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Australia Should Say No To DPAs For Foreign Bribery Offenses

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The Australian Attorney General’s Department (AGD) recently released this public consultation paper in which the Australian Government seeks “a more effective and efficient response to corporate crime by encouraging greater self-reporting by companies” and a “key focus of this consideration is a possible deferred prosecution agreement (DPA) scheme.”

Set forth below is the text of my letter to the AGD urging it to reject DPAs.

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Checking In Down Under

Australia

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery in Sydney). Wyld is the Australia Expert for FCPA Professor.

There have been a number of important developments in Australia over the last few months. The key issues include: (i) false accounting prosecutions arising out of AFP Leighton Holdings investigation; (ii) ASIC’s penalty prosecutions against former senior AWB Ltd executives continue; (iii) proposed model for a Commonwealth Deferred Prosecution Agreement scheme; (iv) proposed amendments to the Commonwealth foreign bribery offence and introduction of new corporate offence of failing to prevent bribery; and (v) AFP and CDPP foreign bribery initiatives

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Friday Roundup

Roundup

No comment, scrutiny alert, when the obvious is not so obvious, quotable, undercover, follow-up, and for the reading stack. It’s all here in the Friday roundup.

No Comment

The recent FCPA enforcement action against Chile-based LAN Airlines (in which the company paid $22 million to resolve DOJ and SEC enforcement actions concerning an alleged payment to resolve an Argentina labor dispute) suggested that both Argentine and Chilean law enforcement officials had commenced investigations of the conduct approximately five years ago.

I’ve tried to find information in the public domain regarding these apparent law enforcement investigations but have generally struck out.

For instance, I contacted LAN’s investor relations office and posed the following question:

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Checking In Down Under

Australia

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery – here).  Wyld is the Australia Expert for FCPA Professor.

*****

This post highlights several important recent developments in Australia including:

(i) new false accounting criminal offences;

(ii) amendments to the foreign bribery offence that become law; and

(iii) the Attorney General’s Department submission on Senate foreign bribery review.

New False Accounting Criminal Offences

For many years, the OECD, Transparency International Australia and experts have criticised Australia for failing to have in place any meaningful false accounting laws which can apply generally or in particular, to foreign bribery cases.

The US history of books and records offences

In addition to its anti-bribery provisions, the United States Foreign Corrupt Practices Act (FCPA) has always contained books and records and internal controls provisions that have been primarily enforced by the US Securities and Exchange Commission.  While the US criminal offences require a degree of intentional conduct, the US civil books and records and internal control offences do not – that is, they merely require listed entities to maintain books and records in a manner that a company would be reasonably expected to maintain.  These laws have been particularly fruitful for the US authorities in prosecuting companies for foreign bribery related offences.  The US Department of Justice (DOJ) focuses on the criminal offences while the US Securities and Exchange Commission (SEC) focuses on the civil cases (the books and records and internal controls offences), often in parallel with the DOJ.

On 27 November 2015, the Australian Government finally addressed this glaring gap in our laws by introducing the Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Bill 2015 to Parliament.  The proposed laws are to be enacted in a new Part 10.9 – Accounting Records section in the Criminal Code Act 1995 (Cth) (the Criminal Code).  (See here for the link).

The False Accounting Offences

There are two primary offences

Intentional false dealing with accounting documents

The essential elements of this offence (proposed s490.1(1) Criminal Code) are as follows:

  • the person commits an offence where the person:

makes, alters, destroys or conceals an accounting document; or

 fails to make or alter an accounting document where the person is under a duty to so make or alter the document; and

  • the person intended the making, alteration, destruction or concealment of the document to facilitate, conceal or disguise the occurrence of one or more of the following:

the person receiving a benefit that is not legitimately due;

the person giving a benefit that is not legitimately due to the recipient or intended recipient;

another person receiving a benefit that is not legitimately due;

another person giving a benefit that is not legitimately due to the recipient or intended recipient;

loss to another person; and

  • one or more circumstance applies as set out in s490.1(2) of the Criminal Code.

