AFP gives insight on Australian anti-bribery laws

In a climate of aggressive enforcement of foreign bribery, both in Australia and overseas, many companies are questioning the precise scope and application of foreign bribery laws and what kinds of actions they should be taking to minimise their risk of exposure. In a joint panel discussion held at Freehills’ Sydney offices on 15 June 2012 and co-hosted by Deloitte, AFP Assistant Commissioner Ramzi Jabbour provided a rare insight into the AFP’s approach to the enforcement of Australia’s foreign bribery laws.

In particular, the AFP Assistant Commissioner provided guidance on how the AFP assesses payments for hospitality, gifts and charitable donations, or payments which may fall within the facilitation payments defence. He highlighted the AFP’s interest in working with industries such as the resources industry to raise awareness and encourage self-reporting.

While many Australian companies are well aware of corruption risks, they may struggle with the precise scope and application of Australia’s foreign bribery laws as well as overseas laws that may now apply to Australian companies, for example, in the US and the UK. Of particular concern are the scope of the facilitation payments defence and the grey areas of corporate hospitality, travel, charitable donations and gifts.

In total the AFP has conducted 29 bribery investigations to date. The Assistant Commissioner commented that the AFP has not targeted particular industries. It is keen to work with industry groups to raise awareness, particularly those industries at higher risk because of the nature of the industry, or the regions in which they operate. One example is the resources industry. The AFP is currently in the process of preparing a ‘fact sheet’ to assist companies to identify and navigate the risks.

Matters to date have generally come from whistleblowers or self-reporting by companies. The AFP sees self-reporting as important but has no power to negotiate outcomes with companies that self-report. 

While each matter will turn on its own facts, key considerations for the AFP when assessing hospitality, travel payments or charitable donations, or facilitation payments are whether these are:

  • reasonable in the circumstances
  • for a business purpose, and
  • clearly documented. 

Transparency will be key. The AFP does not have a specific threshold value when assessing payments, and the cumulative value will be relevant. What may be reasonable on one occasion may become questionable if it is occurring on a regular basis. Payments for close personal protection in dangerous regions may also be legitimate but again should be fully documented.

A key takeaway from the panel was that awareness is critical. Companies need to be aware of how they may be exposed to risks because of the culture and environment in which they operate, the contracts they have in place and the business partners they are working with. Implementing appropriate policies and procedures, continually monitoring risks and clearly documenting payments will stand companies in good stead.

This post is written by Freehills Partner Caroline Cox.

Freehills would like to thank AFP Assistant Commissioner Ramzi Jabbour and Frank O’Toole, Partner Deloitte for participating in the panel discussion. 

Anti-bribery and the mining push into developing countries

2011 was an active year for law enforcers on the foreign bribery and corruption front.

Australian business found itself in a new era – where law enforcers around the world have been pursuing bribery and corruption issues with renewed vigour and increased cross-jurisdictional co-operation. If they weren’t before, Boards are now asking their managements teams whether their companies are doing enough to manage bribery risk and how it is being dealt with in commercial arrangements ranging from ongoing contractual arrangements to one-off acquisitions. 2011 also marked the commencement of the UK Bribery Act – with a number of far reaching consequences, including that many payments that in the past may not have been bribery will now certainly constitute bribery under the UK law. The end of 2011 also flagged that some payments, which in the past would not have been bribery under Australian law, soon may be.

Any Australian business that operates in countries where demands for small payments to lubricate regulatory and other public processes is common are now faced with a risk to the business, its employees and its directors, and a dilemma in how they deal with business transactions in these countries going forward. The dilemma is underscored by mind boggling penalties for getting it wrong.

Toward the end of 2011, the Attorney General’s Department released a Public Consultation Paper inviting comment on the Government’s review of Australian anti-bribery legislation, with particular focus on the treatment of facilitation payments under Australian law.

Presently, if a charge is brought in relation to a payment made to a foreign public official that would otherwise be classified as a bribe under Australian law, it will be a complete defence if the payment was a ‘facilitation payment’.

To be a facilitation payment, the value of the payment must be minor, it must have been paid for the dominant purpose of securing or expediting a routine government function which itself is of a minor nature, and as soon as practicable after the payment a record (which satisfies particular legal requirements) must be made – the most difficult of these being that the payor must effectively obtain a receipt from the foreign official.

In March 1999, the Howard Government amended the Commonwealth Criminal Code to include the offence of bribing a foreign public official. In relation to the facilitation payments, the Government said: “Small payments are something left for local officials to stamp out and it is not appropriate or practical for foreign governments to be concerning themselves with expensive international prosecutions. This approach reflects what is provided for in the Convention and is similar to legislation in the USA and Canada.” [Senate Hansard, 10 March 1999]

For the next 12 years not much happened under Australian anti-bribery laws. That was until the charges laid on 1 July 2011 in the Securency matter. Prior to then, Australian law makers and enforcers had been subject to polite but consistent criticism about a lack of action. In around October 2012 the UN Working Group on Bribery in International Transactions is due to release its ‘phase 3’ report on Australian bribery laws. In broad terms the report will comment on the degree to which Australian laws have been enforced since their introduction. It is likely that Australia will be in for further criticism about a lack of action.

It is against that background that the Federal Government’s ‘assessment of Australia’s anti-bribery laws’ can be better understood. That it will focus on a defence which has never been (and never had to be) invoked is curious.  It can’t be that the prospect of potential defendants invoking the defence has scared off prosecutors. After-all, the recording keeping hurdles imposed in an Australian context mean that the defence will rarely be satisfied. Further, a similar defence is available in USA, and that country is by far the most active, and successful, in enforcing its bribery legislation. The defence is rarely raised by defendants in USA prosecutions for foreign bribery. More likely, the impetus for the Federal Government’s assessment is the renewed emphasis on bribery of foreign officials brought about by the commencement of the UK Bribery Act, and anticipated criticism in the form of the UN’s phase 3 report.

Just how this fits with the Federal Government’s encouragement of Australian business to move into new offshore markets, particularly Africa, is unclear. The World Bank estimates that half of the 10 fast growing economies over the next 5 years will be in Africa. Presently, Australian business reportedly has 665 projects in 42 African countries, with 220 of these being commenced in the passed 20 Months. Meanwhile, in October 2011 Foreign Minister Kevin Rudd launched a $30 million initiative to foster mining development in Africa. This can be contrasted with a public survey of conducted by Transparency International in 2010 – 2011 of more than 6,000 people across the Democratic Republic of Congo, Malawi, Mozambique, South Africa, Zambia and Zimbabwe, the results of which included that 62% of those surveyed considered that corruption had increased in their countries, and 56% actually admitted to having paid a bribe to one of 9 service providers (ie government services) in the previous 12 months. Alarmingly, the police were considered the most corrupt institution in each of the countries.

Regardless, Australian business finds itself in this new era. In the context of the Public Consultation Paper released last 2011, Australian business should now consider that, to the extent the facilitation payments defence ever had any life under Australian laws, it will soon be dead. In response to the UK Bribery Act and these latest developments, many of Freehills’ clients are updating their Codes of Conduct to explicitly outlaw such payments by their employees and others. Any Australian business operating in countries where demands for such payments are common, including fast emerging African economies, should certainly act to prohibit the making of such payments. Business impacts of refusing such demands will also need to be anticipated and planned for. To do otherwise risks the employee, the business and its directors committing criminal offences punishable in Australia (irrespective of where the facilitation payment is made).