Australia is shifting its gears in its approach to tackling the threat of foreign bribery.
On the back of international criticism that our legislation is too soft and there is a lack of successful enforcement, the Australian Government is looking at imposing an automatic liability on companies for foreign bribery offences along with the introduction of the lesser offence of recklessness.
If the measures set out in the April 2017 Consultation Paper are passed in their current form, the potential impact on Australian companies and its officers are far-reaching. If you are an Australian company dealing with foreign officials, whether through your staff or associates, you may be exposed.
The key changes to foreign anti-bribery laws at a glance
If your company does business overseas and persons associated with it deal with foreign officials, then you could be held responsible if they bribe a foreign official to gain some benefit.
A broader definition of "associate"
The proposed measures expand the definition of "associate" to mean "an employee, agent, contractor or subsidiary of the other person, is controlled by the other person or performs services for or on behalf of another person".
The introduction of two new offences
1. Corporate failure to prevent bribery
This applies to companies whose employees or associates engage in foreign bribery to benefit the company. The liability is automatic, regardless of whether the persons involved are convicted.
A defence is available if the company can prove it had adequate procedures to prevent and detect foreign bribery.
2. Lesser offences based on recklessness
The current legislation only applies where it can be proven that the person intended the bribe to influence a foreign official.
The new offence would to apply to situations where the person may not intend to influence a foreign official but is aware there is a substantial risk that a foreign official may be improperly influenced in the circumstances, but still takes the risk. As this fault element is lower than intention, the associated penalties and jail time are lower but still substantial.
A broader definition of "foreign public official"
The definition will be broadened to include formal and informal candidates standing for office. Australian businesses making or considering foreign political donations or contributions to solicit the favour of foreign officials before their election to office should consider the implications of the new measures.
The inclusion of acts outside a foreign official's official capacity
Bribes which solicit acts outside a foreign official's duties, such as soliciting honorific titles, will now be captured.
The implementation of a broader advantage/benefit test
Replacing the specific business advantage/benefit requirement with a broader advantage/benefit test means that bribes for:
- a personal advantage;
- some future advantage or favour; or
- for the benefit of third parties;
will be caught by the new measures.
A move from the "not legitimately due" test to an "improperly influence" test
The "improperly influence" test will shift the focus to the impact upon the foreign official.
The following factors may be considered when trying to determine if there is improper influence:
- proportionality of the benefit derived to the consideration conferred;
- onature of the items involved;
- to whom the benefits are provided and how;
- if a legal obligation exists to provide the benefits; and
- any documentation surrounding each transaction.
The introduction of a deferred prosecution scheme
As an alternative measure to corporate prosecution for serious crimes, the corporation may have the option enter into an agreement to perform certain actions with prosecution suspended pending successful completion. If successfully completed, the crimes subject to the agreement would not be prosecuted.
Higher, tougher penalties
The penalties will depend upon who is involved and whether the crime is intentional, reckless, or involves a corporate failure to prevent foreign bribery.
Maximum penalties proposed are:
If intentional: 10 years' jail and/or 10,000 penalty units (currently $2,100,000)
If reckless: 5 years' jail and/or 5,000 penalty units (currently $1,050,000)
If intentional OR for corporate failure to prevent foreign bribery: the greater of:
- 100,000 penalty units (currently $21 million),
- three times the value of the benefit (if it is ascertainable), or
- 10% of the corporation's annual turnover (if the benefit is not ascertainable)
If reckless: the greater of:
- 50,000 penalty units (currently $10.5 million),
- 1.5 times the value of the benefit (if it is ascertainable), or
- 5% of the corporation's annual turnover (if the benefit is not ascertainable)
Getting ready for tougher foreign anti-bribery laws
Although the measures are only proposals, if they are implemented unchanged the penalties (including jail) for breaches are substantial. With the addition of crimes for recklessness and corporate liability for failing to prevent foreign bribery, the conduct captured is much broader.
When combined with the false accounting crime introduced in March 2016, one instance of foreign bribery can trigger a multitude of breaches, each with their own consequences; the outcomes could be catastrophic to your business.
We encourage you to undertake a detailed review of your business policies, procedures controls and systems you have in place to prevent and detect foreign bribery.
The failure to do so may mean you have no defence available, and cost you more than just reputational damage: there are hefty penalties and possible jail time for individuals if convicted.