Bill S-14, the Fighting Foreign Corruption Act, was introduced in the Senate on February 5 to amend the Corruption of Foreign Public Officials Act (CFPOA) and received Royal Assent on June 19. The amendments significantly expand the reach of the CFPOA, Canada’s principal law aimed at prohibiting bribery and corruption of foreign public officials for the purpose of obtaining or retaining business in foreign markets. In the light of the new, broadened scope of the CFPOA and the significant criminal liabilities that may arise from the violation of its terms, this article reviews the key amendments to the law.
The CFPOA was enacted in 1999 to implement the Paris-based Organization for Economic Cooperation and Development (OECD) anti-bribery convention. The new revisions introduce six significant changes that respond to criticism and pressure from the OECD and organizations such as Transparency International that have urged Canada to deal more firmly with foreign bribery and corrupt business practices. In addition, both the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act, 2010 possess powers that, when compared to the previous CFPOA, showed that the Canadian law as it stood prior to Bill S-14 contained significant gaps. Some of these gaps were addressed in Bill S-14 so that Canada could be equipped with the legal tools needed to respond to the serious issue of bribery and corruption.
Key Changes to the CFPOA
- Jurisdictional Change
Under the previous law, Canada had jurisdiction when an offence under the CFPOA was committed in whole or in part in Canada or there was a “real and substantial” link between the offence and Canada. That meant that a substantial portion of the foreign bribe or corrupt activity had to be linked to Canada. A Canadian abroad who engaged in corrupt practices could have potentially avoided prosecution if the corrupt act had little or no connection to Canada. Citizenship was not sufficient for a real and substantial connection.
The new Act has changed the jurisdiction of the CFPOA by introducing a “nationality” jurisdiction which extends the application of the CFPOA to those committing a prohibited activity outside of Canada regardless of whether there is a real and substantial link to Canada. The new law applies to Canadian citizens and companies at anytime and anywhere, and to permanent residents who return to Canada after committing an offence under the CFPOA.
- Introduction of Books and Records Provisions
The previous law did not have any provision that prohibited the keeping of books and records to hide a bribe to foreign public officials. Such provisions already exist in the U.S. FCPA. To respond to this gap, Bill S-14 amended the CFPOA by introducing a separate offence for illicit accounting that makes it illegal to do any of the following accounting activities for the purpose of hiding a bribe to a foreign public official:
- To establish or maintain accounts which do not appear in any books required to be kept in accordance with accounting standards;
- To make transactions that are not recorded in those books;
- To record non-existent expenditures in those books;
- To knowingly use false documents; or
- To intentionally destroy accounting books earlier than permitted by law.
- No More Facilitation Payments
The previous law contained an exception for payments given to foreign officials to do routine tasks they are required to do as part of their official tasks. Called “facilitation payments,” these typically are small sums of money paid to government officials in order to do some task they are already required to do. This may include activities such as providing electricity or water, providing police services, delivering mail on time, or processing a valid visa in a timely manner. Although bribe-type payments, they are distinguishable from the current prohibition on bribe payments in that they are not used to obtain or retain a business advantage but rather to get officials to do that which they are required by law to do.
Nevertheless, like the U.K. Bribery Act, the new Act proposes the elimination of facilitation payments as an exception from the offence provisions of the CFPOA. Even though the Act has now received Royal Assent, no fixed date has yet been determined for when this elimination will occur.
Both Senate and Government speakers in the House of Commons have expressed concern that Canadian companies could be put at a competitive disadvantage when such facilitation payments are eliminated. This concern stems from the fact that other countries, most notably the U.S., Australia and New Zealand, currently allow this type of payment. Furthermore, in some countries, where these payments are routinely made, they are not considered illegal. The delayed implementation is thus purportedly to allow changes to be made in the global marketplace before the provision is enacted in Canada. Likely this delayed implementation is also aimed at putting Canadians and Canadian companies on notice of the change to permit them time to adjust their internal policies and procedures.
- Increased Penalty
The previous version of the CFPOA carried a maximum penalty of five years imprisonment and/or the levying of fines of an unlimited amount. The new law has increased the maximum penalty of incarceration to 14 years imprisonment. There is no change to the amount of fines that can be awarded.
The maximum jail time is now in line with the domestic fraud provisions of the Criminal Code (i.e. 14 years) but is greater than the five years currently imposed under the Criminal Code for the bribing of Canadian public officials.
The increase of the sentence for time in jail to a maximum of 14 years means that judges will no longer be able to grant absolute or conditional discharges to those Canadian citizens or permanent residents found by the courts to have violated the CFPOA.
- Not Just For Profit
Unlike the FCPA and the U.K. Bribery Act, the CFPOA had previously applied only to “for profit” businesses. This meant that charitable institutions and not-for-profit organizations were not subject to the CFPOA. To remove doubt, under the new law, the word “for profit” has been removed. This means the CFPOA will now explicitly apply to for-profit businesses as well as not-for-profit companies and charities.
- Narrowing Of Power To Lay Charges
Previously, there was no restriction on which Canadian police force or peace officer could lay a charge under the Act. Under the new law, only the RCMP can lay a charge under the CFPOA.
In speeches in the House of Commons, this change was characterized as an effort to have a uniform approach across Canada and to raise awareness of the RCMP’s primary role in CFPOA investigations.
Bill S-14 passed without change, significantly expanding the scope of the CFPOA to place it on par with U.S. and U.K. law.
In light of the significant liabilities that can arise for violations of the revised CFPOA, the prudent course of action for companies and individuals is to make certain they understand the law and have strategies in place, both to comply with that law and to minimize any risks arising from potential violations of that law.