White-collar enforcement in Italy

During the pandemic, white-collar experts have not been as busy as they used to before. Has this also been the case in Italy?

G. Scassellati-Sforzolini: During the pandemic, enforcement authorities have mainly focused on combating fraud related to the health emergency and that did not come as a surprise. The restrictions implemented in Italy also impacted the ordinary activity of companies and authorities. However, as the economy rebounded, we have witnessed a ramp-up of criminal investigations, confirming that Italy remains a hub for white-collar crime enforcement.

What are the key areas and future trends of white-collar enforcement and how do you expect them to impact companies operating in your jurisdiction?

G. Scassellati-Sforzolini: The fight against corruption, money laundering, tax evasion and corporate fraud (including false information in financial statements and market manipulation) remains at the forefront of enforcement action, alongside a number of investigations in the area of health, safety and environment. Although criminal law has always been (and – to a certain extent – still is) at the core of state sovereignty and, therefore, outside the scope of supranational legislators, in recent years the European Union has adopted several pieces of legislation concerning criminal law, which impact national enforcement priorities and strategies. For example, the new European Public Prosecutor’s Office responsible for prosecuting criminal offences affecting the EU’s financial interests, which may act as a driving force for new and more aggressive investigations on VAT fraud or illegally obtained EU funds.

G. Checcacci: We also expect that the EU’s new whistleblowing directive will increase reports of improprieties within companies and may fuel new investigations on corporate crimes. Moreover, the proposal for a new EU directive on corporate sustainability due diligence may also increase attention on environmental and human rights violations, for example in the M&A field, where criminal risks have become a focal point during due diligence.

What are the main features of white-collar enforcement in Italy in comparison with other jurisdictions?

G. Scassellati-Sforzolini: One of the main differences vis-a-vis other jurisdictions, especially common law ones, is that in Italy public prosecutors, at least in principle, do not have discretion in deciding whether to prosecute: in other words, they have an obligation to open an investigation whenever they become aware that a crime may have been committed. As a result, any criminal complaint or report filed by private parties, such as an employee or a competitor, may trigger criminal prosecution regardless of whether the complainant joins the criminal proceedings as a party. We have often seen criminal complaints targeting corporates or their senior executives being filed in the context of complex corporate battles to be ‘used’ as leverage in the overall litigation strategy. However, given that prosecutors have a duty to investigate and that certain crimes are prosecuted ex officio, criminal complaints may then escape the control of the party who lodged them. Moreover, Italian law does not provide for non-prosecution or deferred prosecution agreements. As a result, companies do not have the option to settle the case directly with the prosecutors. In practice, the only option is a plea bargain, which needs to be approved by a court.

G. Checcacci: Another important point to bear in mind is that in Italy companies may be held liable before criminal courts for certain crimes committed in their interest or to their advantage by their directors or employees. After years of patchy enforcement, this piece of legislation, which was first introduced in 2001 and has been expanded over the years to include additional crimes, is being increasingly applied by prosecutors and criminal courts and it acts as an effective deterrent given the heavy sanctions that may be imposed. Those include fines, but also disqualifying measures, such as the prohibition to carry out the business for a certain period or the suspension or revocation of permits or licenses, which may have a drastic impact on the company’s operations.

What does this mean for companies operating in your jurisdiction?

G. Scassellati-Sforzolini: The advice we give to our clients is to heighten their focus on compliance and, specifically in the case of multinationals with significant Italian operations, to adjust their compliance programmes in light of Italian law. The corporate liability statute also applies to foreign companies if the crime is committed in Italy. However, companies may shield themselves from liability if, prior to the commission of a crime, they had adopted and effectively implemented a compliance model suitable to prevent crimes of the same kind as the one committed.

G. Checcacci: We also encourage companies to put in place policies and procedures to properly and timely handle the pitfalls that may arise from investigations, for example preparing a plan of action and training employees. Internal investigations may also be an effective tool: they allow companies not only to preserve documents and information in view of a trial, but also to ponder defence strategies and possibly cooperation or self-reporting actions, bearing in mind though that companies’ cooperation during criminal investigations or self-reporting are not formally considered an exculpatory or a mitigating circumstance as in other jurisdictions. Internal investigations were not very common in Italy until recently, when they started to play a crucial role for mitigating the impact of a criminal investigation. Indeed, a timely internal investigation may allow a company to adopt remedial programmes, which are assessed by judicial authorities to reduce fines or avoid disqualifying measures. We expect this trend to intensify also in light of the new EU directive on whistleblowing which will boost investigations on whistleblowers’ reports.

What are then your recommendations to effectively handle a crisis arising out of a white-collar crime?

G. Checcacci: First, it is critical to identify the issue and draw up an informed action plan early on. Issues overlooked in the early phases of an investigation could prove very costly down the road, limiting options or potentially subjecting a company to greater penalties. A carefully crafted first response plan should consider the scope of the crisis, whether to conduct an internal investigation and its focus, and the people in charge of coordinating any communication with the public prosecutors or other parties: criminal investigations in Italy are generally secret, so any information should be treated accordingly. Outside counsel may also play a key role in helping clients navigating the first responses to white-collar investigations, assessing the issue and liaising with the authorities. Among other things, outside counsel is critical to maintain privilege, because communications with in-house counsel are not privileged at all in Italy, unlike in other jurisdictions.

How has white-collar assistance changed over the years?

G. Scassellati-Sforzolini: We have witnessed – and experienced ourselves – a big transformation of the white-collar practice in recent years. From a niche practice limited to criminal law boutiques, it has become a core area at many national and international multi-practice firms. Indeed, considering the complexity and globalisation of the modern business world, white-collar cases have often a trans-national nature that requires expertise on different jurisdictions and different substantive areas, such as corporate and securities law, administrative law, bank and financial regulations, or antitrust. Moreover, clients often expect white-collar lawyers to be specialised also in compliance and risk management and to help them communicate strategically with a consistent message across constituencies, including authorities, shareholders, employees, and the media. This is why, for example, we have created our global crisis management practice, equipped with lawyers from different offices and with different backgrounds, in order to help clients assess and manage crises through a multidisciplinary and multi-jurisdictional lens.