Proposed revisions to Australia’s foreign bribery laws remain an outstanding piece of legislation at the end of the 46th Parliament, but directors need to be aware that corporate stakeholder anti-compliance expectations are growing, writes Rachel Nicolson.
While anti-corruption was a significant issue in the 2019 federal election campaign, the anti- corruption legislative reform agenda did not progress during the last Parliament. Nonetheless, a number of domestic and international factors mean that corporate stakeholders’ anti-corruption compliance expectations are higher than ever. Chief among these are the accelerating importance of environmental, social and corporate governance (ESG) factors and anti-corruption policy developments. In this context, it is critical that directors are aware of their central role in promoting anti-corruption compliance.
Under Australian law, it is an offence to bribe a Commonwealth, state, territory or foreign public official. It is also an offence to offer, provide, request or receive commercial bribes.
Foreign bribery — the bribery offence to which many companies have the highest level of exposure — occurs when:
- Person A provides or offers a benefit to Person B
- The benefit is not legitimately due to Person B
- Person A intends to influence a foreign public official (who may be Person B or another person) in the performance of their duties
- Person A seeks to obtain or retain business or a business advantage that is not legitimately due. Offending conduct by an individual may be attributed to a company in circumstances where:
- A director or high managerial agent of the company intentionally, knowingly or recklessly committed foreign bribery or expressly, tacitly or impliedly permitted it
- The company maintained a corporate culture that led to non-compliance with foreign bribery laws, or that failed to require compliance with such laws.
The maximum penalties for foreign bribery are significant — individuals face 10 years’ imprisonment and fines of over $2m; companies face fines of tens of millions of dollars.
While Australia’s foreign bribery laws are relatively strong and have been in place for almost 25 years, there have been few convictions, in large part due to the significant hurdles enforcement agencies face when investigating and prosecuting conduct that is likely to occur offshore and unlikely to be documented. Consequently, the Coalition introduced a bill during the past two Parliaments to strengthen Australia’s foreign bribery laws by:
Simplifying the existing foreign bribery offence
Introducing a new “failure to prevent foreign bribery” offence making companies liable for foreign bribery committed by any person within their control or performing services on their behalf, unless the company can prove that it had “adequate procedures” in place to prevent the foreign bribery
Establishing a “deferred prosecution agreement regime” providing for non-trial resolutions of foreign bribery prosecutions.
The bill will lapse when the 2022 federal election is called, but is expected to be reintroduced in a similar form during the next Parliament.
Increasing stakeholder expectations
The anti-bribery compliance expectations of corporate stakeholders have strengthened. Across the board, pressure from investors, employees and communities has elevated the importance of companies taking a proactive approach to ESG issues. Many corporate stakeholders now view strong ESG practices as both a risk mitigant and an investment enabler — and expect companies to calibrate their corporate governance, risk management and compliance systems to international best practices (rather than baseline legal obligations) and to establish integrated systems (rather than take siloed approaches to risk and compliance issues).
Many companies currently have in place anti- bribery compliance policies and procedures calibrated to promote compliance with anti-bribery laws and provide a basis for a forward defence should a bribery incident nonetheless occur. However, corporate stakeholders are increasingly recognising that the maintenance of strong anti- bribery compliance policies and procedures is a key aspect of a company’s corporate governance, and that a bribery incident can significantly undermine a company’s performance against other ESG criteria — for example, by enabling non- compliance with environmental and human rights. As a consequence, companies are under increasing pressure to align their anti-bribery compliance policies and procedures with leading soft law standards, and to ensure anti-bribery policies and procedures are aligned and operate in tandem with other relevant components of a company’s ESG framework (like its anti-money laundering, environmental, human rights and trade controls compliance functions). In addition, while anti- bribery enforcement agencies have always expected boards to demonstrate dedication to anti-bribery compliance, directors are increasingly expected to actively monitor anti-bribery compliance systems and to oversee their corporation’s response to any material reports of bribery incidents.
Strengthening regulatory expectations
At the same time as corporate stakeholder attitudes to ESG factors are evolving, anti-corruption policy developments across the world are signalling strengthening regulatory expectations and heightened enforcement.
In Australia, in anticipation of reforms to foreign bribery laws, the Commonwealth Attorney-General’s Department published a Draft guidance on adequate procedures to prevent the commission of foreign bribery consultation paper. The guidance emphasises such procedures should be proportionate to the risk a company faces and be effectively implemented. It identifies the core components of anti-bribery compliance as:
- Effective risk assessment/due diligence procedures
- Management dedication to anti-bribery compliance
- Communication/training programs
- Confidential reporting/investigation processes
- Monitoring/review processes
This provides the best indication yet of government anti-bribery compliance expectations. There have been multiple recent efforts to establish an Australian federal anti-corruption body, and equivalent state bodies have investigated high- profile public figures and are seeking expanded powers. While such bodies are focused on public sector integrity issues, their investigative powers may be exercisable against companies.
Elsewhere, recently published governmental and intergovernmental instruments portend higher levels of anti-bribery enforcement.
In November 2021, the OECD, which oversees the implementation of treaty setting a global baseline for anti-bribery laws, published a Recommendation, significantly updating guidance that had been in place since 2009, urging countries to strengthen anti-bribery laws and enforcement practices.
The US government published a Strategy on Countering Corruption in December 2021, following the Biden administration’s elevation of the fight against corruption to a core national security interest of the US. It outlines five strategic pillars for US anti-corruption efforts, which include preserving and strengthening the multilateral anti-corruption architecture, and improving diplomatic engagement and leveraging foreign assistance.
An important policy document from China’s Central Commission for Discipline Inspection was leaked in December 2021. Entitled Opinions on Further Promoting the Investigation of Bribery and Acceptance of Bribes, it foreshadows heightened anti-bribery enforcement in China. In particular, it indicates China will undertake “carbon copy” prosecutions against companies found in foreign proceedings to have engaged in bribery with China.
Together, these international instruments suggest we may be about to see increases in the capabilities of several national anti-corruption enforcement agencies and deeper international cooperation on anti-bribery enforcement issues.
Directors are indispensable in ensuring their companies’ anti-bribery compliance policies and procedures comply with existing legal obligations, meet stakeholder expectations and are agile enough to respond to legal and non-legal developments. In particular, it is critical that directors:
- Undertake anti-bribery training
- Establish clear anti-bribery policies that meet legal obligations and stakeholder expectations
- Clearly assign responsibilities for anti-bribery compliance, properly resource their organisation’s anti-bribery compliance function, and establish structures to ensure it interacts with functions with responsibilities for related compliance and risk management issues
- Oversee/monitor anti-bribery compliance
- Oversee the response to bribery incidents
If directors do not meet such responsibilities, they may expose their company to the risk of prosecution, given Australian criminal laws provide for corporate attribution on the basis of a deficient corporate culture. They may also expose their company to diminished stakeholder confidence.
Whether proposed reforms to Australian foreign bribery laws ultimately pass into law or not, the rising tide of anti-corruption sentiment compels directors to place anti-corruption compliance issues high on their agenda.
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