Focus: Best practice guidelines for self-reporting of foreign bribery
9 February 2018
In brief: Best practice guidelines for self-reporting of foreign bribery and related offending by corporations have been published by the Australian Federal Police and the Commonwealth Director of Public Prosecutions. This follows hot on the heels of a Bill tabled in the Commonwealth Parliament which, if passed, will amend foreign bribery laws and introduce a deferred prosecution agreement regime to Australia. Partners Rachel Nicolson (view CV) and Peter Haig (view CV), and Senior Overseas Practitioner Chris Kerrigan, Senior Associate James Campbell and Overseas Practitioner Francesca Bonner-Evans report.
How does it affect you?
- The Best Practice Guidelines on Self-reporting Foreign Bribery and Related Offending by Corporates (the Guidelines) cover a wide range of issues relevant to self-reporting of foreign bribery and related offences,1 including expectations for self-reporting, cooperation with Australian Federal Police (AFP) investigations, legal professional privilege, confidentiality of information shared with the AFP, public interest factors that the Commonwealth Director of Public Prosecutions (CDPP) will consider when deciding whether to prosecute self-reporting corporates, and indemnity from prosecution and early guilty pleas.
- A number of the provisions will encourage more self-reporting and cooperation by corporates. In particular, they (i) clarify that a 'self-report' can be made by a corporation without admitting criminal responsibility; and (ii) specify that self-reporting will be treated as a 'significant' public interest factor against prosecution when applying the second stage of the CDPP Prosecution Policy test (with further guidance around what, specifically, will be taken into account when assessing the public interest in prosecuting a self-reporting and cooperating corporate).
- Ultimately, however, the CDPP retains its broad discretion to prosecute a corporate that has self-reported and cooperated with the AFP's investigation. It therefore offers less certainty to self-reporting corporates than, for example, the ACCC immunity and cooperation policy for cartel conduct (where an offer of immunity is highly likely if the conditions set out in that policy are fulfilled), and contrasts with the position in the US, where the new FCPA enforcement section of the US Attorney's Manual provides a presumption of declination (ie a decision not to prosecute) for self-reporting and cooperating corporates.2
- It is unclear how the Guidelines will interact with the anticipated deferred prosecution agreement (DPA) regime and foreign bribery law amendments; as the Guidelines acknowledge, they will need to be updated to accommodate the DPA regime.
Given the challenges and costs of investigating and prosecuting foreign bribery, and the weak enforcement record in Australia, the Federal Government has been considering ways to encourage self-reporting and cooperation by corporates, as well as the earlier resolution of proceedings. In part, the Government's drive to reform foreign bribery laws, and the incentives to self-report and cooperate, has been prompted by anticipated feedback from the Organisation for Economic Co-operation and Development in its Fourth Report on Australia's anti-bribery enforcement (which was published on 19 December 2017).3 The long-anticipated Guidelines form part of the Government's strategy.
The AFP and the CDPP published the Guidelines in late 2017, following release of an exposure draft in August 2016 and subsequent consultation. This followed the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 (the 2017 Bill) being introduced into Parliament late last year. If passed, it will amend foreign bribery laws and introduce a DPA regime in Australia (please see our Focus: Christmas comes early for the AFP and CDPP: Bill introduced to reform foreign bribery laws and introduce DPA scheme.
The Guidelines cover a number of different topics. We will focus on some of the key issues for corporates.
- Defining 'self-report'. The Guidelines define what will be regarded as a 'self-report'. It is acknowledged that a corporation may 'self-report' conduct by its officers and/or employees without admitting criminal responsibility on its part.4 This is important, as there is often a mismatch between what investigative agencies, such as the AFP, wish to receive by way of self-report (and when) and what corporations regard as reaching the threshold of warranting a 'self-report'. In many internal investigations, it is not possible for the corporation to conclude whether criminal conduct has occurred (and certainly not at the early stages of an investigation). This definition of self-reporting is likely to encourage corporations to be more transparent and to 'self-report' earlier.
