- Increasing risks of foreign bribery, is your business ready?
Proposed law reform will significantly increase compliance risks for companies, directors and senior executives, including a new strict liability corporate offence of failing to prevent foreign bribery.
Imagine this scenario of a company that you are a director or senior executive of:
Unbeknown to you, a distributor for your company is alleged to have paid bribes overseas to a local public official to secure sale contracts for your company. You and the company are now being prosecuted in Australia. Can you establish a statutory defence that your company had adequate systems in place to prevent the bribery?
The following penalties can apply to a foreign bribery offence:
Imprisonment for an individual up to 10 years and/or the greater $ value of:
- Monetary fine of 10,000 penalty units ($2.1million), or
- 3 times the value of the corrupt benefit, or
- 10% company's turnover
In Australia, bribing a Foreign Public Official is an offence per Section 70.2 of the Criminal Code Act 1995 (the Act), and contains the following elements where a person:
- Provides a benefit (to another person)
- Causes a benefit to be provided
- Offers to provide or promises to provide a benefit
- The benefit is not legitimately due
- With the intention of influencing a foreign public official in order to obtain or retain a business advantage.
The Australian Federal Police describes bribery of a foreign public official as: “Foreign bribery includes providing or offering a benefit to a foreign public official, or causing a benefit to be provided or offered to a foreign public official, where the benefit is not legitimately due”.
Proposed future state
The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (the Bill) is currently before Federal Parliament and includes the following significant reforms:
- Creation of a new intentional foreign bribery offence, based on improper influencing a foreign public official in order to obtain or retain business or an advantage. The offence is extended to include any kind of advantage, not limited to business only and may include personal advantage
- Creation of a new strict liability corporate offence of failing to prevent foreign bribery. The company is automatically liable if an associate commits an offence for the profit or gain of the company, unless the company maintains an adequate system of procedures that prevents such conduct
- An “associate” of a company includes:
- An officer, employee, contractor or agent of the company
- A subsidiary of the company
- A company controlled by the company, or
- A person who otherwise performs services for or on behalf of the company.
- An “adequate system” will be determined on a case by case basis by the Courts and the Minister is to issue guidelines that a company may implement to prevent an associate from bribing a foreign public official
- Introduction of a deferred prosecution agreement (DPA) scheme for certain Commonwealth serious financial offences. Prosecutors may negotiate a voluntary agreement with the company. The company undertakes to comply with certain conditions, and thus avoids a lengthy trial, provided the company complies with the terms of the agreement it will not be prosecuted. However, the DPA is available to a company only and not individuals
- Definition of “foreign public official” is extended to include candidates for public office. Candidates are not currently defined as “foreign public official” in the Act. Candidates may be bribed with the intention of obtaining advantages from them once they are appointed
- The requirement that the influencing of a foreign public official must be in the exercise of their official capacity is removed, and includes public officials who may be bribed outside their official duties
- The alleged offender need not have a particular business or advantage in mind. This may include instances where initial contact is made with an official, with the intention that the official will assist in providing an undue advantage at some stage in the future.
We note the past recommendations for prohibiting facilitation payments is not included the Bill. This means it will not be unlawful for companies to make facilitation payments, which in summary are payments to expedite a routine government service. However, they remain a high risk transaction which must be recorded correctly for accounting purposes and which under the UK Bribery Act 2010, are considered a bribe and unlawful.
What should companies do
Whilst the law reform will have more significance for companies with overseas operations, it will raise the bar for compliance and best practice for all companies. We provide the following checklist and forensic insight for company directors and senior executives:
Identify and assess risks
|The first step should be to have an independent risk assessment which covers top level commitment, culture, resourcing, due diligence, internal controls, training, industry and country risk, transaction and partner risks|
|Post risk assessment, it is critical that the Board and Senior Executives demonstrate commitment to implementing and maintaining a broad integrity framework that covers anti-bribery and corruption policies, procedures and culture|
Systems & procedures
|An appropriately designed framework of policies and procedures needs to be in place, which is proportionate to assessed risks, including third party due diligence|
Training & communication
|It is imperative that evidence can be provided that adequate training and communication of anti-bribery policies and procedures has and is occurring. Critically, this must cover third party agreements such as distributors, commission agents, suppliers and sub-contractors|
Monitoring & accountability
|A company must also be able to demonstrate to external scrutiny that it has adequately monitored compliance with its policies and procedures and held parties accountable for non-compliance. This is critical to maintaining an ethical culture of accountability and compliance|