New Crimes under Legislative Decree no. 231/2001. The list of crimes triggering corporate liability under Legislative Decree no. 231/2001 was recently expanded by Legislative Decree no. 184/2021, implementing Directive (EU) 2019/713 “on combating fraud and counterfeiting of non-cash means of payment and replacing Council Framework Decision 2001/413/JHA”. As a result, Section 25-octies.1 on “Crimes related to non-cash payment instruments” was introduced. Such crime arises in case of:
- Unlawful use and forgery of non-cash payment instruments;
- Possession and dissemination of equipment, devices or computer programs aimed at committing offences concerning non-cash payment instruments; and
- Computer fraud, provided for by Article 24 of Legislative Decree No. 231/2001, for which an aggravating circumstance has been introduced in case the conduct results in the transfer of money, monetary value or virtual currency.
Sanctions for committing such crimes are monetary fines up to 800 quotas and the application of blacklisting sanctions.
Amendments to the Italian Criminal Code. Legislative Decree No. 195/2021, implementing Directive (EU) 2018/1673 “on combating money laundering by criminal law”, introduced several amendments to Sections 648, 648-bis, 648-ter and 648-ter.1 of the Italian Criminal Code, providing for the offences of receiving stolen goods, use of goods of unlawful origin, money laundering and self-laundering, all already included in the catalogue of predicate offences under Section 25-octies of the Legislative Decree No. 231/2001. More specifically, the above-mentioned Legislative Decree amended the provisions:
- By extending the scope of the crime of receiving stolen goods also to contraventions and by providing for an aggravating circumstance in case the offence is committed in the exercise of a professional activity;
- By extending the scope of the crimes of money laundering and self-laundering also to culpable offences and contraventions;
- By extending the scope of the crime of use of goods of unlawful origin crime also to contraventions.
Further Proposed Legislative Amendments. Draft law No. 2427 provides for the inclusion of agri-food crimes the list of predicate offences under Legislative Decree No. 231/2001, with the aim of safeguarding public health, with a focus on the traceability of raw materials and products, hygiene violations, and combating fraud in trade, from agro-piracy to Italian sounding. However, the bill has been submitted to Parliament but has not been approved yet.
Any Impacts for Your Company? If your company has not yet adopted an organizational model pursuant to Legislative Decree no. 231/2001, then it will obviously need to consider all the above crimes, in addition to those previously existing. If, instead, your company has already adopted a 231 model, it will be necessary to check if it is at risk of committing such new offences. It would be advisable to carry out a new risk assessment aimed at ensuring that the model is duly updated.
As a result of the so called “PIF Directive”, starting from July 2019 criminal corporate liability under Italian law 231 may be triggered by tax crimes, too.
(If you are not overly familiar with the principles of Italian 231 legislation on criminal liability of corporate entities, perhaps you may start here.)
Under Italian 231 law, corporations are subject to criminal (rather, quasi-criminal) liability when certain specific crimes are committed in their interest or to their advantage. So far, such crimes have never included tax crimes, although the issue had been widely debated and several court decisions had attempted to combine other types of crimes with tax crimes (the Supreme Court had always disagreed, though).
Now, the PIF Directive, which Member States must implement by July 6, 2019, “establishes minimum rules concerning the definition of criminal offences and sanctions with regard to combatting fraud and other illegal activities affecting the Union’s financial interests, with a view to strengthening protection against criminal offences which affect those financial interests.” Liability of legal entities must be foreseen by national legislation and serious offenses against the common VAT system must be punished.
The Italian legislator will thus need to introduce such serious VAT crimes (i.e., having a value in excess of 10 million euros) in the list of crimes triggering corporate liability. This, in fact, may open the door to other tax crimes as a basis of 231 liability of corporate entities.
Whistleblowers will be granted a higher level of protection under new legislation passed earlier this week in Italy.
The new provisions apply to civil servants as well as employees in the private sector. Whistleblowing protection will shield individuals who submit a good faith report concerning unlawful conduct, provided that such report is based on a reasonable belief and factual elements.
The new legislation prohibits any retaliation or other discriminatory measures against good faith whistleblowers, including termination, demotion, transfer or other organizational action.
In the private sector, the new legislation has a significant impact on organizational models adopted to prevent corporate criminal liability pursuant to Legislative Decree 231 of 2001. In fact, all organizational models will need to set up appropriate channels for the confidential reporting of criminal conduct and violations of the organizational models themselves. Measures aimed at protecting the identity of the whistleblowers and the confidentiality of the reports, as well as disciplinary sanctions against retaliatory or discriminatory measures against whistleblowers, will also need to be included in such organizational models.
The new legislation is expected to enter into force shortly, upon publication in the official gazette.
