Boards should critically review their organisation’s current approach to detecting and preventing foreign bribery and corruption.
New laws will see a fundamental shift in the way organisations can be prosecuted for bribery in Australia, including a greater risk of exposure to automatic criminal liability. The Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 (Cth) came into effect in September 2024.
Modelled on similar provisions in the UK Bribery Act 2010, the legislation establishes a new criminal offence for Australian bodies corporate which fail to prevent foreign bribery for the profit or gain of the company by an associate — attracting penalties of $31.3m or higher.
An “associate” is defined broadly and includes all officers, employees, agents, contractors, subsidiary entities in a corporate group and any person who performs services for or on behalf of the company.
The new offence applies to Australian bodies corporate across a broad range of sectors, which include ASX-listed, private companies, government entities and not-for-profits (including both incorporated associations and companies limited by guarantee).
Importantly, the new offence applies on a strict liability basis, meaning there is no requirement to show fault on the part of an organisation. It will be unnecessary to prove that the bribe was authorised by the company, or that the company intended for the bribe to be paid. The only defence available will be if a company can show it had “adequate procedures” in place to prevent the bribery offence.
There are several key questions that directors can ask:
Risk management: What is our organisation’s approach to identify, assess and mitigate foreign bribery risks within and outside the organisation? Has external expertise been sought to support management?
Due diligence: Does the organisation apply bribery-related due diligence measures for associates and prospective associates (including prior to entering into new markets, business relationships or transactions, seeking tenders for work or necessary approvals from foreign government entities)?
Leadership focus: Does the board and management play an active role in the implementation and promotion of the organisation’s anti-bribery policy and procedures (including effective review of procedures, critical decision-making and overseeing breaches of policies and disciplinary measures)?
Communication and training: Are bribery prevention policies, procedures and training communicated throughout the organisation and made accessible to all associates, including contractors?
Confidential reporting and investigation: Is there a confidential reporting mechanism that allows internal and external stakeholders to raise concerns about bribery risks, report instances of bribery and request advice?
Monitoring and review of compliance systems: What regular monitoring and testing of the effectiveness of the anti-bribery policies and procedures is undertaken currently? Has an external assessment been conducted?
Role of contractors: How reliant is the organisation on contractors to operate overseas and how does the board and management gain confidence they are acting lawfully? Will legal agreements need to be reviewed in light of the new laws?
Deferring prosecution
The legislation also makes a number of changes to strengthen the existing foreign bribery offence to address challenges that Australian law enforcement has experienced in pursuing prosecutions.
The AICD notes the amendments do not include a Deferred Prosecution Agreement (DPA) scheme. A DPA scheme accompanies foreign bribery laws in other jurisdictions, such as the UK and US, to incentivise organisations to self-report foreign bribery when it is detected and to cooperate with law enforcement authorities.
AICD senior policy adviser Laura Bacon GAICD says a DPA scheme in Australia would have allowed the Commonwealth Director of Public Prosecutions to enter into a voluntary agreement with organisations to defer prosecutions, subject to a range of conditions, including ongoing investigation, payment of financial penalties, admission to agreed facts or implementing a program to improve future compliance.
“Doing so would offer greater certainty of outcome and make it easier for organisations (but not individuals) to settle disputes quickly and voluntarily, without the need for the financial and reputational costs associated with criminal proceedings,” says Bacon. “This is particularly critical in the context of the new failure to prevent foreign bribery offence, where an organisation may become aware of bribery or corruption by one of its associates in a foreign jurisdiction and face automatic liability.”
AICD submission
The AICD submission on the reforms strongly encouraged government to reconsider the inclusion of a DPA scheme in the legislation. However, the government has confirmed it will only consider the introduction of a DPA scheme after the laws have been given time to operate. Directors of companies operating overseas, or directors sitting on the boards of overseas subsidiaries, are not expected to have specific knowledge of all the laws of the overseas jurisdictions. However, they should seek to ensure the organisation has developed policies, processes and procedures to assure regulatory and legal compliance in each of those countries.
Each country has its own nuances around corporate governance codes. Many will have mandatory requirements for boards that are quite different to Australia. What may be regarded as a perfectly normal way of doing business in one country might be a criminal offence in another.
Due to the risks involved, directors need to think about their own personal position on how their organisation should operate and consider what the organisation’s values and standards are.
Transparency International produces a corruption perception index each year, which ranks countries according to how corrupt their public sector is perceived to be. The latest Corruption Perceptions Index showed that most countries are failing to stop corruption (mrca.pub/4eNJg8q).
Implementing appropriate compliance programs for directors is essential to ensure there are adequate procedures in place in the event of a prosecution.
This article first appeared under the headline ‘Payoffs and penalties’ in the February 2025 issue of Company Director magazine.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
- Corporate governance in overseas jurisdictions
- Australia strengthens foreign bribery laws
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