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SHFA Fraud and Corruption Control Framework - Employee Briefing
1. Dissecting the UK Bribery Act: The High
Watermark of Anti-bribery and Corruption
IQPC Australian Anti-Bribery and Corruption Summit, Melbourne
17 September 2015
Dr Darren O’Connell FGIA
3. The Impeachment of Warren Hastings
The core issue was:
• The employees of a British listed company bribed local businessmen (Brahmins) and
government officials (Rajas / court dignitaries) for private gain;
• Hastings sought to rule India using traditional forms of governance;
• Hastings’ claimed there were two competing “moralities” those of Englishmen
and those of Indian;
• Englishmen overseas should be free to engage in customs or activities that
were morally reprehensible to the laws and customs of England;
• Burke wanted British norms of governance to apply to overseas and rejected
Hastings’ claim, “This geographic morality we do protest against…”;
• In other words, there was only one set of laws, and one standard of behaviour
– those of England (and he was Irish born);
• So if bribery was illegal in 18th Century Britain then it was illegal and morally
wrong to bribe in India.
• After a seven year trial, Hastings was unanimously acquitted of all charges.
4. The Bribery Act (UK) 2010
• This Act covers the criminal law relating to:
• Bribing of, or being bribed by, anyone to induce them to act improperly; and
• The failure of the commercial organisation to prevent bribery on its behalf.
• The Act became operational on 1 July 2011;
• Described as the toughest anti-corruption in the world;
• It has near universal jurisdiction, allowing for the prosecution of an individual or
company with links to the UK regardless of where the crime occurred;
• Penalties for violation include:
• Maximum of ten years’ imprisonment;
• Unlimited financial penalty;
• Confiscation of property under the Proceeds of Crime Act (UK) 2002; and
• Disqualification of directors under the Company Directors Act (UK) 1986.
• Vocal criticism of the Act due to the criminalisation of behaviour that is
acceptable in certain parts of the world (i.e. “geographic morality”);
• Potential disadvantages British business interests in the global marketplace.
5. Principals of the Framework
1. Proportionate
Procedures
2. Top level
commitment
3. Risk Assessment
4. Due Diligence
5. Communication
and Training
6. Monitoring and
Review
Procedures to prevent fraud and bribery that are proportionate to the risk that a
commercial organisation faces
Commitment by the Board and Executive to foster a culture where fraud and
corruption are never acceptable
The periodic assessment of the nature and extent of exposure to the potential
external and internal (i.e. high risk roles) risks of fraud and corruption
Taking a risk based approach, the application of due diligence processes and
procedures in respect to customers, agents, suppliers and third parties who do
business with the commercial organisation
Embedding and understanding fraud and corruption control through periodic and
regular communication and training
Periodic and regular reviews of risk exposure, procedures designed to prevent fraud
and corruption, and make improvements where necessary
Key Principle Description
6. Comparisons to the FCPA (US) 1977
Provision FCPA Bribery Act
Who is being bribed? Only bribes paid or offered to a “foreign official” are
prohibited
Prohibits bribes paid to any person to induce them to act
“improperly” (not limited to foreign officials)
Nature of advantage
obtained
Payment must be “to obtain or retain business” Focus is on improper action rather than business nexus (except in
case of strict corporate liability)
“Active offence” vs
“Passive offence”
Only the act of payment, rather than the
receipt/acceptance of payment, is prohibited
Creates two offences: (1) offense of bribing another (“active
offense”) and (2) offense of being bribed (“passive offense”)
Strict Corporate
Liability
Strict liability only under accounting provisions for public
companies (failure to maintain adequate systems of
internal controls)
Creates a new offence for the failure of a company to prevent
bribery (subject to defense of having “adequate procedures” in
place designed to prevent bribery)
Jurisdiction U.S. companies and citizens, foreign companies listed on
U.S. stock exchange, or any person acting while in the U.S.
Individuals who are UK nationals or are ordinarily resident in the
UK and organizations that are either established in the UK or
conduct some part of their business in the UK.
Business promotion
expenditures
Yes for reasonable and bona fide expenditure related to
the business promotion or contract performance
No similar defence (but arguably such expenditures are not
“improper” and therefore not a Bribery Act violation)
Allowable under local
law
Affirmative defense if payment is lawful under written
laws/regulations of foreign country.
No violation if permissible under written laws of foreign country
(applies only in case of bribery of foreign public official; otherwise
a factor to be considered)
Facilitating payments Exception for payment to a foreign official to expedite or
secure the performance of a routine (non-‐ discretionary)
government action
No facilitating payments exception, although guidance is likely to
provide that payments of small amounts of money are unlikely to
be prosecuted
Enforcement Civil and criminal proceedings by DOJ and SEC Criminal enforcement only by the UK Serious Fraud Office (SFO)
Potential penalties For individuals, up to five years’ imprisonment and fines
of up to $250K; for entities, fines of up to $2M million
For individuals, up to 10 years’ imprisonment and potentially
unlimited fines; for entities, potentially unlimited fines
7. Prosecutions under the Bribery Act
SFO nails its first convictions
under new bribery laws - Reuters • Between April 2011 and February 2012
three men engaged in a £23M biofuel
investment scam;
• Executives of Sustainable AgroEnergy Plc,
a company that promoted biofuel
investment products linked to southeast
Asian plantations of jatropha trees;
• Charges included fraud-related offences,
bribing and taking bribes;
• The three men received jail sentences of
13, 9 and 6 years respectively.
