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Trends and climate
Trends Have there been any recent changes in the enforcement of anti-corruption regulations? In recent years, Canadian authorities have increased enforcement activity in relation to:
- foreign and domestic anti-corruption legislation;
- the Corruption of Foreign Public Officials Act; and
- the Criminal Code.
This increased activity is, at least in part, a response to international scrutiny over the perceived lax enforcement of the Corruption of Foreign Public Officials Act following Canada’s ratification of the Organisation for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials.
There have been several recent high-profile prosecutions under the Corruption of Foreign Public Officials Act and the Criminal Code, including:
- several prosecutions of corporations, including guilty pleas and substantial fines (and, in one case, a court-appointed monitor);
- the first trial, conviction and sentencing to prison of an individual under the Corruption of Foreign Public Officials Act;
- the prosecution of a senior political official; and
- the charges brought against a major engineering firm and several of its former executives for alleged domestic and international corruption, which are still pending.
The Royal Canadian Mounted Police, which is responsible for investigating Corruption of Foreign Public Officials Act violations, has indicated that several corruption investigations are ongoing.
In response to allegations of corruption and collusion in the Quebec construction industry, the enforcement of anti-corruption regulations has increased dramatically since 2011. This increased enforcement includes the creation of:
- the Commission of Inquiry on the Awarding and Management of Public Contracts in the Construction Industry (also known as the Charbonneau Commission); and
- the Permanent Anti-corruption Unit, which manages corruption investigations across Quebec and has been responsible for several high-profile prosecutions, including the prosecution of former mayors and government ministers.
Legislative activity Are there plans for any changes to the law in this area? Corruption of Foreign Public Officials Act amendments
In June 2013 the Corruption of Foreign Public Officials Act was amended to:
- close a jurisdictional loophole;
- create a new accounting offence; and
- generally strengthen Canada’s anti-corruption legislation.
Significant amendments include:
- the expansion of the act’s scope. Before the amendments, part of the formulation, initiation or commitment of an offence had to take place in Canada. As the act addresses foreign bribery, this hindered enforcement in cases where the bribery occurred outside Canada. The amendments allow Canadian authorities to prosecute any Canadian company or individual for a bribe occurring in a foreign country, even if the transaction took place entirely outside Canada;
- the increase of the maximum prison term for a violation of the act from five to 14 years (monetary penalties remain unlimited); and
- the inclusion of a new offence targeting false or misleading accounting entries.
The 2013 amendments also provide for the future removal of the facilitation payment exception. At present, ‘facilitation payments’ (ie, small payments made to low-level officials to secure or expedite the performance of routine acts) are exempt from the Corruption of Foreign Public Officials Act. This exception will be removed once an amendment to the act comes into force, although no date has been set.
New Integrity Regime Canada recently implemented the Integrity Regime for all federal government procurement, which imposes:
- a lengthy mandatory debarment period (five to 10 years) on companies convicted of corruption and other designated offences; and
- an 18-month suspension period on companies that have been charged (but not convicted).
Since 2013, companies wishing to contract with the Quebec government may have to obtain prior authorisation from a provincial regulator. The regulator can deny authorisation (and has done so) based on a company’s failure to meet the high standards of integrity.
Extractive Sector Transparency Measures Act The Extractive Sector Transparency Measures Act came into force on June 1 2015. The act is designed to further Canada’s international commitments in the fight against corruption by establishing reporting obligations regarding payments made by extractive sector companies to foreign and domestic governments (and government officials), including aboriginal governments.
Quebec reimbursement programme Through specific legislation enacted in 2015, the Quebec government created a programme that allows for the voluntary reimbursement of amounts improperly paid as a result of fraud – including corruption – in connection with public contracts. Through this programme, individuals and companies can seek a civil settlement with provincial government agencies until November 1 2017. After this date, the government is expected to seek recovery of amounts its agencies paid as a result of fraud by instituting civil actions against individuals and companies with whom no settlement has been reached. The programme is not designed to allow for the settlement of criminal prosecutions.
