Anti-Corruption in Australia

By Georgie Farrant*, Andrew Emmerson* (Baker McKenzie Australia)

1. Domestic bribery (private to public)

1.1       Legal framework

Divisions 141 and 142 of the Criminal Code Act 1995 (Cth) (the “Australian Criminal Code”) make it illegal under Australian law:

  • to promise or offer a bribe or corrupting benefit to a Commonwealth public official; or
  • to provide or cause to be provided a bribe or corrupting benefit to a Commonwealth public

Individuals and corporations may be charged with these criminal offenses and it is not necessary to prove that the defendant, whether that is an individual or corporation, knew that the official was a Commonwealth public official.

Each Australian State and Territory also has laws prohibiting bribery and corruption of State or Territory public officials or officers.

Under Part 10.9 of the Australian Criminal Code, it is also an offense for an individual or corporation to intentionally or recklessly facilitate, conceal or disguise in their accounting documents an occurrence of bribery, corruption or loss to a person that was not legitimately incurred (the “False Accounting Offences”).

1.2      Definition of bribery

Bribery requires intention and conduct. The conduct must be to dishonestly provide or offer a benefit (or cause it to be provided or offered) to a Commonwealth public official. The intention must be to influence the official in the exercise of the official’s duties.

The benefit may be intangible, such as the provision of hospitality or entertainment.

There is essentially little difference between a bribe and corrupting benefit other than the offense of providing or offering a corrupting benefit does not require an intention to influence the official. It is sufficient that the receipt or expectation of the receipt of the corrupting benefit would tend to influence a public official in the exercise of the official’s duties.

As a result, under the bribery offense, because the defendant must intend to influence the official, the defendant’s culpability is greater. So too is the maximum penalty when compared to the offense of offering or providing a corrupting benefit to a Commonwealth public official.

Australian State and Territory laws have a similar focus, though some target different types of public official. One example is specific laws for bribery of elected State officials.

1.3      Definition of Commonwealth public official

The Australian Criminal Code contains a lengthy definition of Commonwealth public official, including categories or classes of individuals. The definition expressly includes Australian (Commonwealth/Federal) public service employees, defence force members, members of the Australian Federal Police, service providers contracted to the Commonwealth, members of statutorily appointed bodies (such as chancellors of universities) or Commonwealth holders of office such as members of Parliament, judicial officers and the Governor-General.

Whether employees of publicly owned companies in Australia will be deemed to be Commonwealth public officials will primarily depend on whether they are considered to be employed by the Commonwealth and whether they exercise powers or perform functions conferred on them by a law of the Commonwealth.

Australian State and Territory laws are usually equally broad, though specific laws apply to different types of State or Territory public officials.

1.4 Consequences of bribery

(a)        For individuals

In bribing a Commonwealth public official:

  • up to 10 years’ imprisonment; and/or
  • a fine of up to 10,000 Penalty Units (currently equivalent to AUD 8 million).1


In offering or providing corrupting benefits to a Commonwealth public official:

  • up to five years’ imprisonment; and/or
  • a fine of up to 300 Penalty Units (currently equivalent to AUD 54,000).2

In respect of the False Accounting Offences:

  • if intentional – 10 years’ imprisonment and/or a fine of AUD 8 million;3or
  • if reckless – five years’ imprisonment and/or a fine of AUD 900,000.4

(b)        For corporations

In bribing a Commonwealth public official, the maximum penalty is the greater of:

  • 100,000 Penalty Units (currently equivalent to AUD 18 million);5
  • triple the value of the illicit benefit; or
  • 10% of the annual turnover of the corporation in the year preceding the

In offering or providing corrupting benefits to a Commonwealth public official, the penalty is a fine of up to 1,500 Penalty Units (currently equivalent to AUD 270,000).6

The Australian Criminal Code provides for corporate liability where the conduct of individuals was within the scope of their employment, and:

  • the board of directors or a high managerial agent knowingly or recklessly permitted or carried out the offense;
  • a corporate culture existed that tolerated the offense; or
  • the organization failed to create a corporate culture that required compliance with the law.

In respect of the False Accounting Offences:

  • if intentional – the greater of AUD 18 million fine,7 3 times the value of the benefit or 10% of the annual turnover of the body corporate; or
  • if reckless – the greater of AUD 9 million fine,8 1.5 times the value of the benefit or 5% of the annual turnover of the body corporate.

 

1.5      Political contributions

Contributions to political parties or associated entities are regulated under Part XX of the Commonwealth Electoral Act 1918 (Cth). In general terms, contributions to political parties are allowed but must be disclosed if exceeding AUD 13,200 over the year (effective 1 July 2016 up to 30 June 2017). The threshold is indexed to the official inflation measure so it generally increases each year.

