In recent years, there had been a global increase in high-profile prosecutions for bribery and corruption around the world. In 2008, Siemens AG paid a fine of over $450 million for violating the U.S.’ Foreign Corrupt Practices Act (
FCPA) There were several high profile cases in the U.S. in 2011 including:
• IBM paid $10million in civil fines and penalties for conviction of ‘the provision of improper cash payments, gifts and travel and entertainment to officials in South Korea and China’.
• Johnson and Johnson was fined over $77 million (by both the UK and US governments) for paying bribes to doctors in Greece and to doctors and hospital administrators in Poland as well as paying kickbacks to Iraq to obtain contacts.
• The former president and VP of Terra Communications were sentenced to 15 years and 84 months respectively for paying bribes to Haitian government officials at Haiti Teleco.
The message from the U.S. Government is clear: paying bribes to gain a competitive advantage in a foreign market can be detrimental to your business’ bottom line and reputation.
Australia also has laws to combat bribery, but we have not seen high profile convictions to the extent they occur in the U.S. or UK. That may change over the next few years.
On 15 November 2011, the Minister of Home Affairs launched a public consultation paper to seek stakeholder views on changes to Australia’s anti-foreign bribery laws.
Currently, under Australia’s Commonwealth Crimes Act, an Australian citizen or resident, or even a migrant living in Australia, can be prosecuted for bribery or corrupt conduct which happened overseas. The Australian company employing such an individual can also be held accountable and prosecuted for the actions of the employee under the Act if it can be proven that the company had a corporate culture of ‘looking the other way’ or encouraging bribery overseas to facilitate business dealings. However, Australians 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. The financial consequences and bad press that could happen in the event of a conviction can be detrimental to shareholder value.
The UK’s Bribery Act is even more strict than the FCPA. Currently under the FCPA, and under Australian law, ‘facilitation payments’ or payments for ‘routine government actions’ are permitted. This is not the case in the UK. Under the UK’s
Bribery Act, ‘facilitation payments’ are not permitted. In fact, under the UK law, of ‘failure to prevent bribery’ is also an offence and the Bribery Act has a long arm. Under the Bribery Act, not only are you prohibited from paying bribes to government officials, you are also prohibited from paying a bribe to private officials. Jail terms can be up to 10 years per offence under the Bribery Act (5 under FCPA) and company officers can be held personally responsible, so there is great incentive for compliance.
Consider this scenario: You are the CEO of an Australian company that has a subsidiary in the UK. One of your Sydney-based employees has been sent on a business trip to Venezuela to negotiate a contract and during the trip was asked to pay a ‘facilitation payment’ to a government official to ensure your company would receive the permits required to conduct operations there. Under the UK’s law, your Australian company could be prosecuted for the offence, even though the employee has never set foot on UK soil. In fact, as the CEO, you may be held personally liable under the Bribery Act for ‘turning a blind eye’ to this employee’s actions. Claiming that you had no knowledge of their actions is not adequate defence.
Australian law may soon change to eliminate the permissibility of facilitation payments and tighten up laws around bribery and corruption. On 15 November 2011, the Minister of Home Affairs launched a public
consultation paper to seek stakeholder views on this and other changes to Australia’s anti-foreign bribery laws. It will be interesting to see if Australia amends legislation to become more stringent and how industry will respond to such changes.
What should Australian companies do now to avoid prosecution under US, UK or Australian laws?
Companies with operations in foreign countries, especially ‘high risk’ foreign countries, need to be vigilant and consciously monitor sign of bribery and corruption as part of their risk management program. Best practices include:
1. Have a clear company policy on corruption and bribery. The statement needs to originate from the CEO’s office and should communicate the importance of compliance as well as the consequences of non-compliance. It should not be a mere restatement of the law and it should outline what is expected of employees, agents and business partners.
2. Implement a training program to educate employees about what they can and cannot do overseas. Be sure to cover grey areas such as giving gifts and paying for expensive dinners. The program should not be a 'one size fits all' training. Bribery and corruption are more prevelant in some countries and training should be tailored to assist specific employees traveling to or working in those countries. Employees working with foreign officials or foreign agents need to understand what they may come across in each country, their reporting responsibilities, and the possible consequences of their actions. Training should be regularly refreshed and employees working in hihg-risk countries should be subject to more training than those in low risk countries
3. Have a resource for employees to contact if they have questions. This could be the general counsel, outside counsel or a company employee responsible for managing risk. If you operate in high risk countries and this resource rarely or never receives an inquiry from employees, you should worry. It could mean your compliance program is not working.
4. Create a culture that does not tolerate bribery or corruption and rewards employees for ‘doing the right thing’.
5. Institute a solid recordkeeping program to evidence training given, issues raised and resolutions to problems identified. In the event of prosecution, evidencing that your company has tried to institute a culture of compliance may be a mitigating factor.
6. Utilise data analytics to flag suspicious payments, movements of money, and other activities for review. Out of the ordinary transactions may be red flags of violations.
