Combating Corporate Crime (AU0004)

Objective and description: Australia will strengthen its ability to prevent, detect and respond to corporate crime, particularly bribery of foreign public officials, money laundering, and terrorism financing. We will do this by pursuing reforms to relevant legislative frameworks, which will involve a process of public consultation. Status Quo: Australia has strong laws in place to deal with corporate crime. We are a party to the OECD Anti-Bribery Convention, and are due to be reviewed again under this Convention in 2017. The Criminal Code Act 1995 makes it an offence to bribe a foreign public official and sets out tough penalties for individuals and companies. While we have two sets of foreign bribery prosecutions underway, it is a challenging offence to enforce as the offending typically occurs overseas and can be difficult to proactively detect. We also have a strong regime to fight money laundering and terrorism financing under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. A statutory review of this legislation was tabled in Parliament in April 2016 and the Government is considering its response. We are also exploring new responses to corruption and corporate crime. In March 2016, we released a public discussion paper on a possible deferred prosecution agreement (DPA) scheme in Australia. An effective DPA scheme could help encourage companies to self-report criminal behaviour and provide enforcement and prosecutorial agencies with a new tool to identify and bring corporate offenders to justice. Ambition: We will ensure that our laws applying to the bribery of foreign public officials, money laundering and terrorism financing are strong and there are no unnecessary barriers to effective prosecution. We will consult publicly on the implementation of recommendations from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated Rules and Regulations. We will respond to the public consultation into whether a DPA scheme would facilitate more effective and efficient responses to bribery and corporate corruption by encouraging companies to self-report. We will review the enforcement regime of the Australian Securities and Investments Commission (ASIC), to assess the suitability of the existing regulatory tools available to it to perform its functions adequately. Relevance: This commitment will advance the OGP values of public accountability by: strengthening Australia’s ability to prevent, detect and respond to bribery of foreign public officials, and meet its international obligations; improving the effectiveness of legislation to fight money laundering and terrorism financing; and encouraging companies to self-report criminal behaviour. COMMITMENT DETAILS; OGP Grand Challenge: Increasing Corporate Accountability More Effectively Managing Public Resources; Timeframes December 2016 – 2019; Lead agency Attorney-General’s Department (CriminalLaw@ag.gov.au); Other actors involved Government ACLEI, Australian Federal Police, Australian Securities and Investments Commission, Commonwealth Director of Public Prosecutions, Treasury and Department of the Prime Minister and Cabinet; Non-government: Industry, peak bodies (including Law Council of Australia), non-government organisations (including Australian Open Government Partnership Network, Accountability Round Table) and international partners

4. Combating corporate crime

Commitment Text:

Australia will strengthen its ability to prevent, detect and respond to corporate crime, particularly bribery of foreign public officials, money laundering, and terrorism financing.

We will do this by pursuing reforms to relevant legislative frameworks, which will involve a process of public consultation.

[…]

Ambition:

We will ensure that our laws applying to the bribery of foreign public officials, money laundering and terrorism financing are strong and there are no unnecessary barriers to effective prosecution.

We will consult publicly on the implementation of recommendations from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated Rules and Regulations.

We will respond to the public consultation into whether a DPA scheme would facilitate more effective and efficient responses to bribery and corporate corruption by encouraging companies to self-report.

We will review the enforcement regime of the Australian Securities and Investments Commission (ASIC), to assess the suitability of the existing regulatory tools available to it to perform its functions adequately.

Milestones:

1. AGD to review laws applying to foreign bribery and consult publicly on possible reform options.
2. Respond to the consultation on a possible Australian DPA scheme and consult on possible models.
3. Consult publicly on the recommendations from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated Rules and Regulations, and implement legislative reforms.
4. Review ASIC’s enforcement regime.

Responsible institution: Attorney-General’s Department

Supporting institution(s): ACLEI, Australian Federal Police, Australian Securities and Investments Commission, Commonwealth Director of Public Prosecutions, and Treasury: See the Australia National Action Plan for a full list.

Start date: December 2016 End date: 2019

Editorial Note: This is a partial version of the commitment text. For the full commitment text, see the Australia National Action Plan available at https://www.opengovpartnership.org/wp-content/uploads/2001/01/Australia_NAP_2016-2018_0.pdf

Context and Objectives

This commitment brings together a variety of initiatives relating to disclosure and transparency in corporate regulation.

