Wöss & Partners Newsletter Anti-corruption in Mexico

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Dr.Lic.Herfried Wöss
LL.M.(Exeter)
Lic.Adriana San Román R.
M.A.Finance & Investment (Exeter)
Dante Figueroa,Esq.
LL.M.(AmU),LL.M.(Chile)
Christian Carbajal Valenzuela
LL.M.(Warwick)
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LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)
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Wöss & Partners - Arbitration -Trade -Infrastructure

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The New Mexican Anticorruption
Regulation and its Impact on
Private Parties.
August 25, 2017
As part of a series of reforms and
modifications to the Mexican legal framework
regarding anticorruption, the Mexican Congress
published in 2016 the General Law of
Administrative Responsibilities (“LGRA” for its
acronym in Spanish) that entered into force on
July 19, 2017.
The LGRA introduces a new and interesting
approach. Acts of corruption that involve
public servants and private parties (either a
natural person or legal entity), are considered
as severe administrative faults and are
punishable with respect to the private party.
Punishable Acts of Private Parties
Throughout articles 65 to 72, the LGRA enlists
eight different acts for which a private party
may be sanctioned, all of which will be
considered as severe administrative faults:
1. Bribery
When a private party (direct or indirectly)
promises, offers or delivers a certain benefit
to a public servant, in exchange for the public
servant to carry out or refrain from a specific
act. Bribery is without prejudice of whether or
not the private party obtained a benefit.

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2

2. Illegal participation in administrative
procedures
Consists on a private party participating in
federal, local or municipal procedures, even
though by legal mandate or resolution of a
competent authority, it is ineligible to
participate.
3. Influence peddling
When a private party uses its economic or
political power and influence upon a public
servant, with the aim to obtain a benefit or
advantage for itself or a third party or to
cause damage to a third party. This is without
prejudice of the outcome.
4. Use of false information
Occurs when a private party delivers false or
altered information, tending to simulate the
compliance with requirements established in
administrative procedures, with the purpose to
obtain an authorization, a benefit, advantage
or cause a damage to a third party.
5. Obstruction of investigating authority
Occurs when a private party that is in
possession of certain information in connection
to an administrative procedure provides false
information; delays the delivery of the
information; or fails to answers the petitions
from the authorities.
6. Collusion
When a private party agrees with one or more

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LL.M.(Exeter)
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private parties, in federal, local or municipal
public tender procedures, to carry out certain
actions in order to obtain a benefit or
advantage. This applies also when the
agreements of the private parties are of an
international nature.
7. Misuse of public resources
Consist in acts carried out by a private party
and by means of them result on it collects,
misuses or divert public funds, from the
purpose they were meant to.
8. Illicit hiring of former public servants
When a private party hires former public
servants within a year of leaving office, who
have been in possession of privileged
information, leading the private party to
obtain a benefit in the market out of it.
Sanctions
The sanctions will vary depending if they are
going to be imposed to a natural person or to a
legal person.
Natural persons may be sanctioned as follows:
1. Fine up to twice the benefit obtained. In
case a benefit was not obtained, the fine will
be of approximately 100 to 150,000 UMAs (Unit
of Measure and Actualization), which roughly
would constitute a fine of fro USD$428 to
USD$643,288.
2. Temporal ineligibility (from three months to
eight years) to participate in tenders

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LL.M.(Warwick)
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regarding acquisitions, lease, services or
public works.
3. Payment of damages and lost of profits
caused to the federal, local or municipal
entities.
On the other hand, legal entities will be
sanctioned when natural persons on behalf and
in the name of the legal entity commit the acts
that constitute a severe administrative fault.
The sanctions provided by the LGRA applicable
to legal persons are as follows:
1. Fine up to twice the benefit obtained. In
case a benefit was not obtained, the fine will
be of 1,000 to 1,500,000 UMAs (Unit of Measure
and Actualization), which roughly would
constitute a fine of between USD$4,288 and
USD$6,432,880.
2. Temporal ineligibility (from three months to
ten years) to participate in tenders regarding
acquisitions, lease, services or public works.
3. Suspension of activities of between three
months and ten years, without the possibility
to carry out commercial, economic, contractual
or business activities.
4. Dissolution of the legal entity.
5. Payment of damages and loss of profits
caused to the federal, local or municipal
entities.
When imposing sanctions, the authority will
take into account the person’s: level of
involvement in the conduct and its fault, its
economic capacity, the benefit obtained and