Authorities Which authorities are responsible for investigating bribery and corruption in your jurisdiction? The Royal Canadian Mounted Police (RCMP) investigates alleged breaches of the Corruption of Foreign Public Officials Act. The RCMP and local and provincial police forces investigate Criminal Code breaches. In Quebec, anti-corruption investigations are managed by the Permanent Anti-corruption Unit, with the assistance of local and provincial police forces.
Domestic law What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction? Canada’s key provisions regarding bribery and corruption are found in:
- the Corruption of Foreign Public Officials Act, which prohibits bribery of foreign government officials and related accounting misconduct;
- the Criminal Code, which prohibits bribery of Canadian government officials and corrupt behaviour in certain transactions among private parties; and
- The Extractive Sector Transparency Measures Act, which requires public disclosure of payments made by mining, oil and gas companies to foreign and domestic governments.
International conventions What international anti-corruption conventions apply in your jurisdiction? Canada is an Organisation for Economic Cooperation and Development (OECD) member and took part in negotiating the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which spurred the passing of the Corruption of Foreign Public Officials Act.
While passing the Corruption of Foreign Public Officials Act in 1999 allowed Canada to ratify the convention, Canada faced significant international scrutiny in the following years for what was perceived as ineffective and inefficient enforcement. In March 2011 the OECD Working Group on Bribery issued a report imploring Canada’s government to adopt measures to facilitate the prosecution of its nationals for bribing foreign public officials.
The government’s response to this criticism were the 2013 amendments to the act and increased enforcement activity. The amendments considered a number of recommendations from the OECD’s March 2011 report and were designed to bring Canada’s anti-corruption enforcement regime in line with other leading nations.
In addition to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Canada is also a signatory to the UN Convention against Corruption and the Inter-American Convention against Corruption, which have both been ratified.
Specific offences and restrictions
Offences What are the key corruption and bribery offences in your jurisdiction? Foreign bribery: Corruption of Foreign Public Officials Act Section 3 of the Corruption of Foreign Public Officials Act criminalises the provision of a benefit to a foreign public official:
- in return for an act or omission by the official; or
- to induce the official to influence the foreign state or public international organisation for which the official performs duties or functions.
In many respects, the act is similar to the US Foreign Corrupt Practices Act. However, unlike the Foreign Corrupt Practices Act, it contains no option to proceed with civil rather than criminal enforcement.
A ‘foreign public official’ is defined in the Corruption of Foreign Public Officials Act as a person who performs public duties or functions for a foreign state, including a person employed by a board, commission, corporation or other body or authority that:
- was established to perform a duty or function on behalf of the foreign state; or
- is performing such a duty or function.
This includes employees of wholly or partially state-owned or controlled corporations.
Under Section 3 of the Corruption of Foreign Public Officials Act, a loan, award, advantage or benefit must have been or have agreed to be offered to a foreign public official or any person for the benefit of a foreign public official. Further, the benefit must have been offered:
- as consideration for an act or omission by the official in connection with the performance of his or her duties or functions; or
- to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organisation for which the official performs duties or functions.
Before the 2013 amendments, for a Canadian court to assume jurisdiction over a Corruption of Foreign Public Officials Act offence, the Crown had to prove a real and substantial connection between Canada and the alleged misconduct. As a practical matter, this significantly limited Canada's ability to enforce the act, as part of the formulation, initiation or commission of the offence had to have taken place in Canada. The amendments closed this loophole by classifying acts by Canadian citizens, permanent residents, corporations, societies, firms or partnerships on a worldwide basis as acts that occur in Canada for the purpose of the act. The practical result of the amendments is that Canadian citizens and companies are subject to worldwide regulation by Canadian authorities under the act, regardless of whether part of the activity occurs in Canada.
The 2013 amendments also criminalised the concealment of bribery in company accounting records. This new offence is similar to the US Foreign Corrupt Practices Act’s books and records provisions. Under Section 4 of the Corruption of Foreign Public Officials Act, it is now an offence to:
- keep secret accounts;
- falsely record, fail to record or inadequately identify transactions;
- enter liabilities with incorrect identification of their object;
- use false documents; and
- destroy accounting books and records earlier than permitted by law for the purpose of concealing bribery of a public official.
