The global fight against corruption is gaining momentum, and Australian businesses are being called to action. Both the Ten Principles of the United Nations Global Compact and the Sustainable Development Goals provide a basis for incorporating responsible business practices that address corruption into business strategy and operations.

The global cost of corruption amounts to an estimated US $3.6 trillion per year, according to the World Economic Forum.[1] In Australia alone, corruption is estimated to have cost the domestic economy approximately AU $72 billion between 2012-2018.[2] The Australian government rejects the pervasive view that corruption is simply the cost of doing business overseas and instead considers foreign bribery a ‘threat to democracy, corrosive of good governance and an impediment to economic development’.[3] While corruption, including bribery, has a significant impact on governance, economic and social development, it also poses a significant compliance and reputational issue for business. Legal sanctions not only cost a company financially, but also cause reputational damage.

Compliance with foreign bribery laws is already on the agenda of boards. However, Australian companies of all sizes must keep up with rapidly evolving international expectations and an escalation of enforcement activity in Australia.

Law reforms proposed in the Crimes Legislation Amendment (Combatting Corporate Crimes) Bill 2019 (Cth) (CLACCC Bill) will considerably extend the anti-bribery obligations of Australian corporations. While these reforms are currently before the Senate, when passed, existing bribery offences will be strengthened, and a new offence will be created: ‘failure of a body corporate to prevent foreign bribery by an associate’. The ‘failure to prevent’ offence will mean that Australian corporates not only have an obligation to avoid bribery but will also have a positive obligation to prevent it from occurring within their business and supply chain. The scope of the offence is broad, as ‘associates’ of businesses include their officers, employees, agents and contractors, their subsidiaries and controlled entities, and any other person or business that otherwise performs services for or on their behalf (who might include, for example, non-controlled joint ventures). To avoid liability under the proposed law, a company must prove it had adequate procedures in place to prevent the associate’s bribery.

The proposed ‘failure to prevent’ offence is modelled on a similar offence in the UK Bribery Act 2010. The UK Bribery Act 2010 has already prompted corporations around the world to strengthen their anti-bribery compliance systems. The Australian Law Reform Commission highlights that the ‘failure to prevent’ model of corporate criminal responsibility creates a ‘strong positive incentive’ for businesses to tackle misconduct.[4]

While the United States does not have a corporate ‘failure to prevent’ bribery offence, its Department of Justice strongly incentivises companies to enhance anti-bribery compliance through its highly influential prosecution policies. The Department of Justice regularly takes a more lenient approach to implicated companies if they have bribery prevention procedures in place. The Department of Justice is by far the world’s most active anti-bribery enforcement body, so its approach has been highly influential.

The international movement towards sanctioning ‘failures to prevent’ and rewarding proactive anti-bribery compliance means that Australian businesses should embed adequate anti-bribery compliance procedures within their organisations. This movement also reflects the mounting pressures that businesses face worldwide. For instance, environmental, social and governance obligations are proliferating, and stakeholder expectations surrounding issues of culture, accountability, and transparency are intensifying.

The Global Compact Network Australia, in collaboration with Allens, has launched two publications designed to provide practical guidance on the escalating foreign bribery obligations of Australian businesses, and how to implement adequate procedures designed to prevent bribery.

Fighting Bribery in Business: A guide for risk, compliance and sustainability teams implementing adequate anti-bribery procedures appraises foreign anti-bribery regulatory frameworks and provides guidance and case studies on building and implementing adequate procedures within an integrated risk and compliance system.

The accompanying factsheet, Are your anti-bribery procedures adequate? Guidance for SMEs summarises Australian business’s existing compliance obligations and outlines good practice steps for minimising foreign bribery risk.

While regulatory changes may present challenges for businesses, ultimately, bribery prevention is about more than just escaping liability. Now is the time for Australian businesses to join the global fight against corruption by strengthening and embedding adequate procedures to prevent bribery into their compliance frameworks. This is not only good international business practice, but it is also the right thing to do. In ‘fighting the anti-bribery fight’, Australian companies will protect their business, as well as vulnerable communities and the environment.

Authors:

Dr Nia Emmanouil, Manager of Programmes, Global Compact Network Australia

Andrew Wilcock, Senior Associate, Allens

Grace Gibson, Junior Coordinator, Global Compact Network Australia

[1] Stephen Johnson, ‘Corruption is costing the global economy $3.6 trillion dollars every year’, World Economic Forum (13 December 2018) <https://www.weforum.org/agenda/2018/12/the-global-economy-loses-3-6-trillion-to-corruption-each-year-says-u-n>.

[2] Hannah Aulby and Rod Campbell, The cost of corruption: The growing perception of corruption and its cost to GDP (The Australia Institute, Discussion Paper, January 2018) 9 <https://australiainstitute.org.au/wp-content/uploads/2020/12/P381-Costs-of-corruption-FINAL.pdf>.

[3] Attorney-General’s Department (Cth), ‘What you need to know about Foreign Bribery and its implications’ (Fact Sheet, 7 May 2020), 2 <https://www.ag.gov.au/crime/publications/foreign-bribery-information-and-awareness-pack>.

[4] Australian Law Reform Commission, Corporate Criminal Responsibility (Discussion Paper No 87, 2019) [6.51]-[6.53].

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