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Australia: White collar crime

White collar crime and the targeting of corporate misconduct has finally been given serious attention by the Australian Government. Substantial reforms are in the pipeline addressing foreign bribery laws, whistleblower protection laws, the introduction of a Commonwealth deferred prosecution agreement (DPA) scheme in Australia and enhanced penalties for financial crime. A royal commission is currently examining misconduct in the banking, financial and insurance sectors. And, after many years of denial, there is an increasing possibility that the Commonwealth Government (now or after the next election) might establish a Commonwealth anti-corruption commission. The risks for Australian business in now not reporting corporate misconduct and financial crimes in Australia is greater than ever. This review looks at some important current legislative reforms.

Statutory Reforms to Australia's Foreign Bribery Laws

On 7 December 2017, the Australian Government tabled before Parliament the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017. The Bill has been referred to the Senate Legal & Constitutional Affairs Legislation Committee to consider and report by 20 April 2018. The Bill is at https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1108

The Bill includes the following important reforms:

  • Amendments to the Criminal Code Act 1995 (Cth) (Criminal Code) to create a new intentional foreign bribery offence based upon improper influencing a foreign public official in order to obtain or retain business or an advantage;
  • The creation of a new strict liability corporate offence of failing to prevent foreign bribery by an "associate"; and
  • The introduction of a DPA scheme for certain Commonwealth serious financial offences.

The following important developments should be noted:

  • The existing foreign bribery offence in section 70.2 of the Criminal Code will be replaced with a new offence of, in substance, providing, offering or causing to offer a benefit to another person with the intention of improperly influencing a foreign public official (who may be the other person) to obtain or retain business or an advantage;
  • Whether influence is improper, a court must disregard:
  • whether the conduct was customary, necessary or required;
  • whether there was any official tolerance of the conduct;
  • the fact that the value of any advantage may be insignificant;
  • any official tolerance to an advantage or whether an advantage may be customary;
  • An "associate" for the strict liability corporate offence is defined broadly, to capture any person that "performs services for or on behalf of" the company;
  • The only defence to the strict liability corporate offence of failing to prevent bribery of a foreign public official is if the company had in place adequate procedures designed to prevent the commission of the offence and any associate engaging in the offending conduct; and
  • The Minister must publish a "guidance" on the steps a company can take to prevent an associate from bribing foreign public officials.

Commonwealth Deferred Prosecution Agreement Scheme

The Bill also outlines in more detail the statutory process for the operation of the Commonwealth DPA:

  • The Commonwealth Director of Public Prosecutions (CDPP) may enter into a DPA with a company;
  • Criminal proceedings must not be commenced if a DPA is approved unless the CDPP is satisfied an agreement has been contravened or that inaccurate, misleading or incomplete information was provided in connection with the agreement and the entity supplying the information ought to have known that;
  • The Commonwealth offences to which a DPA may apply will include contraventions of the:
  • Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth);
  • Autonomous Sanctions Act 2011 (Cth) (covering Australian sanctions);
  • Charter of the United Nations Act 1945 (Cth) (covering UN sanctions);
  • Corporations Act 2001 (Cth) (Corporations Act), covering certain types of financial offences:
  • Criminal Code, covering bribery, corruption, fraud, false accounting and money laundering offences:
  • A DPA must contain certain terms including an agreed statement of facts, any conditions to be satisfied, the amount of any financial penalty and a consent to the institution of an indictment without any future committal process;
  • A DPA may contain a variety of other terms concerning compensation, the implementation of a compliance program, the payment of costs, the forfeit of benefits and any other term the CDPP "considers appropriate";
  • The Commonwealth may appoint an "approving officer" (being a former judicial officer of a Federal, State or Territory Court) for a term of 5 years;
  • The approving officer must review and either approve or not approve the DPA, with an approval based on the officer being satisfied the DPA is "in the interests of justice" and is "fair, reasonable and proportionate";
  • Once a DPA is approved, it must be published on the CDPP's website in whole or part, and can be redacted in whole or part in the CDPP's discretion if publication would threaten public safety, prejudice ongoing investigations, or the fair trial of a person or be contrary to an order of a court;
  • Any variation to a DPA must go through the same approval and publication process;
  • There are limits to the admissibility into evidence of documents indicating a DPA was being negotiated or documents created solely for the purpose of negotiating a DPA (but derivative use of information so obtained may still exist); and
  • There are limited rights of a Commonwealth official to disclose any information about a DPA.

On 8 December 2017, the CDPP published it Best Practice Guidelines: Self-Reporting of Foreign Bribery and Related Offences by Corporations. These Guidelines outline how the Director will exercise a discretion in terms of whether to negotiate and offer a DPA, the nature of cooperation that will be expected to be provided by a company to the Director and the investigating Australian Federal Police and the factors the Director will take into account in determining if a DPA is in the public interest.

The Guidelines are at https://www.cdpp.gov.au/publications/best-practice-guideline-self-reporting-foreign-bribery-and-related-offending.

On 7 March 2018, the Australian Government outlined, in a response to questions from the Senate Committee, that it will be developing a DPA Code of Practice.

The Code will outline detail of the practical operation of the DPA scheme including what matters might be included in a DPA and any agreed statement of facts.

It is expected the Government will engage in a consultation process with the proposed DPA Code of Practice.

Statutory Reforms to Private Sector Whistleblower Protection Laws

On 7 December 2017, the Australian Government tabled before Parliament the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. This Bill contains the formal changes proposed to enhance whistleblower protections which are to be included in the Corporations Act. The Bill is at http://parlinfo.aph.gov.au/parlInfo/search/display/display.

