Australia: UK now considering a False Claims Act: is Australia next?

Last Updated: 26 October 2013
Article by Ben Allen


The UK Government recently announced that it is considering the case for financially incentivising individuals reporting fraud in economic crime cases by private sector organisations, in an approach much like the US False Claims Act.

In Australia, the recent passage of the Public Interest Disclosure Act 2013 (Cth) signals a shift in focus by the Australian Government towards the prevention of fraud and corruption in the Australian Public Service.

A likely next step here is the introduction of legislation akin to that now being considered by the UK Government, with an expanded focus on fraud and corruption committed by those in the private sector regularly contracting with government. Such a step, coupled with the eventual release of the long-awaited National Anti-Corruption Plan, will be a brave new world for combatting fraud and corruption in this country.

For any organisation contracting with government, the growing interest and inevitability of a False Claims Act in Australia means that they will need to shift their focus to ensure that systems are in place to properly and effectively manage their contracts to ensure there can be no suggestion of fraudulent activity.

At the very least, conversations with risk and compliance officers, contract managers and those with oversight of invoice management need to start now as such areas will be increasingly in the spotlight when it comes to how organisations' contracts are managed. Ensuring that existing contracts are up to date and properly managed will also be key to ensuring that there can be no suggestion of mismanagement. Proper internal audit and compliance systems will be critical to ensure that organisations can demonstrate that all is in good order.

The UK's Serious and Organised Crime Stratgy paper

The "Serious and Organised Crime Strategy" paper released this month by the UK's Secretary of State for the Home Department sets out how that government plans to take action to prevent serious and organised crime and strengthen protections against and responses to it. The paper asserts that serious and organised crime costs the UK more than £24 billion a year.

The Strategy uses the framework developed for counter-terrorist work and has four components: prosecuting and disrupting people engaged in serious and organised crime (Pursue); preventing people from engaging in this activity (Prevent); increasing protection against serious and organised crime (Protect); and reducing the impact of this criminality where it takes place (Prepare).

The Strategy also lists objectives under each of the four areas. In terms of increasing protection against serious and organised crime, the success of that objective will be measured by the reduction in vulnerability to serious and organised crime across government and the private sector. The key objectives include:

  • Protecting national and local government from serious and organised crime;
  • Improving protective security in the private sector by sharing intelligence on threats from serious and organised crime; and
  • Improving anti-corruption systems.

In the context of anti-corruption, the paper acknowledges that there is a need to not only target serious and organised criminals but also support those who seek to help identify and disrupt serious and organised criminality. Three UK agencies (the Department for Business, Innovation & Skills), the Ministry of Justice and the Home Office have been tasked with considering the case for a US-style False Claims Act in the UK. The paper states:

"[these agencies] will consider the case for incentivising whistle blowing, including the provision of financial incentives to support whistle blowing in cases of fraud, bribery and corruption. As part of this work we will examine what lessons can be drawn from the successful 'Qui Tam' provisions in the US where individuals who whistle-blow and work with prosecutors and law enforcement can receive a share of financial penalties levied against a company guilty of fraud against the government."

What steps the UK Government now takes in this regard remains to be seen. What is certain, however, is that consideration of over 25 years of US False Claims Act history and caselaw will be critical in determining the efficacy of the legislation in the UK context.

The United States False Claims Act

In the United States, the False Claims Act was introduced in 1863 during the American Civil War to combat the defence contractor fraud rife in both the Union North and Confederate South. Largely dormant and forgotten for hundreds of years, it was revived by major amendments in 1986 which have seen a resurgence in its prominence in the United States.

Contained in § 3729-2733 of the US Code, the Act makes a person or entity improperly receiving payment from or avoiding payment to the US Government (other than via tax fraud) liable to compensate the government. The cornerstone of the US legislation is its qui tam provisions, which allow a private individual (the "relator") to bring a claim on behalf of the government and claim a percentage of the overall amount recovered if successful – in effect, a reward for whistleblowing. A qui tam claim is established by section 3730, and allows the relator to recover 15-25% of a successful claim where the government regulator decides to join the claim, or 25-30% where the regulator chooses not to be involved.
According to US Department of Justice statistics on litigation under the Actfrom October 1987 to September 2012 , over $35 billion has been recovered through the legislative scheme in the last 25 years. Of that, almost $24 billion was recovered through qui tam claims.

Weighing up the costs

At least one commentator has criticised the UK Government's consideration of False Claims Act-type rewards by stating that it "presents a serious and insidious threat for UK companies". That threat, it is asserted, arises from the encouragement that some individuals may receive from such financial incentivisation, to perpetuate problems and irregularities in a commercial context that could well have been stopped sooner.

The argument proceeds that the lure of a larger financial payment by allowing problems to develop will potentially jeopardise the employment of fellow employees; subvert good corporate compliance systems that require internal integrity; force companies to make a benchmarked payment to departing and often complicit individuals; and will ultimately subvert the credibility of potential prosecution witnesses. Respectfully, in the context of qui tam claims at least, such arguments bear little resemblance to the actual operation of the False Claims Act in the United States since 1986.

