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12 Aug 11
AFP cracks down on foreign bribery

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Australia’s first prosecution under foreign bribery laws since they were introduced in December 1999 sounds a timely warning for Australian companies conducting business overseas. Derek Pocock and Isaac Evans provide practical advice to protect your overseas operations.

Earlier this year two Australian companies, Securency International Pty Ltd and Note Printing Australia Limited were charged with bribing foreign public officials in Indonesia, Malaysia and Vietnam under the Criminal Code Act 1995 (Cth) (Criminal Code). The charges represent the first prosecution by the Australian Federal Police (AFP) since Australia’s foreign bribery laws were introduced in 1999.

Six individuals, including the chief executive officers, chief financial officers and sales executives of both companies were also charged with similar offences and have appeared in the Melbourne Magistrates Court as investigations continue.

The charges relate to kickbacks alleged to have been paid by international sales agents to public officials in Indonesia, Malaysia and Vietnam between 1999 and 2005, in order to secure contracts for the supply of banknotes in those countries.

Implications for Australian companies

The prosecution, following a lengthy investigation, highlights the willingness of the AFP to expend considerable resources to investigate and enforce Australia’s foreign bribery laws.

Business transactions must be able to withstand scrutiny by the AFP and companies operating overseas should be aware that any payments or other benefits given with the intent of influencing a foreign public official in order to obtain business or a business advantage may be prohibited under the Criminal Code. Companies should also be aware that they may be held responsible for the actions of their employees, foreign consultants (such as sales staff) and other agents.

The law

Bribery of foreign officials: the Criminal Code

Australia’s foreign bribery laws are contained in Division 70 of the Criminal Code and are extremely broad. In particular, the offence of bribery (section 70.2(1) of the Criminal Code) doesn’t require a transaction to actually take place - a promise of a benefit could be enough to constitute a bribe if:

  • the benefit is not legitimately due, and
  • the benefit is provided with the intention of influencing a foreign public official (who may or may not be the person to whom the benefit is given) in the exercise of his or her duties in
    order to:
    • obtain or retain business that is not legitimately due, or
    • obtain or retain a business advantage that is not legitimately due.

The offence is committed irrespective of the outcome or result of the bribe. In a prosecution under section 70.2(1), it is not necessary to prove that business, or a business advantage, was actually obtained - an intention is sufficient.

Further, the restrictions also extend to conduct that occurs outside of Australia where the person involved is an Australian citizen or resident or an Australian company. Accordingly, Australian companies may be liable, even if payments are made through international sales agents operating in foreign countries.

Defences

It is a defence under section 70.3(1) if the benefit given was permitted or required by the written law of the relevant foreign country. A defence is also available where the benefit given constitutes a ‘facilitation payment’, being a benefit of minor value that is given for the purpose of expediting or securing the performance of a routine government action.

To rely on the facilitation payment defence, detailed records about the value of the benefit given, the identity of the foreign official and the person who received the benefit must be kept. Persons wanting to take advantage of the facilitation payment defence should proceed with caution however, as the payment may nevertheless be prohibited by local laws.

Penalties for individuals and bodies corporate

The penalties for bribing a foreign official have recently increased and are substantial. An individual who bribes a foreign public official in contravention of the Criminal Code may be liable for a fine of up to $1.1 million, 10 years imprisonment or both.

A body corporate involved in a contravention may be liable for a fine of up to $11 million, three times the value of the benefit obtained or 10% of its annual turnover in the previous 12 months, whichever is the greatest.

How can you protect your business?

Under Part 2.5 of the Criminal Code, a company may be held criminally responsible for an offence committed by its employees or agents where it has expressly or impliedly authorised or permitted the commission of the offence.

Significantly, a company will have authorised or permitted a foreign bribery offence where (among other things):

  • a corporate culture existed within the company that encouraged, tolerated or led to the offence being committed, or
  • the company failed to create and maintain a corporate culture that required compliance with laws relating to bribing foreign public officials.

Companies that have foreign operations should therefore create and maintain a corporate culture that requires compliance with the law. They should also take reasonable steps to ensure that their employees, officers and agents do not commit foreign bribery offences. Failure to do so may result in the company being held criminally responsible, even where it did not expressly sanction the actions in question.

Companies may mitigate this risk by:

  • adopting a formal written compliance program that adopts a zero tolerance approach to bribery
  • obtaining legal advice on the laws in those countries in which the company operates
  • ensuring that directors, employees and agents are aware of the laws and the consequences of breaching them by undertaking awareness training and making the compliance program easily accessible
  • implementing procedures to accurately record details of any payments made
  • periodically reviewing the program to gauge its effectiveness and to ensure that it remains up to date and relevant to the company and its activities, and
  • undertaking appropriate and comprehensive due diligence when engaging business partners, awarding overseas contracts or appointing agents.

Perhaps most importantly, any policies or compliance programs that are implemented must have the full support of the board and senior management. Adopting an anti-bribery policy will be of little use if the company is willing to overlook breaches in order to secure business or important contracts overseas. To promote of a positive attitude towards legal compliance at all levels within the business, the values, attitudes and beliefs exhibited by directors and senior management are critical.

In addition, the courts have stated that they will consider not only the form and content of the policies and procedures that are put in place, but also the measures adopted by the company to ensure that they are understood and applied, noting that ‘a well drafted set of policies and procedures will mean little if there is no follow up in terms of training of company officers (including directors) and, where appropriate, refresher training.

Ongoing investigations

The AFP have indicated that they will continue their investigations both in Australia and overseas with the assistance of their law enforcement partners, and have suggested that further charges may be laid, noting that ‘this sends a very clear message to corporate Australia that indeed the AFP will diligently chase and enforce the laws relating to foreign bribery.

Bribery is a serious offence. The recent charges against Securency, Note Printing Australia and their officers and employees serve as a timely reminder for any person that has business interests in a foreign jurisdiction. Individuals and companies should proceed with extreme caution when offering benefits to foreign public officials.

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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