Foreign Bribery Update 2015: December

Articles Written by Robert Wyld (Consultant)

This Update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation to 1 December 2015. These developments will impact on Australian businesses working offshore and only reinforces the need to have and to implement an ongoing, pro-active anti-corruption compliance framework within your business.

Please insert this Update behind the Updates tab in your copy of the JWS Foreign Bribery Guide.

Important Developments

The key issues that are covered in this Update include:

  • Australia – new false accounting criminal offences
  • Australia – amendments to foreign bribery offence become law
  • Australia – Attorney General’s Department submission on Senate foreign bribery review
  • Australia – corruption and the Trans-Pacific Partnership Agreement
  • Australia – ASIC on whistleblower rewards
  • United Kingdom – first Deferred Prosecution Agreement
  • United States – the Yates Memorandum on prosecuting individuals
  • United States – judicial review of corporate and individual DPAs
  • United States – latest SEC whistleblower reward
  • China – changes in penalties against bribe givers

Australia – New False Accounting Criminal Offences

For many years, the OECD, Transparency International Australia and experts have criticised Australia for failing to have in place any meaningful false accounting laws which can apply generally or in particular, to foreign bribery cases.

The US history of books and records offences

The United States Foreign Corrupt Practices Act (FCPA) and the US Securities Exchange Act have had substantial administrative accounting sanctions for many years. While the US criminal offences require a degree of intentional conduct, the US civil books and records and internal control offences do not – that is, they merely require listed entities to maintain books and records in a manner that a company would be reasonably expected to maintain. These laws have been particularly fruitful for the US authorities in prosecuting companies for foreign bribery related offences. The US Department of Justice (DOJ) focuses on the criminal offences while the US Securities and Exchange Commission (SEC) focuses on the civil administrative cases (the books and records and internal controls offences), often in parallel with the DOJ.

On 27 November 2015, the Australian Government finally addressed this glaring gap in our laws by introducing the Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Bill 2015 to Parliament. This Bill became law on 29 February 2016. The new laws are included in Part 10.9 – Accounting Records section in the Criminal Code Act 1995 (Cth) (the Criminal Code).

The False Accounting Offences

There are two primary offences

Intentional false dealing with accounting documents

The essential elements of this offence (s490.1(1) Criminal Code) are as follows:

  • the person commits an offence where the person:
    • makes, alters, destroys or conceals an accounting document; or
    • fails to make or alter an accounting document where the person is under a duty to so make or alter the document; and
  • the person intended the making, alteration, destruction or concealment of the document to facilitate, conceal or disguise the occurrence of one or more of the following:
    • the person receiving a benefit that is not legitimately due;
    • the person giving a benefit that is not legitimately due to the recipient or intended recipient;
    • another person receiving a benefit that is not legitimately due;
    • another person giving a benefit that is not legitimately due to the recipient or intended recipient;
    • loss to another person; and
  • one or more circumstance applies as set out in s490.1(2) of the Criminal Code.

The reckless false dealing with accounting documents

The essential elements of this offence (s490.2 of the Criminal Code) are as follows:

  • the person commits an offence where the person:
    • makes, alters, destroys or conceals an accounting document; and
    • fails to make or alter an accounting document where the person is under a duty to so make or alter the document; and
  • the person is reckless as to whether the making, alteration, destruction or concealment of the document facilitates, conceals or disguises the occurrence of one or more of the following:
    • the person receiving a benefit that is not legitimately due;
    • the person giving a benefit that is not legitimately due to the recipient or intended recipient;
    • another person receiving a benefit that is not legitimately due;
    • another person giving a benefit that is not legitimately due to the recipient or intended recipient;
    • loss to another person; and
  • one or more circumstance applies as set out in s490.1(2) of the Criminal Code.

The qualifying circumstances (or jurisdiction) for each offence

Section 490.1(2) sets out certain circumstances, one of which must apply for an offence under s490.1 or s490.2 of the Criminal Code.

