Australia tells OECD it is getting serious about foreign bribery
July 2015 | SPECIAL REPORT: WHITE-COLLAR CRIME
Financier Worldwide Magazine
It is well known that Australia has a patchy enforcement record in the area of foreign bribery and corruption. In 2012, the OECD published its ‘Phase 3 Report on Implementing the OECD Anti-Bribery Convention in Australia’ (2012 OECD Report), the Report analysed Australia’s compliance with the OECD Convention and made a number of recommendations on how Australia could improve its implementation and enforcement of the Convention. Those recommendations mainly addressed the key criticisms of Australia’s implementation efforts to that time, that the Australian Federal Police (AFP) officials tasked with investigating foreign bribery cases may have “closed foreign bribery cases before thoroughly investigating the allegations” and that Australia’s enforcement authorities were failing to work together to ensure that allegations of improper conduct were properly investigated.
Fast forward to 2015 and it is clear that the 2012 OECD Report’s recommendations (and several high profile corruption events in Australia in the interim) have had serious impact at many levels. There has been unprecedented focus on bribery and corruption by the AFP, with an additional prosecution and at least 15 active investigations on foot (a notable increase). There has also been an important restructuring of investigative and enforcement efforts, with improved cooperation within government agencies, as well as between Australian and foreign authorities. Australian companies doing business abroad without effective anti-bribery and corruption compliance measures are at serious risk on many levels.
Australia’s update to the OECD is contained in the ‘Follow-up to the Phase 3 Report & Recommendations’ that was released in April of this year (2015 Report). The 2015 Report details three areas of change in Australia’s efforts to tackle foreign bribery and corruption: (i) improvements and reforms in the investigation of foreign bribery and corruption allegations by the AFP; (ii) improved cooperation between the various arms of government charged with investigative powers into bribery and corruption matters; and (iii) legislative reform. While positive steps have been taken with respect of the first two areas, it is clear that there is still more to do and that Australia’s compliance with its treaty obligations with respect to anti-bribery and corruption remains a work in progress.
Investigation and enforcement
The 2012 OECD Report raised a question as to whether the AFP had sufficient expertise to adequately investigate allegations of bribery and corruption. The concern expressed by the OECD was that without a dedicated unit for foreign bribery, the AFP lacked adequate expertise in investigating corporate economic crime and foreign bribery matters and that this may have led to investigations being closed prematurely or left for investigation by the ASIC (or others), without any proper coordination between the investigative bodies. Clear examples exist, including a high profile matter involving BHP Billiton which US authorities ultimately took the lead on (and recently levied a significant penalty). The AFP has responded to this criticism by setting up a dedicated fraud and anti-corruption team in February 2013. The fraud and anti-corruption team receives guidance from the AFP Foreign Bribery Panel of Experts – a multi-disciplinary/multi-agency body established prior to the 2012 OECD Report, but now with a wider role in the evaluation and investigation of foreign bribery matters and in the training of AFP officers.
It is difficult to comment on the effectiveness of these reforms as yet, but the increase in active foreign bribery investigations (including at least one referred to the Commonwealth Director of Public Prosecution) signals a change. Publicly available information tells us that some of Australia’s biggest companies, including Leighton Holdings (now CIMIC Group) and BHP Billiton, have been the subject of investigation by the AFP in the time since the 2012 OECD Report. The detail of most investigations is not public, but it is reasonable to infer that some of Australia’s largest corporations, as well as several mid-cap companies have been or are presently under investigation.
Australia’s response to the OECD recommendations in relation to foreign bribery is complemented by an increasingly active approach in tackling domestic corruption. There have been a number of high-profile examples of domestic corruption cases, including the New South Wales Independent Commission Against Corruption (ICAC) investigations into Australian Water Holdings Pty Ltd. This investigation led to the resignations of several high profile ministers of the state government of New South Wales, including the premier.
Additionally, there has been a Royal Commission into governance and corruption in relation to the trade union movement in Australia. Although the Royal Commission is ongoing, it is expected that there will be wide-ranging ramifications for anti-bribery and corruption in Australia. Indeed, one proposal put to the Commission is that corrupt payments involving companies should attract fines of up to $17m.
