Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery – here). Wyld is the Australia Expert for FCPA Professor.
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Australia has been gripped by an unusual phenomenon over the last few months, an unreal Federal election campaign. While citizens of the US are used to a year long Presidential campaign, we like ours to be short and sharp, over in no more than a month, as the prolonged sight of too many politicians making too many promises they cannot or will not keep, is unedifying. As a result, any serious attempts at legal reforms concerning foreign bribery and corruption initiatives seem few and far between. However, there has been some movement on the Hill.
Australia Signs up to International Foreign Bribery Taskforce
During May 2013, the Australian Federal Police, the United States Federal Bureau of Investigations, the Royal Canadian Mounted Police and the United Kingdom City of London Police Overseas Anti-Corruption Unit all signed a Memorandum of Understanding setting up a new International Foreign Bribery Taskforce (to be known as IFBT).
The IFBT is part of a new transport agreement undertaken by the Australian, United States, Canadian and United Kingdom agencies to combat foreign bribery. The purpose of the taskforce enables the agencies and the countries they represent to work collaboratively to strengthen investigations into foreign bribery offences and to support the relevant OECD and United Nations Anti-Bribery Conventions.
It is expected that the taskforce will:
- enhance local law enforcement responses to foreign bribery on an international scale;
- allow police experts in the participating countries to share knowledge, skills, methodologies and case studies;
- meet annually to discuss trends and challenges in each of their jurisdictions; and
- share investigative techniques, exchange information and good practice initiatives which can then be applied in international investigations.
The creation of the taskforce goes some way towards Australia addressing the criticisms directed towards it by the OECD in the October 2012 Phase 3 Review of Australia’s compliance with the OECD Anti-Bribery Convention.
Australia Considers Reforms to Anti-Money Laundering and Counter Terrorism Financing Laws
Where improper payments occur involving foreign public officials, there is always a risk that Australia’s anti-money laundering and counter terrorism financing laws (AML-CTF laws) may be invoked.
In June 2013, the Government released a discussion paper which looked at possible areas of reform, including:
- the disclosure of the identity of beneficial owners and controllers in a corporate structure;
- the identity of trust settlors;
- the level of due diligence required in high risk jurisdictions and circumstances;
- understanding a customer’s business or occupation; and
- the extent of record-keeping that is required.
All of these issues impact on the extent to which Australian and overseas regulators require corporations to understand the risk profile in each jurisdiction in which they do business, with who do you do business and to proactively manage those risks.
To Facilitate or not to Facilitate – That is the Economic Question?
On 15 November 2011, nearly 2 years ago, the Australian Government issued a Consultation Paper on whether, amongst other reforms being considered to Australia’s foreign bribery laws, facilitation payments should be banned. The period for consultation was mercifully short, one month. The due date passed, then silence.
From time to time thereafter, various bureaucrats speaking at law conferences would admit that facilitation payments “were being reviewed” or “were under consideration” and that “there were arguments on both sides”, but nothing more was said to inform us about what these arguments were and why the Government was unable to make a decision. It appears as if paralysis had set in.
Then in February 2013, the Canadian Government reignited the debate by amending the Corruption of Foreign Public Officials Act and banning facilitation payments. The ban has yet to take effect, with the Canadian Government giving business, or more accurately those businesses who continue to pay facilitation fees, time to reorganise their affairs.
While the national Australian election is due over the next few months, substantive reform of criminal laws may be less of an election priority. However, that has not stopped one lobby group, the Australia-Africa Mining Industry Group (AAMIG) from spruiking the benefits of facilitation payments as promoting cultural development, lessening poverty and generally allowing Australian business to do business in developing nations.
AAMIG has argued that removing facilitation payments will not help eliminate poverty across Africa, that Africa is not a uniform nation, and that legislative changes in London, Ottawa or Canberra will not add to the economic well-being of Africa (see Why miners pay in Africa, The Australian Financial Review 10 July 2013). AAMIG says it has been lobbying Australia’s politicians (to maintain facilitation payments) and the reception has been, according to AAMIG, “very understanding”, but to what end remains unclear (see Miners nervous of anti-bribery laws, The Australian Financial Review 10 July 2013). No politician is named or quoted as agreeing to the proposition that paying small bribes is good for Australian business.