The relevant circumstances are that:

  • the person is:
    • a constitutional corporation, a corporation incorporated in a Territory or a corporation whose core or routine activities are carried out in connection with a Territory; or
    • an officer or employee of a constitutional corporation acting in the performance of his or her duties or carrying out his or her functions; or
    • engaged to provide services to a constitutional corporation and acting in course of providing those services; or
    • a Commonwealth public official acting in the performance of his or her duties or carrying out his or her functions;
  • the person’s act or omission referred to in s490.1(1)(a) or act referred to in s490.1(2)(a):
    • occurs in a Territory; or
    • occurs outside Australia; or
    • concerns matters or things outside Australia; or
    • facilitates or conceals the commission of an offence against the Commonwealth,
  • the accounting document:
    • is outside Australia; or
    • is in a Territory; or
    • is kept under or for the purposes of a law of the Commonwealth; or
    • is kept to record the receipt or use of Australian or foreign currency.

Penalties for False Accounting Offences

The penalties for a contravention of s490.1, the intentional conduct offence, are:

  • for an individual:
    • imprisonment for not more than 10 years;
    • a fine of not more than 10,000 penalty units (currently AU$1.8 million); or
    • both imprisonment and a fine,
  • for a corporation:
    • a fine of not more than 100,000 penalty units (currently AU$18 million);
    • three (3) times the value of a benefit directly or indirectly obtained or which is reasonability attributable to the conduct; or
    • if the value cannot be determined by a Court, 10% of the annual turnover of the body corporate during the 12 month period ending where the relevant conduct occurred.

The penalties for a contravention of s490.2, the reckless conduct offence, are:

  • for an individual:
    • imprisonment for not more than 5 years;
    • a fine of not more than 5,000 penalty units (currently AU$900,000); or
    • both imprisonment and a fine,
  • for a corporation:
    • a fine of not more than 50,000 penalty units (currently AU$9 million);
    • three (3) times the value of a benefit directly or indirectly obtained or which is reasonability attributable to the conduct; or
    • if the value cannot be determined by a Court, 10% of the annual turnover of the body corporate during the 12 month period ending where the relevant conduct occurred.


The amendments define an “accounting document to mean “any account” or “any record or document made or required for any accounting purpose”.

In addition, it is not necessary that the prosecution prove that a defendant or any other person in fact received or gave a benefit or that loss was suffered by a person.

Commentary on the False Accounting Offences

The Minister of Justice, when he introduced these amendments into Parliament, made it clear that these offences were being introduced in order to address Australia’s obligations under the OECD Foreign Bribery Convention. For many years, the OECD and Transparency International had criticised Australia for the lack of such laws.

The penalties are substantially more than any existing false or misleading account offences in the Corporations Act 2001 (Cth) (see s286, s1307 and s1309). The offences reflect the significant penalties applicable to the primary foreign bribery offence in the Criminal Code. However, these new offences are not predicated upon an underlying foreign bribery offence, so corporations need to be alive to the increasing likelihood that these offences will be used by the Commonwealth to prosecute companies and individuals for any conduct where false accounting has occurred, whether by intentional or reckless conduct. A Senate committee reviewed the laws and in a report published on 3 February 2016, the Senate made it clear that the laws should apply broadly and in respect of all the types of the financial crime cases where false accounting does exist.

As a practical example, in August 2012, David Ellery as the former Securency CFO, was convicted of one count of false accounting (pursuant to s83(1)(a) of the Crimes Act 1958 (Vic)) involving the dishonest falsification of an invoice for approximately $80,000, being money paid to a Malaysian intermediary for expenses purportedly incurred but in fact were not incurred. The intermediary told Securency that he had to “disburse certain expenses accrued” and this and other information was recorded in emails received by, sent to and copied to Mr Ellery. When a debit note was received from the intermediary, outlining certain “marketing expenses”, which Mr Ellery then processed with a request for payment, he knew, in the Court’s view, that no such expenses had been incurred. The Court found that Mr Ellery’s knowledge that what he was doing was dishonest by the later attempts to conceal what had actually occurred.