The reckless false dealing with accounting documents

The essential elements of this offence (proposed s490.2 of the Criminal Code) are as follows:

  • the person commits an offence where the person:

makes, alters, destroys or conceals an accounting document; and

 fails to make or alter an accounting document where the person is under a duty to so make or alter the document; and

  • the person is reckless as to whether the making, alteration, destruction or concealment of the document facilitates, conceals or disguises the occurrence of one or more of the following:

the person receiving a benefit that is not legitimately due;

the person giving a benefit that is not legitimately due to the recipient or intended recipient;

another person receiving a benefit that is not legitimately due;

another person giving a benefit that is not legitimately due to the recipient or intended recipient;

loss to another person; and

  • one or more circumstance applies as set out in s490.1(2) of the Criminal Code.

The qualifying circumstances (or jurisdiction) for each offence

The proposed s490.1(2) sets out certain circumstances, one of which must apply for an offence under s490.1 or s490.2 of the Criminal Code.

The relevant circumstances are that:

  • the person is:

a constitutional corporation, a corporation incorporated in a Territory or a corporation whose core or routine activities are carried out in connection with a Territory; or

an officer or employee of a constitutional corporation acting in the performance of his or her duties or carrying out his or her functions; or

engaged to provide services to a constitutional corporation and acting in course of providing those services; or

a Commonwealth public official acting in the performance of his or her duties or carrying out his or her functions;

  • the person’s act or omission referred to in s490.1(1)(a) or act referred to in s490.1(2)(a):

occurs in a Territory; or

occurs outside Australia; or

concerns matters or things outside Australia; or

facilitates or conceals the commission of an offence against the Commonwealth,

  • the accounting document:

is outside Australia; or

is in a Territory; or

is kept under or for the purposes of a law of the Commonwealth; or

is kept to record the receipt or use of Australian or foreign currency.

Penalties for False Accounting Offences

The penalties for a contravention of s490.1, the intentional conduct offence, are:

  • for an individual:

imprisonment for not more than 10 years;
a fine of not more than 10,000 penalty units (currently AU$1.8 million); or
both imprisonment and a fine,

  • for a corporation:

a fine of not more than 100,000 penalty units (currently AU$18 million);
three (3) times the value of a benefit directly or indirectly obtained or which is reasonability attributable to the conduct; or
if the value cannot be determined by a Court, 10% of the annual turnover of the body corporate during the 12 month period ending where the relevant conduct occurred.

The penalties for a contravention of s490.2, the reckless conduct offence, are:

  • for an individual:

imprisonment for not more than 5 years;
a fine of not more than 5,000 penalty units (currently AU$900,000); or
both imprisonment and a fine,

  • for a corporation:

a fine of not more than 50,000 penalty units (currently AU$9 million);
three (3) times the value of a benefit directly or indirectly obtained or which is reasonability attributable to the conduct; or
if the value cannot be determined by a Court, 10% of the annual turnover of the body corporate during the 12 month period ending where the relevant conduct occurred.

Definitions

The amendments define an “accounting document to mean “any account” or “any record or document made or required for any accounting purpose”.

In addition, it is not necessary that the prosecution prove that a defendant or any other person in fact received or gave a benefit or that loss was suffered by a person.

Commentary on the Proposed False Accounting Offences

The Minister of Justice, when he introduced these amendments into Parliament, made it clear that these offences were being introduced in order to address Australia’s obligations under the OECD Foreign Bribery Convention.  For many years, the OECD and Transparency International had criticised Australia for the lack of such laws.

The penalties are substantially more than any existing false or misleading account offences in the Corporations Act 2001 (Cth) (see s286, s1307 and s1309).  The offences reflect the significant penalties applicable to the primary foreign bribery offence in the Criminal Code.  However, these new offences are not predicated upon an underlying foreign bribery offence, so corporations need to be alive to the increasing likelihood that these offences will be used by the Commonwealth to prosecute companies and individuals for any conduct where false accounting has occurred, whether by intentional or reckless conduct.

As a practical example, in August 2012, David Ellery as the former Securency CFO, was convicted of one count of false accounting (pursuant to s83(1)(a) of the Crimes Act 1958 (Vic)) involving the dishonest falsification of an invoice for approximately $80,000, being money paid to a Malaysian intermediary for expenses purportedly incurred but in fact were not incurred.  The intermediary told Securency that he had to “disburse certain expenses accrued” and this and other information was recorded in emails received by, sent to and copied to Mr Ellery.  When a debit note was received from the intermediary, outlining certain “marketing expenses”, which Mr Ellery then processed with a request for payment, he knew, in the Court’s view, that no such expenses had been incurred.  The Court found that Mr Ellery’s knowledge that what he was doing was dishonest by the later attempts to conceal what had actually occurred.