One notable difference between the Canadian books and records provision and its US equivalent is that a breach of the Canadian provision is a criminal offence, requiring evidence of a criminal standard, whereas a breach of the US provision is a civil offence.
Criminal Code: domestic and private bribery The primary vehicle in Canada for addressing domestic corruption is the Criminal Code. Sections 121, 122, 123 and 426 of the Criminal Code criminalise:
- the provision of bribes to officials;
- the receipt of bribes by officials; and
- corrupt behaviour in certain transactions among private parties.
Section 121: bribery of federal and provincial officials Section 121(1)(a) of the Criminal Code prohibits offering or giving a benefit to a government official, or any member of his or her family, as consideration for cooperation, assistance, exercise of influence or an act or omission regarding the transaction of business with, or a business matter relating to, the government.
Section 121(1)(b) of the Criminal Code criminalises the provision of an award, advantage or benefit to a government official. Notably, this section does not require a quid pro quo arrangement, as it seeks to preserve the appearance of integrity, rather than integrity itself. Section 121(1)(b) therefore penalises the simple provision of a benefit to a government employee or official, with no strings attached, though that benefit must be conferred in respect to the dealing that the accused had with the government. For Section 121(1)(b), obtaining written pre-approval for the benefit from the head of the government branch with whom the accused is dealing would provide a full defence.
Section 121 of the Criminal Code requires that the recipient of the benefit be an ‘official’. This includes employees and officials of provincial and federal governments, as well as municipalities in some circumstances. Employees of government-owned or controlled corporations, known as ‘crown corporations’ in Canada, may also be considered government employees or officials.
Section 122: breach of public trust Section 122 of the Criminal Code criminalises a breach of trust by an official. To qualify as an offence under Section 122, the accused must:
- be an official acting in connection with the duties of his or her office; and
- have breached the standard of responsibility and conduct demanded of him or her by the nature of the office.
Further, the conduct must have represented a serious and marked departure from the standards expected of an individual in the accused’s position of public trust. Finally, the accused must have acted with the intention to use his or her public office for a purpose other than the public good – for example, for a dishonest, partial, corrupt or oppressive purpose. As Section 122 by itself is applicable only to officials, it must be considered in conjunction with Section 21, under which anyone who assists or encourages the commission of an offence is a party to the offence (eg, by providing an official with an incentive for him or her to breach the public trust).
The term ‘official’ in Section 122 of the Criminal Code is not confined to provincial or federal governments and may include any person in a position of duty, trust or authority – particularly people working in the public service or in a corporation, society or similar. This has been held to extend to employees of First Nations bands. Further, while not expressly stated in the Criminal Code, the term ‘official’ may also extend to employees or political party members if they are in positions of duty, trust or authority.
Section 123: municipal corruption Section 123 of the Criminal Code criminalises municipal corruption and is otherwise substantially the same as Section 121(1)(a).
To qualify as an offence under Section 123:
- the accused must have given or offered a loan, reward, advantage or benefit of any kind to a municipal official or another person for the benefit of the municipal official; and
- the benefit must have been given or offered as consideration for the official performing or abstaining from performing an official act.
Further, the accused must have known the recipient was a municipal official and intentionally offered the benefit in exchange for the official performing or failing to perform an official act.
Section 123 of the Criminal Code applies to municipal officials. A ‘municipal official’ is defined as a member of a municipal council or a person who holds an office under a municipal government.
Section 426: commercial bribery Section 426 of the Criminal Code criminalises secret commissions, prohibiting any person from corruptly offering or giving an agent (including an employee) an award, advantage or benefit of any kind as consideration for performing or in anticipation of any act relating to the affairs or business of the agent's principal. To qualify as an offence:
- an agency relationship must have existed;
- the agent must have received the benefit;
- the benefit must have been provided as consideration for an act to be undertaken in relation to the principal’s affairs;
- the agent must have failed to make adequate and timely disclosure of the benefit; and
- the accused must have been aware of the agency relationship and knowingly provided the benefit as consideration for an act to be undertaken in relation to the principal’s affairs.
Section 426 applies to all agency and employment relationships, including First Nations and private sector businesses.
