'White-collar' crimes are fundamentally different to the popular conception of crimes and involve financially motivated and non-violent crime, typically relating to corporate and financial misconduct.
Bribery and corruption are two examples of so-called 'white-collar' crimes which can present significant risks to all organisations in Australia, ranging from not-for-profit organisations and small businesses, to government entities and listed companies. Reputational damage, substantial pecuniary sanctions and criminal prosecutions are all potential consequences where a 'white-collar' crime, such as bribery or corruption, is found to have occurred.
Under State and Commonwealth laws, bribery occurs when a person dishonestly or corruptly provides a benefit or advantage to:
- influence how a person exercises their office or duties; or
- induce a person to act in a particular way in relation to their business affairs.
A bribe can take many different forms, including gifts, loans, fees, kick-backs, rewards or reciprocal favours, and can even include donations.
Corruption, on the other hand, is the misuse of office, power or influence for private or personal gain.
In line with a global trend towards greater regulation and compliance, the legislative framework governing bribery and corruption in Australia has become much more strict and complex. Regulators are targeting companies, and companies are increasingly being held vicariously liable for the actions of their officers, employees and agents.
It is for that reason that many forward-thinking companies have started taking the necessary steps for mitigating the risk of bribery and corruption. The simplest way for a company to begin that process is to implement, or update, formal policies and procedures within the organisation which not only seek to prevent such conduct from occurring in the first place, but plan for and manage the process appropriately if it does occur.
When can a company be liable?
Under Commonwealth Law, a company may be liable for the actions or conduct of its officers, employees and agents when that person is acting within the scope of their actual or apparent authority. A company can also be held liable for a bribery or corruption offence if the board of directors, or certain senior officers within the organisation intentionally, knowingly or recklessly carry out the relevant conduct.
Further, it is sufficient, for the purposes of attributing liability to the company, if the conduct was expressly or impliedly authorised or permitted prior to the commission of the offence. To that end, there have been instances where companies have attracted liability on the basis of its corporate culture—that is, if the corporate culture encouraged or tolerated the non-compliance, or if the company failed to create and maintain a corporate culture that required compliance with anti-bribery or corruption laws. For more information, see our firm's previous article on How Does a Corporation Become a Criminal.
Directors of a company in which bribery or corrupt conduct occurs may face criminal liability in their personal capacity if it can be proven that they aided, abetted, counselled or procured the bribery or corruption. Alternatively, failing to prevent such conduct occurring can also expose directors to liability, as that failure may be found to be in breach of a number of their statutory duties under the Corporations Act 2001 (Cth), including failing to exercise care and diligence, or failing to exercise their duties in good faith and for a proper purpose.
What are the potential penalties?
Unsurprisingly, the penalties for bribery and corruption offences are significant.
Under Commonwealth law, corporate entities may be liable for fines of up to $21 million per offence, or three times the value of the benefit gained. If the precise benefit cannot be quantified, it may be the greater of $21 million or 10% of the company's annual turnover.
An individual can face imprisonment for up to 10 years, or a fine of up to $2.1 million.
In addition, the maximum civil penalties for a breach of statutory duties under the Corporations Act 2001 (Cth) for company directors were recently increased from $200,000 to $1.05 million, or three times the benefit derived by the individual as a result of the contravention. In extreme cases, where the offending conduct involves recklessness or dishonesty, offences under this Act may also attract criminal liability which can result in directors facing imprisonment for a period of up to 15 years.
Penalties under State and Territory laws for bribery and corruption offences are also substantial, and prosecutions under these provisions regularly result in significant financial penalties and imprisonment for company officers.
High profile bribery and corruption cases
Businesses, local governments and unions are frequently plagued by the consequences of bribery and corruption.
In respect to bribery, warnings for companies and their directors and officers can be found in the series of high profile cases in which Note Printing Australia Ltd, a wholly owned company of the Reserve Bank of Australia (RBA), and Securency International Pty Ltd (Securency) pleaded guilty to charges of conspiring to bribe foreign public officials. Both companies were found to have engaged foreign agents who made payments to members of reserve banks in Malaysia, Indonesia and Vietnam in an attempt to secure contracts to supply bank notes. They received substantial penalties of over $2 million and $20 million respectively. Several individuals, including the CEO and CFO of Securency, were also convicted of criminal offences and given suspended prison sentences.
The case of Elomar v R  NSWCCA 224 further demonstrates that Australian courts will not shy away from imposing custodial sentences for bribery and corruption offences. In this case, two directors of Lifese Pty Ltd engaged a consultant to assist with establishing the business in Iraq. The consultant convinced the directors to make a payment to foreign public officials in Iraq in an attempt to secure government infrastructure contracts. Notwithstanding their guilty pleas, both directors received a prison sentence of 3 years and 4 months with minimum non-parole periods, and fines of $250,000.
In respect to corruption, many readers will be aware of the recent controversies surrounding Ipswich City Council (Council). 'Operation Windage', the Queensland Crime and Corruption Commission's investigation into alleged corruption in the Council, resulted in a total of 91 criminal charges against 16 individuals (including two former mayors and two former CEOs). So far, convictions from Operation Windage include that of former mayor Paul Pisasale, who was sentenced to two years imprisonment in July 2019. The severity of the corruption in that case prompted the Queensland State Government to remove the Council from office in August 2019 and appoint an administrator on an interim basis until the 2020 local government elections.
Businesses may also need to consider the impact of such conduct on their taxation and audit reporting obligations.
For example, if a business discovers that an employee has given a bribe to an external party, care needs to be taken to ensure that the business has not itself inappropriately claimed the payment as a deduction in its accounts for the purposes of reporting to the Australian Taxation Office. In addition, corrections may be required to annual reporting documents lodged with the Australian Securities and Investments Commission (ASIC).
Corrupt conduct may also give rise to liability under an array of other legislation. By way of example, bribery and corruption offences can fall within the ambit of the anti-money laundering and proceeds of crime legislation, or even the market-sharing and price-fixing provisions of the Competition and Consumer Act 2010 (Cth).
Minimising the risk
In the current regulatory environment, it is crucial for businesses to establish and maintain a corporate culture that requires compliance with bribery and anti-corruption laws. A formal anti-bribery and corruption policy is an important first step in communicating a company's attitude to bribery and corruption. Whilst senior executives may believe that their organisation has a zero tolerance approach to bribery and corruption, the lack of a policy, or even an inadequate policy, may be taken into account when a Court determines whether a company is responsible for the actions of its officers, employees and agents.
Certain organisations are also obliged to implement a whistle-blowing policy (i.e a policy providing for protection for employees who make anonymous disclosures about illegal or unethical conduct). The Commonwealth Government has recently enacted legislation requiring public corporations, large proprietary corporations, and proprietary corporations that are trustees of registrable superannuation entities, to have in place a whistle-blower policy by no later than 1 January 2020.
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.