Skip to content
Heightened corporate liability risk across APAC
Recent policy updates in the APAC region signal a shifting focus by authorities on financial crime. While countries such as Australia, Vietnam, China, and Malaysia tighten their regulations, Singapore and Hong Kong are enhancing their enforcement capabilities. It is a good time for businesses across the region to reevaluate and re-align their policies and procedures with regulators’ expectations. Having a solid policy on paper runs the risk of complacency, which has tripped up many corporate companies. Without a company-wide integrated compliance process with systematic controls, regular monitoring and documentation, the policy is futile.
Australia introduces ‘failure to prevent’
Australia’s new corporate crime of failure to prevent bribery of a foreign official became effective on September 8, 2024. The Crimes Legislation Amendment (Combatting Foreign Bribery) Act 2024 significantly strengthens Australia’s criminal offences on foreign bribery and indicates a significant shift in a regulatory approach to corruption.
There are similarities between the amendment and the UK Bribery Act of 2010, and many Australian companies with UK associates would have amended their policies in line with the UKBA. However, these policies will not be enough, according to Abigail McGregor, partner and expert on anti-bribery and corruption compliance with Norton Rose Fulbright Australia.
Companies in Australia could already commit the crime of bribery of a foreign official via activities of their employees and agents. The new failure to prevent foreign bribery offence supplements the existing offence of bribing a foreign official. Under the new offence, a company commits a crime if it fails to prevent bribery of a foreign official by its associates. Associate is broadly defined and can include employees, external contractors, agents, subsidiaries or a person that performs services on behalf of the company. It is not necessary for the associate to be convicted of a foreign bribery offence first for the company to be convicted of the offence. Furthermore, the new offence can apply to foreign corporations for conduct committed inside Australia by their associates. The only defence under the new offence is if the company can prove they had adequate procedures. Corporations risk criminal liability if they cannot demonstrate that ‘adequate procedures’ against bribery are in place.
Abigail believes the risk assessment process is critical to a successful compliance program.
“You need to look at where there is a risk that an associated person may bribe a foreign official. There is a wider definition of an associated person under the new amendment, which refers to an employee, your supplier, an agent, an associated entity, or a related entity. When is there an opportunity for an associate to pay a bribe that will benefit your company? Companies need to understand where there is heightened risk in their network and ensure there are controls to manage that risk. They need to then check those controls are working.”
It’s important to note that having anti-bribery controls in place is insufficient for a corporation to use the ‘adequate procedures’ defence. A corporation must also be able to show that the procedures were adequate given the risks that exist.
“An anti-bribery policy is not enough; risk assessments and controls need to be put in place. If you do nothing, and bribery is uncovered, there is absolute liability.”
APAC pushes back – increasing anti-bribery and corruption initiatives
Wilson Ang, who heads the regulatory compliance and investigations practice for Norton Rose Fulbright’s Asia practice, said several government efforts are underway in the region to combat bribery and corruption.
Vietnam
Vietnam is experiencing a significant anti-corruption crackdown, resulting in high-profile prosecutions and resignations from numerous government officials.
The “blazing furnace” anti-corruption drive, spearheaded by Nguyen Phu Trong, the General Secretary of the Communist Party of Vietnam (CPV), is the most comprehensive anti-corruption effort in the CPV’s history. Over 16,000 corruption and corruption-related investigations have been undertaken against over 30,000 defendants, including business executives and senior government officials.[1]
“Businesses looking to diversify their supply chain and manufacturing sources, and looking to Vietnam as an alternative base need to be aware of these challenges on the ground,” Wilson explained.
China
China has similarly engaged in a strong and concerted anti-corruption effort for some time now.
On December 29, 2023, the National People’s Congress formally approved the sixth amendment to the Company Law. The New Company Law was enacted on July 1, 2024, and will impact all companies in the People’s Republic of China, including foreign-invested enterprises.[2]
The new law includes heavier penalties and promises severe punishment for those found offering bribes and committing criminal activities in particular fields, including the ecological environment, finance, workplace safety, food and medicine, disaster prevention and relief, social security, education, and medical care.[3]
Wilson added that there are also amendments providing for higher penalties in certain circumstances, “such as when the giver of the bribe has offered bribes to more than one person or given bribes to administrative law enforcement or traditional officers. This applies to individuals and entities and the entities that accept bribes.”
Malaysia
Malaysia introduced a corporate liability offence under section 17A of the Malaysian Anti-Corruption Commission Act in 2020. Under the offence, a commercial organization can be considered guilty if its employees and associates commit corruption for its benefit. The provision makes a company liable for the acts of bribery of its associated persons unless the company can show it has adequate procedures in place to prevent corruption.
Wilson explains that this is a strict liability offence.
“Recent cases indicate that the law is not just in place but actively being enforced,” Wilson explained. “This shows why it is so much more important now for companies to have adequate procedures in place. They should at least have a defence to show that they had these policies and procedures and be able to make an argument that the offence should not accrue to them.”
Singapore
Singapore has recently seen several high-profile prosecutions involving large corporations and government officials. Significantly, one of the prosecutions is anticipated to lead to a deferred prosecution arrangement (DPA), the first of its kind in the country.