Extractive Sector Transparency Measures Act: payment reporting The Extractive Sector Transparency Measures Act is designed to complement Canada’s existing anti-corruption regime, including the Corruption of Foreign Public Officials Act. The Extractive Sector Transparency Measures Act reporting obligations apply to companies engaged in the commercial development of oil, gas or minerals in Canada or abroad that:
- are listed on a stock exchange in Canada; or
- have a place of business, do business or have assets in Canada and meet at least two of the following size thresholds:
- C$20 million in assets;
- C$40 million in revenue; or
- an average of at least 250 employees.
The Extractive Sector Transparency Measures Act is not restricted to Canadian-headquartered companies. Foreign companies can potentially be caught within the act’s ambit where they have a place of business, do business or have assets in Canada and meet the size threshold.
Where such foreign companies engage in the commercial development of oil, gas or minerals anywhere in the world – either directly or indirectly through subsidiaries – they will likely be subject to Canadian reporting requirements.
The reporting requirements also encompass payments made by a foreign company that:
- is controlled by a company listed in Canada; or
- has a place of business, does business or has assets in Canada and meets the size threshold.
The notion of ‘control’ is broadly defined to include direct or indirect control by any means.
Where an entity must disclose payments under the act, it must provide the minister with, and make available to the general public, a report in a form to be prescribed indicating all payments made to a payee during a fiscal year in the following categories:
- taxes (other than consumption and personal income taxes);
- fees, including rentals, entry fees, regulatory charges and any other consideration for licences, permits or concessions;
- production entitlements;
- dividends (other than dividends paid to ordinary shareholders);
- infrastructure improvement payments; and
- any other category of payment that is prescribed by regulation.
Payments must be reported only where the aggregate amount for each type of payment to the same payee is greater than C$100,000, although the government may alter the threshold amount for any particular payment category by regulation.
The report must also include an attestation made by a director, officer, independent auditor or accountant that the information contained in the report is true, accurate and complete.
The concept of a ‘payee’ in the Extractive Sector Transparency Measures Act is broadly stated to apply to all types of government entity, including:
- any government in Canada or a foreign state;
- a body that is established by two or more governments (which is a similar concept to public international organisations in anti-corruption law); and
- any corporation or other body established to exercise or perform, or that exercises or performs, a government power, duty or function.
Given the scope of this definition, the act also applies to payments to certain aboriginal bands, subject to a two-year transitional period for aboriginal bands in Canada.
Notably, and in addition to the act’s objective of detecting and deterring corruption, a payment made to an employee or office holder of a government body is deemed to have been made to that government body and must also be reported. Accordingly, the act requires public disclosure of:
- lawful payments to governments; and
- payments that could potentially violate anti-corruption legislation, such as the Corruption of Foreign Public Officials Act.
The Extractive Sector Transparency Measures Act criminalises non-compliance with several of its provisions. Further, there is a general anti-avoidance provision making it an offence to structure any payment or other financial obligation or gift to avoid reporting requirements. These offences are subject to a maximum fine of C$250,000 for each day that the offence continues.
Where an entity commits an offence under the act, any officer, director or agent who directed, authorised, assented to or acquiesced or participated in its commission is also guilty of the offence. This is subject to a due diligence defence if the entity or its directors and officers can show that all reasonably prudent measures were implemented. Such measures typically include:
- establishing and monitoring the effectiveness of policies and procedures;
- providing adequate training;
- maintaining a system of internal controls to ensure accurate books and records; and
- auditing payment records.
The Extractive Sector Transparency Measures Act also requires companies to keep records of payments for seven years from the date on which the company provided its report to the government, or such other period as may be prescribed by regulation. This retention obligation should be read in conjunction with Section 4 of the Corruption of Foreign Public Officials Act, which criminalises the destruction of accounting records earlier than permitted by law for the purpose of concealing bribery. Accordingly, non-compliance with record-keeping obligations under the Extractive Sector Transparency Measures Act may also be punishable by criminal penalties under the Corruption of Foreign Public Officials Act if the non-compliance was for a bribery-related purpose.
