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Checking In Down Under

Today’s post is from Robert Wyld [1] (an attorney at Johnson Winter & Slattery in Sydney).

Wyld is the Australia Expert for FCPA Professor.

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This year-end review covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation to 20 December 2017. It has been a busy year for politicians (creating new laws), regulators (pushing for easier ways to investigate and prosecute) and enforcers (Australia’s first foreign bribery convictions). And of course, and very much deserved, much enhanced private sector whistleblower protections are inching ever closer to reality.

The key issues that are covered in this review include:

Australia – First Foreign Bribery Prosecution and Conviction

On 27 September 2017, in R v Jousif; R v I Elomar; R v M Elomar [2017] NSWSC 1299, the NSW Supreme Court sentenced 3 individuals on charges of conspiring to bribe a foreign public official. Two of the offenders were brothers and directors of an engineering, construction and infrastructure company, Lifese Ltd while the third was a facilitator who held himself out as an expert in introducing companies to government and statutory authorities in Iraq. The two brothers were convicted and sentenced to 4 years imprisonment (with a 2 year non-parole period) and a fine of AU$250,000 each while the third offender, the facilitator, was sentenced to 4 years imprisonment (again with a 2 year non-parole period) and with no fine. The case can be found here [2].

The case concerned the payment of approximately US$1 million to entities in Iraq for the purpose of ensuring that commercial contracts were secured in favour of the company. In passing sentence, the Court made the following observations (at [269]-[270] and [313]):

“I infer that the offence is difficult to detect. None of the parties to a conspiracy to bribe has an interest in its disclosure. The victim is the nation state whose foreign public officials are to receive a benefit…It is important that the sentence includes an element of denunciation so that those Australians who carry on business overseas appreciate that bribery of foreign officials is as serious and as criminal as bribery of local officials and can never be excused, much less justified, on the basis of a business imperative…Each offender has deliberately flouted Commonwealth law and employed criminal means in the expectation of financial advantage. Their respective criminality is serious and warrants imprisonment to communicate “the censure of society”.

The first foreign bribery prosecution, the Securency bank note printing saga, will finally make it way to trial. The trial is listed to commence before the Supreme Court of Victoria in late January 2018. Assuming the extensive non-publication orders are dissolved for the hearing, then expect some close media scrutiny of the evidence as it unfolds.

[3]

Australia – False Accounting Prosecution against ex-Leighton Holdings Executives

In late 2016 and early 2017, ASIC charged Peter Gregg and Russell Waugh with engaging in conduct that resulted in the falsification of the company’s books in contravention of the Corporations Act 2001 (Cth). The trial of the two accused was listed to commence on 27 November 2017. On 29 November 2017, the trial was adjourned to 15 October 2018. Further updates will be provided as they become available.

Australia – Proposed New Foreign Bribery and DPA Laws

On 7 December 2017, the Australian Government tabled before Parliament the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017. The reading of the Bill was adjourned to the first sitting of Parliament in the New Year, on 5 February 2018 and has been referred to the Senate Legal & Constitutional Affairs Legislation Committee to consider and report by 20 April 2018. The bill can be found here [4].

The Bill includes the following important reforms to Australia’s foreign bribery laws:

These reforms have been covered in the April 2017 Update. In reviewing the draft Bill, the following important developments should be noted in relation to the foreign bribery offence:

The Bill also outlines in more detail the statutory process for the operation of the Commonwealth DPA scheme for certain Commonwealth offences:

There are some transitional amendments to other laws, most notably the Income Tax Assessment Act 1997 (Cth) where the non-deductibility of bribes exists as an offence, the Crimes Act 1914 (Cth) in relation to factors to consider on sentencing and the DPP Act 1983 (Cth) in relation to authorising the CDPP to negotiate, enter into, administer, and issue directions or guidelines concerning the negotiations for, the entering into and the administration of a DPA.

Given that these proposed amendments have been on the Parliamentary table and under extensive public consultation for many months, it is hoped these reforms will be enacted in the first half of 2018 after further review by the Senate Legal & Constitutional Affairs Legislation Committee.

