Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery – here). Wyld is the Australia Expert for FCPA Professor.
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The key issues that are covered in this post include: (i) Australia’s anti-corruption ranking slips down; (ii) The G20 Anti-Corruption Implementation Plan 2015-2016; (iii) Australia’s Attorney General Department’s Foreign Bribery website module; (iv) Australia and ASIC corporate penalties; (v) Australia and China – Operation Fox Hunt – chasing Chinese economic fugitives; (vi) Australia and extractive industry transparency; and (vii) Asia-Pacific Corruption Network.
Australia’s Anti-Corruption Raking Slips Down
On 3 December 2014, Transparency International released its well-known Corruption Perception Index for 2014. Australia slipped out of the top 10 “clean countries” and now sits at No 11 in the ranking of 174 countries.
Prof AJ Brown, a director of Transparency International Australia made the following comments to illustrate why Australia has slipped down the rankings, despite the progress made in leading the G20 to a new Anti-Corruption Implementation Plan (see below):
accumulating corruption scandals;
a heightened concern as to whether scandals reported in the media and investigated by authorities actually result in any prosecutions;
an increasing public perception that Governments do not do enough to seriously target the “big end of town” with the refusal within the Reserve Bank of Australia to admit any problem (with the Securency banknote printing scandal or to independently investigate the conduct of the relevant companies and their Boards of Directors) is just one example; and
the consistent reluctance of the Australian Government to acknowledge that corruption is a national problem and failing to even acknowledge that a robust, properly resourced independent national anti-corruption body has a role to play.
It appears that this reluctance to see corruption as a systemic national and international problem in Australia afflicts both the left and right side of politics. In an era of cost cutting, blow-out fiscal budgets and razor gangs cutting swaths through the public sector, business calling for less regulation, it so often just seems too hard for politicians to address. This is unfortunate given the excellent progress Australia demonstrated in leading the G20 to target foreign bribery – now the challenge is to address initiatives focusing on both domestic and foreign bribery with equal zeal and live up to the G20 ideals, failing which the perception of Australia’s anti-corruption efforts is likely to continue to fall, which reflects poorly on us all.
G20 Anti-Corruption Implementation Plan 2015-2016
After the breathless excitement of the G20 meetings in Brisbane in November 2014, the G20 published their collective Anti-Corruption Implementation Plan 2015-2016 (the G20 AC Plan).
The G20 AC Plan identifies key action areas and then for each Action Area, a set of Deliverables over the 2 years of the Plan. The key Action Areas with their identified Deliverables are as follows:
member countries are to identify concrete steps to require the disclosure of ultimate beneficial owners behind any commercial or other structure to promote transparency in all commercial dealings;
member countries must promote their own rules on improving transparency in the public sector, including open data, whistleblower protections, immunities from prosecutions, fiscal and budget transparency and standards for public officials, with the Deliverables ranging from practical toolkits, disclosure of assets by public officials to self-assessments of each Members’ compliance with the Plan;
to actively promote the criminalisation of foreign bribery and the legal liability of persons (companies and individuals) with a key Deliverable being to focus on the role of intermediaries;
improving all levels of government cooperation with a Deliverable focus on acting to identify, recover and return the proceeds of corruption to the victims, countries or entities with enhanced criminal, civil and administrative sanctions and the improved use of anti-money laundering processes;
targeting anti-corruption initiatives in high risk areas with a Deliverable focus on customs, extractive industries, fisheries and primary industries and the construction industry; and
working to improve private sector transparency and integrity, particularly for small business, incentives for self-reporting, the role of the financial sector in detecting suspicious transactions and for business to adopt robust ethical standards to combat corruption.
The challenge over the next 2 years will be for the G20 member and other countries to take real and meaningful steps to address these issues in the face of inevitable complaints from business about the costs of regulation and compliance, so that these costs and attitudes are seen to work towards sustainable economic growth.
Australia’s Attorney General Department’s Foreign Bribery Module
On 9 December 2014 (world Anti-Corruption Day), the Australian Minister of Justice launched a new inter-active module addressing Australia’s key foreign bribery laws, sanctions, international issues and how business should manage its foreign bribery risks.
The Minister said:
The Australian Government has a zero tolerance approach to foreign bribery and corruption. This type of criminal offence poses a significant risk to Australian businesses operating in overseas markets. There are serious criminal implications for individuals and corporations, both under Australian and foreign laws. Business needs to be aware of the risks and take action to minimise them. The online learning module provides advice on Australia’s anti-bribery policy, the relevant laws and how they apply, and steps that business can take to help promote compliance. It also assists with our whole-of-government programme on foreign bribery and ensures our awareness-raising efforts are efficient, cost-effective and consistent across Government. Australia is reporting to the Organisation for Economic Co-operation Working Group on Bribery later this week on initiatives undertaken since their evaluation of Australia in 2012. The online learning module helps address recommendations to continue to educate and engage with the business community.
The module is available here and companies should consider incorporating the ideas from the module into their existing e-learning or other training modules.
Australia and ASIC Corporate Penalties
Over the last few months, the question of the adequacy of corporate penalties for commercial offences has been bubbling along. In light of various scandals involving banks, their financial planning businesses and other ventures where average investors invested lot and lost a lot more, the ability of ASIC to really prosecute individuals, remains a live debate. Many see ASIC as too weak and too beholden to large companies that generate the fees ASIC collects for the Australian Government.
