Australia: Fraud & Regulatory Enforcement

Last Updated: 24 November 2012
Article by Amanda Turnill and Alexandra Chubb

Have you seen a notable rise in the level of corporate fraud, bribery and corruption in Australia in recent years?

It is impossible to determine the exact levels of economic crime perpetrated in Australia, but available data suggests that there has been an increase in its incidence over recent years. Although Australia weathered the global financial crisis better than most other developed countries, the tumultuous economic climate appears to have created an environment in which fraud is more readily perpetrated within and against corporations. This may be due to weakening fraud controls within organisations as a result of 'job-shedding', combined with increased personal hardship and/or more difficult performance targets which provide an added 'incentive' to commit fraud. Recent data suggests that economic crime within and against Australian corporations is increasing. In terms of bribery and corrupt conduct engaged in, by or on behalf of corporations, media reports suggest that several Australian corporations have recently reported suspected corrupt activity to the Australian Federal Police (AFP) involving bribes allegedly paid to foreign officials in exchange for commercial benefit.

Are there any specific types of fraud that seem to be appearing more frequently in the current climate?

Available data suggests that Australian corporations are experiencing more economic crime than their international counterparts. This is likely due to increased awareness and detection of fraudulent activity in Australia. The most common types of economic crime reported by Australian organisations are misappropriation of assets – for example, theft of cash and non-cash items, fraudulent expense claims and fraudulent use of corporate cards – accounting fraud, bribery and corruption, and cyber crime. Cyber crime appears to be on the increase as organisations roll out new technology without putting in place adequate measures to address the associated risks. Recent data also suggests that frauds committed against investors by financial advisers, involving misappropriation of investment funds, have become increasingly prominent in recent times. Going forward, Australia may also see a new type of fraud emerging following the introduction of the Clean Energy Act 2011, namely 'sustainability fraud' on the carbon market.

Have there been any regulatory changes implemented in your jurisdiction that are designed to combat fraud and corruption?

Currently, the Australian government's attention is focused squarely on combating bribery of domestic and foreign officials. Legislative reform in this area follows criticism from the international community about Australia's perceived failure to take a tough stance on bribery and corruption. As a result, in February 2010, the Commonwealth Criminal Code Act 1995 was amended to dramatically strengthen the penalties for bribing domestic and foreign officials. In November 2011, the Minister for Home Affairs and the Attorney-General's Department released a consultation paper regarding further proposed amendments to the Criminal Code which will toughen Australia's anti-bribery laws further still. Arguably the most significant and most controversial proposed amendment is the removal of the 'facilitation payments' defence. The Australian government has also announced its intention to formulate a National Anti-Corruption Plan which will provide a cohesive framework to guide anti-corruption activities by policy-makers and enforcement agencies across Australia. A public consultation paper about the development of the Plan was released in March 2012.

Do regulators in Austalia have sufficient resources to enforce the law in this area? Are they making inroads?

In July 2011, the first charges were laid under the Criminal Code against two Australian companies and a number of former executives in relation to the alleged payment of bribes to foreign officials in Asia, which were allegedly made to secure supply contracts. Media reports since then suggest that investigations by the AFP relating to alleged bribery of foreign officials are increasing. The Australian Securities and Investments Commission (ASIC) is responsible for enforcing the Corporations Act 2001, which creates fraud-related offences applicable to company directors and officers. ASIC is an active enforcement authority but its resourcing and capacity to conduct large-scale investigations and litigation has been questioned by some commentators. Offences relating to fraud more generally are covered by the Commonwealth Criminal Code and state and territory crimes legislation. Available data suggests that overall numbers of prosecutions for serious fraud in Australian courts have fallen in recent years, but it is unlikely that this is reflective of any decline in the number of frauds actually occurring.

Are companies more at risk of regulatory investigation and prosecution? What penalties could they face for failure to comply?

Combating fraud, bribery and corruption is high on the international agenda at the moment. Not only is Australian enforcement activity increasing, but companies should also be aware of the extraterritorial reach of anti-bribery legislation enacted in other parts of the world, such as the UK Bribery Act and the US Foreign Corrupt Practices Act. UK and US enforcement authorities are active and have publicly commented that they will not shy away from prosecuting foreign companies within their jurisdiction. The penalties for engaging in fraudulent or corrupt conduct can be severe. For example, companies found guilty of providing bribes under the Commonwealth Criminal Code now face fines of at least AU$11m, whilst individuals may be fined up to AU$1m, imprisoned for a maximum of 10 years, or both. Commonwealth proceeds of crime laws also allow enforcement authorities to trace, restrain and confiscate assets which are wholly or partly derived from crime. State and territory legislation also carry heavy penalties for fraud-related offences.

What general steps can companies take to proactively prevent corruption and fraud within their organisation?

Companies can employ a range of strategies to minimise their fraud risk, including conducting fraud risk assessments, establishing independent audit committees, conducting fraud awareness training for staff, screening staff prior to employment, analysing data to identify indicators of fraud, establishing anonymous fraud reporting channels, and performing 'stress testing' of existing fraud controls. Combating bribery and corruption also requires companies to undertake risk assessments, to develop and continually review adequate policies and procedures that address the identified risks, and to conduct due diligence relating to staff and business partners on an ongoing basis. The exact measures taken will depend on the nature of the business and the size of the organisation. However, in all organisations, it is important that there is board and senior management commitment to stamping out fraud and corruption, and a willingness to take proactive steps to manage the risks.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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