In this scenario, it is highly likely that an offence would have been committed under the false accounting offences. It is likely that Mr Ellery made an accounting document being the request to process the payment, or alternatively, he failed to alter the request for payment by refusing to pay it in circumstances when he knew the payment was not for any legitimate services and was not therefore legitimately due to the recipient (the Malaysian intermediary). Mr Ellery by his subsequent conduct in concealing the true nature of the transaction, intended (or even was reckless as to the effect which was) to conceal the fact that another person (the intermediary) had received a benefit that was not legitimately due to him and a person (Securency) had incurred a loss. Mr Ellery was an officer (and employee) of Securency carrying out his duties or functions, his conduct concerned matters or things outside Australia and the accounting document was kept for the purposes of a law of the Commonwealth (taxation laws as to expenses incurred by the company in generating income) or otherwise recorded the use of Australian currency.

These laws have the potential to apply far more broadly than might at first blush be anticipated. While the laws grew out of a concern to target foreign bribery and international corruption, the breadth of the drafting of the laws mean that they may apply to a much wider range of domestic and international commercial and financial transactions and give rise to unanticipated consequences, serious and criminal in nature, for those companies and individuals who engage in transactions where “accounting documents” (within the meaning of the law) play a critical part.

Australia – Amendments to Foreign Bribery Offence

In March 2015, the Australian Government proposed amending the foreign bribery offence in section 70.2 of the Criminal Code to make it easier for prosecutors not to have to identify a particular foreign public official who was offered or in fact paid a bribe.

On 26 November 2015, the Crimes Legislation Amendment (Powers, Offences and Other Measures) Act 2015 (Cth) received the Royal Assent.

From 26 November 2015, for the purposes of the foreign bribery offence under section 70.2, it is not necessary for a prosecutor to prove that:

  • the person offering or paying a benefit (not otherwise legitimately due) intended to influence a particular foreign public official; and/or
  • the business, or a business advantage to be obtained (from the offending conduct), does not need to be actually obtained or retained.

Australia – Attorney General’s Department Submission to Senate Foreign Bribery Review

In September 2015, the Attorney General’s Department (AGD) has filed a multi-agency submission to the Senate Economics Committee’s review of Australia’s foreign bribery laws.

Highlights from AGD Submission

The following can be drawn from the AGD submission:

  • Australia is committed to combatting corruption and foreign bribery yet the submission is silent on the financial resources to be dedicated to the task (perhaps naturally so leaving that to the Government as a political matter);
  • Australia’s updates to the OECD Working Group on Bribery have been well received, so we need to wait until the next OECD review to independently assess how Australia is in fact tracking on the various benchmarks identified by the OECD over many years;
  • the AFP hosted National Fraud & Anti-Corruption Centre is coordinating investigations and ASIC and the AFP are working together under an MOU in a manner that clearly implies that nothing else needs to be done, despite numerous other submissions calling for a closer look at how foreign bribery investigations and prosecutions are conducted;
  • the Government has now proposed new, more substantial criminal false accounting offences (see above);
  • the submission says nothing as to whether a self-reporting regime, such as the Deferred Prosecution Agreement scheme that exists in the United Kingdom, should be introduced into Australia and appears content to leave the present very unattractive system in place providing little real incentives to companies or individuals to report potential offences;
  • the submission implicitly states that the Australian Government should not issue any Resources Guide or other guide to business, simply because “it is a matter for business” and “Australia does not have any case law in this area”, neither of which appear to be reasons of any great weight or merit; and
  • on facilitation payments, the submission is silent on whether they should be banned, as almost all submissions called for.

Review of the AGD Submission

Overall, the AGD submission, while illuminating in certain respects in highlighting the inter-agency relationships (particularly as between the AFP and ASIC) is underwhelming on a number of levels. While the submission highlights the improved level of inter-agency cooperation, it fails to address anything of substance to the consistent calls for more clarity in the Government’s work in promoting foreign bribery awareness, it ignores calls for any resources guide for business, it fails to address the need to improve self-reporting by offering a better, more focused self-reporting process in the criminal law system (such as deferred prosecution agreements) and it is silent on facilitation payments. While the AGD may be reluctant to put forward ideas as policy, it fails to engage in any intellectual debate on these topics, preferring to remain silent. That is regrettable given the overwhelming call in the majority of submissions for action on these matters.

