This article was written by Daisy Mallett and Lucy Forbes.
COVID-19 has caused economic hardship for companies around the globe and has required many to act quickly in order to ensure supply of in-demand goods or services.
During these difficult economic periods risks of bribery and corruption increase, as financial stress and disruption to "business as usual" enhances the danger that individuals or corporations may act improperly. Where contracts are entered into quickly, usual due diligence may not be performed. Cost-cutting measures driven by constrained finances often target non-revenue generating departments such as compliance, reducing a company's ability to monitor adherence to its policies and procedures. Furthermore, travel restrictions reduce companies' visibility over their offshore subsidiaries, and third-party partners. Given these factors, COVID-19 has heightened risks of bribery and corruption for businesses globally.
Recent investigations by regulatory bodies in Australia and overseas indicate that anti-bribery and corruption laws are still being actively enforced, despite the crisis. Australian companies should be more vigilant than ever to ensure they have adequate systems in place to prevent bribery and corruption, and that those systems are implemented and audited.
Anti-corruption watchdogs remain vigilant despite disruption
Regulatory activity in Australia
There are significant recent and ongoing investigations in Australia related to anti-bribery and corruption, targeting both members of parliament and corporations. Allegations against corporations have included a failure to pay foreign customs duties in full, failure to put in place proper financial controls, and improper payments to entities associated with government officials.
Regulatory activity overseas
The US regulators also continue to be extremely active. A recent settlement with a multinational company related to to a scheme of payments to Chinese government officials and involved the maintenance of false accounting records (recording bribes as travel and entertainment expenses) to conceal these payments. In another settlement reached this week, US regulators imposed a record US$2.3 billion fine in relation to activities of a US company's subsidiary in Malaysia. Not only are fines imposed by regulators often eye-wateringly large, but their impact on reputation, share price and regulatory licenses is also extremely significant.
China's corruption regulators, meanwhile, currently have a particular focus on enforcing anti-corruption laws in the health sector.
Scope of obligations on Australian companies may soon increase
In Australia, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (the Bill) continues to be before the Australian parliament. It proposes the following changes to Australian bribery laws:
- introducing a new strict-liability corporate offence of failing to prevent foreign bribery by an "associate";
- broadening the offence of bribery of a foreign public official;
- introducing a new Deferred Prosecution Arrangement scheme for companies that have engaged in corporate crime; and
- amending the definition of "dishonesty" to refer to conduct that is 'dishonest according to the standards of ordinary people', without requiring a defendant to be subjectively aware of that dishonesty.
For further details on the Bill, see our previous alert here.
As a result of the disruption to Federal Parliament's sitting schedule this year, the Bill remains before the Senate. While it is unclear how long it will be before the changes are introduced, companies should expect that they will face stricter obligations to prevent bribery and corruption in the future.
Lessons from recent regulatory activity
Ongoing regulatory investigations demonstrate the damage that can result from poor oversight of overseas operations and partners as well as companies' failure to maintain (or act on) internal reporting mechanisms. Furthermore, it is clear that regulators have not paused enforcement activity during the COVID-19 crisis. Despite disruptions, therefore, companies cannot afford to let compliance with anti-bribery and corruption legislation slip.
How we can help
Our team can:
- Assist you to review and update your anti-bribery and corruption policies to ensure compliance with regulator expectations;
- Conduct anti-bribery and corruption risk assessments of your business;
- Assist you to develop a tailored compliance programme directed to a company's third-party associates;
- Prepare and deliver anti-bribery and corruption training programmes; and
- Conduct anti-bribery and corruption due diligence in relation to specific transactions and third-party dealings.