New laws are set to get tough on foreign corporate bribery and place increased responsibility for compliance with directors.
Proposed new laws to prevent foreign bribery by Australian companies are set to place greater onus on directors to take steps to prevent, detect and respond to potential corruption. The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (Cth) shifts the responsibility onto companies to prevent foreign bribery.
The bill, introduced into the Australian Senate in December 2017, will render a company’s failure to prevent foreign bribery as an offence — it will also ensure the offence of foreign bribery is easier to prove. The bill will also increase the range of tools available to investigators and prosecutors in dealing with serious corporate crime.
Australian corporations will be liable for foreign bribery by associates and employees unless they can prove the company had a strong anti-corruption program in place at the time the crime was committed. While the changes represent a significant strengthening of anti-bribery laws in this country, they merely bring Australia into line with existing regulations of other advanced economies such as the US and UK.
“The proposed reform will involve a sea change in director responsibility,” says Herbert Smith Freehills partner Grant Marjoribanks. The most significant changes of the proposed new laws are:
1. New offence for failing to prevent foreign bribery
An Australian company will be criminally liable where an associate such as an officer, employee, contractor, agent or other service provider bribes a foreign public official for the profit or gain of the company — unless the company can demonstrate that it has adequate procedures in place to prevent the offence. A company can also be convicted under this provision even if the accused associate has not been successfully convicted of a foreign bribery offence.
Pamela Hanrahan, professor of law at the University of NSW and a leading authority on financial services law and regulation, says the new law reverses the burden of proving that appropriate steps were taken.
“You’re assumed to be liable,” she says. “It’s your fault if somebody else does it unless you can prove you had adequate arrangements in place to protect against bribery.”
The maximum penalty for each offence will be the greater of either $21 million, three times the benefit obtained from the bribery, or 10 per cent of the company’s annual turnover. Convicted individuals could face a prison term of up to 10 years.
2. Amendments to existing foreign bribery offences
The proposed amendments will lower the bar for prosecution of a foreign bribery offence. Changes include extending the definition of “foreign public official” to include candidates for office; removing the requirement to show the foreign public official was influenced in the exercise of his or her duties; clarifying that the accused did not need to have a specific advantage in mind to have committed the offence; and clarifying the scope of the offence to make clear the business or advantage can be obtained for another person, not just the person who provided or offered the benefit.
3. Deferred prosecution agreement scheme
The new laws will introduce a deferred prosecution agreement (DPA) scheme in Australia for the first time. DPAs are voluntary negotiated settlements between a criminal prosecutor and a company, where the company defendant agrees to comply with certain requirements — such as compensating victims or paying a financial penalty — in exchange for prosecution discontinuing.
DPAs will only be available to companies, not individuals, and only an option for certain serious corporate crimes such as bribery, fraud, insider trading and other market misconduct. According to Hanrahan, the laws give companies the opportunity to inform regulators if they discover they have committed a criminal offence and the chance to negotiate an outcome to avoid criminal prosecution.
What directors should do
The federal government intends to publish guidelines on steps companies can take to ensure they have adequate procedures in place to prevent foreign bribery, and also avoid prosecution if an officer commits that offence. However, this has not yet been done.
Hanrahan says the guidelines will likely be similar to those already in place in the US and UK and that such preventative measures should already be in place within companies. “It’s not to say that directors don’t need to actively turn their minds to when the guidelines come out as to whether existing arrangements are appropriate,” she says. “They need to put it on the board agenda and say, ‘Let’s not just assume we’re doing all of this, let’s double-check we’re doing it because if something goes wrong, it’s a really significant penalty.’”
The Australian Federal Police (AFP) and Commonwealth Director of Public Prosecutions (CDPP) have released guidelines for Australian corporations seeking to proactively disclose suspected foreign bribery and related offences.
AFP Commander Peter Crozier, manager of criminal assets, fraud and anti-corruption, says the guidelines clarify expectations on corporations assisting in investigations. They provide a framework for self-reporting suspected incidents and clarify the AFP and CDPP principles and process applied for self-reported activity associated with foreign bribery, money laundering, false documents and false accounting.
They need to put it on the board agenda... Let’s not just assume we’re doing all of this, let’s double-check we’re doing it because if something goes wrong, it’s a significant penalty.
“Directors should ensure their companies closely monitor that guidance and engage with any consultation process the government runs to ensure companies have clarity around expectations in this area, and that their systems and processes meet those expectations,” says Herbert Smith Freehills partner Jacqueline Wootton, who leads the firm’s Australian Corporate Crime and Investigations team with Marjoribanks. “Rather than directors reacting to issues that come to their attention, they will have a positive responsibility to take steps to ensure such issues do not arise.”
Having robust internal systems and processes to ensure conformity with Australian law will be the key to compliance, says Marjoribanks. This should include regular reporting to directors on how the company embeds its anti-corruption policy and its efforts to prevent corruption, plus the company’s ongoing steps to monitor and detect any potential issues. “A paper policy alone will not be sufficient to establish adequate bribery prevention procedures,” Marjoribanks says.
With tough new legislation, improved AFP guidelines and increased international cooperation, it is more likely than ever that bribery and corruption issues will be uncovered and prosecuted, according to Allen & Overy partner Jason Gray. A rising trend of increasing international cooperation among law enforcement agencies on foreign bribery activities is driving investigations in Australia. Joint global initiatives have resulted in several high-profile cases in recent years, such as the recent Unaoil bribes-for-contracts scandal.
Australia’s neighbours across Asia are also moving on the issue, with China recently introducing a new anti-corruption agency. “Australian executives and boards should be taking a hard look at their internal anti-corruption frameworks, especially for activities located in high-risk jurisdictions and industries,” says Gray. “Australia’s reputation as a soft-touch jurisdiction for anti-bribery enforcement is coming to an end.”
International perceptions of honesty
Transparency International ranks 180 countries and territories by their perceived levels of public sector corruption, according to experts and businesspeople, using a scale of zero (highly corrupt) to 100 (very clean).
- New Zealand: 89
- Denmark: 88
- Finland: 85
- Norway: 85
- Switzerland: 85
- Australia (equal 13th): 77
- Somalia: 9
- South Sudan: 12
- Syria: 14
- Afghanistan: 15
- Yemen: 16
- Sudan: 16
Source: Transparency International, Corruption Perceptions Index 2017
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