global regulatory drivers in 2012 - - - - - - - - - - - - - - - - taking a global view of good...
TRANSCRIPT
Global regulatory drivers in 2012- - - - - - - - - - - - - - - - Taking a global view of good governance
Nathan Lynch
Head regulatory analyst
Australia & NZ
Thomson Reuters
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KEY REGULATORY DRIVERS – 2012
• Bribery laws – facilitation payments
• New sanctions legislation
• Bank stress testing – Basel III
• FATCA – US tax legislation
• Anti-money laundering – tranche two
• Super and financial advice – FoFA, Stronger Super
• Client money rules (MF Global)
• Market competition
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REGULATION QUIZ: WHO AM I?
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REGULATION QUIZ: WHO AM I?
Bruce Hall.xcf
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THE BRUCE HALL STORY
• Bruce Hall, an Australian, was the chief executive at Aluminium Bahrain (Alba) from 2001 to 2005.
• During this period Alba bought alumina for its smelters from Alcoa-associated refineries in Australia.
• In 2008 the company alleged that Hall and others had accepted bribes in return for inflating the prices that Alba paid for alumina. The company was seeking $1bn in damages.
• The action against Alcoa in the US was dropped in 2008. Subsequently Hall was charged in the UK under anti-bribery laws. He is currently in jail in NSW fighting extradition to the UK to face bribery charges.
• Case highlights the extra-territorial reach of anti-bribery laws.
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FOREIGN ANTI-BRIBERY REGULATIONS AND AUSTRALIAN BUSINESSES
Bribery Act 2010 (UK)• Applies to any company that
conducts business in the UK. This includes UK dual-listings, local employees, agents and third-parties
• Applies to corrupt practices involving government officials as well as the private sector
• New corporate offence of "failing to prevent bribery" – subject to a defence of "adequate procedures"
• Severe penalties: Up to 10 years imprisonment for individuals (and/or fines) and unlimited fines for companies
• Took effect July 1, 2010
Foreign Corrupt Practices Act (FCPA)• Extra-territorial reach – captures
foreign companies with U.S. operations, companies that issue securities in the U.S. and that have a nexus to the U.S. that is used to further bribes being paid anywhere in the world
• Focuses on corrupt practices involving government officials
• Severe criminal and civil penalties on companies and individuals, including fines of up to two times the benefit received from the corrupt practice and up to five years’ imprisonment
• In force since 1977
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THE AUSTRALIAN CONTEXT
• Australia’s anti-bribery laws are contained in federal Criminal Code Act 1995.
• Division 70 makes it an offence under Australian law to offer or provide a bribe to a foreign public official for the purpose of obtaining business or an undue business advantage.
• Divisions 141 and 142 of the Criminal Code make it an offence to bribe a Commonwealth public official or for a Commonwealth public official to solicit a bribe.
• Penalties: Individuals – 10 years in prison and $1.1m fines. Corporates – $11m million in fines, or three
times the benefit gained (or 10% of annual turnover).
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WHAT IS A BRIBE?
Under Australian law, bribery occurs when someone provides or offers to provide a benefit to a person where that benefit is:
• not legitimately due; and
• where it is given or offered with the intention of influencing a public official in the exercise of their duties.
The bribe must be provided or offered with the intention of obtaining business or a business advantage. That intention need not be expressed and the benefit given can be monetary or non-monetary.
The bribe may be made to the public official directly or indirectly, for example, through an agent, relative or business partner of the public official or person within the private sector.
Defences: lawful payment, facilitation payment.
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THE AUSTRALIAN REFORMS
Consultation has just closed on several key changes:
Facilitation payments – removal of the defence to bribery of a foreign public official, where the payment was a “facilitation payment”.
Value of benefit – changes would allow a court to consider the value of the benefit in determining whether the benefit was not legitimately due to a person in a particular situation.
Identity of bribe target – possible removal of the need to prove that a person intended to bribe a particular public official.
Harmonisation of domestic offences – removal of the requirement of dishonesty from Div 141 and 142 of the Criminal Code (domestic bribery) to bring these laws into line with the crimes for foreign bribery.
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COMPLIANCE IN PRACTICE -WHAT DOES A ROBUST ANTI-CORRUPTION FRAMEWORK LOOK LIKE?
UK Bribery Act (2010) – the ‘gold standard’ for anti-bribery
1. Proportionality - Anti-bribery procedures should be proportionate to the bribery risks faced by the organisation and the nature, scale and complexity of its activities.
2. Top Level Commitment - Top level management should be committed to preventing bribery. Foster a culture in which bribery is “never acceptable”.
3. Risk Assessment - A periodic, informed and documented assessment of the nature and extent of the organisation’s exposure to external and internal bribery risks.
4. Due Diligence - Mitigate identified bribery risks through proportionate and risk-based due diligence in respect of persons who will perform services for or on behalf of the organisation.
5. Communication - Ensure that bribery prevention policies and procedures are embedded through the organisation through internal and external communication, including training, in a way that is proportionate to the risks faced.
6. Monitoring and Review – Regularly monitor and review procedures to prevent bribery and make improvements where necessary.
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EXAMPLES WHERE THIS MAY BE AN ISSUE
• Securing regulatory permits (e.g., mining leases, telecommunications) in foreign jurisdictions.
• Hidden charges – ‘transportation fees’ in the case of Australian Wheat Board.
• Bribes to win business – see Securency and Note Printing Australia cases.
• Cases where bribes have been solicited by corrupt officials (e.g., over-charging taxes).
• Entertaining clients – what is acceptable?
• ‘Tea money’ or payments to charities in other countries.
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SANCTIONS LEGISLATION
• In May this year Australia passed the Autonomous Sanctions Act 2011. Consultation took place on regulations in October. When passed, these will trigger the transition to new regime, which is expected to be effective early next year.
• Will affect a broad range of companies and individuals – e.g., mining and petroleum, professional trustees, lawyers, banks, universities, freight forwarders and real estate.
• High-risk sectors: finance, defence and import/export.
• Much higher penalties:Individuals – 10 years’ jail and fines of A$275,000 or three times the transaction in question.
Corporations – fines up to A$1.1m or three times the value of the transaction that breached the sanctions legislation.
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RISKY BUSINESS
• High-risk jurisdictions: Myanmar, North Korea, Fiji, the former Yugoslavian countries, Iran, Libya, Syria and Zimbabwe.
• The laws ban the “unauthorised trade in military and other strategic goods and services with these countries, as well as financial or commercial dealings with sanctioned individuals.”
• The new laws have been given a very broad extra-territorial reach.
• Australians can be prosecuted for their conduct anywhere in the world.
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STRICT LIABILITY OFFENCES
• Introduction of a strict liability offence for any corporation that deals with sanctioned entities.
• Prosecution will not need to prove that the company intended to undertake the conduct prohibited in order to secure a conviction. If a breach takes place inadvertently this alone will be grounds for prosecution.
• Defence: "reasonable precautions and due diligence".
• Underscores the importance of compliance program.
• Essentially, if a company has made reasonable efforts to avoid a breach, and exercised due diligence, it will not be in breach of the sanctions laws.
Q & A
QUESTIONS & ANSWERS
