New Classification of Offences and Penalties Applicable in Proceedings Provided for in the Financial Institutions Law

The Central Bank of Argentina established, though Communication “A” 5838 dated November 21, 2015, a new classification for infringements under the proceedings provided for in article 41 of Law No. 21,526 of Financial Institutions, as well as the penalties and the criteria for their enforcement, including a scale of fines according to the regulation about “Substantiation and punishment applicable to proceedings regulated under article 41 of Law No. 21,526”. 

Moreover, the communication establishes a case by case classification system for possible infractions depending on the magnitude of the infringements, including the categories of most serious, very serious, serious, moderate or slight ones.  In the event that the infringement is not expressly provided, it must be classified according to their similarity to the cases expressly provided. 

As to the penalties, the communication states that for the offenses: 1) Most serious: the fine will be the greater of (i) 10% to 15% of the amount of the transactions under analysis, (ii) between AR$ 25,000,000 and AR$ 45000.000, and (iii) equal to 150% of the amount if the pecuniary benefit obtained by the offender can be determined; 2) Very serious: the fine will be the greater of (i) AR$ 15,000,000 to AR$ 20,000,000 and (ii) equal to 150% of the amount if the pecuniary benefit obtained by the offender or the damage caused to a third party can be determined; 3) Serious: the fine will be the greater of (i) AR$ 5,000,000 to AR$ 15,000,000 and (ii) equal to 150% of the amount if the pecuniary benefit obtained by the offender or the damage caused to a third party can be determined; 4) Moderate:  the fine will be the greater of (i) AR$ 1,000,000 to AR$ 5,000,000 and (ii) equal to 150% of the amount if the pecuniary benefit obtained by the offender or the damage caused to a third party can be determined; 5) Slight: the fine will be imposed from a scale between AR$ 150,000 to AR$ 1,000,000, or a warning or call of attention.

Moreover, the weighting factors provided for determining the fines, such as the magnitude of the offense, damage caused to third parties, the pecuniary benefit generated for the offender, the operating volume of the offender and the computable net worth of the company.  As for the scale of fines, the communication includes matrixes for calculating fines and objective factors (mitigating and aggravating, with varying degrees of each other) for the purpose of weighting the facts and behaviors under analysis.  In the case of more than one infraction, the scale for the most severe breach included is applicable and the rest of the breaches must be absorbed by that one, even when the number of charges or infractions in the proceedings might increase the quantification of the fine.  Lastly, the communication established certain limits on the sanctions when they are non-serious offenses since for financial institutions they are related to their capital position, for exchange entities to their computable net worth, and for other legal entities net worth.

Because the parameters stated by the communication are just a guideline for the authority, different criteria may be used when applying such rules, mitigating or aggravating the sanctions with justified arguments. Individual cases could be beyond the scope of these standards, and this circumstance will not be a limit for the discretional decision of the Central Bank.