The noose is tightening on foreign bribery and corruption in Australia
The risk of foreign bribery is increasing in Australia, given our location and the significant business dealings we have with countries in the Asia-Pacific region, where there is a heightened risk of bribery and corruption. While the improved level of enforcement by the AFP and prosecution by the Commonwealth Department of Public Prosecutions is encouraging, Australia still lacks an independent Anti-Bribery and Corruption (ABC) regulatory agency and is out of step with other major economies, including the US and UK, where regulatory agencies are specifically tasked with ABC regulation.
On 19 December 2017, a Report on Australia by the OECD Working Group on Bribery, which evaluates and makes recommendations on Australia’s implementation of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, was released.
The report acknowledges a number of positive initiatives taken by Australia since the last OECD examination in October 2012. One of these is an increase in the level of enforcement of the foreign bribery offence by the Australian Federal Police (AFP).
However, the report notes that the high level of exports and outbound investment by Australian companies in countries where there is a high risk of corruption, means the increased level of enforcement must continue.
Substantial steps to improve and strengthen the framework for detecting and investigating foreign bribery, including the creation of the AFP Fraud and Anti-Corruption Centre, which consists of a range of specialists from the AFP and other law enforcement agencies to evaluate foreign bribery referrals. The report also comments on the additional funding / resourcing for the AFP and Commonwealth Director of Public Prosecutions (CDPP) to investigate and prosecute foreign bribery cases.
A Bill recently introduced to parliament to amend Australia’s foreign bribery offence, including the introduction of Deferred Prosecution Agreements and a new corporate offence of failing to prevent foreign bribery. Whistleblowing reforms and the strengthening of whistle-blower protections, including measures currently being considered to better protect corporate and tax whistle-blowers.
The report draws specific attention to:
Bribery payments laundered through real estate
The risk that proceeds of foreign bribery can be laundered through the Australian real estate sector, noting that this sector is attractive to foreign investors and that the financial services sector currently plays the key gatekeeper role for real estate transactions of this nature.
SMEs inability to deal with corruption
The significant number of small and medium enterprises (SMEs) who engage in business with jurisdictions that have a high risk of corruption. It notes that SMEs in particular are “simply not prepared for the corruption risks they face abroad” and that there is a general perception among SMEs that “paying bribes was simply a cost of doing business”. Our experience with SMEs supports this view as they often lack the resources and ability to properly understand bribery and corruption risks abroad and the need for compliance programs to manage and mitigate these risks.
Bribery relating to defence exports
The expansion of the defence export sector and the risk of foreign bribery in relation to foreign defence contracting.
Dissatisfaction among public and private sector participants in the OECD review with the continued availability of the “facilitation payment” defence in relation to foreign bribery, noting that the majority of participants took the view that this defence should not be maintained
The report makes a number of important recommendations, including:
The need to address the risk that proceeds of foreign bribery can be laundered through the real estate sector and, in the process, ensure that the financial system is not the sole gatekeeper for these transactions.
Enhancing whistle-blower protection in the private sector so that it aligns, where appropriate, with the public sector.
The need to find ways to assist SMEs, in particular, to develop effective internal controls, ethics and compliance programs to prevent and detect foreign bribery.
The ability to increase the potential to detect foreign bribery through the Anti-Money Laundering system, including through raising awareness of foreign bribery as a predicate offence for money laundering and providing additional guidance to reporting entities in relation to detection of foreign bribery.
The need to amend ATO guidelines to reduce the possibility of tipping off tax payers by tax examiners / auditors and compromising future foreign bribery investigations.
Failing to prevent foreign bribery as an offence
The proposed introduction of a new offence relating to “failing to prevent” foreign bribery is to be welcomed and aligns Australia with a similar provision in the UK. It is clear, however, that guidance will be needed by companies around the adequacy of measures they could take to demonstrate that they have not failed to prevent foreign bribery and, under the proposed legislation, the Minister for Justice is to publish such guidance. In the meantime, companies engaged in foreign dealings should consider similar guidance available in the UK and other countries and review their ABC programs to ensure that they include adequate measures to prevent foreign bribery.
It is worth noting that the government has been reviewing the continued availability of the “facilitation payment” defence to foreign bribery for a number of years. Given the feedback the OECD received and the confusion that often surrounds the legitimacy of these types of payments, the removal of this defence seems long overdue.
Proposed legislation before the federal parliament to strengthen whistleblower protection, if passed, will result in new obligations for companies, including the need for whistle-blower protection policies and training of personnel in responding to whistle-blower disclosures, with a particular focus on protecting the anonymity of whistle-blowers who choose to remain anonymous. Companies should also consider whether they have appropriate facilities for whistle-blowers to make disclosures, including anonymous disclosures – better practice involves the use of internal and external whistle-blower reporting facilities.
Lastly, the government is considering the expansion of the existing Anti-money Laundering (AML) regime to cover other sectors, including the real estate sector. Australia has strong AML legislation and AUSTRAC has recently demonstrated its willingness to enforce this legislation when reporting entities do not comply with the requirements. An expansion of the AML regime to the real estate sector and other sectors, where there is a risk of money laundering, should be welcomed as the burden for addressing the risk will be more widely and evenly spread.