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In-House Counsel Day – Priorities for 2012
Anti Bribery Legislation in the UK, US and Australia
Presented by Gowri Kangeson Thursday 8 March 2012
WIN: What in-house lawyers need
Knowledge, support and networking for the in-house lawyer community
www.dlapiperwin.com
Why is this relevant to you?
Operating in a global environment with differing laws and expectations
Ethical challenges can arise from time to time
You need to know what is expected of you and what you need to do to ensure compliance with the law
You want to be seen as complying with legal obligations
You need to know the laws - anti-corruption laws are strict and penalties are harsh
Be aware that anti-corruption laws often apply to you personally
Ignorance of the law is not a defence - you have a duty to learn and understand the relevant anti-corruption laws and comply with these
Think about this at the front end of a transaction and during ongoing management of a business relationship
Why happens if you break these laws?
There are severe consequences:
You could be required to pay large amounts of money to the government – pecuniary penalties
You (personally) could be required to pay a pecuniary penalty
In the most extreme cases – you could be involved in committing an offence or a crime
Adverse publicity and brand damage
Prevented from tendering for public contracts
What we will look at today?
Segment 1 Background:
why comply?
Transparency
International –
Corruption
Perceptions
Index
Segment 2
Key legal
obligations
Australian law
US law:
FCPA
UK law:
Bribery Act
Segment 3
What you need
to watch for
Increasing
focus on
corruption and
why compliance
is important
Common
red flags
Key
messages
Knowing the hot spots
- The transparency index for corruption (TI) defines corruption
as the abuse of entrusted power for private gain (covers both
public and private sectors)
- 2010 TI Index ranks 178 countries in terms of degree to which
corruption is perceived amongst public officials and politicians
- Inclusion in Index requires minimum of 3 sources of
information assessing the country
- Scale: 10 (very clean) to 0 (highly corrupt)
- Score is important indication of perceived level of corruption in
a country
TI Corruption Perceptions Index, 2010
Source: http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
Have you come across this before ...
International anti-corruption focus
1997 - Organisation for Economic Co-operation and
Development (OECD) Convention on Bribery of Foreign Public
Officials in International Business Transactions (38
signatories) = increased global anti-bribery enforcement
2005 - United Nations Convention against Corruption
(currently 140 signatories)
Regional strategies – eg Asia-Pacific Economic Co-operation
Course of Action on Fighting Corruption and Ensuring
Transparency (2004)
Local jurisdictional requirements - eg US and UK have strict
anti-bribery laws with expansive territorial reach, all Asian
countries have anti-corruption laws
Australian anti-corruption focus – The
Age – 14 February 2012
SEVERAL large Australian public companies have provided
federal police with information implicating themselves in possible
foreign bribery offences. The Age understands companies
involved in mining, exploration and other sectors in Africa and
Asia have discovered possible evidence of overseas bribery
during recent internal audits.
The audits were prompted by the corruption scandal involving
the Reserve Bank of Australia that led to its subsidiaries,
Securency and Note Printing Australia, as well as 10 former
executives, being charged with the nation's first foreign bribery
offences in July last year.
Australian anti-corruption focus
The Age – 17 September 2011
… The former deputy chairman of the Reserve Bank of Australia's currency
firm, Securency, with bribing Vietnam's former central bank governor.
… Bill Lowther is the first Securency board member to face criminal charges
out of the federal police-led global corruption inquiry into two RBA firms,
Securency and Note Printing Australia.
Australian Federal Police have already charged eight former senior executives
with conspiring to pay multimillion-dollar bribes to officials in Indonesia,
Malaysia and Vietnam in return for bank-note printing contracts….
The Reserve Bank owns half of Securency and all of Note Printing Australia.
Mr Lowther is alleged by Britain's Serious Fraud Office to have conspired in
2003 to pay for the son of the then governor of Vietnam's state-owned bank to
attend Durham University, in England.
In return, it is alleged the then governor, Le Duc Thuy, gave a massive contract
to Securency to switch Vietnam's notes from paper to polymer….
… third person outside Australia to be charged with bribery in relation to what
has become Australia's biggest bribery scandal.
Australian anti-corruption focus
Australia: Consultation—Assessing the ‘Facilitation Payments’
Defence to the Foreign Bribery Offence and Other Measures -
LNB 15 November 2011
Australian Government: Consultation launched on possible changes
to anti-foreign bribery laws in Australia. On 15 November 2011, the
Minister for Home Affairs launched a public consultation paper to
seek interested stakeholder views on possible changes to Australia‟s
anti-foreign bribery laws. The Australian Government is committed to
stamping out corruption and has a comprehensive anti-corruption
system for the public and private sectors. Even though Australia has
an admirable anti-corruption record, it is important to consider
possible additional measures, including assessing Australia‟s
anti-bribery laws.
http://www.ag.gov.au/foreignbribery#consultationpaper
Australian legislation
UN and OECD Conventions ratified
1999 – OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions
2004 – UN Convention Against Transnational Organised Crime
2005 – UN Convention Against Corruption
Criminal Code (1995) (Cth): applies at a national and
international level
State and Territory Crimes Acts: no consistency in the
wording of the relevant legalisation in the State and Territory
Acts
Corporations, tax legislation
Australia: overview
The Commonwealth Criminal Code Act 1995 (Criminal Code)
has provisions against the bribery of:
Foreign public officials under Division 70; and
Commonwealth public officials under Division 141.