Separate provisions apply for individual States and Territories. These are often far more proscriptive. For example, in New South Wales (NSW), total yearly donations above certain limits are banned, which for the year 1 July 2016 to 30 June 2017 ranged between AUD 2,600 to AUD 5,900 per year, depending on the person or group to whom the donation is made.

1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Australian Criminal Code does not contain quantitative limitations on hospitality expenses, but these are specifically within the concept of a “benefit” for the purposes of bribery or corrupting benefits.

2.      Domestic bribery (private to private)

2.1      Legal framework

There is no Commonwealth private to private bribery offense in Australia. However, private bribery, kickbacks and secret commissions are criminal offenses under some Australian State and Territory laws. For example, in the State of NSW, this is governed by the Crimes Act 1900 (NSW) (the “Crimes Act”). The False Accounting Offences described above in Section 1.1 may also be applicable.

2.2       Definition of private bribery

The scope of any private bribery offenses varies between Australian States and Territories but, for example, in the State of NSW, the law prohibiting bribery is called the offense of secret commissions. It is an offense when an agent dishonestly accepts money or benefits from a third party in return for departing from a duty he owes to that agent’s principal.

2.3       Consequences of private bribery

The penalties referred to are those for the State of NSW. For individuals involved

  • up to seven years’ imprisonment;
  • a fine of up to 1,000 Penalty Units (currently equivalent to AUD 110,000); and/or
  • repayment of the benefit received or

Note that penalties are higher in other States. For example, Victorian offenses carry 10-year maximum terms of imprisonment.

2.4       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Crimes Act does not establish quantitative nor qualitative limitations on hospitality expenses, but those types of benefits could fall within the scope of the offenses.

3.      Corruption of foreign public officials

3.1       Legal framework

Division 70 of the Australian Criminal Code makes it illegal under Australian law to bribe a foreign public official. Limited defences are included. The facilitation payment defence is one of few such defences that continue to exist globally, although it has considerable restrictions. The False Accounting Offences described above in Section 1.1 also applies.

3.2       Definition of corruption of foreign public officials

Other than the identity of the target or recipient of the bribe, the elements of the offense of bribing a foreign public official are similar to those of bribing a Commonwealth public official. However, the foreign public official offense contains an additional element, which is stated in italics in the next paragraph.

Bribing a foreign public official under Australian law requires intention and conduct. The conduct must be to dishonestly provide or offer a benefit (or cause it to be provided or offered) to a foreign public official. The intention must be to influence the official in the exercise of the official’s duties in order to obtain or retain a business advantage that is not legitimately due.

The benefit may be intangible, such as the provision of hospitality or entertainment.

3.3       Definition of foreign public official

Foreign public official is defined broadly and includes employees or officials of foreign government bodies (including military or police service people), contractors to foreign government bodies, intermediaries of foreign public officials, members of the judiciary of a foreign country, employees of public international (inter- governmental) organizations, persons performing duties for an office under a law of that country, and any person in the service of a foreign government body.

3.4       Consequences of corruption of foreign public officials

(a)        For the individuals involved

  • up to 10 years’ imprisonment; and/or
  • a fine of up to 10,000 Penalty Units (currently equivalent to AUD 8 million).

(b)        For corporations

The maximum penalty is the greater of:

  • 100,000 Penalty Units (currently equivalent to AUD 18 million);
  • triple the value of the illicit benefit; or
  • 10% of the annual turnover of the corporation in the year preceding the

The Australian Criminal Code provides for corporate liability where the conduct of individuals was within the scope of their employment, and:

  • the board of directors or a high managerial agent knowingly or recklessly permitted or carried out the offense;
  • a corporate culture existed that tolerated the offense; or
  • the organization failed to create a corporate culture that required compliance with the law.

3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

The Australian Criminal Code does not contain quantitative limitations on hospitality expenses even though these are specifically within the concept of a “benefit” for the purposes of bribery or corrupting benefits.

4.      Facilitation payments

The Australian Criminal Code provides that making a facilitation payment can constitute a defence to the charge of bribing a foreign public official. The defence is not available to a charge of bribing a Commonwealth public official. The defence essentially requires that:

  • the benefit was of a minor nature;
  • the provider of the benefit made a written record of the relevant conduct as soon as practicable; and
  • the benefit was offered to expedite or secure the performance of a routine government action of a minor

Somewhat controversially, lawfully made facilitation payments are considered legitimate business expenses for the purposes of reducing a company’s taxable income under Australian law.

5.      Compliance programs

5.1       Value of a compliance program to mitigate/eliminate the criminal liability for legal entities

Two instances where the Australian Criminal Code imposes criminally liability on a corporation are:

  • where it is proven that a corporate culture existed within the corporation that directed, encouraged, tolerated or led to non- compliance with the relevant provision; or
  • where the corporation failed to create and maintain a corporate culture that required compliance with anti- corruption law.

