CHILE: An Introduction to Dispute Resolution: White-Collar Crime

The Asset Tracing and Recovery System in Chile: A Modernisation Challenge 

In Chile, the legal regulation regarding the recovery of assets in national and international fraud is deficient. At present, there is no comprehensive legislation dealing specifically with this topic. However, victims of fraud may use the general tools that are available according to Chilean law for victims of crime that seek restoration. As in most countries around the world, Chilean legislation allows both civil and criminal remedies to achieve the recovery of assets.

Restoration of Assets 

In the case of objects that were taken from a victim through fraud and then seized during the criminal investigation,it is possible to request the restoration of these assets through a simple application to the court. However, this simple restoration action can be problematic in cases where it is not possible to establish that the asset clearly belongs to the victim or where the asset has been transformed by the fraudster into another asset. This could also be problematic in cases of multiple victims, as there are no rules for criminal courts as to the order and proportion in which victims should be compensated.

Civil Action for Damages 

The other possibility to obtain restoration within criminal proceedings is by filing a civil action against the defendant for damages (tort liability). Civil actions seeking compensation for the civil damages of criminal conduct can be filed in the same criminal proceeding or before the competent civil court. Thus, it is possible to have parallel criminal and civil proceedings. Nevertheless, once an action has been exercised before the criminal court, this precludes the right to do so in a civil court. On the other hand, if the action is brought by a third party, or directed against a person other than the accused, it must be brought before the competent civil court.

Despite the above, it is necessary to point out that civil liability is independent of criminal liability. Therefore, once the right to bring a civil action is extinguished, the right to file a criminal action persists. In the same sense, the circumstance of issuing an acquittal in a criminal matter does not automatically prevent the civil action from arising, if legally appropriate. On the other hand, criminal convictions produce res judicata in civil courts, and the plaintiff cannot adduce evidence or allegations that are incompatible with the decision in a criminal sentence or with the decisive considerations of that judgment.

Protecting the Economic Interests of the Victim 

To prevent a defendant from dissipating assets or secreting them to avoid the consequences of a judgment, Chilean legislation provides a variety of precautionary measures to protect the economic interests of the victim, both in criminal and civil proceedings. Precautionary measures extend to any act that ensures or protects the claim deduced or the favourable sentence that could be pronounced. There are four measures particularly regulated: the sequestration of the good that is the subject of the lawsuit; the appointment of one or more auditors; the retention of certain goods; and the freezing of assets.

All these measures may be requested to a judge at any stage of the civil trial, even before the complaint is filed. In criminal proceedings, it is only possible to request these measures once the prosecutor has pressed formal charges against the defendant, which can be too late. In these cases, it’s also possible that the public prosecutor seizes assets with a judge’s order, and these objects may be subject to the penalty of confiscation in the final ruling.

International Fraud 

In this regard, international fraud cases are particularly complex. Because of the principle of territoriality, to enforce a precautionary measure on assets located in Chile of a person who committed a crime abroad, either the foreign judgment must be enforceable, or the Chilean court must have jurisdiction over the matter. Therefore, in most cases it’s not possible to establish precautionary measures in assets that are in Chile to ensure the outcome of a trial abroad.

Special Rules 

Along with this general framework, there have been new developments that have introduced special rules that slightly alter the Chilean overall panorama.

For example, in respect to fraud in the banking field, Law No. 19,913, in force since 2003, regulates the Chilean anti-money laundering prevention system with the purpose of preventing the laundering of assets derived from unlawful acts, avoiding the use of the financial system and other actors of the financial system for money laundering. For this purpose, Law No. 19,913 created the Financial Analysis Unit (UAF), entity that has the power to request, verify, examine, and record information on suspicious activities, and request all the files that appear relevant in the context of the report of a suspicious transaction. In addition, it can exchange information with similar agencies abroad, and access the databases of public agencies if more information is required to complete the analysis of a suspicious transaction.

Another major legislative modification took place in 2014, through Law No. 20,720, that amended Chilean insolvency law improving the statute applicable to insolvency offences. This law also regulates cross-border insolvency, based on the UNCITRAL Model Law, determining cooperation between Chilean courts and other agencies involved and the foreign states that intervene in cases of insolvency, to give greater protection to national or foreign creditors and the assets of the debtor.

In that sense, it establishes important proceedings to regulate the cross-border effects of insolvency. For instance, it states the way to request that a foreign proceeding be recognized in Chile, the way assets of the debtor located in Chile may be protected and the way a creditor or other person abroad that is interested in requesting the procedure or participating in one may do it, among other things.

Recently, Law No. 21,459 introduced new cybercrime-related offences and investigative measures to comply with the Budapest Convention of Cybercrime. The new law amends the Chilean Criminal Code, introducing eight new offenses, including attacks on the integrity of a computer system, handling stolen computer data and cyber fraud. As to asset recovery, this law contemplates special investigative measures, including wiretapping and the use of undercover agents. Furthermore, authorities must seize the instruments used to commit the offences and the effects derived therefrom, including any profit. If said seizure is not possible, a sum of money equivalent to their value may be confiscated. However, if the nature of the information resulting from the offence ‘may not be sold to third parties’, Law No. 24,459 authorizes the destruction of the instruments used to perform the punishable conduct and any effects derived therefrom.

Lastly, it’s important to mention the Economic Crimes Bill, which is currently in the final phase of discussion in the Chilean Congress and regulates different economic crimes and introduces the confiscation of profits. The latter could imply the confiscation of everything obtained as a consequence of the crime and could even be imposed without there being a conviction against those responsible.

Conclusion 

In conclusion, although Chile has no comprehensive legislation dealing specifically with the recovery of assets, strivings have been made towards that purpose. However, these efforts have not been enough, especially regarding crimes with international implications. Chilean legislation and institutions need to modernise to effectively investigate and prosecute a thriving range of crimes that are most often executed from one jurisdiction, but have effects on another, and where assets must be recovered in a multiplicity of jurisdictions.