Does your business have procedures in place to deal with the risks of bribery and corruption – or to respond if an incident is uncovered?
If not, it may be time to take action, particularly if you are among the increasing numbers of New Zealand businesses which operate across borders.
New Zealand companies operating offshore are subject not only to our own “long-arm” bribery and corruption laws, but potentially also to those of other countries. Enforcement agencies are actively seeking out evidence of corporate wrongdoing. New Zealand’s reputation as a bribery and corruption-free business environment will be put to the test sooner rather than later.
How clean is New Zealand?
Although New Zealand consistently ranks toward the top on Transparency International’s Corruption Perceptions Index (and is presently ranked Number 1), evidence collected in a recent survey indicates that many New Zealand companies:
- do not consider bribery and corruption to be a business risk which applies to them, and
- consequently do not have systems and policies in place to detect and respond to incidents of bribery and corruption.
Given the hidden nature of bribery and corruption, a perception of New Zealand as corruption-free may – if founded on a lack of attention to potential problems – mask a somewhat different reality.
New Zealand businesses are increasingly operating in parts of the world, including Asia, where the perceived prevalence of bribery and corruption is high. For such companies, complacency towards the risks of corporate bribery and corruption affecting their network is out of step with the prevailing international trend.
The changing regulatory environment
New Zealand already has powerful extraterritorial rules outlawing overseas bribery and corruption by a New Zealand company operating offshore. No prosecutions have, however, yet been laid. Partly for this reason, Transparency International has recently placed New Zealand in the “No Enforcement” category in relation to the OECD’s Anti-Bribery Convention.
This inactivity is unlikely to continue. The Serious Fraud Office (SFO) is actively looking for evidence of overseas bribery and corruption by New Zealand companies and will investigate any genuine allegations.
New Zealand businesses operating overseas also risk enforcement action in other jurisdictions. As well as local laws, New Zealand companies may be subject to:
- the United Kingdom Bribery Act, which applies to New Zealand companies if they do business in the United Kingdom, and criminalises bribery offences committed anywhere in the world, and
- the United States Foreign Corrupt Practices Act, which applies to any acts done in the United States by any person in furtherance of a corrupt payment – including electronic transfers of money through United States banks. As many overseas companies have learned, a great number of international electronic transactions are, at least in part, processed through New York clearing banks.
Protecting your firm
If you conduct cross-border business, it is now best practice – even essential – to have a bribery and corruption compliance policy.
The United Kingdom Bribery Act even creates a corporate offence for organisations that fail to prevent bribery by an associated person.
A robust compliance policy will have a significant focus on prevention. But it should also cover how you respond if a suspicious incident is reported or identified.
The advantages of responding proactively
There are significant advantages in planning ahead for your company’s response to an incident. As highlighted by recent New Zealand case law on directors’ duties, enforcement authorities and the courts are likely to take a dim view of a governance structure which makes no serious effort to identify and investigate matters of concern.
Most importantly, a thorough internal investigation puts you in a stronger position. In some cases, self-reporting of an incident can be a mitigating or exculpatory factor, especially for a company which has uncovered rogue conduct in the field. In other cases, an internal investigation creates a paper trail and knowledge which better equips your company to engage with an enforcement agency in the event of an external investigation.
Initiate an investigation – and seek legal advice
Once management or the board become aware of suspicious events, the first step should be to find out more about the potential problem. In most cases, it will make sense to engage legal counsel to co-ordinate that investigation. The advantages of using a law firm include independence, specialist knowledge and resources. But the most powerful advantage is legal professional privilege.
In New Zealand, the SFO has broad powers to compel disclosure of information by firms and persons under investigation. These include the power to compel a statement by a person even where that will incriminate the person, which is a departure from ordinary rules of criminal procedure.
However, the SFO cannot require a legal practitioner to disclose privileged communications. While privilege is generally available in New Zealand in respect of legal advice from in-house counsel, that is not always the case overseas. Accordingly, should you decide to investigate, the safest course of action is to wrap your investigation in legal privilege to the broadest extent possible.