The Senate Economics Reference Committee has today released its report into foreign bribery. The report, which has been almost three years in the making, found that more can be done to combat foreign bribery from a number of angles including increased regulation, increased resources and changes to corporate culture.
The report is expected to be followed by a report from the Legal and Constitutional Affairs Legislation Committee on the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, which is due on 20 April 2018. That Bill, if passed, will introduce a new offence of failing to prevent foreign bribery, as well as introduce a scheme of deferred prosecution agreements in Australia.
On 24 June 2015, the Australian Senate gave the green light to an inquiry into foreign bribery, referring the inquiry to the Senate Economics References Committee for report by 1 July 2016. The inquiry lapsed at the end of the last Parliament, but was re-adopted in the current Parliament on the Committee's recommendation to the Senate. After a number of extensions, the Committee has today published its report.
Terms of Reference
The Committee was asked to consider the measures governing the activities of Australian corporations, organisations, and individuals, and specifically to consider the effectiveness of, and any possible improvements to, Australia's implementation of its international obligations with respect to bribery and corruption. The Terms of Reference also required the Committee to consider the effectiveness of existing Commonwealth legislation, as well as further improvements which could be made, including:
- the jurisdictional reach of existing legislation;
- how Commonwealth agencies and statutory bodies currently investigate and prosecute offences;
- the range of penalties currently available to the courts and options for expansion, including potential debarment from government contracts and programs;
- whether the existing range of offences should be expanded;
- the liability of directors and senior managerial staff for failing to implement a corporate culture of compliance; and
- measures to encourage corporate self-reporting, including deferred prosecution agreements.
Other key topics included private sector whistleblower protection, the facilitation payment defence, and the economic impact of foreign bribery.
A number of companies, organisations, and individuals made submissions to the Committee. One topic which was emphasised was the need for official guidance as to how to comply with Australian's anti-bribery laws. A number of submissions also dealt with the facilitation payment defence under s 70.4 of the Commonwealth Criminal Code. Some submissions argued that the defence should be abolished. Proponents of abolishing the defence argued that facilitation payments help to maintain an environment in which bribery can flourish and often diverge from local laws. They argued that the existence of facilitation payments makes it difficult, if not impossible, to effectively stamp out the bribery of foreign public officials. The Committee formed the view that allowing facilitation payments perpetuates a culture of bribery and the defence does not align with the Committee's focus on eradicating corruption.
A further topic which received consideration was enhancement of whistleblower protections. A number of submissions supported greater protection, noting the crucial role that whistleblowers play in highlighting unethical behaviour.
Since March 2016, the government has been considering the viability of introducing a deferred prosecution agreement (DPA) scheme in Australia. Legislation was introduced into the Parliament in December 2017 which includes a proposed DPA scheme. The Committee highlighted that in order to successfully engage corporates and incentivise voluntary reporting, any DPA scheme must be supported by robust enforcement of the foreign bribery offence and a suite of government guidance.
The report found that Australia has been underperforming in the regulation and enforcement of foreign bribery due to legislative challenges and poor corporate culture. Other factors that were said to have contributed to the lack of enforcement of foreign bribery include a lack of sufficient expertise, delays, insufficient domestic and international cooperation and limited resources.
In light of this, the Committee made 22 recommendations to address the issues preventing Australia from facilitating a comprehensive foreign bribery enforcement regime. Some of the key recommendations include:
- Recommendation 2: that the Australian Federal Police's annual report include data regarding the number of investigations conducted and successful enforcements.
- Recommendation 3: that a scheme for additional, one-off funding for large and complex investigations of foreign bribery offences is introduced to ensure all investigations are well-resourced.
- Recommendation 7: that a new corporate offence is introduced for failing to prevent foreign bribery.
- Recommendation 11: that the government introduce a DPA scheme for corporations, supported by a strong legislative framework which requires strict compliance and allows for adequate responses in the event of a breach.
- Recommendation 12: that DPAs be published, together with details on how a company has complied with the terms and conditions, and any breach, variation or termination.
- Recommendation 13: that the Code of Practice make provision for the appointment and methodology of independent external monitors at the company's expense to monitor compliance with a deferred prosecution agreement.
- Recommendation 17: that the minister's guidance on adequate procedures in relation to the new failing to prevent foreign bribery offence include the existence of internal corporate whistleblowing systems.
- Recommendation 18: that the facilitation payment defence be abolished over a transition period, to enable companies and individuals to adjust their business practices and procedures to comply with the law as amended.
- Recommendation 19: that ASIC expand the register of beneficial ownership to require companies, trusts and other corporate structures to disclose information regarding their beneficial ownership; and that this information be maintained in a central register.
- Recommendation 20: that the government introduce a debarment framework that would ensure companies are required to disclose if they have been found guilty of foreign bribery offences and give agencies the power to preclude the tenderer from being awarded a contract.
- Recommendation 21: that the government provide practical guidance to companies to draw attention to domestic and international guidance relating to foreign bribery, and to increase awareness of the high-risk sectors and regions in which Australian businesses commonly operate.
What you need to know?
The proposed changes and recommendations, if accepted by the government, will result in significant changes to the regulatory landscape, particularly for organisations conducting business internationally. As the spotlight shines on the foreign bribery space, organisations should be mindful of the increased resources available to regulators and enforcement agencies for investigations. Equally, the recommendations of this report place an emphasis on imposing higher standards on companies by proposing:
- a new corporate offence for failing to prevent foreign bribery;
- broadening the scope of the current bribery offences; and
- increased disclosure obligations for companies in relation to corporate bribery incidents and offences.
What you need to do?
Companies should commence a review of their procedures around preventing, detecting and addressing foreign bribery. The recommendation that the Criminal Code be amended to include a new corporate offence of failing to prevent foreign bribery means that companies will need to take certain steps to establish and implement adequate procedures. It is likely that any guidance ultimately published by the government will, to some extent, draw upon the guidance already published in other jurisdictions, including the United Kingdom.
For further information about how to prepare, see Australia tightens the belt on foreign bribery and corruption.