In which part of the world is the risk of anti-corruption enforcement the highest? Law360 reported last week that, according to a report by Freshfields Bruckhaus Deringer LLP, Asia appears to be the focus of United States (“US”) regulators’ Foreign Corrupt Practices Act crackdown. The article reports that at least 115 pending investigations are currently underway in Asia, followed by 44 ongoing investigations in Africa and 19 in the European Union.
These figures suggest that Canadian companies doing business in Asia should be aware of the increased possibility that they could be the subject of regulatory attention. As the report notes, companies often struggle with compliance in Asia while manoeuvering local laws, customs and business practices leading to behaviour which falls outside the permitted scope of international anti-corruption legislation.
Regulation of Canadian Companies
Canadian companies listed on American exchanges are subject to FCPA enforcement as foreign issuers under the Act. As such, companies may be the subject of U.S. enforcement notwithstanding their incorporation in Canada.
In addition, companies may be investigated under Canada’s Corruption of Foreign Public Officials Act (“CFPOA”), which creates substantially similar offences as the US’ FCPA – namely, bribing foreign public officials or keeping inaccurate books and records for the purpose of hiding bribes. One key difference between the two acts is the upcoming elimination of the facilitation payments exception from the CFPOA. This means that companies could be prosecuted under the Canadian act for small payments made to secure the performance of routine, non-discretionary acts by low-level officials, a common risk for companies doing business in regions such as Asia or Africa.
Although the RCMP maintains criminal prosecutorial authority under the CFPOA, similar to Department of Justice’s criminal jurisdiction over the FCPA, Canada does not have a body responsible, as a matter of policy, for handling anti-corruption matters from a civil/regulatory perspective, such as the Securities and Exchange Commission in the U.S. One possibility would be the Cooperative Capital Markets Regulatory Authority (“CCMRA”), once it is established (The CCMRA is intended to be established in accordance with the memorandum of understanding amongst the Government of Canada and several provincial governments, including Ontario and British Columbia, as discussed in a previous post).
Ensuring Anti-Corruption Compliance
Given the increasing risks inherent in doing business in regions such as Asia and Africa, Canadian companies operating overseas have another reason to ensure they have robust anti-compliance programs in place. Best practices include, for example, building anti-corruption clauses into agreements, ensuring facilitation payments are not taking place, having adequate bookkeeping practices, establishing whistleblower programs to report potential wrongdoing, and ensuring all government payments are made to an institution rather than an individual and governed under a properly executed memorandum of understanding. Companies should also ensure proper oversight following the Pétroles Global decision establishing that wrongdoing by middle management can constitute the directing mind of the company for the purpose of corporate criminal responsibility.