ESG, anti-bribery and corruption

Articles Written by Robert Wyld (Consultant), Macsen Nunn (Associate)

Anti-bribery laws in Australia are divided between Commonwealth laws applying both within and to some extent outside Australia, and State and Territory laws applying within each State and Territory. Anti-bribery laws cover the offer or provision and the receipt of bribes, or any benefit and of any value, to both public officials and private individuals or entities.

The relevant Commonwealth provisions are contained in the Criminal Code Act 1995 (Criminal Code). The Criminal Code offences cover conduct by Australian companies and citizens offshore and in relation to any dealings with Commonwealth public officials. State offences are in State criminal laws and are very similar but with some differences. They cover conduct dealing with State public officials and private, commercial bribery, corruption and/or secret commissions.

Criminal liability (both direct, primary and indirect, secondary) can be imposed on individuals by reason of their own conduct, and attributed to companies by reason of the conduct of the board of directors or a “high managerial agent”.

Companies doing business in Australia and Australian companies doing business overseas should be aware of Australian and foreign anti-bribery laws wherever they undertake business, have policies and procedures in place to comply with them, and be proactive in ensuring a compliance-driven organisational culture. Sanctions are severe with significant fines and imprisonment, along with the long-term impact of reputational damage and a criminal conviction.

Relevant Agencies

Australia’s anti-bribery laws are investigated and enforced by the following agencies:

(a) The Australian Federal Police (AFP) who investigate offences against Commonwealth laws, including foreign bribery;

(b) Australian Commission for Law Enforcement Integrity (ACLEI) which has jurisdiction over a limited number of law enforcement agencies;

(c) State and Territory police forces who investigate offences against domestic laws;

(d) The Commonwealth Director of Public Prosecutions (CDPP) who prosecutes complex Commonwealth criminal offences;

(e) State-based Independent Commissions Against Corruption (or ICACs) which have varying State-based jurisdiction to investigate corrupt conduct (defined broadly), using New South Wales as an example, which includes the improper use of position, knowledge or power by a NSW public official, any dishonest exercise of official functions by a NSW public official in a partial manner or in breach of public trust or where conduct may impair public confidence in public administration; and

(f) State Offices of Directors of Public Prosecutions that prosecute State and Territory criminal offences, and who are referred matters by the public, by government agencies of by a State ICAC.

There is presently no Commonwealth ICAC which is surprising given that, human nature being what it is, with the high volume of Commonwealth revenue, fraud, corruption and misuse of public office, is more likely than not to occur in the nation’s capital. There have been recent proposals to establish a Commonwealth Integrity Commission, but these have been subjected to significant criticism, given the weak powers to be granted to such a body, the limited nature of any public inquiries, the arbitrary imposition of accountability on some but not all Commonwealth agencies and the exclusion of Commonwealth politicians and their staff from oversight. It remains to be seen if these proposals ever see the light of reality.

Commonwealth Anti-Bribery Laws

Commonwealth anti-bribery provisions are contained in Chapters 4 and 7 of the Criminal Code. Criminal liability can be imposed on companies (applying a statutory attribution test) and individuals. These offences cover conduct within Australia and outside of Australia.

(a) Bribing a foreign public official (FPO) requires the following elements:

(i) The actual provision of, or an offer or promise to provide a ‘benefit’ to another person (who may or may not be the FPO) that is ‘not legitimately due’. The offence provision also captures persons who cause a benefit to be provided or offered/promised.

(ii) The benefit is provided or offered/promised with the intention to influence a FPO in the exercise of that FPO’s official duties in order to obtain or retain:

(A) Business; or

(B) A business advantage; For oneself or another that is not legitimately due (whether or not the advantage is in fact obtained).

(iii) There is a relevant connection to Australia, either territorial or based on nationality. For instance, a person will commit an offence where the conduct occurs wholly or partly in Australia or, although occurring outside Australia, the person is an Australian citizen or resident at the time of the offence, or is an Australian incorporated entity.

(iv) “Benefit” includes any advantage and is not limited to property or confined to any particular monetary threshold. It could include political or charitable donations, as well as gifts or corporate hospitality of an excessive unusual, or unreasonable nature.

(v) There are only two defences to a charge of foreign bribery. First, it is a defence to show that the impugned conduct was authorised by a written law of the country of the FPO. Second it is a defence to show that the benefit was a ‘facilitation payment’, which is conduct engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature.

(vi) The maximum penalties per offence and are significant. For an individual, they are 10 years imprisonment and/or a fine of up to $2,200,000 (as at March 2022 based on the declared value of a ‘penalty unit’ under the Crimes Act). For a corporation (as at March 2022), the maximum fine is the greater of:

(A) $22,000,000.00;

(B) Where the benefit obtained as a result of commission of the offence can be determined by a court, 3 times the value of that benefit; or

(C) Where the value of the benefit cannot be determined, 10% of the annual turnover of the corporation during the preceding 12-month period.

