Anti-bribery and corruption - key developments in 2020 and what to expect in 2021

What you need to know

• 2020 has seen companies and individuals come under increased pressure on many fronts as a result of COVID-19, giving rise to increased risk of bribery, corruption and other financial crimes.
• Investigatory and enforcement bodies are ramping up efforts to prevent, detect and punish misconduct, although Australia has only been described as a "moderate" performer in the anti-bribery corruption space by Transparency International.
• Amendments to Australia's anti-bribery laws are on the cards, including the potential introduction of a "failure to prevent bribery" offence and deferred prosecution agreement regime, as well as the establishment of a Commonwealth Integrity Commission.

What you need to do

• Companies should watch for expected legal developments in 2021, and start undertaking risk assessments and reviewing internal policies, procedures and practices to prepare for new laws and increased enforcement activity.

Overview of 2020

2020 has been a year like no other, with every country having to grapple with the pandemonium caused by COVID-19 and the impact it has had socially, politically and economically.

The speed at which COVID-19 has impacted business has required companies to act rapidly, in order to ensure that operations and profitability remain as steady as possible. Heightened financial stress increases the risk of staff or business associates engaging in misconduct on their own behalf or on behalf of the company. At the same time, corporations may be inclined to minimise investment in anti-bribery and corruption (ABC) measures in an attempt to reduce costs.

Now that we near the end of 2020, it is important for all businesses to ensure they have a robust, efficient and up-to-date ABC regime in place to reduce the risk of incidents occurring and to be able to respond appropriately if they do.

In this update, we look at the major ABC developments in Australia in 2020, and highlight some things to keep an eye out for in the coming year.

ABC enforcement in Australia

This year, we have seen a number of high profile incidences of ABC activity involving large corporations and public officials, some of which have led to court proceedings and heavy penalties being awarded. This has included:

• an investigation by the NSW Independent Commission Against Corruption into allegations that a former Member of Parliament for Wagga Wagga engaged in conduct that involved a breach of public trust and using parliamentary resources to improperly gain a benefit (known as Operation Keppel);
• a foreign interference investigation into a NSW State Labor politician and a part time staff member which included home raids by the Australian Federal Police;
• the arrest of a former senior executive of an Australian construction company over his alleged involvement in an $1bn oil bribery plot, which involved a nine year investigation and was part of the impetus for the "Best Practice Guideline: Self-reporting of foreign bribery and related offending by corporations", released by the AFP and Commonwealth Director of Public Prosecutions in December 2017;
• an investigation into an Australian based company for foreign bribery predominantly related to the exports of phosphate from Nauru; and
• investigations into a Melbourne man charged with foreign bribery and false accounting offences with respect to the development and sale of property involving Malaysian entities and officials.

However, a recent report published by Transparency International (TI) - Exporting Corruption – Progress Report 2020: Assessing enforcement of the OECD Anti-Bribery Convention (accessible here – described Australia as only "moderately" enforcing its ABC regime. Although Australia actually improved its ranking in TI's Corruption Perceptions Index for 2019 (up from 13th to 12th of the 198 countries assessed), Australia's overall score remained at 77 ocut of 100 (0 being highly corrupt), well down from its high of 85 and corresponding rank of 7th in 2012.

The TI report rates the performance of 47 leading global exporters, including 43 signatories to the OECD Convention (Australia among them) in "cracking down" on bribery of foreign public officials by companies operating abroad. The Convention requires parties to criminalise bribery of foreign public officials and introduce related measures. The report states that there is a long way to go for many signatories to meet their obligations and that enforcement across the globe has significantly decreased since TI's previous report in 2018.

In relation to Australia, TI noted that, within the four year period from 2016 to 2019, Australia had only investigated 14 matters (two of which led to cases being commenced), and enforced three cases which led to sanctions. TI considered this figure to be remarkably low and a step away from the number of investigations commenced by Australia in the previous four year period (19 investigations).

The criticism of Australia set out in the report reflects the view that bribery and corruption is a real and live issue in Australia which requires higher scrutiny, regulation, and robust and timely enforcement activity.

Legal developments in Australia

Australian Law Reform Commission Report on corporate criminal responsibility regime

Australia has a number of legislative schemes in place to deal with bribery and corruption. Some of these have been reviewed at length in recent years, with a heavy focus in 2019 on strengthening corporate whistleblower protections. However, broader proposed amendments and policy reforms remain ongoing.

In August this year, the Attorney-General tabled the Australian Law Reform Commission's (ALRC) report on Australia's corporate criminal responsibility regime in Parliament. This report reflects the first comprehensive review of Australia's rules of corporate criminal liability – that is, how Australia's federal criminal laws apply to a company. The ALRC made 20 recommendations, which if adopted, will likely make it much easier for a body corporate to be held criminally liable.

You can read more about the ALRC report in our previous article here.

