Bribery and Corruption in Australia: what does 2020 hold?
What you need to know
- Significant anti-bribery reforms are expected in 2020, headlined by a new offence of failing to prevent bribery of foreign public officials and the introduction of a deferred prosecution agreement (DPA) scheme likely to result in more enforcement activity.
- The recent introduction of new whistleblower and modern slavery laws, and updated ASX Corporate Governance Principles, impose further compliance and reporting requirements on companies operating in Australia.
- The Federal Government is expected to turn its attention to the establishment of a proposed federal anti-bribery and corruption watchdog.
What you need to do
- Watch for expected legal developments in 2020, and start reviewing internal policies, procedures and training to prepare for new laws and increased enforcement activity.
Overview
Transparency International recently released its 2019 Corruption Perceptions Index, which shows Australia 12th out of 180 countries. Australia has slid down the index in recent years, with a current score of 77 out of 100 (0 being highly corrupt), compared to a score of 85 out of 100 in 2012.
Despite this, we expect to see some improvement in 2020, particularly in light of the recent whistleblower reforms, talk of a federal anti-bribery and corruption commission and the tabling of the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (Corporate Crime Bill) in Federal Parliament in December 2019.
In light of these developments, it is important for all businesses operating in Australia to be familiar with anti-bribery laws and to have robust policies, procedures and training in place to ensure compliance.
In this update, we look at the impact of the major developments in Australia from 2019 and the key trends we expect to see in 2020.
Combatting Corporate Crime – foreign bribery legislation re-introduced
Following the introduction of similar legislation in 2017 and a Senate report into foreign bribery in 2018, the Federal Government re-introduced the Corporate Crime Bill in December 2019. The Bill proposes to amend the existing foreign bribery offence , introduce a corporate offence for failing to prevent bribery, and introduce deferred prosecution agreement (DPA) schemes.
A high level summary of these three key changes is set out below. More detail on the Corporate Crime Bill can be found in our recent publication here.
Amendments to existing foreign bribery offence
The Corporate Crime Bill proposes to amend section 70.2 of the Criminal Code to cover bribery to obtain a personal and commercial advantage, as well as expanding the definition of a "foreign public official" to include candidates for public office.
The draft legislation also removes the requirement that the foreign public official must be influenced in the exercise of the official's duties, replacing the current requirement with the concept of "improperly influencing" a foreign public official.
If passed, the amendments will remove some barriers to prosecution, increase scrutiny on a wider range of individuals and may result in more investigation and enforcement activity.
New offence for failing to prevent foreign bribery
The Corporate Crime Bill proposes to introduce an offence that will hold a company criminally liable where an officer, employee, contractor, agent or other service provider of the company 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.
If introduced, the proposed offence will also carry a substantial penalty: the greater of $21 million, 10 per cent of annual turnover, or three times the benefit gained from the conduct.
The Federal Government has released draft guidance on what measures are likely to constitute "adequate procedures" for the purposes of the proposed offence, and invited submissions on the guidance by 28 February 2020. The draft guidance can be accessed here.
Introduction of a DPA scheme
The Corporate Crime Bill also proposes to introduce a DPA scheme in Australia. A DPA is a voluntary settlement between a criminal prosecutor and a defendant company, where the defendant agrees to comply with certain requirements (such as compensating victims and paying a financial penalty) in exchange for prosecution being deferred and, if the agreed requirements are met, discontinued.
Law enforcement agencies view DPAs as a means to encourage self-reporting of complex corporate crimes such as foreign bribery where, absent self-reporting, it can be difficult to gather evidence to meet the required standard of proof. For companies, DPAs may enable negotiation of a more certain and satisfactory outcome compared to a traditional prosecution. However, there is a risk that a DPA will not be offered even if the company self-reports identified criminal conduct, or that civil claims are brought connected with the matters agreed under the DPA.
Whistleblower reforms take effect
In February 2019, new whistleblower laws were passed by Federal Parliament that make it easier for whistleblowers to make protected disclosures. The new laws significantly broaden the scope of Australia's private sector whistleblowing laws. In particular, the changes included:
- the removal of a "good faith" test when making disclosures;
- an introduction of public interest disclosure and emergency disclosure avenues for disclosures made under s 131AA(1) of the Corporations Act;
- a requirement for large proprietary and listed companies to have a compliant whistleblower policy; and
- increasing the criminal and civil penalties applicable for breach of the relevant provisions.