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LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)
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LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)

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recurrence, if applicable.
Aside from the above-mentioned factors to
determine the applicable sanction, legal
persons have one more factor in their favor
that is provided in article 25 of the LGRA.
Such article specifies that the liability of
the legal entity will be determined based on
whether the company has or does not have a
Integrity Policy.
There are seven elements that the LGRA
specifies in order to consider it as a
Integrity Policy:
- An organization and procedural manual.
- A code of conduct duly published and known
by all the members of the organization.
- Adequate systems of surveillance, control
and audit.
- Adequate systems that facilitate the
statements of claims.
- Training regarding integrity policy.
- Non-discriminatory policies of Human
Resources in order to avoid that persons
that can jeopardize the company, enter the
work staff.
- Mechanisms for transparency and publicity.
Reduction of Sanctions Benefit – Whistle
Blowers
Article 88 of the LGRA provides for the
possibility of private parties involved in a
severe administrative fault, to confess their
liability in exchange for a reduction of

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LL.M.(Exeter)
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LL.M.(Warwick)
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LL.M.(Exeter)
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between 50% and 70% of all monetary sanctions
or the total pardon of the sanction regarding
the temporal ineligibility.
To be entitled to the benefit the confession
has to meet the following conditions:
- That the procedure for administrative
liability has not yet commenced and been
notified.
- That whoever desires to be entitled to the
benefit:
(i) is the first petitioner, within the
involved parties, to confess and provide
evidence.
(ii) assists the competent authority throughout
the investigation.
(iii)suspends immediately the involvement in
the act that constitutes the administrative
fault.
Procedure
According to the LGRA, the Ministry of Public
Administration (“SFP” for its acronym in
Spanish) and the Superior Auditor of the
Federation (“ASF” for its acronym in Spanish)
are the main investigating authorities.
The investigation for alleged administrative
faults can be initiated ex offico, by virtue of
a complaint or as a consequence of audits

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Tel: +1 (202) 587-5790 -Fax: +1 (202) 248-1899
Tel: +51 (1) 445-5659 -(1) 445-3008
LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)
Tel: +1 (202) 587-5790 -Fax: +1 (202) 248-1899
LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)

7

practiced by the authorities. In the case of
complaints, they may be of an anonymous nature.
Once the investigation commences, the
investigating authority will audit and revise
the documents and information that it deems
important. Based on the result of the
investigations, if it determines the existence
of an administrative fault, it will proceed to
qualify it as non-severe or severe. The
administrative faults qualified as severe will
be the ones in which a private party is
involved. Once the administrative fault has
been qualified, the authority will issue a
Report of Presumed Administrative Liability.
As soon as the Report of Presumed
Administrative Liability has been issued, the
Administrative Liability Procedure will start
before the Federal Tribunal of Administrative
Justice (“TFJA” for its acronym in Spanish).
The TFJA shall conduct the procedure and
resolve whether or not to impose a sanction.
The fines that in a given case are imposed will
constitute tax obligations which can be
executed through the administrative execution
procedure.
The ineligibility sanction will be published in
the Federal Official Journal.
In case the imposed sanction consists in the
suspension of activities, the TFJA will notify

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Tel: +51 (1) 445-5659 -(1) 445-3008
LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)
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LL.M.(Exeter)
Dante Figueroa,Esq.
LL.M.(Warwick)

8

the Ministry of Economy (“SE” for its acronym
in Spanish), the Tax Administration Service
(“SAT” for its acronym in Spanish) and will be
registered in the Public Registry of Commerce.
If the sanction consists of the dissolution of
the legal entity, it will have to proceed as
determined by the provisions of the General Law
of Corporations (“LGSM” for its acronym in
Spanish), in order to dissolve and liquidate
the legal entity.
The authority in order to impose sanctions for
acts that constitute a severe administrative
fault, prescribe in a seven-year term since the
moment such faults were committed.
Conclusions
The LGRA represents a great achievement in the
pursuit of eradicating acts of corruption that
exist in the public administration and the
private sector involved. Private parties may
now be considered as infringers and there is an
administrative sanctioning regime, which is
independent from the criminal procedure that
has not been very efficient.
Even though the LGRA provides for a good
regulation against acts of corruption between
private parties and public servants, there are
still some issues pending in order to eradicate
corruption between private parties.

Wöss & Partners Newsletter Anti-corruption in Mexico

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Wöss & Partners Newsletter Anti-corruption in Mexico