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How to get the designation of the compliance officer right from a procedural perspective

| News | Corporate Compliance / Litigation

Benjamín Prieto analyses the figure and the role of the Compliance Officer from a procedural point of view, when the legal person is being investigated for possible criminal liability
  1. In the years following the introduction by LO 5/2010, of 23 June, regarding the criminal liability of legal persons in Spanish law, the legislator had to deal with an important legislative change that involved, on the one hand, the establishment of the presuppositions of such liability and, on the other, the configuration of the procedural statute of legal persons and the rights that should assist them throughout the criminal procedure.
  2. The amendment operated by LO 1/2015 sought to encourage the collaboration of companies in the clarification of facts during the investigation through exemptions and mitigating liability, advantages that could be exploited by all those entities that had effective compliance programs, able to identify the origin of the infringement and the perpetrators of it.
  3. When the decision in made to implement a compliance program, there are several conditions to consider, and some of them are unfortunately forgotten by the person responsible for developing the program. The programme must serve to mitigate the risks, but it must also be designed for a destination which, if necessary, may be crucial for the company: its contribution to a criminal process in which the company is criminally charged.
  4. As I was saying, this possibility is frequently neglected by the person who carries out the program, and if the company has to take them to a criminal process in order to be dismissed, what cannot happen is that presenting the program in court becomes a problem instead of being the solution; hence the need for it to be prepared by a team that truly specializes in criminal law (both in its substantive and adjective aspects).
  5. On the other hand, those companies whose compliance programs have shown themselves to be flawed will prefer not to provide the trial with all the information that could call into question their good corporate practices and even confirm the budgets for their condemnation.

This being the case, this legitimate right, which assists any investigated person to freely configure his line of defence with reservation of any information whose contribution to the process could be self-incriminating, can lose its purpose when it comes to judging a legal person because the rights of the company to remain silent, not to testify against itself and not to confess guilt can only be exercised by the representative specially appointed by the entity in the terms foreseen in articles 420 bis and 786 bis of Lecrim (The Criminal Procedure Act).

The configuration of such a restrictive subjective scope distorts the guarantee that this right of non-cooperation implies for the legal person under investigation, by allowing the courts to access the reserved information through the testimony of other members of the company, who by reason of their position were aware of the control failures that occurred and whose obligation to declare truthfully is imperative.

