Expansive Changes to Canada’s Foreign Anti-Corruption Legislation Now in Force: Existing Compliance Programs Will Require Revisions
Far-reaching and critical amendments proposed by Bill S-14, An Act to amend the Corruption of Foreign Public Officials Act, received royal assent on June 19, 2013.
We discussed the proposed changes when the Bill was introduced in the Senate on February 5, 2013. Please see our Osler update of February 6, 2013. Since then, the Bill has swiftly passed through both houses of Parliament without any amendments and with the full support of all political parties. All the changes came into force immediately upon receiving royal assent, save for the provision that will eliminate the exception for facilitation payments which will come into force on a date to be fixed by an order of the federal Cabinet. At this time the government has not yet made public the timing for the elimination of the “facilitation payments” exception.
These amendments, the most important since the Corruption of Foreign Public Officials Act (CFPOA) was first enacted in 1998, will require that anti-corruption compliance programs of Canadian businesses operating overseas be revised immediately, particularly to take into account the new books and records provision and phasing out of the exception for facilitation payments.
The provisions now in force will:
- Introduce a books and records provision that imposes extensive and detailed requirements which prohibit certain bookkeeping practices and types of transactions (inadequately identifying, falsifying, hiding, destroying, recording of non-existent expenditures, or using false records), if related to bribery of foreign public officials. This provision of the CFPOA may be applied along with other provisions of Canadian law such as section 155 (financial disclosure) of the Canada Business Corporations Act and sections 361 (false pretences), 380 (fraud), and 397 (falsification of books and documents) of the Criminal Code of Canada.
- Significantly expand the scope of Canadian prosecutorial jurisdiction to cover activities of Canadians (including officers and directors) and Canadian corporations, even if all the activities related to the alleged bribery take place or the falsification of books and records occurs outside Canada, thereby displacing the previous requirement that there be a “real and substantial link” between the offence and Canada. The basis for the offence will include conspiracy to commit, an attempt to commit, being an accessory after the fact or any counselling in relation to the offences of bribery or falsification of books and records.
- Increase the maximum term of imprisonment for individuals convicted under the CFPOA from five years to 14 years. The consequential result of this is that individuals found to have violated the CFPOA will not be eligible upon conviction for either conditional sentences or discharges. In addition, both individuals and corporations will continue to be subject to monetary fines at the discretion of a judge, who will not be restricted by a maximum prescribed amount.
- Clarify the definition of “business” by removing the words “for profit.” The government’s stated intent is to make this provision applicable to all businesses, regardless of whether they are seeking profits. It will therefore eliminate the potential defence that an unprofitable business cannot be charged under the CFPOA.
- Provide exclusive authority to the RCMP to lay charges pursuant to the CFPOA against Canadian companies, Canadian citizens and permanent residents in Canada.
The exception for “facilitation payments” – which in some very limited circumstances currently permits nominal payments made to expedite or secure the performance of an act of a routine nature by a foreign public official – will be eliminated on a date to be fixed by an order of the federal Cabinet.
The increased prison terms for Canadian nationals including officers and directors of Canadian corporations, the elimination of the territorial jurisdiction test, the increased exposure to CFPOA penalties by adding a books and records provision, and the elimination of exceptions and defences such as those for facilitation payments and businesses not earning profits, all point towards continuing vigorous enforcement by the Canadian government of the CFPOA. Canada has stepped up its enforcement of the CFPOA following criticism from the OECD for lack of prosecutions under its foreign anti-bribery legislation. Hefty fines were imposed within a span of a couple of years against two corporations – in 2011, Niko Resources was fined $9.5 million and was put on probation for three years, and in 2013 Griffiths Energy was fined $10.3 million. In its recent report to the OECD Working Group on Bribery, Canada advised advised that it had 35 ongoing RCMP investigations and that three individuals were being prosecuted and will potentially face imprisonment if convicted.
The amendments now in force, including the soon-to-be eliminated facilitation payments exception, reinforce a strong message from the Canadian government that it is “redoubling” its efforts to curb any existing foreign corrupt practices of Canadian businesses. Officers and directors of Canadian corporations should invest in ensuring the existence of an ethical corporate culture as they will be expected to “play by the rules” in their international ventures. This includes having in place compliance programs that have been updated so as to be consistent with all of the provisions of the CFPOA including the recent changes. The new books and records provisions and the elimination of the exception for facilitation payments demand particular attention, as they both require that steps be taken promptly to ensure full ongoing compliance.
In the case of Canadian corporations that have modelled their anti-corruption compliance programs based on U.S. precedents, the elimination of the exception for facilitation payments will compel departing from the U.S. model if this exception is contained in the compliance program. Most U.S. corporations however have policies that strongly discourage or outright prohibit reliance on this exception, paying heed to recommendations from U.S. enforcement authorities that have very strongly discouraged this practice.