In this scenario, it is highly likely that an offence would have been committed under the proposed false accounting offences.  It is likely that Mr Ellery made an accounting document being the request to process the payment, or alternatively, he failed to alter the request for payment by refusing to pay it in circumstances when he knew the payment was not for any legitimate services and was not therefore legitimately due to the recipient (the Malaysian intermediary).  Mr Ellery by his subsequent conduct in concealing the true nature of the transaction, intended (or even was reckless as to the effect which was) to conceal the fact that another person (the intermediary) had received a benefit that was not legitimately due to him and a person (Securency) had incurred a loss.  Mr Ellery was an officer (and employee) of Securency carrying out his duties or functions, his conduct concerned matters or things outside Australia and the accounting document was kept for the purposes of a law of the Commonwealth (taxation laws as to expenses incurred by the company in generating income) or otherwise recorded the use of Australian currency.

These proposed laws have the potential to apply far more broadly than might at first blush be anticipated.  While the proposed laws grew out of a concern to target foreign bribery and international corruption, the breadth of the drafting of the proposed laws mean that they may apply to a much wider range of domestic and international commercial and financial transactions and give rise to unanticipated consequences, serious and criminal in nature, for those companies and individuals who engage in transactions where “accounting documents” (within the meaning of the proposed law) play a critical part.

Australia – Amendments to Foreign Bribery Offence

In March 2015, the Australian Government proposed amending the foreign bribery offence in section 70.2 of the Criminal Code to make it easier for prosecutors not to have to identify a particular foreign public official who was offered or in fact paid a bribe.

On 26 November 2015, the Crimes Legislation Amendment (Powers, Offences and Other Measures) Act 2015 (Cth) received the Royal Assent.

From 26 November 2015, for the purposes of the foreign bribery offence under section 70.2, it is not necessary for a prosecutor to prove that:

  • the person offering or paying a benefit (not otherwise legitimately due) intended to influence a particular foreign public official; and/or
  • the business, or a business advantage to be obtained (from the offending conduct), does not need to be actually obtained or retained.

Australia – Attorney General’s Department Submission to Senate Foreign Bribery Review

In September 2015, the Attorney General’s Department (AGD) has filed a multi-agency submission to the Senate Economics Committee’s review of Australia’s foreign bribery laws.

Highlights from AGD Submission

The following can be drawn from the AGD submission:

  • Australia is committed to combatting corruption and foreign bribery yet the submission is silent on the financial resources to be dedicated to the task (perhaps naturally so leaving that to the Government as a political matter);
  • Australia’s updates to the OECD Working Group on Bribery have been well received, so we need to wait until the next OECD review to independently assess how Australia is in fact tracking on the various benchmarks identified by the OECD over many years;
  • the AFP hosted National Fraud & Anti-Corruption Centre is coordinating investigations and ASIC and the AFP are working together under an MOU in a manner that clearly implies that nothing else needs to be done, despite numerous other submissions calling for a closer look at how foreign bribery investigations and prosecutions are conducted;
  • the Government has now proposed new, more substantial criminal false accounting offences (see above);
  • the submission says nothing as to whether a self-reporting regime, such as the Deferred Prosecution Agreement scheme that exists in the United Kingdom, should be introduced into Australia and appears content to leave the present very unattractive system in place providing little real incentives to companies or individuals to report potential offences;
  • the submission implicitly states that the Australian Government should not issue any Resources Guide or other guide to business, simply because “it is a matter for business” and “Australia does not have any case law in this area”, neither of which appear to be reasons of any great weight or merit; and
  • on facilitation payments, the submission is silent on whether they should be banned, as almost all submissions called for.

Review of the AGD Submission

Overall, the AGD submission, while illuminating in certain respects in highlighting the inter-agency relationships (particularly as between the AFP and ASIC) is underwhelming on a number of levels.  While the submission highlights the improved level of inter-agency cooperation, it fails to address anything of substance to the consistent calls for more clarity in the Government’s work in promoting foreign bribery awareness, it ignores calls for any resources guide for business, it fails to address the need to improve self-reporting by offering a better, more focused self-reporting process in the criminal law system (such as deferred prosecution agreements) and it is silent on facilitation payments.  While the AGD may be reluctant to put forward ideas as policy, it fails to engage in any intellectual debate on these topics, preferring to remain silent.  That is regrettable given the overwhelming call in the majority of submissions for action on these matters.

