Combatting foreign bribery: A closer look at Australia’s new legislation

The Organisation for Economic Co-Operation and Development has been ringing alarm bells about Australia’s enforcement of foreign bribery laws for over a decade. After two false starts, Australia has now taken action.

Australia’s amendments to its Criminal Code came into effect on 8 September 2024, marking a pivotal shift in Australia’s corporate liability landscape. Companies in particular are now exposed to a broader spectrum of anti-bribery and corruption compliance risks, and need to scrutinise their internal policies and procedures to ensure they remain fit for purpose.

This reform is part of a broader push by the Federal Government for stronger laws targeting white-collar crime, sandwiched between the establishment of the National Anti-Corruption Commission in July 2023 and planned amendments to Australia’s anti-money laundering and counter-terrorism financing regime.

This article explores:

1. The new offence of “failing to prevent” foreign bribery
2. Changes to the previous foreign bribery offence
3. How companies can protect themselves from prosecution
4. What’s next on the horizon

The new offence of “failing to prevent” foreign bribery

Section 70.5A of the Criminal Code introduces a criminal offence for companies that fail to prevent their “associates” from bribing a foreign public official for the company’s profit or gain. Importantly, it applies a wide meaning of the word “associate” to capture:

• The company’s officers, employees, agents and contractors
• The company’s subsidiaries
• Any persons that control the company within the meaning of the Corporations Act 2001 (Cth); and
• Persons that perform services for the company or on the company’s behalf

This is an absolute liability offence. As a result, in a fundamental shift in the corporate criminal liability landscape, companies can now be successfully prosecuted even if they had no knowledge of the bribery, and did not intend for the bribery to occur.

Under s 70.5A(5), a company’s only available defence to this charge is that they had “adequate procedures” in place designed to prevent any bribery by associates.

The penalties for failing to comply with this new law are substantial. The maximum penalty for the body corporate is the greater of:

• 100,000 penalty units (currently AUD 31.3 million)
• Three times the value of the company's benefit from the bribe
• 10% of the company's annual turnover

Changes to the previous foreign bribery offence

Australia’s foreign bribery offence under section 70.2 of the Criminal Code has been amended as follows:

1) A person commits an offence if:

1. the person:
   1. provides a benefit to another person; or
   2. causes a benefit to be provided to another person; or
   3. offers to provide, or promises to provide, a benefit to another person; or
   4. causes an offer of the provision of a benefit, or a promise of the provision of a benefit, to be made to another person; and
2. the first‑mentioned person does so with the intention of improperly influencing a foreign public official (who may be the other person) in order to:
   1. obtain or retain business or
   2. a business or personal advantage whether or not for the first‑mentioned person)

These changes replace the former “not legitimately due” test with an “improper influence” test and provide a list of factors that can and cannot be taken into account in making that determination.

They also expand the scope of the offence to include bribes made to obtain a personal, and not just business, advantage. This is designed to capture activity such as bribes paid to process a visa request or reduce a person’s tax liability, and also make it easier to prosecute those that intended to obtain both a personal and a business advantage.

It remains possible for both individuals and companies to be charged with this offence.

How companies can protect themselves from prosecution

On 28 August 2024, the Attorney-General of Australia issued official guidance on what constitutes “adequate procedures” to prevent foreign bribery.

Australia’s new foreign bribery laws closely mirror those in the United Kingdom’s Bribery Act 2010. It is therefore unsurprising that Australia’s guidance shares notable similarities with those issued by the United Kingdom’s Secretary of State for Justice.

Although following the guidance represents best practice, doing so will not provide a company with an iron-clad assurance that it will be able to successfully mount a defence of “adequate procedures”. However, the company’s efforts to do so and implement strong controls will undoubtedly be highly relevant, including in any decision by the Commonwealth Director of Public Prosecutions on whether to commence a prosecution or accept plea negotiations.

