Australia: Protecting you and your organisation from the risk of bribery, corruption and money laundering

Last Updated: 15 October 2013
Article by Nitij Pal and Giselle Parker-Kempe

One year ago the OECD Working Group on Bribery released its report on Australia's implementation of its anti-bribery provisions. The OECD report noted that a significant portion of Australia's international economic activities are exposed to risks of foreign bribery. The report also stated that 75% of the top 100 companies and 63% of the top 200 companies listed on the Australian Stock Exchange operate in a high risk sector, a high risk country, or both. And of particular note is Australia's large mining and resource sector.

Whilst the OECD report welcomed Australia's recent efforts, it was otherwise fairly damning of Australian anti-bribery provisions and enforcement of those provisions. In particular it raised serious concerns that despite the risk of exposure of Australian companies to foreign bribery solicitation in the industries in which they operate, only one foreign bribery case has led to prosecutions.

That single prosecution is the Securency and Note Printing Australia (NPA) case currently being run in the Victorian Supreme Court, which this week has received heightened media attention. In fact, a recent episode of ABC TV programme Four Corners called "Cover Up" discussed the Securency and NPA case, among other things. The programme described it as the "worst corruption scandal" in Australia's history. It was revealed on Four Corners that NPA, a company owned by the Reserve Bank of Australia (RBA) went to Iraq at the height of UN sanctions to discuss the sale of plastic banknotes to the Iraqi government. It was also revealed that employees of another part-owned RBA company, Securency, allegedly paid bribes to public officials in Indonesia, Malaysia and Vietnam to secure banknote contracts.

It appears that Four Corners is focussing on this subject area, as another recent episode called "Preying on Paradise" investigated corruption in Papua New Guinea, Australia's closest neighbour. Papua New Guinea is also one of the largest recipients of Australian aid money. "Preying on Paradise" highlighted the scale of corrupt practices in Papua New Guinea and the gaps in accountability for those responsible. It also suggested that Australia had been complacent with corruption in Papua New Guinea and an allegation was made by Sam Koim, the chair of the Papua New Guinea Government's Task Force Sweep, that Australia is a safe harbour for the proceeds of crime from Papua New Guinea.

The significance of the OECD report, the RBA scandal and the allegations of Australia's involvement with the corrupt practices in Papua New Guinea is that it is causing a large amount of attention in the area of corruption, bribery and money laundering. In our view, this is likely to encourage the Federal Government to take much stronger action in prosecuting corruption, bribery and money laundering, aside from the risk and damage to a corporate brand.

As such, it is a timely reminder to organisations of the true threat that corruption, bribery and money laundering pose to a business and the actions organisations can take to manage any vulnerabilities they may have to these issues. Below we have outlined the legal framework in Australia concerning bribery, corruption and money laundering. We have also outlined some of the steps organisations can take to manage these threats.

Bribery and corruption

Who is at risk?

Organisations that operate in multiple jurisdictions and organisations that use third parties such as agents and intermediaries could be vulnerable to the threat of bribery and corruption.

Bribery and its consequences

Bribing or attempting to bribe a foreign public official is a serious crime. Australian companies or individuals who bribe an official in a foreign country can be prosecuted under Australian law and the laws of foreign countries.

In Australia, a person or corporation may be guilty of bribing a foreign public official under the Criminal Code Act 1995 (Cth) if they:

  • provide a benefit, promise to provide a benefit or cause a benefit to be provided, offered or promised to another person; and
  • the benefit is not legitimately due; and
  • the provision of the benefit was carried out with the intention to influence a foreign public official in their official duties in order to obtain or retain business or obtain or retain a business advantage which is not legitimately due.

A person can be prosecuted in Australia where the conduct constituting the offence occurs wholly or partly in Australia. A person can also be prosecuted in Australia for conduct committed wholly outside Australia where, at the time of the alleged offence, the person who is alleged to have committed it is:

  • an Australian citizen;
  • a resident of Australia; or
  • a body corporate incorporated by or under a law of the Commonwealth or of a State or Territory.

Companies need to be aware that they may be liable for the actions of their employees and agents under Australian law and foreign law.

Organisations must also be aware that they may also be liable under anti-corruption laws of third-party countries. For example, the extended jurisdiction of the United States Foreign Corrupt Practices Act of 1977 includes businesses that issue registered securities under US law, and the UK Bribery Act can be applied to any company carrying on a business or part of a business in the UK. This means a company which carries on a business in the UK could be prosecuted under UK law for conduct committed wholly outside the UK.

The other consequences of bribery to organisations include significant reputational damage and incurring substantial legal and professional fees.

Penalties under Australian law

The maximum penalty for an individual is 10 years' imprisonment and/or a fine of 10,000 penalty units, which equates to $1.7 million.

For a company, if the value of benefits obtained through bribery can be ascertained, the penalty is 100,000 penalty units ($17 million) or three times the value of benefits obtained, whichever is greater. If the value of benefits obtained through bribery cannot be ascertained, the penalty is 100,000 penalty units or 10% of the 'annual turnover' of the body corporate, whichever is greater.

In addition to the above penalties, bribery by an Australian company or individual of an official in a foreign country may also give rise to liability under the laws of that country. Also under the Proceeds of Crime Act 2002 (Cth), any benefits obtained by foreign bribery can be forfeited to the Australian Government.

What should organisations do?

It is prudent that organisations operating in Australia and/or multiple jurisdictions take all appropriate steps to ensure neither they nor their employees or agents engage in bribery. Organisations must have in place a strict anti-bribery and corruption policy and framework to prevent and detect such activity. Such policy should include the following:

  • a definition of what is considered a bribe;
  • an outline of the organisation's policy on facilitation payments;
  • specifications of what must be reported;
  • the reporting procedures depending on whom and what the report involves;
  • the procedures for allegations made against a client of the organisation, a foreign company, a foreign public official or an employee or agent of the organisation; and
  • general encouragement to employees to make others aware of their anti-bribery obligations under the law and to make clear to clients that the organisation's staff will not assist, carry out, condone or ignore any act of bribery.

Additionally, when entering into contractual arrangements with third parties it is prudent to ensure that the third party has obligations to comply with Australian and foreign anti-bribery laws.

How we can help

Rockwell Olivier works with clients particularly in Australia and in the Asia Pacific region to identify and manage threats to foreign bribery and corruption law.

Australia's anti-money laundering framework

In Australia the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) provides the means to help detect and deter money laundering. It imposes obligations on the financial sector, gambling sector, bullion dealers and other professionals or businesses ('reporting entities') that provide particular 'designated services'. The five main obligations required of these reporting entities are:

  • Enrolment: all regulated businesses need to enrol with AUSTRAC and provide prescribed enrolment details.
  • Establishing and maintaining an AML/CTF program: to help identify, mitigate and manage the money laundering and terrorism financing (ML/TF) risks a business faces.
  • Customer due diligence: identifying and verifying the customer's identity, and ongoing monitoring of transactions. These are often known as 'Know Your Customer' requirements.
  • Reporting: notifying authorities of suspicious matters, threshold transactions and international funds transfer instructions.
  • Record keeping: businesses are required to keep records of transactions, customer identification, electronic funds transfer instructions and details of AML/CTF programs.

Rockwell Olivier can help you with queries or problems, and advise you on your AML/CTF obligations.

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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