“Importantly, the mere existence of anti-bribery controls will not be sufficient for a corporation to make use of the ‘adequate procedures’ defence. A corporation must also show that the procedures were adequate.”1
The new criminal offence of corporate ‘failure to prevent’ foreign bribery represents a fundamental shift in how corporations can be criminally prosecuted for bribery in Australia. The offence comes into force on 8 September 2024.
Penalties for committing the crime of failing to prevent bribery of a foreign official include a maximum fine of $33 million, 3 times the benefit of the bribe or 10% of the company’s annual turnover. All corporations are exposed to the risk of committing this crime, regardless of their size or sophistication, if their employees, agents or service providers pay, or attempt to or pay, a bribe to a foreign official for their profit or gain. The knowledge or intention of the corporation of the bribe is not an element of the offence.
As an absolute liability offence (an offence where intention is irrelevant), a corporation’s only defence is to establish that it had in place ‘adequate procedures’ to prevent bribery of a foreign official.
See our summary of the new offence here: Will Australia’s foreign bribery laws finally bite? | Global law firm | Norton Rose Fulbright.
The Guidance
The Commonwealth Attorney-General has now published its guidance on what constitutes adequate procedures to prevent the commission of foreign bribery (Guidance). It is intended to guide corporations on implementing an effective anti-bribery and corruption compliance program to prevent an associate from bribing foreign public officials. Although very similar in a number of respects, the Guidance differs from the UK Guidance on what constitutes “adequate procedures” to prevent bribery under the UK equivalent legislation. To the extent your organisation currently complies with equivalent UK legislation, it is important to ensure those differences are reflected and operationalised.
The Guidance is not intended to be used as a ‘checkbox’ approach to implementing an effective program. Instead, it highlights key principles that underpin ‘adequate’ anti-bribery and corruption compliance systems, and suggests the type of controls that a corporation should adopt.
The Guidance expressly states that failing to take any steps to address the risk of foreign bribery will likely result in a finding that a corporation did not have adequate procedures in place. So, regardless of your business’s circumstances, it is necessary to actively assess risk and adopt controls responsive to your business risks. There are many Australian entities that have assumed that they have no foreign bribery risk, that will now be exposed unless they consider how their associates (including service providers in other jurisdictions) interact with foreign officials.
Key principles that underpin an effective anti-bribery compliance program
The Guidance outlines six key principles that companies should consider when adopting suitable anti-bribery and corruption policies.
All six principles must be given adequate consideration. However, proportionality and effectiveness underlie whether a corporation has implemented effective controls to prevent foreign bribery. As noted by the Guidance, what constitutes ‘adequate procedures’ will ultimately be determined by the courts on a case-by-case basis.
Proportionality
Your business’s bribery mitigation policies and procedures should be proportionate and appropriately adapted to the actual bribery risks faced by your business. Put simply, companies with high foreign bribery risks need to implement more extensive and robust measures than those with a low-risk profile. Contractual clauses with suppliers and agents relating to bribery should be proportionate and respond to risk.
Effectiveness
According to the Guidance, adequate anti-bribery and corruption policies are those that are clear, accessible in writing and effectively operationalised.
The five main indicators of an effective compliance program are:
- A robust culture of integrity within the corporation
Corporations must regularly and thoroughly assess the effectiveness of their bribery prevention controls, and have mechanisms to monitor the behaviour and compliance of senior leadership. Their compliance function must be adequately resourced. Concerns raised by the compliance function (and through other channels, such as whistleblowing reports) must be reviewed and responded to promptly, and foreign bribery allegations investigated by suitably qualified personnel. Disciplinary action must be taken where appropriate. Regular reports to the Board are necessary. There must be careful and proper use of third parties.
- Demonstrated pro-compliance conduct by top-level management and, where applicable, the board of directors
A corporation’s top-level management play a key role in developing and implementing anti-bribery and corruption policies. This can be demonstrated by management proactively engaging with findings of foreign bribery, overseeing corruption risk assessments, and fostering an anti-bribery culture. They must ensure adequate resourcing and the development of a code of ethical business conduct.
- A strong anti-bribery compliance function or functional equivalent
A corporation has a strong anti-bribery compliance function if it can operate autonomously and is adequately resourced to perform its functions, including regularly training employees and regularly reporting to top-level management.
- Effective risk assessment and due diligence procedures
Effective risk assessment and due diligence procedures should be tailored to reflect the corporation’s risk profile and endorsed by, and overseen, by top-level management. Non-controlled associates must be included in this due diligence process, including training of associates tailored to the risks identified. Records of due diligence processes must be maintained, including updating a risk register.
- Careful and proper use of third parties, such as suppliers or agents
Corporations should ensure that, when third parties are engaged to deal with foreign officials, their use is supported by a clear business rationale, subject to oversight and clear contractual terms that describe the services to be performed. Businesses must ensure that those contractual terms are enforced.
What do businesses need to do now?
Corporations that have not already reviewed their anti-bribery and corruption policies and processes, should immediately start doing so. This review should take into consideration the Guidance and the principles that outline what may be considered adequate procedures to prevent foreign bribery and corruption.
Corporations that have already reviewed their policies and processes should now consider, in light of the Guidance, whether they are proportionate and effective.
The Guidance specifically notes that if a corporation does nothing, it will not be able to show it has adequate procedures in place to prevent foreign bribery and corruption. It is clear that simply adopting an anti-bribery and corruption policy will not be enough. As a minimum, a documented risk assessment and response plan to bribery and corruption within the corporation is also required.
Importantly, a corporation’s top-level management personnel (e.g. CEO and executive team, board of directors, or in the case of SMEs, the business owners) play a key role in preventing foreign bribery and corruption within the corporation. They are expected to demonstrate an understanding of the new requirements, and undertake proactive measures to ensure its anti-bribery and corruption policies and procedures are adequate.
The Guidance acknowledges the fact that “foreign bribery has occurred does not, in itself, mean that adequate procedures were not implemented by the relevant corporation.” A corporation can still demonstrate it had adequate procedures in place to prevent foreign bribery and corruption, despite an incident occurring. That is why proactively implementing a proportionate and effective anti-bribery and corruption policy in light of these new laws is critical for your business.
Next steps
Norton Rose Fulbright can assist you (compliance teams, senior management and boards) to review your current anti-bribery and corruption policy and compliance program and strengthen the adequacy of your procedures to prevent bribery and corruption. Contact us today to see how we can assist you to assess your risk of bribery and develop controls responsive to those risks.
