Australia Needs to Get Serious on Corruption 2

Australia Needs to Get Serious on Corruption

King & Wood Mallesons – The OECD delivered a stinging assessment of Australia’s lack of enforcement of foreign bribery laws this week in its report on Australia’s implementation of the OECD anti-bribery convention. A lack of successful prosecutions and poor investigative performance by regulatory agencies came in for particular criticism. The report follows a month in which revelations of Australian involvement in foreign bribery have been all too frequent. In late February, the Australian Federal Police raided the premises of Lifese – a NSW construction company suspected of paying bribes to Iraqi officials to win lucrative contracts. Earlier this month, Senator Sam Dastyari named several large Australian companies in Parliament whose executives were suspected of corrupt practices overseas. Then a senior IT executive was charged with accepting bribes in exchange for granting contracts to a US company.

However, foreign bribery and corruption scandals are not unprecedented in Australia. Famously, the Australian Wheat Board paid kickbacks to Saddam Hussein’s regime in Iraq as revealed in 2005. The corrupt practices of Securency and Note Printing Australia – subsidiaries of the Reserve Bank of Australia – led to Australia’s first successful prosecution under foreign bribery laws. Past scandals have generated significant media attention and occasional inquiries. Yet, enforcement of the laws against foreign corrupt practices in Australia has been inconsistent. This needs to change.

Australian companies are increasingly internationalising and as overseas activities multiply, so too does the risk of corrupt behaviour. At the same time, anti-bribery efforts are assuming greater importance globally. While enforcement lags in some jurisdictions, developed and developing countries alike are enacting more expansive anti-bribery legislation. Australia – a “moderate enforcer”, according to Transparency International – is well behind countries like the US and the UK in terms of its legislative framework and enforcement record.

The first step is to improve Australia’s legislative treatment of foreign corrupt practices. Our current approach is piecemeal. There is no overarching Commonwealth legislation. Rather, conduct involving foreign bribery might fall afoul of provisions in the Commonwealth Criminal Code, the Corporations Act, the Proceeds of Crime Act and others. There is no equivalent to the US Foreign Corrupt Practices Act of 1977 or the UK Bribery Act 2010. The Commonwealth government has recently proposed legislation to close a potential loophole in the current offence of bribing a foreign public official – a commendable but minor step. More comprehensive change is required. Australia might adopt the stronger corporate liability provisions that apply in the UK or consider increased penalties for offences. We might also follow the UK’s lead in banning ‘facilitation payments’ – small bribes to expedite routine government actions. Such changes would clarify the scope of acceptable conduct and assist in achieving successful prosecutions.

Enhancements to the institutions responsible for enforcing foreign anti-bribery laws are also important. The regulatory agencies responsible for enforcement must be more clearly delineated. They must also be better resourced. The breadth of activities supervised by the Australian Federal Police and the Australian Securities and Investments Commission has long outstripped the resources they are given to perform their tasks. Active prosecution of anti-bribery legislation generates revenue through fines and settlements. Consideration ought to be given to using this revenue to further improve enforcement. Ultimately, more dynamic enforcement would encourage Australian corporations to implement strong frameworks and internal processes to prevent and punish corrupt behaviour.

Many foreign bribery scandals come to light through disclosures from whistle blowers within governments and companies. However, Australia lacks a formal whistle blower framework to assist sources to come forward, to protect them when they do, and to properly assess the veracity of their claims. Recently, whistle blowers went through Senator Dastyari to have their concerns ventilated, highlighting the want of a proper reporting mechanism under Australian law. Anti-corruption efforts require a more rigorous process that is consistent, predictable and affords natural justice while also protecting those who come forward to report corrupt practices.

Corruption, like many global scourges, relies on inconsistent enforcement internationally to flourish. Despite several scandals, Australia’s legislative framework is inadequate. Our record in detecting and punishing foreign corrupt practices is uneven. There is now discussion of a Senate inquiry into recent revelations. This is a good start. With any luck, it will provoke more serious reform. It is high time that thoughtful and consultative action was taken to improve Australia’s legislative framework and enforcement in this field.

Mark Darian-Smith is a senior partner in the Perth dispute resolution practice at the law firm King & Wood Mallesons. Mark has been named as one of Australia’s leading commercial litigation and arbitration lawyers in industry surveys including Global Counsel 3000, PLC Which Lawyer?, Euromoney Guide and AFR Best Lawyer.

Varun Ghosh is a solicitor in the Perth dispute resolution practice at the law firm King & Wood Mallesons. Varun is also acts for clients in major finance transactions. He has previously worked as an associate in an international law firm based in New York and as a consultant for the World Bank.

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