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.
GT Anti-corruption legislation around the world Canada, UK, US
1. A Grant Thornton white paper
Anti-corruption legislation casts a
global net: Don’t get caught because
you don’t know the rules
Audit • Tax • Advisory
www.GrantThornton.ca
Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd
2. Do you operate in markets or industries
with a high risk of corruption and/or bribery?
Do you know if your internal anti-corruption
policies are sufficient to defend your company
and its senior management from prosecution
under current anti-corruption legislation?
Do you have operations located in the
United States or United Kingdom?
Contents
3 The new global landscape
4 The major players – taking it to the world
6 An anti-corruption program is a global imperative
7 Culture change must accompany policy change
7 Slow response could have rapid repercussions
3. The new global landscape—
it’s critical to know the terrain
The US Foreign Corrupt Practices Act Prior 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 that both designed to directly and significantly anti-corruption legislation. Aggressive
address bribery and corruption, but investigation and prosecutions have
should be front-of-mind
they are not aimed exclusively at domestic steadily risen, including many non-US
for globally active Canadian companies, making it clear that the fight organizations, their authorized agents and
companies, as countries against corruption transcends national other indirectly culpable entities. The UK
around the world—including borders and has become a global Bribery Act, however, goes even further.
Canada—enact and enforce imperative. Canadian companies are Companies may be at risk simply by not
complex regulations around further challenged by heightened having a corporate anti-corruption
corruption and bribery. enforcement of the Corruption of Foreign program in place.
Public Officials Act (CFPOA). Both The regulators mean business.
From fines and reputational
private and public companies have been— Canadian companies operating in global
damage to jail time for and will continue to be—aggressively markets have been subject to multiple
convicted individuals and targeted by these laws, particularly those foreign laws and are at risk on a number
companies, the consequences doing business in foreign markets where of fronts, which now includes bribery and
of non-compliance are the 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 local
potentially severe, with fines, penalties and international laws relevant to your
Canadian companies must
and jail time all on the table. activities and take steps to identify, avoid
now work to understand the
and 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 settlement
United States and complex structures of multinationals fines totalled US$1.8 billion.
After terrorism, fighting foreign often discourage scrutiny, the United
corruption is the US government’s biggest States is no longer holding back, and Eight of the top 10 largest FCPA corporate
focus. In 2008, Siemens AG plead guilty their approach is successfully breaking defendants of all time involve foreign rather
than US companies.
to violating the FCPA, agreeing to pay down traditional barriers to cross-
a US$450 million penalty and disgorge border prosecutions.5
$350 million in wrongful profits.1 In 2010, guidance document published by the
French-based Alcatel-Lucent2 joined Ministry of Justice6 clearly states that they
the growing number of successfully will also have jurisdiction over offences
prosecuted foreign multinationals, paying committed outside the United Kingdom
US$137 million in fines. A trend is clearly where the person committing these
emerging—enforcement and prosecution offences has a close connection with the
in bribery and corruption cases almost United Kingdom.
doubled from 2009 to 2010,3 and the United Kingdom While the courts will decide how
size of fines increased as well. Of the The Bribery Act, which came into effect the Act applies to non-UK companies,
top 10 penalties incurred since the July 1, 2011, may apply to a Canadian the Serious Fraud Office—the police
FCPA’s inception, eight occurred in the company if it “carries on a business or department responsible for handling
past 24 months, including UK defence part of a business” in the United investigations of this nature—appears
contractor BAE’s settlements of almost Kingdom. The British authorities have to be taking the view that virtually any
US$500 million.4 made it clear that they will vigorously company conducting business in the
The 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 exceeds
and other authorities are highly focused where in the world the acts or omissions the FCPA in several significant areas.
