GT Anti-corruption legislation around the world Canada, UK, US

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A Grant Thornton white paper that outlines anti-corruption legislation in Canada, the US and UK. We offer some insight into this legislation and how it could impact your business.


<ul><li> 1. A Grant Thornton white paperAnti-corruption legislation casts aglobal net: Dont get caught becauseyou dont know the rulesAudit Tax Advisorywww.GrantThornton.caGrant Thornton LLP. A Canadian Member of Grant Thornton International Ltd</li></ul><p> 2. Do you operate in markets or industrieswith a high risk of corruption and/or bribery?Do you know if your internal anti-corruptionpolicies are sufficient to defend your companyand its senior management from prosecutionunder current anti-corruption legislation?Do you have operations located in theUnited States or United Kingdom?Contents3 The new global landscape4 The major players taking it to the world6 An anti-corruption program is a global imperative7 Culture change must accompany policy change7 Slow response could have rapid repercussions 3. The new global landscapeits critical to know the terrainThe US Foreign Corrupt Practices ActPrior to the UK Bribery Act, the These are some of the(FCPA) and new UK Bribery Act are FCPA was the global gold standard for critical questions thatboth designed to directly and significantly anti-corruption legislation. Aggressiveaddress bribery and corruption, but investigation and prosecutions have should be front-of-mindthey are not aimed exclusively at domesticsteadily risen, including many non-US for globally active Canadian companies, making it clear that the fight organizations, their authorized agents and companies, as countriesagainst corruption transcends nationalother indirectly culpable entities. The UK around the worldincluding borders and has become a global Bribery Act, however, goes even further. Canadaenact and enforce imperative. Canadian companies areCompanies may be at risk simply by not complex regulations around further challenged by heightenedhaving a corporate anti-corruption corruption and bribery.enforcement of the Corruption of Foreignprogram in place.Public Officials Act (CFPOA). BothThe regulators mean business. From fines and reputationalprivate and public companies have been Canadian companies operating in global damage to jail time forand will continue to beaggressivelymarkets have been subject to multiple convicted individuals andtargeted by these laws, particularly thoseforeign laws and are at risk on a number companies, the consequencesdoing business in foreign markets where of fronts, which now includes bribery and of non-compliance arethe risk of corruption is high. Sanctions corruption. As this risk landscape substantial. As a result,for failing to comply with these laws are expands, you need to understand the localpotentially severe, with fines, penalties and international laws relevant to your Canadian companies mustand jail time all on the table. activities and take steps to identify, avoid now work to understand theand respond to unintended complicity. substance and reach of US and UK laws as well as our own legal environment. 3 4. The major players taking it to the world court. This has had the expected Prosecutions of companies and individuals impact on US companies, but a more occur daily and the numbers are increasing. worrisome trend for the rest of the world is the consistent targeting and In 2010, the US SEC and the DOJ pursuit of non-US-based entities. investigated dozens of cases of suspected Although the international holdings corruption, and prosecutions or settlementUnited Statesand complex structures of multinationalsfines totalled US$1.8 billion.After terrorism, fighting foreignoften discourage scrutiny, the United corruption is the US governments biggestStates is no longer holding back, and Eight of the top 10 largest FCPA corporatefocus. In 2008, Siemens AG plead guiltytheir approach is successfully breaking defendants of all time involve foreign rather than US violating the FCPA, agreeing to pay down traditional barriers to cross-a US$450 million penalty and disgorgeborder prosecutions.5$350 million in wrongful profits.1 In 2010,guidance document published by theFrench-based Alcatel-Lucent2 joinedMinistry of Justice6 clearly states that theythe growing number of successfully will also have jurisdiction over offencesprosecuted foreign multinationals, payingcommitted outside the United KingdomUS$137 million in fines. A trend is clearlywhere the person committing theseemergingenforcement and prosecution offences has a close connection with thein bribery and corruption cases almost United Kingdom.doubled from 2009 to 2010,3 and theUnited KingdomWhile the courts will decide howsize of fines increased as well. Of theThe Bribery Act, which came into effect the Act applies to