Corporate crime, policymakers and the major developments for 2023

What to stay across in the new year 7 min read

2022 saw increased attention from policymakers in relation to corporate crime, with developments proposed or adopted to improve the capacity of the courts to hear criminal cases and increase transparency and accountability in Australia in relation to bribery and corruption, tax and beneficial ownership.

This Insight summarises these developments.

Domestic anti-corruption law reform

As we recently reported, on 30 November 2022 the Federal Parliament passed legislation to establish the National Anti-Corruption Commission (NACC). The NACC will operate independently of government to investigate and report on serious or systemic corruption in the federal public sector and to refer evidence of criminal corrupt conduct for prosecution. It will have wide-ranging powers to investigate corruption, including powers to require the production of documents and compel oral evidence, overriding protections for legal professional privilege and privilege against self-incrimination.

Although the NACC's primary focus will be on corrupt conduct of public officials, its remit is broad and the NACC will also be able to conduct corruption investigations, and make findings, in relation to allegations against a business or any officer or employee of a business if:

• they engage in any conduct that (either directly or indirectly) adversely affects or could adversely affect the honest or impartial exercise of any public official's powers or the performance of their duties or functions; or
• they conspire with another person (whether or not a public official) to engage in the above conduct or in corrupt conduct involving a public official.

The NACC is expected to commence operation in mid-2023, with recruitment already underway for key statutory roles, including the Commissioner and Deputy Commissioners.

Foreign bribery law reform and developments

As we reported in June, a bill to implement long-awaited reforms to Australia's foreign bribery laws lapsed for a second time earlier this year following the calling of the election. Although the Australian Labor Party (ALP) previously committed to reforming Australia's response to corporate bribery (including removing the 'facilitation payment' defence to Australia's existing foreign bribery offence and establishing a national debarment scheme to preclude companies found to have engaged in bribery from receiving federal contracts), there has been no progress or public statement since the election.

The completion of an OECD periodic review into Australia that is currently underway may provide a renewed impetus for reform of foreign bribery laws. The US Department of Justice (DOJ)'s recent corporate crime guidance, discussed below, may also have implications for the approach taken to foreign bribery enforcement in Australia.

Separately, in a recent foreign bribery case,¹ the New South Wales Court of Criminal Appeal upheld a sentence which substantially discounted the maximum penalty of $11 million for one foreign bribery offence down to $1.35 million. The discount reflected the significant weight the courts placed on the corporate defendant's self-reporting, guilty plea and substantial and ongoing cooperation with authorities. The case will now be heard in the High Court, and we expect the outcome will be significant for future foreign bribery cases in Australia.

Potential jurisdiction of the Federal Court to hear corporate crime cases

The Attorney-General's Department recently concluded a public consultation on an exposure draft for the Federal Court of Australia Amendment (Extending Criminal Jurisdiction and Other Measures) Bill. The Bill proposes to amend current laws to support the expansion of the Federal Court's jurisdiction in relation to a range of corporate crime offences that are administered by ASIC.

Currently, the Federal Court is able to hear almost all civil matters arising under Australian federal law, but is limited in the types of criminal matters it can hear. The proposed changes will enable regulators to prosecute more corporate crime matters each year by allowing the Federal Court to exercise its jurisdiction alongside state and territory courts.

No further steps have been taken by the Government since the consultation period closed on 31 October. If the consultation demonstrates support for the Bill, businesses should expect further consultation and the possible publication of an issues paper on the proposed reforms.

Other business transparency-related reforms

As part of its election campaign, the ALP committed to introducing a multinational tax integrity package. This package aims to address and prevent tax avoidance practices by multinational enterprises (MNEs) and improve tax transparency and reporting.

The implementation of the Government's commitments will occur alongside, and as part of, its engagement with the OECD's Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, including the introduction of a global minimum corporate tax rate of 15%.

If passed, two aspects of the package—increased disclosure requirements for certain tax information and the introduction of a public register of beneficial ownership—will have significant implications for business transparency in Australia, and in some respects will be world leading.

Public consultation on multinational tax integrity and transparency

Recently, the Australian Treasury publicly consulted on proposed multinational tax integrity reforms, which aim to address the tax avoidance practices of MNEs and improve transparency through better public reporting of MNEs' tax information.

The proposed reforms follow the increased reporting requirements adopted by the European Union in November 2021, and will have global significance. Foreign bodies, such as the Financial Accountability and Corporate Transparency Coalition in the US, have applauded Australia's leadership on global tax transparency and called upon other nations to adopt similar requirements.

Key features of the proposed reforms include:

• expanding the scope of public reporting of tax information of large MNEs on a country-by-country basis;
• mandatory reporting of material tax risks to shareholders; and
• requiring tenderers for Australian government contracts worth more than $200,000 to disclose their country of domicile for tax purposes.

The Government is expected to issue and consult on exposure draft legislation based on the proposals. While the ALP's election commitment indicated new measures could apply as early as 1 July 2023, timelines remain unclear.

Introducing a public register of beneficial ownership

The Government has also committed to introducing a public register of beneficial ownership in Australia (UBO register).

UBO registers record who ultimately owns, controls and receives benefits from a company, asset or legal vehicle, recognising that this may not always be the direct legal owner. Their purpose is to:

• increase transparency of beneficial ownership;
• detect or prevent financial crimes such as tax evasion, money laundering and corruption; and
• facilitate the enforcement of sanctions.

UBO registers already exist in the United Kingdom, Singapore and across the European Union.

The existing disclosure regime in the Corporations Act requires listed entities to provide beneficial ownership information, but there are gaps in regulatory coverage. The current proposal for a public UBO register would enable the systematic collection, authentication and publication of beneficial ownership information from both listed and unlisted corporate entities.

In November 2022, the Government initiated a public consultation on the initial design features of an Australian UBO register. The consultation concluded on 16 December 2022.

The Government is proposing a phased approach. Initially, only certain entities will be required to maintain a UBO register: Australian proprietary companies, unlisted Australian public companies, unlisted Australian managed investment schemes (MISs), and unlisted corporate collective investment vehicles (CCIVs). These entities will be required to maintain a register of certain natural persons, companies, registered MISs, CCIVs and trusts that satisfy threshold requirements. In future phases, this will be expanded to include additional entities and legal vehicles, and the information will be centralised in a single public register.

Listed entities will continue to identify beneficial ownership through the existing substantial holding notice and tracing notice regimes, and therefore will not be required to maintain a UBO register at this stage.

To support the new measures, the Government plans to introduce an enforcement mechanism which will permit regulated entities to issue notices requesting information from entities it suspects of being beneficial owners, and penalties to enhance compliance with UBO register disclosure obligations. There are also proposals to bolster the existing enforcement regime applying to listed entities in respect of the substantial holding notice and tracing notice regimes.

Next steps

• We suggest companies revisit these reforms in the new year, consider how they might affect business models and regulatory obligations and prepare to engage early in 2023 on further consultations and draft legislation as it is released.
• Please contact our team to discuss how these developments may impact your business. We have worked with a range of clients to assist them in reviewing and uplifting their anti-bribery and corruption programs and regulatory reporting frameworks to address legislative change and can explore with you the assistance your business may require.