These provisions prohibit:
the dishonest direct or indirect conferral of a benefit on a
Commonwealth public official with the intention of influencing their
exercise of duties as a Commonwealth public official; and
bribery of a foreign public official, whether in Australia or
elsewhere
This means that Australian citizens and corporations can be
prosecuted for actions undertaken overseas
Bribery of commonwealth public official
The giving of a bribe is the:
dishonest direct or indirect conferral of a benefit on a
Commonwealth public official;
with the intention of influencing their exercise of duties as a
Commonwealth public official;
whether or not the giver was aware that the receiver was a
Commonwealth public official and was exercising the duties of a
Commonwealth public official.
A benefit includes any advantage and is not limited to property.
Offence: Payer of the bribe
Section 141.1 (1) Criminal Code Act 1995 describes the
offence relating to the giving of a bribe to a Commonwealth
public official
Commonwealth Government Officials
Definition in Criminal Code
Public Administration Act 2004 (Victoria) definition
Australia – Foreign Bribery
Criminal Code 1995 (Cth) – division 70
Person A is guilty of an offence if:
Provide or cause to provide a benefit to Person B;
Offer or promise to offer to provide a benefit to Person B;
Where the benefit is not legitimately due to Person B;
Person A acts with intention of inducing a public official (who
may or may not be Person B) in the exercise of the official‟s
duties as foreign public official to:
Obtain or retain business.
Obtain or retain a business advantage that is not legitimately due to the
recipient or intended recipient.
Any defences?
Limited specific defences
The conduct was lawful in the country in which it occurred; or
The benefit was a facilitation payment
A facilitation payment is:
a payment of minor value;
to a foreign public official;
to secure performance of routine government actions of a minor
nature, such as granting a permit or licence, providing utility
services, or loading or unloading cargo.
The action must be ordinarily and commonly performed by the
official
Defences
The action must not involve a decision about awarding new
business or continuing existing business.
For example, on arriving in a foreign country, a business person is
informed that their visa is invalid. The business person, who is
entitled to a visa, pays a fee to a foreign public official for the sole
purpose of expediting the issue of a new visa
Evidentiary duties: If relying on a facilitation defence:
Need a record of the conduct; or
Need to establish that the record has been lost or destroyed
because of the actions of a third party or because of an event over
which the accused had no control.
Penalties - Recently strengthened
Individuals
Maximum of 10 years imprisonment; and/or
Maximum $1,100,000 fine (increased from $66,000)
Corporations – the greatest of:
$11,000,000 each offence (increased from $330,000)
3x value of the illegal benefit obtained that is reasonably
attributable to the conduct constituting the offence (including
conduct of related corporation)
If Court cannot determine value of benefit, 10% of annual turnover
of corporation during 12 months preceding offence
Other sanctions – disqualification of individuals from managing
corporations, suspension of financial services licences,
confiscation of illegally obtained assets
Importance of a good compliance culture
The Criminal Code allows the prosecution to lead evidence that a
company's compliance culture is such that despite formal documents
appearing to require compliance with laws prohibiting foreign bribery,
the company fosters non compliance in reality.
A company can be criminally liable if the corporate culture directs,
encourages, tolerates or leads to non-compliance with the criminal
provisions proscribing the bribery of foreign public officials.
A company can be criminally liable if the company fails to create and
maintain a corporate culture that requires compliance with the law.
Corporate culture is defined to mean: an attitude, policy, rule, course
of conduct or practice existing within the body corporate generally or
in the part of the body corporate in which the relevant activities take
place.
Foreign bribery: recent enforcement activities
It appears there have not been any convictions under the
foreign bribery provisions of the Criminal Code Act 1995.
However, in light of the relatively recent bribery convictions in
China of Rio Tinto employees, and the earlier incidents
involving the Australian Wheat Board and HIH, awareness is
rising in Australia.
Managing tax obligations
Sections 26-52 and 26-53 of the Income Tax Assessment Act
1997 (ITAA) deny taxpayers a deduction for bribes paid to
foreign or domestic public officials
Deductions may be allowable for facilitation payments to
foreign public officials (subsections 26-52(4)-(5))
Due to the similarity of the relevant laws (ITAA and Criminal
Code), a payment which is considered a bribe for the tax law is
also likely to be referred for criminal investigation
US Foreign Corrupt Practices Act: Purpose
FCPA Anti-Bribery Provisions
Prohibits U.S. and certain foreign entities and individuals from
bribing foreign government officials to obtain, retain or direct
business, or to secure an improper advantage.
FCPA Accounting Provisions
Require U.S. issuers and certain foreign subsidiaries to
Accurately and fairly reflect transactions and dispositions of assets, and
To implement internal accounting controls (ie management
authorization of transactions).