non-UK companies,top 10 penalties incurred since theJuly 1, 2011, may apply to a Canadian the Serious Fraud Officethe policeFCPAs inception, eight occurred in thecompany if it carries on a business or department responsible for handlingpast 24 months, including UK defence part of a business in the United investigations of this natureappearscontractor BAEs settlements of almost Kingdom. The British authorities have to be taking the view that virtually anyUS$500 million.4 made it clear that they will vigorously company conducting business in theThe Department of Justice (DOJ), the pursue cases where a UK-based company United Kingdom must be in compliance.Securities Exchange Commission (SEC) is impacted by bribery, irrespective of The scope of this law actually exceedsand other authorities are highly focused where in the world the acts or omissionsthe FCPA in several significant areas.on developing sophisticated techniques may have been committed. In other First, the UK Bribery Act applies toand procedures for taking offenders to words, the bribery activity can take placecommercial bribery as well as bribery anywhere in the world and it wouldof government officials. This means that1 appear that the UK authoritieslike their unlike the FCPA or CFPOAwhose crm-1105.html2 counterpartsintend to take an scopes are applicable only to the latter lucent-settles-bribery-case.html aggressive stance on jurisdiction. Theprosecution of business-to-business3 fcpa-enforcement-a-dojsec-priority-127995108.html4 5 6 pay-the-fcpa-piper/foreign-corrupt-practices-act.html act-2010-guidance.pdf4 5. The UK Bribery Act, which came into effect in 2011, is a significant redraft and upgrade of earlier legislation that had been roundly criticizedby the Organisation for Economic Cooperation and Development (OECD). The OECD stated in an October 2008 report that the continuedfailure of the UK to address deficiencies in its laws on bribery of foreign public officials and on corporate liability for foreign bribery hashindered investigations.bribery is fair game. Second, the Act Progress Report 2011: Enforcement of the More recent developments show thatconsiders failure to prevent briberyOECD Anti-Bribery Convention7 reports the enforcement picture is changing inan offence. This may be its moston this lack of progress in enforcing Canada, and the conviction of Nikoambitious and far-reaching provision, and the OECD Anti-Bribery ConventionResources Ltd. in June 2011 indicates justthe most controversial, as it suggests that in Canada. Among other criticisms,how much. The company was fined aif a company with no anti-corruptionCanada was chastised for again beingtotal of C$9.5 million and was placed onmeasures in place becomes implicated in the only G7 country in the little to no probation for three years. The Canadianbribery, the lack of a program may itself enforcement category and the onlyprobation order, however, was basedbe a crime. Third, facilitation payments, OECD member that does not provide on a US Department of Justice (DOJ)which are allowed under the FCPA andnationality jurisdiction, which presentsdocument called a deferred prosecutionCFPOA, are specifically disallowed undera serious obstacle to enforcement. Onagreement used in FCPA cases. Thisthe UK Bribery Act. the positive side, the report found ittype of document is an agreement in Further clarification on how and topromising that 23 foreign briberywhich companies under FCPA scrutinywhom the Act will be applied comes from investigations are under way and are granted amnesty in exchange for the governments official guidance suggested that if prosecutions resulted,fulfilling certain corruption compliance(referenced above), Canadas international status should rise.8 requirementsalso known as a the joint prosecution guidance of the Given the United Kingdoms responseSchedule C.director of the Serious Fraud Officeto similar criticism, it seems likely that The fact that a Canadian probationand the director of public prosecutions Canada could react similarly. In fact, theorder was based on a set of requirementswho are charged with enforcing thegovernment introduced Bill C-31 in 2009,listed in a US DOJ agreementwas aAct, andwhich proposed to amend the CFPOAclear example of the rapidly growing the Acts ongoing application andby clarifying that it applies to Canadian cooperation between governments toresulting precedents. individuals acting outside of Canada.prosecute corruption. The terms of theIt also included provisions to applyorder may potentiallyshow how the lawsThe Act focuses on companies registered the CFPOA based on the nationalityof different countries are leading to morein or with offices in the United Kingdomprinciple, which would allow certainharmonization of global standards foror that employ UK citizens, but evenoffences committed outside Canada tocompliance in this area. Since the