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ABC Legislation

Thursday 17 May 2018


Financial Crime 


 
Changes in anti-bribery legislation will have an impact in Australia, with new expectations for companies in terms of risk and compliance approach.

At the recent AML & ABC Framework event, speaker Alyssa Phillips, Partner at Ashurst Lawyers, told attendees that enforcement at the local level has been lacking. As a result, Australia has been seen internationally as a bit of a soft target for white-collar crime.

With the Foreign Bribery review published in March, the Australian Government is looking at updating its anti-bribery and corruption policies; thus, organisations need to ensure they have strong policies tailored to their organisation.

In partnership with the GRC Institute, Lexi Nexis Risk’s Charles Thomas, who is the Director of Anti-Bribery and Corruption, along with Phillips from Ashurst, spoke to attendees about the importance of having a strong ABC framework, and how other jurisdictions have been tackling ABC—specifically in the area of foreign bribery.

On the Transparency International Corruption Index, Australia has remained in 13th place—a position it has held for the past three years—after falling from the 11th place it held in 2014. 
 


Regulatory changes
There are some provisions and new offences that organisations need to take seriously.

Failure to prevent bribery of a foreign official is one such new offence of which companies should take note. This is modelled off Section Seven of the UK Bribery Act. Companies can be held liable for their conduct, unless they can show they have done everything they could to prevent the act from happening.

Changes have also been made to the existing criminal code in reference to the bribery of public officials. However, overseas legislation needs to be considered.

“It is a major issue overseas, and the fines continue to increase every year,” Phillips said.

One the changes Phillips identified is that there is increasing inter-regulatory cooperation around the world, and she highlighted the case of Rolls-Royce as an example.

Last year, The Guardian reported that Rolls Royce paid £671 million to settle bribery and corruption charges to avoid being prosecuted in Brazil, the US and the UK, after it was found to have been paying bribes in six countries.

To date, when looking at ABC, focus has been mostly on high-risk industries often involved in bribery scandals in the past, such as construction; however, cases like Rolls Royce indicate that bribery and corruption is not limited to any one industry, and similarly, there are no limits to enforcement when bribery is an issue, and especially on such an international scale.

Phillips argued that any industry should be treated as ‘at-risk’, when it comes to ABC. Nor should companies only consider the size of the fines, but the legal costs and internal compliance—and the rebuilding of internal compliance—costs.

In short, companies need to have a comprehensive program that is supported by the board and communicated clearly throughout the organisation so that employees are aware of it and ‘live it’ as a policy.

“Top level commitment is very important,” said Phillips. “It’s very important that it is visibly shown from the highest level of management. Hopefully, the risks we see with ABC going forward should be enough to convince management that it is really important.”

These policies must be based on a risk assessment. The policy itself then must be proportionate and geared to areas where there is the greatest risk, since all organisations have a finite amount of resources.

Phillips presented the audience with tips on how to tackle reported cases of corruption and bribery within their organisation, or if they suspect they might have challenges within their organisation:


  • Act quickly
  • Investigate
  • Employees
  • Advice
  • Strategy
  • Disclosure
  • Self-reporting
  • Policies and programs
 
The international regulatory trend
When tackling bribery and corruption around the world, Thomas’s global role allows him to see the different challenges faced by companies in different jurisdictions.

“One thing I have noticed in the last four-or-five years in the industry is that, when the UK Bribery Act came out, it was a big thing,” he said. “I was being dragged around the world from pillar to post to talk at events like this about the UK Bribery Act, and there was real appetite, particularly in Australia, to know more, to learn more, and to develop a ‘UK-style’ bribery strategy.”

For a while, however, interest in the new regulation seemed to trail off. But recently, Australia has made some big changes. The same has been seen in other jurisdictions, where a move has been made away from prosecuting companies to prosecuting individuals.

“I was at conference a few months ago in America,” said Thomas, “and one of the individuals from the FBI who works with the DOJ and SEC in enforcing the FCPA stood up and said, with the most gentle and menacing smile, ‘I am a people person—I want to prosecute people’.”

According to Thomas, there is a real drive by the Foreign Corruption Prevention Act (FCPA) to go after personal convictions.

Failure to have strong policies, as also indicated by Phillips, can have major knock-on effects to a company and even to an industry.

Thomas mentioned an article he had read where a construction company was claiming to find it difficult to even attract young people to the company because the construction industry was perceived to be corrupt.

“Australia is getting a lot of pressure,” he said. “I think it’s fair to say that Australia is seen as a bit of soft target—for bribery; for corruption; for money laundering.”

Thomas highlighted that one of the challenges for Australia is that it is uniquely placed to get a flow of money from a variety of very diverse and higher-risk locations. The perception of laxity on Australia’s part, however, will change with the new regulations before Parliament that will align Australia more with other jurisdictions.

“There is a growing trend in enforcement and regulations,” Thomas explained. “The US is no longer stepping in to act as the world’s police.”

The UK Bribery Act has changed that mentality, and Thomas suggested that, as every country develops their own procedures, it will help to level the playing field in terms of consistency between jurisdictions.

 

Limitations of some regulations
Thomas does not believe the FCPA is a good piece of anti-bribery and corruption legislation. However, he does believe it is a good piece of legislation for bribery of foreign officials.

The UK Bribery Act is far more encompassing and stipulates that you shouldn’t pay or receive bribes.

“Originally, it was thought that the UK Bribery Act was going to be a barrier to business,” Thomas said. “Yet, it hasn’t been at all. It has not stopped British businesses from doing business.”

Thomas also spoke about Sapin II, the new French anti-bribery legislation. In Thomas’s opinion, however, it is very narrow and only applies to certain French companies.

Importantly, Sapin II does make it mandatory for an organisation to have an anti-bribery policy, and failure to do so can result in a fine. This includes a proactive ‘audit’ process that allows Agence Français Anticorruption (AFA) to demand to see the anti-bribery policy, even if a crime has not been permitted. 

This the first proactive approach. Most other anti-bribery and corruption policies can only be enforced after the deed has been done. Potentially, therefore, the French legislation goes a step further than criminal liability for failure to prevent corruption.

 

Potential changes in Australia

  • Definition of a foreign public official: the Australian guidance is looking to expand the definition of a foreign public official to include candidates for office. The challenge here is that there can be multiple candidates per seat. Thomas suggests this might create a lot of ‘noise’.
  • Benefit that is not legitimately due: this helps clarify what a bribe actually is and could clear some of the challenges around facilitation payments.
  • Personal as well as business advantage.
  • Reckless bribery: this ties into the UK legislation around failure to prevent bribery and corruption.
  • Influencing someone in an official capacity.
 
It is hoped these changes will not only bring Australia more into line with other jurisdictions, but that it will also help Australian companies comply with those regulations.

What these changes do not solve, however, is the challenge of having large amounts of existing regulation with which companies must comply in their home jurisdictions, as well as any and all jurisdictions in which they might do business.


Positively, it is a step in the right direction for both Government and companies in tackling bribery and corruption.

 


Alyssa Phillips, Partner of Ashurst Lawyers and Charles Thomas, Anti-Bribery and Corruption, Lexis Nexis Risk