Over the last fortnight, there has been significant media criticism of ASIC’s approach to foreign bribery cases.

Today, ASIC Chairman Greg Medcraft responded to this criticism in a speech at the AmCham Business Leaders Lunch to ‘set the record straight’, describing much of the criticism as ‘ill-informed’.

The transcript of his speech has been uploaded to the ASIC website here.

Key takeaways from the speech include:

ASIC’s focus is on public companies

ASIC’s key objective is on ensuring confident and informed investors and fair and efficient markets. Accordingly, and given its limited resources, it focuses on cases against public companies which affect a wider range of shareholders, especially ‘mum and dad’ investors.

ASIC considers that the AFP has primary responsibility for foreign bribery

Foreign bribery is an offence under the Criminal Code, enforced by the AFP, not ASIC. The AFP are the ‘bribery specialists’, with:

  • a dedicated Fraud and Anti-Corruption Centre;
  • officers in foreign jurisdictions as well as forensic accountants and lawyers; and
  • access to international intelligence.

By contrast, ASIC’s role is to enforce breaches of the corporations legislation.

ASIC did confirm, however, that there may be a small number of cases where a bribery offence might also mean that directors are liable for breaches of the Corporations Act, and that this will be an issue for ASIC.

ASIC is reluctant to run parallel investigations with the AFP

ASIC will generally avoid running civil proceedings parallel to criminal proceedings in order to preserve the principle that allows defendants in criminal proceedings the right to silence.

Other reasons why ASIC is reluctant to run parallel investigations include:

  • the difference between civil and criminal penalties available, with the latter acting as a far more effective deterrent; and
  • parallel investigations can result in duplication of resources and added pressure on witnesses.

ASIC will, however, run a parallel bribery investigation concerning directors’ duties under certain circumstances. Relevant factors include:

  • if a limitation period is due to expire;
  • the impact of the conduct on the market, in particular, whether the conduct is ongoing;
  • if the bribery materially damages the company or involves a publicly listed company;
  • whether the AFP investigation will be adversely impacted; and
  • whether the AFP action alone is an appropriate response  

There are 3 things normally required for a successful directors’ duty prosecution in the bribery context

  • Hard evidence that the underlying foreign bribery offence took place
  • Demonstration of director negligence
  • Likelihood of the company suffering harm as a result of this negligence

ASIC noted such cases are complex and costly (referring in particular to the AWB experience) – the takeaway being that such cases will not be taken on lightly.

Centro provides key lessons for directors which are applicable in the bribery context

  • Scepticism – Directors must question the information provided to them. There is no defence for wilful blindness.
  • Accounting knowledge – Directors are expected to have financial literacy and basic accounting knowledge.
  • Accountability and control – It is up to directors to ensure the executive has systems, protocols and controls to ensure sound corporate governance, and that there is the right level of risk management.

ASIC noted that 1 and 2 are particularly relevant in the bribery context – directors of companies operating in high risk sectors or jurisdictions need to ensure they have appropriate policies in place to mitigate the risk, and systems, procedures and protocols to create a culture where bribery will not occur.

There are 3 broad factors which ASIC will take into account in deciding what cases to pursue

  • ‘The extent of harm or loss’ – including the number of people who have lost money, and whether the matter is ‘so far-reaching and so egregious (that) it must be investigated’.
  • ‘Cost vs regulatory benefit’ – that is, what are the regulatory benefits of pursuing misconduct compared to the cost, and whether alternative actions are available to ASIC or others.
  • ‘Available evidence’ – whether the case will stand up in court, and be based on ‘hard fact’ rather than ‘rumour or hearsay’.