Compliance programs are instruments that corporations rely on to discourage and prevent bribery and corruption within their organization and will assist in demonstrating that an appropriate culture exists.

Even if during a criminal prosecution a compliance program is found to be inadequate and does not fully exculpate a corporation, it may be a mitigating factor for the purpose of sentencing.

5.2       Absence of a compliance program as a crime

It is not an offense under the Australian Criminal Code to be without a compliance program; it is only a factor that can be taken into account if a corporation is charged with bribery as a result of an employee’s or agent’s conduct.

5.3       Elements of compliance program

(a)        Legal framework

The Australian Criminal Code does not regulate the elements of any compliance program. There is no Australian legislation, case law or regulatory guidance that sets out the elements to incorporate into a compliance program. Australian Standard AS: 8001-2008 Fraud and Corruption Control, together with the associated suite of corporate governance Australian Standards and the new International Standard for the prevention and detection of bribery ISO-37001, are not mandatory in this context but are of some assistance when tailoring compliance programs to suit any organization.

(b)        Recommended practice

Baker McKenzie recommends that corporations adopt a compliance program that is tailored to the corporation’s geographical and operational risks, and ensure that it is comprehensively and continually communicated, monitored and enforced. While there is no Australian legislation, case law or regulatory guidance that sets out the elements to incorporate into a compliance program, the UK Ministry of Justice Guidelines and the DOJ/SEC Guidance will provide a starting point in understanding the elements that regulators globally will expect corporations to have considered.

6.      Regulator with jurisdiction to prosecute corruption

The Australian Federal Police investigate bribery and corruption allegations at a Commonwealth/Federal level. State and Territory police investigate pursuant to State and Territory laws.

Prosecution under Australian Commonwealth/Federal law is under the auspices of the Commonwealth Director of Public Prosecutions, although the Australian Federal Police may commence the court process (and continue to be involved). At a State and Territory level, the relevant State or Territory department of public prosecutions would be involved in conjunction with the State or Territory police.

The Australian Securities and Investments Commission is the main corporate regulator and can be involved in investigations into corrupt conduct where an Australian corporation is involved.


1 On 16 February 2017, the Commonwealth Government introduced a bill to parliament to increase the penalty unit rate by AUD 30, from AUD 180 to AUD 210, to be effective from 1 July 2017. These proposed increased penalties are calculated in the following footnotes. If the bill is passed, the maximum penalty for bribing a Commonwealth public official will increase to AUD 2.1 million. – Back
2 It is proposed that from 1 July 2017, the fine will be up to AUD 63,000.
3 It is proposed that from 1 July 2017, the fine will be up to AUD 2.1 million.
4 It is proposed that from 1 July 2017, the fine will be up to AUD 1.05 million.
5 It is proposed that from 1 July 2017, the fine will be up to AUD 21 million.
6 It is proposed that from 1 July 2017, the fine will be up to AUD 315,000. – Back
7 It is proposed that from 1 July 2017, the fine will be up to AUD 21 million. – Back
8 It is proposed that from 1 July 2017, the fine will be up to AUD 10.5 million.

 


Baker McKenzie
Level 27, A.M.P. Centre 50 Bridge Street
Sydney, NSW 2000
Australia

Georgie Farrant

Georgie Farrant is the Australian head of Baker McKenzie’s Global Compliance and Investigations team.
Georgie practices in commercial disputes, with a particular focus on financial services disputes and regulatory disputes and investigations. She also advises companies and individuals in relation to a range of compliance and regulatory issues, including anti-money laundering, anti-corruption, whistleblowing and regulator investigations.
Georgie has advised in relation to corruption matters involving the Australian Federal Police, the Australian Securities and Investments Commission, The New South Wales Police, The Independent Commission Against Corruption, the US Serious Fraud Office and the US Department of Justice.

georgie.farrant@bakermckenzie.com

Tel: +61 2 8922 5601

Baker McKenzie
Level 27, A.M.P. Centre 50 Bridge Street
Sydney, NSW 2000
Australia

Andrew Emmerson

Andrew is a member of Baker McKenzie’s Global Compliance and Investigations team and International Trade and Commerce team.
Andrew practices in general corporate and commercial disputes in state and federal courts, ranging from administrative law, contract, construction, customs and taxation, trade practices, in addition to advising on trade sanctions, export control and bribery and corruption compliance.
Andrew has assisted clients with regulatory investigations and prosecutions concerning issues of fraud and bribery and corruption.

andrew.emmerson@bakermckenzie.com

Tel: +61 2 8922 5491