On June 19, 2013, broad amendments to Canada’s Corruption of Foreign Public Officials Act (CFPOA) came into force. They include a new “books and records” offence that effectively brings Canada’s anti-corruption regime more closely in line with the US Foreign Corrupt Practices Act (FCPA) and will make prosecutions much easier for enforcement officials. The change to a nationality test for jurisdiction will also assist enforcement.
The amendments further repeal the current exemption for facilitation payments, but suspend the coming into force of this amendment until a future date to be determined by cabinet. When cabinet brings this amendment into force, the CFPOA will be more closely aligned with the UK Bribery Act, which has no such exemption, but may be out of step with the US FCPA, which currently exempts facilitation payments.
Bill S-14, also known as the Fighting Foreign Corruption Act, was introduced in the Senate on February 25, 2013, and quickly passed through the Senate and the House of Commons without amendment. As set out in our previous bulletin, “Beefing up Canada’s anti-corruption legislation,” the amendments make six changes to the CFPOA, which will dramatically affect how many Canadians do business at home and abroad.
The six amendments: (1) create a new books and records offence; (2) allow for cabinet to eliminate the facilitation payments exemption; (3) broaden the definition of “business” to include any business, profession, trade, calling, manufacture or undertaking, whether or not for profit; (4) create nationality jurisdiction, to be able to prosecute Canadian citizens, permanent residents, and businesses organized under federal or provincial laws wherever they are in the world; (5) increase the maximum penalty to 14 years imprisonment; and (6) specify that the RCMP alone can lay charges.
For most companies, the two most significant changes are the creation of a books and records offence and the eventual elimination of the facilitation payments exemption. Non-governmental organizations and charities will also be significantly affected by the CFPOA’s expanded scope of application.
Books and records offence
The new books and records offence is similar to that which exists in the US FCPA. This offence will prohibit maintaining accounts that do not appear in any of the books and records that are required to be kept in accordance with GAAP, failing to record or inadequately recording transactions, recording expenditures that did not occur, incorrectly identifying the purpose of a liability, knowingly using false documents, and intentionally destroying books and records earlier than permitted by law.
Criminal liability will follow under the CFPOA where any person commits any of these acts in order to obtain or retain an advantage in the course of business or to hide such advantage.
US authorities heavily rely on a similar FCPA provision to prosecute corruption and bribery, rather than the bribery offences themselves, because it is easier to convict a person for having failed to accurately record the payment of a bribe. It can be expected that Canadian authorities will follow suit.
Eventual elimination of facilitation payments exemption
Facilitation payments are commonly made (and expected) in certain countries, and removing this exemption from the CFPOA could dramatically affect how many Canadians and Canadian entities conduct themselves abroad. No date for the coming into force of the removal has been set. Government witnesses stated at parliamentary committee meetings on the bill that delayed implementation of this amendment is intended to afford Canadians and Canadian entities adequate time to, as the case may be, adapt their business practices to the new regime.
Eliminating the facilitation payments exemption will bring Canada’s legislation in line with the UK Bribery Act and other anti-corruption regimes in place around the world that currently prohibit facilitation payments. However, it may put Canada out of step with the US FCPA, which continues to have an exemption for facilitation payments. This will no doubt be an important consideration in cabinet’s deliberations over the timing of when to bring the amendment eliminating the exemption for facilitation payments into force.
The full text of the amendments is available online here.