Corporate Crime a Compliance Priority in 2018

Significant legislative reform is proposed to be introduced this year aimed at introducing stronger measures to combat corporate crime following recent reports that show that Australia has made slow progress in ending bribery and corruption.

On 21 February 2018, Transparency International released its Corruption Perception Index 2017. Australia’s index score remained at 13 out of 135, after Denmark, the United Kingdom, Canada, Germany and New Zealand (which achieved the highest index score).

In December 2017, the OECD Working Group’s Phase 4 Report found that Australia had made some significant improvements since the last evaluation in 2012, in particular in relation to the overall increases made in enforcement of bribery offences. However, the Phase 4 Report also highlighted many areas for improvement, such as the following:

  • Australia was still not doing enough to address the risk of foreign bribery proceeds being laundered;
  • there were insufficient protections for whistleblowers; and
  • Australia’s actions on self-reporting foreign bribery had fallen short.

The legislative reform proposed to be introduced this year is likely to address some of those deficiencies, which will in turn make compliance a top priority for organisations.

The proposed reforms are summarised below.

New strict liability offence of failure of a body corporate to prevent bribery by an associate

The Crimes Legislation Combatting Corporate Crime Bill 2017 (Combatting Corporate Crime Bill 2017) proposes to introduce a new offence of failure of a body corporate to prevent bribery committed by its “associates” (which includes officers, employees, agents, contractors, off-shore subsidiaries and related entities). The new offence is designed to overcome challenges in establishing liability of corporate entities for foreign bribery, particularly in cases of wilful blindness.

Like in the United Kingdom, the only statutory defence will be if the body corporate can show that it had adequate procedures in place to prevent the commission of the offence. The Minister will publish guidance to assist companies in implementing appropriate measures to prevent bribery from occurring, although a robust anti-bribery program tailored to a company and its associates and enforced from the top down is likely to be key in mitigating risk.

Removal of impediments to prosecution of bribery

If enacted, the Combatting Corporate Crime Bill will also remove previous impediments to the prosecution of bribery.

This is proposed to be achieved by:

  • amending the definition of foreign public officials to include candidates for public office;
  • removing the requirement that foreign public officials must be influenced in the course of their official duties;
  • extending the offence to cover personal (non-business) advantage; and
  • introducing the concept of “improper influence” to replace the requirement of a benefit being “not legitimately due”.

Introduction of deferred prosecution agreement scheme (DPA scheme) 

Another key reform proposed to be introduced by the Combatting Corporate Crime Bill is the introduction of DPA schemes.

The purpose of a DPA scheme is to encourage greater self-reporting and accountability of Australian business. Under a DPA Scheme, a company (but not an individual) can negotiate an agreement to meet certain requirements such as imposition of financial penalties, in exchange for the avoidance of a criminal conviction.

DPA Schemes have been used extensively in overseas jurisdictions. In the United Kingdom in 2017, the Serious Fraud Office secured a DPA payment totalling £497.25 million which included disgorgement of profit and payment of a financial penalty plus £13 million costs.

If enacted, the DPA scheme will operate together with Best Practice Guidelines to assist corporations in self-reporting foreign bribery issued by the Australian Federal Police and Commonwealth Director of Public Prosecutions in December 2017.

The Combatting Corporate Crime Bill 2017 is currently awaiting report from the Senate Legal and Constitutional Affairs Legislation Committee (due on 20 April 2018).

Strengthening protections for private sector whistleblowers

Corporate crime can be difficult to detect or prove and often only comes to light because of individuals who are prepared to disclose it.

The Treasury Laws Amendment (Whistleblowers) Bill 2017 (Cth) (Whistleblowers Bill 2017) proposes to:

  • remedy existing gaps in coverage for whistle-blowers in the Corporations Act 2001 (Cth);
  • improve protections offered to whistleblowers, for example by eliminating the requirement that disclosures be made in good faith, and allowing for anonymous disclosures;
  • harmonise the law with the public sector; and
  • impose on public companies and large proprietary companies a requirement to have a whistleblower policy that sets out information about the protections available to whistleblowers, and how the company will ensure fair treatment of employees of the company who make disclosures that qualify for protection.

The Whistleblowers Bill 2017 has been referred to the Senate Economics Committee for report (due on 22 March 2018) and will commence on the day the bill receives Royal Assent.

Mandatory compliance obligations with respect to anti-money laundering

Bribery and money laundering are closely linked because illicit gains are usually placed and layered within the global financial network. Digital currency providers are at particular risk because they operate with greater anonymity and less transparency in a variety of jurisdictions.

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Cth) (AML/CTF Act 2017), which was granted Royal Assent on 13 December 2017, will impose mandatory registration and compliance obligations on digital currency providers with respect to anti-money laundering.

The primary purpose of an AML/CTF compliance program is to provide companies with a basis for identifying the money laundering and terrorism financing risks their business faces and to ensure they establish policies, procedures and controls to mitigate those risks. AUSTRAC’s website provides further information about the requirements for an AML/CTF compliance program.

The compliance obligations introduced by the AML/CTF Act 2017 will include:

  • requirements to enrol and register on the Digital Currency Exchange Register;
  • maintaining an anti-money laundering program to identify and mitigate risks; and
  • reporting of suspicious matters and record keeping obligations.

The AML/CTF Act 2017 will commence on the proclamation date (expected to be 3 April 2018), or if no date is proclaimed, on 14 June 2018 (section 2, AML/CTF Act 2017).

Companies and their lawyers should be taking active steps now to review and implement their compliance policies and programs having regard to the obligations proposed to be imposed by the Combatting Corporate Crime Bill 2017 and the Whistleblowers Bill 2017 and which have already been introduced by the AML/CTF Act 2017.

Practical Law Australia Commercial
provides detailed guidance in this complex, dynamic area of the law. Our expertly drafted resources help lawyers decide what questions to ask, what law applies and why. To learn more about Practical Law Australia or to request a trial, visit the website.

Nadia Janisz is a senior writer in the Practical Law Australia Commercial and Dispute Resolution legal writing teams. She has over 15 years’ experience in private practice and in-house. Nadia practised at a large law firm for 10 years acting for large corporate clients nationally and internationally, before moving in-house to work as legal counsel at a global consumer goods company, specialising in Competition and Consumer Act issues, advertising and marketing and compliance.

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