For a lot of Australian corporates, the sudden focus in the last 18 months on bribery and corruption has been a big surprise. 

The Criminal Code has prohibited bribery of foreign officials since 1999, but while Australian companies have been rapidly increasing their footprint in Asia, the Middle East, Latin America and Africa, it seems that ensuring that Australian corporates don’t engage directly or indirectly in corrupt activities has not been high on the risk agenda.

We all wish we could have a crystal ball, but when the RBA Governor Glenn Stevens told the House of Representatives’ Standing Committee on Economics when questioned about the Securency scandal that, ”with the wisdom of hindsight, older and more scarred as we are now…there should have been more scepticism and questioning of the management of both those companies earlier”, many in the Australian corporate community shuddered.

To effectively manage the risk of bribery and corruption, corporates need to be prepared. Having an anti-bribery policy is great, but in itself it is not enough. We need to learn from mistakes and anticipate and plan for potential legislative changes and regulatory shifts both here in Australia and abroad.

Looking into our crystal ball, we have put together our top 5 predictions for anti-bribery regulation and enforcement in Australia for 2013.

1. Increased investigations and prosecutions

The OECD’s phase 3 report on Australia’s implementation of the OECD Anti-Bribery Convention was released last month and it wasn’t glowing.

It has not escaped the OECD’s attention that the Securency case which began in July 2011 is Australia’s only foreign bribery prosecution to date. The report suggests that the lack of enforcement is not for want of allegations with 28 allegations of foreign bribery involving Australian companies and individuals since 2005. The report expresses a concern that cases have been terminated prematurely and without full investigation.

It is clear that the OECD expects to see an increase in enforcement action by the Australian Federal Police (AFP). Given that Australia is required to make an oral follow-up report on its implementation of certain recommendations by October 2013, in the next year, Australian corporates can expect to see some changes in relation to enforcement action. No more Mr Nice Guy from the AFP. However, don’t expect investigations and enforcement to be swift unless the AFP can muster some more resources quick smart.

2. Spotlight in the boardroom

According to the OECD report, at least 75% of the top 100 companies listed on the Australian Stock Exchange operate in a high risk sector, a high risk country or both. It is surprising then that despite this exposure, a number of Australian companies do not appear to adequately manage this risk. However, times are changing.

In the last 18 months, directors’ focus on bribery and corruption has increased exponentially with the reams of press dedicated to the issue. The implementation of the UK Bribery Act, Securency prosecutions, executives from the Reserve Bank of Australia (RBA) hauled in front of the House of Representatives Standing Committee for Economics, investigation into one company’s operations in Iraq and ASIC settling proceedings against Andrew Lindberg for alleged breaches of his duties of CEO of AWB in connection with the misuse of the UN Oil for Food program, has got directors lying awake at night and taking note.

In 2013, you can expect that bribery and corruption will be a fixed agenda item at board meetings for Australian companies operating in high risk sectors and regions. No director will dare to dismiss this issue as another boring compliance sign off.

3. Focus on self-reporting

The RBA governor Glenn Stevens acknowledged when questioned about the Securency scandal, that he should have called in police earlier to investigate the bank’s note-printing subsidiaries, now implicated in foreign bribery charges.

In Australia, there are no clear legislative provisions requiring companies to self-report incidents of bribery. So, when misconduct is discovered, it is a conundrum for the executives and directors to decide whether the company should initiate the first step and go to authorities. It is always much easier when you have the benefit of hindsight, but Glenn Stevens’ comments will be ringing in the ears of directors for a long time.

With the knowledge that the AFP is going to be more aggressive with prosecutions going forward, there will be increasing pressure on companies to self-report. In 2013, expect to see more companies coming forward and self-reporting.

4. Removal of facilitation payments defence

The UK Bribery Act’s removal of the facilitation payments defence has caused all sorts of issues with Australian companies with a presence in the UK and operations in jurisdictions where bribes are ordinary course. Some have just banned facilitation payments entirely – we just hope that their colleagues and business partners in Somalia got the message.

The Australian Government released a consultation paper in 2011 seeking views on the potential removal of the facilitation payments defence. The feedback was mixed, but it was clear that for some, facilitation payments are an essential part of doing business in certain jurisdictions and that the removal of the defence would impact a lot of Australian companies.

In 2013, we can expect the Australian government to follow the Brits and take further steps to remove the facilitation payments defence. Let’s just hope the government get the Energy and Resources lot on board beforehand.

5. Greater protections for whistleblowers

We have been seriously thinking about national legislation and greater protection for whistleblowers for how long? We have had Select Committees, inquiries and recommendations, but our commitment on this issue has been lacking to say the least.

In the United States, whistleblowers have been instrumental in the Securities and Exchange Commission (SEC) and Department of Justice bringing actions against US corporates for bribery and corruption related offences. The new SEC rules will now incentivise whistleblowers to report incidents to their company first, which can only assist companies in managing any unethical behaviour and reinforcing a culture where bribery is prohibited.

It is clear that harmonised national legislation in Australia which protects whistleblowers, will assist both corporates and regulators alike in the fight against corruption.

In 2013, we can’t expect miracles, but with increasing pressure on the AFP to prosecute, we can expect the government to think carefully about how they can incentivise employees to dob on their naughty bosses - if some of the fines internationally are anything to go by, successful prosecutions may even help bring Australia’s budget into surplus!