Ensuring Compliance with Foreign Anti-Bribery Provisions for Banks

Banks and financial services businesses have until September this year to get ready for new laws that require businesses to demonstrate they have proper processes in place to stop their staff and contractors from engaging in bribery overseas.

From September 2024, The Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 introduces a new indictable offence by which banks and financial service providers may be criminally liable where an associate has bribed a foreign public official, unless they can demonstrate adequate procedures are in place to prevent the offence.

In addition to expanding existing foreign bribery offenses to capture a broader range of conduct, the legislation is about trying to prevent foreign bribery and penalise people who bribe foreign officials to gain an advantage in business.

As a generic example, the new provisions cover situations such as bank employees, agents or intermediaries working overseas who are paid a commission to bring in work for the bank, but who bribe a foreign official to secure the work.

The World Bank estimates more than US$2.6 trillion, or five per cent of global GDP, is lost to corruption each year around the world.

“This targets businesses that ignore misconduct by their associates and employees,” says Howard Rapke, a partner with law firm, Holding Redlich.

Australia’s amended foreign bribery rules are an expansion of the Australian Criminal Code Act 1995.

“These changes bring Australia into line with global foreign bribery legislation around the world,” says RSM Australia head of fraud and forensic services, Roger Darvall-Stevens.

The UK Bribery Act 2010 is the high bar internationally when it comes to foreign bribery laws. The US Foreign Corrupt Practices Act, which has been in place since 1977, has also informed Australia’s updated foreign bribery laws.

“Australia’s new laws model the UK Bribery Act. Our new laws have a strict liability offence for associates’ actions, which covers officers, employees, agents and contractors,” says Darvall-Stevens.

The maximum penalty for contravening these laws is $31.3 million per contravention, or three times the value of the benefit directly or indirectly obtained by bribery. If the value of the benefit can’t be determined, the penalty is 10 per cent of the business’s annual turnover during a 12-month period.

“This is very serious and the high penalties reflect US and UK foreign bribery laws,” says Darvall-Stevens.

For banks, the risk of non-compliance is greater than penalties and include loss of customers and reputation and a share price drop.

Where there is no suggestion Australian banks and financial services businesses are engaging in corruption overseas, a famously controversial case involved two Reserve Bank of Australia companies, Securency and Note Printing Australia, which were reported to have, “pleaded guilty to bribing overseas officials to win bank note printing contracts.”

Last year, a Colombian financial services institution, Corporación Financiera Colombiana S.A., was ordered to pay more than US$80 million to put to bed bribery allegations in the US.

Scope of the new rules

The Attorney-General has published draft guidance that indicates once the new rules come into place, corporations may be assessed by the proportionality and effectiveness of their anti-bribery procedures.

Darvall-Stevens says organisations will approach compliance with the new foreign anti-bribery rules in different ways.

“Some will have anti-bribery, anti-corruption programs, some will call them foreign anti-bribery compliance programs,” he says.

But they must comprise the following factors:

• A robust culture of integrity.
• Top level management and directors demonstrating a compliance culture.
• A strong anti-bribery compliance function.
• Effective multi-country risk management and assessment.
• Effective due diligence procedures
• Background checks on agents and subsidiaries.
• Careful and proper use of third parties.
• In addition to communication and training, a program to allow reporting foreign bribery (including a whistle blower program).
• Monitoring and review of the foreign bribery compliance program.

“It’s about managing and monitoring third parties and communicating to and training employees, the board, senior management, intermediaries and contractors,” says Darvall-Stevens.

Banks will also need a self-reporting tool they can use if they find employees have committed foreign bribery.

“This is not a set-and forget obligation. Businesses must appoint a person who is responsible for making sure policies and procedures are refreshed, implemented and operating on an ongoing basis and training is performed periodically, not just once during staff induction,” says Darvall-Stevens.

Most large banks will already have processes in place to ensure they comply. But smaller banks may have work to do to ensure they are ready for the introduction of the new rules in September 2024.

Demonstrating compliance

“Banks and financial service providers should consider whether and how to update their existing anti-bribery and corruption policies, procedures and training, to ensure they have adequate procedures in place to prevent bribery of a foreign public official, particularly in high-risk jurisdictions,” says Rapke.

Until now, foreign bribery has existed largely under regulators’ radars. While the new laws indicate there is more emphasis on foreign bribery at the federal government level, there are question marks over the way the regime will be regulated.

While prosecution is the Australian Federal Police’s responsibility, without a formal regulatory structure or body sitting across the law, as is the case in the UK or US, it’s not known how motivated authorities will be to pursue these cases.

Strengthening integrity and ethics in finance

As banks and financial services businesses have until September this year to get ready for new laws that require businesses to demonstrate they have proper processes, finance professionals can better grasp effective strategies to uphold and strengthen ethics and integrity in the workplace.   

 Ethics in Business and Finance | CPD: 1 hour
Develop your understanding of ethical practice in the workplace and the positive influences on business culture that are achieved when ethical decision-making is applied effectively throughout an organisation.

Integrity in the Workplace | CPD: 0.25 hours
The course explores two key principles – understanding your moral standards and acting according to your morals – to uphold integrity in the workplace. The course includes activities, case studies and examples to embed the learning objectives.

This article was originally published on Financial Services Professional Body | FINSIA