ARGENTINA: An Introduction to Compliance

A year into President Milei’s administration the regulatory landscape affecting compliance in Argentina has dramatically changed. Foreign enforcement actions and market incentives continue to guide the decisions of many companies. However, the deregulation of several economic sectors, including the disentangling of opaque administrative and financial structures, formerly unaudited state funds, billions of dollars in federal state distribution of resources, and dozens of business-oriented regulatory measures have fostered competition and transparency in the local market, prompting local actors to engage in compliance initiatives.

The existing legal framework has not changed. It includes corporate criminal liability for corruption, money laundering, and other financial crimes, along with incentives for corporates and individuals to co-operate with authorities. An administrative infrastructure supports corporate risk management and provides compliance guidance for the private sector.

In April 2024, the very first non-prosecution agreement was reached between Securitas, a Swedish company, and the Prosecutor’s office. Securitas admitted that its subsidiaries in Argentina paid bribes to several public agencies in exchange for contracts to supply security services. After two years of internal investigations, Securitas filed for the NPA in 2022 and co-operated with the Prosecutor’s office for two years. In April 2024, the Prosecutor’s office arrested several public and former public officials after searching connected properties. Securitas was ordered to disgorge profits, and fully and frankly co-operate with the investigation. In exchange, the company will only pay a reduced fine. The agreement, the first precedent in the application of the corporate criminal liability law in Argentina, sends the right message to the market by adequately balancing the government’s and the private sector’s respective interests in the resolution of these types of case.

Furthermore, several judicial decisions have underscored the possibility of convictions for corruption and money laundering Notably, former president Cristina Fernandez de Kirchner was sentenced to six years in prison and permanently disqualified from holding public office in the Vialidad case, a scheme to award public contracts to Lazaro Baez who was also convicted of money laundering, in exchange for kickbacks. Kircher is similarly likely to face public trials for receiving those kickbacks.

Congress has also passed laws to promote foreign investment in strategic sectors. The Incentive Regime for Large Investments (RIGI by its acronym in Spanish) is already boosting foreign and local investments in infrastructure, mining, energy, forestry, and hospitality. These investments require investing in compliance, as they not only increase the interaction with public officials at all levels, but also exponentially multiply third-party risks as value chains are multiplying and interconnecting.

Increased foreign investment also increases private enforcement. Investors, business partners and external auditors, among other gatekeepers, have significantly expanded their compliance efforts, triggering due diligence efforts and investigations to identify, remediate, or compensate past compliance-risky behaviour. This trend is not only evident in mergers and acquisitions but also in lending agreements, debt-to-equity transactions, and financial certifications. Although the most prominent internal investigations continue to be primarily driven by foreign legal risks, particularly FCPA, “market-driven compliance requirements” have also spurred internal investigations in Argentinian subsidiaries of multinational companies and family-owned Latin American business groups with access to foreign markets.

Corporate investigations have also been driven by the rise in cyber fraud, where victim companies must conduct forensic investigations and determine if insiders were involved. Additionally, growing concerns around environmental, social, and governance (ESG) issues, such as gender-based discrimination, workplace mistreatment, and modern slavery, have led to a visible increase in internal investigations.

Finally, in the AML field, Law 27739 introduced significant changes in the AML/CFT system in March 2024. The Financial Information Unit aligned its legal framework with the most recent Financial Action Task Force (FATF) standards, helping Argentina to successfully pass the FATF’s last evaluation and avoid the FATF’s grey list. The government continued the accession process to the OECD and announced its willingness to pursue free trade agreements. Both market and political landscapes are aligned towards strengthening legal and institutional frameworks, enhancing enforcement, and improving organisational compliance practices in the private sector.