A recent evaluation of Australia’s detection and enforcement of foreign bribery offences has praised recent regulatory developments but highlighted areas for further improvement.
The Organisation for Economic Co-operation and Development (OECD) Working Group regularly reviews Australia’s implementation of the OECD Convention on Combating Bribery of Foreign Public Officials (OECD Convention). A phase 4 evaluation was conducted in 2017 and the OECD Working Group released its report in December last year (Report). While generally positive, the Report pushed for the further tightening of regulations and improved enforcement as Australia is a significant exporter to high risk countries and in high risk sectors.
The Report details several recommendations that indicate the government’s likely focus areas in the short term. These include:
- improving the potential for detecting foreign bribery through Australia’s anti-money laundering system;
- enhancing whistleblower protections for private sector employees;
- continuing to investigate and prosecute foreign bribery and ensuring appropriate resourcing of authorities to facilitate those improvements; and
- engaging with the private sector to encourage adoption of robust anti-bribery procedures.
Australia is required to report back to the Working Group in two years on the implementation of these recommendations and its further enforcement activities. The Working Group predicts that enforcement will continue to increase as Australian regulators continue to strengthen the institutional framework for investigation and prosecution of foreign bribery offences.
What is the OECD Convention?
The OECD Convention establishes legally binding standards to criminalise bribery of foreign public officials in international business transactions. Australia is one of 43 signatories to the OECD Convention, each of which is subject to phased reviews by the OECD Working Group. This is a highly respected peer-review system of monitoring. The evaluation and reporting system aims to provide some measure of accountability in respect of implementing and monitoring the Convention.
Praise for improved detection and enforcement
Prosecutions and investigations
The OECD Working Group found that there has recently been a marked increase in Australia’s enforcement of foreign bribery offences.
Since 2012, Australia has achieved its first successful foreign bribery prosecution. The ongoing case of R v Ellery  VSC 349 has netted the convictions of four people in relation to bribery involving a Malaysian bank. Three people have also pleaded guilty to foreign bribery offences in R v Jousif  NSWSC 1299, which levelled allegations against a construction company for bribing an Iraqi official.
The Australian Federal Police (AFP) has 19 investigations underway and 13 referrals are under review. The majority of foreign bribery allegations involve officials in the Asia-Pacific region. However, African nations are increasingly involved in foreign bribery investigations. On an industry-basis, the mining and extractives sector was most heavily involved in evaluations, investigations and prosecutions by the AFP. The construction and engineering sector was also prevalent.
Australian regulators continue to face difficulties in investigating foreign bribery offences. The most common challenge is difficulty obtaining evidence from overseas sources. This may be because the bribe recipient cannot be identified or because the recipient may face the death penalty in his or her country, which is of particular concern in South-East Asia. The prevalence of large amounts of complex electronic data is a further practical challenge for Australian authorities.
Enhanced detection, investigation and prosecution capacity
The Report outlined various ways in which Australia has enhanced its capacity for detecting, investigating and prosecuting foreign bribery cases:
- Whistleblower protections in the public sector have been significantly improved under the Public Interest Disclosure Act 2013 (Cth). Despite those improvements, the OECD Working Group identified major deficiencies in protections for private sector whistleblowers. ASIC established a dedicated Office of the Whistleblower in 2014 and a Bill was introduced in Commonwealth Parliament in December 2017 seeking to strengthen these protections.
- Australia has enacted broad false accounting offences in the Commonwealth Criminal Code. Enforcement of these crimes is likely to be improved by the establishment of the Fraud and Anti-Corruption Centre (FACC) in 2014. The FACC is staffed by members of ASIC and the AFP, which is helping to foster a closer working relationship between those authorities. This collaborative relationship promotes early response to combatting foreign bribery and information sharing.
- Legislative amendments have been made to the foreign bribery offences in the Criminal Code to remove impediments to prosecutions. These include removing the requirement that an offender intended to influence a particular foreign public official.
- The establishment of the Fintel Alliance in March 2017 is an important initiative that will help combat foreign bribery. This public-private partnership aims to fight money laundering, terrorist financing and organised crime, including by streamlining the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth).
- The AFP’s international operations include engaging AFP liaison officers around the world to assist in foreign bribery investigations. Liaison officers are a direct contact point for suspicious activities and help in the smooth exchange of intelligence. One key advantage is that AFP liaison officers can help ensure evidence obtained overseas meets Australian evidentiary requirements.
Proposed legislative reforms
Similar to measures in the United Kingdom, the Australian Government has proposed a new corporate offence of failing to prevent foreign bribery. This would see a company held liable for bribery by employees, contractors and agents unless it could demonstrate that it had proper internal procedures to prevent bribery. This would ease the burden on authorities, which currently struggle to attribute responsibility to Australian corporations for bribery by a company or person operating offshore.
A further positive measure has been public consultation by the Australian Government about a proposed model for a deferred prosecution agreement (DPA) scheme. Under those arrangements, a company could avoid prosecution if it negotiated with authorities to cooperate with investigations, pay a financial penalty and implement a compliance program.
These initiatives are yet to be implemented but Australian authorities consider that introducing the new corporate offence in conjunction with a DPA scheme would encourage corporate Australia to self-report foreign bribery. The OECD Working Group recommended that Australia identify ways to encourage companies to develop and adopt internal procedures and compliance programs, along with measures to detect foreign bribery.
Room for improvement
The OECD Working Group identified several areas ripe for follow-up in two years’ time. In particular, the following issues will be subject to scrutiny by Australia’s OECD peers:
- inconsistencies between the Criminal Code and income tax reporting requirements that mean taxpayers are not recording tax deductions in line with the facilitation payments defence, such that the Australian Tax Office is hamstrung in seeking to detect foreign bribery;
- the fate of the Bill introduced into Federal Parliament in 2017 proposing to introduce DPAs and the new corporate offence of failing to prevent foreign bribery;
- steps taken to enhance protections for whistleblowers in the public and private sectors;
- the ongoing existence of the facilitation payments defence, which continues to attract criticism from the OECD Working Group despite acknowledgement that Australia has recently raised awareness about the distinction between facilitation payments and bribes;
- whether external auditors are reporting reasonable suspicions of foreign bribery to authorities, for instance in relation to falsifying company books and records, or to an appropriate level of management;
- enforcement of foreign bribery cases involving political sensitivities; and
- enforcement of false accounting offences involving foreign bribery.