Australia: Australia will Ramp Up Anti-Bribery and Corruption Enforcement after OECD Criticism

Efforts to detect and prosecute bribery and corruption will soon be more resourced, coordinated and focused. Anti-bribery and corruption measures will be improved and used.

Companies must be aware of the likely impending changes and get ready.

Just a few weeks ago the OECD Working Group on Bribery released its report on Australia's implementation of its anti-bribery provisions. That report was fairly damning of Australian provisions and the enforcement of those provisions. It made a number of recommendations that are significant for a number of reasons. Probably the most important reason why these recommendations are critical is that they are likely to change the way the Australian Federal Government approaches anti-bribery over the next year. They'll change it by making the Australian Federal Government much more active in the area, much more pro-active at enforcement and doing everything it can to show, not just to the OECD but also the UN (especially in light of our new seat on the Security Council), that we're serious about the implementation of the conventions that we're signatories to. It's been a bit of a sore point for the Federal Government, who has made this area a priority.

The release of the report is even more significant coming, as it does, at a time when the Federal Government is due to release its recommendations for a National Anti-Corruption Plan. That's set to happen at the end of this year and it shows us that the Federal Government already has heightened attention to this area. It's also worth bearing in mind that all but one of the last set of OECD recommendations have been wholly or partially implemented. That means that companies have to be very aware of what the OECD recommendations are and make sure that they have their compliance plans and programmes up to speed as soon as possible.

So what did the OECD report say? Well, the OECD looked at the way Australia sits in the world in terms of the risks for corruption and bribery that its companies face. Seventy-five per-cent of the top 100 ASX companies are operating either in sectors or geographical areas that are at very high risk for corruption and bribery. If we take that out to the top 200 ASX companies, it's 63% in those high risk sectors. And yet in Australia we've only had one single prosecution for corruption and bribery out of 28 referrals to the AFP since 2006. The single prosecution is the Securency and Note Printing Australia case currently ongoing in the Victorian Court as we speak and which has led to parliamentary enquiries of Reserve Bank Governor Glenn Stevens, among others.

That record is simply appalling in the view of the OECD working group, and the recommendations that come out of the report are telling in giving us a clue as to what's gone wrong over the last several years and why that record is so poor. It also identifies solid ways in which the Australian Government might make improvements to increase prosecution and enforcement.

THE FINDINGS AND RECOMMENDATIONS

So let's just turn to what some of those recommendations are. There are a lot of them so I'll try to hit the highlights, the things that you should bear in mind when you're thinking about compliance. It helps you to know what's coming around the bend.

The first finding is that the Australian Federal Police and the Commonwealth Department of Public Prosecutions have been under-resourced and the recommendation is that they get significant increased resources and importantly that they adequately investigate incidences of potential corruption and bribery that are reported to them as well as take a much more pro-active role in investigating things themselves-- that is, identifying where there might be potential corruption and bribery themselves and rooting it out.

The report makes plain that the AFP does not appear to have the skill-set at present to adequately investigate corporate economic crime and suggests that perhaps ASIC might help AFP develop a task force with skills in this area that will enable them to do that much more effectively. In a similar vein, the report makes a recommendation that Australian agencies cooperate with each other in a much more effective and laid out, transparent way to come at corporate economic crime, including corruption and bribery, in a way that allows the use of statutes other than just the Criminal Code provisions on foreign corruption and bribery. So for example, if a bribery offence cannot be proved, it may be that some conduct involved in that transaction can be gotten at by use of anti-money laundering provisions, taxation provisions, proceeds of crime provisions or by use of false book-keeping and accounting provisions.

Another recommendation firmly made by the report is that the false accounting penalties of the Australian Criminal Code be increased significantly and that those provisions be used much more proactively, perhaps involving prosecutions by ASIC in the way that the US uses DoJ and SEC to effectively combat that conduct. This would be a great enforcement tool, keeping in mind that many of those provisions have a lower standard of proof to get a conviction and get a significant penalty-- at least the penalties will be significant if the recommendations are followed.

Another recommendation coming out of the report which is very significant and heeds the cry that has been heard around Australia for some time now is that whistleblower protection in Australia needs to be beefed up quite a bit and it needs to be very effective at not only protecting people who blow the whistle in this area but also at encouraging whistle-blowing activity. For example, in America the SEC has, through its rule making under the Dodd Frank Act in May 2011, announced a new set of rules that give whistleblowers a bounty of between 10% and 30% of a penalty that might result from information they provide to a law enforcement agency, as a reward for bringing that information to that agency for prosecution. There's nothing like that in Australia. DoJ and SEC have been getting more than 8 tips per day since the rules commenced.

Another parallel recommendation the report makes is using plea bargaining provisions to encourage companies to self report and making very plain and transparent what those provisions are and how they will operate. The idea is to give companies guidelines to know what they can expect if they self report in terms of some credit that they might get for bringing the information to authorities themselves, some goodwill. But also what the plea bargaining will mean in terms of undertakings they might have to make about future enforcement of these provisions in their organisation and what it might mean as a practical matter for prosecution of the offence or otherwise against them. That simply does not exist in Australia at the moment, and nor do 'do not prosecute', or 'deferred prosecution' agreements or other similar things which exist in other jurisdictions and have encouraged companies to self report at a much higher rate.

Other recommendations that come out the report are that there should be increased cooperation between Australia and overseas authorities-- because a lot of information in this area, by its very nature, is going to be multi-jurisdictional. Australia has not been particularly effective at those multi-jurisdictional cooperative type environments so far, and increased activity and improvement of those efforts is strongly recommended by the report.

One last recommendation that I'll touch on probably throws up most significantly some of the simple short comings in this jurisdiction in recent times. And that's that the report recommends that better education take place around exactly what the law is. For example, in the area of facilitation payments, which are currently legal under Australian anti-bribery law, it comes to light that even law enforcement don't really understand what facilitation payments are. They're very often mistaken for low value bribes when in fact, a true facilitation payment is not a bribe at all, but a minor payment made to speed up a governmental action of a minor nature in a foreign jurisdiction, and it would have to be recorded in a company's books and records immediately to be a facilitation payment under the Criminal Code at all.

And what's been happening, according to the report, is that there is so much confusion about what a facilitation payment is or isn't, that it's often used as an umbrella under which all sorts of bribes are parked and people say 'it's a minor bribe, so it must be a facilitation payment and that's alright', and even authorities on the topic misstate the law around facilitation payments. So it's very telling that the report's pointed this out that the Federal Government has recently had a consultation about the elimination of the facilitation payment defence, most likely out of concerns along the same vein.

To sum up, the significance of the report is that it's going to encourage the Federal Government to take much stronger action in the area of corruption and bribery. It's going to cause a large amount of attention in this area to be devoted on the part of not just the AFP and the Department of Public Prosecutions, but the Government and policy makers as a whole, and that means that companies need to be aware of upcoming changes in this area and get ready for them.

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