Combatting commercial crime – Australia’s new foreign bribery reforms

After reforms to Australia’s foreign bribery regime were first proposed by the Turnbull Government in 2017, the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2024 (Cth) (CFB Bill) was finally passed by Federal Parliament on 29 February 2024 and received Royal Assent on 8 March 2024.

In advance of the commencement of its provisions on 8 September 2024, we examine the major changes to Australian foreign bribery law as a result of the CFB Bill, its practical impact on Australian businesses and in particular, on supply chain risk management.

Snapshot

• Since the current foreign bribery offence was first enacted in 1999,^[1] attempts to reform Australian foreign bribery law have been long in the making. Australia has been criticised for some years by international organisations (like the OECD) for its weak enforcement record. Its laws are complex and difficult for prosecutors to use. There have been very few prosecutions in Australia against Australian (or any other) companies and individuals for foreign bribery. Similar bills were introduced by the Turnbull and Morrison governments but lapsed during their Parliamentary terms.
• Under the current foreign bribery offence, the prosecution needs to show that both the bribe and the business advantage sought were ‘not legitimately due’. This is particularly problematic where the bribe is (a) concealed as a legitimate payment; and (b) where the advantage sought/received is non-business (i.e. personal)
• The CFB Bill introduces new and broader foreign bribery offences for Australian companies as well as reduces the evidential burden required of prosecutors under existing offences. Modelled on the foreign bribery regime in the United States^[2] and the United Kingdom,^[3] this has been done through:
  • a new offence for body corporates where they fail to prevent the bribery of a foreign public official;
  • expansion of the offence to capture circumstances where the advantage obtained by the person is personal;
  • expansion of the definition of “foreign public official” to cover candidates for public office; and
  • replacing the requirement that the prosecution prove that the bribe and business advantage was “not legitimately due” with a standard of an intention to “improperly influence” a foreign public official.

Strict liability for failing to prevent the bribery of a foreign public official

Currently, a corporation will not be held criminally responsible for bribery by its employees, agents or officers if it can prove it exercised due diligence to prevent the crime. The process of attribution of criminal liability on a corporation is a complex process and often not easy for a prosecutor to establish.^[4]

The CFB Bill creates a new strict liability offence for body corporates that fail to prevent bribery of a foreign public official by its “associates”. An “associate” is broadly defined and includes any person or company operating anywhere on the company’s behalf for profit.

That is it – no issue of intention, knowledge or reckless disregard or of proving what individuals knew or did not know or ought to have known. The fact that an associate engages in conduct that amounts to the offence of foreign bribery could mean the company will also be criminally liable. A company’s only defence is that it has in place “adequate procedures” to prevent the offending conduct from occurring (see below).

The maximum penalty for committing the offence is the greater of:

• 100,000 penalty units (as at 1 July 2023, this is equivalent to $31.3 million);^[5]
• three times the benefit received from the offence; or
• if the court cannot determine the value of that benefit, 10 per cent of annual turnover during a 12-month period.

Improper influence

This is not a term used in Australia’s criminal law. It has been introduced from concepts used in this area overseas.

The CFB Bill, while recognising that whether there is “improper” influence is a question of fact to be determined by the trier of fact (judge or jury), provides guidance on what it might mean.

It provides that the following matters may be given regard to by the trier of fact (noting this list is non-exhaustive):

• the recipient or intended recipient of the benefit;
• the nature of the benefit;
• the manner of provision of the benefit;
• whether the value of the benefit is disproportionate to the consideration provided;
• the absence of any legal obligation to provide, offer or promise the benefit;
• whether the benefit was provided, offered or promised dishonestly;
• whether and to what extent the benefit is recorded or documented, and if so, the accuracy of the record;
• whether there is evidence that due diligence was exercised in relation to the benefit;
• whether the relevant conduct is contrary to a written law in force in the place the conduct occurs; and
• whether the business or advantage was awarded on a competitive or non-commercial basis or whether there is any demonstrable conflict of interest.

Inversely, the CFB Bill also provides that the fact that the benefit may be or be perceived to be customary, necessary or required in the situation, officially tolerated or that the advantage itself is insignificant, is to be disregarded by the trier of fact.

Adequate procedures

The CFB Bill reverses the onus of proof and seeks to make the life of the criminal prosecutor easier than in the past. The prosecutor need only establish, to the requisite degree, that an associate engaged in conduct that constituted foreign bribery (as now defined). Once established, the corporation must prove, to avoid the strict liability applying, that it had adequate procedures in place to prevent such conduct occurring.

Adequate procedures are not defined. The best starting point is that under the UK Bribery Act, a similar defence has existed since 2010 and the UK Ministry of Justice Bribery Act Guidance^[6] provides a useful summary of the factors a corporation must consider to rely upon the defence. The Australian Government issued a Consultation Paper in 2019 which reflected the UK position although no guidance has been published.

Practical steps

The global supply chain is remarkably interconnected. The law often is catching up with business operations. Bribery and corruption are a scourge on all economies and it is those least able to afford it that are the victims of corruption with the wealthy and the powerful the beneficiaries of illegal conduct.

While the “adequate procedures” required for companies to prove the defence to the new offence has not been defined, the following is highly recommended for a robust anti-bribery policy or procedure and should be actively implemented by businesses before the CFB Bill reforms commence in September 2024:

• Risk assessment: review business operations, identify and document risk profile, particularly, supply chain risks and the role of third party agents or suppliers;
• Dedicated management: with leadership, endorsing practices and oversight;
• Due diligence: examine, understand and assess all business relationships, proportionate to identified risks, especially on third parties, subsidiaries, consultants, suppliers and agents;
• Communication and training: internal to employees and external to all suppliers;
• Confidential reporting and investigation: value disclosures of misconduct, respect individuals who report misconduct (no retaliation or discrimination), independently investigate and act on any findings; and
• Monitor and review procedures: update program as business or circumstances change, ensure robust internal controls (which highlight the importance of accurate and truthful records) or audits exist.

Corporations have a window now to consider their supply chain management, to understand where risks lie or may lie and to implement strategies to minimise and/or remove those risks, to the extent possible. A proactive approach, supported by a good audit trail, will go a long way to being able to demonstrate that adequate procedures are (and were) in place, if an unfortunate event occurs and investigators are knocking at the door.

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).