As of 1 March 2016, Australia is a step closer to addressing legislative gaps identified by the Organisation for Economic Co-operation and Development (OECD) with respect to Australia’s anti-bribery obligations under international law.
The OECD has previously noted that Australia’s existing laws either do not apply in a wide enough range of circumstances to properly criminalise false accounting in the context of paying bribes, or do not apply adequate sanctions.1
The new criminal law
The Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Bill 2015 (Bill) received royal assent on 29 February 2016 and the false accounting provisions commenced on 1 March 2016.
As discussed in our previous newsletter issued in December 2015 titled ‘Foreign bribery update - proposed laws for false accounting introduced to Parliament’, the Bill amends the Criminal Code Act 1995 (Cth) (Code) to create two new offences of false dealing with accounting documents (i.e any documents required for accounting purposes, and registers or financial records under the Corporations Act 2001 (Cth)).
To recap, the new laws2 will criminalise conduct where a person either:
- Makes, alters, destroys or conceals an accounting document, or fails to make or alter an accounting document that the person is under a duty to make or alter; and
- Either intends or is reckless to the fact that the conduct would facilitate conceal or disguise the giving or receiving of a benefit that is not legitimately due, or a loss that is not legitimately incurred.
The offences apply to conduct that occurs both within Australia and overseas, and to companies incorporated in Australia, Australian company officers and employees, as well as persons engaged to provide services to an Australian company, and Commonwealth public officials acting in the performance of their duties. The offences will apply to the activities of foreign subsidiaries of Australian parent companies (and their officers, employees and agents).
The Attorney General’s written consent is required to commence proceedings if the conduct constituting the alleged offence occurs wholly overseas, and the alleged offender is not an Australian citizen, resident or body corporate incorporated under the laws of Australia.
To establish either offence it is not necessary to prove that a benefit was actually received or a loss actually incurred, or that the offender intended that a particular person would receive a benefit or incur a loss.
The intentional false dealing with accounting documents offence imposes a maximum penalty for an individual of 10 years’ imprisonment, a fine of $1.8 million, or both.
The maximum penalty for a body corporate is the greater of $18 million; three times the value of the benefit directly or indirectly obtained; or 10% of the annual turnover of the company during the previous 12 months.
The reckless false dealing offence imposes a maximum penalty for an individual of 5 years’ imprisonment, a fine of $900,000, or both.
The maximum penalty for a body corporate is the greater of $9 million; 1.5 times the value of the benefit directly or indirectly obtained; or 5% of the annual turnover of the company during the previous 12 months.
What this means for you and your company
The application of the false accounting offence provisions is not limited to circumstances relating to foreign bribery (as it applies equally to the domestic context) but is clearly intended to cover the use of irregular accounting methods (e.g. ‘off the books accounts’) aimed at concealing or enabling bribes, including bribes to a foreign public official.
Companies must ensure that they have adequate anti-corruption compliance procedures in place to address corruption risks and the impact of this recent legislative change, including by:
- Having systems in place to deter, detect and investigate irregularities (and potential acts of bribery), and monitor the ethnical quality of transactions (by use of internal financial controls);
- Making employees, contractors and agents fully aware of company policies and procedures relating to corruption risks (e.g. facilitation payments, hospitality, promotional expenditures etc.), including all financial control mechanisms;
- Ensuring a right to audit the books and records of subsidiary entities, business partners, agents and contractors;
- Inserting indemnities into contracts with service providers, consultants, agents and intermediaries (etc.) to protect the company in event such persons fail to comply with applicable anti-corruption laws and company policy while engaged by the company. If breaches are ‘material’ contracts should allow a right to terminate;
- Establishing an audit committee if involved in joint venture activities where at least one representative of each company has the authority to view accounts and expenditure and prepare regular reports; and
- Providing a confidential process for employees and agents to report any concerns or suspicions of bribery or other corrupt activity.
Most importantly, the new laws are a timely reminder of how important it is for companies to foster a corporate culture of compliance with the law by way of an executive level commitment of ‘zero tolerance’ to corruption in any form. This requires effective management communication (both internally and externally) of the company’s anti-corruption position, and an appropriate degree of management involvement in the on-going development of the company’s anti-bribery and anti-corruption measures.