Last week, some important legislative reforms relating to false accounting practices were introduced in the Commonwealth Parliament.

Australian CFOs and other relevant executives should know about the proposals because substantial criminal offences will apply to them individually where the company has engaged in impropriety.

Proposed criminal offence

In summary:

  • it will be a criminal offence to make, alter, destroy or conceal an accounting document (defined broadly as a document kept under or for any accounting purpose or the purposes of a Commonwealth law or to record the receipt or use of Australian currency) if you intended to facilitate, conceal or disguise the giving or the receiving of a benefit that is not legitimately due (to a person) or someone (including the company) incurs a loss; or
  • it will be a criminal offence to make, alter, destroy or conceal an accounting document if you are reckless as to whether the making, alteration, destruction or concealment of the document facilitates, conceals or disguises the giving or the receiving of a benefit that is not legitimately due (to a person) or someone (including the company) incurs a loss.

The laws apply to a corporation, any officer or employee of a corporation, any supplier of services to a corporation (and to all Commonwealth public officials). They will be enforced by Australian Federal Police working with ASIC and the Serious Financial Crime Taskforce.

It is likely that the Australian authorities will, as in the United States, target financial directors, executives and managers of companies involved in illegal or improper financial transactions in circumstances where, although proof of intentional dishonesty is absent, individuals acted recklessly as to their conduct or otherwise turned a blind eye to events that they could have prevented.

Penalties

For companies: between $9m and $18m (or 3x the value of the benefit).

For individuals: between 5 and 10 years imprisonment and/or fines of between $900,000 and $1.9m.