What's happened so far in 2023? 10 min read
As we reported in our 2022 end of year update, developments in the corporate crime landscape continue apace. The National Anti-Corruption Commission (the NACC) has now commenced operations and it is anticipated that foreign bribery reform will follow very soon. The High Court of Australia has also provided greater clarity as to penalties in relation to foreign bribery and other corporate criminal offences.
In this Insight, we summarise the major developments in anti-bribery and corruption, fraud and sanctions in 2023 so far. With increased exposure, scrutiny and penalties, it is ever more vital to ensure your organisation is taking steps to be compliant with the evolving corporate crime landscape.
- NACC, the new domestic anti-corruption watchdog, has a wide-range of powers to investigate corrupt conduct in the federal public sector. Recent engagement with the NACC has indicated that it considers its remit includes members employed by federal agencies, individuals engaged in assisting federal agencies, and contracted service providers to such agencies.
- Foreign bribery reform is expected to make its way through Parliament before the end of the year and will introduce a new 'failure to prevent bribery' offence under the Criminal Code Act 1995 (Cth).
- Following a report on scam prevention, detection and response, there is a heightened expectation for banks to minimise the impact of scams on the Australian community. We are seeing regulators expect frauds and scams to be given the same organisational prominence and discipline as financial crime (eg anti-money laundering).
- The High Court's decision in the recent Jacobs case on the calculation of penalties for foreign bribery offences will likely have wide-reaching implications for a variety of other offences.
On 1 July 2023 the long-awaited NACC commenced operations to detect, investigate and report on serious or systemic corrupt conduct in the federal public sector. It has wide-ranging powers to investigate corruption – including to require the production of documents and compel oral evidence – that override protections for legal professional privilege and privilege against self-incrimination. Where the NACC considers it appropriate, it will refer evidence of criminal corrupt conduct for prosecution.
While the NACC's primary focus will be on corrupt conduct of public officials, its remit is broad and it 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.
Recent engagement with the NACC has indicated that it considers its remit flows down the federal supply chain. This includes members employed by federal agencies, individuals engaged in assisting federal agencies, and contracted service providers under federal contracts administered by such agencies. It is therefore important for organisations to develop a clear understanding of their Governmental touchpoints, lest they be caught unaware in the NACC's crosshairs.
We have prepared a guide for companies on what they may expect from the NACC.
In April 2023 the Australian Securities and Investments Commission (ASIC) published a report on scam prevention, detection and response by the four major banks. It sets out expectations for the banking sector in helping to minimise the impact of scams on the Australian community. These include recommendations relating to:
- bank-wide governance – ASIC expects banks to implement formalised governance regarding scams that is akin to their governance arrangements for other types of financial crime, including a formalised strategy, board and senior management oversight, clarity of accountabilities, and reporting and systems capability; and
- end-to-end processes and procedures for responding to scams – ASIC expects the many teams within banks dealing with fraud or scam issues to be coordinated and consistent in their approach.
Relatedly, on 1 July 2023 the Government launched the National Anti-Scam Centre (the NASC) – a taskforce within the ACCC, which is guided by an industry advisory board. The NASC will aim to utilise resources across government agencies, law enforcement and the private sector to disrupt scammers, raise consumer awareness about scams and assist scam victims. It will coordinate a series of 'fusion cells': an expert time-limited taskforce designed to address specific and urgent problems. The first fusion cell will focus on disrupting investment scams. This fusion cell is led by the ACCC and ASIC, partnering with specialists from banks, the telecommunications industry and digital platforms.
We see the report and the launch of the NASC as articulating ASIC's and the ACCC's expectation that dealing with scams will be given the same organisational prominence and discipline as financial crime (eg, with anti-money laundering and anti-bribery measures).
In February 2023 the Department of Foreign Affairs and Trade announced a review of Australia's autonomous sanctions framework, ahead of the expiry of the Autonomous Sanctions Regulations 2011 (Cth) (the Regulations) and associated instruments on 1 April 2024. The review seeks to streamline the legal framework for autonomous sanctions, to reduce the volume of subordinate legislation, refine authorisation powers for sanctions permits and consider the introduction of civil penalty provisions for sanctions breaches. The review's outcomes have not yet been published, but provides an opportunity for Australia's sanctions regime to be brought in line with international best practice and for further guidance to be developed to clarify its remit.
Court dicta on the scope of some of the provisions in the Autonomous Sanctions Act 2011 (Cth) and Regulations is also expected in due course, with cases on sanctions laws relating to Russia currently before the Federal Court.
In June 2023 the Government tabled the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 (the CFB Bill) in Australia's latest attempt to reform its foreign bribery laws. This represents the third attempt in recent years to strengthen these laws – first in 2017 and again in 2019. In both instances, however, the Bills lapsed in Parliament before being passed.
The CFB Bill has been drafted in near identical terms to the 2019 Bill, with the main provisions seeking to amend the Criminal Code Act 1995 (Cth) by:
- Introducing a new strict liability 'failure to prevent bribery' offence for body corporates.
