1. FOREIGN BRIBERY The ethical challenges and implications for accountants Dr John Purcell FCPA Policy Adviser - ESG Policy & Corporate Affairs, CPA Australia

2. OBJECTIVES

3. Know how foreign bribery affects me Understand my role in combatting foreign bribery Address issues around developed & emerging economy practices

4. WHAT WE WILL COVER

5. Definitions Rules and guidance - IESBA Code of Ethics International conventions - OECD and the United Nations Effectiveness of the conventions - OECD evaluations United States Foreign Corrupt Practices Act Australian case studies Some concluding reflections - Where to next? - The intractability of foreign bribery What we will cover

6. DEFINITIONS

7. What is…? BRIBERY“The corrupt payment, receipt, or solicitation of a private favour for official action.” BRIBE“A price, reward, gift or favour given or promised with the view to pervert the judgement of or influence the actions of a person in trust.” CORRUPTION“Abuse of public office for private gain”

8. IESBA Code of Ethics for Professional Accountants

9. Section 100 Introduction and Fundamental Principles 100.1 A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, a professional accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer. In acting in the public interest, a professional accountant shall observe and comply with this Code. If a professional accountant is prohibited from complying with certain parts of this Code by law or regulation, the professional accountant shall comply with all other parts of this Code.

10. Section 100 Introduction and Fundamental Principles 100.12 Threats may be created by a broad range of relationships and circumstances. When a relationship or circumstance creates a threat, such a threat could compromise, or could be perceived to compromise, a professional accountant’s compliance with the fundamental principles. A circumstance or relationship may create more then one threat, and a threat may affect compliance with more than one fundamental principle. Threats fall into one of more the following categories:

11. Part B – Professional Accountants in Public Practice, Section 260 Gifts & Hospitality 260.1 A professional accountant in public practice, or an immediate or close family member, may be offered gifts and hospitality from a client. Such an offer may create threats to compliance with the fundamental principles. For example, a self-interest or familiarity threat to objectivity may be created if a gift from a client is accepted; an intimidation threat to objectivity may result from the possibility of such offers being made public.

12. Part C – Professional Accountants in Business, Section 350 Inducements 350.2 Offers of inducements may create threats to compliance with the fundamental principles. When a professional accountant in business or an immediate or close family member is offered an inducement, the situation shall be evaluated. Self-interest threats to objectivity or confidentiality are created when an inducement is made in an attempt to unduly influence actions or decisions, encourage illegal or dishonest behavior, or obtain confidential information. Intimidation threats to objectivity or confidentiality are created if such an inducements is accepted and it is followed by threats to make that offer public and damage the reputation of either the professional accountant in business or an immediate or close family member.

13. Part C – Professional Accountants in Business, Section 350 Inducements 350.4 The significance of any threats shall be evaluated and safeguards applied when necessary to eliminate them or reduce them to an acceptable level. When the threats cannot be eliminated or reduced to an acceptable level through the application of safeguards, a professional accountant in business shall not accept the inducement. As the real or apparent threats to a compliance with the fundamental principles do not merely arise from acceptance of an inducement but, sometimes, merely from the fact of the offer having been made, additional safeguards shall be adopted. A professional accountant in business shall evaluate any threats created by such offers and determine whether to take one or more of the following actions:

14. Part C – Professional Accountants in Business, Section 350 Inducements 350.5 A professional accountant in business may be in a situation where the professional accountant in business is expected, or is under pressure, to offer inducements to influence the judgment or decision-making process of an individual or organization, or obtain confidential information. 350.7 A professional accountant in business shall not offer an inducement to improperly influence professional judgment of a third party.

15. Definitions Professional accountant in business A professional accountant employed or engaged in an executive or non-executive capacity in such areas as commerce, industry, service, the public sector, education, the not for profit sector, regulatory bodies or professional bodies, or a professional accountant contracted by such entities.

16. INTERNATIONAL CONVENTIONS OECD Convention on: Combatting Bribery of Foreign Public Officials in International Business Transactions

17. Preamble The Parties, Considering that bribery is a widespread phenomenon in international business transactions, including trade and investment, which raises serious moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions; Considering that all countries share a responsibility to combat bribery in international business transactions;

18. Article 1: The Offence of Bribery of Foreign Public Officials “Each Party shall take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business.”

