Elimination of the Crime of Tax Fraud in the Constitutional Reform on Preventive Detention

On November 13, 2024, the Chamber of Representatives approved theinitiative to amend Article 19 of the Political Constitution of the UnitedMexican States (CPEUM), which provides the list of offenses warrantingmandatory preventive detention.

After a discussion in the Chamber of Representatives, it was decided that,among other offenses, tax fraud did not merit mandatory preventive detention,which had been proposed by the Executive Branch in the original reforminitiative.

Among the offenses that were maintained and stand out for their businessimplications are:

1. Smuggling, and
2. Any activity involving false tax receipts, as defined by law.

The mandatory preventive detention for these offenses is proposed under the rationale that they are as socially dangerous as high-impact crimes, such as extortion, and the illegal production, preparation, sale, purchase, import, export, transportation, storage, and distribution of synthetic drugs like fentanyl and its derivatives.

Furthermore, it is established that, in interpreting and applying the conditions for preventive detention, state authorities must adhere strictly to the letter of the law. Any interpretation that attempts to ignore or undermine its terms or validity, either wholly or partially, is prohibited.

The ruling, after its approval in the Chamber of Representatives, has been sent to the Senate for further legislative process. If approved by the Senate and by the Local Congresses, this constitutional reform would come into force once published in the Official Gazette of the Federation.

 Preventive Actions for the Business Sector and Protection of Corporate Governance Bodies

This reform presents a business risk since smuggling is listed under Article 11 BIS of the Federal Criminal Code as crimes attributable to legal entities.

For this reason, members of the governing bodies of a company under investigation for the offenses covered in the reform, who fail to implement organizational controls to prevent these crimes, will be at risk of preventive detention during the criminal process and until sentencing.

In light of the potential legislative approval, it is essential that companies implement appropriate organizational controls and compliance measures, as required by Article 421 of the National Code of Criminal Procedure. These preventive measures will help mitigate risk and potentially exclude the corporation and its governing body from preventive criminal liability.

Crime prevention models can be developed under corporate criminology principles, following standards recognized by the United Nations Office on Drugs and Crime, and include control environment and risk mitigation elements based on ISO 31022 and 37301, and UNE 19601 and 19602 standards for general, criminal, and tax compliance risk management. These models should include the creation of necessary evidentiary support for corporate criminal defense.

Our firm's Tax Law and Corporate Criminal Liability and Compliance Practices are fully equipped to represent our clients in complex corporate criminal litigation and to advise them on necessary fiscal and criminal compliance to prevent the criminal liability of legal entities.

Our expert team has extensive experience in developing criminal and tax risk analyses, as well as in designing, implementing, and operating Organizational Management and Control Systems for corporate fiscal and criminal compliance.