Checking In Down Under

Australia

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery in Sydney).

Wyld is the Australia Expert for FCPA Professor.

*****

This post covers a range of important developments in Australia and the region in the area of foreign bribery policy, investigations and regulation as of September 1, 2015.

Topics covered in this post include:

  • Australia – Senate Review into Australia’s Foreign Bribery Laws
  • Australia – Securency suppression order lifted, Asian politicians identified
  • Australia – books and records and internal controls and BHP Billiton’s Beijing Olympics hospitality program
  • Australia – Fraud Against the Commonwealth Report 2015
  • Australia – Ernst & Young review of bribery in the mining and metals industries
  • Australia – NSW ICAC and “serious corruption”
  • New Zealand – Update on Organised Crime and Anti-Corruption Bill

Australia’s Senate Review into Australia’s Foreign Bribery Laws

From July 2015, the Senate Economics Reference Committee commenced its long-publicised review into Australia’s foreign bribery laws.  Submissions have been called from interested parties, to be lodged with the Senate by 24 August 2015.  The Committee is to finalise its report by 1 July 2016.

There are likely to be numerous topics up for review by the Senate.  These include:

  • an entire review of section 70 of the Criminal Code (the foreign bribery offence) given we have seen only 2 prosecutions in over 15 years;
  • abolishing facilitation payments;
  • improving the corporate criminal liability provisions (again because there have been no prosecutions);
  • considering the introduction of a deemed corporate liability offence reflecting section 7 of the UK Bribery Act with an “adequate procedures” defence;
  • introducing structured Deferred Prosecution Agreements (currently under review);
  • reviewing how the existing enforcement agencies work together – AFP or ASIC – and the role of the CDPP;
  • creating a books & records and internal controls offence with substantial penalties (under the Corporations Act for ASIC to enforce or the Criminal Code for the AFP to enforce);
  • introducing comprehensive whistleblower protections and rewards in the private sector;
  • considering the publication of an Australian Foreign Bribery Guidance to business similar to guidance published in the US and the UK;
  • reviewing and implementing a national Anti-Corruption Plan, modelled on the UK plan; and
  • creating an independent Federal anti-corruption commission.

There appears to be a fundamental fracture in the present system of investigation and enforcement of foreign bribery laws in Australia.  Throughout the 22 submissions lodged with the Senate:

  • almost all describe Australia’s foreign bribery enforcement record as weak, poor or ineffectual;
  • almost all, bar 2, strongly encourage the abolition of the facilitation payment defence while 1 suggests if the defence remains, clear guidance should be published on payments that are permitted;
  • several encourage a complete review of the current investigation and enforcement regime; and
  • most submissions note the lack of a whole-of-government approach to targeting foreign bribery, with the result that there is as perception amongst business (and the community more generally) that prosecutions for illegal commercial conduct (foreign bribery) are rare, too hard and complex so just get on with your business, risky though it may be.

In over 15 years, we have seen only two prosecutions for offences under section 70 of the Criminal Code.  The Securency case commenced in July 2011 and most details of it are suppressed in Australia.  The Lifese foreign bribery prosecution commenced in February 2015.  We have seen no corporate criminal liability prosecutions relating to foreign bribery (under sections 12.1 to 12.6 of the Criminal Code).  We have seen no civil prosecutions for false or misleading books and records.  We have seen ASIC spend almost 6 years pursuing former AWB directors and officers for alleged breaches of their duties arising out of the infamous AWB wheat sales to Iraq in the early 2000s, two agreed to fines and a disqualification period (the former Managing Director and Chief Financial Officer), two had their cases discontinued in late 2013 and 2 face trial listed to commence in October 2015.

Why is that? Is the law too difficult to enforce?  There have been no substantive changes to the law so that can hardly be the issue.  Are cases too hard to prove or is the CDPP seeking too high a threshold to prosecute (certainty of success rather than evidence of a reasonable basis to secure a conviction, as the CDPP Prosecution Policy promotes)?  What role should ASIC and the AFP play and how can criminal and civil prosecutions be improved are key areas to review.

