Just five days after the Pandora Papers were circulated in Honduras, the National Congress convened to amend the Money Laundering Law, despite protests by opposition legislators. One reform defines Politically Exposed Persons (PEP), which include civil society organizations that oversee, investigate, evaluate or analyze public administration, while another reform erodes the Ministry of Justice’s authority to investigate corruption. The National Congress also amended certain articles of the Penal Code in order to potentially criminalize social protest, and extended tax benefits in the Bay Islands. Lastly, leniency for politicians who have not submitted their campaign finance reports was also approved.
By Jennifer Avila/ Contracorriente
Screenshot from Congressperson Luis Redondo’s Twitter page
The National Congress of Honduras convened a virtual session on a national holiday that was protested by opposition legislators for noncompliance with the procedures established by law. During this session, the National Congress approved reforms to the Money Laundering Law, the Penal Code, the Penal Procedural Code and the Political Party Control Law (Ley de Fiscalización de Partidos Políticos).
Congressperson Luis Redondo of the Social Democrat Party for Innovation and Unity (Partido Innovación y Unidad Social Demócrata – PINU-SD) criticized various irregularities in the congressional session that approved high impact reforms despite lacking a quorum. Redondo also characterized the legal reforms as a hasty reaction to the revelations of the Pandora Papers international investigation.
In an interview with Contracorriente, Redondo said, “These changes to the law are a clear sign that money laundering is indeed happening, and that people are looking for ways to protect themselves from prosecution.”
On October 7, the National Congress amended Articles 2, 26, 29, 30 and 47 of the Special Anti-Money Laundering Law (Ley Especial Contra el Lavado de Activos). A new Politically Exposed Person entity was added to Article 2 (Definitions) that was defined as “… those who perform or have performed public functions in the country or in a foreign country; civil society organizations that manage external cooperation funds to implement various types of projects or programs, or oversee, research, evaluate or analyze public administration; and officials or members of political parties who, due to their influence on government decisions, business relationships, or public processes of any nature, may use their influence for their own benefit or that of a third party. Persons designated as PEP will retain such designation for up to one year after leaving office.”
Seventy deputies participated in the legislative session, including José Zambrano, Mario Pérez, Milton Puerto, Nelson Márquez, Johana Bermúdez, Oswaldo Ramos Soto, José Villanueva, Juan Diego Zelaya, Marco Handal, an alternate for congressperson Yaudet Burbara who was named in the Pandora Papers, and Óscar Nájera, who was recently included on the Engel List and has been sanctioned under the Magnitsky Law.
In a TV interview on the Televicentro TN5 news program, Lester Ramirez, Director of Governance and Transparency for the Association for a More Just Society (ASJ), said that these legal changes are turning Honduras into Nicaragua or Venezuela, where civil society organizations that investigate and audit the administration of public funds have supposedly been persecuted.
“Since PEPs can be natural persons or legal persons like civil society organizations, this reform is highly irregular and may even be unconstitutional,” he said. Ramirez also argued that the PEP designation applies to organizations like the ASJ and the National Anti-Corruption Council (Consejo Nacional Anticorrupción – CNA), and even to media companies that may represent a threat to those accused of corruption, “Venezuela began by registering civil society organizations that managed international cooperation funds and persecution soon followed. These new reforms also violate certain United Nations conventions.”
Also enacted in the October 7 session was another controversial reform to Article 26 (Availability of Records), which establishes that, “During criminal investigations or judicial cases, reviews of financial information pertaining to natural or legal persons shall only be authorized by a judge with the proper jurisdiction.”
Article 47 on banking, professional, and tax confidentiality was amended to read, “Banking confidentiality can only be suspended in investigations of the crimes indicated in Titles XXV and XXXII of the Penal Code [extortion and money laundering], and cases involving the unequivocal deprivation of ownership of assets of illegal provenance, by means of an order issued by a body with the proper jurisdiction.”