Why should you be concerned with US
legislation?
FCPA enforcement is at an all-time high - The FBI considers
FCPA enforcement one of its “highest priorities”
Violators face heavy criminal and civil fines and penalties
The FCPA has wide extra-territorial reach and the US
Department of Justice (DOJ) encouraging other regulators to
take tough stance on bribery and corruption
Not only does the U.S. Government prosecute business
entities for FCPA violations, but it is targeting responsible
individuals
Companies required to comply with the FCPA are also
responsible for the anti-bribery compliance of their business
partners
Beware the FCPA’s wide reach
The FCPA applies to:
U.S. issuers – U.S. public companies and companies required to make filings with the SEC
U.S. persons and entities regardless of where they are in the world
Domestic and foreign subsidiaries of U.S. companies
Employees, agents and consultants of U.S. companies and their subsidiaries (domestic and foreign)
Almost anyone that is in the U.S. and commits an act in violation of the FCPA. (eg. an Australian citizen that, while in the U.S., discusses making improper payments to government officials in furtherance of a business interest)
FCPA in Australia – who is at risk?
A common misconception is that foreign laws like the FCPA do
not affect Australian companies or individuals.
It is not just US companies that risk prosecution under the
FCPA. The following may also be at risk:
Australian companies with US operations
Australian companies with any nexus to the US contracts for the
US Military –
where the US nexus is used in furtherance of bribes being paid
anywhere in the world
Executives within affected Australian companies
Australian companies that issue securities in the US
FCPA: Anti-bribery
Anti-bribery Provisions
Prohibits U.S. issuers, domestic concerns and certain foreign
persons and their officers, directors, employees or agents acting
on their behalf from:
directly or indirectly offering anything of value to a foreign official to
wrongly influence
an official government act or decision
in order to obtain or retain business or to secure any improper advantage
The law does not require that a payment actually be made
FCPA: Accounting provisions
Accounting Provisions
Requires that books, records and accounts be kept in reasonable
detail to accurately and fairly reflect transactions – this includes
the recording of gifts and entertainment provided to external
parties
That internal accounting controls be established and implemented
The intentional incorrect recording of any payment is a violation of
the FCPA
All employees are required to comply with the FCPA
Only applies to U.S. issuers and foreign subsidiaries of
U.S. issuers
What is anything of value?
The term „anything of value‟ includes
Cash or cash equivalent
Gifts and hospitality
Charitable donations
Political contributions
Travel expenses
Meals and entertainment (tickets to sporting events, golf, scuba-
diving trip, etc)
Anti-bribery provisions – anything of value
Business opportunities
Sponsorships to conferences, payment of speaker fees
Services
Loans
Jobs for friends or relatives, personal favours, etc
Any other benefit
What is a government official?
Definition is very broad, but includes:
An officer or employee of a government or any department or
agency of the government
An officer or employee of a government owned airline
An officer or employee of a government-owned or controlled
business – key opinion leaders (KOL), administrators and
other employees of government-owned entity
Political party, party official or candidate for office
Employees or officials of public international organisations such as
the United Nations, the World Bank, the IMF
Any person acting in an official capacity on behalf of any of the
above
Business purpose/improper advantage
Payments must be made to obtain or retain business or to
secure an improper advantage
The U.S. Government interprets the above broadly
In 2007 a U.S. court held that the term covers almost all
actions that benefit a business
An action is considered illegal even if it does not occur inside
the United States
Ask yourself why a payment, gift or travel opportunity is being
made. If it is not made, will you still receive the business or
will your business be affected in other ways?
FCPA exceptions/defences
Facilitation Payments: payments to a government official to
facilitate or expedite performance of a routine government
action (payments for visas, permits, licenses)
Bona fide promotion payments
Payment or offer to pay is legal under the country‟s official law:
bribery is not legal in China so this is not a defence
FCPA exceptions/defences
The following are not acceptable excuses
this is how business is done in this country
all of our competitors are doing it
an agent did it
there is no other way to do business
FCPA Penalties
Individuals
Criminal penalties –
Fines of up to US$100,000 or twice the gain resulting from the
payment; and/or
Imprisonment of up to 5 years
Corporations
Criminal penalties –
Fines of up to US$2 million or twice the gain resulting from the
improper payment
FCPA Penalties
Civil penalties –
Fines, disgorgement of profit, injunctions
Suspension or disbarment from U.S. government
contracts or programs and foreign government
programs
Inability to receive export licenses
Can be sued in a private right of action
UK: Bribery Act: Catching up
(and overtaking) the US?
Bribery Act – Came into force 1 July 2011
Targets overseas corruption and makes companies criminally
liable for failing to have adequate anti-bribery procedures.
2 general offences – bribing and being bribed – committed
when someone:
offers, promises or gives another (offence of bribing), or
requests, agrees to receive or accepts (offence of being bribed)
a financial or other advantage in connection with a person
performing a function improperly (ie breaching an expectation that
the function will be performed in good faith, impartially or as a
result of a position of trust).