Starting from November 19, 2017 and following an amendment of the Anti-Mafia Code, additional criminal conducts will trigger corporate criminal liability pursuant to Legislative Decree no. 231 of 2001. (If you are not yet familiar with “231”, i.e., the Italian law setting forth criminal corporate liability, you may refer to our previous blog post for an overview of such legislation).
Section 25-duodecies of Legislative Decree no. 231 of 2001 has been amended by the introduction of three new paragraphs (1-bis, 1-ter and 1-quater) relating to the following crimes in the area of illegal immigration:
• Procured illegal entry into the State; and
• Favoring illegal permanence into the State.
The full list of crimes and sanctions can be found here.
The idea is to punish companies who take advantage of illegal immigration, as well as to provide an incentive to companies to organize their activities in order to prevent such corporate crimes (in fact, companies are exempt from liability if they set up and actively pursue organizational models aimed at preventing corporate crimes). It is, however, unclear if continuously increasing the list of crimes that companies must prevent is an efficient way to do that.
Are Companies Criminally Liable under Italian Law? Yes!
Legislative Decree no. 231/2001 (the “231 Decree”) has introduced in Italy the principle that companies are responsible for crimes committed by:
- Individuals vested with powers of company’s representation, control, direction, or management;
- Individuals subject to the authority or control by the above-mentioned individuals, including employees, consultants, non subordinate employees and whoever acts on behalf of the company.
- As a result, a company may now be considered liable for crimes committed by individuals in the interest or to the benefit of the company (while crimes committed by individuals in their exclusive interest or in the exclusive interest of third parties do not trigger company’s liability). The company’s liability is separate and distinct from the liability of the individual who committed the crime.
Which Crimes Trigger Liability? Several (not just corruption!).
The 231 Decree lists a number of crimes for which companies may be liable, which include:
- Corporate crimes;
- Crimes against public administrations;
- Crimes against the dignity of individuals;
- Conspiracies and terrorism;
- Crimes arising out of breach of laws protecting the environment and health and safety at work;
- Crimes related to criminal associations;
- Money laundering.
Which Sanctions Apply? Monetary and blacklisting sanctions.
If a company is found liable, the following sanctions may apply:
- monetary sanctions up to a maximum amount of Euro 1,549,370.69 (and precautionary seizure of the price or profit arising from the crime),
- blacklisting sanctions (applicable also as a precautionary measure), with duration between 3 to 24 months, which can consist of, inter alia, the prohibition to conduct the Business’ commercial activity, the prohibition to contract with the public administration, the prohibition to advertise goods or services, seizure, or the publication of the court’s decision (if a blacklisting sanction is applied).
Are There any Grounds of Exemption from Criminal Corporate Liability? Yes!
A company is not liable pursuant to the 231 Decree if it proves that:
- The management has adopted and effectively implemented a so-called ‘Organizational Model’ in order to prevent the commission of the criminal offences listed in the 231 Decree by subjects acting on behalf of the company;
- The company has established an internal body (‘Compliance Committee’) entrusted with the task of supervising the proper functioning and update of the Organizational Model, as well as the actual compliance by all those who must abide by it;
- Crimes were committed by individuals vested with management powers who have fraudulently avoided compliance with the Organizational Model;
- The Compliance Committee has not omitted to perform, or negligently performed its supervision duties.
- This explains why companies operating in Italy typically devote substantial resources in the setting up of an Organizational Model.
How to Set up an Organizational Model? Risk assessment, gap analysis, preventive measures.
In order to prepare an Organizational Model the following process is usually followed:
- Examination of areas of risk: on the basis of the company’s Organizational Model and relevant job descriptions, the risk of commission of each crime set forth in the 231 Decree is assessed.
- Analysis of existing procedures: all existing procedures and ethical principles are reviewed in order to identify procedures that may reduce the risk of commission of the crimes.
- Possible implementation of new measures: should the analysis of existing procedures lead to conclude that some of the risks are not properly reduced, new procedures should be implemented.
The Organizational Model must be Effective. A compliance program on paper will not help!
Once a company has adopted an Organizational Model by means of a resolution of the Board of Directors, the company must ensure that it is effectively implemented, that employees and other individuals acting on behalf of the company are duly trained on the model and that any breach of the Model is sanctioned.
In particular, the appointed Compliance Committee must actively supervise the effective functioning and adequacy of the Model on an ongoing basis and in independent fashion. The Compliance Committee is generally in charge of:
- Monitoring the activity carried out within the company and the areas considered at risk;
- Assessment of the actual implementation of, and compliance with the Organizational Model;
- Cooperation and consultation with the management as regards the application of disciplinary sanctions to employees in the event of breach of the internal procedures provided by the Organizational Model.