Australian companies operating in, or which have a nexus with overseas jurisdictions, need to be aware of, and protect against, the risk of employees, contractors and agents engaging in acts of bribery. This is particularly pertinent for resource sector companies who often operate in jurisdictions with high levels of public sector corruption, where corruption is often ingrained in the culture of government officials.This paper (Part 1 of 2) examines the anti-bribery law in the key jurisdictions of Australia, The United States of America (US) and the United Kingdom (UK). It is relevant to Australian companies engaging in activities or operations overseas, and those with a nexus to the US or UK. This paper also highlights the consequences for persons and companies who engage in foreign corrupt practices. Part 2 will examine antibribery regimes in some key developing country jurisdictions. Key takeaways: There are a range of actions a company can take to become anti-bribery compliant and to safeguard against prosecution from anti-corruption regulators. Compliance measures may include the following: • Establishing an executive/managerial level commitment of ‘zero tolerance’ towards bribery that filters throughout the organisation and influences the company culture as a whole. • Establishing a corporate policy that imposes a blanket ban on the use of facilitation payments. If operating in multiple jurisdictions, this enables companies to manage the risks more effectively. • Conducting regular (at least yearly) anti-corruption training for all staff (including contractors and secondees) on all aspects of foreign corrupt practices law relevant to the jurisdictions in which the company operates. General training should be mandatory as part of the induction process for new employees. However, employees in high risk roles (e.g. procurement, project approvals and gas marketing) may require more specialised training. • Developing a comprehensive (and wellresourced) company compliance program with nominated internal anti-bribery specialists who can keep, implement and improve the compliance system as required (i.e if the company moves into new jurisdictions or undertakes new activities the compliance program will need to be reviewed). The compliance program needs clear corporate guidelines for gift giving, entertainment and hosting which are easily accessible to all personnel (including the company’s agents and contractors). • Devising standard anti-bribery and business ethics provisions in all contracts (e.g. based on the Australian, UK and US laws), and stipulate that all contractor/service provider’s subcontracts need to be back-to-backed. • Conducting adequate research on prospective third party intermediaries (and prospective joint venture partners) to determine: their past operating practices; whether they have any history of foreign corrupt practices; their commercial standing; their known affiliations; whether they are accurately representing their technical/professional capabilities; and if they have an adequate compliance program in place.
A significant portion of Australian companies operate in high risk environments Australian resources companies frequently operate in some of the least transparent jurisdictions in the world, where it is de rigueur for business to be ‘facilitated’ with bribes and public sector corruption is endemic. In fact, pick a country on the world map with poor governance and low transparency and you can bet at least one Australian explorer has been there and had a go at pegging out an exploration permit. Australian resource companies are active across the developing world in places such as Tajikistan, Cambodia, Laos, Nigeria, Pakistan, Papua New Guinea, Mali and Cote d’Ivoire: all of which have high perceived levels of public sector corruption. Over 220 listed exploration and mining companies with a combined market capitalisation in excess of AUD 250 billion are active in Africa. 1 With Australia’s increasing presence in such jurisdictions, Australia’s commendable ranking of 9 th (81 out of a possible score of 100) in Transparency International’s 2013 Corruption Perceptions Index 2 perhaps belies the murkiness of many of these business opportunities. Australia’s failure to tackle bribery Until more recently, the Australian government has paid scant attention to the activities of Australian companies abroad. In fact, the Organisation for Economic Co-operation and Development (OECD) is ‘seriously concerned’ 3 by Australia’s lack of bribery convictions, with just a single case leading to prosecution out of 28 referrals in 13 years. 4 The level of enforcement is simply not commensurate with the risk profile of Australian companies. 5 The OECD criticises Australia for failing to vigorously pursue foreign bribery allegations and for closing cases prematurely. For example, the Australian Federal Police (AFP) initially failed to investigate allegations of foreign corrupt practices at Securency and Note Printing Australia 6 or to pursue a formal investigation into the Joint Venture Buyout case. 7 Rio Tinto, Tenix, and BHP Billiton 8 have also found themselves caught up in questionable dealings. It is highly likely that many more companies are simply flying under the radar, yet to get caught. However times are clearly changing. Companies participating in corrupt practices could now find themselves in the spotlight of Australian and overseas anti-corruption regulators as a greater emphasis is being placed on cross border co-operation between law enforcement agencies. The law in Australia Bribing or attempting to bribe a foreign public official is a serious crime. Under Australian law it is no defence to argue that you were not aware that your conduct constituted bribery. In response to previous OECD criticism of Australia, the government amended the Commonwealth Criminal Code Act 1995 (Code) in 1999 to include provisions addressing foreign bribery and further amended those laws in 2010 to introduce much harsher penalties for individuals and companies found guilty of bribing foreign government officials. The Code provides that Australian citizens, residents and companies who bribe or attempt to bribe a foreign public official can be prosecuted under Australian law even though the conduct occurs outside Australia.
