Circular 1/2016 and its impact on compliance programmes

Written on 24 Feb 2016

The Circular 1/2016 recently published by the Spanish General Prosecutor’s Office (Circular de la Fiscalía General del Estado 1/2016) provides criteria to interpret the new regulation on criminal liability of legal persons. It specifically gives guidance on how to assess the effectiveness and appropriateness of the crime prevention and compliance programmes after the reform of the Spanish Criminal Code introduced by Law 1/2015 of 30 March (Ley Orgánica 1/2015, de 30 de marzo).

Since the introduction of the criminal liability of legal persons in the Spanish Criminal Code in 2010, the doctrine has called for the legislator to be more specific about its contents as it was considered to be incomplete and muddled. This imprecision has led to amend the provisions of article 31 bis of the Spanish Criminal Code through Law 1/2015, aimed at clarifying the liability regime rather than modifying it.

Moreover, the Prosecutor’s Office has given through this Circular its own interpretation of the provisions of article 31 bis. The aim of the Circular is to provide prosecutors with guidance on how to assess the possible criminal liabilities of legal persons and how legal persons should properly implement the internal control programmes in order to be exonerated from criminal liability.

We state below the indications given in the Circular that we think should be highlighted:

  • The Prosecutor’s Office makes it clear that, the last amendment to the provisions of article 31 bis contains an extension affecting the type of natural persons, whose unlawful conduct may lead the company to be held criminally accountable. This extension includes a “potentially high number of positions and middle management staff” (with organizational and management powers). That is to say, prosecutors are instructed to extend the scope of analysis, not only in respect of natural persons who may lead the company to be held criminally liable, but also regards the scope of the company’s policies and internal control procedures aimed precisely at preventing the commission of criminal acts.
  • In order for the company to be held criminally accountable, article 31 bis requires that it must have benefited from a criminal offence. However, according to this new reform, such benefit is deemed to exist regardless of whether it has been directly or indirectly received. To this end, the Prosecutor’s Office understands that the scope of application of the criminal liability of legal persons has been extended because it now includes entities that do not have a financial corporate purpose (i.e. non-for-profit foundations). Likewise, the indirect benefit could be obtained through a third party (for instance, distributors, agents, consultants, etc.) or it may consist of strategic, intangible or reputational benefits.
  • The General Prosecutor’s Office assumes that the aim of the internal organisational and management programmes is to make companies aware of the need to encourage a culture of professional ethics rather than one that avoids criminal penalties. The Circular warns that, to achieve this, the programmes to be examined by the prosecutors must be adapted to the company and its specific risks. Companies cannot simply copy other company’s programmes; on the contrary, programmes should be tailored to the particularities and needs of each company and to its constant evolution.
  • According to the Circular, the reporting channels required in section 5 of article 31 bis to promote crime prevention have a key role in achieving this. The Prosecutor’s Office understands that the independence and confidentiality of a whistle-blower must be protected and considers that the outsourcing of this service is an appropriate measure to ensure this protection.
  • The Circular lists the functions that the person in charge of implementing the internal crime prevention policy in the company, also known as the compliance officer, should perform, since the Spanish Criminal Code does not specify these functions, not even after the last reform. These functions are: to take part in the preparation of the organizational and management programmes, to ensure their compliance, and to design proper audit mechanisms to assess the performance of such programmes.

We are aware that the Circular issued by the Prosecutor’s Office -and briefly discussed in this article- only establishes a conceptual framework to be followed by prosecutors when they are conducting criminal proceedings and, therefore, it is not a binding rule for legal persons. However, it provides a useful guide to be taken into account by companies when they have to assume their compliance obligations, and this is precisely what the Circular anticipates: how companies could be investigated for criminal offences and, if they have compliance programmes, how such programmes will be assessed.