“There were reports earlier in the year that the public prosecutor is discussing a deferred prosecution arrangement with the company in respect of alleged offences in Brazil,” Wilson explained. “The terms have yet to be worked out, but a DPA will need the approval of the High Court before it can come into force.
“This signals a new direction in Singapore for cross-border bribery and is very much a development to keep an eye on.”
Hong Kong
While Hong Kong does not have a corporate offence for failure to prevent bribery, the country is seeing increasing enforcement activity.
The Independent Commission Against Corruption (ICAC), responsible for bribery and corruption enforcement, has recently signed Memorandums of Understanding with other local regulatory authorities. According to Daniel Ng from Norton Rose Fulbright’s Hong Kong office, these MoUs have enhanced investigation capacity and helped achieve several arrests for corruption.
“In April this year, there was a large-scale joint operation by the ICAC and the Competition Commission for the first time. Over 40 premises were raided, and more than 20 people were arrested.”
The ICAC actively encourages the private sector to review its policies and internal management.
“Several guidelines have been published over the last few years to help businesses improve their risk assessment and management. This includes anti-corruption guidelines for banks and construction companies. They are not mandatory but contain some very practical tips on how businesses can establish a culture of prevention of bribery interruption.” Daniel says.
“We expect other developments in Hong Kong, such as the deferred prosecution arrangement. A DPA encourages businesses to self-report and allows them to review their internal management policies and procedures to help prevent bribery.”
Also expected soon are whistleblowing protocols.
“The legislative reforms are not in place yet, but we do know that they have been in legislative discussions”, Daniel explains. “We ideally would like to have a statutory regime for whistleblowing, where informants, staff, and employees can report suspicious activities without disclosing their identity. The confidential basis of the reporting completes the whole culture of bribery prevention.”
The rise of the whistleblower
Organizations should also note the growing regulatory trend of whistleblowing protection. Aware that it is impossible to police private sector activity around the world, some governments are offering incentives and gateways for potential whistleblowers. The US is leading the way in this regard, and businesses should be aware of a recent development in US policy with an extraterritorial reach.
The Corporate Whistleblower Pilot Program, effective August 1, 2024, is designed to reward whistleblowers who report information about corporate misconduct that results in a successful forfeiture. Whistleblowers may be rewarded with up to 30% of forfeitures in excess of USD 1 million.
The program focuses on crimes committed by financial institutions, foreign and domestic corruption, and health care fraud.
Paul Devlin, Partner with Norton Rose Fulbright Australia who focuses on white-collar crime and regulatory enforcement matters, says the pilot project will focus on private companies and other entities falling outside of existing US whistleblower programs such as the SEC’s Whistleblower Program.
“These changes are really designed to force companies to quickly investigate allegations and to race against whistleblowers to the DOJ’s front door. It’s going to provide significant financial incentives to whistleblowers.”
While it’s too early to understand the impact of the policy changes on enforcement activity and resolutions, it is apparent that they will further complicate the job of the compliance team. Valuable resources, already stretched beyond limits, will need to be directed to the management of new risks.
Key takeaways
The concept of an anti-bribery and corruption program for large multinational organizations will not be new for APAC businesses, but with the recent regulatory developments, programs and policies may require a realignment.
“Many businesses will have attempted or established this type of program, following the guidance notes published by US and UK government agencies,” says James Swenson, Managing Director of Enhanced Due Diligence Research for Ethixbase360.
Australia’s Attorney-General has published its guidance on adequate procedures to prevent the commission of foreign bribery, similar to the guidance supporting the UK Bribery Act 2010. While each jurisdiction’s approach to financial crime needs to be fully explored, the Australian guidance is a good starting point for understanding’ adequate procedures’.
Six key principles should be considered when implementing suitable anti-bribery and corruption policies.
- Fostering a control environment to prevent foreign bribery
- Responsibility of top-level management
- Risk assessment
- Communication and training
- Reporting foreign bribery
- Monitoring and review
The tricky part is that this is guidance only, and the courts determine what constitutes ‘adequate procedures’ on a case-by-case basis. Senior management has to define the company’s risk appetite, gain a comprehensive understanding of the actual risks the company faces, categorize their relationships in terms of risk, and then ensure that any anti-bribery and corruption measure is proportionate and responsive.
“There needs to be a strong tone from the top of senior leadership and senior management, putting compliance and integrity at the top of the agenda, you know, having things like codes of conducts, anti-bribery and corruption policies, communicating these to staffs and potentially externally to customers,” James advises.
Technology is evolving rapidly and can be used to simplify compliance, increase accuracy and ensure a better understanding of risk. New technology is also helping to broaden data analysis and include other risks, such as environmental, social and governance issues, not usually included in compliance tasks. Regulators, however, are broadening their focus.
It can be a complex and cumbersome task, but the consequences of not taking action are increasingly severe.
————————
[1] Vietnam’s Anti-Corruption Drive and Its Economic & Political Impacts, Stoneturn.com, April 6 2023
https://stoneturn.com/insight/vietnams-anti-corruption-drive-and-its-economic-political-impacts/
[2] China releases its newly revised Company Law, Norton Rose Fullbright, January 2024
[3] China amends criminal law to toughen punishment for bribery, Ministry of Justice of the People’s Republic of China, March 1 2024
