Focus: Securency arrests and the UK Bribery Act
8 July 2011
In brief: The recent arrests of former executives of Securency on foreign bribery charges on 1 July 2011, coinciding with the commencement of the tough new UK Bribery Act, have implications for Australian companies and their management. Partner Matthew Skinner and Senior Associate Tim Robinson report.
How does it affect you?
- The investigation and prosecution of former executives from Securency and Note Printing Australia represents a major development in the efforts of the Australian Federal Police to enforce laws prohibiting foreign bribery.
- This coincides with the commencement of the strict new UK Bribery Act that will likely apply to any Australian company with operations in the UK.
- These two developments together illustrate the increased risk of detection and prosecution of foreign bribery for Australian companies and underline the importance of preparing and implementing a robust compliance program.
On 1 July 2011, the Australian Federal Police (the AFP) are reported to have arrested and charged six former executives of Securency and Note Printing Australia with offences under the Commonwealth Criminal Code, which contains prohibitions on the payment of bribes to foreign government officials. The AFP also charged the two companies with related offences. The charges reportedly mark the culmination of a two-year international investigation by the AFP in which they worked with a number of regulators around the world, including in Malaysia and the UK.
The charges are particularly significant given they are the first to be brought under the foreign bribery provisions of the Criminal Code. The length and complexity of this investigation indicates that the AFP is now willing and able to devote significant resources to investigation of foreign bribery. This represents an important change to the local enforcement landscape and marks a significant increase in risk for Australian companies who operate in emerging markets without first implementing adequate policies and procedures to prevent bribery.
The AFP is also reported to have called for changes to Australia's foreign bribery laws to facilitate the prosecution of foreign bribery. In that context, it is timely to review the effect of the UK Bribery Act, which will likely apply to any Australian company with operations in the UK. One of the aims of the UK Act was to make prosecution of foreign bribery easier.
The UK Bribery Act also came into effect on 1 July 2011, the same day as the Securency arrests.
The Act will apply to all UK individuals and companies, and to any company or individual who commits an element of an offence in the UK. The Act contains a new strict liability offence of 'failing to prevent' bribery, which will apply to any corporation or partnership that 'carries on a business or any part of a business' in the UK. The limited UK authority on the meaning of this phrase indicates that an Australian company that contacts customers in the UK, actively markets products in the UK and occasionally visits the UK may be carrying on part of a business in the UK. Any Australian company with an office or employees based in the UK is likely to be subject to the Act.
Under the new offence of 'failing to prevent' bribery, a company will be liable for any bribes paid by its employees, agents or service providers unless it can show that it had 'adequate procedures' in place to prevent bribery. In other words, once the prosecution prove that a bribery offence was committed by an employee or agent with the intention of benefiting the company, the company is automatically liable unless it can prove (on the balance of probabilities) that it had 'adequate procedures' in place.
The UK Ministry of Justice has published guidance as to what will constitute adequate procedures, indicating that procedures will be assessed against six principles:
- Proportionate procedures – Procedures should be proportionate to the bribery risk and the nature of the organisation's activities.
- Top-level commitment – A clear, unambiguous message that bribery will not be tolerated should be communicated regularly.
- Risk assessment – The company should assess the risks of bribery in markets in which it operates and regularly update this assessment.
- Due diligence – The company should implement procedures for conducting due diligence on service providers and business partners, taking a proportionate risk-based approach, in order to mitigate identified bribery risks.
- Communication – Anti-bribery policies and procedures should be embedded and understood throughout the organisation via training and internal and external communication.
- Monitoring and review – Procedures should be monitored and reviewed and improvements made where necessary.
Other key differences between the UK Bribery Act and the Australian legislation include the following:
- the UK Act contains a broader offence of bribery of a foreign public official, the elements of which ought to be easier for a prosecutor to prove;
- 'facilitation payments' are outlawed under the UK Act, whereas in Australia it can be a defence to show that a payment was a 'facilitation payment'. Under the Australian Criminal Code, 'facilitation payments' are small payments made in return for 'routine government actions'. The definition is very narrow and requires that payments be documented in detail; and
- the UK Act applies to bribery in the private sector, whereas non-government bribery is left to state laws in Australia, some of which have a more restricted application to conduct outside Australia.
In addition to these differences, the UK has also indicated that it will be devoting significant resources to enforcing the UK Bribery Act and that it will seek to minimise any perceived disadvantage to complying UK companies by actively seeking to prosecute non-complying foreign companies where possible.
The willingness of the AFP to devote significant resources to foreign bribery enforcement, together with the commencement of the UK Bribery Act, heighten the importance for Australian companies of preparing and implementing a robust compliance program to prevent involvement in foreign bribery.
- Ross DrinnanPartner, Practice Leader, Commerical Litigation & Dispute Resolution,
Ph: +61 2 9230 4931
- Guy FosterPartner,
Ph: +61 2 9230 4798