Australian foreign bribery update - 2013 in review

Articles Written by Robert Wyld (Consultant)

The year in Australia for foreign bribery and corruption matters has been mixed. While the singular Securency prosecution has become delayed in legal argument with the committal hearing yet to be completed, the Australian media has been at the forefront of promoting a greater awareness of foreign bribery issues and taking to task corporations and management (ranging from allegations concerning the Reserve Bank banknote printing scandal, BHP Billiton and tainted Olympic medal minting contracts, Oz Minerals and Cambodian mining sagas and Leighton Holdings construction projects in the Middle East) who appear, at least in the eyes of the media, to be less than diligent in their compliance and ethical activities.

In September 2013, Australia changed government from a Labor to a conservative (Liberal/National) government. Whether or not foreign bribery and its regulation and enforcement are of interest to the current government is unclear as they have said almost nothing on the topic. It is hoped international momentum in combating foreign bribery and commercial corruption continues to germinate in Australia, albeit very slowly and becomes more of a focus during 2014.

Australia's corruption reputation

The Transparency International Corruption Perception Index 2013 was released earlier this month and, surprise surprise, Australia's ranking amongst the stars in cleanliness dropped from 85 in 2012 to 81 in 2013.

While Australia was still ranked as the 9th 'cleanest' country in the world and the 3rd cleanest country in the Asia Pacific region, the constant flow of media attention on the topic, particularly the criminal prosecution of the Securency and Note Printing Australia executives through to the offshore activities of BHP Billiton, Oz Minerals and Leighton Holdings to the NSW State-based corruption investigations of various former politicians and crown ministers, it does not take much publicity to generate a negative perception that Australia is perhaps not as clean as it would like to be seen. Clearly, further work needs to be done to address these perceptions.

Australia's enforcement activity

Over the last 12 months' since the OECD Phase 3 Review was published in October 2012, the response from the Australian Federal Police (AFP) has been noteworthy.

The AFP's Expert Panel on Foreign Bribery cases has been running for nearly 12 months. In addition, a range of earlier investigations have been reviewed and resources pooled into a coordinated team approach. Senior AFP officers have candidly admitted past shortcomings while proactively seeking to improve investigation procedures. In May 2013, the AFP signed up to the International Foreign Bribery Taskforce together with regulators from the US, Canadaand the UK. While further criminal prosecutions are yet to occur, there is significant activity in the investigation space which bodes well for encouraging business to understand and comply with the law and the ethical standards underlying the law.

The AFP has also been active in the proceeds of crime jurisdiction. The AFP Asset Confiscation Taskforce has turned its attention to economic crime. Given the size of profit opportunities that exist in many large-scale contractual deals won through corrupt practices, the threat of disgorging the value of the profit or contract value secured from corrupt conduct should add a significant deterrent element to the array of regulatory sanctions that can and should be used to encourage ethical commercial behaviour.

However, the position of Australia's corporate regulator, the Australia Securities and Investments Commission (ASIC) has been less favourably reviewed.

ASIC has been heavily criticised in the media for its apparent inaction on any significant investigation into highly public scandals, including the bribery allegations concerning the Reserve Bank of Australia subsidiaries (Securency and Note Printing Australia) and Leighton Holdings. The Chairman of ASIC has responded by saying that foreign bribery is a criminal matter, therefore it falls to be investigated by the AFP and besides, it will rarely interfere in a criminal investigation or undertake a civil investigation while a criminal investigation is running, save for exceptional circumstances. More surprising, the Chairman's strategic goals of ASIC made no mention of enforcement - which is surprising and appears to add weight to a popularly held view (in many sections of the media) that ASIC is, in comparison to other corporate regulators, relatively weak and risk adverse in taking on well-funded corporations and their executives.

Some careful thought should be given to the creation of one national agency or a national coordinating agency that takes full responsibility for the criminal and civil investigations of foreign bribery and corruption complaints. This ought to have the following features:

  • a clear mandate to cover all civil and criminal investigations and to prosecute and/or negotiate settlements;
  • all potential settlements should be ultimately supervised by the courts and the terms made public (similar to the current UKmodel for Deferred Prosecution Agreements in the Crime and Courts Act 2013 Schedule 17);
  • the new agency should be properly and adequately resourced (drawing upon the existing skills within numerous Commonwealth agencies);
  • prosecutions could take place in conjunction with the existing Commonwealth Director of Public Prosecutions, or a dedicated independent prosecutor; and
  • the organisations under investigation do all the heavy work in their internal assessment of the offending conduct and report that to the agency (similar to the US and UK position) and the agency can then determine its own action or further work that it needs to perform.

This would be a great step forward in addressing the criticism directed to all Australian governments over the years (that they pay lip service to really targeting foreign bribery by creating numerous laws and adopting international treaties but rarely follow through in practice because it is just all too hard or too expensive). However, in the current political cycle dominated by budget deficits and slash and burn financial savings, this may still be but a dream!

Australia's moribund National Anti-Corruption Plan

In 2011, the Commonwealth Attorney General's Department actively promoted a National Anti-Corruption Plan. Since that time, silence has descended and little, if anything, has been heard about it. Indeed, some sources have suggested that the Commonwealth Government does not believe there is corruption in its ranks, and if a national Anti-Corruption Commission is necessary, then it requires examples of corruption in order to justify the creation of the commission! We had thought such obtuse attitudes had finally been abandoned when all Australian States agreed to or are in the process of implementing their own State-based anti-corruption commissions. The Commonwealth is clearly lagging behind in this field and it is hardly to its credit in a year when it takes on the chairmanship of the G20 Group, that it had failed to address corruption at a national level.

