Preventing foreign bribery: Adequate procedures

On 2 December 2019, the Australian Government introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 into Parliament.

The Bill proposed a new corporate offence for failure to prevent foreign bribery by an associate of a body corporate. However, the offence will not apply if the corporation can show it had adequate procedures in place designed to prevent the commission of foreign bribery.

The Government has developed draft adequate procedures guidance and invited interested parties to provide feedback by 28 February 2020. A final version of the guidance addressing the feedback received will be published before the new corporate offence for foreign bribery commences. We look at the key information outlined in the guidance document.

 

Australia’s substantive foreign bribery offence

This offence essentially applies if a person intentionally bribes a foreign public official in order to obtain an advantage. Both individuals and corporations may be liable for foreign bribery.

The Bill proposes to expand the foreign bribery offence in section 70.2 of the Commonwealth Criminal Code by including bribery to obtain a personal (i.e. non-business) advantage, extending the definition of ‘foreign public official’, and implementing additional amendments to remove undue impediments to the successful investigation and prosecution of foreign bribery.

It is important to note that a corporation could be found guilty of substantive foreign bribery as a result of the actions of its agents and employees, separate from and in addition to the ‘failing to prevent’ offence discussed below. Examples of this scenario include where a corporate culture exists which encourages bribery, or where management knowingly permitted the commission of foreign bribery by an agent of the company.

 

New corporate offence of failure to prevent foreign bribery

The Bill also proposes to introduce a new corporate offence of failing to prevent foreign bribery in section 70.5A of the Criminal Code. The offence applies where an associate of a corporation has committed bribery for the profit or gain of the corporation.

The offence does not apply if the corporation is able to demonstrate that it had adequate procedures in place to prevent the commission of foreign bribery by its associates, including employees, agents, contactors and subsidiaries.

The “adequate procedures” defence will not apply if there is evidence that high managerial agents engaged in bribery and the primary offence is substantiated.

 

Gearing up to prevent foreign bribery

Each corporation should assess the nature and extent of the foreign bribery risks it faces. The policies and procedures implemented should be proportionate to the corporation’s circumstances, including its foreign bribery risks, its size and the nature of its activities. A small corporation would not necessarily need to implement measures as extensive as those expected of large corporations.

Corporations need to have an effective anti-bribery compliance program. This includes ensuring a strong culture of integrity within the organisation; demonstrated pro-compliance by top senior management; having a strong anti-bribery compliance function; implementing effective risk assessment and due diligence procedures; and careful and proper use of third parties in dealing with foreign officials.

The company’s bribery prevention policy should be clearly articulated, easily understood, and accessible. It is also recommended that companies adopt a policy of requiring other entities over which they have control to implement adequate anti-bribery measures.

The draft guidance document also outlines suggested procedures that corporations may adopt to prevent foreign bribery, including:

  • Risk assessment – to inform the extent of anti-bribery policies and procedures required. For example, does the company conduct substantial business in high-risk jurisdictions and engage third parties to deal with foreign public officials?
  • Management dedication – top-level management has the greatest responsibility for fostering an anti-bribery culture within the corporation.
  • Due diligence – should be proportionate to the identified risks. Thorough due diligence should be applied prior to entering into a business relationship, and continuous monitoring for foreign bribery risks should be implemented.
  • Communication and training – to ensure that associates understand the corporation’s anti-bribery policies and the practical application of related procedures. For example, how are they expected to respond to bribe solicitation?
  • Confidential reporting – all companies should adopt a mechanism that allows for confidential and secure reporting of bribery concerns, and that clearly communicates available protections for whistleblowers.
  • Monitoring and review – testing the effectiveness of existing anti-bribery policies and procedures and adapting them to changes in the business environment.

 

Conclusion

Companies need to be increasingly diligent in ensuring compliance with anti-bribery measures. While the traditional foreign bribery offence covers intentional bribery and outright corporate recklessness, the new proposed ‘failure to prevent’ offence exposes companies to risk through the actions of their associates. It is no longer good enough to simply not be reckless. Companies need to develop effective anti-bribery compliance programs and take proactive steps to prevent foreign bribery including ongoing risk assessment and due diligence, communication and training, and the facilitation of reporting.

Nyman Gibson Miralis provides expert advice and representation in complex foreign bribery cases, and assists companies to effectively achieve compliance with anti-bribery legislation.

Contact us if you require assistance.