As part of its efforts to strengthen its anti-bribery and corruption enforcement framework and comply with international obligations, the Australian government has introduced two new criminal offences relating to “false accounting” into the Commonwealth Criminal Code.
On 29 February 2016, Royal Assent was given to the Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Act 2016. The Act, among other things, introduces two new offences relating to the “false dealing with accounting documents”.
The new offences are designed to implement Australia’s obligations as a party to the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Article 8 of that Convention requires its members to take measures to prohibit the establishment of off-the-books accounts, as well as the use of false documents, by companies for the purpose of bribing foreign public officials or hiding such bribery.
False dealing with accounting documents
It is now an offence for a person to:
- make, alter, destroy or conceal an accounting document, or
- fail to make or alter an accounting document that the person is under a duty to make or alter;
where the act or omission is done with the intention that the person’s conduct would facilitate, conceal or disguise the receiving or giving of a benefit that is not legitimately due, or a loss that is not legitimately incurred.
The legislation introduces a second offence, which is the exact same as the first except that it applies where a person is reckless as to whether the making, alteration, destruction or concealment of the document (or the failure to make or alter the document) facilitates, conceals or disguises the relevant benefit or loss.
The offences apply to “accounting documents”. These are given a broad definition and include:
- any account, record or document made or required for any accounting purpose;
- any register under the Corporations Act 2001 (Cth); and
- any financial report or financial records within the meaning of that Act.
It is not necessary for the prosecution to prove that the defendant, or another person actually received or gave a benefit or that any loss was incurred. It is also not necessary to prove that the defendant intended that a particular person receive or give a benefit, or incur a loss.
These provisions are similar to those already contained in the US Foreign Corrupt Practices Act 1977. The books and records offences, as they are commonly known in the United States, have been a major source of prosecutions for the relevant civil and criminal regulators. The Australian false accounting provisions have the same potential and for that reason companies should ensure they have proper policies and procedures in place.
For individuals, the first offence of false dealing with accounting documents carries a penalty of 10 years’ imprisonment or a fine of $1.8 million (or both). Meanwhile, corporations found to be liable face a penalty, which is the greater of:
- $18 million;
- three times the value of the benefit obtained by the body corporate and any related body corporate from the offence; or
- 10% of the annual turnover of the body corporate during the previous 12 months.
The penalties for the second offence, which has the lower requisite state of mind of recklessness, are half of these amounts.
Corporations can be liable for acts of employees, agents and officers
Under the Commonwealth Criminal Code corporations can be liable for the acts of their employees, agents and officers where:
- the board of directors or a high managerial agent carried out or engaged in the conduct, or authorised or permitted the offence;
- there was a corporate culture that directed, encouraged, tolerated or led to non-compliance with the offence; or
- the corporation failed to create and maintain a corporate culture that required compliance with the relevant provision.
It is, therefore, essential that companies focus on creating a corporate culture which makes clear that bribery, corruption and other unethical business practices will not be tolerated. A genuine top-down commitment to ethical practices combined with regular compliance training is essential for companies wishing to achieve this.
What do you need to do?
- Review and, if necessary, update your current anti-bribery and corruption policies to reflect the changes.
- Ensure your employees, agents and officers are aware of the new laws and their obligations.