What is bribery? There are four elements to the offence of bribery in Australia: • Providing, causing, offering, or promising to provide a benefit (includes inducing or encouraging others to bribe or attempting to bribe); • The benefit is not legitimately due (‘benefits’ can be a non-monetary and non-tangible inducement); • With the intention of influencing a foreign public official in their official duties; • In order to obtain or retain business or a business advantage that is not legitimately due. 9 In working out whether a benefit or business advantage is ‘not legitimately due’ to a person in a particular situation, the fact that the benefit may be perceived to be customary or necessary in the situation; the value of the benefit; or any official tolerance of the benefit are factors to be disregarded. 10 Who is a foreign public official? The term ‘foreign public official’ encompasses a broad range of people including employees, officials, contractors and authorised intermediaries of foreign government bodies, public international organisations, and state owned corporations; members of parliament; judicial officers; military personnel; police officers, and even tribal elders where they are performing a duty of an office or position created under a custom or convention of a foreign country. 11 Penalties The maximum penalty for an individual under the Code is 10 years imprisonment and / or a fine of $1.7 million. 12 For a corporation, the maximum penalty is a fine of $17 million (per offence) or if the value of the benefits obtained by bribery can be ascertained, three times the value of the benefit obtained, whichever is greater. If the value of the benefits obtained through bribery cannot be ascertained, the maximum penalty is a fine of $17 million or 10% of the annual turnover of the company and related bodies corporate, whichever is greater. 13 Any benefits obtained from foreign bribery can be forfeited to the Australian government under the Proceeds of Crime Act 2002 (Cth). Defences There are two defences to the offence under the Code. The first is the ‘advantage permitted or required’ defence which applies where a written law governing the foreign public official expressly permits or requires the benefit to be given. 14 The second is the facilitation payments defence. Facilitation payments are made to secure routine governmental action of a minor nature that does not result in the obtaining of a business advantage (e.g. processing visas or providing police protection). 15 The elements of a ‘facilitation payment’ are: • A small unofficial payment (the value of the benefit is of a minor nature); • Sole or dominant purpose is to expedite or secure the performance of a routine government action which an official would normally provide; • Not made to win or retain business; • Where details of the payment are recorded, including the value of the benefit, the identity of the foreign official, the person receiving the benefit, and particulars of the routine government action sought. 16 Recent proposals to remove the facilitation payments defence faced fierce resistance, particularly from the 220 mid-sized Australian mining companies operating across Africa (led by Anvil Mining CEO Bill Turner). 17 However, it is highly likely the Australian government will eventually fall in line with the UK and Canada, and ban facilitation payments. The potential for the exemption to undermine corporate anti-bribery procedures and widespread uncertainty within the business community on the meaning of a ‘facilitation payment’ provide strong arguments for abolishing the concept.