Australia – Anti-Corruption and the Trans-Pacific Partnership Agreement

The Trans Pacific Partnership (TPP) has generated intense debate, enhanced by the reluctance of the Australian Government to clearly disclose to the electorate the benefits of the agreement, assuming there are indeed benefits over the longer term. Now the form of the agreement has been finally published by the US Government with the banner headline “Made in America - leveling the playing field for American workers & American businesses”.

Chapter 26 of the TPP focuses on Transparency and Anti-Corruption. There are a number of key messages from the TPP on Australia’s anti-corruption initiatives:

  • a commitment to eliminate bribery and corruption in international trade and investment (Article 26.2.1);
  • to define “foreign public officials” and “public officials” in potentially a narrower manner than the definitions in the Criminal Code or indeed the FCPA (Article 26.1);
  • to criminalise the conduct of persons who intentionally offer or give an “undue advantage” to a public official (Article 26.7.1) which is in language different to the foreign bribery offence in section 70.2 of the Criminal Code;
  • to ensure penalties are “effective, proportionate and dissuasive” of offending conduct (Article 26.7.3);
  • to enact robust offences maintaining the integrity of books and records and financial statements and the use of false documents (Article 26.7.5);
  • to protect whistleblowers “against any unjustified treatment” where a person, in good faith and on reasonable grounds, reports conduct to a relevant authority (Article 26.7.6);
  • the promotion of integrity, honesty and responsibility in public officials (Article 26.8.1); and
  • involving non-government and non-public sector entities and individuals in the fight against corruption (Article 26.10.1).

While Australia ticks many of these criteria, there is still work to be done in protecting whistleblowers who are, in general, treated with less than due respect by their employers (public or private sector) when they blow the whistle on improper or illegal conduct. While there is an obligation to enforce anti-corruption laws, the TPP is silent on enforcement obligations, resourcing issues and how sovereign countries will allocate public resources to the task. If the US Government considers a fellow signatory of the TPP is not enforcing its contractual obligations and US business interests suffer losses, the US Government may seek to enforce its rights under the TPP dispute mechanism in Article 28 and sue the other government. We have to wait and see how all this develops.

Australia – ASIC and Whistleblower Rewards

For many years, ASIC has been reluctant to support the notion that whistleblowers should be rewarded or receive compensation for blowing the whistle. This appears to reflect a view of Australian culture that you should not reward those who “dob in a mate”.

Greg Medcraft, the chairman of ASIC has recently expressed the view that some form of compensation should be offered to whistleblowers in recognition of the risks they took and damage done to their careers. Mr Medcraft was giving evidence to a Parliamentary Committee looking into whistleblowers. While he remained of the view that rewarding whistleblowers on the US model was inconsistent with Australian culture, it was time that whistleblowers who reported wrongs to the company should receive some form of compensation (out of any fine or penalties imposed on the company). ASIC may now be accepting the game-changing role that whistleblowers play (which is the case as far as the US SEC is concerned) in helping to change corporate culture.

As Mr Medcraft was quoted in the Australian media, it is not just a matter of having the right internal controls, “but equally, it is about having a situation where whistleblowers are…actually properly supported and compensated, potentially, for their lifetime earnings.” This willingness to proactively recognise the value of whistleblowers reflects the pioneering research of Prof AJ Brown at Griffith University who found that in a landmark survey between 2012 and 2014 at least 80% of respondents considered all whistleblowers needed proper protections and compensation for the courage to speak out about improper or illegal conduct.

These developments will be monitored.

United Kingdom – First Deferred Prosecution Agreement

On 30 November 2015, the UK Serious Fraud Office (SFO) announced the first Deferred Prosecution Agreement (DPA) entered into between the SFO and ICBC Standard Bank Plc, approved by a judgment published by Lord Justice Leveson at Southwark Crown Court.