Australia’s guidance focuses on six key principles:

1) Fostering a control environment to prevent foreign bribery

The guidance recommends that companies put in place controls that are proportionate to their operations, including the level of its exposure to foreign bribery risks and its business activities, which includes the relationship between the company and its contractors.

It also highlights five main indicators of a company having an effective anti-bribery and corruption compliance program:

1. A robust culture of integrity within the corporation.
2. Demonstrated pro-compliance conduct by top-level management and, where applicable, the board of directors.
3. A strong anti-bribery compliance function or functional equivalent.
4. Effective risk assessment and due diligence procedures.
5. Careful and proper use of third parties.

2) Responsibilities of top-level management

The guidance emphasises the expectation that a company’s top-level management plays a central role in developing and implementing its anti-bribery and corruption compliance program and fostering an “anti-bribery culture” within the corporation. This could include overseeing the company’s risk assessment and any responses to breaches of their anti-bribery and corruption policy.

3) Risk assessment

There is a strong expectation that companies perform a risk assessment to identify their bribery risks and then design its anti-bribery and corruption controls accordingly. Such a risk assessment would take into account the countries and sectors that the company operates in. Particular attention should be paid to common red flags such as dealings with foreign public officials, politically exposed persons, or state-owned enterprises, or being asked to make donations or facilitation payments.

4) Communication and training

When seeking to prove that a company has “adequate procedures” in place, it will not be enough for the company to rely on a robust anti-bribery and corruption policy document. Additional relevant factors will include the company’s communications to its associates and the training it provides, its review of that training, and how the company implements its controls in practice. Once again, the guidance focuses on communications coming “from the top”.

5) Reporting foreign bribery

Consistent with recent focus by corporate regulators on whistleblower protections, all companies are urged to adopt accessible and confidential mechanisms that encourage the reporting of actual or suspected bribery, not just those companies that are subject to the mandatory whistleblowing regime under the Corporations Act 2001 (Cth).

6) Monitoring and review

The guidance highlights that companies should not take a “set-and-forget” approach to their anti-bribery and corruption policies and controls. Instead, companies should regularly monitor, review and adjust their procedures to ensure that they remain appropriate for the company’s operations and business environment.

What’s next on the horizon

These latest reforms do not go as far as the reforms initially proposed in 2017 and 2019 by the Liberal Party of Australia. Specifically, they do not introduce “deferred prosecution agreements” into the Commonwealth Director of Public Prosecution’s toolkit. The deferred prosecution agreements would have allowed prosecutors and corporate defendants to enter into settlement agreements in relation to a wide range of crimes.

Those agreements would require the company to comply with specific conditions such as cooperating with investigations, paying a penalty, and/or improving its compliance function. If those conditions are met, the company could avoid being prosecuted. Deferred prosecution agreements are available and commonly used in other jurisdictions, including the United States, and are widely considered to encourage increased self-reporting and result in a higher number of enforcement outcomes.

However, the view of Australia’s governing Labour Party is that deferred prosecution agreements offer companies undue leniency in avoiding prosecution (that individuals do not have). It also took into account the enforcement landscape, namely that there have been very few foreign bribery prosecutions against companies to date. However, though, as set out above, there are a range of other offences where deferred prosecution agreements could also have been introduced.

While this was heavily debated during the passage of the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 (Cth), ultimately the Government took the position that it would be “premature” to introduce deferred prosecution agreements at this time and would revisit the issue “after the measures in this bill have been enacted and given time to work”.

As noted above, these changes are part of a broader suite of reform of white-collar crime laws that the Federal Government is pursuing. Companies can expect that the next set of amendments will be the large-scale expansion and reform of Australia’s anti-money laundering and counter-terrorism financing legislation. The proposed legislation has already been subject to two rounds of consultation and is expected to be introduced into Parliament this year.

In the meantime, companies should ensure that they review their anti-bribery and corruption policies and procedures and test them against the newly-released guidance so that they can provide protection in the worst-case scenario of a company or its associates engaging in bribery.