Hospitality restrictions Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details? While Canada’s anti-corruption provisions do not specifically mention hospitality, it is an offence under the Corruption of Foreign Public Officials Act to provide “a loan, reward, advantage or benefit of any kind” to a foreign public official. There is no judicial guidance specific to the act on what constitutes a ‘benefit’. However, the phrase “a loan, reward, advantage or benefit of any kind” is also used in Section 121 of the Criminal Code, which prohibits bribery of Canadian government officials. There is a significant body of case law on what constitutes a benefit in the context of Section 121 of the Criminal Code, which is likely applicable to the Corruption of Foreign Public Officials Act.
In R v Hinchey ( 3 SCR 1128), the Supreme Court of Canada held that a ‘benefit’ must constitute a “material or tangible gain” before criminal liability will be imposed. Other case law suggests that benefits include:
- the provision of tickets to sporting events;
- a one-sided pattern of paying for meals (or one lavish meal); and
- payment for travel.
Conversely, the courts have stated on a number of occasions that the provision of a trivial social courtesy, such as a cup of coffee, does not constitute a benefit. In the context of the Corruption of Foreign Public Officials Act, it is important to note that what constitutes a “material or tangible gain” may be different in Canada than for a US public official earning $200 per month.
Under Sub-section 3(3)(b) of the Corruption of Foreign Public Officials Act:
“No person is guilty of an offence under subsection (1) if the loan, reward, advantage or benefit… was made to pay the reasonable expenses incurred in good faith by or on behalf of the foreign public official that are directly related to the promotion, demonstration or explanation of the person’s products and services, or the execution or performance of a contract between the person and the foreign state for which the official performs duties or functions.”
To meet this exception, the expenses must be:
- incurred in good faith; and
- directly related to:
- the promotion, demonstration or explanation of the person’s products or services; or
- the execution or performance of a contract with the foreign official’s state.
For example, paying for an official’s travel to a company facility may be legitimate, but an all-expenses paid side trip would not be. An example of the danger of side trips is R v Niko Resources Ltd ( AWLD 4536), in which payment of a foreign government official’s travel expenses to the Calgary gas and oil exposition was defensible, but payment of C$5,000 for non-business related travel and expenses was not.
However, the above exception applies only in respect of foreign government officials. There is no exception for the payment of reasonable and bona fide expenses regarding the promotion, demonstration or explanation of products or services to Canadian government officials.
Facilitation payments What are the rules relating to facilitation payments? A ‘facilitation payment’ can generally be described as a payment made to a government official in order to expedite or secure the performance of a routine non-discretionary government action. While not definitive, facilitation payments are typically small and made to low-level government officials to secure or expedite routine services, such as:
- unloading cargo;
- processing visa paperwork;
- expediting permits or licences; or
- activating telephone or mail delivery services.
There is no facilitation payment exception in the Criminal Code for dealing with Canadian government officials.
The Corruption of Foreign Public Officials Act permits facilitation payments involving foreign government officials. However, the Canadian government introduced amendments to the act in February 2013 that, among other things, will remove the exception for facilitation payments at a later date. The timing for such removal is subject to a further order of the governor in council.
Scope of liability Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction? Both individuals and companies can be held liable under the Corruption of Foreign Public Officials Act and the Criminal Code.
Individuals An individual is subject to the Corruption of Foreign Public Officials Act if they are a Canadian citizen or a permanent resident of Canada. Foreign individuals may also be subject to the act if:
- their conduct involves a real and substantial connection to Canada; and
- they are present in Canada (or a country with extradition arrangements with Canada) when enforcement proceedings are commenced or any time thereafter.
An individual may be liable under the Criminal Code where some part of the formulation, initiation or commitment of the offence takes place in Canada.
Companies A business (eg, a corporation, society, company, firm or partnership) is subject to the Corruption of Foreign Public Officials Act if it is incorporated, formed or otherwise organised under the laws of Canada or any of its provinces or territories.