The law in the US The US developed the first foreign anti-corruption law in 1977 when it realised that widespread corporate bribery was fundamentally destroying the integrity of the free market. Pursuant to the Foreign Corrupt Practices Act 1977 (FCPA), the US is able to prosecute: • Businesses that issue registered securities under US law (e.g. companies listing and trading shares on a US stock exchange), as well as officers, directors, employees, agents and shareholders acting on behalf of any issuer (whether US or foreign nationals); • Citizens, nationals and residents of the US or any business entity having its principal place of business in the US or which is organised under US law (referred to as a ‘domestic concerns’); • Foreign nationals (including officers, directors, employees, agents or stockholders acting on behalf of such persons), whether through agents or otherwise, that engage in any act in furtherance of a corrupt payment while in US territory; and • Foreign nationals or companies that aid and abet, conspire with or act as an agent of an issuer or domestic concern, regardless of whether the foreign national or company itself takes any action in the US. 18 An increasingly wide territorial jurisdiction The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) Resource Guide on FCPA19 (Guide) confirms that the FCPA’s anti-bribery provisions will extend to foreign nationals or entities who engage, either directly or through an agent, in the use of ‘US mails or any means or instrumentality of interstate commerce’ in furtherance of a corrupt payment while ‘in the territory of the US’. Thus, a non US person or company may face liability under the FCPA for placing a telephone call or sending an email, text message or fax from, to, or through the US or sending a wire transfer from or to a US bank or otherwise using the US banking system. 20 US case law precedent establishes that any action taken by a foreign company abroad that causes something to be done in the US is sufficient for establishing territorial jurisdiction, regardless of how minimal the nexus is to the US. A key example of the extraterritorial application of the FCPA is the case of criminal enforcement actions brought against Siemens AG and three non US subsidiaries: Siemens Bangladesh, Siemens Argentina, and Siemens Venezuela. The investigation by regulators revealed evidence of corruption by Siemens spanning many decades in many operating groups and regions. It often involved the movement of funds through several countries. However, part of the evidence against the subsidiaries was based on conduct loosely connected with the US, such as the use of US bank accounts to facilitate payments. 21 Today the SEC and DOJ are extremely active in investigating and prosecuting cases of bribery and money laundering and often work in conjunction with law enforcement agencies in other countries. 22 SEC and DOJ are more frequently resorting to deferred prosecution or non-prosecution agreements (DPA/ NPA) as an incentive for companies to self report and settle (i.e. DOJ maintains the right to file charges but refrains from doing so to allow the company to demonstrate its good conduct during the term of the NPA). Importantly, the adequacy of a company’s corporate compliance program will heavily influence what action the US regulators will take, such as the penalty amounts and whether it should be resolved through DPA or NPAs. 23 There are two limbs to US FCPA law, the ‘antibribery’ provisions and the ‘accounting or books and records’ provisions. 1. Anti-bribery provisions The FCPA prohibits the following: • Offering to pay, paying, promising to pay or authorising the payment of money or anything of value to a foreign official (non-US); • In order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. 24 The Guide provides examples of the meaning of key terms underpinning the anti-bribery provisions. • Anything of value Not just limited to cash, and can include travel expenses, ‘consulting fees’ or ‘commissions’, promises of future employment, scholarships, and expensive gifts (including payments or gifts to third parties such as an official’s family member in order to influence the official). However, there needs to be a corrupt intent. That is, the payment was intended to induce the foreign official to misuse his or her official position. A corrupt intent would be hard to establish by the mere purchase of a cup of coffee or a gift of a company promotional item of nominal value (i.e branded goods). However, anti-bribery enforcement focusses on smaller payments and gifts where they comprise part of a systemic or long standing course of conduct that evidences a corrupt intent. • Foreign official As in Australia, the term ‘foreign official’ is very broadly defined and includes officers and employees of public international organisations (e.g. United Nations) and state owned or controlled enterprises. Determining whether you are dealing with a ‘foreign official’ may require an assessment of things such as how the entity was created, the entity’s ownership and control, the purpose of its activities, and whether the general perception is that it is performing a government function. • Obtain or retain business Examples include influencing the procurement process, circumventing the rules for the importation of products, evading taxes or penalties and gaining access to non-public bid tender information. Gifts, travel, entertainment and other things of value The FCPA does not prohibit gift-giving, rather, it prohibits the payments of bribes disguised as gifts. It is permissible to give gifts in a business context if they are: • Non-extravagant gifts where they are given openly and transparently, properly recorded in a company’s books and records; • Provided only to reflect esteem and gratitude; • Reasonable in the context in which they are given; or • Permitted under local law. Any travel and entertainment must be ‘reasonable’. For example, the Guide provides that paying for a ‘sightseeing’ trip to Italy for government officials including US$1000 in pocket money would be deemed improper under the FCPA, as would spending US$10,000 on dinner, drinks and entertainment for an official. 25 The actions of third party intermediaries The FCPA expressly prohibits corrupt payments made through third parties and intermediaries. 26 Australian companies should be aware of the risks of engaging local intermediaries and agents (even though they are often used to provide legitimate
advice regarding local customs and procedures) as the actions of a third party do not eliminate potential for liability under the FCPA. ‘Wilful blindness’ is no defence to the actions of an intermediary, and a company will be deemed to have the requisite knowledge when they are aware of a high probability of the existence of the conduct. 27 Liability for the actions of a subsidiary and successor liability A parent company will be liable for bribes paid by its subsidiary whether by direct participation in the bribery scheme or through the principles of agency. Be aware that if you acquire a company, you take on board all the civil and criminal liabilities including FCPA violations. The Guide notes that SEC and DOJ will take action against successor organisations who fail to stop the misconduct from continuing after the acquisition but are unlikely to do so where the acquiring company voluntarily disclosed conduct and co-operated fully with authorities during the merger or acquisition process.