- Status of self-reports to other authorities. The Guidelines state that a self-report to another domestic authority may be treated by the AFP and the CDP as a self-report to the AFP for the purposes of the Guidelines. It can be inferred from this that a self-report to a foreign authority will not be treated as a self-report to the AFP. Unsurprisingly, it is confirmed that information disclosed during a self-report may be shared with other agencies (domestic or foreign), but that, where possible, the AFP and the CDPP will give the corporation notice of on-disclosure, and work through any issues that may arise in relation to such on-disclosure. This underscores the need to be transparent with all relevant agencies and regulators (whether domestic or foreign).
- Independent investigations. The AFP will independently investigate the conduct that is self-reported, and assess the quality and veracity of any internal investigation and report by the corporation.5 Corporations may therefore wish to engage with the AFP at an early stage of their internal investigation, to ensure that the AFP's expectations in relation to the scope and approach of any internal investigation are satisfied.
- Investigation cooperation agreements. Corporations may be asked to enter into an investigation cooperation agreement (ICA), which sets out the AFP's expectations. The court may then use the ICA to assess the extent and quality of the corporation's cooperation if the matter proceeds to prosecution and sentencing.6 The terms of any ICA are to be negotiated on a case-by-case basis but are likely to include:
- the duration and termination of the ICA;
- legal liabilities;
- execution of warrants and the management of legal professional privilege claims;
- interviews and statements;
- access; and
- communication and media strategy.7
Although we agree that ICAs should be adapted to the investigation to which they relate, if a template ICA were made publicly available, like the sample Voluntary Confidential Legal Professional Privilege Disclosure Agreement on ASIC's website, this would provide corporations with greater clarity on expectations and terms.
- Privilege. There is a tension relating to privilege. The Guidelines make clear that it is expected self-reporting will include providing 'all documents relating to the matter, including reports from any investigation carried out … including reports commissioned by the corporation's lawyers',8 but this does not include documents subject to a valid claim to legal professional privilege.9 This is a tension that has surfaced in the UK, where corporates seeking to 'cooperate' with the UK Serious Fraud Office have been told that they are not expected to waive privilege but are expected to provide factual accounts of witnesses.
- Self-reporting and the public prosecution test. Self-reporting is confirmed as a 'significant factor' taken into account when determining the public interest.10 The Guidelines set out the additional factors, in addition to those listed at paragraph 2.10 of the CDPP Prosecution Policy, that it will consider in determining whether a prosecution of a self-reporting corporation is in the public interest. These are listed at paragraph 15 of the Guidelines and include:
- the 'quality and timeliness' of the self-report;
- the extent of cooperation;
- history of similar conduct;
- governance frameworks to mitigate bribery risk;
- the 'culture of compliance with that framework';11 and
- how culpable individuals have been dealt with and the corporation's efforts to redress harm.
It remains to be seen how this guidance will need to be adapted to fit with the DPA regime and the factors to be taken into account when determining whether a corporation should be invited to enter into DPA negotiations.
- Written undertakings. Where the CDPP reaches a decision that it is not in the public interest to prosecute a self-reporting corporation, but the corporation will assist in the investigation and prosecution of others, it may receive a written undertaking to the effect that evidence given by the corporation as a witness is not admissible, whether directly or derivatively, against the corporation in any criminal or civil proceedings, and that the corporation will not be prosecuted for specified Commonwealth offences.12 It is unclear from the Guidelines how early on in the self-reporting process this undertaking could be provided.
- Early guilty pleas
- At paragraph 22, the Guidelines set out a procedure for dealing with an early offer to plead guilty. The Guidelines confirm that all communications with the AFP in this regard would be non-binding and 'without prejudice'13 for the purpose of seeking to identify a potential guilty plea, which the AFP would then refer to the CDPP for advice and assessment. However, any views expressed by AFP officers do not bind the AFP; nor do views expressed by the AFP bind the CDPP. As expected, the Guidelines also make clear that sentencing is ultimately a matter for the court. They state that the AFP will not make any representations, or offers of concessions, to the corporation in relation to sentencing submissions or outcomes.