Why should Australian companies be
concerned with UK legislation?
It applies to every company doing business in the UK –
depends on connection with the UK
Simply having a UK presence (subsidiary, office or operations)
may (but not necessarily) create jurisdiction.
The Bribery Act applies to both UK companies and foreign
companies with operations in the UK, even if offenses take
place in a third country and are unrelated to UK
operations.
This means that the relevant criminal act can occur outside the
UK and persons or companies in the UK can be liable. For
example, if a Australian company has a UK branch and
engages in bribery in Asia, that Australian company may have
liability under the Bribery Act and could be prosecuted in the
UK for failing to prevent bribery.
What are the implications for non-UK
individuals?
Senior officers need to understand that they could be
personally liable under the Bribery Act:
for offenses committed by the organization
if they have consented to or connived in (turned a blind eye
to) the commission of the main bribery offenses, including
bribing a foreign public official (but not that of failing to
prevent bribery), and if any part of the offense has taken
place in the UK.
If the offense is committed outside the UK, they will only be
liable if they have a “close connection” with the UK (such as
being a British passport holder or being ordinarily resident in
the UK).
How does the UK Bribery Act differ from the
US FCPA?
There are some significant differences:
the Bribery Act makes it an offense to receive, as well as give, a
bribe;
bribery of private individuals and companies is criminalized;
there is no need to prove corrupt intent;
there is a strict liability corporate offense for failing to prevent
bribery;
there is no exemption for facilitation payments; and
the extraterritorial reach has a broader impact for companies and
individuals.
UK: Bribery Act 2010
2 new offences:
Bribing a foreign public official
Corporate offence – Failing to prevent bribery
UK: Bribery Act 2010
Bribing a foreign public official –
Offence committed when person bribes or offers advantage to
FPO
With the intention of influencing FPO in his/her capacity as an
FPO;
In order to obtain or retain business or an advantage in the
conduct of business;
When the FPO is not permitted or required by applicable local
law to be influenced by the advantage.
Note: Facilitation payments remain illegal, even if permitted or
expected under local custom (cf. FCPA, Criminal Code 1995
(Cth))
UK: Bribery Act 2010
Corporate offence: Failing to prevent bribery - Relevant
commercial organisation strictly liable if:
Person associated with it bribes another person intending to obtain
or retain an advantage in the conduct of business for the
organisation; and
There are no adequate procedures in place designed to prevent
bribery.
Broad definitions:
„Relevant commercial organisation‟ includes partnerships and
corporations incorporated anywhere in the world that carry on any
part of their business in the UK.
„Person associated‟ with organisation includes people who perform
services on its behalf regardless of capacity – eg. employees,
agents, subsidiaries, joint venture partners.
UK: Bribery Act 2010
Offence committed regardless of whether:
Associated person is actually prosecuted for the bribery offence.
Associated person‟s actions forming part of the offence take place in UK
or elsewhere in world.
Organisation was unaware of the conduct and did nothing to bring about
or encourage it.
Penalties:
Imprisonment up to 10 years (individuals)
Unlimited fines (individuals and companies)
Company debarment from competing for public tender contracts in EU in
perpetuity
Director disqualifications
Asset confiscation proceedings: not just the profit but also the revenue
Ban on funding support from multi-lateral development banks
UK: Defence of adequate procedures
No definition provided.
MOJ consultation paper suggests principles-based approach:
Risk assessment – Company expected to assess and keep
current with bribery risks in its sector and markets
Top level commitment – Company should demonstrate top-down
approach to anti-corruption culture with management buy-in to all
policies and ensuring publication and communication to all
employees, subsidiaries and business partners
Due diligence – Policies and procedures to cover business
partners and all markets in which company does business;
considering risks associated with politically exposed persons
.
UK: Defence of adequate procedures
Proportionate procedures – Clear ethics code and policies
and procedures for gifts and hospitality, political
contributions, lobbying
Communication (training) – to ensure dissemination of
anti-corruption culture at all levels within organisation
Monitoring and review – Mechanisms are required to
ensure compliance with policies and procedures and to
identify and address any issues when arise. May include
commissioning external verification or assurance processes.
UK: Reasonable business entertainment
permissible
Genuine, bona fide hospitality provided to government officials
that is “reasonable and proportionate” for promotional
purposes is not intended to be covered by the UK Bribery Act.
Indeed, the recent guidance expressly states that tickets to
sporting events or taking clients to dinner will not be an offense
under the UK Bribery Act, so long as it is reasonable and
proportionate to your business.
UK: Potential for cooperation credit
Although not specifically stated, the Guidance suggests that
companies that have incorporated anti-bribery prevention
procedures and choose to self-report an offense may receive
“credit” or leniency.
Making reference to the Serious Fraud Office‟s guidance –
Approach of the Serious Fraud Office (SFO) to dealing with
overseas corruption – the Guidance notes that the company‟s
willingness to cooperate will be taken into account when the
government is determining whether to bring criminal
proceedings.