19. Article 8: Accounting “In order to combat foreign bribery of foreign public officials effectively each Party shall take such measures as may be necessary, within the framework of its laws and regulations regarding the maintenance of books and records, financial statement disclosures, and accounting and auditing standards, to prohibit the establishment of off-the-books accounts, the making of off-the-books or inadequately identified transactions, the recording of non-existent expenditures, the entry of liabilities with incorrect identification of their object, as well as the use of false documents, by companies subject to those laws and regulations, for the purpose of bribing foreign public officials or of hiding such bribery.”

20. Criminal Code Act 1995 Chapter 4 - The integrity and security of the international community and foreign governments Division 70 - Bribery of foreign public officials 70.2 Bribing a foreign official (1) A person is guilty of an offence if: (a) the person: (i) provides a benefit to another person; or (ii) causes a benefit to be provided to another person; or (iii) offers to provide, or promises to provide, a benefit to another person; or (iv) causes an offer of the provision of a benefit, or promise of the provision of a benefit, to be made to another person; and (b) the benefit is not legitimately due to the other person; and (c) the first-mentioned person does so with the intention of influencing a foreign public official (who may be the other person) in the exercise of the official’s duties as a foreign public official in order to: (i)obtain or retain business; or (ii)obtain or retain a business advantage that is not legitimately due to the recipient, or intended recipient, of the business advantage (who may be the first-mentioned person).

21. INTERNATIONAL CONVENTIONS United Nations: Convention against Corruption

22. Chapter I General Provisions Article 1. Statement of purpose The purposes of this Convention are: (a) To promote and strengthen measures to prevent and combat corruption more efficiently and effectively; (b)To promote, facilitate and support international cooperation and technical assistance in the prevention of and fight against corruption, including in asset recovery; (c) To promote integrity, accountability and proper management of public affairs and public property.

23. Chapter III Criminalization and law enforcement Article 15. Bribery of national public officials Each State Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally: (a) The promise, offering or giving, to a public official, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties; (b)The solicitation or acceptance by a public official, directly or indirectly, of an undue advantage, for the officia lhimself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties.

24. INTERNATIONAL CONVENTIONS Effectiveness of the conventions

25. The current state of play – How effective have efforts been? Some remarks on Papua New Guinea’s performance - Transparency International’s 2013 assessment Resourcing, funding, skills and political will - a global rather than developing economy issues “Justice delayed is justice denied” and “let the punishment fit the crime” - the drawn out and complex process of investigation and legal proceedings A ‘preferred’ path of attack through punishing false accounting

26. A ‘scorecard’ of country performance by OECD Convention signatories SHARE OF WORLD EXPORTS SANCTIONS AGAINST INDIVIDUALS SANCTIONS AGAINST COMPANIES AUSTRALIA1.3 %00 FRANCE3.3 %70 GERMANY8.1 %4075 KOREA3.1 %164 NETHERLANDS3.1 %00 UK3.5 %62 USA9.9 %5832

27. What the OECD Working Group on Bribery said in 2013 – Netherlands and France

29. What the OECD Working Group on Bribery said in 2013 – Australia

30. UNITED STATES FOREIGN CORRUPT PRACTICES ACT

32. AUSTRALIAN CASE STUDIES

33. 1. BHP Billiton The outcome in the USA for BHP Billiton The actions and behaviour subject to US Department of Justice and US Securities and Exchange investigation What the investigations found and were able to substantiate The specific breaches of US rules – the civil books and records and internal accounting controls requirements of the Foreign Corrupt Practices Act

34. 2. Securency International Pty Ltd and Note Printing Australia Limited

35. 3. Australian Wheat Board Any discussion of Australian foreign bribery cannot pass without mention of the Australian Wheat Board! The historical context The AWB commercial role and significance to agribusiness The “inland transport fees” How it all came undone The 2005 Justice Cole Commission of Inquiry and its aftermath A 2015 postscript

37. Some concluding reflections It is tempting to conclude that often it seems that it is the CFO or other accounting officers who end up being the easy target Also the existence or absence of accounting records is a means of attack where others’ behaviours are more blameworthy and clearly criminal Strong laws are one thing, the institutional resources and willingness are often another Protracted investigation and resort to civil rather than criminal sanction, though a valid last resort, seriously undermines any deterrent impact The IESBA Code of Ethics remains a vital source of guidance for accountants that can be called upon regardless of the wider institutional challenges And finally – why does bribery occur and why is it so hard to combat?

38. Final reflections In the words of Commissioner Cole: “The conduct of AWB and its officers was due to a failure of corporate culture.” Why? “The answer is a closed culture of superiority and impregnability, of dominance and self-importance” And as to the limits of legal rules: “Legislation cannot destroy such a culture or create a satisfactory one.”

39. QUESTIONS? THANK YOU