Practically speaking, the US experience demonstrates that, rather than undermining good corporate compliance systems, it promotes greater scrutiny of such systems. Further, under the US False Claims Act, any employee, contractor or agent is entitled to all relief necessary to make them whole if they are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by them or someone with whom they are associated in furtherance of an action under the Act or to stop one or more violations of section 37291. Additionally, coupled with relevant "proceeds of crime" legislation, complicit individuals are unlikely to receive the benefit of any recovered funds.

Claims under the US False Claims Act are also limited in time. The limitation of liability is the later of either 6 years after the date on which the violation of section 3729 is committed,2 or 3 years from the date when facts material to the right of action are known or reasonably should have been known by the official of the United States with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed.3

Finally, in practice the "first in time" rule often sees claims brought sooner rather than later, for fear of being shut out of any recovery action. US courts will dismiss any action or claim if substantially the same allegations or transactions alleged in the claim have already been publicly disclosed in a Federal criminal, civil or administrative hearing in which the Government or its agent is a party, in a congressional, Government Accountability Office, or other Federal report, hearing, audit or investigation, or by the news media.4

The operation of the False Claims Act in practice

In the past ten years in the US, there have been a considerable number of significant payouts made by large corporations in response to qui tam claims. Many of these claims resulted in settlements or court orders in the hundreds of millions or even billions of dollars and also led to criminal charges.

The majority of large-scale qui tam claims under the US False Claims Act have been taken against large pharmaceutical corporations. According to an article in the New York Times in April 2009, "almost every major drug company has been accused in recent years of giving kickbacks to doctors or short-changing federal programs".5 Among these, claims have been successfully prosecuted or settled for offences such as falsely or fraudulently billing Medicare for durable medical equipment, promoting drugs for uses not approved by the Food and Drug Administration, failing to report key safety data for products, false price reporting practices, Medicare and Medicaid fraud, and paying kickbacks to physicians. Another common use of the qui tam provisions under the Act has been against defence and infrastructure contractors. Technology and manufacturing companies have been forced to pay tens of millions of dollars for fraudulent acts such as knowingly providing defective goods and inflating hours actually spent providing repair services. The more common kinds of fraud engaged in by contractors include inflation of costs and charges, improper cost allocation / cross-charging and improper product substitution.

Other examples of fraud have included contractors misrepresenting the pricing structure in relation to a contract by failing to include details of discounts it received from suppliers, knowingly using out of date cost information, fraudulently cross-charging for materials used in multiple contracts and misrepresenting the progress of building the goods that were contracted for.

When a claim will be considered "false"

The US False Claims Act utilises a variety of mechanisms that imposes liability on persons and companies who defraud the government. In order to establish a claim under the Act, three elements must be satisfied. A person will be liable if:

  • they submit a "claim" for payment;
  • the claim is false; and
  • the claim is made knowingly or in reckless disregard of the truth or falsity of the information set out in the claim.

Claims are defined broadly to include any demand or request to the government for payment of money or property. A demand or request may qualify as a claim under the Act regardless of whether or not the government actually pays it and regardless of whether a contractual relationship exists with the government (for instance, in the case of a sub-contractor's claims passed on to government).

Determining whether or not a claim is false has proved to be a contentious issue. In some cases, the falsity is clear, for example where a contractor seeks payment for a product but it was never delivered or the work never performed. A request for payment will also be false if the work for which the contractor seeks payment for does not comply with contract specifications.

However, there will be other circumstances where the false element is not as clear cut, including a situation involving scientific or engineering judgment and interpretation of technical specifications. Difficulty in establishing the false nature of the claim also may arise when considering laws and regulations that may apply to a contractor's contract performance, such as environmental laws, OHS laws and wage regulations.

What to expect in Australia

The Australian Institute of Criminology (AIC) collects statistics on fraud committed against the Australian Government every financial year by surveying government agencies. The survey takes into account both fraud committed by agency employees (internal fraud) and fraud committed by those outside of the agency (external fraud).

The latest figures released by the AIC show a reported loss of $495,534,658 from external fraud in the 2009-2010 financial year. This compares to a reported loss of $2,039,162 from internal fraud in the same period – less than 1% of that amount. Of that $495 million, only $196 million was reported as recovered.

These reported losses, on their own, are alarming enough. However, they cannot account for the losses that are unquantified, unreported or undetected. According to the AIC, of the 51 agencies that reported having experienced incidents of external fraud in that financial year, only 65% quantified that loss. Further, it is commonly accepted that acts of fraud are often undetected or unreported.

It is obvious that the amount of taxpayer money lost to external fraud in a given year must exceed the reported amount, possibly to a large degree. According to the 2012 Report to the Nations released by the Association of Certified Fraud Examiners, government organisations will typically lose 5% of revenue to fraud every year. If that 5% figure is accurate, even allowing an error margin of several billion dollars, that is a staggering amount of money. It is even more alarming when you compare it to the less than $500 million of reported losses.

The large recoveries made by the US Government under the False Claims Act indicate the potential for similar success in the Australian context. The enactment of legislation akin to the US False Claims Act is the next logical step in the Australian Government's policy shift against fraud and corruption at the Federal level and the lessons learned in the US will be very relevant to any policy development in this area. Watching what the UK does in this regard will also be key.


131 USC 3730(h)(1).

231 USC 3731(b)(1).

331 USC 3731(b)(2).

431 USC 3730(e)(4)(A).

5Gardiner Harris, New York Times, 2 September 2009.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ben Allen
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions