Australia: Foreign bribery legislation in Australia

Last Updated: 27 March 2016
Article by Paul Curby and David Lehmann

Views from the coal-face

1 Background

In August 2015, KordaMentha made a submission to the Senate References Committee inquiry 1 into foreign bribery. Our views in that submission were based on the collective knowledge and experience of our Forensic investigations and risk practitioners.

In November 2015, we held a series of roundtable lunch events in Melbourne, Sydney, Brisbane and Perth. A total of 29 people attended. Their roles included In-house General/Legal Counsel, Risk and Compliance, Integrity Departments of State Government, Management, External Counsel, and Financial Crime Prevention and Detection.

Industry sectors represented at the events included:

  • Financial Services
  • Infrastructure/Construction
  • Engineering
  • Regulatory
  • Telecommunications
  • Not-for-profit.

2 The issues

The issues discussed at the lunches were based on the key recommendations in our submission to the Committee:

  • Implementation of a books and records provision
  • Introduction of an offence of failure to prevent bribery
  • Introduction of an offence of failure to report bribery
  • Whether to remove or maintain the defence of facilitation payments
  • Introduction of an offence of corporate bribery
  • Whistleblowing incentives and protection
  • Resolution options
  • Enforcement – structure and responsibility.

The discussion relating to these issues was lively and the views of respondents were captured using live polling.

3 The results

  1. Does Australia's anti-bribery legislation require more 'clarity'?

Whilst a majority of respondents (55%) agreed that more clarity was needed, about 45% either believed it was not necessary or were unsure.

For those that didn't think it necessary, the rationale was that Australia's legislation had been in place since 1999, yet there had been very little enforcement of it.

  1. What is your view of Australia's enforcement efforts in respect of foreign bribery?

An overwhelming majority of respondents believed that Australia's enforcements efforts were poor (71%) or fair (25%).

A significant factor in forming these views was the fact that only two corporate convictions had been achieved in 17 years since the foreign bribery legislation was enacted.

Interesting comments included that the lack of enforcement action was a direct result of the lack of political will to deal with the issue.

  1. For some time, there has been debate about whether the defence of 'facilitation payments'2 should remain. What is your view?

A significant majority (78%) agreed that the facilitation payments defence should be removed. A significant reason was that doing so would remove uncertainty about conduct that may lead to exposure to breaching foreign bribery law.

Arguments for retaining the defence included that not having it would make doing business in certain countries or regions impossible given the cultures of gift-giving and the need for facilitation payments to get anything done.

  1. Australia's foreign bribery legislation does not contain a books and records provision like the FCPA3. Would such a provision assist enforcement efforts?

An overwhelming majority of respondents (94%) believed that a books and records provision was necessary, not only to assist law enforcement, but also to create a greater incentive for organisations to have appropriate prevention measures and controls in place.

It was agreed that bribery in general, particularly foreign bribery, is difficult to investigate and prosecute. So, having a complementary offence requiring the true nature of transactions to be recorded, as well as related provisions about internal controls, would make enforcement easier and create greater motivation for companies to establish and maintain effective compliance frameworks.

As a result of the recent Senate Committee report the Criminal Code has been amended by adding a new Division 490 to cover false or reckless dealing with an accounting document. The amendments are not limited to foreign or offshore bribery or to conduct involving public officials. They apply from 29 February 2016 and vindicate the views of most attendees at our events and the broader business community.

  1. Should Australia's foreign bribery legislation include an offence of the failure of a commercial organisation to prevent bribery similar to that contained within the UK Bribery Act?

Given the low levels of enforcement activity in Australia, there has been little incentive for organisations to spend time and money on implementing effective compliance programs in respect of foreign bribery.

The vast majority of respondents (91%) believed that, in order to create this motivation, an offence similar to that contained within the UK Bribery Act with its defence of adequate procedures should be implemented.

  1. The UK's offence of the failure of a commercial organisation to prevent bribery has a defence of 'adequate procedures'. Guidance on adequate procedures was issued by the UK Department of Justice to increase the understanding of what adequate procedures means. Should Australia issue similar guidance to assist our corporations?

Whilst there is guidance available for legislation from other jurisdictions such as the US FCPA in the FCPA Resources Guide and in the UK Bribery Act Guidance on adequate procedures, the vast majority of respondents (81%) thought that more detailed guidance specific to the Australian position would be useful.

Those that disagreed thought that existing guidance, some of which is mentioned above, was sufficient.

  1. Should Australia's legislation include an offence of failing to report foreign bribery?

The question of mandatory reporting was a vexed one.

A significant minority (23%) thought that an offence of this nature would be just too difficult for organisations to comply with and would create even more onerous compliance obligations. However, of those in favour (77%), almost two-thirds believed that protocols and guidance would be needed to guide organisations about when foreign bribery should be reported, e.g. after preliminary investigations had established to a reasonable degree of certainty that bribery had occurred.

  1. Should whistleblower protection legislation be enhanced to better protect private-sector whistleblowers?

It was unanimously agreed that whistleblowing was a key method of detecting serious misconduct such as fraud and corruption, but also that the consequences for whistleblowers were often significant.

Many examples of the harsh treatment of whistleblowers led to a large majority (94%) forming the view that greater protection for private sector whistleblowers was required.

Another factor in favour was the difficulty of investigating bribery issues and the need to create an environment in which individuals would feel more comfortable making reports.

  1. Should financial incentives be introduced for whistleblowers who report serious misconduct such as fraud and bribery?

A significant number of respondents voted 'no' (42%) mainly on the basis that financial incentives may lead to a deluge of unwanted and unhelpful reporting. However, the majority of respondents who voted for financial incentives (58%) did so on the basis that strict conditions would have to be met before payments could be made. These included that any information provided would have to be original and significantly contribute to the success of any investigation and to resolution of the matter investigated.

Another reason for the need to make payments was that whistleblowers are often disadvantaged financially through loss of career advancement or employment and may be subject to bullying.

  1. Aside from criminal punishment, should Australia's legislation provide for a wider range of resolution options, such as but not limited to:
  • Civil remedies and forfeiture, negotiated settlements together with deferred and non- prosecution agreements, disgorgement of profits etc.
  • Obligation to establish or enhance compliance programs and the imposition of company monitors and self-reporting regimes.
  • Administrative proceedings.
  • Debarment from government contracting.

A large majority of respondents (88%) believed that a wider range of resolution options was necessary when dealing with foreign bribery. Availing regulators with deferred and non- prosecution arrangements similar to those used in the USA under the FCPA for example, was seen as a key means by which regulators could reach a suitable conclusion to an investigation. The benefits identified included reductions in investigation time-frames by agreeing suitable pecuniary penalties and other measures such as effective compliance programs that would reduce future risk for an organisation that was subject to an agreement.

  1. What measures would help to make the enforcement of Australia's foreign bribery legislation more effective?

As mentioned above, it was widely agreed that Australia's foreign bribery efforts were poor and need to improve. A range of possible improvements was put forward. A significant number of respondents (43%) believed that all of the options provided were needed to bring about the required improvement.

Interestingly, almost a third of respondents thought that just the creation of a central, standalone Commonwealth anti-corruption enforcement agency would increase effectiveness. The creation of such an agency would provide for greater focus and strategic direction.

  1. Do you think boards of directors are generally knowledgeable enough about foreign bribery to adequately deal with it?

The response to this question was not altogether surprising. A clear majority (57%) believed that the lack of board knowledge about foreign bribery was due to the low levels of enforcement.

It was agreed that boards need greater education about the significance of foreign bribery risk so that they can set agendas for responsible business practices.

  1. My company has appropriate training, education, systems and procedures in place to prevent or detect bribery and corruption if it occurs?

A significant number of respondents (46%) believed that the systems in their organisations were very effective.

A significant number of respondents (41%), however, stated that systems in place in their organisations may be ineffective. This group of respondents brought home the point that to achieve a culture of compliance, ongoing training and communication are required. In addition, it was agreed that there is no 'one-size-fits-all' compliance program: each needs to be tailored to an individual business and its risk profile.

Another significant factor discussed was the ever-changing nature of the business environment. All compliance measures should be monitored on an ongoing basis and modified when necessary.

4 Summary

Based upon the feedback received during these events, it was generally agreed that:

  • Australia's foreign bribery legislation should be modified to meet international standards. Key legislative changes that should be seriously considered include:
    • Introduction of a books and records provision, similar to that of the FCPA. As mentioned above at Part 4 of Section 3, the new false/reckless dealing offences are now law; and
    • Creation of an offence of failure by a commercial organisation to prevent bribery, similar to that of UK Bribery Act;
  • Australia's foreign bribery legislation has been in place since 1999, but the enforcement of it has been insignificant when compared to other countries, in particular the USA;
  • Enforcement agencies lack coordination and the resources (human and financial) to deal effectively with foreign bribery;
  • Greater protection for private sector whistleblowers should be implemented and serious consideration should be given to a whistleblowing reward scheme;
  • Boards of directors should be more knowledgeable about foreign bribery risk in order to be able to deal with it more effectively; and
  • Training and communication within corporates is fundamental to producing a culture of compliance and speaking up about foreign bribery.

Endnotes

1 See: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Foreign_Bribery/Submissions Page 2, article #22
2 The defence of 'facilitation payments' can be found at Section 70.4 of the Commonwealth Criminal Code Act 1995. It provides a defence to the bribing of foreign public officials where, (i) the sole or dominant purpose of the payment is to expedite or secure the performance of a routine government action of a minor nature, (ii) the payment does not relate to a decision to award new business or continue existing business and (iii) the value of the benefit is of a minor nature and is accounted for in a record containing detailed information stipulated in the Criminal Code.
3 The Accounting provisions of the Foreign Corrupt Practices Act ('FCPA') are found at Section 13(b)(2)(A) of the Securities Exchange Act (15 U.S.C. § 78m(b)(2)(A)), commonly referred to as 'the books and records' provision; and Section 13(b)(2)(B) of the Securities Exchange Act (15 U.S.C. § 78m(b)(2)(B)), the 'internal control' provisions. The books and records provisions require issuers to 'make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer'. The internal control provisions require issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are approved appropriately and assets are appropriately accounted for. (See FCPA Resources Guide, Chapter 3).

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 Mondaq.com.

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

Authors
 
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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (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 www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 by clicking here .

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

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