The national Fraud & Corruption Centre hosted by the AFP draws upon multi-agency skills and experience, yet still Australia sees or hears little about why there is so little enforcement.  It is time to reassess the overall management of Australia’s national response to fraud, corruption and foreign bribery and to decide if it is important enough for political leadership to dedicate resources to the process consistent with Australia’s international obligations.  We all like to be a Convention signatory but are we prepared to live up to convention obligations?

Australia – Securency Suppression Orders and Foreign Politicians

Annexure A to the CDPP Prosecution Policy states that the Commonwealth Director of Public Prosecutions has issued the following statement:

When deciding whether to prosecute a person for bribing a foreign public official under Division 70 of the Criminal Code, the prosecutor must not be influenced by:

  • considerations of national; economic interest;
  • the potential effect upon relations with another State; or
  • the identity of the natural or legal persons involved.

This statement reflected the terms of Article 5 of the OECD Convention.  There is however, no law in Australia giving effect to this “obligation”.

Australian courts all have statutes or rules that permit the suppression or non-publication of certain facts, information or evidence or the whole or part of a proceeding before the Courts.

In June 2014, the Australian Government through Department of Foreign Affairs & Trade (DFAT) secured suppression orders seeking to protect the identity of various Asian political figures from being named as alleged participants in the Securency bribery scandal in circumstances where those individuals were not charged with any offence.  The DFAT notice informing the Court of its application for a suppression order stated that its purpose was “to prevent damage to Australia’s international relations that may be caused by the publication of material that may damage the reputation of specified individuals who are not the subject of charges in these proceedings.”   Quite why Australia should be concerned to protect the reputation of Asian-based politicians who can well look after their own reputation (and often do by suing for defamation and using national sedition laws to silence critics) is not entirely clear from the judgment (as the key evidence is redacted).

In June 2015, the Court revisited its initial orders on the application of the Australian media.  After hearing debate, the Court’s judgment discharged the initial suppression orders.  While the Court was critical of Wikileaks for publishing the June 2014 orders and the media for inaccurate reporting of the effect of those orders, the Court was not persuaded to maintain the suppression orders.  The Court characterised DFAT’s evidence as “unsourced or second-hand hearsay” and was drafted “at an unsatisfactory high level of vagueness or generality.”   The Court made it clear that the strong public interest in the public knowing about the Securency case and what did or did not happen had to be balanced with countervailing public interest considerations concerning protecting the administration of justice and Australia’s national security – matters that DFAT bore the onus of establishing, which it failed to do.

Article 5 of the OECD Convention is clear – economic interests or the identity of persons is and should not be a relevant consideration.

When individuals may be named in any criminal proceeding, it is for the Court and those persons to deal with it – it should not be the role of Government to come in and seek to protect friendly politicians in the name of “national security” (whatever that means on any particular day).  It is important to remember that to be truly effective, foreign bribery offences need to target not only those responsible for paying the bribe but also those who either directly or indirectly – whether at first instance or second instance or even more remotely – benefited from the bribe.  Seeking to suppress the name of some individual who allegedly ultimately received some benefit from the illegal conduct does not assist foreign Sovereign States in preventing bribery of their public officials The use of suppression orders in circumstances such as these should only be granted in the most exceptional of cases and rarely if ever in foreign bribery cases (given the very high level of public interest in requiring such cases to be public and transparent) so justice is not only done but is seen to be done in the eyes of the public and society generally.

Australia – Books and Records, Internal Controls and BHP Billiton

There is a significant failing in Australia’s laws in relation to foreign bribery – there are no comparable books and records and internal controls offences in Australia as there is under the US FCPA, as enforced with great success by the US SEC.

The FCPA requires issuers (those listed entities or other entities trading in US-listed shares subjected to the FCPA) to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the entity’s assets.  In addition, issuers must devise and maintain a system of internal accounting controls that assures that transactions are executed and assets are accessed only in accordance with management’s authorisation; are periodically reconciled and recorded so that the entity’s financial statements conform to nominated standards.  Critically, issuers are strictly liable for the failure of any of their owned or controlled foreign affiliates to meet the books and records and internal control standards.

Under the Corporations Act, a corporation is already required to keep written financial records that correctly record and explain its transactions, financial position and performance and which would enable true and fair financial statements to be prepared and must not falsify records or provide false information.  Conduct in contravention of these provisions are offences of strict liability with penalties ranging from fines of up to 200 penalty units (or approximately $34,000 and/or 5 years imprisonment per offence).  A director is liable to a civil penalty if he or she fails to take all reasonable steps to comply or to secure compliance with the record-keeping provisions.

