"The time has come" for major anti-bribery reforms

What you need to know

• A long awaited Senate Committee report has found that "the time has come for Australia to improve its anti-foreign bribery compliance and enforcement response… by strengthening its legal framework against foreign bribery and building a culture of integrity and compliance".
• The Senate Committee considers that Bills currently before Federal Parliament to introduce: a new offence of failing to prevent foreign bribery; a deferred prosecution agreements scheme; and stronger whistleblower protections, do not go far enough.
• Further recommendations of the Senate Committee include: additional funding for enforcement agencies; abolishing the facilitation payments defence; establishing a register of corporate beneficial ownership; and debarment from Government work for companies involved in bribery or corruption.

What you need to do

• This report is a further warning that significant anti-bribery and corruption reforms are on the immediate horizon in Australia. Companies should be taking steps now to consider their risk profile and assess whether they have adequate policies and procedures in place to manage the heightened risk of corporate liability under the proposed new laws.

"The time has come"

In recent years, there has been a significant focus on Australia's anti-bribery and corruption framework. In particular, Australia has been criticised for the lack of enforcement activity in relation to foreign bribery, and for failing to have a framework as robust as those that exist in other jurisdictions, such as the United Kingdom and United States.

On 6 December 2017, the Australian Government introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, which aims to significantly strengthen Australia's anti-bribery and corporate misconduct laws. The key features of the proposed new laws include:

• a new offence of failing to prevent bribery of foreign officials;
• amendments to the existing foreign bribery offence to remove potential impediments to a successful prosecution; and
• the introduction of a deferred prosecution agreement (DPA) scheme.

For more information about the proposed new laws, see our publication here.

The following day, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 was tabled in Parliament, which proposes to strengthen Commonwealth whistleblower protections in numerous ways. For more information about the proposed amendments to the whistleblower framework, see our publication here.

Nearly three years ago, the Senate voted in favour of an inquiry into foreign bribery. The Senate Committee has now released its long awaited report which analyses in detail the perceived deficiencies of Australia's foreign bribery regime, and considers potential reform options including those in the current Bills. The full report can be accessed on the Australian Parliament website.

The Committee has firmly put forward its view that Australia needs to improve its anti-foreign bribery compliance and enforcement response by not only strengthening its legal framework against foreign bribery, but also by building a culture of integrity and compliance.

Key recommendations in the Committee report

In its 234 page report, the Senate Committee has made 22 wide ranging recommendations. We outline the key points below.

Additional funding to enforcement agencies

In its report, the Committee notes the criticisms from various stakeholders and the Organisation for Economic Co-Operation and Development (OECD) of Australia's enforcement record in relation to foreign bribery.

In light of this, the Committee has recommended that consideration be given to developing a contingency mechanism that provides for additional one-off funding to enforcement agencies for large and complex investigation of foreign bribery offences, and to ensure that any allegations are thoroughly investigated and prosecuted where appropriate.

New offence of failing to prevent bribery

As mentioned above, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 that is currently before Parliament seeks to amend the Commonwealth Criminal Code to, amongst other things, introduce a new corporate offence of failing to prevent bribery of foreign public officials. The introduction of this offence would mean that a company is automatically liable for bribery of a foreign public official committed by an "associate" (including a subsidiary, officer, employee, contractor, or third party service provider) for the benefit of the company, unless the company can demonstrate that it had "adequate procedures" in place designed to prevent the bribery from occurring.

The Committee has endorsed the introduction of this offence, particularly in light of the fact that it has been nearly 10 years since a similar offence was introduced in the UK.

Guidance on adequate procedures

The Committee also supports the publication of guidance as to the steps companies need to take in order to establish and implement "adequate procedures". In this regard, the Committee's opinion is that any such guidance should be principles-based and should be designed in a way that ensure it is of general application to corporations of all sizes and in all sectors.

However, the Committee has expressed concern that no details of the intended ministerial guidance have yet yet been made publically available. The Committee recommends that the Minister finalise and publish the guidance with sufficient time before the commencement of the failing to prevent foreign bribery offence, to allow companies to implement and/or adjust internal compliance measures.

Deferred prosecution agreement scheme

The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 also proposes the introduction of a DPA scheme in Australia. A DPA is a voluntary settlement between a criminal prosecutor and a defendant company alleged to have engaged in serious corporate crime (including bribery), whereby the defendant agrees to comply with certain requirements (such as compensating victims and paying a financial penalty) in exchange for prosecution being discontinued.

The Committee supports the introduction of a DPA scheme, and recommends that such a scheme be supported by a strong legislative framework which requires strict compliance and allows for adequate responses in the event of a breach. Importantly, the Committee recommends that independent monitors are appointed to assess company compliance.

Stronger whistleblower protections

The Committee has endorsed the Parliamentary Joint Committee's report on strengthening whistleblower protections (see our publication on the Joint Committee's report here), and recommends that the Government work with the expert advisory panel to expeditiously implement the Committee's outstanding recommendations, in addition to specifically considering whether the proposed scope of protections provides sufficient coverage in bribery cases.

Facilitation payment defence

Under the current Australian anti-bribery framework, a "facilitation payment" defence is available in respect of the foreign bribery offence where:

• the value of the benefit given to a foreign official was of a minor nature;
• the benefit was given for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and
• a record of the conduct was made as soon as practicable after it occurred.

The facilitation payment defence has been controversial - the OECD has called for facilitation payments to be prohibited, and under the UK Bribery Act, such payments are illegal. Despite this, the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 does not propose to abolish the defence.

The Committee's view is that facilitation payments perpetuate a culture of bribery. The Committee has therefore recommended 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 any amended laws. In our experience, many Australian companies already proactively prohibit facilitation payments given the uncertainty of when the defence applies, and the fact that such payments are not permitted under other regimes that have broad extraterritorial application (eg the UK Bribery Act and the US Foreign Corrupt Practices Act).

Disclosure of information regarding beneficial ownership

The Committee recommends that ASIC establishes and maintains a register of the beneficial ownership of companies, trusts and other corporate structures, which is to be centralised, public and mandatory. The Committee believes that such a register will act as a deterrent to a wide range of crimes, including foreign bribery.

Debarment framework

Finally, the Committee notes that the Government has failed to implement the OECD's recommendation from 2006 that Australian procuring agencies put in place transparent policies and guidelines regarding whether to debar tendering companies or individuals that have been convicted of foreign bribery.

The Committee has recommended that the Government introduce a debarment framework that would ensure companies are required to disclose if they have been found guilty of a foreign bribery offence, and would give agencies the power to preclude the tenderer from being awarded a contract.

Next steps

The recommendations and observations in the Committee's report are another sign that Australia is on the verge of significant anti-bribery and corruption reform. The result will be an increased risk of prosecution for bribery offences for companies who do not implement and maintain a culture of compliance, or are otherwise unprepared.

It remains to be seen how the Government will react to the Committee's report, and whether it will endorse any or all of the additional recommendations put forward. However, given the level of pressure being placed on the Government to improve Australia's anti-bribery and corruption framework, we expect that the two Bills tabled in Parliament last December will be voted on in 2018.

In the meantime, the next step on the road to reform will be the release of a further Senate Committee report specifically in relation to the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017, which is due by 20 April 2018.

Authors:  Alyssa Phillips, Partner; James Clarke, Senior Associate; and Melanie Wong, Lawyer.