07 Mar 2018
Australia has had criminal laws prohibiting the bribery of foreign public officials in place for many years, however, to date, it has successfully convicted individuals in connection with foreign bribery only on two occasions.
Stung by criticism by the Organisation for Economic Co-operation and Development in 2015, Australia’s federal government has taken steps to increase the resources available to police and prosecutors, and reform how foreign bribery offences may be investigated.
To implement those changes, the federal government has proposed three key reforms worth noting.
First, a Bill has been introduced into the federal parliament to amend primarily the federal Criminal Code’s provisions around the bribery of foreign public officials.
Although there are a number of smaller technical amendments within the Bill, the substantive issues are that:
- it will be an offence to provide a benefit to a person with the intent of improperly influencing a foreign public official in order to obtain or retain business or an advantage. The offence is being extended to apply to any advantage of any kind, which may be a personal advantage rather than business-related.
- Australian businesses will be held automatically responsible if their “associates” bribe foreign public officials but it will be an absolute defence if the corporation can prove it had “adequate procedures” in place to prevent its associates engaging in foreign bribery.
Second, the Bill proposes a Deferred Prosecution Agreement (DPA) scheme which would, as in the US and UK, allow corporate suspects to avoid criminal prosecution subject to certain conditions e.g. co-operation in other prosecutions, the forfeiture of any likely benefits etc.
Although such agreements would be available for a range of corporate criminal offences, the federal government has specifically said they “may assist” in enforcing foreign bribery laws.
Finally, another Bill has been introduced that consolidates and increases whistleblowing protections in the private sector.
The key elements of this are that large companies will be required to have effective whistleblowing programmes in place; that more workers will be covered by whistleblowing protections; and that companies can be fined up to AUD 1 million (USD 780,000) if they disclose the identity of whistleblowers in unauthorized circumstances.
In addition to the proposed legislative changes, the Australian Federal Police and the Commonwealth Director of Public Prosecutions (which is primarily responsible for investigating and prosecuting foreign bribery) have jointly published a best practice guide for self-reporting suspected incidents of foreign bribery.
What do compliance professionals need to know?
None of the government’s proposals come across as being particularly radical. In particular, the “failure to prevent” offence substantially recreates the provisions of section 7 of the Bribery Act 2010 (UK).
The compliance systems of many transnational corporations and financial institutions operating in Australia will not need to be significantly amended in light of the new legislation, simply because they have already been designed to comply with tougher legislation in other jurisdictions.
In light of the above, professionals who advise or work within businesses that operate in Australia should be focusing on the following three practical issues in the coming months:
1) Anti-bribery systems
Organisations without anti-bribery procedures need to create them immediately. Those systems should be practical and not overly “legalistic”.
In our experience of building anti-bribery systems, it is absolutely critical to involve all internal stakeholders from the first day: a diktat from the legal or compliance department will almost certainly fail. As readers are well aware, an up-to-date and commercially-sensitive risk assessment is the key to launching systems.
Organisations that already have anti-bribery measures need to fearlessly ask themselves two questions: is that system really adequate? And can that adequacy be demonstrated to a sceptical (and perhaps commercially unsophisticated) law enforcement officer or court?
In the experience of the authors, many organisations’ anti-bribery efforts have gone no further than drafting a policy that sits on a shelf; other organisations have a pot pourri of measures that are not effective in practice. Neither of those arrangements will be accepted by a court as “adequate” to prevent foreign bribery.
2) Business partners
The proposed amendments create potential liability for the misconduct of “associates” – that is, subsidiaries and other persons who perform services for the defendant. As with the UK concept of “associated person”, this is broad enough to include employees, agents, JV partners, suppliers and even potentially customers.
The practice in the crosshairs here is wilful blindness by Australian corporations to bribery by their business partners: in essence, no longer will it be acceptable to pay offshore companies’ invoices for nebulous “marketing services” unless the payer has a clear idea of what is being done on their behalf.
The upshot is that Australian corporations must engage effectively with their “associates” about anti-bribery. The elements of that engagement will be familiar screening/onboarding, training, anti-bribery clauses in formal agreements, testing/audit of partners’ compliance, ensuring the partners themselves have adequate anti-bribery procedures in place etc.
However, we should also remember that that engagement needs only to be proportionate in light of the risk posed: in other words, a JV partner in a high risk market should be monitored more carefully than an arms-length supplier of goods in a low risk market.
As an aside, some businesspeople in developed markets are reluctant to ask business partners to complete anti-bribery training or provide details of their anti-bribery measures, fearing insult or a lack of sophistication of the business partner.
In our experience, this concern is almost always misplaced, but in any case a court will be mightily unimpressed to hear that a defendant was too embarrassed to raise anti-bribery with associates who later engage in corruption.
As with anti-bribery systems (which should normally include a whistleblowing element), large companies that do not have formalised whistleblowing systems in place should introduce them immediately. Other companies should be sure that their systems are practical and comply with the new proposed measures, particularly around protecting the identity of whistleblowers.
Specific consideration should be given to outsourcing whistleblowing services to specialist providers (to ensure proper multilingual engagement, escalation of calls, and trends reporting) and involving internal or external counsel in any response (to leverage legal privilege or, where possible, advocate’s secrecy).
Conceptually, organisations should not just tolerate but actively encourage whistleblowing. Whistleblowers are – generally speaking – people who understand an organisation’s rules and are motivated enough to bring them to the attention of the organisation. Whistleblowing reports should be regarded as desirable (but not necessarily accurate) pieces of intelligence.
Consequently, we should regard a sustained volume of whistleblowing as evidence that compliance systems are working, not failing. Conversely, an organisation that has zero or insignificant whistleblowing might be perfectly compliant (unlikely) or failing to escalate concerns about non-compliant behaviour (more likely).
In some respects, the proposed legislation misses opportunities to propel Australia to the leading edge of anti-bribery: there is no mandatory requirement to have anti-bribery systems in place (as is the case now in Russia, Kenya and France) and neither does it provide for a Sarbanes-Oxley style bounty for whistleblowers.
The proposed legislation does not criminalise private sector bribery (B2B bribery) overseas, instead remaining constrained by the traditional conception of bribery of foreign public officials.
Finally, the legislation does not anticipate a harmonisation of public sector and private sector (B2B) bribery laws at state and federal level; this omission probably reflects the difficulty of getting state and federal governments to collaborate on such a politically contentious issue.
We remain unconvinced that a DPA scheme and the published best practice guide to self-reporting will actually raise the enforcement of foreign bribery laws in Australia. To be blunt, such schemes are most effective when wrongdoers worry their misconduct will be detected and worry that the consequences of detection will be severe.
In comparison with jurisdictions like Singapore, England & Wales or France, Australia does not yet have a track record of enforcement that is likely to inspire that fear in the hearts of corporations and financial organisations.
With increased resources having been released to police and prosecutors in the past year, this hopefully will change in the near future.
Those reservations aside, the proposed legislation generally appears proportionate and practicable. In particular, the adoption of the “adequate procedures” terminology originally used in the Bribery Act 2010 (UK) is useful, as it suggests that the non-governmental analysis that has been produced over the last seven years in respect of that act can inform organisations’ response to the forthcoming Australian legislation.
Jamie Nettleton and Cate Sendall are respectively a Partner and Senior Associate in the Australian law firm Addisons.
Viv Jones is a Senior Associate in the Corporate Crime & Investigations practice of the international law firm Eversheds Sutherland.
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