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GRC Professional : GRC Spring 2011
14 grc professional • Spring 2011 “The key here is to focus on whether the intention was to influence the official. The exchange of low value gifts with a view to generally building or maintaining a good relationship is unlikely to be a problem, but a lavish function or an expensive gift just prior to the official making a decision that has a major ef fect on the relevant company is more problematic.” Jane Ellis, Partner at Blake Dawson and a Board member of the Australian chapter of Transparency International, says the same thinking applies to hospitality. “If your tender is currently being assessed, that’s a bad time to take anyone out to dinner, even a $5 coffee,” Ellis says. “If there’s no decision making going on and you go out and have a dinner that’s $50 a head and get a couple of bottles of wine, that would probably be quite acceptable. “If you have an expensive dinner with a bottle of Dom Perignon and a lap dancer, it becomes more problematic.” The issue of whether gifts are bribes is currently under scrutiny by the Independent Commission Against Corruption (ICAC) in New South Wales. A two-year ICAC investigation has allegedly uncovered “apparent corruption” totalling over $1.5 million and more than $116,000 in gifts from three suppliers to 110 public authorities including local councils, police, RailCorp and the Roads and Traffic Authority. At the inquiry, Mark Moskow, Managing Director of industrial chemical supplier Momar Australia, reportedly acknowledged that gift giving was part of his company’s marketing strategy. In return for orders above $500, Momar Australia would deliver Coles Myer vouchers, a move which Moskow said boosted sales and customer loyalty, according to the Sydney Morning Herald. A sales representative from another supplier, NCH Australia, told the inquiry that the company ran a ‘rewards program’ whereby people could accumulate points and choose an item from a range of promotional products. Company records showed three staff members from Lithgow City Council received gifts including crates of red wine, iPods, a high-pressure cleaner and a DVD player. The ICAC inquiry is now examining whether these gifts could actually be classified as bribes. Facilitation payments An even more challenging area is that of ‘facilitation payments’, which are particularly common in construction and property development. “A facilitation payment is something that you would pay for something that you should ordinarily be entitled to,” Ellis explains. “If you move into a house and you want electricity connected it might take three days, but if you pay a fee, you can do it tomor row.” Australia is just one of nine OECD countries that provides a defence against bribery if it can be proven that the money or benefit was a facilitation payment. However Allens Arthur Robinson’s Matthew Skinner says facilitation payments are commonly misunderstood. “Some people place a lot of reliance on the facilitation payment defence without realising that the defence only applies to ‘minor payments’ to secure or expedite ‘routine government actions’ and only then when the payments are carefully recorded,” he says. uk Bribery Act raises the bar Facilitation payments are banned completely under the new UK Bribery Act 2010, which came into force on 1 July. Ellis has noticed a significant increase in legal inquiries over the past year as a result of the UK Bribery Act, particularly from organisations that do business in the UK or may have dual-nationals working for them. “Facilitation payments are problematic. The best thing is just don’t pay them. If you are a UK citizen, don’t do it. If you are Australian, you have to keep appropriate records.” The offence of most interest (and concern) to companies in the UK Bribery Act is the new strict liability offence of “failure of commercial organisations to prevent bribery”. This offence is unlike anything in the Australian Criminal Code or the US’s Foreign Corrupt Practices Act and applies broadly to non-UK companies and citizens. X if there’s no decision making going on and you go out and have a dinner that’s $50 a head and get a couple of bottles of wine, that would probably be quite acceptable. if you have an expensive dinner with a bottle of dom perignon and a lap dancer, it becomes more problematic. securency – a new compliance framework Since the Australian Federal Police investigation into bribery allegations at Securency commenced in May 2009, the plastic banknote company says it has taken a comprehensive series of steps to “ensure the highest compliance with ethical business practices”, including: • The renewal of the executive team, involving the departure of a number of senior executives and the appointment of five new executives from outside the company into the most senior roles including the appointment of a new Managing Director; • The termination of every agency arrangement; • The appointment of a Chief Risk & Compliance Officer reporting directly to the new Managing Director with an open channel to the Board; • The introduction of a new compliance framework, a new Code of Conduct and Ethics and annual training in the code for all employees; • The introduction of a comprehensive whistle blower policy; • The establishment of a Risk and Integrity Committee; • Assessing every country using external corruption and transparency indices and as a result deciding not to do business in a number of countries; • Full membership of the anti-bribery compliance organisation TRACE International with full independent due diligence of all customer- facing personnel; • The establishment of a Board-approved anti- bribery program for full compliance with the highest global standards including the new UK Bribery Act 2010.
GRC Summer 2012