Thought leadership from our experts

White-collar crime in Portugal: risks and challenges

With an economy that is still fragile and trying to define the right way out of the financial crisis that led to the intervention of the IMF/European Commission in the middle of 2011, any analysis of white-collar crime in Portugal is dominated by the investigations relating to the main financial institutions affected. The circumstances that led to the State's intervention in BPN (nationalisation in November 2008) and BPP (intervention in 2008 and licence withdrawn by the regulator in 2010) are still today subject to various legal actions that are keeping the Portuguese investigators and courts are busy. In the area of criminal law, all the institutions referred to were the origin of various cases with accusations that are still before the Portuguese courts. In parallel, various administrative offence proceedings (brought by the Bank of Portugal) led to accusations in which the fines to be applied to the various people and entities responsible stood at several millions of euros (higher than the maximum for the criminal fines). These fines have been challenged in the courts but the cases are still very far from reaching any conclusions.

Then there is the case of BES (subject to a resolution action in August 2014) which has already given rise to accusations by the Bank of Portugal (still at the administrative stage, with the analysis of evidence presented by the defendants) and with various ongoing criminal investigations which are, however, also still at the early stages. As a result of the size of BES and the impact of the decisions taken by the authorities, we expect that the criminal justice system will be kept busy for at least the next decade with the criminal and administrative offence cases that that have resulted from the incidents that led to the fall of one of the largest private Portuguese banks. The duties of the directors, their acts and omissions and their relevance in terms of criminal and administrative offence proceedings, as well as the interconnection between the criminal accusations and administrative accusations, will occupy the legal and judicial debate, and will be the understandable focus of media scrutiny and coverage. Finally, and even more recently, BANIF has appeared as yet another bank needing state intervention, with the exchange of accusations between the previous directors and the Government.

Another case that will see developments throughout 2016 is the one involving former Prime Minister José Socrates, who was remanded in custody for 11 months and is now expecting a formal accusation to be filed during the course of this year. With a significant impact on the media, the case may involve a large set of crimes (corruption, tax fraud and money laundering), and is related to the six years that José Socrates was Prime Minister of Portugal.

Besides the cases described above, the judicial authorities are focusing keenly on tax crimes. In a country that is still dominated by a heavy tax burden on citizens, the judicial authorities have focused particular attention on this area in the last decade. It is certain that the option to regularise tax debts with the consequent provisional suspension of the process for a period of 2 years (agreement given by the Public Prosecutor, by the investigating magistrate and by the defendants) and subsequent dismissal of the proceedings without trial, has made it possible for the State to bring in many millions of euros. These practices of negotiation have increased the possibilities of application of the provisional suspension of the process in cases where the amounts in question cannot be quantified without particular difficulties.

Other cases will certainly dominate the Portuguese legal system in the near future: (i) a case investigating state secrecy which is at the trial stage, with judgment expected during 2016, (ii) the case related to Golden Visas in which the judicial authorities are investigating irregular practices in granting visas and which should come to trial before the end of the year, (iii) a case in which the sale of Banco de Cabo Verde to a Portuguese businessman is being investigated and in which the Public Prosecutor has arrested the businessman in question, and (iv) the case looking into the deals made by the same businessman with Congo.

In terms of cracking down on crime, this means 2016 will be dominated by judicial attention to the investigation of acts of fraud, tax evasion, corruption, embezzlement, forgery of documents and money laundering. The focus will continue to be on the actions of the Public Prosecutor's Office and the way in which it works together with the investigating magistrate.

In Portugal, the Public Prosecutor's Office is the constitutional body with power to take criminal action. Enjoying its own status, the Public Prosecutor's Office is organised as a procedural independent magistracy, in two senses: that of not interfering with other recognised powers that it has, and in its conception as a distinct magistracy, guided by a principle of separation and parallelism in relation to the judicial magistracy. This independence is defined by its being bound by criteria is of legality and objectivity. In actions carried out by the DCIAP (Central Department of Criminal Investigation and Action) as the body of the Public Prosecutor's Office that coordinates and manages investigation and prevention of violent crime, highly organised crime or especially complex crime, the Public Prosecutor's Office frequently coordinates with the magistrate. Some criticisms have been addressed precisely to the Central Criminal Court (Tribunal Central de Instrução Criminal – TCIC), which works most closely with the DCIAP and whose principal magistrate has followed the proposals of the Public Prosecutor in almost their entirety. In some cases, the said magistrate applies measures more serious than the ones actually requested by the Public Prosecutor in terms of the application of measures depriving suspects of their liberty. Despite these criticisms, it is certain that those decisions have been followed in cases in the higher courts. For this reason, we do not expect great changes in the guidance followed by the principal magistrate.

Also under intense focus will be the recent judicial reform that came into force in 2014, which introduced the new model for organisation of the courts, which are now managed by a presiding judge assisted by a prosecutor from the Public Prosecutor's Office and a judicial administrator. As it is still too early to pass judgment on this new model, we do not expect there to be major changes to what has been decided, except perhaps for certain operational adjustments that may have to be made. By way of example, the Lisbon DCIAP recently moved to new premises and it is expected that the TCIC will soon do the same.

For the reasons indicated above, 2016 will continue to be fertile ground when it comes to investigations and trials involving white-collar crime. However, it is hoped that there will be a great increase in the area of prevention and in developing compliance systems within companies.

In fact, with the exception of banking and financial activity, and companies quoted on the stock market and multinationals that operate in Portugal, most Portuguese companies have still not woken up to the importance of having mechanisms to prevent legal and regulatory risks.

Indeed, the State itself has been criticised for failing to implement legislation on crime prevention, having preferred to focus on sanctioning crime after the event.

It is hoped then that the year 2016 will bring the bases to launch a real policy of prevention when it comes to economic crime, and Portugal's leading law firms are aware of this need and prepared for this development in the legal market.