Milestone 1: It is currently an offence under section 70.2 of the Criminal Code[1] to provide a benefit not legitimately due to a person with the intent to influence a foreign public official in the exercise of their official duties. However, there have been very few prosecutions under this offence.[2] The OECD Working Group on Bribery reported in 2015 that further reforms and enforcement action was necessary to establish the government’s commitment to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.[3] The government has recognised that it is difficult to prove the intention of the alleged offender, bribes can be concealed as legitimate payments in breach of false accounting laws,[4] detailed information may not be able to be obtained from other countries, and there is uncertainty over whether the offence extends to obtaining unforeseen business for other persons.[5]

Milestone 1 commits the government to review these current laws applying to foreign bribery and consult on their reform. The form and extent of the review and method of consultation is not made clear in the commitment text and therefore it is not very specific. The proposal to publicly consult on proposed reforms will enhance public consultation during the consultation process, but there is no provision for increased collaboration with civil society groups in the future.

The milestone has minor potential impact as it does not make any commitment to implement reforms after the consultation process. Even if implemented, it is not clear what impact any possible reforms might have in increasing access to information or accountability of public officials. Transparency International, for example, in various submissions and in interviews for this report, suggest that law reform is needed to curb foreign bribery. However, the impact of the proposed reforms will be limited unless they include the following: (a) protection of whistleblowers, (b) barring deficient companies from government work, (c) ensuring sufficient resources are available to enforce the laws on foreign bribery and (d) preventing suppression orders being issued in foreign bribery cases. Encouraging self-reporting and negotiated settlements, as in milestone 2, is also important.[6]

Outside of the commitment an inquiry into foreign bribery conducted by the Senate Economics References Committee was commenced on 24 June 2015. [7] The Committee report, published on 28 March 2018,[8] will be discussed in the end-of-term report.

Milestone 2: Deferred prosecution agreements (DPA) involve voluntary, negotiated settlements between a prosecutor and defendant to avoid the need to successfully prosecute breach of a crime. They typically require cooperation with any investigation, payment of financial penalties, a program to improve future compliance and potentially compensating those affected.

A public consultation paper inviting comments on whether a DPA scheme should be introduced in Australia to enhance the accountability of Australian business for serious corporate crime was released in March 2016.[9] Submissions generally agreed with the need for such a scheme to overcome the complexities associated with detecting, investigating and prosecuting corporate crime, encourage self-reporting of internal misconduct by companies, improving corporate compliance and culture, and mitigating the reputational impacts of prosecutions.[10]

This milestone committed the Australian government to further public consultation on a proposed model for introduction of a DPA Scheme. This will, therefore, increase public participation during the process of consultation, but although measurable, the milestone is not specific as to the model of consultation to be adopted and the extent any consultation will lead to introduction of a DPA scheme. This milestone has moderate potential impact. A DPA scheme has the potential to include public disclosure of negotiated outcomes as well as establishing public guidelines on their use. Such a scheme, once implemented, could increase public information on the investigation and enforcement of corporate crime.[11] The operation of the scheme itself is also likely to be subject to review. However, it is not proposed at this stage that additional mechanisms to ensure accountability for the use of DPAs are introduced with the scheme other than transparency of negotiated outcomes or instigation of prosecutions. These potential impacts are conditional on implementation of a DPA scheme along the lines currently being proposed.

Milestone 3: The Anti-Money Laundering and Counter-Terrorism Financing Act 2006[12] (the AML/CTF Act) requires regulated businesses to establish, implement and maintain a compliance program, conduct due-diligence on their customers and lodge reports on specified transactions and suspicious matter with the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The Attorney-General’s Department completed a review of this regulatory regime in April 2016.[13] Based on feedback from industry and the various agencies involved, the review concluded that industry was generally in support of the current regime and its risk-based approach, but that it needed to be strengthened and simplified. The review made 84 recommendations, including simplification of the legislation and rules, reforms to be co-designed in partnership with industry and partner agencies, that regulated businesses be provided with targeted feedback on their compliance activity, and that sharing of AUSTRAC information be improved. This milestone commits the government to publicly consult on the recommendations of the review, and to implement legislative reforms.

