6 Addressing the conduct


6.1 Stopping payments and money laundering offences

Making or receiving payments or property when you are aware of a risk that they might be associated with serious misconduct like bribery or corruption can itself be a criminal offence.

Division 400 of the Commonwealth Criminal Code creates 'money laundering' offences for dealing with money or other property that is used in the commission of an offence or to facilitate the commission of an offence (an instrument of crime) or is derived wholly or partly, directly or indirectly from the commission of an offence (a proceed of crime).

There are offences for intentionally, recklessly or negligently dealing with a proceed of crime or an instrument of crime. This means that if you are aware of a high risk that money or property is a proceed or an instrument of crime, then any dealing with the property or money will be a further criminal offence. There is an additional criminal offence for dealing with a proceed of crime valued at over $100,000 if there is reason to suspect it is a proceed of crime.

This can create difficulties where possible misconduct is uncovered partway through a commercial project: continuing to make or receive payments could create further criminal exposure, but stopping payments might tip off counterparties (and also amount to an offence), or might create commercial exposures.

There is an additional criminal offence for dealing with a proceed of crime valued at over $100,000 if there is reason to suspect it is a proceed of crime.
6.2 Identifying and remediating root causes

Any effective response will need to identify root causes of the issues and put in place improvements to policies, procedures and controls to comprehensively demonstrate that the issues could not arise again. Key lenses to consider when remediating root causes include:

Controls

What controls could or should have identified the issues, and how did it occur despite those controls? What improvements will prevent recurrence?

Systems

Did any systems fall short (eg accounting or payments systems)? Do they need upgrades and improvements?

Resourcing

Was lack of resourcing of compliance or audit a factor?

Policies/training/communication

What improvements to policies and training are necessary to ensure that staff understand the expectations and requirements of the company?

Remuneration and incentives

What incentivised staff to engage in the misconduct? How can remuneration structures and performance evaluation processes be amended to incentivise the desired behaviours?

Cultural drivers

Are there other cultural drivers within the business unit or team that precipitated or encouraged the conduct? How can that culture be changed?

6.3 Accountability and consequence management

The consequences that might flow to both an organisation and individuals in that organisation following the identification and investigation of bribery or other serious criminal conduct can be significant. Stakeholders will expect organisations to identify those who engaged in the misconduct and hold them to account, including imposing proportionate (and, where appropriate, severe) consequences. Some of those may include:

  • withholding variable remuneration, such as bonuses and other types of deferred remuneration;
  • termination of employment; and
  • referring the conduct to the police.

However, it has become abundantly clear (especially post-Financial Services Royal Commission), that there are public, regulatory and investor expectations that accountability also be reflected amongst those that manage and control the organisation, being the Board and senior management. How to appropriately demonstrate that accountability at senior levels also needs to be carefully considered.

6.4 Remedy

In addressing any misconduct identified, a company should also consider what remedies are appropriate, including whether and to whom reparations should be made. Reparations generally include the payment of restitution or other compensation to victims, foreign governments and/or the wider community affected by the misconduct.[1]

In Australia and other jurisdictions, reparations are an important demonstration of a company’s contrition for its conduct and regulators and courts commonly consider the nature of any reparations made by the company in reaching a determination as to the proper penalty or sentence to be applied. For example, Australian courts have accepted reparations directed at the 'community' through the form of donations as evidence for its contrition: (see ACCC v Santo Pennisi [2007] FCA 2100). In the US and UK, reparations are an essential factor that prosecutors consider in determining the appropriate resolution for a corporate defendant.

[1] For example, in 2015, a deferred prosecution agreement between the UK Serious Fraud Office and Standard Charter Bank included a payment to the Tanzanian Government, because in that case an agent of Standard Bank had used money to which the Tanzanian government was entitled in order to pay an illegal bribe.