AAMIG uses an example of the payment of money to a foreign public official for petrol for his government vehicle to conduct on-site inspections. What AAMIG appears to favour is a law that permits small bribes to be allowed as a feature of doing business and for them to be transparently recorded until such time as developing countries can properly pay their employees and their own governance frameworks improve. This analysis raises many questions which AAMIG appear not to address. For example, what assurance does an Australian company receive that the money (no doubt cash) paid for petrol in fact goes in petrol? Why is cash used? Why is cash paid to an individual instead of a company dealing directly with a government agency? What receipt is received (none is the probable answer)? How does the company record the payment in its books and records? Would such a payment be made in Australia if requested by a public official?
AAMIG appears to advance a system which entrenches small systemic bribes so that affluent companies can continue to do business throughout the world without regard to the underlying damage that corruption causes to the local society. It is not as if AAMIG is promoting itself as a participant in any foreign political reform, the group just wants its members to be free to pay small bribes to get their business up and running and a financial return to stakeholders (whoever that amorphous group may be). As Glenn Dyer and Bernard Keane from the Crikey.com website wryly noted, it seems that AAMIG are promoting a sense of cultural imperialism (see No exemptions: bribes are bribes, from Murdoch to African miners, Crikey.com 10 July 2013) – it is immoral not to pay these (facilitating) bribes as the economic wellbeing of the nation demands that the foreign companies invest in the nation and they have to pay these bribes to help the nation develop. What AAMIG fails to appreciate or in fact ignores is the cancerous effect that corruption (and the very business activities it wants its members to undertake) has had and continues to have in many developing countries.
The international trend is moving inexorably away from allowing facilitation payments. While the United States of America and Australia permit facilitation payments, the defence is of very limited operation. The Commentaries to the OECD Convention suggest that while criminalisation may not be practical, governments must address the “corrosive phenomenon” of facilitation payments. The United Nations Convention Against Corruption requires its signatory members to enact laws to criminalise bribery, public or private. The Rt Hon TRH Cole, the Royal Commissioner who investigated AWB’s UN Oil-For-Food Program payments in 2006 was blunt in his assessment of facilitation payments – saying “only sophistry enables one to distinguish a facilitation payment – which is a small bribe – from the notion of a corrupt payment” as it is simply a payment made to secure an advantage or priority to which the payer is not otherwise entitled (see Managing Corruption Risks in Offshore Operations, TRH Cole, 24 October 2007).
Increasingly, large, medium and small businesses are banning facilitation payments. AAMIG is telling its members to effectively pay small bribes in circumstances where if those members do not fully understand the circumstances of the payment, their helpful bribe to promote or advance their business (why else is the payment being made?) all of a sudden has become an illegal bribe to a foreign public official with the potential intent to secure or maintain that which the company seeks, its own commercial advantage in business, and to which it might not otherwise be legitimately entitled.
Perhaps the last word should be left to the Australian Council of Superannuation Investors (ACSI) which published a report, Anti-Corruption and Bribery Practices in Corporate Australia in October 2011 (at www.acsi.org.au), one month before the Australian Government published its facilitation payment consultation paper. The ACSI offered this view:
Bribery is a ‘long tail’ risk difficult to quantify and address. Bribe giving or taking can remain hidden for many years then unexpectedly surface with catastrophic consequences. Directors and employees with shorter term horizons are less likely to suffer immediate consequences of engaging in corruption or bribery than investors (leaving aside the risk of prosecution and imprisonment) but ultimately this risk threatens the long-term success and stability of a company and consequently value for shareholders, who eventually pay the price (italics added)
The investors and shareholders of AAMIG members might do well to pause and reflect on the risks they really want their directors and management to undertake and their own levels of transparency and accountability.