Transparency International identifies concerns with Canadian enforcement in biannual report
In recent years, Canada has faced criticism for a perceived lack of anti-corruption enforcement. Much has been written about this, including in our Risk Blog (see our posts Is Canada rising to the challenge? Responding to calls for more effective financial crime prevention and enforcement and Canada drops from Top 10 Least Corrupt Countries in Transparency International Annual Corruption Perceptions Index). Following on similar findings in its 2020 report, Transparency International released its biannual Transparency International Report [PDF] (the Report) on October 11, 2022. According to the Report, Canada only carries out “limited enforcement” of the Corruption of Foreign Public Officials Act (CFPOA).
The biannual Transparency International Report is an independent review of the foreign bribery enforcement performance of signatories to the 1997 OECD Anti-Bribery Convention (the Convention). The Report also identifies inadequacies in legal frameworks and enforcement systems and progress in addressing them, including victim compensation and transparency of foreign bribery enforcement data and case disposition. The Report includes four enforcement categories: active, moderate, limited, and little or no enforcement. Countries are scored based on enforcement performance at different stages (i.e., number of investigations commenced, charges filed and cases concluded with sanctions) over a four-year period (2018–2021). Canada has previously been found to have “limited enforcement” in previous reports, including most recently in 2020 [PDF].
The Report also found worldwide enforcement against foreign bribery has dropped to its lowest level since Transparency International began this measurement in 2009. Just two countries — Switzerland and the United States — were found to be “active enforcers” that investigate, charge and impose sanctions commensurate with their share of exports, consistent with a worldwide decline in enforcement in the two years of the COVID-19 pandemic. Transparency International expects this number to rise in 2022 or 2023, assuming the low levels of enforcement are connected to the pandemic.
Canada’s uptake of the ‘remediation agreement’ found lacking
According to the Report, from 2018 to 2022, Canada opened three foreign bribery investigations, commenced three cases and concluded three cases with sanctions. These numbers resulted in Canada remaining in the “limited” enforcement category for this year’s Report. However, Canada was only one point away from achieving the minimum points required for the “moderate enforcement” category.
Transparency International’s criticisms of Canada’s CFPOA enforcement record remain mostly unchanged from the Exporting Corruption report in 2020, discussed in Osler’s 2020 Legal Year in Review: Key developments in white-collar defence. They continue to recommend greater transparency in several areas and the development of an administrative framework that supports consistency and rationality in decision making and the structure of remediation agreements and increased resources for law enforcement.
A new area flagged in the Report is uptake of Canada’s remediation agreement regime (often referred to as “deferred prosecution agreements”). As we have previously written, Canada’s remediation agreement regime came into force on September 19, 2018, as a means for Canadian companies to avoid criminal conviction while imposing financial penalties and compliance obligations on companies and requiring cooperation with law enforcement in the prosecution of individuals involved. For more information on remediation agreements, please see our earlier posts: World Bank debars German company for thirteen months; Deferred Prosecution Agreements (DPAs) come into force in Canada; Canada’s deferred prosecution agreements: Still waiting for takeoff; and Osler’s 2021 Legal Year in Review: White-collar defence: Increasing risks and enforcement activity.
The Report identified three key issues with the current remediation agreement regime:
- First, despite being enacted in 2018, the first remediation agreement was not approved by the court until 2022. The first-ever remediation agreement was approved by the Québec Superior Court in May 2022 to settle the SNC-Lavalin corruption and fraud charges. A second remediation agreement is currently pending with Ultra Electronics Forensic Technology Inc. and four of its former executives. It remains to be seen whether this uptake in remediation agreement proceedings will result in further use of this enforcement mechanism.
- Second, while the RCMP has signaled that Canadian companies are coming forward for remediation agreements, no specific number was made publicly available or provided to Transparency International. The Report finds that improving transparency would allow Canadian corporations to better gauge the state of enforcement efforts.
- Third, the Report found that while remediation agreement framework emphasizes victims’ compensation and specifies that foreign victims are eligible, only a small amount of compensation (roughly the amount of the alleged bribe) was awarded to a victim in the SNC-Lavalin case. Further, this compensation award was contingent on the victim reaching an agreement with the defendant about the amount of the loss.
The Report recommends that Canada enact regulations on remediation agreements to clarify issues associated with these agreements and increase transparency about the public interest criteria considered when assessing whether to negotiate a remediation agreement.
It remains to be seen how enforcement in Canada will progress, including future implementation of remediation agreements. While the remediation agreements entered into so far represent a significant development, Canada continues to face criticism for a perceived lack of anti-corruption enforcement. Developments such as remediation agreements and the establishment of enforcement authorities dedicated specifically to complex financial and white-collar crime may lead to further development in the future in this area.
 See table on page 9 of the Report.