Defences There are two defences to a prosecution under the FCPA. First, a local law defence if the payment is lawful under the written laws of the foreign country at the time of the offence. 28 This defence is used very infrequently. Second, the reasonable and bona fide expenditures defence. Certain expenditures are acceptable under the FCPA if they are reasonable, bona fide and directly related to the promotion, demonstration or explanation of products and services or the execution of the performance of a contract. 29 Examples would be travel and expenses to visit company facilities or for training purposes. Exceptions (1) Facilitation payments As with the law in Australia, there is a narrow exception for facilitating or expediting payments made in furtherance of ‘routine government action’ where the acts are within the officials’ job description 30 such as obtaining permits and licences, providing police protection, supplying utilities such as power and water, processing visas and other government papers. This will not include circumstances where the acts are within an official’s discretion or are abuses of power.
The US regulators will focus on the purpose of the payment not the value. Care needs to be taken to ensure that facilitating payments are in fact legal by the local law of the country you are operating in even if they do not violate the FCPA. All such payments should be appropriately recorded. (2) Extortion or duress Payments made in response to true extortionate demands under imminent threat of physical harm will not breach the FCPA (e.g. a payment to an official to keep an oil rig from being dynamited). However, mere economic coercion (without an imminent threat to health and safety) does not amount to extortion for the purpose of this exception. For example, the Guide clarifies that a bribe payor who claims that payment was demanded as ‘a price for gaining market entry or obtaining a contract’ cannot argue that the payor lacked the intent to bribe the official because the payor made ‘a conscious decision’ to make payment. 31 2. The accounting provisions Bribes may be mischaracterised in a company’s books and records as ‘commissions’ or ‘consulting fees’ and even ‘petty cash withdrawals’. 32 The FCPA’s books and records provisions requires that companies make and keep books, records and accounts, which ‘in reasonable detail’, accurately and fairly reflect the transactions and dispositions of the assets of the company. 33 The Guide provides that keeping records ‘in reasonable detail’ requires companies to keep records that reflect transactions in conformity with accepted methods of ‘recording economic events’ and effectively prevent ‘off the books slush funds and payments of bribes’.
The FCPA also requires that companies have in place a system of ‘internal accounting controls’ sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements (e.g. preparing financial statements in conformity with generally accepted accounting principles). 34 Violations under the accounting provisions usually relate to a misrepresentation of large bribe payments or widespread inaccurate recording of smaller payments made as part of a systemic pattern of bribery. Criminal liability will be imposed on companies and individuals for knowingly (wilfully) failing to comply with the books and records or internal controls provisions. 35 For example, a Californian company was found to have violated the accounting provisions when two Chinese joint ventures in which it was a partner paid more than US$400,000 in bribes over a four year period to obtain business in China. The payments were recorded on the books as ‘business fees’ or ‘travel and entertainment’ expenses. Even though the payments were made solely by Chinese employees of the joint venture, the Californian company failed to have adequate internal controls in place and failed to act when there were clear indications its partners were engaging in bribery. 36 Minority held subsidiaries As companies are not able to exercise the same degree of control over minority held subsidiaries as they can over a majority or a wholly owned entity, the FCPA provides that if a parent company owns 50% or less of a subsidiary or affiliate, the parent is only required to use ‘good faith efforts’ to cause the minority owned subsidiary to devise and maintain a system of internal accounting controls consistent with the company’s own obligations under the FCPA. 37
Penalties Criminal penalties For each violation of the anti-bribery provisions the FCPA provides that corporations can be liable for a fine of up to US$2 million, while individuals can be liable for a fine of up to US$250,000 and/ or imprisonment for up to five years. 38 For each violation of the accounting provisions, corporations are subject to a fine of up to $25 million 39 and individuals are subject to a fine of up to US$5 million and/or imprisonment for up to 20 years. 40 However, courts have the ability (under separate laws) to impose fines of up to twice the benefit that the defendant obtained in making the corrupt payments. Fines imposed on the individual are not able to be paid by the employer. Thus, a company cannot indemnify individuals. Civil penalties • For each violation of the anti-bribery provisions, individuals and corporations can be liable for a civil penalty of up to US$16,000 per violation. 41 For each violation of the accounting provisions, SEC may obtain a civil penalty not to exceed the greater of: (a) the gross amount of the pecuniary gain; or (b) a specified dollar limitation based on the severity of the violation. 42 • Collateral consequences including suspension or debarment from contracting with the U.S Federal government or multilateral development banks (such as the World bank) and the suspension or revocation of certain export privileges. • Disgorgement of profits resulting from illegal conduct. • Compliance monitoring (which may involve the appointment of an independent corporate monitor in more extreme criminal cases).
