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1 This Webcast Will Begin Shortly If you have any technical problems with the Webcast or the streaming audio, please contact us via at: Thank You! 1

2 Managing Corruption Risk in the APAC Region: Strategies to Protect Your Company Murray Thornhill Director, Commercial and Litigation HHG Legal Group 2

3 Trends in the Asia Pacific Region Widespread implementation of comprehensive legislation and policies for anti-bribery and corruption with a focus on gifts to government servants. The Chinese government s campaign to investigate and prosecute corrupt officials continues to influence other nations in the Asia Pacific region. Transparency International has recently released a report that is largely critical of the efforts of governments in the Asia Pacific region. 3

4 Case Examples US SEC and NU Skin A subsidiary company fined for making a charitable donation to avoid payment of a fine in China Impeachment of former South Koran president Park Geun-hye, who is accused of using her position to obtain donations for related charities. Investigation of Malaysian Prime Minister Najob Razak, who is accused of embezzling monies from state fund 1MBD. 4

5 ISO Certification for anti-bribery ISO A management tool rather than a cure. In summary, a management program to reduce anti-bribery and corruption through: conducting risk assessments conducting due diligence training employees; engaging management; implementing financial controls; implementing whistle-blowing procedures; and implementing feedback loop for effectiveness. 5

6 Responsible Agencies Australian Federal Police (AFP) Investigates and prosecutes various federal crimes, including fraud against the Commonwealth, foreign bribery, corruption by government employees and complex identity crime. Commonwealth Director of Public Prosecutions (CDPP) Prosecutes federal crimes. Australian Securities and Investments Commission (ASIC) Investigates particular breaches of the Corporations Act 2001 (Cth) and issues regarding publicly listed companies and market integrity. Australian Competition and Consumer Commission (ACCC) Responsible for enforcement of fair trading and consumer protection laws. 6

7 Inter-agency Response The multiagency Serious Financial Crime Taskforce (SFCT) investigates corruption and foreign bribery. The SFCT comprises: Attorney General's Department (AGD) Australian Federal Police (AFP) Australian Taxation Office (ATO) Australian Border Force (ABF) Australian Criminal Intelligence Commission Australian Transaction Reports and Analysis Centre (AUSTRAC) Australian Securities and Investments Commission (ASIC) Commonwealth Director of Public Prosecution (CDPP) 7

8 Legislation and Penalties Commonwealth Criminal Code 70.2 Bribing a foreign public official Penalty: For individuals - Up to 10 years imprisonment and/or a fine of up to $1.7 million For companies - Up to $17 million or 10% of annual turnover or 3 times the value of benefits obtained, whichever is greater Bribery of a Commonwealth public official Corrupting benefits given to, or received by, a Commonwealth public official Penalty: For individuals - Up to 10 years imprisonment and/or a fine of up to $1.7 million For companies - Up to $17 million or 10% of annual turnover or 3 times the value of benefits obtained, whichever is greater. 8

9 Legislation and Penalties Corporations Act 2001 (Cth) Section Frauds by officers of companies Proceeds of Crime Act 2002 (Cth) Benefits obtained from use of foreign bribery could be forfeited to the Government. 9

10 Recent Developments False Accounting Offences Since 1 March 2016, Australia has introduced new offences in relation to the use of false accounting methods to facilitate or conceal illegitimate benefits or losses. These new offences work together with the requirement under the Corporations Act 2001 (Cth) to keep financial records (and not falsify books). Senate Committee Following the 2016 election, all Senate Committees of the former federal parliament have been disbanded including the National Integrity Commission ( NIC ) which was expected to report to the Senate on 22 September Consultation for Deferred Prosecutions Federal Justice Minister Michael Keenan has previously expressed a desire for Australia to move towards deferred prosecutions. The deadline for public comment to a draft public consultation paper titled Consideration of a Deferred Prosecution Agreements scheme in Australia concluded in May