As of February 2015:
• Sixteen cases of small scale domestic bribery convictions have been recorded since 1 July 2015;
• Of these, 13 cases were brought under S. 1 of the Act, two under S. 2 of the Act and one is unknown;
• No S. 6 or S. 7 cases have yet been brought to trial.
8. Application to Australia
• How does the Bribery Act (UK) 2010 apply to Australian businesses?
• UK companies operating directly in AU or through wholly-owned AU
subsidiaries must comply; and
• AU companies operating directly in the UK or through wholly-owned UK
subsidiaries must comply; however
• AU companies operating domestically do not need to comply.
• It should be noted that in 1999 the bribing of foreign public officials
legislation was incorporated into the Commonwealth Criminal Code
(Cth) 1995;
• All state-based legislation expressly criminalises fraud and corruption
activity for public agencies;
• Any Australian individual or company engaged in bribery, fraud or
corruption with a non-public official will fall foul of domestic and/or
international law.
9. Implications for Australia
• In general:
• Where a foreign customer of a UK company or subsidiary does not have an anti-
bribery compliance framework in place, or agree to be bound by that UK firm’s
compliance framework, then further commercial activities could cease depending
upon the level of bribery risk inherent in the customer and its country of registration;
• There have been examples in Australia of UK companies threatening to walk
away from contractual obligations because the Australian firm did not have, or
agree to be bound by, the UK’s anti-bribery compliance obligations.
• Such a position would be tenuous at law and would be prefaced by respective
bargaining power, and probably arose over confusion by the UK firm operating in
Australia about how to comply with the Act.
11. Why comply with the Act?
There are at least four reasons why voluntary compliance should be encouraged:
1. Bribery is a topical risk in Australia in both public and private spheres have
demonstrated e.g.:
Securency convictions
Note Printing Australia convictions
BHP Biliton US$25M civil penalty
2. Managing and mitigating bribery risk can be worked into existing fraud &
corruption policies (e.g. ASX Principle 7) and the various state government
ordinances; and
3. The Commonwealth may well decide to beef-up bribery provisions in the CCA
to harmonsie with the US and the UK
4. Australian companies are demonstrating a zero tolerance appetite for bribery
and signalling a global commitment to good corporate governance
A competitive advantage would be gained that would offset the incremental
compliance cost.
12. Suggested Compliance Response
Key Principle Compliance Response
Proportionate
Procedures
Stocktake of internal structure, business activities and customers, suppliers etc. to determine the risk for bribery,
fraud and corruption.
The procedural response to bribery, fraud and corruption control will depend on the risk of these activities occurring.
The higher the risk of bribery, the greater the organisational response must be.
Top level commitment The Board communicates a commitment that the organisation has zero-tolerance to bribery, fraud and corruption.
The Board and Executive performance includes KPIs on bribery, fraud and corruption prevention.
Risk Assessment Conduct a bribery, fraud and corruption risk assessment on the types of business activities and the customers the
company deals with.
Understand and mitigate what anti-bribery, fraud and corruption measures are in place when dealing with domestic
and foreign public officials/agencies.
Internal and external mechanisms to be introduced to report and investigate instances of bribery, fraud and
corruption.
Implement a Code of Conduct, Conflicts of Interest and Gifts & Hospitality Register.
Due Diligence Reviewing procurement and tender procedures to alert potential third parties that the organisation has a bribery,
fraud and corruption policy in place.
Providing copies of the policy to third parties prior to commencing procurement or tender operations.
Ensuring overseas agents conform to the requirements of the policy.
Communication and
Training
Organisational broadcast alert on bribery, fraud and corruption controls.
Staff briefings.
eLearning modules.
Monitoring and Review Biennial review of policies and procedures, or reviews triggered by specific changes in law or by specific bribery, fraud
and corruption incidents.
Develop and disseminate an organisational bribery, fraud and corruption survey to gauge employee sentiment.
13. Suggested Corporate Architecture
Leadership and executive visibility on
ABC considered paramount;
An ethical framework is essential
(e.g. code of conduct, values etc);
Policies must reflect zero tolerance to
bribery, corruption and fraud;
Framework should contain
prevention, notification, detection
and investigation systems;
A system for managing third-party
risk is crucial;
Clear lines of responsibility need to
be established;
Regular ABC awareness and training
should be delivered and recorded.
14. In summary
The origins of the UK Bribery Act can be
traced by 227 years;
The Act itself is the toughest anti-bribery
legislation in the world;
It has significant differences to the FCPA
that must be clearly understood;
Limited prosecutions under the Act so far
There are applications and implications for
Australian companies;
Voluntarily compliance need not disrupt
existing frameworks to combat fraud and
corruption;
Competitive advantages can accrue from
complying with the Act.
The
Premier’s
Choice