Earlier this week, tough new false accounting laws came into force, which make it a criminal offence, punishable by significant penalties, to intentionally or recklessly falsify accounting documents. While the impetus for the new laws was a desire to improve Australia's implementation of the OECD Bribery Convention, the new offences extend to false accounting practices that seek to conceal domestic and commercial bribery, as well as bribery of foreign public officials. Importantly, the offences can be established even if the actual giving or receiving of a bribe is not proved, potentially making it easier for prosecutors to pursue convictions for false accounting offences.
Australia’s anti-bribery laws will now be more closely aligned with foreign bribery regulation and enforcement in other jurisdictions such as the United States, where a substantial proportion of enforcement actions under the Foreign Corrupt Practices Act (the FCPA) have focused on "books and records" violations, even in the absence of anti-bribery findings.
Article 8 of the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions (the OECD Bribery Convention), which Australia ratified in 1999, requires parties to the Convention to create offences of false accounting for the purposes of concealing or enabling bribes to foreign public officials.
Prior to the introduction of the new false accounting laws, Australia had relied on the false and misleading accounting offences in the Corporations Act 2001 (Cth), and other state and territory laws, to meet its Article 8 obligations. However, the penalties associated with those provisions are relatively low, and have various limitations as to their scope. For example, the Corporations Act offences attract maximum penalties of a fine of $18,000 and/or imprisonment for 2 years.
In evaluating Australia’s compliance with the Convention in 2012, the OECD Working Group on Bribery identified the sanctions for false accounting as an area in need of improvement. The Group recommended that Australia increase the maximum sanctions, and ‘vigorously pursue false accounting cases.’ Those recommendations were made against a backdrop of United States regulators having long enjoyed considerable success in pursuing "books and records" violations of the FCPA, without also pursuing primary anti-bribery charges.
The new false accounting offences
The new false accounting laws were introduced as a direct response to the OECD Working Group's 2012 recommendation, and came into force on 1 March 2016. They are reflected in the new Accounting Records section in Part 10.9 of the Criminal Code Act 1995 (Cth) (the Criminal Code), and are additional to pre-existing Commonwealth, State and territory laws dealing with false accounting.
There are two new offences. The first applies to companies or individuals that intentionally conceal illegitimate payments by making, altering, or destroying accounting records, or by failing to make or alter accounting records that are required by law to be made or altered. The second applies to companies and individuals that recklessly do so. The relevant intention for the first offence is one to facilitate, conceal or disguise the giving or receiving of a benefit that is not legitimately due, or a loss not legitimately incurred. The second offence requires that the accused be reckless about those matters - that is, aware of a substantial risk that their conduct would result in the outcomes described.
"Accounting document" is defined broadly and includes:
- any account;
- any record or document made or required for any accounting purpose; or
- any register under the Corporations Act, or any financial report or financial record within the meaning of that Act.
The new provisions specify that it is not necessary for the prosecution to prove the giving or receiving of a benefit, or loss to another person, or that the accused intended that a particular person receive or give a benefit or incur a loss. This is significant, because it removes the need for prosecutors to establish actual payment or receipt of bribes, or the targeting of a particular person in doing so - often the most demanding aspect of a traditional bribery prosecution. Under the new provisions, it is enough to show that the manipulation of records was done intending to facilitate, conceal or disguise illegitimate payments (or being reckless about doing so).
Another important aspect of the new laws is their application to cases of domestic or "private" bribery, even though the genesis of the laws was a reaction to the 2012 recommendations of the OECD Working Group on Bribery. The laws are sufficiently broadly framed to capture not only false accounting connected with the conferring of illegitimate benefits to foreign public officials (the primary concern of the OECD Bribery Convention), but also false accounting practices connected with illegitimate benefits directed to (for example) Commonwealth public officials acting in the course of their duties, or to corporations.
Like the existing primary foreign bribery provisions in the Criminal Code, the new false accounting offences have broad extra-territorial application. They extend to any Australian resident, citizen or corporation (and employees of those corporations), regardless of where the conduct engaged in by those persons took place, and in some circumstances, regardless of where the accounting documents are located.
The maximum penalties for a contravention are significant. Individual offenders face:
- 10 years imprisonment and/or a fine of $1.8 million, for the intentional offence; or
- five years imprisonment and/or a fine of $900,000, for the reckless offence.
Corporate offenders who commit the intentional offence can face fines of up to $18 million, three times the value of the benefit gained from the conduct (if that value can be ascertained), or ten per cent of annual turnover (if the value of the benefit gained from the conduct cannot be determined), whichever is the greater of those alternatives. The maximum penalty for a body corporate where recklessness can be proved is half that which applies to the intentional offence.
In determining corporate liability, the Criminal Code provides for actions of corporate employees and agents to be attributed to the corporation. The corporation's state of mind (that is, whether it meets the intention or reckless standard specified in the offences) is assessed by taking into account factors such as whether its Board or senior management authorised or permitted the conduct in issue, or whether its culture encouraged or tolerated the non-compliance.
The new laws are an important step towards heightened foreign bribery enforcement action in Australia. To date, Australia's record of such enforcement has been patchy, and the subject of criticism from a number of quarters. The broad scope of the new false accounting provisions, together with the fact that they do not rely on proof of primary bribing activity, may well assist Australian regulators improve that track record.