  1. Of all these testimonies, the one that the Compliance Officer can give is going to be a special protagonist, because given the functions that this organ develops and the important documentation that it handles, its call to the process will be almost inevitable and its declaration will often be decisive to elucidate whether or not there is criminal responsibility of the legal person. Therefore, companies must be very careful when determining which professional profile they consider most suitable to assume the position.
  2. There are many candidates for the position of Compliance Officer within a company, such as the Financial Director, the person responsible for quality control, human resources, etc., each of them with its advantages and disadvantages. As Compliance is a tailor-made suit, what in some companies is more convenient (due to the specific profile of the person or persons, the activity carried out, organization chart, etc.), in others it may be unadvisable.
  3. In practice, a lawyer's profile is one of the most sought after for the position of Compliance Officer since his legal knowledge greatly facilitates the work of identifying criminal risks and the application of policies and protocols, bearing in mind also that other legal operators (judges and prosecutors) can ultimately judge whether such protocols have been diligently applied. It should not be forgotten, however, that lawyers also have an inherent guarantee inherent in the status of lawyer that does not extend to other professions, i.e. the waiver of the obligation to declare in legal proceedings for the protection afforded by professional secrecy.
  4. Although the professional secrecy of company lawyers has been questioned on several occasions, it can be said that there is no legal or case-law basis to support an interpretation of the will of the national legislature in such terms. Professional secrecy is recognized in art. 542.3 of LO 6/1985 of the Judiciary and art. 32.1 of the General Statute of Lawyers in the following terms: "Lawyers must keep secret all facts or news of which they become aware by reason of any of the modalities of their professional performance, not being able to be forced to testify about them". Such precepts do not establish any differentiation of treatment between internal and external lawyers, so there is no legal basis for a restrictive interpretation that excludes in house lawyers from its scope of application.
  5. The pronouncements against professional secrecy to date have been made in very specific areas of law, in respect of very specific obligations, none of them of a criminal nature, and have not been based on sufficiently solid arguments to force a legislative change in this respect.
  6. The judgment of the Court of Justice of the Akros Case of September 14, 2010, which denied the professional secrecy of the internal lawyers because it considered that the working relationship with the entity called their independence as a lawyer, into question was especially noteworthy. This pronouncement, limited to the scope of the European Union's Competition Law, has been strongly criticized by the Spanish legal profession. In this regard, RAFAEL DEL ROSAL pointed out that "The reasoning is wrongly based on the alternative use of the double meaning of its legal categories, because neither the independence of the lawyer is a state but a behaviour, nor the dependence of the work contract on its organic nature, nor the secrecy of an award to the independent lawyer but a fundamental right of the defendant. (...) If the internal lawyer will have difficulties to renounce to the defence, it will be it by personal economic dependence -that not work- of his only client. The same dependence that the external lawyer has on his "unique" clients and both due to the high competition prevailing in the market".
  7. Likewise, this very last year the reform of the General Tax Law is being processed in order to transpose Directive 2011/16/EU. Although initially the draft bill included the obligation of company lawyers to inform and disclose both national and cross-border operations to the Tax Agency, the strong criticism that this declaration of intent generated within the Spanish legal profession has made the preliminary draft finally presented last June much more moderate, connecting this obligation of information with the current regime of professional secrecy regulated in Article 93.5 of said General Tax Law according to which "it will not reach those confidential data of its clients of which they have knowledge as a consequence of the provision of professional advisory or defence services", is included in the General Tax Law itself".
  8. On the other hand, some authors have denied the professional secrecy of the Compliance Officer, even though this position is assumed by a registered lawyer, considering that we are facing a job not necessarily legal since, in many companies, as previously indicated, it is exercised by members of other departments such as quality or human resources. It is also alleged that professional secrecy is not compatible with the decisions to be taken by the Compliance Officer in executing the company's compliance program, at the risk, otherwise, of creating a conflict of interest between his functions as internal lawyer and as Compliance Officer. 

This approach is erroneous in that it means forgetting that the Compliance Officer, although he or she is a body with full autonomy to carry out investigative work, has no say or vote in the decisions taken by the company's management after the investigation. In both cases, a legal advice service is provided on corporate good practice that operates as a preventive mechanism for adjusting activity to legality. In both cases, the Compliance Officer reacts to non-compliance by advising the organisation on the measures that best guarantee the defence of its interests if legal proceedings are initiated. There is therefore no collision between his functions as Compliance Officer and his functions as a lawyer, the first of which may be perfectly integrated within the framework of activities he carries out as a company lawyer, directly linked to the legal advice of the entity and protected by professional secrecy in the terms established in art. 5 of the Lawyers Code of Ethics: "with respect to the facts or news known by reason of any of the modalities of his professional performance, limiting the use of information received from the client to the needs of his defence and legal advice or advice, without being forced to declare about them as recognized by the Organic Law of the Judiciary”.

To claim that the functions of the Compliance Officer are not protected by professional secrecy because such a position could be exercised by an employee of a non-legal department is as absurd as to claim that there is no dispensation to declare in criminal proceedings for the lawyer who legally advised a client in cases where such advice could also have been provided by an economist or social worker.

Having said this, it is important to specify that in the case of money laundering (which can generate criminal liability for the legal person, even through its imprudent commission), Law 10/2010 and its Regulations establish that, when the lawyer provides an advisory service, he must report any suspicion of committing this crime to SEPBLAC (Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences), although, when the lawyer is involved in a criminal case, he will be exempt from any obligation to report, and therefore protected by professional secrecy. In any case, we cannot ignore the fact that the legislator's will has been to specifically regulate crimes related to money laundering and the financing of terrorism. If the will of the legislator were the opposite, there should be an amendment to the Criminal Code in the same terms.

