On February 5, 2013, the Canadian government introduced amendments to the Corruption of Foreign Public Officials Act (CFPOA) that close significant loopholes, create new offences and generally strengthen Canada's anti-corruption legislation. These amendments, when passed, will be one of the most significant developments in Canada's battle against bribery and corruption since the enactment of the CFPOA and, in conjunction with recent prominent enforcement proceedings, will further raise the stakes for individuals and companies conducting business abroad. Notably, the proposed amendments to the CFPOA include increasing the maximum sentence of imprisonment, eliminating facilitation payments, creating a new books and records offence, and significantly expanding the application of the CFPOA to the worldwide conduct of Canadian citizens and companies. The amendments are discussed further below.
The CFPOA as currently enacted contains a significant loophole. Unlike other anti-corruption statutes, such as the United States' Foreign Corrupt Practices Act (FCPA), the CFPOA currently requires a territorial nexus between Canada and the offence. As a practical matter, this is currently a significant limiting factor on Canada's ability to enforce this legislation, as some portion of the formulation, initiation, or commission of the offence currently needs to take place within Canada. The proposed amendments close this loophole by deeming the acts of Canadian citizens, permanent residents, corporations, societies, firms, or partnerships on a worldwide basis to be acts within Canada for the purpose of the CFPOA. The practical result of the amendments is that Canadian citizens and companies would be subject to worldwide regulation by Canadian authorities under the CFPOA, regardless of whether some portion of the activity occurs in Canada. This will increase the scope of conduct caught by the CFPOA and broadens the reach of Canadian enforcement authorities.
The proposed amendments also significantly increase the penalties for violating the CFPOA. The CFPOA currently provides for a maximum penalty of five years' imprisonment. The proposed amendments increase the maximum penalty to 14 years' imprisonment. The CFPOA also provides for unlimited fines for corporations.
NO FACILITATION PAYMENTS
The CFPOA as currently enacted provides an exception for facilitation payments. Facilitation payments are small payments to low-level officials made to secure or expedite performance of "acts of a routine nature" (i.e., do not involve discretion on the part of the official and are acts that the company is entitled to as of right). As facilitation payments are effectively small bribes, and typically illegal in the foreign country, the proposed amendments eliminate the facilitation payment exception putting these payments on the same footing as other unlawful payments under the CFPOA.
To the extent that corporate policies currently permit facilitation payments in any circumstance, these policies and training materials should be updated to reflect the new legal landscape. Notably, however, the amendments to the CFPOA provide that the facilitation payment exception is to be phased out at a later date by order of council.
NEW BOOKS AND RECORDS OFFENCE
The proposed amendments create a new offence for concealing bribery in company accounting records. This new offence has some similarity to the books and records provisions of the FCPA, which has been a very effective enforcement tool for U.S. regulators. The proposed amendments make it an offence to keep secret accounts, falsely record, not record or inadequately identify transactions, enter liabilities with incorrect identification of their object, use false documents or destroy accounting books and records earlier than permitted by law for the purpose of concealing bribery of a public official. This offence carries a maximum penalty of imprisonment of up to 14 years. Notably, the addition of this books and records offence has the potential to broaden the reach of the CFPOA to not only those involved in bribery and corruption schemes, but also to those responsible for maintaining corporate book and records.
NO FOR-PROFIT REQUIREMENT
The proposed amendments also potentially broaden the bribery offence. The CFPOA as currently enacted contains language that restricts a bribery offence to for-profit transactions. Under the proposed amendments, the for-profit requirement has been removed. While this may slightly broaden the reach of the CFPOA, this change appears less significant.
These proposed amendments demonstrate further commitment by the Canadian government to combat bribery and corruption by Canadian citizens and companies. The proposed amendments significantly expand the scope and reach of the CFPOA, which along with recent enforcement proceedings, underscores the need for robust compliance programs to deter and detect improper conduct.
We wish to acknowledge the contribution of Paul Schabas to this publication.