Anti-corruption laws in Canada and elsewhere have become increasingly relevant in recent years. As a result, Canadian businesses and organizations must be proactive in gaining expertise on these Canadian laws and implementing internal policies to ensure compliance with the legislative requirements.
Canada’s anti-corruption regime also has similarities to anti-corruption regimes in other jurisdictions, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”) and the U.K. Bribery Act, which have seen aggressive enforcement in recent years. The developments associated with the FCPA and the U.K. Bribery Act may therefore have a strong influence on future trends in Canada.
This is the first post in a series of blog posts which will provide valuable information and updates related to anti-corruption compliance efforts in Canada.
Overview of Legislation and Offences
There are two major sources of anti-corruption regulation in Canada: the Corruption of Foreign Public Officials Act, SC 1988, c 34 (the “CFPOA”) and the Criminal Code, RSC 1985, c C-46 (the “Code”).
In 2013, the CFPOA underwent major amendments which greatly enhanced the corruption regulation regime in Canada. The CFPOA applies to all businesses (including NGOs and other not-for-profit organizations) and individuals that engage in corrupt practices with a “foreign public official”. That term is defined in the CFPOA to include persons holding legislative, administrative or judicial positions in a foreign state, persons performing public duties or functions for a foreign state, and officials or agents of public international organizations. Notably, the definition of “foreign public official” does not include political party officials or political candidates.
There are essentially two offences codified in the CFPOA. Under section 3, it is an offence to bribe a foreign public official as consideration for the official agreeing to an act or omission, or to induce the official to use his or her position to influence acts or decisions of the foreign state. It is considered an offence whether or not the bribe is actually paid or the action is actually carried out. Furthermore, both offering and accepting a bribe are considered offences. Section 4 deals with accounting offences, commonly referred to as “books and records” offences. Offences falling under this section include forging accounting records to facilitate or conceal the bribery of a foreign public official. Canadian courts have jurisdiction over both offences under the CFPOA where the accused is a Canadian citizen, permanent resident, or a public body or entity formed under Canadian law, regardless of whether the offence actually occurs within Canada.
Businesses are currently allowed to make “facilitation payments” to foreign public officials by virtue of an exception in s. 3(3) of the CFPOA. A facilitation payment is a payment made to guarantee or accelerate routine actions undertaken by a foreign public official as part of his or her official duties or functions. However, the Bill which introduced the 2013 reform of the CFPOA included a provision intended to eliminate this exception. Accordingly, facilitation payments will become an offence in Canada once that provision proclaimed into force.
Additionally, the Code contains specific offences relating to corruption and bribery committed in Canada or by Canadian entities or individuals. Sections 119-125, 380 and 426 create offences for bribery of judges, Members of Parliament, police officers and government officials (among others), fraud, municipal corruption, and secret commissions.
Anti-corruption compliance is also relevant to interactions with First Nations governments and officials in Canada. While interactions with such governments and officials will not attract scrutiny under the CFPOA, existing regulations, such as the Code, and new initiatives, such as the Extractive Sector Transparency Measures Act, SC 2014, c 39, s 376 (“ESTMA”), have implications for anti-corruption compliance programs.
For example, ESTMA requires entities engaged in the exploration or production of oil, gas or other minerals to report all payments made to Aboriginal governments and/or Aboriginal government officials in an attempt to enhance transparency and prevent corruption in these transactions. While a two-year grace period for such disclosure requirement was provided at the implementation of ESTMA on June 1, 2015, these requirements are proposed to come into force on June 1, 2017. Therefore, organizations must be conscious not only of their dealings with foreign and domestic governments and officials, but also of their interactions with Canadian Aboriginal governments and officials.
Consequences of Corruption
Corruption is a concern for governments, businesses and the public. Corruption increases the cost of doing business, wastes public resources, and destroys public trust in the rule of law. These causes of concern contribute to the significant consequences associated with anti-corruption laws in Canada.
The principles of sentencing contained in the Code and jurisprudence on anti-corruption highlight denunciation and deterrence as primary considerations for punishing corruption offences. Under the CFPOA, both the bribery offences in section 3 and the accounting offences in section 4 carry a maximum penalty of 14 years imprisonment. This high maximum penalty means that discharges and conditional sentences are unavailable as sentencing options. Additionally, no upper limit exists on the fines that can be charged in relation to offences under the CFPOA.
Corruption offences may also result in an individual or a corporation facing debarment or disqualification. Essentially, debarment forces the individual or corporation convicted of a corruption offence to endure a period of ineligibility from bidding on government contracts. Public Works and Government Services Canada imposes an extremely strict Integrity Framework which imposes significantly higher periods of ineligibility than most other states.
To date, Canada has produced a limited number of decisions reprimanding corruption by individuals and businesses. A lenient decision was rendered in R v Watts,  A.J. No. 568. In that case, the corporation, its president and an employee were charged with bribing a foreign public official contrary to the CFPOA. Payments totaling nearly $30,000 were made to a US immigration officer to facilitate immigration of the corporation’s employees into the US. The corporation was fined a mere $25,000 and the corporation’s president and employee did not face any personal conviction.
More imposing punishments have been rendered since the Watts decision. In both R v Niko Resources Ltd. (2011), 101 WCB (2d) 118 and R v Griffiths Energy International,  A.J. No. 412, a corporation was found guilty of bribing a foreign public official contrary to the CFPOA. In Niko, the corporation had provided a $200,000 vehicle and travel expenses to a State Minister of Bangladesh in order to influence his decision regarding compensation payments to villagers whose community had been damaged by a blowout of the corporation’s oil wells in that country. The corporation in Griffiths had paid the wife of Chad’s ambassador to Canada $2 million to persuade the ambassador to use his influence to secure a production contract for the corporation in Chad. Both corporations incurred fines close to $10 million, including a 15% victim surcharge fine.
Most recently, an individual was sentenced under the CFPOA in R v Karigar, 2014 ONSC 3093. The individual in that case had conspired with employees of a corporation to pay out $450,000 in bribes to assist the corporation in winning a multi-million dollar contract with Air India. A sentence of three years’ imprisonment was imposed on the individual. It is important to note that the amendments increasing the maximum penalty for bribery from 5 years to 14 years’ imprisonment had not yet been implemented at the time of the Karigar decision.
In addition to the above examples there are many ongoing investigations and proceedings in connection with Canadian anti-corruption enforcement efforts at any given time.
The Importance of a Compliance Program
The CFPOA does not explicitly create a legal requirement on organizations to implement an anti-corruption compliance program. However, given the anti-corruption enforcement activity witnessed in other jurisdictions, organizations would be best served by creating and implementing policies, programs and enforcement methods to deal with the elimination and avoidance of corrupt practices.
Unfortunately, the CFPOA does not outline specific requirements to be included in an anti-corruption policy for an organization that chooses to implement such a program, and the existing guidance from the courts affords only marginal assistance. Organizations should seek guidance from legal counsel experienced with development, implementation and administration of anti-corruption compliance programs for assistance as a helpful starting point to initiate or bolster anti-corruption policies and compliance within their operations.
Canada and other states are placing greater focus on investigating and enforcing anti-corruption regulation. Accordingly, it is becoming increasingly important for Canadian businesses and organizations to be aware of the applicable legislation, create comprehensive anti-corruption policies, and emphasize enforcement of those internal and external standards. Stay tuned for more information as we will address specific issues of importance in respect of anti-corruption compliance in future blog posts in this series.