I am pleased to welcome readers to the fifth edition of the Guide to Anti-corruption Regulation in Asia Pacific.
Over the past two years we have witnessed an exponential increase in global efforts to combat corruption. Nowhere is this more visible than Asia, where a number of countries have passed new anti-corruption legislation or taken steps to strengthen their existing
anti-corruption frameworks. Whether it is broadening the definition of 'corruption' to prohibit private as well as public sector bribery, or enacting new regulations prohibiting all gifts to public sector employees, the scope of prohibited conduct has expanded significantly since the fourth edition of this guide. Indeed, the US Foreign Corrupt Practices Act is no longer the only anti-corruption statute on the minds of in-house lawyers and compliance counsel. In today's compliance environment it is the local anti-corruption rules that impose the strictest requirements and create the greatest enforcement risk for locally incorporated organisations and their employees.
This edition of the guide is divided into two parts. The first provides an overview of the US Foreign Corrupt Practices Act and UK Bribery Act – far reaching statutes both in terms of the offences they create and their jurisdictional impact on individuals and businesses across the globe. The second part analyses the domestic anti-corruption framework in 15 key countries across Asia Pacific. This edition of the guide contains a number of significant changes that are designed to provide more detailed and practical information to our readers. In addition to adding chapters covering the rules in Australia and Myanmar, we have modified the format to focus on three areas of particular concern in order to provide readers with:
- a clear, concise explanation of the relevant legal and regulatory anti-corruption frameworks;
- an overview of the powers and obligations of various anti-corruption enforcement bodies; and
- an explanation of the issues organisations should consider when faced with suspected corruption, or a regulatory or enforcement action.
Following feedback from readers, we have also included a new checklist at the end of each country chapter. This gives readers an 'at a glance' summary of the country's regulatory framework, the powers of its enforcement authorities, and specific guidance on dealing with corrupt activity or a contentious investigation.
I would like to extend particular thanks to the contributing firms for their time and efforts. We are delighted to work with them on this guide. As always, we welcome any feedback from our readers. Please contact me if you have suggestions or comments.
Partner and Global Head of Corporate Crime and Investigations Herbert Smith Freehills
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2015 GUIDE TO ANTI-CORRUPTION REGULATION IN ASIA PACIFIC 03
IMPACT OF OVERSEAS ANTI-CORRUPTION LAWS
US FOREIGN CORRUPT PRACTICES ACT (FCPA)
Enacted in 1977, the FCPA makes it unlawful for persons or companies to make corrupt payments or to provide anything of value to non-US public officials, parties or candidates, in order to assist in obtaining or retaining business. The FCPA also obliges companies subject to the jurisdiction of the Securities and Exchange Commission (SEC) to maintain heightened accounting standards designed to deter and detect bribery.
The Department of Justice (DOJ) has primary responsibility for enforcing the anti-bribery provisions of the FCPA while the SEC generally enforces the accounting (books and records and internal controls) provisions.
In terms of extra-territorial application, the DOJ and the SEC each have jurisdiction over "issuers" and "domestic concerns" (for acts undertaken outside, as well as within, the US), and certain foreign persons and entities for acts undertaken within the US. The term "issuers" includes foreign issuers that have a class of securities (including American Depository Receipts) listed on a US exchange. "Domestic concerns" refer to any entity with a principal place of business in the US or organised under US law, and any individual who is a citizen, national or resident of the US.
The DOJ and SEC will typically conduct investigations together. At the conclusion of an investigation, the DOJ may bring criminal charges against alleged violators and the SEC may bring civil charges. The DOJ also has the power to bring criminal or civil charges against foreign persons or companies who violate the FCPA while in the US. This includes non-US persons who, directly or through an agent, engage in any act in furtherance of a corrupt payment (for example, an offer, promise, or authorisation to pay) of money or anything of value to a foreign official in order to obtain or retain business while in the US. This catches a variety of activities including meetings, calls, and emails sent in furtherance of foreign bribery. It can even catch actions by non-US persons which cause something to be done in the US, including wire transfers, correspondent banking transactions and using emails overseas that touch a US based server.
The primary elements of the bribery offence under the FCPA are as follows:
• a payment of – or an offer, authorisation, or promise to pay – money or anything of value, directly or through a third party
- Anything of value can constitute a bribe, including: cash, cash equivalents, tangible and intangible property, loans, promises of future employment, scholarships and sports tickets.