The Critical Facts

In 2012, the Government of Tanzania wished to raise funds by way of a sovereign note private placement. A subsidiary of Standard Bank Group Ltd, Stanbic Bank Tanzania Ltd (Stanbic) and another entity obtained the mandate to raise those funds. In the process, Stanbic entered into an agreement with a Tanzanian company as a local partner, Enterprise Growth Market Advisors Ltd (EGMA) whose majority directors and shareholders were senior Tanzanian officials. As part of the terms of the placement, the fee payable to Stanbic was increased from 1.4% to 2.4% and the extra 1% was to be paid to EGMA. There was no evidence of any services provided by EGMA. In due course, Stanbic paid EGMA the 1% fee, represented by the sum of US$6 million which was then withdrawn in cash. It was only by the large regular cash withdrawals that officers of Stanbic raised concerns which were escalated to Standard Bank head office in South Africa and London.

The Bank’s Response

Features of the how the Bank responded included:

  • on or about 26 March 2013, Stanbic staff raised concerns as to cash withdrawals;
  • on 2 April 2013, the Bank began an internal investigation;
  • by 17 April 2013, the Bank’s office in London was informed and Jones Day were instructed to report the matter to the authorities;
  • on 18 April 2013, Jones Day reported to the UK Serious and Organised Crime Agency and on 24 April 2013 to the SFO;
  • on 21 July 2013 the Jones Day report with its findings was sent to the SFO;
  • as a result of the review of the report and the SFO conducting its own investigation with interviews, the Director of the SFO commenced negotiations with the Bank for a DPA; and
  • on 30 November 2015, the Court published its final judgment approving the DPA.

The Proposed Indictment

The SFO indictment relied upon the offence of a corporation failing to prevent bribery pursuant to section 7 of the Bribery Act. The particulars of the offence were alleged to be that the Bank failed to prevent Stanbic or officers of Stanbic from committing bribery in order to obtain or retain business or an advantage by promising 1% of the placement monies to EGMA in circumstances where no or no reasonable consideration was received for the payment and the payment of the 1% amount was intended by Stanbic to induce Tanzanian officials to favour the Bank in granting it the placement mandate.

The Court’s Findings on Conduct

The Bank and the SFO submitted a Statement of Agreed Facts to the Court which set out in detail the relevant facts. They are summarised in the preliminary judgment dated 4 November 2015. Key findings that come out of the judgment include the following:

  • the Bank’s applicable anti-corruption policies were unclear and they failed to provide specific guidance about the role and obligations where a Bank entity engaged an introducer or consultant to a transaction;
  • obvious red flags about financial transactions in high risk countries were ignored;
  • the Bank’s internal team raised no questions about the role or EGMA and made no inquiries about EGMA, relying entirely on Stanbic to do that work, if at all;
  • the Bank did not undertake any enhanced due diligence procedures when accounts were opened; and
  • the Bank failed to identify and respond to the presence of politically exposed persons involved in the entities and the transaction where a third party was introduced and which charged a substantial fee.

The Court’s Judgment

The Court’s preliminary judgment dated 4 November 2015, published on 30 November 2015 provides the benchmark analysis of the DPA scheme and its application, particularly focusing on the sentencing issues and the assessment of the applicable penalty.

Key points to note from the judgment include the following:

  • the Court assessed the reasons why the Director of the SFO was satisfied that it was in the interests of justice to conclude a DPA, noting that:
    • the criminality involved a failure to prevent bribery arising out of inadequate compliance procedures;
    • there was no evidence that any Bank officer knew the payment to EGMA was intended to be a bribe;
    • the Bank adopted a genuinely proactive approach to reporting the conduct and cooperating with the authorities;
    • the Bank disclosed information that would otherwise have in all likelihood have remained unknown to the authorities;
    • the Bank’s internal senior management had changed since the conduct and there was no prior relevant history of criminal conduct;
  • in considering the applicable compensation and penalty, the Court approved the earlier comments of Thomas LJ in R v Innospec (26 March 2010), and following the appropriate sentencing guidelines, was satisfied that the level of culpability determined by the SFO was at a medium level, later adjusted to the higher part of that category by the appropriate harm figure multiplier (a feature that does not exist under Australian sentencing principles);
  • as with Innospec, the Court heard that the US DOJ confirmed the proposed penalties were in line with US likely penalties and if the DPA was approved, the DOJ would close its investigation; and
  • in all the circumstances, the terms of the proposed DPA were approved.

