A recent OECD Report on Australia's implementation of the OECD Anti-Bribery Convention has identified a poor investigation and enforcement record and highlighted gaps in the current law.
The OECD's Convention on Combating Bribery of Foreign Officials in International Business Transactions provides the international framework for laws dealing with transnational bribery, including the US Foreign Corrupt Practices Act (FCPA), UK Bribery Act and Australia's own Commonwealth Criminal Code.
The OECD Working Group on Bribery regularly reviews and reports on the performance of signatories to the Convention. It has recently delivered Australia's report card.
The Report comes at a crucial time for Australia's anti-bribery laws and their enforcement. The Federal Government is conducting a consultation on the facilitation payments defence to foreign bribery which may lead to its repeal. At a policy level the Federal Government has announced that foreign bribery is a priority, and it is expected to release a National Anti-Corruption Plan in late 2012. The first prosecution under Australian foreign bribery law is currently before the courts.
While commending certain developments, on balance the Report is critical of Australia's investigation and enforcement efforts, and certain aspects of Australian legislation and policy. The Report makes a number of recommendations which are likely to shape the direction of Australian legislation, policy and enforcement.
Investigation and enforcement
The Report is highly critical of Australia's investigation and enforcement record, describing overall enforcement as "extremely low". The Report notes that of the 28 foreign bribery referrals received by the Australian Federal Police (AFP) since 2005, 21 have been concluded without charge, one has led to prosecutions, and the balance remain ongoing. The Report also states that the AFP may have closed certain foreign bribery cases before thoroughly investigating the allegations.
Apart from observations in respect of particular investigations, what appears to underlie the OECD's critique is a belief that the investigation and enforcement statistics do not match the size of the Australian economy, its level of exports, and the risk profile for Australian businesses given the sectors and countries in which they operate.
The Report calls upon Australia to review its overall approach to enforcement through steps such as:
- raising awareness of the distinction between facilitation payments and bribes, and encouraging companies to prohibit or discourage the use of small facilitation payments;
- enhancing the use of corporate liability provisions;
- increasing sanctions and enforcement efforts in respect of false accounting provisions and leveraging the Australian Securities and Investment Commission's (ASIC) experience and expertise in investigating corporate economic crimes;
- improving co-ordination and information sharing between investigative bodies;
- ensuring that foreign bribery allegations are not prematurely closed by the AFP; and
- improving whistleblower protections while developing a clear framework in relation to plea bargaining and self-reporting.
False accounting provisions
Of note is the Report's focus upon the “false accounting” provisions in the Corporations Act 2001. This is the first time that the OECD has commented in detail on these provisions. The Report concludes that the maximum sanctions against legal persons for these offences are currently insufficient, and that there is a low level of enforcement. It recommends that the AFP routinely consider investigations of charges such as false accounting, especially in cases where a substantive charge of foreign bribery cannot be proven.
In the US, the so-called “books and records” offences are often used by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) as a way into investigating and prosecuting companies for violations of the FCPA.
Perhaps an adjunct to the OECD's recognition of the importance of regulating accounting practices as a gateway to the investigation and prosecution of bribery offences there is a recommendation that the AFP leverage the ASIC’s experience and expertise in investigating corporate economic crimes to assist in the prevention, detection and investigation of foreign bribery where appropriate. The Report also calls for the two organisations to define their roles and responsibilities, and rules for case referral and information sharing with greater precision.
If ASIC's experience and powers were deployed in aid of anti-bribery enforcement in Australia, that would have a dramatic effect on the exposure of corporate Australia to investigations of this kind.
Previous OECD Reports have resulted in legislative and other developments in Australian law and policy.
In the short term the timing and content of the Report could add impetus to calls to repeal the facilitation defence for foreign bribery. In the medium to long term it may lead to increased co-operation in the investigation and prosecution of foreign bribery offences, and more focus upon the false accounting provisions under the Corporations Act.
As such, the effects of the Report are likely to be felt directly by Australian companies and soon. Further, it serves as a reminder that Australian companies must continually review their practices and procedures to ensure compliance, and be alive to the potential for further legislative developments in the short to medium term.