In-House Counsel Day Priorities for 2012 - DLA Piper WIN ... · In-House Counsel Day – Priorities for 2012 ... Age – 14 February 2012 ... Securency and Note Printing Australia,

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

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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

http://www.ag.gov.au/foreignbribery

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

http://www.ato.gov.au/youth/content.aspx?menuid=0&doc=/content/00104079.htm&page=4

http://www.ato.gov.au/youth/content.aspx?menuid=0&doc=/content/00104079.htm&page=4

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


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))


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.


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



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



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



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



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


1995



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


1995

3 Exchange Act 1934



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


1995



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


1995

4 Proceeds of Crime Act 2002



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


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?

Documents

In-House Counsel Day Priorities for 2012 - DLA Piper WIN ... · In-House Counsel Day – Priorities for 2012 ... Age – 14 February 2012 ... Securency and Note Printing Australia,