In short, the in-house lawyer acting as Compliance Officer is subject to the same professional statute as any other registered lawyer, protected by the same rights and subject to the same ethical obligations. The attribution of this position to a lawyer therefore provides the company with a fundamental procedural guarantee, which is to allow it to control the direction of its own defence strategy, guaranteeing that, even when the Compliance Officer is called to the trial as a witness, the professional secrecy that protects him or her will protect the organisation against court action.

Suffice it to say, finally, that since it is a question of lege ferenda that affects the configuration of art. 429 bis Lecrim, it is very probable that in the coming years there will be a jurisprudential change that will reformulate the subjective parameters of the right to non-incrimination and non-active collaboration that assists the legal person to extend them to all those who are representatives of the will of the Organization. In this sense, authors such as JUAN JOSÉ GONZÁLEZ LÓPEZ have shown that restricting the right of not self-criminating only to the specially designated representative implies distorting the very logic of such right "since the appointment of a "necessary" representative does not exclude other natural persons from integrating the will of the legal person and acting as its organs, in such a way that demanding the active collaboration of said natural persons legally implies claiming the active collaboration of the legal person. In the case of the legal person, the natural person may be proposed as a witness, but, insofar as it integrates the will of the legal person, it is also investigated, albeit not as a natural person, but as an element of the legal person.”

The Circular of the State Attorney General's Office 1/2016, gives us a good clue of this circle of subjects that make up the will of the organization in its analysis of art. 31 bis 1.a) CP and that basically would be constituted by de facto and de jure administrators, shareholders, individual attorneys-in-fact and middle managers who have powers of organization and control among them, responsible for data protection, labour risks, and of course, the Compliance Officer.

However, even if the jurisprudence evolved in the coming years along these lines, and the Compliance Officer, whether or not he was a lawyer, could refuse to cooperate actively with the courts by virtue of the right to self-incrimination, the professional qualification of the Compliance Officer would not be indifferent to the organisation, since it is not the same to testify under the right to active non-cooperation as to do so under the protection of professional secrecy.

In this regard, GUILLERMO GALBE TRAVER has pointed to a number of relevant differences between the right to non-discrimination (nemo tenetur) and professional secrecy:

  1. Professional secrecy extends to all facts known by reason of the charge: "Professional secrecy protects information and documents on an absolute basis so that the lawyer can refuse any cooperation whether the company is investigated or whether the investigated is an employee. The nemo tenetur, on the other hand, will only protect documents and information in the case of proceedings in which the company is investigated or accused. In cases in which the investigated or accused is a manager or employee of the company, this guarantee would not allow for exemption from providing documents or testifying.
  2. Professional secrecy is a right and duty and is timeless: “Professional secrecy is configured as a right-duty. It constitutes an obligation for the lawyer at the same time as a right for the client and for the lawyer himself. On the contrary, the nemo tenetur is only a right, but it does not imply an obligation for the employee not to testify against his company. (...) "the content of the nemo tenetur is more reduced than that of the professional decree. This is because in principle he could only invoke this right for as long as his employment relationship with the legal person subsists. On the other hand, the duty of professional secrecy is subject to time limitations so that even after the lawyer-client relationship has ceased, even if the lawyer does not yet practice the profession" (cf. art. 5.7 Code of Ethics).”

In this way, the professional secrecy of the Compliance Officer's lawyer would prohibit the possibility that he would contribute to a procedure incriminating information that he had in his possession, regardless of whether the working relationship has been terminated and of the personal interest that the Compliance Officer might have in the process. This would also strengthen the company's protection against a currently very common practice, which is that the entity ends up being investigated as a result of the facts revealed in the witness statements made in a procedure in which Directors or Officers of the organization were being investigated.

You can see the article in the Diario la ley

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