The criminal liability of corporations under the act and Criminal Code is based on the actions of senior officers. A ‘senior officer’ may include a director, partner, employee, member, agent or contractor of the corporation who played an important role in the establishment of its policies or was responsible for managing an important aspect of its activities. Section 22(2) of the Criminal Code makes a corporation liable for the acts of its senior officers where an officer, intending to benefit the corporation and acting within the scope of his or her authority:
- is a party to the offence;
- directs another director, partner, employee, member, agent or contractor of the corporation to become party to the offence; or
- knows a representative of the corporation is about to become a party to the offence and does not attempt to stop them.
Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?
Agents or facilitating parties can be held liable under Canadian anti-corruption legislation and businesses may be liable for bribery offences committed by their agents. Sub-section 3(1) of the Corruption of Foreign Public Officials Act makes it an offence to offer bribes directly or indirectly to foreign public officials. This captures payments provided through third-party agents. Section 22(2) of the Criminal Code also specifies that corporations may be liable for the acts of agents.
The primary circumstances in which a business or its agent may be liable for bribery offences are where:
- a senior officer of the business directed an agent to act in a manner that was contrary to applicable anti-bribery legislation;
- an individual directing the business knew that an agent was about to act in a manner that was contrary to applicable anti-bribery legislation and failed to make all reasonable efforts to stop them; and
- a senior officer was wilfully blind to bribery by one of the business’s agents.
Foreign companies Can foreign companies be prosecuted for corruption in your jurisdiction? For a foreign company to be prosecuted for corruption in Canada:
- it must have engaged in conduct that has a real and substantial connection to Canada (ie, some part of the formulation, initiation or commitment of the offence took place within Canada); and
- it must have an office or a senior officer present in Canada (even if only temporarily) to be served with documents commencing enforcement proceedings.
Whistleblowing and self-reporting
Whistleblowing Are whistleblowers protected in your jurisdiction? Whistleblowers who report anti-bribery violations are protected in Canada. Section 425(1) of the Criminal Code prohibits employers from retaliating or threatening to take action against employees who provide information on employer wrongdoing that constitutes a criminal offence or other unlawful acts to law enforcement authorities.
Self-reporting Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed? Leaving aside disclosure considerations under securities law, there is no general duty in Canada to report a crime. Accordingly, there is no obligation under the Corruption of Foreign Public Officials Act or Criminal Code to self-disclose a potential offence to the Royal Canadian Mounted Police (RCMP) or prosecutor’s office.
Companies should keep in mind the following self-disclosure considerations:
- For bribery charges, there is no option for civil resolution and no alternative non-criminal resolution options, such as deferred prosecution agreements or non-prosecution agreements. The resolution options available in Canada are:
- convincing the authorities not to proceed with criminal charges;
- pleading guilty to a criminal offence; or
- fighting the matter at trial.
The Canadian authorities are more likely to bring a case that is handed to them, whereas the risk of an independent enforcement proceeding is lower. However, in Canada there is no limitation period for Corruption of Foreign Public Officials Act and criminal offences, so the risk of prosecution can never fully be abated. If there was a conviction or guilty plea, there would usually be meaningful credit for self-reporting. However, the precise credit amount would be at the judge’s discretion, as there are no fixed guidelines for self-reporting credit in Canada. The Canadian and US authorities are in close contact. For companies with operations in the United States, any decision to contact the authorities should include near simultaneous contact with both US and Canadian authorities.
In terms of process, for matters involving foreign bribery under the Corruption of Foreign Public Officials Act, self-disclosure would take place through the RCMP or a prosecutor at the public prosecutions service of Canada. For domestic corruption, self-disclosure would take place though the local or provincial police or the RCMP and the crown attorney’s office. Legal counsel should be consulted before self-disclosure of a potential criminal offence.
Dispute resolution and risk management
Pre-court settlements Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements? It is common in Canada for anti-corruption enforcement actions to be settled before trial by way of the plea bargaining process. Crown prosecutors in Canada have broad discretion to engage in resolution discussions, which are a common part of the legal system. However, Canada lacks mechanisms to resolve anti-bribery cases outside of the criminal justice system. The implication is that the most common resolution of a bribery case involves a guilty plea for an offence and a joint submission by the parties regarding the penalty. For example, inR v Niko Resources Ltd ( AWLD 4536), the company entered into a sentencing agreement with the Crown, pursuant to which they agreed to pay approximately C$9.5 million. This fine took into consideration the fact that Niko had cooperated with the Royal Canadian Mounted Police’s investigation. Another example is R v Griffiths Energy International ( AJ 412 (Alta QB)), in which the company pled guilty under the Corruption of Foreign Public Officials Act for paying a C$2 million bribe and shares to a corporate entity owned by a foreign official’s wife. The court accepted a joint submission for a penalty of approximately C$10 million.