US FCPA cases Some examples of recent US FCPA prosecutions in the resources sector include: 43 2014 - Alcoa SEC charged the global aluminium producer with violating the FCPA when its subsidiaries repeatedly paid bribes to government officials in Bahrain to maintain a key source of business. Alcoa agreed to pay $384m to settle the SEC charges and a parallel criminal case. 2013 - Total S.A SEC charged the France headquartered oil and gas company for paying bribes to intermediaries of an Iranian Government Official who then exercised his influence to help the company obtain valuable contracts to develop oil and gas fields. Total agreed to pay $398m to settle SEC and criminal charges. 2013 - Weatherford International SEC charged this Swiss based oilfield services company with authorising bribes and improper travel and entertainment for foreign officials in the Middle East and Africa to win business. The company agreed to pay more than $250m to settle cases with the SEC and other agencies. 2010 -‘The Palapina case’ SEC charged a global freight forwarding company, Palapina, and six of its oil and gas industry customers (Pride International, Tidewater, Transocean, GlobalSantaFe Corp, Noble Corporation and Royal Dutch Shell plc) with widespread bribery of customs officials in more than 10 countries to receive preferential treatment and improper benefits during the customs process. The 7 companies paid a total of more than $235m in civil and criminal sanctions and disgorgement. The bribes were in exchange for such benefits as: evading customs duties, expediting the importation of equipment, lowering tax assessments, obtaining false documentation relating to temporary import permits for drilling rigs and enabling the release of drilling rigs and other equipment from customs officials.
The law in the UK The UK has the strictest anti-bribery legislation in the world, with the harshest penalties. The UK makes no exception for facilitation payments (regardless of size or frequency). The UK’s Bribery Act 2010 commenced on 1 July 2011 and is now the ‘gold standard’ to which countries will look to in developing and improving their own laws. The UK law applies to the whole of the UK and provides for wide extraterritorial jurisdiction to deal with bribery committed outside the UK. The law potentially captures commercial entities based in Australia (or elsewhere) if the entity carries on business or part of a business in the UK (regardless of where in the world the company was incorporated or formed), even if the UK activity is a minor part of overall operations. 44 As with the US FCPA, the UK law does not intend to prohibit reasonable and proportionate hospitality and promotional or other similar business expenditure however all such payments must be bona fide. The UK law provides for a number of potential offences including: • General offences covering the offering, promising or giving of a bribe (‘active bribery’) and the requesting, agreeing to receive or accepting a bribe (‘passive bribery’); 45 • The offence of bribing a foreign public official in order to retain or obtain business or an advantage in the conduct of business. 46 As in Australia and the US, an offence is not committed where the official is permitted or required by the applicable written local law to be influenced by the advantage; • Corporate liability for failure of a commercial organisation to prevent bribery by a person associated with it. 47 Facilitation payments In the context of facilitation payments, if there is a realistic prospect of conviction, the UK Serious Fraud Office will prosecute if it is in the public interest to do so. The Serious Fraud Office may consider civil recovery as an alternative to prosecution. Examples of factors tending to favour prosecution include large or repeated payments or where payments are accepted as part of the standard way of conducting business (which may indicate the
