Will Australia’s foreign bribery laws finally bite?

Current law – “due diligence”

Under the current law, a corporation is not criminally responsible for bribery by its employees, agents or officers, if it can prove it has exercised due diligence to prevent the crime.

New law – “absolute liability”

The Bill introduces a new absolute liability offence of failing to prevent bribery of a foreign public official. A corporation will commit the offence if an associate commits the bribery offence for the profit or gain of the corporation.

An ‘associate’ is broadly defined, and includes an employee, contractor, agent, subsidiary or controlled entity of the corporation, or a person that otherwise performs services on behalf of the corporation. The latter phrase is a new concept. The Explanatory Memorandum states that such a person need not necessarily be an officer, employee, agent, contractor, subsidiary or controlled entity of the corporation. Conceivably this applies to individuals and entities that are not directly engaged or paid by a corporation. For example, indirect suppliers such as customs agents who are engaged by a supplier in another market may fall within this definition.

The new offence will result in maximum penalties of the greater of:

• AU$31.5 million;
• three times the benefit received; or
• (if the court cannot determine the benefit) 10% of the corporate group’s annual turnover

Adequate procedures defence

The new offence of failure to prevent bribery can be committed even if the bribe was not authorised by the corporation, and the corporation did not intend for its associate to engage in bribery. A corporation’s only defence to the new absolute liability offence is proving it adopted ‘adequate procedures’ to prevent bribery.

The Bill does not detail what constitutes adequate procedures to prevent bribery. Instead, the Bill provides that the Attorney-General must publish guidance on adequate procedures.

The Attorney-General has indicated that the guidance will be based on the UK Government’s guidance that accompanies the ‘failure to prevent’ offence under s 7 of the Bribery Act 2010 (UK). The UK guidance provides that adequate procedures should be informed by six broad principles:

1. Proportionate procedures
2. Top-level commitment
3. Risk Assessment
4. Due diligence
5. Communication
6. Monitoring and review

Other changes

Under the current bribery offence, if an employee, agent or officer of a body corporate acting within the actual or apparent scope of their employment, or within their actual or apparent authority, provides a benefit to a foreign official that was ‘not legitimately due’, a corporation can be liable for providing or causing that benefit. Bribes can often be disguised as agent fees, which makes it difficult to determine whether the payment was legitimately due.

The Bill replaces the concept of ‘not legitimately due’ with one of ‘improper influence’. The rationale of this change is to stamp out bribes that are concealed as legitimate payments.

What do businesses need to do now?

In our experience, effective anti-corruption and bribery (ABC) programs are:

• tailored appropriately to risks identified by a rigorous risk assessment;
• championed by the C suite and consistent with the organisational culture;
• designed and implemented effectively; and
• regularly reviewed and updated.

Many Australian corporations have ABC policies in place, but they may not have:

• conducted an ABC risk assessment and designed responsive controls;
• consistent tone of compliance from the top;
• provided adequate training for both direct employees, agents, contractors and other persons and entities who are now covered by the definition of “associate”; and
• assessed the effectiveness of their ABC programs.

Corporations in this position will not be able to make out an adequate procedures defence.

The expanded definition of “associate” means corporations need to carefully consider their direct and indirect supplier ABC risk. Australian third party due diligence programs seldom focus on ABC risk beyond their agents. This is a significant broadening of potential criminal risk.

Next steps

These changes will commence six months after the Bill receives royal assent. This gives corporations time to assess their ABC risks and design effective programs that could underpin an adequate procedures defence.

Norton Rose Fulbright has vast experience in assisting corporations in improving the effectiveness of their ABC procedures. We are able to provide guidance on what constitutes adequate procedures and regulatory practices.

This also extends to providing customised ABC training via our award-winning online legal compliance training program, Compliance Manager. 

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