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Active bribery –
bribing another
person
Offence to bribe any person (a UK public
official, a foreign public official, a private
individual, a corporate entity):
- by giving, offering or promising
- a financial or other advantage (directly or
indirectly)
„Foreign public official‟ is broadly defined to
include legislative, administrative and
judicial personnel, and anyone who
performs a public function or is an official of
a public international organisation
„Foreign public official‟ does not include
candidates for office (but bribery of those
persons are still barred under the general
bribery offences)
Note: Commercial/private bribery is also
covered
Offence to bribe foreign officials:
- by offering, giving or promising (directly or
indirectly)
- money or anything of value
A „foreign official‟ is a person with
governmental authority, including political
party officials and candidates for office.
„Foreign official‟ also includes employees of
companies owned by foreign governments
Note: Only applies to bribery of foreign
officials. The US does use other laws
(such as the Travel Act1 and mail and
wire fraud statutes) to prosecute
commercial/private bribery
Offence to influence a foreign public
official in the exercise of the official's
duties:
- by offering, providing, promising
(directly or indirectly through an
intermediary)
- a benefit to another person which is
not legitimately due to that person
A 'benefit' includes any advantage and is
not limited to property
The definition of 'foreign public official' is
broad. It includes, for example,
members of a legislature of a foreign
country, and individuals who perform
work for a public international
organisation under a contract
Note: Commercial/private bribery is not
covered2
Passive bribery –
receiving bribes
Offence to receive bribes
Also an offence to request or agree to
receive bribes (directly or indirectly)
But the passive bribery offence is not
applicable to foreign officials, ie they will not
be prosecuted in the UK for requesting,
receiving or agreeing to receive bribes
Not an offence to receive bribes
Active bribery (offering, giving or promising)
only
Note: Other US laws (such as 18 U.S.C §
201) target both active and passive
bribery of domestic officials
Not an offence for a foreign public
official to receive bribes
Active bribery only
49
Bribery Act
2010 FCPA 1977 Criminal
Code
Act 1995
1 Legislation prohibiting interstate travel or use of an interstate facility in aid of a racketeering or an unlawful business enterprise (includes bribery as an „unlawful activity‟) 2 However there is a separate offence under the Criminal Code Act dealing with bribery of a Commonwealth public official
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Bribery of foreign
officials
Specific offence of bribing a public
official (the foreign official does not
commit an offence which can be
prosecuted in the UK)
The bribe can be given, offered or
promised directly or indirectly
Offence is not committed if foreign
official is permitted or required under
written local law to be influenced in his
capacity as a foreign public official
Only deals with offences related to the
bribery of foreign officials
The offer, promise or gift can be direct or
indirect
Affirmative defense available if payment to
foreign official is lawful under written laws
and regulations of foreign country
Specific offence dealing with the bribery of
foreign public officials
The benefit can be provided, offered or
promised, either directly or indirectly through
an intermediary, to the foreign public official
or to any other person
Defence available if the conduct occurs in
relation to a foreign public official and the
conduct is lawful under relevant written laws
(eg a law of a foreign country)
Acts or omissions –
purpose in mind
General bribery offences
Improper performance of a „relevant
function or activity‟ in return for a
„financial or other advantage‟
A breach of a an expectation of good
faith or impartiality, or in breach of a
position of trust
It is not necessary to prove that a
financial or other
Foreign officials
Influencing the foreign official in his or
her official capacity
Influencing the foreign official in his or her
capacity
Inducing the foreign official to do or omit to
do an act in violation of his or her lawful
duty, or
Securing any improper advantage in order
to assist in obtaining or retaining business
for or with, or directing business to, any
person
Influencing a foreign public official in the
exercise of the official's duties as a public
official in order to:
- obtain or retain business, or
- obtain or retain a business advantage that
is not legitimately due to the recipient, or
intended recipient, of the business
advantage
50
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Intent required General offences
Evidence of improper performance
required, as determined by the
standards expected by a reasonable
person in the UK
No requirement for corrupt or dishonest
intent
Foreign officials
Evidence of intent to influence in order
to retain or obtain business is required
No requirement for corrupt or dishonest
intent
It is not necessary to prove that
business was actually obtained or
retained
Evidence of corrupt intent required
Payment must be intended to induce the
recipient to misuse his official position to
direct business wrongfully to the payer or to
any other person
It is not necessary to prove that the corrupt
act succeeded in influencing the official
receiving the payment
Also an offence to provide a payment or
anything of value to any other person while
knowing or having reasons to suspect that
any part of such offer, payment, loan or gift
will be given or promised to a foreign official
for an improper purpose. Evidence of a
conscious disregard or deliberate ignorance
of known circumstances that should
reasonably alert one to high probability of
violations of the Act will suffice to establish
intent
Evidence of intent to influence a foreign
public official in the exercise of the
official‟s duties as a public official is
required
It is not necessary to prove that
business, or a business advantage, was
actually obtained or retained
Liability of senior
officers
Senior officers who consent or connive
