On 24 June 2015, the Commonwealth Senate voted in favour of undertaking an inquiry into corrupt practices by Australian entities operating in foreign jurisdictions and the adequacy of Australia's anti-bribery legislation to combat those practices.
The Senate inquiry, which is currently accepting submissions, is due to table its final report by 1 July 2016. The terms of reference governing the inquiry primarily focus on the following key issues:
- the effectiveness of the existing legal framework in Australia for investigating and prosecuting foreign corrupt practices;
- the role and resourcing of the Australian Federal Police (AFP) and other agencies to properly investigate and prosecute foreign corrupt practices; and
- what further actions can be taken to ensure that foreign corrupt practices by Australian persons and entities are eliminated.
The Senate inquiry comes at a time of intense media scrutiny of alleged corruption worldwide, including the arrest of several FIFA officials in Zurich in June this year. Closer to home, reports have emerged of an Australian lawyer allegedly offering advice regarding the bribing of politicians in Papua New Guinea and laundering money into Australia.
Set against a backdrop of an exceptionally low rate of
prosecution by Australian authorities of foreign corrupt practices
– only one prosecution relating to alleged foreign bribery
offences has been brought in Australia to date – the Senate
inquiry highlights the Australian Government's increasing focus
on escalating investigations into and prosecutions of its citizens
who engage in unlawful business practices overseas.
It is likely that, in reviewing Australia's anti-bribery and corruption legislative model, the Senate inquiry will analyse features of the US and UK models. The UK, in particular, has been described as having a 'gold standard' anti-bribery legislative model that focuses on 'failing to prevent bribery' .
The following reforms are likely to be considered by the Senate inquiry:
- making facilitation or expediting payments (often referred to
as "grease" payments) illegal. Facilitation payments are,
under the Commonwealth Criminal Code Act 1995, a legitimate defence
to allegations of breaches of Australia's anti-bribery
legislation, if the person relying on the defence can establish
that the payment was:
- of minor value;
- for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and
- as soon as practicable after the payment was made, details of the payment – including its value and to whom it was made – were recorded (for example, by way of noting these details in the minutes of a board meeting).
- making bribery a strict liability offence. Currently, it must
be established that an individual or an entity (through its
directors, employees, agents or officers) had an 'intention to
bribe'; this is a difficult element to establish to the
requisite criminal standard of proof. Eliminating the need to prove
a particular state of mind on the part of the accused person would
make it more difficult for the accused person to argue, for
example, reliance on foreign custom or law as a defence.
- implementing stronger regulation of Australian entities, including requiring more detailed reporting obligations and requiring the foreign transactions of Australian entities to be examined by auditors for potential violations of anti-bribery and corruption laws.
- reforming the resourcing of Australian law enforcement agencies, including the introduction of court-supervised deferred prosecution agreements (DPAs). A DPA is an agreement between a prosecutor and a company accused of economic offences, such as fraud or foreign bribery, which allows the company to avoid a criminal conviction in return for compliance with certain conditions.
Potential investigations and prosecutions
Senator Sam Dastyari has signalled that he intends to use the Senate inquiry to examine a number of foreign bribery allegations. It is therefore possible that the inquiry may give rise to investigations and prosecutions.
Essential steps for Australian entities to ensure compliance
Australian entities seeking to ensure compliance can be in part guided by the increasing focus of regulatory agencies on the extent to which an entity in question fostered a corporate culture of compliance. Currently, companies are taking the following steps which are considered to be minimum requirements to be able to point to the existence of a corporate culture of compliance:
- implementing comprehensive codes of conduct, anti-bribery and corruption policies and whistleblower policies;
- implementing risk assessment and compliance programs at an employee, executive and board level,
- training domestic and overseas employees in relation to company policies and procedures; and
- setting up appropriate reporting procedures and fostering a workplace environment in which questionable practices are unambiguously prohibited.
In recent years, Australia appears to have redoubled its efforts to address the issue of its bare record of prosecutions in the area of anti-bribery and corruption. The commencement of the Senate inquiry again confirms that confronting the issues surrounding foreign corrupt practices is (at least currently) high on the political agenda; it is also yet another reminder to Australian entities operating in foreign jurisdictions that they must adopt, monitor and adapt, if required, measures to both prevent and act upon allegations of foreign bribery.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.