The Terms of the DPA

The terms of the DPA set out the following substantive provisions:

  • compensation (to the benefit of the Government of Tanzania) was fixed at US$6 million plus interest of US$1,046,196;
  • the financial penalty was fixed at US16.8 million;
  • the disgorged profit from the transaction was fixed at US$8,400,000;
  • the SFO’s costs were fixed at £330,000;
  • PricewaterhouseCoopers was appointed as monitor for 3 years (the term of the DPA);
  • the Bank will continue to cooperate with the SFO and any other national or foreign agency;
  • the Bank will implement a new anti-corruption internal compliance program; and
  • assuming all terms are complied with, the indictment will be discontinued after its term expires.

Lessons from the Standard Bank DPA Case

This case demonstrated that even where an international finance company sought to act through subsidiaries in high risk countries, it cannot afford not to have its own or group anti-corruption policies having a proper role in the organisation’s structure and applied to every transaction. While the Court accepted there was no evidence of intentional criminal conduct on the part of the Bank, its lack of internal compliance policies and delegating compliance responsibilities to local subsidiaries in a high risk country were key weaknesses. Critically, the Court noted that much of the evidence may never have come to light to the authorities.

In Australia, where the AGD submission to the Senate Inquiry remained silent on the desirability of a DPA model in Australia yet notes that foreign bribery prosecutions are costly, time-consuming and take at least 7 years to complete, this judgment and the important messages it sends to business, has cogently pierced that silence. One can only conclude that if the Bank was located in Australia and chose not to volunteer the evidence to the Australian authorities as there is no DPA scheme in Australia to encourage the very conduct that the Court gave real credit towards, the position might have been very different.

The last words should be left to Lord Justice Leveson:

I add only this. It is obviously in the interests of justice that the SFO has been able to investigate the circumstances in which a UK registered bank acquiesced in an arrangement (however unwittingly) which had many hallmarks of bribery on a largescale and which both could and should have been prevented. Neither should it be thought that, in the hope of getting away with it, Standard Bank would have been better served by taking a course which did not involve self-report, investigation and provisional agreement to a DPA with the substantial compliance requirements and financial implications that follow. For my part, I have no doubt that Standard Bank has far better served its shareholders, its customers and its employees (as well as all those with whom it deals) by demonstrating its recognition of its serious failings and its determination in the future to adhere to the highest standards of banking. Such an approach can itself go a long way to repairing and, ultimately, enhancing its reputation and, in consequence, its business. It can also serve to underline the enormous importance which is rightly attached to the culture of compliance with the highest ethical standards that is so essential to banking in this country.

United States – Developments

The Yates Memorandum on Prosecuting Individuals

In September 2015, the US Deputy Attorney General, Sally Yates published what is now known as the “Yates Memorandum”, in the form of instructions to US District Attorneys on focusing on holding individuals accountable for various crimes, including foreign bribery.

The key steps set out in that Memorandum, which need to be appreciated by all corporations, directors and officers, are the following:

  • corporations must disclose the conduct of all relevant employees and officers to qualify for credit in cooperating with the US authorities;
  • individuals should be the focus in all criminal and civil corporate investigations;
  • criminal and civil investigators must routinely work closely together;
  • absent exceptional circumstances, culpable individuals must not be released from any liability when resolving claims against the corporation;
  • any resolution with a corporation must include a clear plan to resolve or deal with individuals and any declined prosecutions must be set out in writing; and
  • civil investigators must focus on claims against individuals beyond merely considering an individual’s ability to pay (a fine or costs).