- Under this provision, it will be an offence for a corporation to fail to prevent foreign bribery by an ‘associate’ (which includes officers, employees, contractors, agents, service providers and subsidiaries). As it is a strict liability offence, the corporation will automatically be found liable unless it can show it had 'adequate procedures' in place designed to prevent the bribery from occurring. The Government has stated that it intends to release new guidance on what constitutes 'adequate procedures' within six months of the CFB Bill receiving Royal Assent, which will build on the prior draft guidance released by the Attorney-General's Department and will largely be modelled on the United Kingdom Government's guidance.
- The CFB Bill also renders a breach of the new provision an indictable offence. This will allow prosecutions of the offence to be heard in superior courts, and enable the Commissioner of the Australian Federal Police (the AFP) and the Commonwealth Director of Public Prosecutions (the CDPP) to seek certain orders under the Proceeds of Crime Act 2002 (Cth) regarding the offence, including particular types of restraining orders, forfeiture orders and pecuniary penalty orders.
- Broadening the current foreign bribery offence in Division 70 of the Criminal Code, including by:
- framing the bribery prohibition around an intent to ‘improperly influence’ a foreign public official, rather than the current requirement to demonstrate the benefit provided was ‘not legitimately due’;
- extending the foreign bribery offence to include bribery of candidates for public office (not just current holders of public office); and
- including obtaining or retaining a ‘personal advantage’, not only a business advantage, as part of the offence.
One significant departure from the 2017 and 2019 Bills is that the CFB Bill does not seek to introduce a deferred prosecution agreement (DPA) scheme into Australia's foreign bribery framework. The omission is particularly noteworthy, as it represents a material point of difference between Australia's approach to combating foreign bribery and that of the United States and United Kingdom (both of which rely on DPAs as a cornerstone of their enforcement approach). In the second reading speech, the Government indicated that it is prepared to revisit the introduction of a DPA scheme once the measures in the CFB Bill have been enacted and given time to work.
We expect the CFB Bill to make its way through Parliament before the end of the year.
On 2 August 2023 the High Court passed down its long awaited judgment in the case of The King V Jacobs Group (Australia) Pty Ltd Formerly Known As Sinclair Knight Merz  HCA 23. It concerned the proper construction of section 70.2(5) of the Criminal Code, which prescribes the maximum monetary penalty for a foreign bribery offence by a body corporate. Relevantly, under s70.2(5), the maximum penalty is the greater amount of:
- 100,000 penalty units (at the time, each penalty unit was $110);
- if the court can determine the value of the benefit obtained that is reasonably attributable to the conduct constituting the offence, three times the value of that benefit; or
- if the court cannot determine the value of the benefit obtained, 10% of the corporation's annual turnover during the 12-month period ending at the end of the month in which the offending conduct occurred.
The Supreme Court of New South Wales and the Court of Criminal Appeal of New South Wales had both found in favour of the defendant, in that they held the maximum penalty should allow for deductions of any costs incurred in performing the contracts obtained by foreign bribery.
Significantly, the High Court overturned these decisions and held that, on its proper construction, s70.2(5)(b) requires the value of the benefit obtained to be determined as the sum of the amounts in fact received under the contracts secured by the bribery offence. No deduction can be made for any costs incurred in performing the contracts.
Particularly when viewed together with the potential new 'failure to prevent' foreign bribery offence, this decision raises the stakes for companies managing foreign bribery risks. It is also important to note that the reference to 'benefit' under a 'three-pronged' approach to calculating a penalty under s70.2(5) of the Criminal Code is similar to the approach adopted in various other federal statutes that impose financial penalties for corporate offences, such as the Competition and Consumer Act 2010 (Cth) and the Corporations Act 2001 (Cth). Examples include:
- civil penalty provisions under the Corporations Act;
- civil penalty provisions under the Australian Securities and Investments Commission Act 2001 (Cth);
- anti-competitive practices and cartel offences under the Competition and Consumer Act; and
- serious and repeated interferences with privacy under the Privacy Act 1998 (Cth).
As such, the High Court's decision will likely have wide-reaching implications for the calculation of penalties for a variety of offences.
On 11 August 2023 the AFP reported on its first concluded matter to have involved the application of the CDPP's Best Practice Guideline on Self-Reporting of Foreign Bribery and Related Offending by Corporations (the Best Practice Guideline). The Best Practice Guideline was introduced in 2017, and outlines the principles and processes that the AFP and CDPP will apply where a corporation self-reports conduct involving a suspected breach of the foreign bribery offence and related offences. The AFP has stated that: 'Given the level of cooperation and remediation shown by the company in this case, the AFP supported the company's submission to the CDPP that it not be prosecuted on public interest grounds'.
The developments described above should serve as a trigger for entities to consider and review their processes to address these new compliance risks. This includes:
- conducting and maintaining risk assessments regularly to identify areas of risk for your business. Including relevant touchpoints to government, and assessing whether controls are appropriate to manage these risks;
- raising awareness of the recent and impending reforms for your employees and agents, including refreshing training and considering appropriate amendments to contractual clauses;
- reviewing internal whistleblower channels and other reporting mechanisms are effective and adequately resourced; and
- reviewing internal policies and procedures (including for internal investigations) to account for potential NACC requests.
Please contact our team to discuss how we might be able to assist you in this space. 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.