The nature and breadth of the consultation is not specified in the commitment text, though the recommendation in the review that reforms be co-designed with industry and partner agencies suggests that the consultation will involve more than merely release of further issues papers. The milestone has a moderate potential impact if the legislative reforms extend to the extent recommended in the review. In submissions to the consultation process to date and in interviews for this report, there was general support for simplifying the current regime and enhancing the transparency of its operation and impact.[14] Concerns were raised over some of the proposed reforms, including whether there is sufficient evidence of effectiveness of current laws to justify their expansion, and the associated regulatory intrusion, to new industries or professions.[15]

Milestone 4: A review of Australia’s financial system in 2014 identified a number of gaps in the Australian Securities and Investment Commission’s (ASIC) enforcement powers and recommended that ASIC be provided with stronger regulatory tools.[16] In response, in October 2016 the government established the ASIC Enforcement Review Taskforce to examine existing legislation dealing with corporations, financial services, credit and insurance, including the need for stronger penalties, availability of alternative enforcement mechanisms, enhanced information gathering powers, and expanding disclosure requirements for unlawful activity.[17] The Taskforce panel is chaired by the Treasury Department and includes senior representatives from ASIC, the Attorney-General's Department and the office of the Commonwealth Director of Public Prosecutions. An expert group was also established involving representatives from the Consumer Action Law Centre, the Law Council of Australia, academics and lawyers.[18]

While this milestone, on face value, commits the government to a review of ASIC’s enforcement powers, in the context of the establishment of the taskforce, the scope and conduct of the review is highly specific. The role of the expert group and other consultation efforts in carrying out the review could have a significant impact in increasing civic participation. However, as the role of the expert group is limited in scope and duration the potential impact on civic participation is only moderate.

Completion

Milestone 1: This milestone was completed. The Minister for Justice (MoJ) released a public consultation paper on proposed reforms to Australian foreign bribery laws on 4 April 2017.[19] It included an exposure draft of proposed legislative changes. The MoJ invited submissions until 1 May 2017, with 16 submissions being received from industry bodies, civil society organisations and academics. The Attorney-General’s Department made all submissions publicly available.[20]

Foreign bribery laws were also discussed with non-government stakeholders during the Government Business Anti-Corruption Roundtable held on 31 March 2017.[21] However, interviews with participants at that roundtable pointed to the limited time available due to the broad range of topics covered, including terrorism and cyber security related issues.[22]

The Attorney General’s Department had not provided feedback on the submissions of roundtable discussion or other evidence of further response at the time of writing this report.

Milestone 2: This milestone was completed. The MoJ released a public consultation paper, responding to the earlier consultation, on a proposed model for a DPA scheme on 31 March 2017 with submissions invited until 1 May 2017.[23] There were 18 submissions from stakeholders including law firms, business groups, civil society organisations and academics. The Attorney General’s Department has not made any feedback or further response to the consultation process publicly available.

Milestone 3: This milestone saw substantial completion. The Attorney-General’s Department released a project plan for implementing the 2016 review of the Anti-Money Laundering and Counter-Terrorism Financing Act in February 2017.[24] It sets out two implementation phases, with consultation on the first phase already having commenced in November 2016. A consultation paper on phase 1 amendments had already been released by the Attorney-General’s Department in December 2016[25] along with a separate paper on regulating digital currencies, a particular issue identified in the 2016 Review.[26] The Attorney-General’s Department also released sector-specific consultation papers in November 2016 relating to accountants, dealers of high-value or luxury goods, legal practitioners and conveyancers, real estate professionals, and trust and company service providers.[27] Public submissions on each of these papers closed on 31 January 2017, with six general submissions and 25 sector-specific submissions made available on the Attorney-General’s website.[28] The Attorney-General’s Department had not made details of further roundtable discussions and the establishment and role of the Industry Consultation Council publicly available.[29]

The project plan provided for legislative implementation or reports on phase 1 projects would be completed by July 2017. Proposed legislation was introduced to Parliament on 17 August 2017, after the period of implementation under consideration.[30] Interviews with the Attorney General’s Department indicate that recommendations to government coming out of the sector-specific consultations were provided on 30 June 2017, and that consultations relating to phase 2 projects also commenced in July 2017.