- Paragraph 25 envisages a statement of facts being agreed as part of any early plea deal, to be drafted by the AFP and the corporation, but ultimately subject to CDPP approval. The Guidelines state that the statement will not be admissible as evidence of the truth of its contents in any other criminal or civil proceedings, and that it will have no evidentiary value until after, and to the extent that, it is admitted or adopted by the corporation. In our view, admissibility and evidentiary value will be issues that the relevant court (foreign or domestic, civil or criminal) hearing a proceeding to which the statement may have some relevance will need to determine.
- Corporations entering a guilty plea will usually be asked to agree an undertaking to cooperate with law enforcement agencies in relation to future prosecutions/confiscation proceedings.14
- Sentencing. The Guidelines recognise that if a corporation self-reports offending that is subsequently prosecuted, the fact of the self-report and the nature and scope of the broader cooperation are mitigating factors a court must take into account.15 The CDPP will make submissions to the court, including the extent of any cooperation. 16 The AFP may also provide a 'letter of assistance' outlining the 'nature and value' of the corporation's assistance relating to evidence or information beyond the scope of its own offending.17 The corporation is free to make its own submissions.
- Carve out for proceeds of crime offences. For reasons that are unclear, any indemnity from prosecution that the CDPP offers will not prevent a proceeds of crime authority from taking confiscation action under the Proceeds of Crime Act 2002 (POCA).18 The Guidelines also state that any decision to take action under POCA will be independent of any decision whether to commence a criminal prosecution.19
There is change afoot in Australia in the area of foreign bribery and corporate crime more generally. The Guidelines will be of most immediate relevance to corporates that have already self-reported and are in the process of engaging with the AFP. For those weighing up the advantages and risks of self-reporting to the AFP, the Guidelines will be another factor in favour of self-reporting; whether they are sufficient to 'tip the scales' remains to be seen. Many clients may prefer to wait for the DPA regime to be introduced or to see how the Guidelines are applied in practice before 'taking the plunge'.
It is important that corporates understand the Guidelines in the broader context of legislative change and evolving regulatory expectations. Allens is advising clients on the Guidelines, the proposed DPA regime and foreign bribery law changes and other connected developments such as proposed changes to Australia's whistleblower laws (see our Focus: Increased whistleblower protections, and more to come…)
- Paragraph 6 defines a 'related offence' as 'an offence potentially connected with the subject matter of Division 70 of the Criminal Code (Cth), eg money laundering offences under Division 400 of the Criminal Code, false document offences under the Corporations Act 2001 (Cth) or Commonwealth/ State/ Territory false accounting offences'.
- The United States Department of Justice.
- See Australia takes major steps to combat foreign bribery, but OECD wants to see more enforcement.
- Paragraph 5.
- Paragraph 9.
- Paragraph 10.
- Paragraph 10.
- Paragraph 10 of the Guidelines.
- Footnote 2 and Paragraph 11 of the Guidelines.
- Paragraph 16 of the Guidelines.
- Footnote 7 of the Guidelines provides that the CDPP will be guided by international best practice principles over the period of offending, including any relevant policies issued by the Australian authorities, the International Standards Organisation, the United States Department of Justice and the United Kingdom's Ministry of Justice and/or other relevant entities.
- Sections 9(6) (6B) and 9(6D) of the Department of Public Prosecutions Act 1983 (Cth).
- It is unclear how such a communication could be 'without prejudice' – see subsection 131(5)(b) of the Evidence Act 1995 (Cth).
- Such s16AC undertakings may be tendered in sealed envelopes, or through an alternative confidential process, where publication could jeopardise the safety of a suspect or the integrity of an ongoing investigation: paragraph 31.
- Paragraph 7(f).
- Paragraph 36.
- Such letters may be tendered in sealed envelopes, or through an alternative confidential process, where publication of the letter could jeopardise the safety of a suspect or the integrity of an ongoing investigation: paragraphs 32 and 33.
- Paragraph 19.
- Paragraph 38.
- Rachel NicolsonPartner,
Ph: +61 3 9613 8300
- Peter HaigPartner,
Ph: +61 3 9613 8289
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