As the focus on investigating and prosecuting Australian companies for foreign corruption increases, so too does the need for SMEs in particular to foster robust corporate cultures of compliance.
The federal Senate has recently voted in favour of undertaking an inquiry into corrupt practices by Australian entities operating in foreign jurisdictions.
The approval of the Senate inquiry is a timely reminder and opportunity for companies whose operations extend beyond Australia’s borders to take stock of their current compliance programs.
SMEs in particular should consider whether there exists a sufficient level of awareness within their organisations with respect to the consequences of falling foul of the law. In 2014, the OECD noted that many companies, but especially SMEs, were unaware of the risks they run in Australia by engaging in certain activities abroad.
Small and medium size businesses may also encounter specific kinds of difficulties owing to resourcing restrictions (whereas large corporations increasingly have teams dedicated to these issues). For these reasons it is particularly imperative that SMEs have access to quality best practice advice in developing appropriate policies and procedures.
All business owners must bear in mind that whether a business can defend itself against allegations of violations of anti-corruption laws will depend in large part upon the extent to which the company is able to demonstrate a robust corporate culture of compliance.
A five-step ‘health check’ is a useful starting point for companies to assess the state of their compliance programs:
1. When was your last risk assessment? Knowing the nature and extent of the risk you face is preliminary to being able to reduce it. A thorough risk assessment should reveal any areas of vulnerability and lead to codes of conduct, policies and procedures being tailored appropriately. Importantly, SMEs are often subsidiaries of overseas parents and may be directed to operate in a certain manner – particularly where those subsidiaries are wholly owned. It is therefore vital that SMEs in such a position are cognisant of the nature of, and risks associated with, the tasks they are directed to undertake overseas or in dealing with foreign public officials in Australia.
2. Do you have an up-to-date code of conduct? It is imperative for businesses to make clear the expectations and rules surrounding conduct, and to ensure that employees, executives, boards and agents understand the standards to which they must adhere. An unequivocal and clearly communicated code of conduct can be one effective way of disseminating this information.
3. Have you implemented appropriate policies and procedures? Demonstrating a culture of compliance is virtually impossible if you can’t point to policies and procedures designed to promote such a culture. These policies should address not only prevention, but also appropriate responses to alleged misconduct. In respect of the latter, there must be clear internal reporting procedures aimed at encouraging those who encounter misconduct to report it, as well as rigorous internal investigation procedures. All policies must be based on best practice advice that is cognisant of the potential for a business’s activities to contravene the provisions of other jurisdictions’ foreign corrupt practices legislation. This is particularly relevant in the context of policies regarding facilitation payments, which are currently permissible in Australia but prohibited in several overseas jurisdictions, including the UK. Finally, monitoring is important; if a policy or procedure is revealed to be ineffective, it must be fixed
4. Have you trained your staff in your policies and procedures? Simply having appropriate codes of conduct, policies and procedures in place is unlikely to offer sufficient protection if allegations of violations are raised. Businesses need to ensure that all staff – and executives, boards and agents – are adequately trained in codes of conduct, policies and procedures and are given refreshers both periodically and when changes are implemented.
5. Does your workplace environment foster compliance? This depends upon the four preceding steps having been sufficiently adopted and, crucially, all staff – particularly those in senior positions – being dedicated to adhering to the highest standards of ethical conduct and requiring and promoting transparency at all times. Companies should also bear in mind that having a truly robust culture of compliance extends to expecting business partners to be compliant.
The commencement of the Senate inquiry signals that confronting issues surrounding foreign corrupt practices is high on the political agenda. Australian companies operating in foreign jurisdictions – which includes companies operating via foreign agents or whose subsidiaries act in foreign jurisdictions – must adopt, monitor and adapt, if required, stringent measures to both prevent and act upon allegations of foreign bribery and corruption.
Ula Strus is a lawyer and Catherine Williams a paralegal at Holding Redlich.