If a violation is suspected, a well-documented internal investigation should be conducted. If a violation is confirmed, legal counsel should be sought regarding making a prior disclosure to the governments of all jurisdictions which could impose a penalty for the violation. By disclosing the violation, companies are in a better position to present a case as to why their penalties should be mitigated. With so much at stake including brand value, export licensing, shareholder price, jail time for executives, and fines and penalties, compliance with anti-bribery legislation should be a priority for every Australian company’s senior management and board.
The message from the U.S. Government is clear: paying bribes to gain a competitive advantage in a foreign market can be detrimental to your business’ bottom line and reputation.
Australia also has laws to combat bribery, but we have not seen high profile convictions to the extent they occur in the U.S. or UK. That may change over the next few years.
On 15 November 2011, the Minister of Home Affairs launched a public consultation paper to seek stakeholder views on changes to Australia’s anti-foreign bribery laws.
Currently, under Australia’s Commonwealth Crimes Act, an Australian citizen or resident, or even a migrant living in Australia, can be prosecuted for bribery or corrupt conduct which happened overseas. The Australian company employing such an individual can also be held accountable and prosecuted for the actions of the employee under the Act if it can be proven that the company had a corporate culture of ‘looking the other way’ or encouraging bribery overseas to facilitate business dealings. However, Australians 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. The financial consequences and bad press that could happen in the event of a conviction can be detrimental to shareholder value.
The UK’s Bribery Act is even more strict than the FCPA. Currently under the FCPA, and under Australian law, ‘facilitation payments’ or payments for ‘routine government actions’ are permitted. This is not the case in the UK. Under the UK’s Bribery Act, ‘facilitation payments’ are not permitted. In fact, under the UK law, of ‘failure to prevent bribery’ is also an offence and the Bribery Act has a long arm. Under the Bribery Act, not only are you prohibited from paying bribes to government officials, you are also prohibited from paying a bribe to private officials. Jail terms can be up to 10 years per offence under the Bribery Act (5 under FCPA) and company officers can be held personally responsible, so there is great incentive for compliance.
Consider this scenario: You are the CEO of an Australian company that has a subsidiary in the UK. One of your Sydney-based employees has been sent on a business trip to Venezuela to negotiate a contract and during the trip was asked to pay a ‘facilitation payment’ to a government official to ensure your company would receive the permits required to conduct operations there. Under the UK’s law, your Australian company could be prosecuted for the offence, even though the employee has never set foot on UK soil. In fact, as the CEO, you may be held personally liable under the Bribery Act for ‘turning a blind eye’ to this employee’s actions. Claiming that you had no knowledge of their actions is not adequate defence.
Australian law may soon change to eliminate the permissibility of facilitation payments and tighten up laws around bribery and corruption. On 15 November 2011, the Minister of Home Affairs launched a public consultation paper to seek stakeholder views on this and other changes to Australia’s anti-foreign bribery laws. It will be interesting to see if Australia amends legislation to become more stringent and how industry will respond to such changes.
What should Australian companies do now to avoid prosecution under US, UK or Australian laws?
Companies with operations in foreign countries, especially ‘high risk’ foreign countries, need to be vigilant and consciously monitor sign of bribery and corruption as part of their risk management program. Best practices include:
1. Have a clear company policy on corruption and bribery. The statement needs to originate from the CEO’s office and should communicate the importance of compliance as well as the consequences of non-compliance. It should not be a mere restatement of the law and it should outline what is expected of employees, agents and business partners.
2. Implement a training program to educate employees about what they can and cannot do overseas. Be sure to cover grey areas such as giving gifts and paying for expensive dinners. The program should not be a 'one size fits all' training. Bribery and corruption are more prevelant in some countries and training should be tailored to assist specific employees traveling to or working in those countries. Employees working with foreign officials or foreign agents need to understand what they may come across in each country, their reporting responsibilities, and the possible consequences of their actions. Training should be regularly refreshed and employees working in hihg-risk countries should be subject to more training than those in low risk countries
3. Have a resource for employees to contact if they have questions. This could be the general counsel, outside counsel or a company employee responsible for managing risk. If you operate in high risk countries and this resource rarely or never receives an inquiry from employees, you should worry. It could mean your compliance program is not working.
4. Create a culture that does not tolerate bribery or corruption and rewards employees for ‘doing the right thing’.
5. Institute a solid recordkeeping program to evidence training given, issues raised and resolutions to problems identified. In the event of prosecution, evidencing that your company has tried to institute a culture of compliance may be a mitigating factor.
6. Utilise data analytics to flag suspicious payments, movements of money, and other activities for review. Out of the ordinary transactions may be red flags of violations.
If a violation is suspected, a well-documented internal investigation should be conducted. If a violation is confirmed, legal counsel should be sought regarding making a prior disclosure to the governments of all jurisdictions which could impose a penalty for the violation. By disclosing the violation, companies are in a better position to present a case as to why their penalties should be mitigated. With so much at stake including brand value, export licensing, shareholder price, jail time for executives, and fines and penalties, compliance with anti-bribery legislation should be a priority for every Australian company’s senior management and board.