Australian developments – bribery, whistleblowers and DPAs
July 2017 | SPECIAL REPORT: WHITE-COLLAR CRIME
Financier Worldwide Magazine
July 2017 Issue
As of May 2017, the Australian Federal Police (AFP) was investigating 37 foreign bribery matters. Twenty of these are active cross-border investigations involving Canada, the UK, the US and others. International experience is that a single foreign bribery investigation currently takes on average seven and a half years to conclude. While there are a significant number of investigations underway in Australia, this has not been reflected in the number of proceedings commenced by the Commonwealth Director of Public Prosecutions (CDPP), nor in the number of convictions achieved.
In the face of criticism from international entities such as the OECD and Transparency International, the government has been looking to strengthen Australia’s regime dealing with the bribery of foreign officials and corporate crime. It has already improved resourcing, through increased funding and the late 2016 announcement of a specialist multiagency AFP-led fraud and anti-corruption centre, which prioritises foreign bribery investigations. The government is now looking at a range of proposed changes which will increase the likelihood of detection and conviction.
For Australia, 2017 will be a year of change in the area of white-collar crime. The writing is plainly on the wall. A detailed reform programme is underway, and if the Australian government’s suggested reforms and proposals are implemented, we will see changes to the foreign bribery offence, the widening of whistleblower protections and the implementation of a scheme for deferred prosecution agreements (DPAs).
If implemented, these reforms would widen the scope of conduct that is viewed as corrupt and will increase the likelihood of improper conduct being successfully detected and prosecuted in Australia. The reforms present a significantly increased risk for both corporations and directors that do not take adequate steps to ensure appropriate compliance procedures are in place or fail to undertake the necessary due diligence of their business partners and agents.
To combat these risks, corporations and directors will need to revise risk registers and audit and risk management committees should have a heightened focus on this area.
There are some changes coming to the formulation of the existing offence. First, the current offence requires the CDPP to demonstrate that a benefit or advantage was “not legitimately due” to a public official. There can be uncertainty whether a benefit is “not legitimately due”. The changed provisions will instead prohibit “improperly influencing” a foreign public official – this focus on improper influence is in line with UK provisions. The definition of a public official will also be expanded to clearly include people who are running for office, rather than being limited to those already in office (as well as many other types of public officials).
The offence currently focuses purely on whether bribery occurs in an attempt to obtain or retain “business” or “business advantages”. However, bribery can occur for other reasons which may not fall within those categories. Under proposed reforms, it would no longer be necessary to demonstrate the benefit is business-related, it may now be personal, such as the granting of a particular type of visa for an in country employee.
There are also two proposed new offences in the framework. First is a new offence of recklessly bribing a foreign public official. Second, and more importantly for corporations, will be the new corporate offence of “failing to prevent foreign bribery”. This new offence reverses the onus of proof so that, in order to avoid strict liability, a company must prove that it had adequate procedures in place to prevent such conduct. Those procedures extend not only to the company’s conduct, but also to the management of the conduct of its own subsidiaries, contractors and third parties (such as agents). In essence, this can make a company liable for the improper conduct by everyone in its supply or engagement chain. This will not be unfamiliar to those in the UK, as it reflects the operation of the UK Bribery Act. All of these changes widen the net as to what can expose a corporation or an individual to liability.
The Australian government also wants to bring about behavioural change. Consultation is under way with the aim of implementing a whistleblower protection regime that would allow a wider range of persons to obtain whistleblower protection against punitive conduct or recrimination in respect of a much wider range of types of conduct. Presently corporate legislation only provides whistleblower protection to current employees, service providers and others, in relation to whistleblowing concerning contraventions of the Corporations Act 2001.
The proposal is to broaden the scope of the framework, to provide the benefit of whistleblower protection to both former and current employees, service providers, agents and others in relation to breaches of not only the Corporations Act, but a much wider range of legislation. Many of the submissions that have been provided to the government recommend that any disclosure of any conduct which breaches any legislation should entitle the informant to whistleblower protection. There is widespread support in the community for these changes.
One aspect raised for discussion is whether a bounty system should operate – to provide rewards to the informant following any successful regulator action which results in a penalty. Such a system operates in the US. This is unlikely to be implemented. There has been significant content in the submissions which goes against this proposal. Indeed, the corporate regulator, the Australian Securities and Investments Commission (ASIC) has changed its position over the last six months from being mildly supportive, to now taking an approach of “not yet, wait and see”.
Another significant mooted change is one which will increase the incentives for Australian corporations to self-report. There are currently some incentives for corporations to self-report in the areas of cartel conduct and some breaches of the corporation law; for example, for cartel conduct there can be immunity from prosecution, and for other types of competition or corporate misconduct, leniency policies which will reduce any penalties imposed. However, in the bribery space, there is little incentive for Australian corporations to inform regulators when they have identified contravening bribery conduct.
A proposal has been developed for the implementation of DPAs. The proposal is very similar to the regime deployed in the UK – with some slight amendments to ensure that it would have constitutional validity. A DPA will be a voluntary negotiated settlement between the CDPP and a defendant corporation (they are not available to individuals). They would be made available on certain conditions – requiring an obligation for a corporation to cooperate with any investigation, admit to agreed facts, pay a penalty and implement a programme of improvement. Independent monitors may be required to oversee the implementation of the DPA and compliance with its obligations. Put simply, DPAs will apply to serious economic crimes, such as fraud, false accounting, foreign bribery, money laundering, and proceeds of crime conduct.
Combined with the new formulation of the foreign bribery offence and the strict liability for corporations, the attractiveness of DPAs is significantly heightened.
While these changes will be significant, corporations can start getting prepared now. There are significant resources already available to Australian corporations to ensure that they are taking the steps necessary to ensure that they have “adequate procedures” in place to prevent foreign bribery. These are sourced from US regulators and UK regulators, particularly, the Ministry of Justice’s Guidance publications. Additionally, the Department of Foreign Affairs and Trade, the AFP and Austrade (a government body that supports Australia’s exporters) all provide detailed guidance on their websites in the implementation and development of appropriate procedures in relation to foreign bribery.
Richard Flitcroft is a partner at Corrs Chambers Westgarth. He can be contacted on +61 2 9210 6435 or by email: email@example.com.
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Corrs Chambers Westgarth