11 Australia s Response to Corruption The Fraud and Anti-corruption Centre was established in February 2013 Australia as been criticised for lack of enforcement of anti-corruption laws The AFP is reported to currently have more than 30 investigations into bribery and corruption in Australian businesses 11

12 Impact on APAC Region Australia has been referred to as a dumping ground of dirty money sourced from Asia Since 1999, the AFP has commenced about 30 investigations. Only two have led to prosecutions, both of which are ongoing Recently the AFP commenced investigations into betting company Tabcorp in respect of allegations of paying bribes in Cambodia to secure a gaming licence 12

13 Efficacy of Anti-corruption Clauses Anti-corruption clauses have not been tested in Australian courts It is uncertain whether anticorruption clauses can be effectively used to: terminate a contract; or as a defence or mitigation to bribery and corruption prosecutions. Regardless, anti-corruption clauses and internal systems may be taken into account in respect of potential prosecutions It remains good practice to include anti-corruption clauses in contracts and it is still widely done 13

14 Remedying Failures at the Contractual Stage Prevention is better than the cure. However, where contracts cannot be amended companies should : educate employees about the risk and indicators of bribery and corruption implement whistle-blower policies and minimum record keeping standards issue a company policy guide and company statement about corruption and bribery offences under Australian law issue an open letter about the company s commitment to anti-corruption to third parties require third parties to attend in house conferences or obtain third party certification on their compliance with their obligations require suppliers to issue itemised invoice conduct regular audits of payments and invoices seek clarification and advice where payments are suspicious 14

15 Managing Corruption Risk in the APAC Region: Strategies to Protect Your Company An Australian Perspective Presented by Selwyn Black, Partner Ph: Fax: Website: codea.com.au Sydney, Canberra, Newcastle, Parramatta, AUSTRALIA Copyright Selwyn Black

16 E-Government Already implemented in various APAC regions Use of information and communication technology (ICT) by government agencies to transform relations with citizens, businesses and government organisations 16

17 Governance Governance is the way [an organisation] is managed and the way authority is exercised and controlled. It influences how the priorities of the organisation are set and achieved, how financial and reputational risk is monitored and assessed, and how performance is improved and managed 17

18 Example 1: Price Mark Up Payments by supplier to someone in company/ organisation Prices marked up 18

19 Example 1: Possible Responses Competitive Tendering Benchmarking of costs and sharing of benchmarking amongst organisations/ companies Internal systems of control Audit Suppliers to certify no arrangements 19

20 Example 2: IT Contract Relationship too familiar Ignorance of requirements Over servicing 20

21 Example 2: Possible Responses Obtain independent assistance on specifications/ needs Tenders Maintain clear separation of roles Avoid dependency on 1 supplier Monitor contracts clear responsibilies and capable staff 21

22 Example 3: Cheating Regulator trying to trick government regulator on environmental requirements 22

23 Example 3: Possible Responses Create culture of compliance Encourage whistleblowing 23

24 SPECIFIC RECOMMENDATIONS 24

25 1. Obtain auditor s advice on internal systems of control and implement that advice 25

26 2. Who to tell a complaints mechanism 26

27 3. Have strict procedure for signing contracts including internal signoffs 27

28 4. Requirement for directors /council members approval to have any dealings with family/related parties, with directors/council being fully informed. 28

29 5. All positions advertised and open externally 29

30 FINAL OBSERVATIONS A proper system may assist in mitigating penalties Good systems reduce negligence / criminal risk to officers/directors and organisation/company 30

31 PREVENTION DIDN T WORK WHAT NOW? 31

32 Media relations- a test of credibility 32

33 LEGAL STRATEGY Co-operate or fight regulator? PR versus legal risk How do you get the real facts? 33

34 Carroll & O'Dea Lawyers SYDNEY AUSTRALIA Phone Fax Website: codea.com.au Copyright Selwyn Black

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