This Memorandum may be nothing more than a restatement of the practices of the DOJ and the SEC. However, it is refreshingly stark in its message to directors and executives – be warned as all senior individuals involved in corporate crime will have their conduct closely examined.

Judicial Review of Corporate and Individual Deferred Prosecution Agreements

In a recent ruling in United States v Saena Tech Corporation and United States v Intelligent Decisions Inc, Case 1:14-cr-00066-EGS dated 21 October 2015, the US District Court published a comprehensive judgment on the powers of the US Federal Courts to review Deferred Prosecution Agreements (DPAs) and their extension to cover individuals.

Key features to emerge from the lengthy ruling include the following:

  • the Court has jurisdiction (under the US Speedy Trial Act in truncating criminal and civil process to ensure a quick resolution of proceedings) to review the reasonableness of a DPA and decline approval if the agreement is not genuinely designed to reform a defendant’s conduct;
  • the Court is not an administrative “stamp” merely to approve DPAs without question, as the US DOJ argued;
  • a DPA can in principle, be granted to an individual subject to each individual case; and
  • the Court said Congress did not limit DPAs to individuals or corporations and the US authorities should consider using DPAs to encourage individuals to demonstrate their rehabilitation (in light of the focus noted in the Yates Memorandum to target culpable individuals).

This judgment is an interesting call to the US authorities to show more flexibility in dealing with individuals who have traditionally been excluded from DPAs and who have no choice but to plead guilty or to fight lengthy, expensive criminal prosecutions. Whether the US authorities take up this call remains to be seen.

SEC Whistleblower Reward

On 4 November 2015, the SEC announced a whistleblower award totaling more than US$325,000 for a former investment firm employee who tipped the agency with specific information that enabled enforcement staff to open an investigation and uncover the extent of the fraudulent activity. The whistleblower provided a detailed description of the misconduct and specifically identified individuals behind the wrongdoing to help the SEC bring a successful enforcement action. The whistleblower waited until after leaving the firm to come forward to the SEC. Agency officials say the award could have been higher had this whistleblower not hesitated.

“Corporate insiders who become aware of securities law violations are encouraged to come forward without delay in order to prevent misconduct from continuing unabated while investors suffer more harm,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “Whistleblowers are afforded significant incentives and protections under the Dodd-Frank Act and the SEC’s whistleblower program so they can feel secure about doing the right thing and immediately reporting an ongoing fraud rather than letting time pass.”

Sean McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award recognizes the value of the information and assistance provided by the whistleblower while underscoring the need for whistleblowers to report information to the agency expeditiously.”

China – Changes in Penalties to Bribe Givers

On 1 November 2015, the Ninth Amendment to the PRC Criminal Law took effect. The Amendment created additional grounds of liability and imposed harsher penalties for corruption offences. All businesses operating in China should be aware of these changes.

The important changes include the following:

  • criminal liability arises on those who give bribes to “close relatives” or other persons “closely” related to State functionaries;
  • while a “close relative” is defined as “husband, wife, father, mother, son, daughter and siblings”, there is no definition of who might otherwise be “closely related” to a State functionary;
  • monetary fines are imposed on all individuals convicted of giving or receiving bribes, with judicial discretion likely to result in significant fines to act as a punitive response to the offence and as a general deterrent measure;
  • the current law, which set monetary thresholds to determine the sentence of a convicted bribe taker, has been changed with the discretionary concepts of:
    • “a relatively large amount” with fixed terms of imprisonment of not more than 3 years and/or a fine;
    • “a huge amount” with fixed terms of imprisonment of not less than 3 years and not more than 10 years and/or a fine and/or confiscation of assets; and
    • “an especially huge amount” with fixed terms of imprisonment of not less than 10 years or life imprisonment and/or a fine and/or confiscation of assets and if the conduct causes a “serious loss to the State and its people, life imprisonment or death and confiscation of assets.

All Australia and other businesses operating in China need to take account of the seriousness in which the current government is pursuing anti-corruption initiatives.

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).