Milestone 4: This milestone was substantially completed. The ASIC Enforcement Review Taskforce, led by a panel chaired by the Treasury Department, has released six consultation papers up to the end of September 2017. These include ‘Self reporting of contraventions by financial services and credit licensees’ on 12 April 2017.[31] The Attorney-General’s Department has not made submissions or feedback on the consultation process public at the time of preparation of this report. Interviews with the Attorney General’s Department indicated that a report would be provided to government to consider by the end of 2017.[32]

Apart from the consultations undertaken in implementation of this commitment there were no publicly available results.

Next Steps

The consultation and implementation process for milestone 3 is likely to continue into the next action plan cycle. The remaining aspects of that process should be reflected in the next action plan. An ongoing collaboration with non-government stakeholders could be considered to evaluate the implementation and impact of any reforms and consider further reform options.

Commitment 4. Combating Corporate Crime

Commitment Text:

Australia will strengthen its ability to prevent, detect and respond to corporate crime, particularly bribery of foreign public officials, money laundering, and terrorism financing.

We will do this by pursuing reforms to relevant legislative frameworks, which will involve a process of public consultation.

[…]

Ambition:

We will ensure that our laws applying to the bribery of foreign public officials, money laundering and terrorism financing are strong and there are no unnecessary barriers to effective prosecution.

We will consult publicly on the implementation of recommendations from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated Rules and Regulations.

We will respond to the public consultation into whether a DPA scheme would facilitate more effective and efficient responses to bribery and corporate corruption by encouraging companies to self-report.

We will review the enforcement regime of the Australian Securities and Investments Commission (ASIC), to assess the suitability of the existing regulatory tools available to it to perform its functions adequately.

Milestones:

1. AGD to review laws applying to foreign bribery and consult publicly on possible reform options.
2. Respond to the consultation on a possible Australian DPA scheme and consult on possible models.
3. Consult publicly on the recommendations from the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated Rules and Regulations, and implement legislative reforms.
4. Review ASIC’s enforcement regime.

Responsible institution: Attorney-General’s Department

Supporting institution(s): ACLEI, Australian Federal Police, Australian Securities and Investments Commission, Commonwealth Director of Public Prosecutions, and Treasury: See the Australia National Action Plan for a full list.

Start date: December 2016              End date: 2019

Editorial Note: This is a partial version of the commitment text. For the full commitment text, see the Australia National Action Plan available at https://www.opengovpartnership.org/sites/default/files/Australia_NAP_2016-2018_0.pdf

Commitment Aim:

Under this commitment, the Australian government was to consult on and review a variety of initiatives in corporate regulation, including use of transparency and disclosure to regulate bribery of foreign public officials, money laundering, and terrorism financing, and corporate corruption generally. In particular, this commitment aims to:

1. Review current offences and enforcement practice relating to foreign bribery and engage in a consultation on their reform, without committing to implementing the results of any consultation;
2. Engage in further public consultation on a model for deferred prosecution agreements (DPAs) to be used in areas involving corporate crime, after a 2016 consultation established general support for the use of such a scheme;
3. Engage in public consultation on recommendations made in a 2016 review of anti-money laundering and counter-terrorism financing legislation, and implement legislative reform; and
4. Review the enforcement powers of the Australian Securities and Investment Commission (ASIC) through establishment and support of the ASIC Enforcement Review Taskforce.

Status

Midterm: Substantial

Overall this commitment was substantially completed by the midterm. Milestones 1 and 2 were completed, with the Minister of Justice releasing consultation papers on proposed reforms to Australian foreign bribery laws [28] and a proposed model for a deferred prosecutions agreements scheme. [29] The Attorney-General’s Department convened the Government Business Anti-Corruption Roundtable with non-government stakeholders and discussed bribery laws, on 31 March 2017. [30] The Attorney-General’s Department also completed the first of two phases of consultation on the 2016 review of the Anti-Money Laundering and Counter-Terrorism Financing Act with the second phase of consultation due to commence after the period under review in the Progress Report (milestone 3). [31] The ASIC Enforcement Review Taskforce, established prior to the commencement of the national action plan, released two of a planned series of consultation papers (milestone 4). [32]