Congressperson Luis Redondo and Luis Javier Santos, the prosecutor for the Anti-Corruption Prosecution Unit (Unidad Fiscal contra la Corrupción – UFERCO), both view these legal reforms as limiting the Ministry of Justice’s authority to investigate corruption.
Santos tweeted, “What happened today, on a holiday and right before a national soccer team match, is not the act of a National Congress that legislates to benefit the citizenry. Rather, these are people under investigation for corruption that are seeking to protect themselves and their relatives. Every day I am more convinced that we live in a lawless country here in Honduras … the reforms approved today invoke banking confidentiality to hinder the investigation of corruption and they restrict prosecutors from investigating abuses of authority.”
These new reforms further restrict the Ministry of Justice, already hobbled by a previous reform to the Penal Code that prevents the Ministry from issuing fiscal injunctions without first obtaining an opinion from the Superior Audit Court (Tribunal Superior de Cuentas – TSC), thereby eliminating the ministry’s ability to levy charges.
Tax and political party benefits
The legal reforms include an extension “for a term of fifteen years upon expiration, of the benefits and tax incentives granted by the Law of the Tourism Free Zone pertaining to the Department of the Bay Islands, indicated in Decree No. 181-2006, dated November 29, 2006, and published in the Honduran government’s official gazette (La Gaceta) on January 8, 2007, Edition No. 31,199.” The extension of the tax benefits and incentives granted by Decree No. 181-2006 only apply to companies that currently operate in and are members of the Bay Islands Tourism Free Zone (ZOLITUR).
One heavily criticized reform exonerates candidates for public office, domestic political movements, and political parties from fines and legal sanctions for failing to present campaign financial reports to the Office for Campaign Financing, Transparency and Control within the mandated one-month period after decree approval. This bill was introduced by Oscar René Canales Ortíz, the alternate representative for the Department of Choluteca.
Redondo told Contracorriente that his party voted against the bill introduced by Canales, since this benefits candidates and parties that did not submit their campaign financing reports for the March 2021 primary elections. Redondo claims that the government stands to lose almost US$21,000 in revenue from fines.
Potential criminalization of social protests
The special session of the National Congress approved an increase to the prison sentence for extortion from 15 to 20 years, and another increase in the prison sentence for usurpation from four to six years, making the latter a non-commutable sentence.
According to Luis Redondo, the crime of usurpation has been modified to effectively criminalize political protests ahead of the potential crisis looming for the November 2021 general elections. The law now defines this crime as “the unlawful use of real estate or a real right, or the occupation of land or space that is considered public property such as a right of way, road, street, garden, park, green area, promenade or other places of public use or domain, or any other real estate that is property of the state or of the municipalities; with the purpose or objective of preventing a legally constituted natural or legal person from undertaking or continuing its work, thereby affecting the normal exercise of its activities and rights.” This expanded definition of usurpation therefore includes protests that block traffic or prevent a company from doing business.
“This is especially relevant in light of the widespread antipathy towards the ZEDE,” said Redondo in reference to the protests against Honduras’ Employment and Economic Development Zones (Zonas de Empleo y Desarrollo Económico – ZEDE), which are areas that have been granted tax benefits and special jurisdiction. Some civil society organizations consider the ZEDE mechanism to be a violation of national sovereignty.
ASJ’s Lester Ramirez told Contracorriente that the reform “related to usurpation eliminates a judge’s discretion in deciding how to evaluate the evidence, and also adds requirements that are inappropriate according to the law. The reform created an expedited procedure for prosecutors to vacate a case that may or may not involve a magistrate. It’s incredible how criminal law has been perverted to benefit the powerful. In layman’s terms, what they’re doing is getting ready for any type of public protest of fraud or irregularities at the polling stations during the upcoming elections. They want to restrict the right to protest, which could be considered unconstitutional because it violates the rights of free association, free expression, and citizen protest.”
Read our special report on the Pandora Papers