This brings us to BHP Billiton’s hospitality program for the Beijing Olympics in 2000, having been named as a principal sponsor and having secured a contract to mint the medals for those Olympics.  BHP Billiton is a dual listed Australian and UK entity and one of the largest mining corporations in the world.

On 20 May 2015, the US SEC announced that BHP Billiton would be fined an amount of US$25 million for contraventions of the books and records and internal control provisions of the FCPA.  According to the press release issued by the SEC:

An SEC investigation found that BHP Billiton failed to devise and maintain sufficient internal controls over its global hospitality program connected to the company’s sponsorship of the 2008 Summer Olympic Games in Beijing.  BHP Billiton invited 176 government officials and employees of state-owned enterprises to attend the Games at the company’s expense, and ultimately paid for 60 such guests as well as some spouses and others who attended along with them.  Sponsored guests were primarily from countries in Africa and Asia, and they enjoyed three- and four-day hospitality packages that included event tickets, luxury hotel accommodations, and sightseeing excursions valued at $12,000 to $16,000 per package.

BHP Billiton footed the bill for foreign government officials to attend the Olympics while they were in a position to help the company with its business or regulatory endeavours,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “BHP Billiton recognized that inviting government officials to the Olympics created a heightened risk of violating anti-corruption laws, yet the company failed to implement sufficient internal controls to address that heightened risk.

What is the response from Australia – little to non-existent save for suggestion in the media (The Sydney Morning Herald 9 August 2015) that the AFP was still investigating BHP Billiton in relation to the Beijing Olympics activities.  Certainly there is no suggestion in the media or from ASIC that ASIC is investigating BHP Billiton for any allegedly false or misleading books and records offences arising out of the Beijing Olympics case.  In all probability, the US and Australian authorities accepted that if BHP Billiton was to be punished, the US authorities would do it as the laws in Australia were in all likelihood seen as inadequate.

It is important that a substantial books and records and internal controls offence for foreign bribery must be created and the penalties must be as severe as the underlying primary foreign bribery offence (in section 70.2 of the Criminal Code).  Careful consideration should be given to whether these offences are included in the Corporations Act (to be enforced by ASIC) or in the Criminal Code (to be prosecuted by the CDPP) and wherever they exist, they are properly and robustly enforced.

Australia – Fraud Against the Commonwealth and a national ICAC

Fraud, including corruption (involving an abuse or misuse of public position), is and continues to be an endemic problem for all governments.  There is no reason in principle or practice for the focus on foreign bribery to be at the cost of not addressing national, domestic corruption, however uncomfortable that might be to national politicians and public officials.

There are certain key views about fraud in and affecting the Commonwealth government that have recently been reviewed (Australian Institute of Criminology, Fraud Against the Commonwealth 2010-2013, Canberra, July 2015).

Over the 3 years between 2010 and 2013, there were at least 265,866 incidents of suspected fraud reported by Commonwealth entities.

  • Each year, substantially greater numbers of external fraud incidents were detected than suspected internal fraud incidents.
  • Fraud involving financial benefits was the most frequently reported category of external fraud.
  • Over the 3 years, the number of fraud-related corruption increased substantially from 37 incidents in 2010-2011 to 163 in 2012-2013.
  • While the cost of this fraud is hard to quantify and figures may vary, a conservative estimate is approximately $530m over 3 years, with increases from $119m in 2010-2011 to $204m in 2011-2012 to $207m in 2012-2013.
  • Over the 3 years, external fraud accounted for $521m while internal fraud amounted to $9.1m or 1.7% of the total reported fraud losses.
  • In relation to external fraud:
  • risks arise in connection with the provision of new benefits, the introduction of new taxes, procurement practices, government-funded programs and the use of consultants; and
  • the relationship between corruption and collusion between external actors and those public servants working within government.

The Resources Management Guide No 201 Preventing, Detecting and Dealing with Fraud, reflecting the 2011 Commonwealth Fraud Control Guidelines, require Commonwealth entities to investigate routine or minor instances of fraud.  More serious instances are usually referred to the AFP.