End of term: Substantial

In relation to milestone 4, the ASIC Enforcement Taskforce released eight consultation papers through November 2017. [35] 149 submissions were received and made available on the Treasury Department’s website. [36] The Treasury also formed an expert group drawn from academia and legal experts to inform the taskforce. [37] The taskforce provided its report to government on 18 December 2017, making some 50 recommendations for reform relating to self-reporting of contraventions by providers of financial and credit services, strengthening search powers and access to telecommunications intercept materials, adoption of a co-regulatory model for industry codes of conduct, toughening licencing powers and ability to ban individuals from managing financial services, increasing penalties available, and introducing the power to make binding directions on financial services and credit licensees. [38] The government responded to the taskforce’s report on 16 April 2018, agreeing, or agreeing in principle, to all of the taskforce’s recommendations. [39] Milestone 4 therefore has been completed.

Did It Open Government?

Civic Participation: Major

Implementation of this commitment, principally through the public engagement process adopted in milestone 4, had a major effect on opening up government.

As noted on the ASIC Review: ‘Public consultation on an ASIC directions power highlighted the importance of clear procedural fairness for licensees and assisted the taskforce in arriving at its final recommendations.’ [40] This consultation process involved a highly detailed and structured release of multiple consultation papers, submissions from a broad range of persons potentially affected by the work of the taskforce, and included significant contributions from a widely drawn expert panel.

The process went well beyond the past common practice of providing an opportunity to comment on a public consultation paper. As agreed by Gerard Brody, CEO of the Consumer Action Law Centre, a member of the expert group that informed the taskforce, this group provided a significant opportunity for the perspectives of consumers and business, as well as academic expertise, to be included in the work of the taskforce.

The release of a discussion paper, and public release of submissions in response, under milestones 1 and 2, was similar to recent practice of the Treasury Department in relation to corporate law reform. The Department did not release any public feedback on the consultation, but legislation—the Crimes Legislation Amendment (Combating Corporate Crime) Bill 2017—was proposed to Parliament, but lapsed at the end of the parliamentary session on 1 July 2019. [41] The proposed legislation largely reflects the exposure draft and elements put forward by the government as part of the consultation process. However, some elements of the exposure draft on changes to foreign bribery offences, such as including the fault of recklessness as an element of the offence, were amended as a result of the consultation process. [42]

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (‘Amendment Act’) implements a number of reforms put forward as part of the first phase of the consultation on the 2016 statutory review, under milestone 3. The IRM researcher could not find any evidence on whether the proposals put forward in that consultation paper but not reflected in the Amendment Act have been rejected (perhaps due to the consultation process) or are still being progressed and included in future Bills.

The measures in the Amendment Act are also described by the Attorney-General’s Department as being of a more technical nature and able to be implemented quickly. [43] As at the end of term for the first national action plan, there was no publicly available information on the more substantial and complex reforms recommended by the review, including simplification and rationalisation of the AML/CTF regime, inclusion of businesses based offshore, and the possible extension of the regime to particular services provided by lawyers, accountants, conveyancers, real estate agents, high-value dealers, and trust and company service providers. [44]

Outside of the commitment, an inquiry into foreign bribery conducted by the Senate Economics References Committee (SERC) began on 24 June 2015. [45] In the course of its inquiry the SERC received 46 public submissions and held three public hearings—two in Sydney and one in Melbourne. The SERC report, published on 28 March 2018, [46] notes the consultation process for milestones 2 and 3 discusses the reforms proposed but does not engage with the submissions made as part of that consultation. However, there is reference throughout the report to the views of stakeholders put forward during the consultation process. The SERC makes several recommendations in line with the proposed Combating Corporate Crime legislation but also includes others going beyond the scope of the proposed legislation to include abolition of a facilitation payments defense and expansion of beneficial ownership registration.

Carried Forward?

There is no commitment relating to public consultation on reform of anti-money laundering and counter-terrorism financing legislation in the second national action plan. [47] The second national action plan does, however, include a statement that the government will continue to implement incomplete commitments and publicly report on progress to the OGP Forum. [48]

The IRM researcher suggests to continue promoting broad civic participation to implement recommendations by both the ASIC Enforcement Taskforce Review and the SERC Report.

The mid-term report recommended that remaining aspects of the process set out in milestone 3 should be reflected in the next action plan and that an ongoing collaboration with non-government stakeholders be considered to evaluate the implementation and impact of any reforms and consider further reform options.