(b) Bribing a Commonwealth public official (CPO):

(i) The offence of bribing a Commonwealth public official, involves the following:

(A) The dishonest provision of, or offer or promise to provide, a benefit to another person; 

(B) Where the benefit is provided or offered/promised with the intention of influencing a CPO in the exercise of that person’s duties as a CPO; and

(C) Whether or not the defendant knew the official was a CPO or was exercising his/her duties as a CPO.

(ii) It is also an offence for a CPO to dishonestly receive, agree to receive or ask for, a benefit for the CPO or another person with the intention either that the exercise of the official’s duties as a CPO will be influenced, or of inducing, fostering or sustaining a belief that such duties will be influenced, by the benefit. Where an actual intention cannot be proved, there are separate offences of giving and receiving a ‘corrupting benefit’, which only requires that the benefit ‘would tend to influence’ the CPO.

(iii) The maximum penalties are identical to those applied to the offence of bribing a FPO.

Policies

As is clear from the section above, domestic or foreign bribery by any Australian company or citizen is treated very seriously under Australian law, with large fines for companies and potential imprisonment for individuals. It is very important that corporations have appropriate policies in place which set out standard procedures in making payments both in Australia and overseas. While there is no express defence to a bribery charge that a company had effective corporate policies in place, the AFP and the CDPP will assess not only policies but a corporate culture to determine whether or not to prosecute a company.

If a company fails to create and maintain a corporate culture requiring proactive compliance with the law, or condones its employees breaching the law, the company is exposed to criminal liability.

The giving and receiving of gifts, hospitality and entertainment, donations and engaging with third parties are all acceptable subject to any payment being reasonable and proportionate to the business circumstances.

It is very important that companies ensure they:

  • Implement their policies and proactively practice what they preach in their codes of conduct about zero tolerance for illegal conduct;
  • Provide training and educate their staff in understanding the policies (and make them available in any relevant foreign language); and
  • Ensure compliance with policies by periodical random audit and review.

Working with government

When it comes to dealing with the government and its various regulatory bodies, it is important to ensure that a strong and cooperative relationship is built. The Commonwealth Attorney General’s website has some detail for companies engaged in offshore trade, covering the risks associated with foreign bribery and corruption (see https://www.ag.gov.au/crime/foreign-bribery). AusAid (see https://www.dfat.gov.au/sites/default/files/wp_ch6.pdf on the delivery of Australian foreign aid) and Austrade (see https://www.austrade.gov.au/australian/how-austrade-can-help/bribery-of-foreign-public-officials) have some resources available for business. In addition, in countries where Australia has an embassy or a consulate, information on local laws, conditions and risks can help.

Before engaging directly with a regulatory body, it is important to take advice from experienced external experts such as a law firm. Some of the reasons for engaging external legal professionals at the outset of a matter include:

  • External legal advice often acts as a useful circuit breaker, no matter how sophisticated the corporate entity; and
  • External legal advice can attract privilege and confidentiality, thus protecting from public disclosure any findings made from an initial investigation into the issues and any exposure the company might have.

There can be complex legal issues arising if potential criminal conduct is uncovered, which may impact on the rights of individuals (employees or third parties) and the rights of the company.

In instances where misconduct is uncovered, after taking external legal advice, a company is then in a far better position to make a decision as to whether or not it makes a voluntary disclosure of potentially criminal conduct..

Whistleblower Protections

It is important for companies to recognise the statutory protections that are designed to protect and promote the value of individuals within organisations speaking out and disclosing corporate misconduct and to have internal policies that give effect to those protections.

A whistleblower policy should recognise the importance of voluntary disclosures of potential misconduct as well as the discloser’s right to anonymity. Breaching a whistleblower’s anonymity and engaging in detrimental conduct towards a whistleblower or potential whistleblower is a serious offence which carries with it equally serious civil and criminal penalties.

Panama, Paradise and the Pandora Papers

In 2016, it was the Paradise Papers, in 2017, it was the Panama Papers and in 2021 it was the Pandora Papers, the largest set of confidential documents leaked to the media, exposing the offshore banking affairs of some of the world’s most famous and perhaps, infamous, individuals and companies.

While the media tend to paint all parties involved with the same brush, it is helpful to be reminded that it is perfectly legal for individuals and companies to make use of offshore structures in order to minimise the amount of tax that they pay. These structures are usually legal in whatever countries they are created. It is only in a small number of cases, that they are created with the intention to promote the illicit flow of criminal funds or the proceeds of crime.

However, there are associated risks which are important to bear in mind. In particular, if documents of overseas structures are publicly disclosed in the media and subsequently wind up in the possession of the ATO, they can be used in formal tax assessments or audits. With any mass public dissemination of otherwise confidential documents, whether voluntary or not or with or without the consent of the document owner, the ATO can use those documents to investigate and determine whether any tax or revenue offences have been committed, including the underpayment of or the illegal avoidance of tax.

Making a claim of legal professional privilege over such documents has been attempted in the past without success. While legal professional privilege can be used to resist the compulsory production of documents by regulatory authorities, if those same authorities come by those documents through legal means and they are documents the agency is entitled, under its statutory powers, to have regard to in assessing, for example, a taxpayer’s tax liabilities, the Commissioner of Taxation is entitled to rely on the documents. Any confidence in the documents has been lost (irrespective of the conduct of the taxpayer) and legal professional privilege cannot, under current Australian law, be used to reclaim any confidence that had been lost.