- Payments do not have to be made directly by a company employee to create potential liabilities under the FCPA. A company, for example, may be liable for payments made by an agent or third party if the company authorises the payment or if it had knowledge (or should have had knowledge) that the improper payment would be made.
• to any non-US official
- A "non-US official" can mean any officer or employee, regardless of rank or position, of a foreign government, a public international organisation (such as the United Nations), a sovereign wealth fund, or a state owned enterprise. For example, in China, an employee of any of the state owned banks, or a professor at a state-run university, may be deemed a non-US official under the FCPA.
• for the corrupt purpose of influencing an official decision
- The person making or authorising the payment must have corrupt intent, and the payment must be intended to induce the recipient to misuse his/her official position and direct business wrongfully to the payer or to another person.
- This "corrupt purpose" element is interpreted broadly. Individuals or corporations that deliberately ignore events that should have put them on notice of an improper payment may be prosecuted for knowing that the payment would be passed on to a foreign official. Liability cannot be avoided under the FCPA simply by "sticking your head in the sand".
• in order to assist the company in obtaining or retaining business or in directing business to any person or to secure an improper advantage
- The "obtain or retain business" element has a broad application and will be satisfied even if the improper payment to the foreign official does not lead to a government contract. The receipt of favourable reports from governmental agencies, tax breaks, and operating licenses and permits have been prosecuted as "improper advantages".
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Permissible payments and affirmative defences
The FCPA contains an exception to the bribery prohibition for facilitating payments for routine government action. It also provides affirmative defences which can be used to defend alleged violations of the FCPA. These are:
- payments expressly permitted by the written laws of the host country (the first affirmative defence); and
- payments which constitute reasonable and bona fide expenditures, such as travel and lodging expenses, incurred in relation to the promotion or demonstration of the payor's products or services or the execution or performance of a contract between the payor and the foreign official's employer (the second affirmative defence).
Accounting/records/internal control provisions
The FCPA's accounting, books and records, and internal controls provisions are contained within the books and records provisions of the Securities Exchange Act 1934 (section 13(b)(2)) and therefore apply only to issuers.
These require companies to keep accurate books and records and maintain internal controls that may avoid or identify activities associated with bribery. These provisions are primarily designed to prevent the payment of bribes and keep companies from covering up illicit overseas transactions.
Books and records provision
This requires companies to keep "books and records" in reasonable detail. For example, accounting records must disclose the following types of transactions: political contributions, income tax violations, customs violations, payments to government officials and extraordinary gifts.
Internal controls provision
This requires companies to devise and maintain a system of internal accounting controls sufficient to ensure that transactions are executed in accordance with management authorisations, and are correctly recorded and reviewed.
Companies and individuals convicted of offences under the FCPA potentially face both criminal and civil penalties. Individuals violating the statute's anti-bribery provisions are subject to up to five years' imprisonment and a USD 250,000 fine, or a fine totalling twice the pecuniary gain or loss resulting from the bribe. Corporations and other business entities face fines up to USD 2 million or twice the pecuniary fine or loss resulting from the bribe. Collateral consequences, including debarment and loss of export privileges, may also be applied.
Individuals violating the accounting provisions face potential fines up to USD 5 million and imprisonment for up to five years, and corporations and other business entities may be fined as much as USD 25 million for such violations. Individuals and organisations also face potential fines for civil violations of the FCPA.
UK BRIBERY ACT
The Bribery Act 2010 came into force on 1 July 2011. It is extensive in scope, both in terms of the offences it creates and its jurisdictional reach, and promises to have a substantial impact on the international fight against corruption.
The Bribery Act creates a number of offences, including:
- an offence of active bribery (ie, giving, promising or offering a bribe);
- an offence of passive bribery (ie, requesting, agreeing to receive or accepting a bribe);
- a specific offence of bribing a foreign public official;
- a specific offence for senior company officers where bribery offences are committed by the company with the consent or connivance of the senior officer; and
- a corporate offence which applies where a corporation or partnership fails to prevent those performing services on its behalf from paying bribes.
Active and passive bribery
The active and passive bribery offences under the Bribery Act apply both to conduct occurring in the UK, and to acts undertaken outside the UK by persons with a "close connection" to the United Kingdom, including British companies, citizens and resident individuals. The offences apply to conduct in both the public and private sectors.