The key changes set out in the Whistleblower Protections Bill are as follows:

  • The Bill, once enacted, will apply from 1 July 2018 but will cover conduct occurring before 1 July 2018;
  • A disclosure may be made by an eligible whistleblower to an eligible recipient where the discloser has reasonable grounds to suspect that the information indicates that a company (or officer or employee) or a related body corporate has engaged in conduct that constitutes a contravention of any Commonwealth law that is punishable by imprisonment for a period of 12 months or more, or which represents a danger to the public or the financial system;
  • An eligible whistleblower can be a current or former officer, employee, or person who supplies goods and services to the company, an associate of a company and in respect of any individual, a dependent or spouse;
  • Emergency disclosures are permitted to a third party (a journalist or a member of a Parliament of the Commonwealth, State or Territory) if a disclosure has been made, a reasonable period has passed, and the discloser has reasonable grounds to believe that there is an imminent risk of serious harm or danger to public health or safety, or to the financial system if the information is not acted on immediately;
  • Confidentiality of a whistleblower's report and his or her identity is reinforced;
  • Compensation rights are set out and while a whistleblower must still bring an individual claim, there are provisions reversing the onus of proof for certain matters and cost protections (so no adverse cost order can be made unless a court is satisfied that the discloser acted without reasonable cause);
  • A public company and a large proprietary company must have a whistleblower policy in place (by 1 January 2019) that covers a range of matters including information about a whistleblower's rights under the new laws;
  • Enhances the protections to whistleblowers against retaliation and victimisation; and
  • Provides protection from civil and/or criminal liability in connection with the subject matter of a disclosure made under the new laws.

While the Bill did not take up the challenge of establishing an independent agency to represent whistleblowers or to create a reward or bounty scheme (recommended in a report published by the Joint Parliamentary Committee on Corporations & Financial Services in September 2017), the Bill remains a good start to tackle the long-standing deficiency of adequate and robust private sector whistleblower protections in Australia. All listed and large proprietary companies should revisit their internal policies and procedures to bring them into line with the expected changes, which have cross-party support in the Parliament. They will be required to have in place a whistleblower policy that reflects the new laws by 1 January 2019.

ASIC Enforcement Review Panel Report on Penalties for White Collar Crime

In October 2017, the Australian Government announced a consultation process into the level of penalties for white collar crime. The ASIC Enforcement Review Panel published its Position Paper 7, Strengthening Penalties for Corporate and Financial Sector Misconduct, outlining key issues that it thought should be addressed by changes in the law (see the Paper at https://static.treasury.gov.au/uploads/sites/1/2017/10/c2017-t232150.pdf). Consultation has closed and it is hoped reforms occur early in 2018.

The key issues include the following:

  • The effect of the key positions put in the paper would be to expand the range of civil penalty provisions and to increase maximum civil penalty amounts in the Corporations Act and National Consumer Credit Protection Act 2009 (Cth) (Credit Act) to:
  • for individuals, 2,500 penalty units (AU$525,000); and
  • for corporations, the greater of: 12,500 penalty units (AU$2.625 million), or three times the benefit gained (or loss avoided) or 10% annual turnover.
  • This would mean increases from AU$200,000 (individuals) and AU$1 million (corporations) in the Corporations Act and 2,000 penalty units (AU$420,000) for individuals and 10,000 penalty units (AU$2.1 million) for corporations in the Credit Act.
  • To broadly align with planned changes to the Australian Consumer Law, penalties in the Australian Securities and Investments Commission Act 2001 (Cth) would increase from 2,000 penalty units (US$420,000) for individuals and 10,000 penalty units (AU$2.1 million) for corporations to:
  • For individuals – 2,500 penalty units (AU$525,000); and
  • For corporations – the greater of: 50,000 penalty units (AU$10.5 million), three times the benefit gained (or loss avoided) or 10% annual turnover.
  • In addition to increasing civil penalties ASIC would be able to seek disgorgement remedies (removal of benefits illegally obtained or losses avoided) in civil penalty proceedings brought under the Corporations, Credit and ASIC Acts.
  • Maximum terms of imprisonment would be increased for a range of offences. The most serious Corporations Act offences, given the nature and/or consequences of the offending (many involving dishonesty), will increase to the highest penalties available under the Act:
  • For individuals – 10 years imprisonment, 4,500 penalty units (AU$945,000) or 3 times benefits; and
  • For corporations – 45,000 penalty units (AU$9.45 million) or 3 times benefits or 10% annual turnover.
  • Maximum fine amounts for other criminal offences would also increase, and be standardised by reference to a formula based on length of available prison term:
  • For individuals – Maximum term of imprisonment in months multiplied by 10 = penalty units;
  • For corporations – Multiplied by a further factor of 10.
  • For strict liability offences, the lowest level fines would increase and ASIC would be able to deal with these offences through the existing penalty notice regime as an alternative to prosecution.
  • ASIC would also be able to deal with a wider range of offences through infringement notice regimes.

While substantially increased penalties have been on the horizon for some years, this is a consistent review to look at the spectrum of penalties open to ASIC in the corporate and financial sectors and will do much to give ASIC extra teeth, assuming it is prepared to press for such penalties to be imposed.

Overall, these proposed reforms are likely to substantially strengthen the ability of regulatory agencies to investigate and prosecute serious financial crime, they will encourage companies to more readily and voluntarily report offending conduct and if disclosures are made by whistleblowers under the new protection laws, to help encourage a culture of speaking out about corporate crime.