To blow or not to blow the whistle?

Australian Governments of all political persuasion appear alarmed by the thought that whistleblowers who report incidents of potentially serious crime should be free to do so. Over the years, Australian governments and business have each preferred to shoot the messenger rather than address unpalatable messages.

In July 2013, the Public Interest Disclosure Act 2013 (Cth) came into effect. The Australian States have various forms of public interest disclosure statutes while other laws, for example, the Corporations Act 2001 (Cth), create a statutory protection in favour of an employee in reporting the company's conduct which may amount to a potential offence under that Act. While the 2013 Act is a significant improvement on the previous very patchy protections given to whistleblowers and the almost inevitable targeting of whistleblowers as rogue complainants, the system still does not cover all those involved in exercising public power (that is, politicians) and ASIC's public perception of responding to whistleblowers appears patchy at best. What is needed is clear leadership to encourage the transparent (and protected) reporting of serious allegations of commercial and public wrongdoing which can then be investigated.

Australiahas not gone down the USpath of offering bounties to whistleblowers if the evidence they disclose (often direct to the US Securities & Exchange Commission) results in securing a conviction against the perpetrators. Australiais probably unlikely to adopt such a course. But, the value of such a system, in positively rewarding whistleblowers, ought to be seriously considered in light of how the USprogram has developed over nearly 2 years of operation. The sky did not fall in and yes, the SEC has approved two modest and one more significant bounty to a whistleblower. What the system has generated is a well recognised process for whistleblowers to rely upon, completely independent from reliance upon any internal reporting of the alleged wrongdoing (often to the alleged wrongdoer) which can often result in persecution and retribution against the complainant.

Facilitation payments

In November 2011, the Commonwealth Government issued a discussion paper calling for comment on certain proposed changes to the Criminal Code 1995 (Cth), the most important of which was whether to abolish facilitation payments as a defence to foreign bribery. The government only allowed one month for submissions with the deadline closing in December 2011. Again, since then, a deafening silence.

The UK Bribery Act 2010 had no facilitation payment defence. The world of commerce in Londondid not fall over and collapse. The Canadians followed suit earlier this year. In January 2014, the Brazilian Clean Companies Act will impose strict liability on conduct constituting the bribery and corruption of domestic and foreign public officials with no facilitation payments permitted.

There is no good principled reason to retain any facilitation payments as a defence to conduct constituting the offence of foreign bribery. All facilitation payments do is encourage both developing and developed nations and their public officials and corporations to trade in minor bribes for pure commercial gain and personal exploitation (particularly the bribe recipient). The arguments peddled in favour of facilitation payments (maintaining Australian jobs and business and simply having to comply with "local demands") are spurious and illustrate a misguided view about any concept of ethical commercial behaviour.

When most corporations espouse the highest standards of integrity (in the Codes of Conduct) and then resort to facilitating bribes to pursue their commercial projects, there is a serious disconnect between ethical perception and reality. For Australia to fail to address this glaring issue in a year in which it assumes a leading role within the G20 community reflects very poorly on its own ethical standards

Anti-corruption guidance for the public and business

The website of the Commonwealth Attorney General's Department contains a series of short fact sheets which set out in plain terms what is foreign bribery, the offence, the penalties, Australia's international obligations and how to report suspect conduct (see the link at http://www.crimeprevention.gov.au/Financialcrime/Pages/Briberyofforeignpublicofficials.aspx).

Given the vast amount of literature that exists and the level of guidance published by various regulatory agencies (such as the US FCPA Resources Guide) and NGOs (such as the World Bank, the OECD and Transparency International), it would be of great benefit for the Australian authorities to draw this body of knowledge together and to publish a guide for Australian business on anti-corruption ethics and compliance to clearly demonstrate the type of commercial conduct and ethical behaviour that is expected by Australian corporations and individuals consistent with their legal obligations, particularly operating outside Australia. The traditional view (adopting a conservative economic free market theory framework) is largely to leave it to business to work out the issues, as Australian governments and regulators do not like telling business what to do - they only act when business gets it wrong. Such a guide is likely to be of great assistance to many businesses who genuinely try and do the right thing, but who would be assisted by a clear message on what the Australian Government considers (in a non-binding sort of way) to be the way to behave.

Wish list for 2014

If I was asked to advance some key developments that I would like to see occur in 2014, then these would be on top of the ethical Santa's list:

  • abolish facilitation payments;
  • implement a robust National Anti-Corruption Plan underpinned with a truly independent national anti-corruption commission;
  • issue a discussion process for the creation of one properly funded and resourced national agency to take responsibility for all civil and criminal investigations and prosecutions of foreign bribery offences with clear powers to negotiate settlements in a manner contemplated by the UK acceptance of Deferred Prosecution Agreements into its criminal law;
  • publish a thorough and informative guide for Australian business to encourage them to proactively manage their offshore trade risks and reduce the likelihood of foreign bribery occurring; and
  • give serious thought to implementing a whistleblower bounty scheme (modelled on the US SEC scheme) which promotes a transparent and regulated system for encouraging those inside in the know to report corrupt conduct to the authorities.

Will any of this occur? I live in hope but remain slightly pessimistic given Australia's apparent traditional minimalist approach to tackling foreign bribery and corruption.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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