offence was premeditated). Examples of factors tending against prosecution are if the payment was a single, small payment likely to result in a nominal penalty or if the payments were discovered as a result of a genuinely proactive approach involving self-reporting and remedial action, or where a company has a clear policy on such payments and this has been followed. 48 Failure of commercial organisations to prevent bribery Under UK law, a corporation is liable if a person ‘associated’ with a commercial organisation engages in bribery. People ‘associated’ are those that perform ‘services’ for or on behalf of the organisation (coverage includes employees, agents, subsidiaries, contractors and even suppliers). 49 For an unincorporated joint venture, the degree of control that a joint venture participant had over an arrangement is likely to be one of the relevant circumstances that authorities will take into account in deciding whether a person who paid a bribe in the conduct of the joint venture business was ‘performing services for and on behalf of’ a participant in that arrangement. Without proof of the required intention, liability will not accrue through simple corporate ownership or investment or through the payment of dividends or provision of loans by a subsidiary to its parents. Liability would arise in circumstances where, for example, the subsidiary is the entity which pays a bribe which it intends will result in the parent company obtaining or retaining business or vice versa. 50 Defences It is a full defence to the charge of failing to prevent bribery if you can show that your organisation had ‘adequate procedures’ in place to prevent persons associated with it from engaging in bribery. 51 What is ‘adequate’ depends on the bribery risks the company faces in doing business. Whether a company’s procedures are ‘adequate’ is ultimately a matter for the courts to decide on a case by case basis.
What are ‘adequate procedures’? The UK Government notes six principles which should inform the anti-bribery processes an organisation puts in place. The principles are intended to be flexible as bribery prevention procedures should be proportionate to the risk. 1. Proportionality: the actions you take should be proportionate to the risks you face (and to the nature, scale and complexity of the company’s activities). Small companies can still face significant risks, however small organisations are unlikely to need procedures as extensive as those of a multinational. For example, small companies may be able to rely on periodic oral briefings to communicate policy and procedures, whereas large companies may require extensive written communication. 2. Top level commitment: company executives need to show that they have been active in educating staff and business associates that bribery in any form is not to be tolerated. A top-level engagement in bribery prevention is likely to involve the selection and training of senior managers to lead anti-bribery work; leadership in awareness-raising throughout the company to ensure effective dissemination of anti-bribery policies to employees, subsidiaries and associated persons; oversight of breaches of policy and regular reporting to the board on issues relating to compliance. 3. Risk assessment: think in-depth about the potential bribery risks faced by the business. Commonly encountered risks can be categorised into five broad categories – country risk (e.g. lack of transparency in governance), sectoral risk (e.g. extractive industry sector is high risk), transactional risk, business opportunity risk and business partnership risk. An assessment of a company’s external bribery risks can help in developing appropriate risk mitigation strategies. 4. Due diligence: research prospective associates, contractors and joint venture partners. 5. Communication (including training): any compliance training must be proportionate to the size and type of the business. Communications from management relating to anti-bribery policies should cover approval procedures for hosting, entertainment and promotional expenditures, the company’s position on facilitation payments as well as outline the implications for staff if they breach company policies. 6. Monitoring and review: if a company enters new markets the risks to the organisation may change, so policies and procedures need to be consistently reviewed and updated, where required. 52 These principles give helpful guidance to all Australian organisations not just those that have a nexus to the UK. Penalties Under the UK law, companies that engage in bribery are liable for a fine (unlimited) and individuals can face imprisonment for up to 10 years and/or a fine.