Defences Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction? Criminal Code For Section 121(1)(b) of the Criminal Code, obtaining written pre-approval for a benefit from the head of the branch of government with whom the accused is dealing would provide a full defence. Similarly, disclosure to a principal before providing a benefit to an agent or employee is a complete defence against a secret commissions charge under Section 426.
Corruption of Foreign Public Officials Act The following payment procedures are exempt under the Corruption of Foreign Public Officials Act:
- payments that are lawful under the laws and regulations of the foreign nation where they were received. The defence applies when the payment was either “permitted or required under the laws of the foreign state or public international organization”;
- the provision of a benefit to a foreign public official that was provided in good faith to pay the reasonable expenses of demonstrating, promoting or explaining products or executing or performing obligations of a contract formed with a foreign government. These expenses cannot include entertainment or other ‘softer’ expenses; and
- facilitation payments from the bribery prohibitions.
What other defences are available and who can qualify? The Corruption of Foreign Public Officials Act also includes a double jeopardy defence. Canadian companies and individuals tried and sentenced in another jurisdiction cannot be convicted for the same conduct in Canada (subject to certain exceptions).
Other criminal defences of more general application, such as duress, also apply to corruption charges.
Risk management What compliance procedures and policies can a company put in place to assist in the creation of safe harbours? In Canada, because bribery offences are true criminal offences that require mens rea (ie, intent), the existence of adequate policies and procedures does not provide a full defence against bribery charges, but can be a useful tool for negotiating with authorities or avoiding proceedings against corporate entities. Further, because liability can also be founded on ‘wilful blindness’ (ie, the deliberate failure to make enquiries), the existence of anti-corruption policies and procedures can be helpful in rebutting any inference that a company or its executives ignored bribery.
A risk assessment is the first step towards implementation of a robust anti-corruption programme. Put simply, a risk assessment involves identifying the corruption risks faced by the target company. It primarily consists of identifying:
- touch points with government officials (directly and through third parties); and
- potential scenarios where bribery could occur.
Potential risk areas to consider include:
- licensing and regulatory regimes;
- environmental requirements;
- regulatory inspections;
- local government relations;
- import and export requirements;
- immigration requirements;
- tax requirements; and
- any other area where employees or third parties acting on a company’s behalf interact with government officials.
Third parties create a particular risk given the potential for them to create liability for their employer or principal and the greater challenges inherent in seeking to monitor and control their conduct. Accordingly, identification of all third parties who interact with government officials on a company’s behalf is also a key component of a risk assessment. The goal of an initial risk assessment is to ensure that:
- an anti-corruption compliance programme is specifically tailored to the target company’s areas of greatest risk; and
- compliance resources are focused appropriately.
To the extent that the subject company expands its business into jurisdictions presenting heightened risk, country-specific risk assessments are advisable to ensure that the anti-corruption compliance programme remains effective.
The cornerstone of any compliance programme is a clear and concise policy against bribery. Typical elements of an anti-bribery policy include:
- a prohibition on bribery and corruption;
- an explanation of what constitutes bribery and corruption and who is a government official;
- guidance on:
- gifts, meals, entertainment and travel involving government officials;
- charitable and political donations; and
- facilitating and expediting payments;
- due diligence requirements for third parties who interact with government officials on the company’s behalf, including ongoing monitoring of third-party relationships;
- a prohibition on false or inaccurate accounting entries; and
- a system for reporting violations.
This policy should be translated into local languages, reviewed on a periodic basis and updated as required. Training should be provided for:
- the board and senior management;
- employees involved in international business who may interact with government officials; and
- associated accounting personnel.