During the course of the longstanding inquiry which preceded the ALRC report, the Government introduced a range of measures to strengthen the corporate regulatory framework aimed at increasing accountability for corporations with respect to corruption and bribery. This includes:

• the Treasury Laws Amendment (Enhancing Whistlblower Protections) Act 2019 (Cth) (which passed both houses in December 2019); and
• the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (the Combatting Corporate Crime Bill).

You can read about the whistleblower reforms in our previous article here .

The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019

The Combatting Corporate Crime Bill was introduced into Parliament on 2 December 2019 and proposes four major reforms:

• broadening the existing offence of bribery of a foreign public official (under section 70.2 of the Criminal Code);
• introducing a new corporate offence of "failure to prevent foreign bribery" which if passed will make a company criminally liable where an "associate" (which is broadly defined to include a subsidiary, officer, employee, contractor, agent or other service provider) bribes a foreign public official for the profit or gain of the company, unless the company can demonstrate that it had "adequate procedures" in place to prevent the offence;
• amending various "dishonesty" offences to remove any requirement for the accused to have actual knowledge that he or she is engaging in dishonest conduct; and
• implementing a Commonwealth Deferred Prosecution Agreement (DPA) scheme to enable the Commonwealth Director of Public Prosecutions to invite a corporation that has engaged in serious corporate crime to negotiate an agreement to suspend criminal proceedings in exchange for compliance with specified conditions.

The proposed reforms for the implementation of a DPA scheme and "failure to prevent" office, in effect, introduce a separate attribution model to those discussed by the ALRC. The ALRC considered how Part 2.5 of the Criminal Code applies to bodies corporate generally, compared with the Combatting Corporate Crime Bill, which would create more specific mechanisms for corporate liability for bribery offences.

On 17 March 2020, the Senate Legal and Constitutional Affairs Legislation Committee published its report on the Combatting Corporate Crime Bill, recommending that all four major reforms be passed.

As a result of COVID-19, Federal Parliament has been disrupted and it is unclear when the Combatting Corporate Crime Bill is likely to next be considered by Parliament. However, the reforms which are proposed have the potential to significantly increase the risk of Australian corporate liability for bribery and corruption, and so companies should keep watch on the progress of these reforms and the need to begin preparing for their introduction by undertaking ABC risk assessments and updating policies, procedures and practices.

You can read more about the Combatting Corporate Crime Bill and Senate report in our previous article here.

Commonwealth Integrity Commission

In February 2017, the Australian Government formed a committee for the purpose of establishing a Commonwealth Integrity Commission (CIC).

The proposed structure and powers of the CIC have been the subject of considerable public debate over the last few years, but on 2 November 2020 the Government published two draft bills for consultation:

• the draft Commonwealth Integrity Commission Bill, to establish the CIC as a centralised agency to investigate criminality and corruption in the public sector; and
• the draft Integrity and Anti-Corruption Legislation Amendment (CIC Establishment and Other Measures) Bill, which provides for the necessary consequential amendments to existing Commonwealth legislation to support the introduction of the Commonwealth Integrity Commission Bill.

The proposed CIC will be a centralised, specialist agency whose role is to investigate corruption in the public sector, and which will absorb the existing Australian Commission for Law Enforcement Integrity (ACLEI). Its powers will extend well beyond the ACLEI's current jurisdiction, and capture the conduct of a significantly broader range of entities, employees and contractors.

It is proposed that the CIC's powers will include the ability to:

• compel people to give sworn evidence at hearings, with a maximum penalty of two years' imprisonment for not complying;
• compel people to provide information and produce documents (even if the information would incriminate the person), with a maximum penalty of two years' imprisonment for not complying; and
• search people and their houses, or seize property (under warrant); arrest people; tap phones and use other surveillance devices to investigate them; and confiscate people’s passports by court order.

Submissions on the draft bills close on 12 February 2021, and the Attorney-General Christian Porter has confirmed that the CIC will not be in place for at least another six months.

For those who may be subject to a future CIC investigation, it is a timely reminder to stress-test your current integrity framework and take steps to address any systemic or cultural risks identified. Serious or systemic corruption will be given priority by the CIC.

You can read more about the CIC in our previous article here.

Looking ahead to 2021

2020 has been a difficult year for everyone, but despite the disruptions caused by COVID-19 we have seen several ABC investigations and court proceedings, as well as gradual progress of ABC reforms. The recent findings of TI indicate that more can be done in Australia to further prevent bribery and corruption from occurring.

Looking ahead, we anticipate seeing a greater number of investigations into misconduct next year, the possible passage of the Combatting Corporate Crime Bill, and the potential introduction of the CIC. The level of funding proposed in the next Federal budget will also provide a strong indication of how much support stakeholders will receive to boost efforts in investigating and enforcing ABC in Australia.

Companies should continue to monitor ABC developments and ensure they are receiving contemporaneous advice, particularly in light of higher scrutiny of corporate behaviour and the number of investigations and high profile court cases we have seen in 2020.

Authors: James Clarke, Partner; Rani John, Partner; Alyssa Phillips, Partner; Melanie Wong, Lawyer; and Dario Aloe, Lawyer.