For the second time ever, the Australian Federal Police have laid bribery and corruption charges against directors of an Australian company. Unlike their regulator counterparts in the US and UK, the AFP have until now, been very reluctant to exercise their anti-bribery powers, but with a reported further 14 active foreign bribery investigations at the moment (only 9 of those publicly known), the time is ripe for our regulator to start flexing its powers against bribery and corruption. Neville Tiffen, director with Transparency International Australia, calls this “a wake-up call to all directors and executives, both listed and non-listed companies,” and a warning to check that anti-bribery and anti-corruption compliance programs are up to date, not just for the sake of the company and shareholders, but to avoid potential personal liability as a director.
It was reported that after a series of raids in Sydney, Australia last week, Australian Federal Police officers charged the directors of construction company Lifese with foreign bribery offences under Division 70.2 of the Criminal Code 1995 (the Code). The Code prohibits the provision or offering of a benefit, not legitimately due, to a foreign public official. Under section 70.2, it is an offence if a person (which includes a corporation) provides or offers a benefit to another person where the benefit is not legitimately due and its intention is to influence a foreign public official in the exercise of their duties to obtain or retain business or a business advantage that is not legitimately due. The current charges allege that the two directors attempted to bribe Iraqi government officials in order to secure multi-million-dollar contracts there.
The spotlight on corruption in Australia has intensified recently, with a number of high profile corruption inquiries at both the State and Federal level. The issue of corruption in government and the political sphere has garnered widespread public attention, particularly following the resignation of the New South Wales Premier after hearings of the Independent Commission Against Corruption, however despite this, charges relating to bribery and corruption (especially where foreign officials are involved) have been slow to follow. The Organisation for Economic Cooperation and Development (OECD) has been critical of Australia’s handling of foreign bribery matters, particularly while governments around the world are taking a tougher stance on bribery and corruption through anti-bribery legislation and actively prosecuting corporations and individuals who contravene these laws. Greater enforcement of the Foreign Corrupt Practices Act 1977 in the US and the Bribery Act 2010 in the UK has left many wondering why Australia’s corruption regulator has been slow to enforce its powers under the Code.
Organisations that operate internationally, or that contract with third parties who do so, are particularly vulnerable to these laws and need to consider now what further measures they need to take to avoid prosecution. This is particularly relevant in circumstances where the current penalties for individuals are up to 10 years imprisonment and/or a fine of up to $1.7 million. For corporations, penalties are significantly harsher, being the greatest of $17,000,000; three times the value of benefit obtained; or 10% of the company’s turnover in the 12 months prior to committing the offence. For multinationals in the financial services industry, knowing who you are dealing with in international markets will be critical to avoid allegations of foreign corruption or bribery. Recent surveys of financial institutions suggest that the biggest risk influence in 2015 will be the practical implementation of changing regulatory expectations, which puts organisations in a much less certain place about how they provide evidence of compliance with the unknown qualitative expectations. This includes compliance with Australian anti-bribery and anti-corruption laws.
To keep ahead of the game, organisations should review and update anti-corruption compliance policies, including provisions for anonymous reporting, hotlines and whistleblower policies. Organisations should consider:
- developing programmes designed to encourage employees to report bribery and corruption issues internally rather than going to the press or regulator in the first instance, ensuring that such programmes include robust anti-retaliation provision;
- whether it is appropriate to offer incentives to employees for appropriate internal reporting of potential violations and cooperation in any ensuing investigation;
- implementing a comprehensive action plan that will allow immediate responses to whistleblower tips and ensure an expeditious resolution of any investigations;
- conducting anti-bribery and anti-corruption training to all staff to ensure everyone is aware of what is allowed, particularly in the context of facilitation payments; and
- offering regular training on the internal reporting policy and procedures so that employees know the process and the people involved.
Organisations that have effective policies, codes of conduct, compliance programmes and crisis management protocols will be in a stronger position to demonstrate compliance with anti-bribery and corruption laws.