in a act of bribery committed by the
corporate are also guilty of the same
offence
This applies to the general bribery
offences and bribing a foreign official
but not to the corporate offence of
failing to prevent bribery (see below)
Conspiracy and aiding/abetting principles
apply
A person who aids, abets, counsels or
procures the commission of a bribery
offence is taken to have committed that
offence and is punishable accordingly
51
Bribery Act 2010 FCPA 1977 Criminal Code
Act 1995
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Corporate offence Strict liability offence for „commercial
organisations‟ that fail to prevent bribery
Defence available where the corporate
can demonstrate that it had „adequate
procedures‟ in place to prevent bribery
No comparable offence for compliance failures
In determining whether to charge the
corporation, prosecutor will consider: (a)
nature and seriousness of offence; (b)
pervasiveness of wrongdoing, including
complicity by management; (c) corporation‟s
history of similar misconduct; (d) timely and
voluntary disclosure of wrongdoing; (e)
existence and effectiveness of the
corporation‟s pre-existing compliance program;
(f) corporation‟s remedial actions; (g) collateral
consequences; (h) adequacy of prosecution of
individuals responsible for corporation‟s
malfeasance; (i) the adequacy of remedies
such as civil or regulatory enforcement
Compliance programmes are not a defence to
FCPA liability but as per above are a factor
that will be considered in determining whether
to prosecute and the terms of a settlement
No comparable offence for failure
to prevent bribery
In determining whether to charge a
corporation, the prosecution may
consider if the company authorised
or permitted the bribery by various
means. The prosecutors may
consider (among other things):
- whether a corporate culture
existed that directed,
encouraged, tolerated or led to
the conduct; and
- whether the corporation failed to
create and maintain a corporate
culture that required compliance
with the law
Prosecutors are not to be
influenced by:
- considerations of national
economic interest
- the potential effect upon relations
with another State; or
- the identity of the natural or legal
persons involved
52
Bribery
Act 2010
FCPA 1977 Criminal
Code Act
1995
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Business purpose nexus For certain offences only
Required for the offence of bribing a foreign
official where the purpose must be to „obtain
or retain business or an advantage in the
course of business‟
Required for the corporate offence of failing
to prevent bribery in so far as the bribe that
the corporate failed to prevent must have
been committed with intention to „obtain or
retain business or an advantage in the course
of business‟ for that organisation
Required
Payments or offers must be made in
order to „obtain or retain business‟ or
directing business to another party
Obtain or retain business is interpreted
broadly
Required
Benefits or offers or promises to
provide benefits must be made in
order to 'obtain or retain business' or
to 'obtain or retain a business
advantage that is not legitimately
due' to the recipient, or intended
recipient, of the business advantage
A 'business advantage' is defined to
mean an advantage in the conduct
of business
In determining whether a business
advantage is 'not legitimately due',
the following will be disregarded:
- the fact that the business
advantage may be customary, or
perceived to be customary, in the
situation
- the value of the business
advantage
- any official tolerance of the
business advantage
53
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Jurisdiction General offences
An act or omission committed in the UK –
no connection with the UK required
An act or omission outside the UK:
- individuals who are UK citizens or
„ordinarily resident‟ in the UK
- corporates that are incorporated in the
UK
Senior officer offence
For a senior officer to be liable for
bribery on the basis of consent or
connivance, they must have a „close
connection‟ with the UK (eg British
Citizen or „ordinarily resident‟)
Seniors officer is defined as „director,
manager, secretary or other similar
officer‟ or anyone purporting to act in
such capacity
Corporate offence failing to prevent
bribery
The act or omission does not have to
take place in the UK
Anti-bribery provisions
Domestic concerns (US citizens and US
corporates)
Issuers3 of securities (including non-US
corporates)
Any officer, director, employee or agent
of an issuer
Since 1998, also apply to foreign
corporates and persons who cause,
directly or through agents, an act in
furtherance of such a corrupt payment to
take place within the territory of the
United States (includes meetings, using
US banks, wire transfers, email servers,
correspondent accounts etc)
Books and records
All issuers including foreign issuers
FCPA accounting provisions apply to
„issuers‟:
- issuers are those required to file reports
with the SEC or those with securities
registered with the SEC
Applies to a person who is incorporated
in Australia, a citizen, or a resident at
the time of the conduct, even if the
conduct occurs wholly outside Australia
Does not apply to foreign nationals or
companies unless the conduct occurs
wholly or partly in Australia, or wholly or
partly on board an Australian aircraft or
ship
54
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
3 Exchange Act 1934
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Jurisdiction
Cont’d
Non-UK corporates are covered by the Act
(for acts or omissions in any part of the
world) if they have a UK office or do
business in or via the UK
- definition of issuer is sufficiently broad to
cover corporates that issue American
Depository Receipts traded on US markets
or stock exchanges
Books and records
No specific books and records provision
but criminal proceedings (or civil recovery)
possible for failure to keep accurate
accounts2
Includes specific books and records
provisions obligation to maintain accurate
accounts (subject to civil or criminal
enforcement), which applies only to issuers
Note: There is no requirement that an
issuer have knowledge in order to be held
civilly liable for a violation of the books
and records or internal control provisions.
