In this briefing we provide a round-up of Australia’s foreign bribery enforcement and law reform environment in 2016.
Enforcement activity on the rise
Since the establishment of the Australian Federal Police (AFP) Fraud and Anti-Corruption Centre in 2014, Australian authorities have been assertive in declaring an ongoing focus on investigating and prosecuting allegations of foreign bribery by Australian companies.
In May 2016 the Commonwealth Government committed an additional $15m in funding (over three years) to bolster law enforcement efforts to detect and combat corruption. This was followed in September by the announcement that the AFP would establish specialist complex fraud and anti-bribery and corruption teams in Perth, Sydney and Melbourne, with 26 added specialists to strengthen the AFP’s operational response to serious and complex fraud, foreign bribery, and corruption. To read more about the new AFP team in Perth see our previous article.1
These investments are in line with the rising level of activity by foreign bribery investigators. In April 2016 the AFP confirmed it had 18 ongoing investigations, four of which were with the Commonwealth Director of Public Prosecutions (CDPP), and two with the courts. Since that time, reports have continued of other new matters being brought to the AFP’s attention. The growth in these figures over recent years reflects the regulatory push to step up enforcement efforts coupled with the complexity and delay that characterises the investigation and prosecution of these types of matters.
What sectors and activities are generating the most foreign bribery risk?
Given the nature of foreign bribery, companies with overseas operations in high corruption risk countries obviously face a heightened risk of corruption in their businesses activities.
In terms of specific regions and countries, we see a broad spread of places where Australian companies face scrutiny from authorities for foreign bribery issues. Based on publicly reported information, Australian companies have encountered issues in recent years in relation to business activities in a range of countries, including Iraq, Cambodia, India, Indonesia, Malaysia, Philippines, Nepal, Sri Lanka, Bangladesh, Congo, Nigeria, Guinea, Solomon Islands, Nauru and the US.
Sectors that have seen recent regulatory scrutiny include mining, construction, defence, entertainment, engineering and services.
Experience also shows that the types of activities that are more likely to generate foreign bribery risk include payments to agents, government contracting, procurement, hospitality, donations, scholarships, deal structuring and share issues.
Law reform remains on the agenda
Law reform in the bribery and corruption area has continued to be high on the political agenda in 2016.
Over the last year, the government has demonstrated a track record of delivering on some (more minor) legislative reforms in this area. In March 2016 amendments to the Criminal Code Act introduced false accounting offences into Commonwealth laws. These changes bring Australia closer into line with other OECD Convention countries that have provisions similar in scope to the accounting provisions in the United States Foreign Corrupt Practices Act. To read more about these changes see our previous article.2
Pressure for further reform has continued on a number of fronts.
Ongoing Senate inquiries have maintained a focus on other potential avenues for law reform. In June 2015 the Senate Economics References Committee commenced an inquiry into the effectiveness of Australia’s foreign bribery regime. Public hearings occurred not long before the 2016 election was called. The inquiry, which lapsed with the 2016 election, has recently been reinstated and is now due to report by 30 June 2017.
The inquiry terms of reference are broad and cover topics such as:
- measures to encourage self-reporting
- official guidance on what constitutes a good anti-bribery compliance program
- private sector whistleblower protection and incentives to report foreign bribery
- the facilitation payment defence
- the use of suppression orders
- foreign bribery involving sporting bodies
Also on the Senate’s agenda (and due to report back in early 2017) is an inquiry into penalties for white collar crime.
Review of foreign bribery laws
Scrutiny over the rate at which foreign bribery investigations are converted into prosecutions has also been on the reform agenda. The Federal Government, AFP and CDPP have each indicated that a review of foreign bribery laws is underway, which includes examining the legislative framework that allows investigators to tackle these crimes, and consideration over the ease with which foreign bribery laws may be prosecuted.
Deferred prosecution agreements
Whether Australia should introduce deferred prosecution agreements has also been debated and a public consultation paper was released in March 2016. Various submissions were received, most of which favour adopting a scheme. In December 2016 the Attorney General’s Department confirmed that this potential reform remains under active consideration and it is looking at overseas models to determine how such a scheme could work in an Australian context.
The government’s recent deal in the Senate to commit to wider whistleblowing reforms in exchange for the votes of Senate crossbenchers to pass the Fair Work (Registered Organisations) Amendment Bill 2014 was a further signal of the ongoing pressure towards law reform. This trend will continue into the new year with the government now committed to a wider parliamentary inquiry into whistleblower protection and the establishment of an expert advisory panel by June 2018.
- AFP establishes Perth-based team to investigate foreign bribery.
- New false accounting offences commence operation in Australia.