The AFP established the Fraud and Anti-Corruption centre (FAC Centre) in February 2013, to improve cooperation between relevant government departments. The FAC enables better coordination between and collaboration between the AFP and the Australian Securities and Investment Commission (ASIC) and Australian Taxation Office (ATO) (and others).The FAC are often seconded by other government agencies in order to assist the AFP in bribery and corruption investigations. This multi-agency evaluation process demonstrates that Australia is not only throwing additional financial resources towards combating foreign bribery, it is also carefully examining how these resources can be used most effectively, and allows the AFP to draw on the expertise of other government agencies and departments regarding corporate financial crime.
Again, it is difficult to evaluate the effectiveness of the FAC Centre as yet. In support of it, the Australian government points to its track record in ASIC prosecutions of false accounting and false record keeping offences. The AFP argues that it and the ASIC are better able to evaluate potential false accounting cases when working together, and that the cooperation between the agencies means that there is less duplication. Equally, by working together, they can better assess whether a complaint is best handled as a foreign bribery matter – the preferred primary offence – or as a false record keeping matter. However, Australia still only has two prosecutions for foreign bribery offences (the Securency/Note Printing Australia cases that are still working their way through the courts, and the Lifese prosecutions in February 2015). Nevertheless, the experience of the authors is that there are material and focused increased cooperation and enforcement efforts underway.
The 2012 OECD Report recommended legislative reform in a number of areas. It recommended that the Australian parliament take steps to clarify that proof of an intention to bribe a particular foreign official is not specifically a requirement of establishing the foreign bribery offence. Furthermore, it recommended an increase in the applicable penalties for false accounting.
With respect to the intention element of the foreign bribery offence, the 2015 Report says that Australia does not believe that its legislation requires proof of an intention to bribe a particular official to make out the foreign bribery offence. Nevertheless, Australia has taken the OECD’s recommendation on board, and notes that it intends to develop a minor technical amendment to the foreign bribery offence in division 70 of the Criminal Code Act 1995 (Cth) (Criminal Code), which will put the matter “beyond doubt”. This intention was reflected in a bill recently introduced by the Australian parliament. If enacted, the bill will mean that a person does not “need to intend to influence a foreign public official” in order for a foreign bribery offence to be established against them.
Additionally, Australia aims to introduce a bill to parliament which will create a new false record keeping offence which would apply specifically in the context of foreign bribery. To date, no such bill has been put before parliament; however, the bill is likely to be introduced later this year. It remains to be seen whether applicable penalties are higher than those for similar offences, as recommended by the OECD Report.
Where to from here?
The Australia Report demonstrates that the country is ramping up its investigation and enforcement of foreign bribery offences. With the increased activity by the regulators has come a heightened sense of awareness among Australian businesses regarding the risk of prosecution for foreign bribery offences. Companies doing business in other countries must think carefully about implementing strong and rigorous compliance programs going forward.
However, disappointingly for some, the increased level of investigation is taking time to bear fruit. Patience is wearing thin in some quarters, and calls for reform are ongoing. For example, in March 2015, Senator Sam Dastyari famously called for a senate enquiry into foreign corrupt practices and named executives from BHP Billiton, Thiess and Leighton Holdings, which he said were implicated in corrupt behaviour. In calling for an enquiry, Mr Dastyari was critical of Australia’s enforcement record to date, especially when compared to the anti-corruption measures adopted in the US and the UK.
It remains to be seen whether a senate enquiry will in fact be held. While the criticisms made by Mr Dastyari are well founded, the reality may be that it takes some time for the reforms implemented by the AFP and other government agencies to come to fruition. In the meantime, the OECD is pleased that Australia has made progress. These developments, in combination with the explosion of enforcement efforts across the Asia-Pacific region, and continued efforts of US and UK authorities (indeed, more than half those penalised under US FCPA and related provisions are non-US entities), mean that all companies conducting business in multiple jurisdictions would be well advised to properly and rigorously manage bribery and corruption risks when doing business overseas.
Annette Hughes is a partner, Adam Purton is a senior associate and Joshua Levy is a lawyer at Corrs Chambers Westgarth. Ms Hughes can be contacted on +61 3 9672 3506 or by email: firstname.lastname@example.org.
© Financier Worldwide
Annette Hughes, Adam Purton and Joshua Levy
Corrs Chambers Westgarth