• Anti-Bribery and Corruption Overview

A brief history lesson of anti-bribery and corruption legislation

In the 1970’s the ‘Watergate’ investigations revealed illegal contributions to Richard Nixon’s presidential campaign. The Securities and Exchange Commission (SEC) then encouraged US companies to self-disclose on the basis that if they self-disclosed they would be exempt from prosecution.

500 companies, including the top 100 companies came forward and collectively declared over USD$300m in illegal campaign contributions. After this in 1977, Jimmy Carter signed the Foreign Corrupt Practices Act (FCPA) into law.

Under the FCPA, US authorities can prosecute conduct occurring outside the US, which has some connection with the US.

More recently in the United Kingdom the UK Bribery Act 2010 was introduced and is seen as the most comprehensive anti-bribery legislation that exists today.

Key bribery offences

  • Bribery of a private person or a public official is criminalised whether it occurs domestically or overseas
  • Companies can be prosecuted if your employee, or your agent, bribes another person to obtain or retain business or any other form of advantage for you if you do not have adequate procedures in place to prevent bribery – this offence is extra-territorial, meaning that domestic organisations can be prosecuted internationally and are not typically protected by local laws if the offence has been committed overseas
  • Facilitation payments, for example to speed up an application for a permit are not permitted

What is corruption and bribery?

The term ‘corruption’ can be used to broadly describe a number of offences including; bribery, extortion, fraud, deception, collusion and money laundering.

Bribery is most commonly defined as “anything of value given, offered, promised, accepted, requested or authorised with the intent that a person who is trusted or expected to act in good faith or with impartiality, performs that function improperly or in order to obtain or retain an advantage in the course of business”.

How much corruption is out there?

The exact size of the bribery and corruption problem is impossible to estimate due to the highly secretive nature of this crime although the The World Bank Institute have estimated that $1 trillion dollars is paid in bribes each year, with the burden falling disproportionately on the billion or so people living in extreme poverty.

What are the general impacts of corruption?

When fraud, corruption or money laundering are discovered in an organisation there are a number of very serious issues that the organisation faces including:

  • Conducting an investigation to identify the source of the issue and taking steps to remedy the situation
  • Answering questions posed by regulators who may initiate formal criminal proceedings against the organisation
  • Reputation damage to the organisation’s brand, as well as, directors, boards and management
  • Falling share price as other organisations withdraw business and distance themselves from the organisation
  • Exposure to the risk of shareholders initiating proceedings against the board and senior management.

What is the impact on international business?

Following a number of high-profile incidents of bribery and corruption, regulators around the world are increasingly seeking to enforce international anti-bribery and corruption laws and are co-operating more than ever across international boundaries to bring the perpetrators to justice. It is therefore important for any organisations that are conducting business overseas to understand the risks that they face and to identify ways they can protect themselves.

Under Australian legislation (the Commonwealth Crimes Act) any company incorporated in Australia, or any individual citizen or resident of Australia, can be prosecuted for bribery and corruption offences which have occurred overseas. In addition, a company may be held liable for the actions of its employees if it can be proven that the corporate culture encouraged or tolerated this behaviour. And it is not just Australian law that companies and individuals need to worry about.