economic Cooperation and Development (OECD)(3). To further their efforts, Costa Rica approved the adoption of the OECD “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions” on May 10, 2017(4,5).

Highlights of the new law:

• Allows for holding domestic (private or state owned) or foreign corporations (conducting business in Costa Rica), trusts, associations, and foundations criminally responsible for domestic or transnational bribery

• Allows for sanctioning a parent company for the actions of their subsidiaries and affiliates

• Establishes large potential financial penalties for corporations found guilty of corruption

• Allows for the potential reduction of penalties (up to 40%) if certain “mitigating circumstances” are met by the corporation

Mitigating Circumstances include:

• Having in place an effective anti-corruption program

• Having in place an independent compliance officer

• Reporting potential non-compliance

• Cooperation with authorities investigating the potential non-compliance

Costa Rica Corruption Rankings

• 2018 TRACE Bribery Risk Matrix Rank(6): 48 out of 200 countries (1 Best)

• 2018 Corruption Perceptions Index Rank(7): 48 out of 180 countries (1 Best)

• 2019 GCSG Country Compliance “Corruption” Risk Rating(8): Moderate

Contact us to learn more about this development in Costa Rica.

References

1. Legislative Assembly of the Republic of Costa Rica - “Liability of Legal Persons in Domestic Bribery, Transnational Bribery and Other Crimes” - Legislative Decree No. 9699, Record No. 21,248 | Approved 06/06/2019

2. OECD - “OECD establishes roadmap for membership with Costa Rica” - 15/07/2015

3. OECD Home page - “Organization for Economic Cooperation and Development”

4. FCPAmericas Blog - “Costa Rica Adopts the OECD Anti-Bribery Convention” - 06/06/2017

5. OECD - “Costa Rica to join the OECD Anti-Bribery Convention” - 31/05/2017

6. Trace International, Inc. - “2018 TRACE Bribery Risk Matrix”

7. Transparency International - “2018 Corruption Perceptions Index”

8. Global Compliance Solutions Group LLC (GCSG) - “Country Risk Ranking - Sources & Methodology”

OECD and IBA form Task Force to develop corruption guidance for lawyers

The Organisation for Economic Co-operation and Development (OECD) and the International Bar Association (IBA) will form a Task Force to develop conduct standards and guidance for lawyers involved in international commercial structures and recommendations for governments.  The Task Force will be comprised of lawyers and policy leaders with experience in professional ethics, taxes, anti-money laundering, anti-corruption, financial services, trade and government affairs. 

When the International Consortium of Investigative Journalists (ICIJ) published the “Panama Papers” on May 9, 2016 it exposed a landscape with potential land mines for lawyers to unknowingly assist their clients in concealing assets or in laundering money.

The Financial Action Task Force (FATF) has published international standards for conducting due diligence on customers and identifying beneficial owners.  However, it’s become obvious these standards are not sufficient alone.  Underlying this issue is the professional obligation lawyers have to maintain attorney-client privilege.

In a December 14, 2016 OECD news release IBA President David W Rivkin, said the following: “It is undeniable that lawyers must play a central role in complex offshore financial transactions.  To ensure that they do not unwittingly facilitate economic crime, it is imperative that lawyers ask the right questions of their clients, vet them sufficiently, understand who are to be the ultimate beneficiaries of their client’s actions, and have an understanding of sovereign laws.  In practice, inevitably complications arise. For example, what are a law firm’s obligations when conflicting sovereign laws apply in cross-border transactions? Recent events have shown that existing international and professional standards may not provide sufficiently clear guidance to lawyers who handle such transactions. Recent actions also present the danger that in their anti-corruption activities, governments may ignore the need for lawyers to advise their clients in confidence. For this reason, the IBA has partnered with the foremost inter-governmental organization analysing and promoting economic policies, the OECD, to create appropriate standards while, at the same time, respect the fundamental rules applicable to the profession that are a key element of the rule of law. Each organization will bring its relevant expertise to the project.”  

Some of the questions the Task Force will consider, per the OECD news release, include the following:

• What is the legal profession’s role in combatting corruption, tax evasion money-laundering and terrorism financing taking into account relevant international standards professional duties of lawyers and the role that such duties play in preserving the rule of law?

• What steps, if any, should lawyers take in the event that acts or transactions previously legal become illegal as a result of a change of law?

• What should be the result when – notwithstanding the best efforts from the law firm – the client engages in activities that are legal in one jurisdiction but illegal in another?

• What use, if any, may be made of illegally garnered information and what liability do lawyers have for inadvertent breach of client confidentiality?

• What steps should governments take to provide transparency of such transactions while recognizing legitimate attorney-client privilege and professional secrecy?

OECD issues guidance designed to reduce corruption in the aid sector

On December 9, 2016 the Organisation for Economic Co-operation and Development (OECD) issued guidance intended to improve control systems for avoiding and responding to corruption in the management and delivery of aid. 

The guidance is designed to implement more checks and balances in work processes of international development agencies and private firms.  The recommendations apply to the 41 countries party to the OECD Anti-Bribery Convention and the 30 members of the OECD Development Assistance Committee (DAC). 

The report recommendations include implementing the system of controls (as appropriate) noted below:

• Code of Conduct
• Ethics or anti-corruption assistance/advisory services
• Training and awareness on anti-corruption
• High level of auditing and internal investigation
• Active and systematic assessment and management of corruption risks
• Measures to prevent and detect corruption enshrined in contracts
• Sanctioning regime
• Joint responses to corruption
• Taking into consideration the risks posed by the environment of operations

You can access the full report here: 

Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption 2016