Foreign Bribery (Part Two): Exploring Deferred Prosecution Agreements and the Failing to Prevent Foreign Bribery Offence

This article is Part Two in a series. Click here for Part One and here for Part Three.

The draft Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (Cth) (the Bill) introduces a number of new concepts into the Criminal Code Act 1995 (Cth) (Criminal Code), such as deferred prosecution agreements and the new strict liability corporate offence of failing to prevent foreign bribery (and the defence available). We take a closer look at these concepts and discuss how they might work in practice.

Who is Caught by the New Bill?

The Bill amends the Criminal Code such that there will be two main foreign bribery offences - bribing a foreign official and failing to prevent the bribing of a foreign official. Each offence has different potential offenders and consequences. Any person can commit an act of bribing a foreign official, but only a body corporate or an associate of the body corporate (within the definition contained in the Bill) can be guilty of failing to prevent an act of foreign bribery.

Deferred Prosecution Agreements

What is a Deferred Prosecution Agreement?

A deferred prosecution agreement (DPA) is a method of remedying an act of misconduct amounting to serious corporate crime by a corporation. The DPA model gives prosecutors the option of inviting the corporation who has committed the misconduct to enter into a DPA to undertake a range of specific conditions imposed by the prosecutor, in return for any prosecution relating to the misconduct being stayed. The DPA can require the corporation to carry out a range of measures in response to the misconduct. These can include establishing policies and procedures to prevent future offending. If the corporation satisfies the terms of the DPA within the agreed timeframe, the prosecutor will move to have the charges dismissed.

Why Are DPAs Used?

The purpose of the DPA model is to address some of the challenges law enforcement agencies have in detecting and addressing serious corporate crime, by encouraging corporations to self report misconduct in return for greater certainty of outcome when compared to litigation. The model also acts as a support to the ongoing improvement of corporate culture by requiring the corporation to admit to agreed facts concerning its misconduct, pay a financial penalty and disgorge profits and other benefits received in the course of the misconduct.

The benefits of entering into a DPA are clearly very attractive, but care should be taken by corporations to avoid placing a reliance on the model as a method of avoiding prosecution. The model is not designed, and will not be operated, as a ‘free pass’ to corporations who have engaged in serious corporate crime. Before the prosecutor can offer a DPA, the draft terms will be assessed by an independent ‘approving officer’ to determine whether the terms of the DPA are in the interests of justice and are fair, reasonable and proportionate.

What Offences Can a DPA be Used For?

The overarching purpose of the DPA model is to address serious corporate crime, the specific misconduct of which can fall under several Commonwealth Acts such as the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and the Corporations Act 2001 (Cth).

A DPA is also a very fluid model that permits the prosecutor to apply a DPA to specific elements of the offence if it is not appropriate to offer the DPA in its entirety. This approach applies equally to instances where the primary offence of misconduct occurs, and as a result of that misconduct, further secondary misconduct occurs.

Can a DPA be Revoked?

A DPA is not a cast-iron protective tool. It is conditional on the corporation meeting the agreed terms within the agreed timeframe. A prosecutor may still prosecute a party to a DPA if:

  • the prosecutor determines there has been a material contravention of the DPA, or
  • if a party to a DPA provides inaccurate, misleading or incomplete information in connection with the DPA, and that party knew, or should reasonably have known the information to be inaccurate, misleading or incomplete.

What would constitute a ‘material contravention’ would depend on the terms of the DPA. Importantly, it is also irrelevant when the material contravention is detected, so if the DPA ended years before the material contravention was detected, the prosecutor is permitted to bring criminal proceedings against the corporation.

Failing to Prevent Foreign Bribery

Who is Caught?

The Bill provides that a corporation will be guilty of failing to prevent foreign bribery if an associate bribes, or attempts to bribe, a foreign official for the benefit of the corporation (s70.5A(1)(c)). It is not relevant whether or not that associate has faced any charges or has been successfully prosecuted.

‘Associate’ is defined very broadly to mean any officer, employee, agent, contractor, subsidiary, entity who is controlled by the corporation, or entity who otherwise performs services for or on behalf of the corporation.

What Does ‘Failing to Prevent’ Mean?

‘Failing to prevent’ is a strict liability offence so the act or attempted act by an associate to bribe a foreign official for the benefit of the corporation is sufficient to establish guilt. However, the new offence will be coupled with an ‘adequate procedures’ defence. This means that if the corporation can prove, on the balance of probabilities, that its anti-bribery and corruption program contained sufficient policies and procedures to prevent foreign bribery, criminal charges may not be pursued.  

How to Avoid DPAs and Successfully Prevent Foreign Bribery

The new Bill attempts to align Australia with the UK and the USA in terms of its approach to foreign bribery. A comprehensive compliance program which includes policies and procedures specifically adapted to the corporation’s risks and business model will be required to give corporations the tools and expertise needed to effectively manage any foreign bribery risks it faces.

What are ‘Adequate Procedures’?

As part of the overall foreign bribery prevention strategy, the Minister will publish guidelines following public consultation setting out how to achieve a successful defence of having ‘adequate procedures’. Although the guidelines have not yet been published, the Attorney General has indicted that the guidelines will be principles-based using the UK Ministry of Justice’s approach under the UK Bribery Act 2010. The UK has implemented six principles for the development of adequate procedures to prevent bribery:

  1. Proportionate Procedures which are clear, practical and risk appetite appropriate.
  2. Top-Level Commitment from senior management to foster a culture in which bribery is never acceptable.
  3. Risk Assessments by the commercial organisation of the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it.
  4. Due-Diligence procedures are applied in respect of persons who perform or will perform services on behalf of the commercial organisation
  5. Communication (including training) by the commercial organisation seeking to ensure that the corporation’s prevention policies and procedures are embedded and understood.
  6. Monitoring and Review of procedures designed to prevent bribery by persons associated with it and the making of improvements where necessary.

What Should You Do?

The Bill is not lengthy, but it certainly packs a punch. If you do not look at how you manage your risks associated with foreign bribery, and make appropriate changes, you may face an array of penalties which can and should be easily mitigated. The industry has been put on notice, and it would be prudent to start your compliance review process sooner rather than later to ensure that internal comprehensive compliance can be achieved before the Bill is assented.

Poll: Does this affect you?

Do you believe that your organisation will need a written compliance program in order for you to comply with the new draft Foreign Bribery Bill? Fill out our poll on this post to have a say!

Financial Services Updates

Financial Services Updates