A significant reform impacting Australian corporates
Australia has recently undertaken major reforms to its anti-bribery and corruption framework. Following the inception of the National Anti-Corruption Commission in 2023, Australia has now introduced a second major anti-corruption reform with the passing of the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 ("CFB Bill") on the 29th of February 2024.
Coming into effect in September 2024, the CFB Bill broadens the reach of foreign bribery laws and addresses criticism regarding the low number of foreign bribery convictions in Australia, which has seen only three individuals and seven corporations convicted for foreign bribery since the enactment of foreign bribery laws in 1999. Australian corporations and executives must take action to address the new requirements introduced by the CFB Bill. Broader definitions and new offences in the CFB Bill will increase scrutiny from authorities and result in hefty penalties for non-compliance.
Changes Brought by the CFB Bill
The changes brought about by the CFB Bill in Australia are substantial. However, two changes stand out:
- Offence of “Failure to Prevent”: This new offence punishes failure to prevent bribery of a foreign official by an "associate." Corporations can defend this charge by demonstrating they had “adequate procedures” in place to prevent bribery of a foreign official. Failure to prevent is now an absolute liability offence, which shifts the burden of proof to corporations to demonstrate they had adequate procedures in place.
- Definition of “Associate”: Defined broadly by the CFB Bill, an associate now encompasses corporate officers, employees, agents, contractors, and anyone rendering services on behalf of corporations, including its subsidiaries and controlled entities.
Other changes include broadening of the definition of a foreign public official to include candidates for office. The CFB Bill has also simplified the process of establishing wrongdoing by requiring proof of an "intention to improperly influence" a foreign official, rather than focusing on proving that a benefit was “not legitimately due”. Finally, the amendments now cover seeking personal advantages through bribery, not just business advantages.
Adequate Procedures to Prevent Foreign Bribery
The Attorney General’s Department published its “Guidance on adequate procedures to prevent the commission of foreign bribery” (“the Guidance”) on 29 August 2024. According to the Guidance, the concept of “adequate procedures” is based on two key principles: proportionality and effectiveness.
Proportionality in compliance measures means aligning these measures with the specific risks an organization faces, considering factors such as its size, operations, geographical presence, and complexity. Corporations with higher exposure to bribery and corruption risks, particularly in certain higher risk jurisdictions or industries, should implement more comprehensive measures than those with lower risks. To address proportionality, corporations should conduct a thorough risk assessment to evaluate their risk exposure and design tailored measures to mitigate those risks,
Effectiveness refers to the practical functioning of these procedures in mitigating risks, ensuring they operate as intended. There are five main indicators of effectiveness outlined in the Guidance:
- A strong culture of integrity within the organisation;
- A clear commitment to compliance from senior management;
- A robust anti-bribery compliance function or functional equivalent;
- Effective risk assessment and due diligence procedures; and
- Proper management of third parties, such as suppliers or intermediaries.
The Guidance identifies a risk assessment as central and critical to establishing adequate procedures. Corporations must identify, evaluate and document the risks they face, such as operating in countries with high levels of corruption, engaging in transactions involving foreign public officials, or using intermediaries. The findings from these risk assessments should guide the implementation of proportionate controls, adapted to the company’s operational circumstances and exposure to foreign bribery risks.
Another key element of the Guidance is the critical role that top-level management is required to play in developing, implementing and promoting an anti-bribery and corruption compliance program. This includes providing effective leadership, being involved in critical decision making, and communicating and promoting the benefits of preventing bribery.
Employees and associates of corporations must receive continuous and tailored training in different forms to ensure that they understand the corporation’s anti-bribery and corruption program. Additionally, companies should adopt mechanisms that encourage and facilitate reporting of suspected or actual instances of bribery and corruption, while affording whistleblowers the relevant whistleblower protections.
Instances of bribery and corruption must be adequately investigated by companies, which means investigations should be objective, timely, properly scoped, appropriately conducted and documented. Companies should also consider obtaining legal advice about self-disclosure to relevant authorities, including the Australian Federal Police, when an instance of bribery or corruption is uncovered. Existing guidance from the Australian Federal Police (AFP) and the Commonwealth Director of Public Prosecutions (CDPP) highlights the potential benefits to corporates in self-reporting suspected foreign bribery & corruption.
Ultimately, according to the Guidance, what constitutes “adequate procedures” will be determined by the courts on a case-by-case basis, so it is important to regularly monitor and review anti-bribery and corruption programs to ensure they are commensurate with the risks faced by the company.
Impact on Australian Companies
Australian companies doing business overseas can expect increased scrutiny by Australian authorities on their activities in other jurisdictions, and an increased number of investigations and prosecutions should be expected under the expanded foreign bribery laws.
Companies transgressing the foreign bribery laws will face increased penalties, consisting of the greatest of $31.3m, three times the value of the benefit obtained by the company or 10% of the company’s annual turnover.
Preparing for Change
The CFB Bill came into effect in September 2024. Kroll´s subject matter experts can assist you in preparing for this new risk environment with:
- Risk assessments: Kroll has 70 offices in 34 countries with local experts who can provide expert insight to deliver a risk assessment tailored to the operations of your organisation.
- Anti-bribery & Corruption (“ABC”) Compliance Policies and Procedures: Recently ranked Best Regulatory and Compliance firm of the year by Private Equity Wire, Kroll has global ABC subject matter experts with significant hands-on experience in the design and implementation of ABC policies, procedures and controls.
- Third Party Risk Management and ABC Due Diligence: Kroll has significant experience delivering bespoke risk-based third-party risk management programs as well as all levels of due diligence on vendors, intermediaries and other counterparties.
- Investigating Bribery and Corruption: Kroll provides specialist support with complex and sensitive cross-border investigations involving bribery and corruption and other types of wrongdoing, including fraud, whistleblower disclosures and workplace misconduct.
About Kroll
Kroll is a globally integrated company which excels in governance, risk and compliance advisory services, forensic investigations and intelligence, as well as valuations, cybersecurity and corporate restructuring. In Australia, our team includes former senior law enforcement and intelligence officials, trade and investment specialists, forensic accountants, governance, risk and compliance specialists, and former investigative journalists.
Our clients include listed and private companies, law firms, financial institutions, private equity firms, government agencies, high-net-worth individuals and not-for-profit organisations.
