Australian Foreign Bribery Law Gets an Update

Seven years and two failed attempts later, the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023* (‘2024 Act’) to reform and strengthen the foreign bribery laws finally passed in the Parliament. This article discusses the newly introduced offence of failing to prevent foreign bribery and the related defence of having ‘adequate procedures’

If you are an Australian business with overseas operations or connection (eg: you have commercial activity or outsourced operations overseas, overseas service providers, or a foreign subsidiary), then the recent changes to the foreign bribery law should be on your radar, if they are not already!  The changes in the law make it easier to investigate and prosecute corporates for foreign bribery offences.

A new strict liability corporate offence of failing to prevent foreign bribery

One of the key changes through the 2024 Act is that it establishes a new corporate offence of failure to prevent bribery of a foreign public official by an associate. In brief, bodies corporate would be liable if their associate commits the offence of foreign bribery, and it was for the profit or gain of the body corporate.

This brings us to the other related change under the 2024 Act – in the case of such an offence, bodies corporate have a statutory defence that they had in place ‘adequate procedures’ to prevent its associates from committing foreign bribery.

The new provisions apply to such bodies corporate as specified in the 2024 Act, which includes constitutional corporations.

The penalties for the offence are stiff – not more than the greatest of $31.3 million, or three times the benefit received from the offence, or 10% of annual turnover.

The Explanatory Note to the Bill mentions that the newly established offence will be an incentive for corporations to implement and maintain measures to prevent bribery. It seems that the law took a cue from the UK, where a similar law introduced in 2010 led to an increased adoption of corporate compliance programmes.

While at it, it will also be useful to understand the concepts of ‘associate’ and ‘adequate procedures’.

Associate

An Associate of a body corporate includes in its scope an officer, employee, agent, contractor or subsidiary, controlled entity, or one who performs services for or on behalf of the body corporate.

Thus, the sweep of the definition is quite wide, including everyone who works for the body corporate or provides services to it, and can also cover persons not directly engaged by the body corporate but performing services for it. Since the outsourced contractors and service providers are also considered associates, wrongful conduct on their part may lead to an offence by the body corporate.

Adequate procedures

What are ‘adequate procedures’? The 2024 Act states that this will be determined by the courts on a case-by-case basis. It is envisaged that this concept will be scalable - its requirements will depend on the circumstances, including the nature of the body corporate concerned and the relevant sector and geographical sector in which it operates.

While in a given case, the above determination will come only when a matter reaches the Court, it is imperative that entities take proactive risk mitigation measures proportionate to their size, nature and complexity, and the scale of bribery risks they face.

As an aid, the law requires that the Minister must publish guidance on the steps that bodies corporate can take for bribery prevention. However, as the name suggests, it will be guidance of a general nature and principles-based, and will not be considered a legislative instrument.

2019 ‘adequate procedures’ draft Guidance

During the 2019 iteration of a similar Bill (it did not pass), the Attorney General’s office had released a draft guidance for consultation, describing ‘adequate procedures’. Taking a cue from that, broadly bodies corporate should consider the following principles in their framework:

- Risk assessments, risk-based approach, regard to size, nature, and complexity of activities

- Pro-compliance conduct by the top management and the board of directors, oversight and assurance, fostering an anti-bribery culture

- Due diligence procedures for bribery risk assessment relating to the associates

- Communication and training programmes

- Confidential reporting and investigation, ie adopting a reporting mechanism that allows internal and external stakeholders to raise concerns about bribery risks and whistleblowing

- Monitoring and review that ensures the ongoing effectiveness of the anti-bribery framework.

The steps taken must result in an effective anti-bribery compliance programme.

Way forward

Companies should examine the applicability of the new provisions for them, and review their current AB&C compliance framework in regards to the foreign bribery risk. The nature of the offence, the wide scope of ‘associates’ and the requirement of ‘adequate procedures’ necessitate companies put in place robust foreign bribery prevention measures as part of their AB&C compliance framework.

By the way, the new provisions will come into effect early September 2024!

* The Foreign Bribery Bill was passed by the Parliament on 29 February 2024; and received Royal assent on 8 March 2024. The law will become effective six months from the assent.

Regulatory references - Click here and here.

29 March 2024

The above article was also published in the Stockbrokers and Investment Advisors Association (SIAA) magazine SIAA monthly, and can be seen here.

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Update - 11 June 2024

The Attorney-General's Department published, for consultation, draft guidance note on what steps corporations can take to prevent an associate from bribing foreign public officials ('draft guidance'). Relevant resources can be referred here:

- Overview on the draft guidance - click here

- Draft guidance note - click here.

The feedback from the previous consultation, that was undertaken in 2020 (referred to in the article above), has been considered in this draft guidance. The consultation on the draft guidance closed on 9 June 2024.

The draft guidance recommends a range of items to constitute 'adequate procedures'. Some of these are given below. It be noted that as per the legislation provisions, it is really upto the Court, in a given case, to decide what constitutes ‘adequate procedures’ for a corporation.

- Having an effective anti-bribery compliance and control framework, that is proportional to the corporation’s business operations and the foreign bribery risks it faces.

- Robust culture of integrity, and pro-compliance conduct. The top-level management has a key role to play in developing, promoting and implementing its Anti-Bribery & Corruption (AB&C) Programme, providing leadership on policy development and implementing, ongoing oversight and reviews, and stressing on effective implementation.

- A strong AB&C function, or functional equivalent. This is amplified by appropriate ongoing training and awareness programmes for employees and other constituents, ongoing reporting to the senior management and the board, regular performance reviews, and AB&C function to have full and timely access to the information in relation to any allegation of foreign bribery.

- Undertaking effective risk assessment and due diligence procedures. The risk assessment should be conducted on a risk-based approach, where the corporation should consider various bribery risks (including foreign bribery risks) it faces. The assessment should undertake rating the risks, by rating both the likelihood of the risk occurring and their potential impact. The assessment exercise must document the process and findings.

- Strong third-party oversight, ensuring careful and proper use of the third parties in dealing with the foreign government officials.  This will help to ensure that the third parties act in alignment with the corporation’s AB&C programme.

- Adopting whistle-blower mechanisms to encourage and facilitate reporting of actual or suspected instances of bribery or bribery solicitations.

- Provisions to consider self-reporting by a corporation to the Australian Federal Police, where it identifies any actual or suspected instance of foreign bribery, keeping in view Self-Reporting Best Practice Guidelines.

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Update - 6 September 2024

Final Guidance on Adequate Procedures

Last week, the Attorney-General's Department published the final Guidance on adequate procedures to prevent the commission of foreign bribery.

The Guidance sets out six elements of what constitutes adequate procedures. These are:

(a) Fostering a control environment;

(b) Responsibilities of top-level management;

(c) Risk assessment;

(d) Communication and training;

(e) Reporting foreign bribery; and

(f) Monitoring and review.

The relevant resources can be referred here:

- Overview on the Guidance - click here

- Final Guidance document - click here.

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