Nikowithout direct ties to the United be prosecuted as if they had occurred inconviction, several other enforcementKingdom, Canadian businesses with Canada.9 While this Bill died on the orderincidents have emerged, including a raidglobal presence or aspirations need topaper, growing international pressure on junior mining company Blackfireunderstand UK, US and other globalmakes it likely that these or similar Exploration in Calgary10 and a probe intoanti-corruption legislation and be awaremeasures will be the next likely legislativethe overseas operations of SNC-Lavalin.11of related emerging issues. step. In the meantime, we are seeingThere are, in fact, dozens of known casesincreasing enforcement of the CFPOAs currently under review by the RCMP,existing measures.and at least one further prosecutionNazir Karigar, who has been chargedwith one count of corruption.Canada7 Transparency International, Progress ReportJust as the OECD targeted the United 2011: Enforcement of the OECD Anti-Bribery Convention, lax response to foreigndownload/61106/978536,8 Ibid., 6.corruption, Canada has now been singled 10 TI-Canadas Anti-Corruption Developments Review, http://out as the worst offender amongst G7 calgary-miner-over-bribery-allegations/article2145226/ Corruption_Developments_Review_01-01_2001-Winter.pdf,11 Transparency Internationalsp. 6-7. co-operating-with-rcmp-investigation/article2155640/5 6. An anti-corruptionprogram is a global imperativeClearly, the rules have changed in Canada and 3. Develop an effective anti-corruption policyaround the world. Domestic enforcement is on thethat considers the prevention, detectionrise and simply doing business, including raising and ramifications of foreign corruption andcapital or debt, in the United States or the United bribery. It must be reflected in all aspects ofKingdom may subject you to the provisions in theiryour operations, with controls focused onrespective corruption acts. International enforcement high-risk areas. This is a crucial measure.legislation is broad, diverse and has teeth, whichRemember, having adequate procedures inmeans that Canadian companies need to takeplace to prevent bribery could be used as acorrective defence should anyone associated withThere are six steps you can take to help addressthe company be accused.12known risks and prepare for even more broad futureglobal legislation: 4. Ensure that all individuals and entities actingon your behalf overseas are properly trained in1. Understand the specific risks facing your your anti-corruption policies and procedures.Also conduct comprehensive backgroundorganization by undertaking a detailed riskdue diligence, not only on individuals, but onanalysis. Identify high- and low-risk areasoverseas acquisitions, joint venture partners andwithin the company, pinpoint their locations,any other entities to ensure they do not pose adefine their activities and review existing anti-corruption risk.corruption and related procedures.2. Be sure you understand the laws to which5. Design and implement a specific plan to meetthe above challenges and requirements for youryour international operations are subject, ascompanys particular situation.well as which countries are keen to act onthem. If you operate in countries where therisk of bribery and corruption is high, or6. Understand that failing to take action on thesewhere the legal framework and environment issues results in severe risks for companies andencourage prosecution, you could be a targettheir officers/directors.for investigation.12 7. Culture change Slow responsemust accompany could have rapidpolicy changerepercussionsCompanies can actively combat corruption Initial corporate reaction to this new wave of global anti-corruption legislation has been mixed. Of course,through controls and policies, internalno company supports, encourages or countenances any kind of criminal behaviour, but corruptioninvestigations and appropriate penalties,often occupies a middle ground. Many behavioursbut enforcing an organization-wide that have long been acceptedclient entertainment and gifting, for exampleare now under scrutiny.culture change is equally critical. YouCertainly in the United Kingdom, some worry thatmust implement a zero-tolerance anti-new, more restrictive legislation on what is and is not acceptable might disadvantage them in relation tocorruption policy while consistently companies operating in largely unregulated regions. Change is here, however, and its in your bestencouraging positive behaviours, interests to see that your organization understandsparticularly during difficult economic the landscape. The new legislation is complex, and understanding the big picture will betimes when corruption often increases. particularly difficult for companies operating in multiple jurisdictions. For many, an adviser who can provide an organization-wide program of e...</p>