There is a knowledge requirement that
must be technically proven to establish
criminal liability for a books and record or
internal controls violation
No specific books and records
obligation under this Act
Note: A company should keep a
record of its compliance programs and
any facilitation payments, as these will
be relevant to its defence.
Facilitation payments
No specific exemption
But prosecutors do have discretion – may
not consider that it is in the public interest
to prosecute for small one-off payments or
payments made to secure the safety of
individuals
Limited exemption for „routine governmental
action‟
Eg obtaining permits, licenses, or other
official documents; processing governmental
papers, such as visas and work orders;
providing police protection; mail pick-up and
delivery
There is a limited defense for
facilitation payments made to expedite
or secure the performance of a 'routine
government action of a minor nature',
provided that the value of the benefit is
of a 'minor nature'
The defence is not available unless a
written record is made as soon as
practicable, and the record contains the
prescribed details.
55
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Criminal & civil
enforcement
Both criminal and civil proceedings
possible:
Criminal proceedings – against individuals
and corporates mainly instituted by the
Serious Fraud Office
Civil Recovery Orders4 for corruption
cases are also possible – used to recover
sums obtained in relation to „unlawful
conduct‟ (to date only used against
corporates where there have been
„payment irregularities‟), and where there is
insufficient evidence to prosecute for
corruption offences
Both criminal and civil proceedings possible:
Anti-bribery provisions
DOJ – responsible for all criminal
enforcement and for civil enforcement with
respect to domestic concerns and foreign
companies and nationals
SEC – responsible for civil enforcement of
the anti-bribery provisions with respect to
issuers
Books and records provisions
SEC responsible for civil enforcement
actions against violators of the accounting
provisions
DOJ responsible for criminally prosecuting
„wilful‟ violations of the accounting
provisions
Only criminal proceedings are
possible
The Commonwealth Director of
Public Prosecutions (CDPP) is
responsible for enforcement
If the conduct occurs wholly outside
Australia and the person who is
alleged to have committed the
offence was a resident, but not a
citizen, of Australia at the time, then
the CDPP may not commence
prosecution without the Attorney-
General‟s written consent
56
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
4 Proceeds of Crime Act 2002
A Comparison Of The UK Bribery Act, The US Foreign
Corrupt Practices Act & The Australian Criminal Code Act
Penalties Individuals – up to 10 years‟
imprisonment and/or an unlimited fine
Corporates – unlimited fine
Note: In addition to fines, asset
recovery proceedings can be brought
against individuals and corporates to
confiscate the proceeds of crime
Bribery - criminal
Individuals – up to five years imprisonment
and fines of up to $250,000 (or up to twice
the benefit sought or received, whichever is
greater5)
Companies – fines of up to $2 million (or up
to twice the benefit sought or received,
whichever is greater)
Bribery - civil
SEC – individuals and corporates – fines of
up to $10,000
Court (in addition) to the above:
- fine equal to the gross amount of the
pecuniary advantage; or
- a specified dollar limitation (individuals –
up to $100,000; corporates up to
$500,000)
Books and records - civil
Individuals – up to $150,000
Companies – up to $500,000
Individuals - fines of not more than
10,000 penalty units ($1.1 million) or
not more than 10 years imprisonment
Companies – fines of not more than
the greatest of:
- 100,000 penalty units ($11 million)
- 3 times the value of the benefit that
has been obtained directly or
indirectly and that is reasonably
attributable to the offending conduct;
and
- (if the court cannot determine the
value of the benefit) 10% of annual
turnover during the 12 months
ending at the end of the month in
which the offending conduct
occurred
Penalties
Cont’d
Books and records - criminal
Individuals – up to 20 years‟ imprisonment
and fines of up to $5million
Companies – fines of up to $25million
Note: fines and terms of imprisonment
can be imposed per violation
57
Bribery Act 2010 FCPA 1977 Criminal Code Act
1995
5 Alternative Fines Act
What about the rest of the world?
Country Legislation
Europe Criminal Code of the Federal Republic of Germany, French Penal Code;
Spanish Criminal Code; EU Framework Directive
Japan Unfair Competition Prevention Law
Singapore Prevention of Corruption Act
China Criminal offence to: (1) Bribe a government official („Official Bribery‟);
(2) Offer to bribe to a company („Commercial Bribery‟)
Administrative Violation to: (1) Bribe counterparties for the purpose of
selling/purchasing products by way of offering valuables or other
methods („Non-Criminal Commercial Bribe‟). Subject to administrative
penalties
Amendments this month.