Australia – Proposed Reforms to Private Sector Whistleblower Protection Laws

In September 2017, the Parliamentary Joint Committee on Corporations & Financial Services published its Report on whistleblower protections. The Report contained a number of important recommendations for reform including a wholesale review of private sector whistleblower protections.

On 23 October 2017, the Commonwealth Government published an Exposure Draft Treasury Laws Amendment (Whistleblowers) Bill 2017 for public consultation.

However, three important features from the Report not contained in the draft Bill are that:

On 7 December 2017, the Australian Parliament considered a revised whistleblower protections bill, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. This Bill contains the formal changes proposed to enhance whistleblower protections which are to be included in the Corporations Act 2001 (Cth). The Bill can be found here [5].

The key changes set out in the December 2017 Bill are as follows:

While there are still some serious criticisms of the scope of the protections, particularly the high threshold test for disclosures to third parties, being “an imminent risk of serious harm or danger to public health or safety, or to the financial system if the information is not acted on immediately” (see section 1317AAD(1)(c) of the draft Bill), which may result in further amendments (see “Whistleblower laws need to be fixed”, Adele Ferguson, The Australian Financial Review 11 December 2017), the Bill remains a good start to tackle the long-standing deficiency of adequate and robust private sector whistleblower protections in Australia.

While the Bill remains under consideration, it is timely for all large listed and proprietary companies to revisit their internal policies and procedures to bring them into line with the expected changes, which have cross-party support in the Parliament. They will be required to have in place a whistleblower policy that reflects the new laws by 1 January 2019.

The importance of addressing these issues is highlighted by Prof AJ Brown who led the research project, Whistling While They Work 2 (in conjunction with ASIC). In the Project’s Preliminary Report published in July 2017 (see here [6]), Prof Brown found out of 702 organisations surveyed, almost 23% reported “having no specific strategy, program or process for delivering support and protection to staff” with another 26.8% relying on “setting up such a strategy as needed, rather than having any standing support program”. The time for corporate complacency in the private sector over whistleblowers in Australia is fast disappearing. 

Australia – Senate Review of Foreign Bribery Laws

During the second half of 2017, the Australian Senate Economics Reference Committee reactivated its review of Australia’s foreign bribery laws. While a report was to be published by early December 2017, that has now been pushed back to 7 February 2018.

Australia – ASIC Enforcement Review Panel Report on Penalties for White Collar Crime

In October 2017, the Australian Government announced a consultation process into the level of penalties for white collar crime. The ASIC Enforcement Review Panel published its Position Paper 7, Strengthening Penalties for Corporate and Financial Sector Misconduct, outlining key issues that it thought should be addressed by changes in the law (see here [7]). Consultation has closed and it is hoped reforms occur early in 2018.

The key issues include the following:

While substantially increased penalties have been on the horizon for some years, this is a consistent review to look at the spectrum of penalties open to ASIC in the corporate and financial sectors and will do much to give ASIC extra teeth, assuming it is prepared to press for such penalties to be imposed.

Australia & the OECD – Enforcement Review 2016 and Phase 4 Report of Australia’s Obligations under the OECD Anti-Bribery Convention

On 14 November 2017, the OECD Working Group on Bribery released its 2016 Data on Enforcement of the Anti-Bribery Convention. While the report focused on the degree of international cooperation, it made some interesting findings:

Against this backdrop, on 19 December 2017, the OECD Working Group on Bribery published the Phase 4 Report on Australia and its performance in complying with the OECD Anti-Bribery Convention. The OECD recognised the substantial steps taken by the Australian Government to improve its framework for detecting and investigating foreign bribery (with 19 ongoing investigations and 13 referrals under evaluation), that enforcement had increased markedly since the 2012 Phase 3 Report and a number of legislative and institutional reforms have or are designed to strengthen the focus on targeting foreign bribery.

The Phase 4 Report makes the following recommendations for the future:

Overall, the Phase 4 Report illustrates that the Australian Government is recognising the importance of tackling foreign bribery and corruption, is strengthening Australia’s laws to prosecute companies and individuals, is recognising the importance of enhanced whistleblower protections (to promote the disclosure of illegal conduct) and ultimately, and this is where the test lies, to adequately resource and staff the AFP and the CDPP to go after foreign bribery in a manner now being adopted by their overseas counterparts.

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