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Australian Companies need to take a good hard look at their risk management practices related to foreign anti-bribery legislation.

The Organisation for Economic Cooperation and Development (OECD) is coming to Australia to assess how the Government is tracking with its commitment to combating corruption. Australia was quick to ratify both the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Convention) in 1999 and the United Nations Convention Against Corruption (UNCAC) in 2005.  According to Transparency International however, not enough has been done to enforce anti-bribery legislation in Australia. In fact, their 2011 progress report classified Australia as a country that has little or no enforcement activity. The Transparency International report had many recommendations including that Australia implement larger penalties for violations, offer increased whistle-blower protection for both public and private sectors and create stronger accounting, auditing and taxation frameworks to prevent companies from concealing bribery. Though progress has been made, many of their recommendations have not yet been fully implemented. The global financial crisis and domestic political issues have kept the Government otherwise occupied and a lack of resources dedicated to enforcement may have allowed Australian persons and corporates that engage in the bribing of foreign officials to fly under the radar. This will soon change.

The OECD Working Group on Bribery in International Business Transactions, which is made up of representatives from the 38 parties to the Convention will be in Australia conducting the third phase of assessments later this month. While the first phase of assessments focused on the adequacy of Australian legislation and the second phase focused on effective application of the legislation, this third phase will focus on Australia’s enforcement of the laws governing obligations under the Convention. The Working Group’s visit will likely reinvigorate focus on Australia’s commitment to the Convention and may lead to an increase in enforcement activity.

Very little enforcement has taken place in Australia given that very few investigations into allegations of foreign bribery have been conducted here since the Convention was ratified. In fact, until 1 July 2011, no prosecutions had been initiated.

Australia’s first prosecution in 2011 saw charges laid against two companies and six individuals for the alleged bribery of foreign officials in Malaysia, Indonesia and Vietnam between 1999 and 2005. Securency International Pty Ltd and Note Printing Australia (NPA) Limited pleaded guilty and were ordered to pay penalties of $19.8m and $1.8m respectively under the Proceeds of Crime Act.

Under the Criminal Code Act 1995 (Section 70.2), which criminalises the bribery of foreign public officials, the  offence is punishable by up to 10 years imprisonment and a  fine of 10,000 penalty units (currently $1.1 million) or both for an individual. For a body corporate, the penalty is the greater of 100,000 penalty units (currently $11 million) or three times the value of the benefit obtained (if calculable); or 10% of the previous 12 month's turnover of the company concerned. The fines in Australia are relatively low when compared to the fines for similar violations in other OECD countries that have a strong focus on enforcement. In 2008, Siemens AG paid a fine of over $800million for violating the US Foreign Corrupt Practices Act (FCPA). There have been several high-profile enforcement cases in both the US and the UK during the course of the past 5 years as the laws have become more stringent and penalties have increased.

However, though enforcement activities are likely to increase in Australia, it’s not just the penalties from the Government that Australian corporations should be concerned about. The April 2012 New York Times’ report on the alleged FCPA violations committed by Walmart, and the alleged subsequent internal cover-up of the violations, has damaged the company’s reputation. In the US, they call this "The Wall Street Journal Effect”. No CEO wants to wake up to a morning paper with headlines condemning the company’s business practices, especially not one that alleges a top-down cover up of systematic violations of the law. The effect on the brand value and share price can be just as much if not more damaging than the actual penalty itself. Australian companies should therefore be very concerned about their own internal risk management practices when it comes to Australian anti-bribery legislation.

Under Australian law, it is an offence to bribe a foreign public official even if a bribe is regarded to be necessary or part of the normal course of business in a particular foreign country. Australian companies may be liable for the actions of their employees and agents under Australia’s anti-foreign bribery laws. Prosecutions under Australian law take into consideration whether the bribery of foreign public officials was encouraged or tolerated by management. It will also seek to determine if there was a failure to create and maintain corporate policies that required compliance with anti-foreign bribery laws and a corporate culture that supported these policies.

However, Australian companies have more to worry about than Australian law when it comes to bribery and corruption. Prosecutions of Australian executives and employees can happen under both U.S. and UK law, even if the offence was committed in another country altogether.

Australians should be aware that under the FCPA, the U.S. can prosecute Australian citizens or companies if the company has a U.S. presence, issues stock in the U.S., employs U.S. citizens, or engages in business in the U.S. The crime itself does not have to be committed in the U.S. for charges to be brought.

It is more important than ever therefore that Australian companies implement a compliance program that has measurable metrics and can be audited on a regular basis to assess its efficacy. Employees working in countries where bribery is common and expected should have training that is custom tailored to the counties they are working in. They should be made aware of the personal and professional consequences of bribing a foreign official and should have resources available to them should they need legal advice while overseas or require guidance on corporate policy in a given situation. Our blog post from 5 December 2011 has some additional recommendations. If your company does not have a management supported and auditable compliance program in place, now is the time to take action.

The Australian Government has taken significant steps during the past twelve months to prepare for its phase three assessment by the OECD Working Group later this month. A national anti-corruption plan has been in the works since September 2011 and will undergo further development pending the phase three OECD assessment. It is important that Australian corporations make their challenges known to the Government during the next few months to help Government understand both the pace at which more stringent legislation will need to be phased in and the support Government will need to provide to industry.

On 15 November 2011, the Minister for Home Affairs launched a public consultation paper to seek stakeholder views on possible changes to strengthen Australia's anti-foreign bribery laws. In particular, the Government is reviewing:

  • the treatment of 'facilitation payments' under Australian law
  • the factors that influence whether a benefit is 'legitimately due' to the recipient
  • the current requirement to identify a particular foreign public official in order to establish an offence, and
  • the role of dishonesty in domestic corruption offences.

Though the opportunity to make submissions in response to the public consultation paper has passed, Australian stakeholders can still have their say. In late May, the OECD Working Group will meet with stakeholders from both the private and public sectors in Canberra and Sydney.  The Working Group will likely ask about general views on Australia’s anti-foreign bribery regime and challenges faced by stakeholders in compliance with Australian legislation. The meetings will take place in Canberra on 28-29 May and in Sydney on 30-31 May. Parties interested in attending can contact the Attorney-General’s office by emailing

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