After a recent series of announcements from the Office of Australia’s Minister for Home Affairs on organised crime, money laundering, bribery and corruption, you could be forgiven for thinking that Australia’s laws in these areas are on the verge of vigorous external scrutiny (see below). You’d be right. In early June 2012, experts from Japan and Canada-Australia’s Lead Examiners under the Organisation for Economic Co-operation and Development (OECD) Convention Combating Bribery of Foreign Public Officials in International Business Transactions (the Convention)-are due to visit Australia for the purpose of preparing their Phase 3 Report on Australia’s performance under the Convention. In addition, in 2013 the Financial Action Task Force on Money Laundering (FATF) will undertake its fourth review of Australia’s compliance with the FATF’s 40 Recommendations and nine Special Recommendations for tackling money laundering.
The Phase 3 Report will assess Australia’s progress in addressing weaknesses identified in its Phase 2 assessment, any issues raised by changes to Australia’s domestic legislation or institutional framework, Australia’s enforcement efforts and results, as well as issues that affect the OECD more broadly.
In its Follow-Up Report on the Implementation of the Phase 2 Recommendations (29 August 2008) and its original 2006 Phase 2 Report, the OECD Working Group on Bribery (WGB) had identified problems with the definition of and public understanding of the defence of “facilitation payments”. The WGB also directed that Australia “continue compiling statistics on the offence of money laundering, including the level of sanctions and the confiscation of proceeds of crime,” and “provide [cash dealers] with guidance on identifying suspicious transactions that may be linked to foreign bribery offences”.
In light of the revelations arising from the Securency bribery scandal-in which the Reserve Bank failed to alert authorities that its subsidiary, Note Printing Australia, was implicated in the bribery of foreign officials-and Australia’s imminent assessment for its efforts to combat bribery and money laundering, it is unsurprising that two recent announcements directly addressed the concerns raised by the WGB in its earlier reports.
In the first, made on 8 November 2011, Australia’s anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit (AUSTRAC) released its first National Threat Assessment (NTA) on money laundering, outlining the threats faced by business and government from money laundering.
In the second, made on 15 November 2011, the Federal Government announced possible changes to Australia’s laws concerning foreign and domestic bribery. The changes, if adopted, will strengthen anti-bribery legislation in Australia and bring it into line with UK anti-bribery legislation.
The Consultation into Foreign and Domestic Bribery Legislation
The public consultation announced by the Minister for Home Affairs on the possible amendments to the Criminal Code Act 1995 (Cth) covers four issues:
- Facilitation payments – possible removal of the defence to bribery of a foreign public official, where the payment was a facilitation payment.
- Value of benefit – possible changes to Section 70.2(2)(b) of the Criminal Code that would permit a court to consider the value of the benefit in determining whether the benefit was not legitimately due to a person in a particular situation.
Identity of bribe target – possible removal of the need to prove that a person intended to bribe a particular public official.
- Harmonisation of domestic offences – the possible removal of the requirement of dishonesty from Sections 141 and 142 of the Criminal Code, which criminalise domestic bribery, to bring these laws into line with the crimes for foreign bribery.
It is worth looking at Australia’s foreign bribery laws, before reviewing the consequences of these proposed amendments.
Australia’s Foreign Bribery Laws
Under federal Australian law, domestic bribery and foreign bribery offences are contained in the Criminal Code. Under the Criminal Code, bribery occurs when someone provides or offers to provide a benefit to a person where that benefit is not legitimately due and where it is given or offered with the intention of influencing a public official in the exercise of their duties.
The bribe must be provided or offered with the intention of obtaining business or a business advantage. That intention need not be expressed and the benefit given can be monetary or non-monetary.
The bribe may be made to the public official directly or indirectly, for example, through an agent, relative or business partner of the public official or person within the private sector.
A bribe is not criminal where it
- Is lawful conduct in the jurisdiction in which it was made according to the written law in that jurisdiction.
- It is a facilitation payment.
Under the Criminal Code, “facilitation payments” are benefits of a minor nature provided or offered in return for “routine government actions”. The definition is narrow and requires that payments be documented in detail.
Consequences of the Proposed Amendments
Of the proposed ammendments to the Criminal Code, the most significant is the proposal to remove the defence of facilitation payments.
While some Australian companies may perceive the removal of a facilitation payments defence as a possible threat to their competitiveness when conducting business overseas, the defence is not itself without compliance difficulties. Critically, companies seeking to rely on the facilitation payments defence need to consider that
- The defence only applies if the company, which has made a facilitation payment, has kept a record of the facilitation payment (which may in itself create exposure for the company).
The defence will not protect that company from foreign laws that may prohibit the same transaction.
- The Australian Government may assist foreign governments in their prosecution of facilitation payments.
- A company making a facilitation payment may be precluded from obtaining Australian Government support and finance, and may be unable to rely upon civil remedies to enforce any contract that has been obtained by means of a facilitation payment.
In addition, the making of one or more facilitation payments may cause a company reputational damage and may expose it to further demands for bribes in the future.
The facilitation payment defence does not exist in the laws of many of Australia’s trading partners. For example, the UK Bribery Act 2010, which came into effect on 1 July 2011, does not contain this defence. This means that companies carrying on business in the United Kingdom are prohibited from making or offering facilitation payments anywhere in the world.
AUSTRAC’s Assessment of Money Laundering Threats In Australia
In its commentary on Australia’s achievements in addressing money laundering, the WGB’s 2006 Phase 2 Report took note of Australia’s plans to reform its money laundering regime and to implement the 40 Recommendations of the Financial Action Taskforce. In large part, these reforms were enacted in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
The Australian Government intends to enact a further round of legislation to tackle money laundering. Public consultation on a second tranche of reforms concluded in April 2011 and the Commonwealth Government is currently considering how to implement the submissions made during that process. Specific details for further rounds of public consultation have not yet been released.
In its 2010-11 Annual Report, the Commonwealth Director of Public Prosecutions, the body charged with compiling statistics on money laundering crime in Australia, records 39 summary charges and 69 indictable charges for money laundering offences. The AUSTRAC NTA has pooled information from a number of agencies involved in combating money laundering to identify the types of money laundering threats faced by the following significant money laundering channels. These are
- The banking system
- Money transfer business and alternative remittance services
- The gaming sector
- High value goods
- Legal entity structures
- Cash intensive businesses
- Electronic payment systems and new payment methods
- Cross-border movement of cash and bearer negotiable instruments
- International trade
- Investment vehicles.
The NTA provides information, particularly through the examples and case studies it cites, on the types of activities that should arouse the suspicions of persons engaged in legitimate businesses in any of the sectors it covers. For example, the NTA cites legal professionals’ reports of unusual requests to pass funds through their trust accounts, and the use of investment vehicles such as shares, insurance products and superannuation funds to channel criminal wealth that has already been laundered, using more vulnerable parts of the economy such as the gambling sector.
Australia’s anti-bribery and money laundering landscape has changed considerably since the OECD’s Phase 2 review in 2006. It is likely that it will continue to do so. In light of the possible reforms to Australian bribery and corruption laws outlined above, companies should consider reviewing their policies and compliance programs. Companies operating in any of the “significant money laundering channels” identified in AUSTRAC’s NTA should consider the NTA’s guidance on the sorts of threats that they may face from money laundering.
The Minister has invited submissions on the proposed reforms to Australia’s anti-bribery and corruption legislation by 15 December 2011. Submissions may be sent to email@example.com.
The consultation paper is available at www.ag.gov.au/foreignbribery.
The money laundering threat assessment is available here.
Minister for Home Affairs Press Releases