The Government has reintroduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (Cth) (the ‘Bill’) to the Senate for a second time. If the Bill is successful, its implementation will reshape Australia’s bribery framework and ensure it is on par with those in both the UK and the United States.
The Bill represents the Government’s latest commitment to address Australia’s obligations under the OECD Foreign Bribery Convention, and expand the arsenal available to law enforcement agencies to bring bribery enforcement action and remove impediments to successful prosecution of foreign bribery.
Introduced for the first time in December 2017, the Bill lapsed when the government was dissolved in advance of the 2019 election. The 2019 Bill introduces an absolute liability offence of failure to prevent bribery and a deferred prosecution agreement scheme (DPA). The Government has also introduced adequate procedures guidelines for corporations to refer to when introducing policies and procedures to comply with the proposed new bribery reforms.
Lessons learned from the introduction of the UK Bribery Act suggests that the Bill is likely to increase the number of corruption investigations and the likelihood of corporates being prosecuted or entering a DPA.
The reputational and financial impact of a violation of the proposed failure to prevent offence is significant with a maximum penalty of $21 million, 10 percent of annual turnover, or three times the benefit gained – whichever is greatest. Accordingly, corporates should review their anti-bribery policies and ensure they have adequate procedures in place to detect and prevent bribery, particularly if operating in high risk jurisdictions.
Doing nothing is not a defence.
The Bill introduces a new corporate offence of failure to prevent foreign bribery by an ‘associate’ that mirrors the failure to prevent bribery offence in the UK Bribery Act 2010. An associate is defined as an officer, employee, agent, contractor, subsidiary or person within the control of a corporation, or a person otherwise performing services on behalf of a corporation.
Under the proposed legislation, companies would be automatically liable for foreign bribery committed by an associate (including those operating overseas), except where the company can prove it had ‘adequate procedures’ in place to prevent it.
The proposed reforms also include a number of changes to the existing foreign bribery offence that seek to simplify and strengthen the offence, including:
Lastly, the 2019 Bill redefines ‘dishonesty’ in the Criminal Code to give it an objective meaning ‘according to the standards of ordinary people’. This change will also make it easier for the CDPP to prosecute dishonesty related offences under the Criminal Code, and add to the changing regulatory landscape.
Although consulted on in the 2017 version of the Bill, the current iteration of the proposals do not remove or amend the facilitation payment defence, which allows payments of minor value to expedite routine government actions.
The proposed reforms give prosecutors the power to enter into DPAs with commercial organisations that they suspect of criminal wrongdoing. The concept of DPAs is modelled on the US scheme of DPAs which was also introduced in the UK in February 2014.
DPAs are voluntary agreements between the prosecutors (in Australia, the CDPP) and the corporation, whereby criminal proceedings are deferred so long as the corporation abides by the prosecutor’s set conditions. The introduction of the DPA scheme is to encourage corporations to self-report misconduct, and to make it easier for regulators to bring enforcement action in relation to foreign bribery allegations.
The introduction of the DPAs in the UK in 2014 allowed for the closure of the first corporate investigations under the 2010 UK Bribery Act, including:
To accompany the Bill, the Government has released draft adequate procedures guidance which sets forth six essential elements of bribery prevention, including risk assessments, management dedication, due diligence, communication and training, confidential reporting and investigation, and monitoring and review of compliance systems. All corporations irrespective of their size or sector are urged to incorporate these elements into their bribery prevention procedures.
The Government makes no secret that the guidelines are aligned to those issued under the UK Bribery Act 2010. This deliberately enables Australian companies who have already framed their anti-bribery policies on international guidelines to easily incorporate additional policies relevant to the Australian context. The guidelines state that the policies and procedures adopted must be ‘effective and proportionate’ to prevent bribery. Proportionality is defined as being appropriate to the specific corporation’s foreign bribery risk, size and nature of activities. The principle of ‘effectiveness’ requires corporations to ensure that their procedures are effective in practice and are implemented.
The first contested failure to prevent case in the UK provides insight into how proportionality might be interpreted by Australian courts. The UK courts returned a guilty verdict to a company whose defence centred on the fact it was low risk, domestic focused business with less than 30 staff. The prosecution challenged that the company lacked an anti-bribery training program, policies had not been updated since the introduction of the UK Bribery Act and there was no whistleblowing mechanism within the company.
The introduction of the Bill and the publication of the draft guidance comes at a time of increased regulatory scrutiny of corporates, the introduction of additional whistleblower protections from January 2020 and a new proposal by the Australian Law Reform Commission (‘ALRC’), under which senior managers may be subject to civil penalties for failing to stop crimes committed by corporations.
The ALRC proposal arises from a sweeping review of corporate criminal responsibility commissioned by the Attorney-General that is examining corporate regulation and ways to more easily penalise corporate wrongdoing. The Bill is also hot on the heels of reforms that have introduced a ‘books and records’ style offence into Australian law. The offence prohibits an individual or company from intentionally or recklessly making, altering, destroying or concealing an accounting document, or failing to make or alter an accounting document where there is a legal duty to do so, in order to facilitate or disguise the giving or receiving of a benefit not legitimately due.
“The accountability bar is rising, for many years we have seen US regulators pursue companies not for a substantive bribery offence but for falsely recording the payment in their books and records. Australia introduced a similar law in 2016 and together with these proposed amendments it is definitely time for boards and management to re-visit their anti-bribery programs if they want to avoid becoming the next headline”
– Dean Mitchell
With new funding to prosecute corporate crime available to the AFP and CDPP, the time is ripe for corporations to get their compliance policies in order and ensure they have adequate procedures in place to prevent bribery.