Who investigates Government fraud at the Commonwealth level?  In the first instance, the relevant entity conducts its own investigation.  If the incident is more serious, the AFP is usually called in pursuant to a referral and if charges arise, they are conducted by the CDPP. More broadly, the Commonwealth Integrity Commissioner, supported by the Australian Commission for Law Enforcement Integrity, is responsible for preventing, detecting and investigating serious and systemic corruption issues in a limited number of prescribed Australian Government law enforcement agencies.

The Criminal Code contains extensive provisions dealing with offences involving Commonwealth public officials which are separate from the foreign bribery offence.  Nevertheless, foreign bribery and corruption (involving public officials and private commercial interests) are but one shade of fraud in a general sense as the public invariably perceive it.  To have proactive anti-corruption commissions at the State level, but nothing at the Commonwealth level is, to say the least, very puzzling.  The public is rightly sceptical of politicians who are the first to cast accusations at opponents for impropriety, yet then duck and weave when anyone suggests a truly independent body be created to review allegations of improper or illegal conduct.  The creation of such a body can only improve the public’s perception of politicians and the political process which ought to place trust, integrity and ethical conduct at the forefront of how our community leaders behave.

Australia – Ernst & Young Fraud, Bribery & Corruption Survey in the Mining and Metals Industry

In August 2015, Ernst & Young published their 2015 report on Managing fraud, bribery and corruption risks in the mining and metals industry.

In the extractive industries, Ernst & Young see two leading developments – an increasing globalisation with multinationals operating across the globe with increasing risk profiles and second, global anti-corruption enforcement on the rise.  These developments are not exclusive to extractive industries.  Based on figures from TRACE International, extractive industries accounted for the highest number of fraud, bribery and corruption enforcement actions for any given industry.

Other important lessons from the report include the following:

  • an increased cooperation between international regulators;
  • fraud and corruption is seen by corporations as one of the top risks to manage;
  • despite increased enforcement and regulation, corporations still take risks, paying cash to win or retain business or misstating financial records;
  • facilitation payments remain the norm for many corporations in high risk countries and properly complying with strict recording obligations is patchy.

It is expected legislation will be introduced and supported by all sides of politics and in the words of the NSW Premier, “we want ICAC to get cracking…we want it to continue to hunt down serious and systemic corruption in this state.”

Australia – NSW ICAC and “Serious Corruption”

In August 2015, the New South Wales Government announced its response to the independent review of the function and powers of the NSW Independent Commission Against Corruption (ICAC).  This review was prompted by ICAC’s ultimately unsuccessful and aborted investigation into the conduct of a serving senior Crown Prosecutor and rulings by the High Court of Australia (see Independent Commission Against Corruption v Cunneen [2015] HCA 14 where the Court held that ICAC could not investigate cases in which a private citizen adversely affected the functions of an honest public official) that the investigation was beyond ICAC’s powers.  In the interim, the NSW Government had legislated to validate all of ICAC’s then existing findings and investigations.

The NSW Government will:

  • limit ICAC’s jurisdiction to making findings “only in the case of serious corrupt conduct”;
  • permit ICAC to investigate the conduct of non-public officials in limited circumstances (such as collusive tendering, fraud in or relation to applications for mining licenses and dishonestly benefiting from the payment of public funds); and
  • permit ICAC to examine breaches of donation and lobbying laws

New Zealand – Update on Organised Crime and Anti-Corruption Bill 2015

The Organised Crime and Anti-corruption Legislation Bill is part of the New Zealand Government’s All of Government Response programme to combat serious crime.  The Bill, introduced to Parliament in June 2014, gives law enforcement agencies in New Zealand the power to deal with organised crime and corruption.  The Law and Order Committee reported the Bill back to the Parliament on 4 May 2015 and it is currently awaiting Committee of the whole House stage.

Key new measures introduced by the Bill, relevantly include:

  • requiring banks to report all international transfers of $1,000 or more and all physical cash transactions of $10,000 or more to the NZ Police  Financial Intelligence Unit;
  • redrafting the money laundering offence to specify that intent to conceal is not required
  • introducing new offences to address identity crime, including selling or passing on identity information
  • amending the Policing Act 2008 to expressly provide Police with a power to share information with its international counterparts;
  • revising the foreign bribery offence, including clarifying the circumstances in which a corporation is liable for foreign bribery;
  • increasing penalties for bribery and corruption in the private sector to bring them into line with public sector bribery offences.

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