In November 2019, ASIC issued guidance on preparing whistleblower policies which are compliant with the new laws. For further detail on the whistleblower reforms, see our previous publications: Whistle while you work: Whistleblower protections reforms for the private sector have passed, Australian whistleblower laws: One month on, and ASIC releases guidance on establishing a compliant whistleblower policy.
ASX Corporate Governance Principles and Recommendations
In addition, new ASX Guidelines effective from 1 January 2020 require listed entities to have and disclose a whistleblower policy and an anti-bribery policy. While the recommendations are not mandatory, listed entities who do not comply with the ASX Guidelines are required to publically disclose the reason why they have failed to follow the recommendations.
Given the heightened pressure on listed entities to act in a transparent manner, public companies should familiarise themselves with the updated ASX Guidelines in order to minimise any potential reputational risk. Proprietary companies should also consider adopting the ASX Guidelines as a matter of best practice.
A copy of the full ASX Guidelines can be found here, and are discussed in our earlier publication New ASX Corporate Governance Principles and Recommendations require public disclosure of whistleblower and anti-bribery policies.
The proposed Commonwealth Integrity Commission
2019 saw a number of companies, councils and public sector entities face increased scrutiny over allegations of bribery and corruption. Accordingly, we expect to see renewed focus on the role and structure of a federal anti-corruption watchdog.
The Federal Government originally outlined a model for a federal anti-corruption watchdog (to be called the "Commonwealth Integrity Commission") in December 2018.
The investigative powers of the body in the proposed structure are far more limited in comparison to the equivalent state anti-corruption bodies. The proposed powers have drawn criticism for their restrictive scope comparably with the state counterparts. In September 2019, the Greens, with the support of the ALP and the cross-bench introduced and passed in the Senate the National Integrity Commission Bill 2018 (No. 2).
Following a consultation process and public submissions, we expect to see the Federal Government introduce a draft bill establishing the federal anti-corruption commission in 2020. Given that all states now have independent anti-corruption bodies, any proposed model is likely to undergo significant scrutiny and consultation.
Modern slavery
The Modern Slavery Act 2018 (Cth) came into effect on 1 January 2019. The Act imposed new mandatory reporting requirements for domestic and foreign entities carrying on business in Australia with consolidated revenue of at least $100 million.
During 2020, companies will be required to meet the first reporting period under the Act, with companies following the Australian Financial Year (1 July to 30 June) required to submit their statement to the Australian Border Force by no later than 31 December 2020. The statements must:
- identify the reporting entity;
- describe the reporting entity’s structure, operations and supply chain;
- describe the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls;
- describe the actions taken to assess and address these risks, including due diligence and remediation processes;
- describe how the reporting entity assesses the effectiveness of these actions;
- describe the process of consultation with any entities the reporting entity owns or controls (a joint statement must also describe consultation with the entity giving the statement); and
- provide any other relevant information.
The legislation also imposes an obligation for the statement to receive Board approval, be signed by a director and be provided to the Australian Government for publication on a central online repository.
Guidelines for reporting entities can be found here.
How can you best safeguard your organisation and minimise risk in 2020?
We expect 2020 to be a big year in the anti-bribery and corruption field, particularly if the Corporate Crime Bill passes. All companies and individuals, but especially those with operations perceived to be high-risk (such as infrastructure and mining, or with operations in high risk jurisdictions), should be aware of the significant penalties facing individuals and organisations, and the significant reputational risks if companies fall short of best practice standards.
The draft guidelines on adequate procedures lists the following factors as central to an effective compliance program:
- a robust culture of integrity within the corporation;
- demonstrated pro-compliance conduct by top level management and the board of directors (where applicable);
- a strong anti-bribery compliance function;
- effective risk assessment and due diligence procedures; and
- careful and proper use of third parties.
While these are important steps, our experience is that large proprietary and listed companies generally require tailored approaches to anti-bribery and corruption policies, procedures and training, reflecting their size, the industries they operate in, their business structure and compliance frameworks, and their geographic presence.
Ashurst has extensive experience advising companies in relation to managing anti-bribery and other compliance risks, and we would be happy to speak with you about preparing for likely reforms in 2020.
Authors: James Clarke, Partner; Rani John, Partner; Melanie Wong, Lawyer; and James Samartzis, Graduate.
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