The ongoing public leaks of complex offshore corporate and trust structures, often used to minimise tax, and sometimes used to launder the proceeds of crime, is already increasing the pressure on Australia to reform its antiquated, and internationally criticised, anti-money laundering laws. They are presently overly complex and of limited application to certain entities in the financial, insurance, remittance, gambling and cryptocurrency sectors. Critically, intermediaries such as lawyers, accountants and real estate agents, are outside the reach of Australia’s AML laws. While the Financial Action Task Force has been encouraging countries to make non-financial entities subject to certain AML-style reporting and compliance obligations, lobbying for these intermediary sectors has so far been successful in resisting further regulation. Whether that remains the case in Australia is a moot point.

Reforms and Enhanced Obligations

On 2 December 2019, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (Corporate Crime Bill) was introduced to Parliament which seeks to address challenges associated with detecting and addressing serious corporate crime.

The Corporate Crimes Bill seeks to enact, among other things, the following reforms:

  • Streamlining the existing foreign bribery offences to make them more consistent with prevailing US laws and perhaps, easier for prosecutors to bring cases;
  • Introduction of a new strict liability offence of failure of a body corporate to prevent foreign bribery by an associate (defined widely so as to capture any third dealing with a company for profit); and
  • Implementing a Commonwealth Deferred Prosecution Agreement (DPA) scheme to cover nominated Commonwealth offences.

These reforms, if enacted, will mean Australian businesses with any operations overseas will need to take a proactive approach to identifying and managing risk and, where possible avoiding risk in transactions that might give rise to the possibility of foreign bribery. However, with a national election looming by May 2022, it is likely the Corporate Crime Bill will lapse once Parliament is prorogued, leaving reform for another government.

An Australian “Magnitsky Act”

In 2008, Sergei Magnitsky was a tax accountant who accused Russian tax officials and Russian law enforcement of a US$230 million against the Russian revenue. For his troubles, he was arrested and jailed, accused of aiding tax evasion and died in mysterious circumstances in Matrosskaya Tishina detention facility in November 2009. As a result of the campaign by Bill Browder, the US Congress passed the Russia and Moldova Jackson–Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act, 2012, otherwise known as the Magnitsky Act. The US Magnitsky Act targets the illicit assets of alleged individual wrongdoers (rather than foreign states) by freezing assets, excluding targets from the US banking system and travel bans.

On 2 December 2021, receiving royal assent on 7 December 2021, the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Act 2021 (Cth) amended the Autonomous Sanctions Act 2011 (Cth) (Sanctions Act) by permitting the targeted sanctioning of individuals and other entities for limited proscribed conduct, but not the unilateral freezing of assets.

The amendments are designed to:

  • clarify that autonomous sanctions can be imposed to address particular issues (thematic sanctions) rather than being country-specific; and
  • Set out the decision-making process for imposing targeted financial sanctions and travel bans on designated persons and entities under the thematic sanctions regimes.

The thematic sanctions include the following:

  • the proliferation of weapons of mass destruction;
  • threats to international peace and security;
  • malicious cyber activity;
  • serious violations or serious abuses of human rights;
  • activities undermining good governance or the rule of law, including serious corruption; and
  • serious violations of international humanitarian law.

An exposure draft for amendments to the Autonomous Sanctions Regulations 2011 (Regulations) has also been released.

An entity or individual can be declared a designated person or a designated entity if it is determined that they:

  • Contributed to the proliferation of weapons of mass destruction;
  • Caused, assisted with or were complicit in significant cyber activity;
  • Engaged in serious violations or serious abuses of human rights; or
  • Were involved or complicit in serious corruption (including bribery).

The Minister for Foreign Affairs and Trade will be able to designate a person or entity as a designated person or a designated entity.

It is an offence under the Sanctions Act to do business with a designated person or entity other than in accordance with a permit.  It is an offence to directly or indirectly make an asset available to or for the benefit of a designated person or a designated entity or to deal with the assets of such a person or entity (other than in accordance with a permit).

Where to from here

The goal of the new amendments is to allow the Australian Government to respond flexibly and swiftly to a range of situations of international concern. However, it should be noted that countries and individuals who may engage in the thematic conduct are equally creative at evading and/or ignoring sanctions. They are often seen as political tools, used to justify political initiatives, and are rarely applied consistently or fairly. The Minister for Foreign Affairs has observed that it is “timely for Australia to ensure that we do not become an isolated, attractive safe haven for such people and entities, and their illegal gains.” This has been a long-expressed desire by the Australian Government, yet the OECD (and FATF) has often found Australia’s laws have fallen behind other developed nations and the flow of illicit funds appears to continue to come into and out of Australia. The gambling sector seems particularly vulnerable, at least from recent examinations (by royal commissions) into the conduct and behaviour of casinos and their gaming operations and from the media exposé of how pubs and clubs seem to permit money laundering through their operations in apparent disregard of the law. In addition, the attractive Australian real estate sector is often regarded by international observers as particularly vulnerable to permitting illicit funds to be used to purchase and sell real estate.

 

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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