There has long been discussion in Australia and attempts by regulators to make their life easier in terms of bringing criminal proceedings against companies where conduct suggests economic or financial crimes have been committed. The traditional criminal law makes the progress of such charges time-consuming and unpredictable, in particular whether it can be said that the conduct of individuals can bind the company and is conduct of the “guiding minds” of the company. In 2001, the Criminal Code Act 1995 (Cth) (Criminal Code) created statutory corporate criminal liability to try and address the difficulties associated with the attribution of individual conduct to a corporate entity, but the offences remain untested before the courts.
Since 2015, the Australian Senate Economics Reference Committee has had Australia’s foreign bribery laws under review. Since 2016, the Australian Joint Parliamentary Committee on Corporations & Financial Services has been actively reviewing Australia’s whistleblower protection laws in the private and not-for-profit sectors. Both these reviews have received many submissions, all pointing to the need for reform and in some cases, substantial reform, of existing and in the opinion of many of the submissions, largely inadequate laws.
The likely critical consequences of these proposed reforms will be to:
All companies, however large or small, will need to comply with these proposed laws when (rather than if) they are enacted.
These laws do not require a “Rolls-Royce” response in every circumstance. Rather, the laws are likely to require a response proportionate to the identified business risk facing a company in each jurisdiction where it operates, for the risks to be identified, managed and monitored with flexible changes in conduct occurring to reflect changing risk profiles.
It will be critical for companies to undertake a risk-based and proportionate review of their business (including the activities of all third party agents, consultants, intermediaries and subsidiaries) to determine their risk profile and potential exposure and then to put in place procedures that adequately address that profile and exposure. It will not be enough for companies to do nothing or to try and hide behind diffuse corporate structures. Rather, a proactive risk-based approach will be required and once implemented, for the procedures to be reviewed, monitored and adapted as the business changes and develops.
In 2010, the United Kingdom enacted the Bribery Act. This was significant not only because all forms of bribery and corruption were criminalised with unlimited fines, but companies were particularly targeted by what has become known as the “section 7 offence”.
That is, a company is deemed criminally liable for the conduct of a person “associated” with the company (or under the Bribery Act, an “organisation”) unless the company can prove it had “adequate procedures” in place to prevent such conduct.
The UK Ministry of Justice published a Guidance document setting out six broad compliance principles to guide companies on what was expected of them to prove that they had acted in a manner to prevent such conduct.
As you might imagine, the imposition of strict criminal liability for a failure to prevent certain conduct was relatively new under UK law. It has resulted in many companies substantially reviewing and revising their internal procedures to demonstrate that they indeed have adequate procedures in place.
What has occurred over the last couple of years is that companies that detect or are alerted to potential illegal conduct are increasingly seeking to disclose that conduct to the UK authorities and to benefit from the UK “deferred prosecution agreement” (or DPA) scheme. No such scheme exists in Australia.
Now it is Australia’s turn.
The Commonwealth Government has released a draft exposure bill, the Crimes Legislation Amendment Bill 2017 to amend the Criminal Code Act 1995 (Cth) (the Criminal Code). While amending the existing foreign bribery offence to create two offences – (1), intentional bribery of a foreign public official and (2), a new offence of recklessly bribing a foreign public official, the law will create the new corporate offence of failing to prevent foreign bribery.
In addition, the Commonwealth is proposing to enact a Commonwealth DPA scheme to cover identified economic crimes and specified offences under the Corporations Act 2001 (Cth) (yet to be identified). Furthermore, substantial reforms are likely to strengthen the form of protections for whistleblowers across the private sector and substantially change the existing whistleblower protections (in Part 9.4AAA of the Corporations Act).
All of these reforms are being actively promoted by the Commonwealth Government and supported by parliamentary reviews in the Australian Parliament. One explanation for these raft of changes is that Australia, as signatory to the OECD Anti-Bribery Convention, will later in 2017 begin its Phase 4 peer review process of member States and a key focus will be on enforcement and gaps in laws that can be remedied to promote enforcement.
The proposed new corporate offence of failing to prevent foreign bribery has the following as its key elements.
In terms of the UK Ministry of Justice Guidance, it is clear that companies will be expected to implement the following principles into their business:
What that all means will very much depend on the individual company, its operations, risk profile and how it manages those aspects of its business.
In late March 2017, the Commonwealth Government published a Consultation Paper setting out a proposed model for a DPA scheme in Australia.
The Paper is the result of the initial 2016 consultation process inviting submissions on the introduction of a DPA scheme for Commonwealth offences. Broadly, the majority of submissions in 2016 favoured the introduction of a DPA scheme. The rationale for a DPA scheme is to enhance accountability within the business sector for serious corporate crime, to punish companies in a process that provides effective redress and seeks to promote an improved compliance and corporate culture.
A DPA involves, in summary, the following:
In addition to the key features noted above, the model proposed by the Australian Government contains the following conditions:
The model DPA scheme is likely, if it becomes law, to be reviewed after two years and further consideration will be given whether to include other crime types (such as environmental crime, tax offences, cartel offences and OH&S offences).
The importance of these proposed changes are to make the job of ASIC, the AFP, the Serious Financial Crime Taskforce and ultimately the CDPP easier to target, investigate and prosecute complex corporate crime, in Australia (noting the reference to “specific offences under the Corporations Act” that will be covered by the proposed DPA scheme) and overseas. In addition, companies are likely to have more certainty about how they will be treated once the CDPP and AGD publish a framework on how the DPA scheme will work in practice.
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