The Bribery Act does not specify the nature of prohibited benefits, instead merely referring to providing another with a "financial or other advantage", or offering to do so. Accordingly, any payment, gift, hospitality or other form of benefit is potentially caught by the Bribery Act where it is provided or offered:
- with the intention of inducing the recipient (or another) to act improperly, or rewarding the recipient (or another) for acting improperly; or
- where it is known or believed that it would be improper for the recipient to accept the advantage.
Bribing a foreign public official
The Bribery Act prohibits offering, promising or giving any benefit to or for a foreign public official (or to another person at the official's request) with the intention of influencing that official in their capacity as a public official, and with the intention of obtaining an advantage as a result. This is somewhat wider than the active bribery offence under which the donor must intend to influence the recipient to do something improper, as opposed to merely intending to influence the foreign public official, and thereby obtain a business advantage. It is not necessary to prove that the donor intends that the official should act improperly to make out the offence of bribing a public official.
No offence is committed if the foreign official is permitted or required to be influenced by the benefit under the written law applicable to that official. In practice, however, it is rare for written laws to make such provision, and therefore this exemption is rarely available.
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Unlike the FCPA, there is no exclusion under the Bribery Act for facilitation payments made to foreign public officials. Such payments are prohibited under the Bribery Act, both under the active bribery offence and, in some cases, under the foreign public officials offence.
Liability of senior company officers
The Bribery Act introduces liability for senior officers, including directors, managers and secretaries of companies involved in bribery. If any of the active, passive or foreign public official offences are committed by a company with the "consent or connivance" of a senior officer of the company, or a person purporting to act in such a capacity, that senior officer (or person) may be held to have committed a criminal offence.
The most far reaching provision of the legislation is the corporate offence of failing to prevent bribery. Prior to the enactment of this offence, corporate prosecutions for bribery were rare in the UK, principally due to the difficulty of proving that those at the company with a "directing mind and will" (ie, directors and, in some cases, senior management) had the relevant "corrupt intent" to render the company liable (the common law "identification principle"). This gave rise to a concern that companies were avoiding liability for corrupt acts and failing to take sufficient responsibility for the conduct of their employees and agents.
The corporate offence is partly aimed at addressing this concern by imposing strict liability on companies for the acts of their employees and others who perform services for or on behalf of the company. The offence is committed where a company or partnership fails to prevent those associated with it from paying bribes which are intended to obtain or retain business, or to obtain or retain an advantage in the conduct of business, for the company. The only defence is to demonstrate that an organisation had "adequate procedures" in place to prevent such conduct. The government has issued statutory guidance consisting of six "guiding principles" to assist companies in determining whether their compliance programmes constitute "adequate procedures" for the purpose of the Bribery Act.
The offence has very broad jurisdictional scope. It applies not only to companies and partnerships incorporated and formed in the UK, but also to foreign incorporated companies and partnerships which carry on a business, or part of a business, in the UK. To date, no company has been charged with this offence – the majority of recent investigations and prosecutions are understood to relate to conduct which pre-dates July 2011 and are therefore being progressed under the pre-Bribery Act law.
There are potentially heavy penalties for breaches of the Bribery Act. Persons convicted of the active, passive or foreign public official offences may be subject to unlimited fines or up to 10 years' imprisonment. Confiscation and debarment from public tendering may also follow from a bribery conviction. Companies convicted of failing to prevent bribery may be subject to an unlimited fine. In October 2014, the Sentencing Council issued its first Guideline on sentencing fraud, bribery and money laundering offences, which included, for the first time, guidelines on the sentencing of corporate offenders. Whilst the Guideline has yet to be applied in practice, it is generally expected that it will result in an upward trend in the level of fines imposed on corporate offenders.
Another development in 2014 relevant to corporate liability for bribery was the introduction of Deferred Prosecution Agreements (DPAs). DPAs provide a means, in appropriate cases, of resolving offending by corporate entities without a conviction. Under a DPA, a company will agree to certain conditions (which are likely to include a financial penalty, reparation to victims, repayment of profits and measures to prevent future offending), and an agreed statement of facts setting out its wrongdoing. The prosecutor will lay – but not immediately proceed with – criminal charges against the company. The charges will be withdrawn after a specified period if the company has complied with the DPA conditions, with the result that the company will not be formally convicted of an offence. As yet, no DPAs have been entered into, but the Serious Fraud Office (the UK body responsible for investigating and prosecuting serious overseas corruption, which is undertaking some significant and high profile bribery investigations), has indicated that it is considering the use of DPAs in a number of cases.
