Following claims that certain corrupt business practices should be outlawed, an employment lawyer explains how HR professionals can prevent corruption within their workforce.
In a submission to the Senate, the International Bar Association (IBA) referred to Australian laws around foreign bribery as ineffective and “woeful”.
“We have had 15 years of foreign bribery laws in Australia,” Robert Wyld, the submission’s author, wrote.
Wyld noted that there had been 28 investigations during that time, of which 21 were dropped and there were only two resulting prosecutions.
“The system is not working,” Wyld added. “Unless people go to jail, unless people see imprisonment as the real ultimate penalty, there will be no behavioural change.”
According to Rachel Nicolson, Partner in Commercial Litigation and Dispute Resolution at Allens law firm, it is “very likely” that there will soon be changes to Australian foreign bribery laws.
“Given the current Senate inquiry into foreign bribery, it is likely that there will be changes to these laws over the next few months,” she told HC. “Removal of the facilitation payments defence is likely. It is also possible that further clarification around how liability can be attributed to a corporation, and how a corporation can defend itself from allegations of foreign bribery, will occur.”
Nicolson added that foreign bribery is “definitely” a problem in Australian businesses.
“For companies working in emerging economies where rule of law or governance is weak, it is a clear, ongoing commercial and legal risk,” she explained.
“This is the case across a range of sectors – mining, oil and gas, pharmaceuticals and industrials. It is very difficult to do business in some of these jurisdictions without making at least small payments, and this was a normal business practice for many businesses.
“However, laws like the Australian Criminal Code that have extraterritorial reach, as well as the increased enforcement of domestic anti-bribery laws in these emerging economies – for example as we're seeing in China – mean that making these sort of payments is no longer an option.”
Nicolson advised employers to an anti-bribery policy and supporting compliance program in place.
“Make sure the program ensures, amongst other things, training of their staff who are in high risk jurisdictions or roles, screening of business partners and third parties that act on behalf of the company and strong contractual obligations with third parties that set out expected standards of conduct,” she said.
According to the ABC, US parent companies are liable for the conduct of their subsidiaries or intermediaries – but this is not the case in Australia.
“If you want your company to pay bribes, just set up a subsidiary and ensure whatever structure you use is isolated, in terms of effective management from the parent company,” Wyld wrote.
But it isn’t just legal experts who are advocates for legitimate business practices – recent research has shown that Australian workers would be more loyal to employers who operated their businesses morally.
In recent months, Ernst & Young’s survey, Fraud and Corruption – driving away talent?, found that 72% of Australian workers felt that a strong reputation for ethical behaviour is a commercial advantage, while almost half said they would leave an organisation involved in a major bribery case.
A massive 80% of employees based in the greater APAC region claimed they would be unwilling to work for companies involved in bribery or corrupt practices.
According to Rob Locke, lead partner of Ernst & Young’s Fraud Investigation and Dispute Services in Australia, strong leadership strategy is key to ensuring that employees feel their company is working ethically.
“Only 5% of all respondents said it would make no difference to their willingness to work for an employer if the company was found to have been involved in bribery and corruption,” he said.
“It is essential that companies comprehensively address this via strong ethical leadership and a cohesive fraud prevention framework, with up-to-date and well-enforced internal controls, policies and procedures.”
Meanwhile, the 2015 Deloitte Bribery and Corruption Survey found that almost a quarter of Australian organisations with offshore operations were not concerned about any risks arising from non-compliance with bribery laws.
The research also found that 77% of companies surveyed had never conducted a bribery risk assessment.
“There is no longer any excuse for complacency against this risk,” said Barry Jordan, lead forensics partner at Deloitte. “Apart from the legal ramifications, which can include heavy fines or even jail time, the long term reputational damage from corruption can have serious long term flow on effects on an organisation's bottom line.”
According to Deloitte’s report, 40% of Aussie workers reported either not having or not being aware of a formal compliance program to manage corruption risk, while almost one in five participants operating in high risk jurisdictions did not discuss the risks at management or board level.
“There is no one size fits all,” Rachel Besley, general counsel at Deloitte Australia said. “What’s important is that responsibility is delegated to specific senior individuals who have the right resources and appropriate authority to ensure the effective operation of [an anti-bribery and corruption compliance] programme.”
In the IBA’s submission, it was also suggested that the organisation wanted to see an increase in the civil and criminal penalties imposed on perpetrators of corruption and foreign bribery.
The organisation also suggested banning ‘facilitation payments’, which are small cash sums given to officials to ensure business is completed. Such payments are currently legal under Australian foreign bribery legislation.
“They are bribes,” said Mike Ahrens, executive director of Transparency International, who is currently leading a campaign to abolish facilitation payments as a form of defence.
However, some have argued that facilitation payments are a necessity for those operating businesses in specific countries or regions.
“If facilitation payments were banned, it would make it much more difficult to operate in Africa,” the Australia-Africa Mining Industry Group's Bill Turner told the ABC.
“A policeman will pull you up at a roadblock, you wind the window down and he will poke an AK-47 through the window,” he said. “It is a little bit difficult to argue the case about not being able to make a facilitation payment under such circumstances.”
In spite of this, Wyld referred to facilitation payments as “grease payments”.
“That is not a facilitation payment, that is a worker who is being extorted,” he wrote. “That would be a justifiable and reasonable thing to do and the person would have the defence of making a payment under duress.”
Wyld also noted that facilitation payments had already been banned in the UK, but had caused no detriment to businesses based there.
“[The ban] has not put United Kingdom companies out of business, they are still operating in the markets where Bill Turner’s clients work,” he said.
In 2005, the World Bank estimated that corruption had an annual price tag of US$1 trillion.
The Senate Economics Reference Committee is due to conduct hearings, the findings of which will be released in a report on July 1, 2016.
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