on developing sophisticated techniques may have been committed. In other First, the UK Bribery Act applies to
and procedures for taking offenders to words, the bribery activity can take place commercial bribery as well as bribery
anywhere in the world and it would of government officials. This means that
1 http://www.justice.gov/opa/pr/2008/December/08- appear that the UK authorities—like their unlike the FCPA or CFPOA—whose
crm-1105.html
2 http://www.fcpablog.com/blog/2010/12/28/alcatel- US counterparts—intend to take an scopes are applicable only to the latter—
lucent-settles-bribery-case.html
aggressive stance on jurisdiction. The prosecution of business-to-business
3 http://www.prnewswire.com/news-releases/aggressive-
fcpa-enforcement-a-dojsec-priority-127995108.html
4 http://blogs.wsj.com/law/2010/02/08/bae-the-latest-to- 5 http://blog.issgovernance.com/esg/2010/02/survey-of- 6 http://www.justice.gov.uk/downloads/legislation/bribery-
pay-the-fcpa-piper/ foreign-corrupt-practices-act.html act-2010-guidance.pdf
4
5. The UK Bribery Act, which came into effect in 2011, is a significant redraft and upgrade of earlier legislation that had been roundly criticized
by the Organisation for Economic Cooperation and Development (OECD). The OECD stated in an October 2008 report that “the continued
failure of the UK to address deficiencies in its laws on bribery of foreign public officials and on corporate liability for foreign bribery has
hindered investigations.”
bribery is fair game. Second, the Act Progress Report 2011: Enforcement of the More recent developments show that
considers “failure to prevent bribery” OECD Anti-Bribery Convention7 reports the enforcement picture is changing in
an offence. This may be its most on this lack of progress in enforcing Canada, and the conviction of Niko
ambitious and far-reaching provision, and the OECD Anti-Bribery Convention Resources Ltd. in June 2011 indicates just
the most controversial, as it suggests that in Canada. Among other criticisms, how much. The company was fined a
if a company with no anti-corruption Canada was chastised for again being total of C$9.5 million and was placed on
measures in place becomes implicated in “the only G7 country in the ‘little to no probation for three years. The Canadian
bribery, the lack of a program may itself enforcement category’” and “the only probation order, however, was based
be a crime. Third, facilitation payments, OECD member that does not provide on a US Department of Justice (DOJ)
which are allowed under the FCPA and nationality jurisdiction, which presents document called a “deferred prosecution
CFPOA, are specifically disallowed under a serious obstacle to enforcement.” On agreement” used in FCPA cases. This
the UK Bribery Act. the positive side, the report found it type of document is an agreement in
Further clarification on how and to “promising that 23 foreign bribery which companies under FCPA scrutiny
whom the Act will be applied comes from investigations are under way” and are granted amnesty in exchange for
• the government’s official guidance suggested that if prosecutions resulted, fulfilling certain corruption compliance
(referenced above), Canada’s international status should rise.8 requirements—also known as a
• the joint prosecution guidance of the Given the United Kingdom’s response “Schedule C.”
director of the Serious Fraud Office to similar criticism, it seems likely that The fact that a Canadian probation
and the director of public prosecutions Canada could react similarly. In fact, the order was based on a set of requirements
who are charged with enforcing the government introduced Bill C-31 in 2009, listed in a US DOJ agreement was a
Act, and which “proposed to amend the CFPOA clear example of the rapidly growing
• the Act’s ongoing application and by clarifying that it applies to Canadian cooperation between governments to
resulting precedents. individuals acting outside of Canada.” prosecute corruption. The terms of the
It also included provisions to apply order may potentially show how the laws
The Act focuses on companies registered the CFPOA based on the nationality of different countries are leading to more
in or with offices in the United Kingdom principle, which would allow certain harmonization of global standards for
or that employ UK citizens, but even offences committed outside Canada to compliance in this area. Since the Niko
without direct ties to the United be prosecuted as if they had occurred in conviction, several other enforcement
Kingdom, Canadian businesses with Canada.9 While this Bill died on the order incidents have emerged, including a raid
global presence or aspirations need to paper, growing international pressure on junior mining company Blackfire
understand UK, US and other global makes it likely that these or similar Exploration in Calgary10 and a probe into
anti-corruption legislation and be aware measures will be the next likely legislative the overseas operations of SNC-Lavalin.11
of related emerging issues. step. In the meantime, we are seeing There are, in fact, dozens of known cases
increasing enforcement of the CFPOA’s currently under review by the RCMP,
existing measures. and at least one further prosecution—
Nazir Karigar, who has been charged
with one count of corruption.