As an additional compliance measure, a company may wish to train third parties who interact with government officials on its behalf. Records should be kept of all training.
Proper ‘tone from the top’ is fundamental to the successful implementation of an effective compliance programme. This can be accomplished through messages from the board and senior management encouraging compliance. The appointment of a compliance officer – who should be responsible for the oversight and implementation of the compliance programme and periodically report to the board or audit committee – is also recommended.
Another component of an effective compliance programme is a system of internal accounting controls aimed at preventing corruption. Accounting controls aimed at identifying and preventing issues that may arise – such as controls around petty cash, expenses and payments to third parties – should also be developed and implemented. Typically, an accounting assessment will be performed as an initial step aimed at identifying potential areas of control risks, with accounting controls then implemented to address those risk areas.
To ensure efficacy, an anti-corruption compliance programme must be periodically assessed. The goal is to develop and implement mechanisms to test for compliance weaknesses and detect issues. This periodic testing should be performed under the direction of counsel to maintain privilege.
Record keeping and reporting
Record keeping and accounting What legislation governs the requirements for record keeping and accounting in your jurisdiction? Corporations in Canada may be established under provincial or federal authority, and a corporation’s governing statute sets out the applicable requirements for record keeping and accounting. There are also additional accounting requirements for publicly listed companies. The Corruption of Foreign Public Officials Act also contains a books and records provision that prohibits accounting practices intended to conceal bribery.
What are the requirements for record keeping? Record-keeping and accounting requirements for a corporation are governed by the legislation under which it was incorporated. For example, Section 20 of the Business Corporations Act requires companies to keep some records for six years, including:
- meeting minutes, director records and resolutions; and
- accounting records.
All federally incorporated companies are subject to these obligations.
The Extractive Sector Transparency Measures Act requires companies in the extractive (ie, mining, oil and gas) sector to keep records of their government payments for seven years from the date on which they provided a report to the government.
Section 4 of the Corruption of Foreign Public Officials Act states that it is an offence for any person, for the purpose of bribing a foreign public official or hiding such bribery, to:
- maintain accounts which do not appear in any of the books and records that they are required to keep in accordance with accounting and auditing standards;
- make transactions that are not recorded in those books or records;
- record non-existent expenditures in those books and records;
- use false documents knowingly; or
- destroy – on purpose – accounting books and records earlier than permitted by law.
Reporting What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations? There is no obligation under the Criminal Code or the Corruption of Foreign Public Officials Act to self-disclose a potential offence to the Royal Canadian Mounted Police or the prosecutor’s office. A company would receive credit on sentencing for such disclosure, although this is discretionary as Canada has no fixed guidelines for self-reporting.
Companies in the extractive sector should also be familiar with the Extractive Sector Transparency Measures Act, which requires disclosure of certain types of payment in limited circumstances.
Individuals What penalties are available to the courts for violations of corruption laws by individuals? All Corruption of Foreign Public Officials Act and Criminal Code offences are criminal in nature. Under the act, individuals are subject to imprisonment of up to 14 years. Under the code, penalties for domestic bribery include imprisonment of up to five years for individuals (including directors and officers who assist or encourage the commission of the offence).
Companies or organisations What penalties are available to the courts for violations of corruption laws by companies or organisations? Companies may be subject to steep monetary penalties for violating anti-corruption law. For example, the penalties in R v Niko Resources Ltd ( AWLD 4536) and R v Griffiths Energy International ( AJ 412 (Alta QB)) were approximately C$9.5 million and C$10 million, respectively. Courts and prosecutors are not limited by a cap on monetary penalties; there is no maximum fine under the Corruption of Foreign Public Officials Act or the Criminal Code.
Canadian jurisprudence demonstrates the various factors that courts may consider when making sentencing decisions, including:
- the degree of planning and duration and the complexity of the offence;
- whether the company has been convicted or penalised by a regulatory body for a similar offence;
- whether the company brought the matter to the authorities’ attention, disclosed the findings of a comprehensive internal investigation and otherwise cooperated with the investigation of the bribe; and
- any steps taken by the company to implement anti-corruption compliance programmes in order to prevent bribes.