58
Chinese Anti-Bribery Laws - bribery
Criminal offences to:
Bribe a government official („Official Bribery‟)
Offer to bribe to a company („Commercial Bribery‟)
Administrative Violation to:
Bribe counterparties for the purpose of selling/purchasing products
by way of offering valuables or other methods („Non-Criminal
Commercial Bribe‟)
Subject to administrative penalties
59
The way ahead: heightened compliance
expectations
Tighter legislation; extra-territorial reach; tougher penalties (eg
UK Bribery Act now one of strictest anti bribery regimes in the
world)
Increase in number and magnitude of FCPA cases and
investigations by US DOJ and SEC; greater activity by UK
regulators. Eg -
2009 - KBR and Halliburton (bribes to Nigerian officials to secure
natural gas terminal contract) – fined US$579m
2008 - Siemens fined total of US$1.3bn
Greater international co-operation between regulators – eg
BAE Systems: US$400 million (DOJ) + ₤30 million (SFO)
Beware the publicity
Know your risk areas
Know the territory: What is its history of corruption ? Eg. consider TI
Score.
Know the local business agents/partners/customers:
What are its qualifications/experience in sector/territory?
What is its business presence in country? Where is it
incorporated?
What are its banking arrangements, ownership structure?
Statements that money is needed to „get the business‟? Requests
for „urgent‟ payments, upfront payments or unusually high
commissions/retainers?
Recommended by government official or customer? Close
personal relationship to government/customer?
Refusal to certify that no prohibited payments will be made?
Insufficient bona fide reasons for using local
representative/business partner?
Look out for common red flags
A government official requests that payments be made
In cash;
To his personal bank account;
To an offshore or unnumbered account;
To a third party;
As sponsorship, charitable contribution or grant; or
In kind
Is the payment requested unusually high or low?
A government official requests you do business with a relative,
company owned by the relative or a crony
Common red flags
Do you „not want to know‟ more details regarding the
transaction? „Head in the sand‟ approach is not acceptable
Are you hiring someone based on a government official‟s
request?
Are you aware of rumours of improper business conduct?
Is a customer insisting that you use a particular person or
company as an intermediary?
Expenses are not supported by appropriate receipts
Unusual number of seasonal gifts to one person
Common red flags
Payment of “entrance fees” to start a negotiation
Use of a “consulting company” required for a negotiation
Request for meetings in unusual (holiday) venues when
meetings need not occur there
Unorthodox or unauthorised payments
Unusual or suspicious patterns or anomalies
Being asked to make an “influence payment”
Beware of political donations
Key messages – be vigilant
Ensure you understand the international and Australian legal provisions in
relation to bribery, corruption and financial misconduct
Have adequate anti-corruption policies and procedures – are regional
policies required? Are the procedures clear, practical and accessible?
Should training be given and a compliance program be established?
Managers are responsible for ensuring that staff are aware of these policies
Foster and encourage a compliance culture and positive attitude towards
compliance
Communicate policies to employees, agents and trading partners
Recognise legal, reputational, operational and financial risks of turning a
blind eye (or worse) – ask yourself – how well do you know what‟s going on
in your team? If asked by a regulator, how will you demonstrate that bribery
and corruption is being prevented?
Ensure thorough review of risks and business partners before entering the
transaction / commercial relationship – effective due diligence of new and
existing trading relationships plus those of acquisition targets
Key messages
Ask - Is this an issue during M&A due diligence? Is an FCPA indemnity
warranty necessary?
Be prepared not to proceed with a deal
Prevention always better than cure: regardless of outcome, regulatory
investigations are expensive, divert management time, create negative
publicity, can affect share price...and can take years
If you are using an agent - review your agency and consulting agreements
to include prohibitions against an agent accepting gifts or other benefits from
a third party supplier of goods or services to ensure that the agent is acting
with your best interests
If you are an agent – ensure transparency – disclose any benefits (cash or
otherwise) you are offered or accept from a third party supplier of goods or
services to your principal
If you are a third party supplier – don‟t offer inducements to agents in return
for which they are required to recommend your goods or services to their
principals
Key messages
Where possible – consistency with rates
A travel and expenses policy when dealing with government
officials
In addition to having policy and procedure on paper, it is highly
advisable to record all payments made (together with documentary
evidence that the event took place) and retain internal approval
documents
Transparency of record-keeping creates a culture of compliance and
minimizes unethical activity - internal accounting controls and
financial records should notify you of risks
Consistent behavior across organisation (eg same contract used, no
disparity in fees paid) shows diligence to regulators and is
invaluable in explaining any potential „one-off mistake or
misjudgment‟
Do’s and don’ts
Do’s Don’ts
Be consistent when dealing with
government officials
Put your head in the sand
Record all payments to government
officials
Turn a blind eye to the activities of your
staff, agents and third party suppliers
Retain internal approval documents Say nothing to staff about their obligation
to comply with anti-bribery laws
Take care to carefully review each
request for payment and ascertain if it is
appropriate
Forget to do proper due diligence of new
trading relationships
Understand international and Australian
legal provisions regarding bribery
Be afraid to terminate a deal
69
What will you do if your employer alerts
you of a problem?
Take an ethical stance and not tolerate bribery and corruption
in any form – direct or indirect
Committed to conducting business in a fair, honest and ethical
manner
Commit to proactively addressing corruption issues -
investigate the matter, request that documents are not
destroyed
Will you pay the fines, penalties and legal costs of your
employees?
Will you indemnify them if they knowingly breach laws?