Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery). Wyld is the Australia Expert for FCPA Professor.
This update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation in the first quarter of 2014.
The key issues that are covered in this Update include:
- Australia’s address to the G20 Anti-Corruption Roundtable
- The Australian Securities and Investment Commission (ASIC) and whistleblower protections
- ASIC and civil penalties
- Australian foreign bribery investigations and prosecutions – media updates
- Asia Pacific developments
Australia and the G20 Anti-Corruption Roundtable
The Australian Government has been remarkably quiet in the foreign bribery space. A Consultation Paper into whether facilitation payments should be abolished (published in November 2011) appears to have died an unfortunate death by inertia.
It was refreshing to read that the Attorney General, George Brandis QC, in delivering his opening address to the G20 Anti-Corruption Roundtable, made it clear that corruption is and remains one of the greatest barriers to global growth and that all governments must address the systemic problems flowing from corruption.
The Attorney General highlighted three specific issues that warranted close attention by the Roundtable group – judicial integrity, foreign bribery and the transparency of legal structures, and the identity of beneficial owners. While little was said on the detail, it is encouraging to see the topic of foreign bribery (whatever that entails) is firmly on the agenda while Australia chairs the G20 in 2014.
ASIC and Whistleblower Protections
On 18 February 2014, ASIC published its Information Sheet No. 52 entitled ‘Whistleblowers and whistleblower protection’. ASIC’s responsibilities are to regulate companies acting in contravention of the Corporations Act 2001 (Cth) (Act). ASIC’s focus is on conduct which is disclosed to it which involves a potential contravention of the Act. The Act provides a statutory framework to protect whistleblowers (see Pt9.4AAA, sections 1317AA to 1317AE).
The key elements under the statutory whistleblower protection regime that must be satisfied are:
- the whistleblower must be an officer or an employee of the company or a contractor or employee of a contractor which has a current contract to supply goods or services to the company the disclosure is about;
- the disclosure must be to the company’s auditor, a director, secretary or senior manager within the company, a person authorised by the company to receive whistleblower disclosures or ASIC;
- the whistleblower must identify himself when making the disclosure;
- the whistleblower must have reasonable grounds to suspect that the information disclosed indicates the company or company officers may have breached the Act (or ASIC’s Act); and
- the whistleblower must make the disclosure in good faith.
The tenor of ASIC’s approach is that it still has limited resources, it prefers to focus on the disclosed conduct and it keeps emphasising that a whistleblower should seek independent legal advice. ASIC has been criticised in the past for responding very slowly at times to significant complaints. ASIC will now appoint a dedicated Liaison Officer to be in regular contact with the whistleblower. While a whistleblower may have protection from victimisation, any complaint about how a whistleblower is treated is a private matter between the whistleblower and the company.
In an Ethics Conversation hosted by the St James Ethics Centre in Sydney on 8 April 2014, the ASIC Chairman, Greg Medcraft indicated that while the protection of whistleblowers was important, he appeared less enamoured of the US whistleblower bounty scheme established under the US Securities Exchange Act. Mr Medcraft felt that such a scheme sat uncomfortably with the Australian culture of “not dobbing in a mate”. At the same event, Rod Sims, the Chairman of the Australian Competition & Consumer Commission, was concerned about how Australian courts might treat an individual who had a financial interest in a prosecution and the impact that might have on a whistleblower’s overall credibility. Perhaps the pioneering research work of Prof AJ Brown at Griffith University might help to debunk the myth of not dobbing in a mate – and encourage regulators to realise that the vast majority of Australians consider that whistleblowers who report serious misconduct should be both praised and protected. It remains to be seen how ASIC will act in the future towards whistleblowers.
ASIC and Civil Penalties
In March 2014, ASIC published its Report No. 387 entitled ‘Penalties for corporate wrongdoing’ which considered the penalties available to ASIC and whether they were proportionate and consistent with those for comparable wrongdoing in selected overseas jurisdictions. The key findings of the Report were as follows:
- ASIC rated effective enforcement as critical to achieving its strategic priorities of fair and efficient financial markets with a range of penalties designed to deter contravention and promote greater compliance;
- in relation to imprisonment and fines open to ASIC to seek through litigation: the maximum fines are broadly consistent with other comparable jurisdictions save for the US; other jurisdictions have greater flexibility to impose higher non-criminal fines; other jurisdictions can seek the disgorgement of profit generated by the wrongdoing,
- within Australian legislation, there are examples where non-criminal fines can be imposed at a much higher amount than those available to ASIC.
ASIC has called for greater penalties to be available to it for corporate wrongdoing. While ASIC made it clear that it will pursue the sanctions and remedies best suited to each case on its merits, Mr Medcraft made it clear at the St James Ethic Centre Conversation that he wanted to target individuals as it was only through “scaring the hell out of people” faced with imprisonment, that he believed commercial behaviour might, in fact, change.
Australian Foreign Bribery Investigations and Prosecutions – Media Updates
The Securency banknote printing corruption prosecution continues to roll on slowly in Victoria. While the whole process is subject to suppression orders in Victoria, it is hoped significant public progress in the case occurs during 2014.
The Australian media has continued to follow the saga of an AFP investigation into the Middle East business activities of Leighton Holdings, its various entities and senior officers. While no criminal prosecution has occurred, the opening salvos in a securities class action in Victoria concerning non-disclosure to the market between aggrieved Leighton shareholders and the company suggests the case will continue to affect the company, currently under new Spanish management.
Asia Pacific Developments
The Asia Pacific region is home to both many of the world’s most active economies and to those where the perception of systemic corruption is the greatest.
Developments in China, as one of Australia’s most significant trading partners, must be followed. From mid-2013, the Chinese Government started to target multinational companies in the pharmaceutical sector, in the “supply side” of corruption rather than its traditional focus on the “demand side” of corruption, being the local Chinese public official. This must ring warnings to all Australian business that they are not immune from Chinese Government investigation.
In addition, the role of the US – China Joint Liaison Group on Law Enforcement, may yet see an increase in parallel US and China investigations, although human rights issues may see such investigations undertaken only in limited cases.
In the Asia-Pacific Economic Cooperation (APEC) Bali Declaration in late 2013, APEC called for greater regional cooperation on corruption and collaboration between regulators. A new regional authority is to be established, called the APEC Network of Anti-Corruption Authorities & Law Enforcement Agencies (ACT-NET). The goal of this agency is to, in part, “encouraging private sector stakeholders to implement APEC’s high standard principles for codes of business ethics”.
At the meeting of the APEC Anti-Corruption and Transparency Working Group held in Ningbo in China in February 2014, members agreed to further discuss ACT-NET’s development and implementation during 2014. The goal of the ACT-NET was said to advance greater collaboration among law enforcement authorities in combating corruption, bribery, money laundering, and illicit trade.. Future meetings of ACT-NET will take place during 2014.