In the wake of the various Libor-related investigations and prosecutions oversea, ASIC’s Chairman was recently quoted in The Sydney Morning Herald (on 2 December 2014) as saying:
“Tougher penalties, such as more jail sentences, would deter would-be white collar criminals…fear had to be lifted in others to ‘smother the greed’…white collar criminals are scared of going to jail. I had 10 years on Wall Street and going to jail is the thing that scares them most…when they come up to the 18th floor and they put people in handcuffs and wheel them off they don’t come back – it sends a message.”
Yet, despite this bravado, little is seen of any aggressive pursuit of economic criminals in the manner described by ASIC. Hyperbole is all good and well, but without demonstrable action to back up the emotive statements, ASIC appears to many to be little more than a regulator with an angry feather duster.
Australia and China, Operation Fox Hunt
Since July 2014, there has been a range of media coverage on Operation Fox Hunt, a joint initiative between Australian and Chinese investigators and police forces (in China and overseas), targeting corrupt Chinese officials who are purportedly investing corruptly secured assets in Australia.
The media has reported that China has arrested 288 suspects accused of financial crimes across 56 countries as part of its sweeping Operation Fox Hunt. The Chinese Ministry of Public Security said 126 of those suspects were brought back to China and confessed to their crimes. Some of them were apprehended in the US, Canada, and Australia, which have become popular with white-collar criminals because they do not have extradition treaties with China.
The Chinese government declared a deadline of 1 December 2014 for suspects to come forth and surrender to authorities, which could get them more lenient punishments. The operation has required Chinese authorities to co-operate with law enforcement in each of the countries where fugitives reside. While details are scarce, Chinese media quotes the Ministry of Public Security thanking countries for “cooperation and support” in the operation.
In Australia, these developments and the free trade negotiations between Australia and China there have fuelled debate about whether an extradition treaty might be negotiated between China and Australia. While there are significant issues to address, including the substantial differences in the criminal legal system in the two countries and China’s use of capital punishment, a treaty may not be so insurmountable as some might think, given the new era of trade relationships between China and Australia.
As one Chinese commentator, Yang Hengjun noted in October 2014:
“This is why I believe the “fox hunt” is of the most importance, along with continuing to hunt “tigers and flies” domestically. But compared to “tigers” (which make huge targets) and “flies” (who are everywhere and can be easily caught), the “foxes” are quite cunning. Unless I’m mistaken, the Ministry of Public Security’s “Fox Hunt 2014” has had only limited success. Otherwise, why would the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Foreign Affairs jointly issue a notice urging overseas “economic criminals” to turn themselves in.”
Australia and Extractive Industry Transparency
The recent Corporations Amendment (Publish What You Pay) Bill 2014 (Cth) is Australia’s response to improving transparency in the extractive industries sector, following the US, the UK and Canada introducing mandatory reporting of what in fact is paid by companies to secure valuable business contracts.
Key features of the Bill to note include the following:
a mandatory reporting regime for all Australia Stock Exchange listed companies, unlisted public companies, large proprietary limited companies and controlled joint venture companies, involved in a resource extraction activity;
a report must be made of any payment, or series of payments of more than AU$100,000 made to a domestic or foreign government (including any authority or company owned by the government);
the “reportable payments” are defined broadly to capture such payments as taxes, royalties, licence fees, dividends and “social payments” (to or for community projects);
an annual report must be lodged with ASIC making the report publicly available 28 days after receipt by ASIC of the report; and
any contravention of the reporting obligations will give rise to an offence under Chapter 2M of the Corporations Act 2001 (Cth) and civil penalties will be available to ASIC if a defaulting company is prosecuted.
The Bill reflects Australia’s commitment to enhancing transparency following the G20 meetings and the increasing focus on how and what type of payments are made to governments and agencies controlled by governments in order to help target and combat corruption. Australian extractive companies should ensure there procedures are reviewed to ensure compliance with the Bill once it is enacted.
Asia-Pacific Anti-Corruption Network
At the 2014 APEC leaders’ meeting in Beijing held in November 2014, APEC agreed to establish an informal structure to facilitate “information sharing” among anti-corruption and law enforcement authorities in the Asia-Pacific region.
It commits the 21 APEC countries, including the United States and China, to “deny safe haven to those engaged in corruption, including through extradition, mutual legal assistance and the recovery and return of proceeds of corruption,” a joint-statement from APEC members said.
Western governments have resisted making extradition deals with China in the past because corruption crimes there are often punished with the death penalty. China has extradition treaties with 38 countries, but not with the United States, Australia or Canada, which have “the highest concentrations of corrupt officials” using those countries to safeguard their illicit assets according to Wang Yukai, an anti-corruption expert at the Chinese Academy of Governance. Mr Yukai also said that:
It will be of great significance if China can build cooperative mechanisms with these countries to capture corrupt officials on the run and recover some economic losses.
The Terms of Reference, adopted at the November APEC meeting require APEC Member States to:
establish the ACT-NET as an informal regional anti-corruption platform to permit prosecutors to consult and share practices to improve their investigation and prosecution of corruption (with China as the initial host for 2014 and 2015);
help in the training and targeting of corrupt assets to secure their capture and return; and
to promote bilateral and multilateral cooperation.