Are you a high risk organisation? Your company will be especially vulnerable if: • It operates in multiple medium to high risk jurisdictions; • Relies on third party intermediaries or agents to do business; and • Lacks a rigorous internal anti-corruption compliance process. What does your company need to do to be anti-bribery compliant? To be anti-bribery compliant, your company must: • Establish an executive-managerial level commitment of ‘zero tolerance’ towards bribery that filters down the organisation and influences the company culture as a whole. A corporate culture committed to the cause is critical to the on-going success of a company’s compliance program and encourages staff to report concerns. • Establish a secure, confidential and accessible means for internal and external parties to raise concerns about bribery (and adequate protection given if they do); to allow staff to offer suggestions to improve the company’s procedures; and to request advice. • Communicate externally (via company website or promotional documentation) the company’s bribery prevention policies through a corporate policy statement. This communication can specify the organisation’s anti-bribery processes, sanctions, and policies on procurement and tendering. This action reassures prospective associates and may discourage those intending to engage in bribery on the company’s behalf, or with company officials. • Conduct regular (at least yearly) anti-corruption training for all staff, (including contactors and secondees), on all aspects of foreign corrupt practices including the applicable legal regimes in the overseas jurisdictions in which the company operates. General training should be mandatory as part of the induction process for new employees. The sanctions imposed by the company on those engaged in bribery must be clearly communicated. We recommend that persons who undertake regular business travel to high risk jurisdictions or are involved in high risk functions (such as purchasing, distribution, project approvals and marketing) should be subject to more in-depth training than other personnel. • Ban use of facilitation payments (or at least discourage such payments and implement measures to approve any such payments) and educate employees on the distinction between a bribe and a facilitation payment. Use real life examples in any training packages. Employees must be aware that even if a payment constitutes a facilitation payment under Australian law, it may be a bribe under the laws that govern the foreign official. • Develop a comprehensive compliance program with nominated internal anti-bribery specialists who can keep, implement and improve the compliance system as required (i.e if the company moves into new jurisdictions the compliance program will need to be reviewed). These persons need to be adequately resourced. The compliance program needs clear and accessible guidelines for gift giving, entertainment and hosting for all personnel, including the company’s agents and contractors. Guidelines should all be available on the company’s intranet. • Consider, as part of the on-going monitoring and review of your company’s compliance program, formal periodic reviews of its effectiveness and reports to the board. We recommend that joint venture participants establish an audit committee with a representative from each joint venture participant to view accounting records and prepare regular reports. • Set appropriate monetary thresholds for gift giving, entertainment and hosting and detail what level of management is required to approve conduct which goes above the set thresholds. • Develop adequate internal controls that properly take into account the operational realities and risks involved in the company’s business activities such as the degree to which you operate in a high risk country and the extent of government interaction. If your operations are exposed to high levels of corruption you will need to devise different controls. • Ensure subsidiaries or affiliates under your control comply with the accounting provisions of the FCPA if your company has a nexus with the US. This responsibility also extends to ensuring that foreign subsidiaries and joint ventures comply with the FCPA accounting provisions. • Do adequate research on prospective third party intermediaries such as agents or contractors to determine their past operating practices and whether the company has any history of foreign corrupt practices; assess their commercial
standing; known affiliations and whether the entity is accurately representing its technical / professional capabilities. For example, if you seek to engage an intermediary, the following should put you on ‘red alert’: a. They request payments are to be made to offshore bank accounts; b. The business it is normally engaged in differs from what you are engaging it for; c. The terms of contract are vague and ambiguous; d. Unreasonably large commissions or discounts third parties are involved; and e. The intermediary is related to a foreign official or was recommended by a foreign official. • Undertake proper pre-acquisition due diligence on an acquisition target because if potential breaches of the foreign corrupt practices law are identified it allows for the target to be properly valued and to adopt a post acquisition program to overhaul the compliance environment. • Undertake proper due diligence on any proposed joint venture partners and assess whether they have an adequate anti-bribery program in place. We recommend making non-compliance with anti-bribery laws a material breach of the joint venture operating agreement which allows a right of termination. • Maintain detailed records of all due diligence and compliance activities conducted. • Devise standard anti-bribery and business ethics provisions in all contracts (e.g. based on the Australian, UK and US laws) and stipulate that your contractor/service provider’s sub-contracts need to include mirror provisions (including obligations to provide appropriate resources and training to staff). • Develop a specific compliance process for charitable donations (if your company is regularly involved in charitable giving, especially in developing countries). This could involve due diligence measures such as gaining certifications from the recipient regarding compliance with anti-corruption laws, checking whether any of the charitable institution’s officers are affiliated with the foreign government, entering into a written agreement with the charity restricting the use of the donated funds and ensuring an ongoing monitoring of the efficacy of the program. 53
The consequences for your company if you engage in bribery Engaging in corrupt practices is not worth the risk given the potential ramifications for a company or the individual. The risks include: • Damage to individual reputations and careers; • Long term damage to corporate reputation and goodwill which is often very difficult to repair; • Enforcement action that results in significant financial penalties and criminal sanctions; and • Debarment from lucrative government contracts. In addition, there are wider reaching ramifications for local and global economies arising from the scourge of corruption including contributing to weakening the rule of law, damaging the principle of free and fair competition and stifling social and economic development.