Anti-corruption update: what it means for accounting

Foreign bribery is inherently difficult to detect and enforce. The OECD says it takes on average 7.3 years to bring a foreign bribery matter to conclusion.

An overhaul of Australia’s foreign bribery and anti-corruption laws is underway. CPA Australia provides an overview of what it means for accounting.

Australia ratified the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions in 1999, when it introduced Division 70 of the Criminal Code Act 1995, implementing the key obligation of criminalising bribery of foreign public officials.

The penalties are severe. For an individual: imprisonment up to 10 years, a fine of not more than 10,000 penalty units (A$2.1 million), or both. Where committed by a corporation, the greater of 100,000 penalty units (A$21 million) or three times the value attributable to the benefit obtained applies.

However, foreign bribery is inherently difficult to detect and enforce. Offences often take place offshore. Evidence is hard to identify and obtain and readily concealed; for example, as agent fees. The OECD says it takes on average 7.3 years to bring a foreign bribery matter to conclusion.

Australia has had only two foreign bribery prosecutions. In one, charges were laid against Securency International Pty Ltd and Note Printing Australia Ltd (entities of the Reserve Bank of Australia), along with six individuals. In the other, three individuals pleaded guilty to conspiracy to bribe a foreign public official to secure contracts for their construction company, Lifese Engineering, in Iraq.

Overcoming obstacles to justice

The main problems confronting prosecutors are how to put companies in the dock, and proving that at least one individual was the “controlling mind” of that company – the perennial problem of attributing criminal fault to the company as an artificial legal person.

These challenges are being addressed though the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 before the Senate, which will make it an offence to have failed to prevent bribery. This will create a strong orientation towards proper oversight and due diligence, and align Australia’s anti-bribery rules more closely with comparable jurisdictions, most notably the UK.

The new offence provisions are accompanied by a defence – being able to demonstrate the presence of adequate procedures. These may include:
  • Ample demonstration of the control environment “tone at the top”, such as a bribery policy and anti-bribery program
  • Business partner due diligence
  • Undertaking of country entry risk assessments
  • Adopting international agency codes (OECD, Transparency International) and industry-specific codes (Extractive Industries Transparency Initiative).

A proactive approach

The ASX Corporate Governance Council (CGC) in the draft fourth edition of its Principles and Recommendations sought to encourage listed companies to be on the front foot, requiring on an “if not, why not” basis both having and disclosing an anti-bribery and corruption policy. The commentary to this recommendation suggests such a policy should:
  • Acknowledge the serious criminal and civil penalties that may be incurred and the reputational damage that may be done if the organisation is involved in bribery or corruption
  • Prohibit giving bribes or other improper payments or benefits to public officials
  • Prohibit the payment of secret commissions to those acting in an agency or fiduciary capacity
  • Include appropriate controls around political donations, and offering or accepting gifts, entertainment or hospitality
  • Train managers and employees likely to be exposed to bribery or corruption about how to recognise and deal with it
  • Incorporate a periodic audit or review of the policy and procedures to check if reports of breaches were appropriately recorded, investigated and responded to.
The Bill also:
  • Extends the offence of bribery to include foreign candidates for office
  • Extends the offence to cover bribery for the means of obtaining a personal advantage
  • Removes the requirement that the foreign official must be influenced in the exercise of the official’s duties
  • Introduces a deferred prosecution agreement regime enabling the Office of the Commonwealth Director of Public Prosecutions to negotiate agreements with a corporation that has engaged in serious corporate crime, under conditions such as appointment of independent monitors and compensation of victims (also available in relation to money laundering offences but not tax and workplace health and safety offences).

Important amendments

In 2015, amendments (section 70.2(1A)) removed the requirement for explicit intent to influence and that the business advantage need not necessarily be obtained or retained.

A further reform passed in 2016 – the introduction into the Criminal Code Act section 490.1: Intentional false dealing with accounting documents. The section, which has wide application beyond the bribery of foreign public officials, can be paraphrased as stating that a person (corporation, officer or employee) commits an offence by making, altering or concealing an accounting document with the intention of receiving or giving a benefit not legitimately due.

Viewed broadly, these reforms are necessary to preserve Australia’s international obligations and drive ethical conduct. There is a focus on matters of accounting at both the point of exposure of wrongdoing and, ideally, as the critical element in safeguarding good corporate behaviour.

Stay in touch

CPA Australia’s policy team welcomes feedback and comments. Visit the policy pages at cpaaustralia.com.au/policy for more details about our submissions, plus information about open consultations and the latest policy bulletins and newsletters.

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