Peru law on corporate crime establishes new penalty system: Key takeaways

Law No. 31740, which significantly expands corporate criminal liability in Peru, is now in effect.

The law, recently enacted by the Congress of the Republic of Peru, amends Law. No. 30424, which introduced an autonomous system of liability for legal entities – holding companies directly responsible for crimes benefiting the company and committed by its employees or representatives. Law No. 31740 builds on that earlier legislation, expanding the list of corporate criminal liability offenses and establishing hefty administrative liability penalties for companies. In extreme circumstances, a corporation found liable under the law could be dissolved.

Among the specific offenses covered under this new penalty system are the following:

• Failure to report or delaying reporting on suspicious financial transactions (i.e., money laundering)
• Parallel accounting
• Crimes against Peru’s cultural property and paleontological heritage
• Crimes intended to finance acts of terrorism
• Active transnational bribery
• Influence peddling
• Tax evasion

Of note: non-application of accessory consequences, insofar as they are special penalties – which combine administrative liability of legal entities and those penalties applicable to the same entities – has been a long-standing aspect of Peruvian law, first incorporated into the 1991 Criminal Code, which in turn draws from the 1983 Spanish Criminal Code and the 1966 German Alternative Criminal Code.

Purpose of the law

At the heart of the law is the concept that a corporation is liable for crimes committed by a corporate employee or subordinate that benefit the company – so-called “subsidiary liability” – which transfers administrative or criminal liability to legal persons or entities.

This model is already embedded in the legal systems of countries like Sweden and Spain, where penalties for such offenses are typically levied via accessory sanctions, such as being excluded from doing business with public entities, disqualified from conducting certain business activities, or disbarred. In crafting Law No. 31740, Peru’s Congress chose to maintain such accessory consequences. The law mandates and prescribes the criteria to impose these penalties, which are based on the concept that corporations should be organized in a way that prevents or mitigates the commission of these offenses.

The legislature chose to base Law No. 31740 on the concept of the autonomy of administrative liability – that is, a self-contained system of accountability – with the goal of preventing organizational deficiencies in legal entities that would enable the commission of criminal offenses by individuals within an organization, and therefore within their sphere of competence or responsibility. For example, Article 3 of the law specifically mentions partners, directors, and legal administrators in its three scenarios discussing possible illegal activities.

Penalty system

Two rules for attributing criminal offenses coexist in the Peruvian criminal justice system, namely 1) acting on behalf of another and 2) legal entities’ autonomy of administrative liability.

Among the notable new penalties established in Law No. 31740 is permanent disqualification from entering into contracts with the Peruvian government. Some observers are noting that this penalty could be deemed unconstitutional – for instance, potentially violating the freedom to enter into contracts set out in Peru’s constitution.

Another aspect of the law that is raising concerns is the discretionary nature of the application of fines, ranging from 10 UITs to 10,000 UITs (a UIT, or Unidad Impositiva Tributaria, is a reference unit set annually by the Peruvian Ministry of Economy to determine payment of taxes, penalties, and fines). These penalties would be applicable even when it is impossible to ascertain the amount of profit gained when a corporation commits the offenses described in the law. Such fines could range from PEN53,500 to PEN535 million.

Notably, the law also holds that, when a corporation has a permanent compliance program in place, sanctions imposed on the company could potentially be mitigated.

Key takeaways

Law No. 31740 establishes new administrative liability penalties pertaining to legal entities for an expanded list of criminal offenses against the public administration, as among them money laundering, bribery, funding of terrorism, and tax fraud.

Corporations found liable under the law may also face accessory consequences such as significant financial penalties and, in extreme cases, corporate dissolution.

From an ex-ante perspective, the concept of the autonomy of administrative liability on the part of a legal entity is based on its ability to organize its own areas of competence, aiming to prevent its subordinates from committing the criminal offenses specified in the law.

Some penalties set out in the law are subjective. For instance, permanently barring a corporation from contracting with the government or imposing significant fines would depend on a court’s opinion, thus granting excessive decision-making powers to the judiciary.

Law No. 31740 encourages the implementation of compliance programs, such as ongoing training addressing such concerns as bribery and money laundering. Up-to-date compliance programs can not only support good corporate governance but, should a corporation be found liable under this anti-corruption regime, may lead to non-application or mitigation of administrative penalties.

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