Comparative Analysis – Bribery Provisions
US FCPA UK BRIBERY ACT
Sectors? Public only Public and private Is foreign official bribery prohibited? Ye s Yes
Does foreign official include SOE
employees? Extra-territorial jurisdiction? Ye s Yes Corporate liability? Yes Yes – subject to an adequate procedure
Supply (active) and demand
Supply only Yes
(passive) side prohibitions?
Defences • Payment was lawful under written law of the foreign official’s country (rare)
- Reasonable and bona fide business expenditure
- Payment was lawful under written law of the foreign official’s country (rare)
- Corporate defence above
Are facilitation payments allowed? Permissible – exception Not permitted
Up to 5 years imprisonment and/or significant criminal and civil fines
Significant criminal and civil fines and collateral consequences (debarment, loss of export privileges)
Up to 10 years imprisonment and/or unlimited fine
HERBERT SMITH FREEHILLS
Australia is a common law country with both Federal (national), and State and Territory (regional) laws. There is a degree of overlap between Federal and State and Territory laws which criminalise certain conduct in relation to public officials. This chapter focuses on public sector bribery laws and related investigatory processes in the Federal sphere. Private sector bribery is predominately regulated by State and Territory laws.
The Criminal Code Act 1995 (Cth) (Commonwealth Criminal Code) prohibits bribery of foreign and Commonwealth public officials. It is an offence to bribe a foreign public official. It is also an offence to bribe a Commonwealth public official or for a Commonwealth public official to receive a bribe.
Limited defences are available, and corporates can be held liable for the conduct of persons acting for them and on their behalf.
The main investigator of allegations of public official bribery is the Australian Federal Police (AFP). The Commonwealth Director of Public Prosecutions (CDPP) has the power to prosecute bribery offences under the Commonwealth Criminal Code.
THE LEGAL AND REGULATORY FRAMEWORK
- WHAT ARE THE PRINCIPAL ANTI-CORRUPTION LAWS, CODES AND GUIDELINES IN AUSTRALIA?
At the Federal level, division 70 of the Commonwealth Criminal Code deals with bribery of foreign public officials and divisions 141 and 142 of the Commonwealth Criminal Code deal with bribery of Commonwealth public officials (anti-bribery provisions). The anti-bribery provisions apply to individuals and companies. In particular circumstances, an employee's behaviour may be attributed to the company employing him/her.
State and Territory
Bribery of public officials is prohibited in most State and Territory legislation, including: Criminal Code Act 1899 (Qld), Criminal Code 2002 (ACT), Criminal Law Consolidation Act 1935 (SA), Criminal Code Act Compilation Act 1913 (WA), and Criminal Code Act 1924 (Tas).
In the State of New South Wales and the State of Victoria, bribery of public officials is dealt with at common law and through a prohibition on secret commissions in the Crimes Act 1900 (NSW) and the Crimes Act 1958 (Vic) (which are applicable to some public sector employees).
See question 2 below for other Federal and State and Territory laws relevant to bribery in the public and/or private sectors.
2. IS PUBLIC SECTOR AND PRIVATE SECTOR CORRUPTION PROHIBITED?
The anti-bribery provisions in the Commonwealth Criminal Code prohibit bribery of foreign and Commonwealth public officials. "Foreign public official" includes an employee or official of a foreign government body, an individual who performs work for a foreign government body under a contract, and a member of the executive, judiciary or magistracy of a foreign country or of part of a foreign country. "Commonwealth public official" includes a minister, a member of either House of Parliament, a Commonwealth judicial officer, an officer or employee of a Commonwealth authority, and a member or special member of the AFP.
Private sector bribery is primarily regulated by State and Territory laws (see question 3 below for more information on secret commission offences).
Various other Federal and State and Territory laws are relevant to bribery and corruption in either a public or private sector context, including:
- offences under the Proceeds of Crime Act 2002 (Cth) (POCA);
- the offence of obtaining financial advantage by deception in section 82 of the Crimes Act 1958 (Vic); and
- money laundering offences in part 10.2 of the Commonwealth Criminal Code.
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