The media is awash with headlines of Walmart's expansion
into Mexico and the way in which it is alleged to have secured its
success through payments of as much as $24 million to secure
construction permits and get around environmental concerns.
It is a familiar story in developing economies, but is also a
timely reminder for Australian companies, many of which are looking
to Asia to increase profit and shareholder return, that significant
economic potential can come with significant exposure to
Thanks to a focus on the potential reach of the UK's new
Bribery Act and some high-profile local investigations and
prosecutions, Australian companies are well aware of corruption
risks, but what does the future of enforcement hold and how can
Australian companies prepare for it?
1. Undertake effective upfront and ongoing due diligence
regarding business partners
Business partners of all kinds (not just agents) are a source of
potential risk. They need to be the subject of effective due
diligence. This includes sufficient upfront due diligence before
entering an agreement (including in a joint venture context), as
well as conducting ongoing due diligence in relation to the conduct
of the business partner. This may extend to ensuring you have a
right to conduct regular audits, that the business partner provides
reports of all dealings with foreign officials and/or an annual
certificate of compliance with your company's anti-corruption
policies as well as relevant anti-corruption laws. Like all
compliance systems, there is no pro forma checklist for such due
diligence – what is required depends upon an assessment
of the particular risks associated with the third party and the
nature of their role. Effective due diligence will help both
mitigate the risk of corruption, and assist in ensuring you have a
due diligence defence in the event that a business partner engages
in corrupt conduct.
2. Plan for removal of 'facilitation payment'
Businesses should be anticipating and planning for the removal
of the current 'facilitation payment' defence in
Australia's Criminal Code Act. Of course, if an Australian
company is exposed to the UK Bribery Act, which does not include a
defence for facilitation payments, prohibition of such payments
will no doubt already have been implemented.
3. Implement and enforce controls in relation to corporate
hospitality and donations
There is no de minimus test in determining whether a benefit is
illegitimate – clearly a payment to a local mayor to get
zoning maps changed will fall within Australian as well as overseas
bribery legislation. But what of dinners and the occasional gift,
or a donation to a local charity? These too may be captured. With
gifts and entertainment being the subject of current investigations
and prosecutions, we are unlikely in Australia to have any firm
guidance on when corporate hospitality or gifts are
'legitimately due' – it therefore rests with each
company to determine how best to manage these risks, but wherever
you draw the line, it cannot be left solely to individual employee
4. Consider the merits of an internal investigation if issues
Internal investigations have clear advantages. They enable a
company to identify the nature and extent of potential issues and
take action against relevant people. They also enable an informed
assessment of whether it is necessary or appropriate to engage with
the regulators, and if so, to cooperate in an informed way. This
may in turn, lead to leniency in respect of any proposed
5. Recognise that any investigations/enforcement may be pursued
by multiple regulators
International co-operation among regulators is now the norm.
This co-operation however, should not be interpreted as regulators
agreeing to restrict enforcement activities to a single country. To
the contrary, regulators internationally are being scrutinised for
their effectiveness in combating corruption and are building
capabilities, as well as an appetite, for such investigations and
their 'rewards'. No longer can it be expected that
regulators will defer to US investigations. Companies need,
therefore, to continue to be mindful of the international scope of
these issues and the prospect of parallel investigations and
regulatory action in multiple countries, and take this into account
in any dealings with local and overseas regulators.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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