Canada 7 Transparency International, Progress Report
Just as the OECD targeted the United 2011: Enforcement of the OECD Anti-Bribery
Convention, http://archive.transparency.org/content/
Kingdom’s lax response to foreign download/61106/978536,
8 Ibid., 6.
corruption, Canada has now been singled 10 http://www.theglobeandmail.com/news/national/rcmp-raid-
9 TI-Canada’s Anti-Corruption Developments Review, http://
out as the worst offender amongst G7 www.transparency.ca/Reports/Reviews/TI-Canada_Anti- calgary-miner-over-bribery-allegations/article2145226/
Corruption_Developments_Review_01-01_2001-Winter.pdf, 11 http://www.theglobeandmail.com/report-on-business/snc-
nations. Transparency International’s p. 6-7. co-operating-with-rcmp-investigation/article2155640/
5
6. An anti-corruption
program is a global imperative
Clearly, the rules have changed in Canada and 3. Develop an effective anti-corruption policy
around the world. Domestic enforcement is on the that considers the prevention, detection
rise and simply doing business, including raising and ramifications of foreign corruption and
capital or debt, in the United States or the United bribery. It must be reflected in all aspects of
Kingdom may subject you to the provisions in their your operations, with controls focused on
respective corruption acts. International enforcement high-risk areas. This is a crucial measure.
legislation is broad, diverse and has teeth, which Remember, having adequate procedures in
means that Canadian companies need to take place to prevent bribery could be used as a
corrective action. legal defence should anyone associated with
There are six steps you can take to help address the company be accused.12
known risks and prepare for even more broad future
global legislation: 4. Ensure that all individuals and entities acting
on your behalf overseas are properly trained in
1. Understand the specific risks facing your your anti-corruption policies and procedures.
Also conduct comprehensive background
organization by undertaking a detailed risk
due diligence, not only on individuals, but on
analysis. Identify high- and low-risk areas
overseas acquisitions, joint venture partners and
within the company, pinpoint their locations,
any other entities to ensure they do not pose a
define their activities and review existing anti-
corruption risk.
corruption and related procedures.
2. Be sure you understand the laws to which 5. Design and implement a specific plan to meet
the above challenges and requirements for your
your international operations are subject, as
company’s particular situation.
well as which countries are keen to act on
them. If you operate in countries where the
risk of bribery and corruption is high, or 6. Understand that failing to take action on these
where the legal framework and environment issues results in severe risks for companies and
encourage prosecution, you could be a target their officers/directors.
for investigation.
12 http://www.legislation.gov.uk/ukpga/2010/23/section/7
6
7. Culture change Slow response
must accompany could have rapid
policy change repercussions
Companies 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, internal no company supports, encourages or countenances
any kind of criminal behaviour, but “corruption”
investigations and appropriate penalties, often occupies a middle ground. Many behaviours
but enforcing an organization-wide that have long been accepted—client entertainment
and gifting, for example—are now under scrutiny.
culture change is equally critical. You Certainly in the United Kingdom, some worry that
must implement a zero-tolerance anti- new, more restrictive legislation on what is and is not
acceptable might disadvantage them in relation to
corruption policy while consistently companies operating in largely unregulated regions.
Change is here, however, and it’s in your best
encouraging positive behaviours, interests to see that your organization understands
particularly during difficult economic the landscape. The new legislation is complex,
and understanding the big picture will be
times when corruption often increases. particularly difficult for companies operating in
multiple jurisdictions. For many, an adviser who can
provide an organization-wide program of education,
prevention, detection and investigation will be critical
to their anti-corruption response.
Take charge, before the regulators take action.
An anti-corruption corporate culture requires:
• Top-level commitment, in the form of
– senior management involvement
– a zero-tolerance atmosphere
• Policies and procedures that
– are clear, practicable and fair
– cover gifts, hospitality, expenses and
facilitation payments
• Procedures applied consistently, internally
and externally
7