Guest Bloggers: Justin Connor is chair of ACC’s International Legal Affairs Committee for 2012-2013. Lucinda A. Low is partner at Steptoe & Johnson LLP.
Earlier this month, Canadian Foreign Affairs Minister John Baird announced proposed amendments to Canada’s foreign bribery law, the Corruption of Foreign Public Officials Act (CFPOA). If enacted, the proposed amendments would result in a significant broadening and strengthening of Canadian foreign bribery law. The proposed amendments include the elimination of the facilitating payments exception, the establishment of nationality jurisdiction for foreign bribery offenses, the introduction of a criminal “books and records” offense, and an increase in the maximum criminal penalty. These changes, which are expected to be passed in the near future, would bring Canadian law more in line with international standards regarding foreign bribery, and could have compliance implications for multinational companies with a nexus to Canada.
The proposed amendments follow sharp criticism in 2011 from the OECD Working Group on Bribery (Working Group) regarding Canada’s implementation and enforcement of the OECD Anti-Bribery Convention. In its March 2011 Phase 3 Report on Canada, the Working Group criticized Canada’s enforcement of its foreign bribery law, noting that it had completed only one prosecution since the law’s enactment in 1999. The Report also made recommendations, some of which are captured in the proposed amendments, including to clarify that the CFPOA applies to bribery related to all international business, whether or not for profit, to make its penalties more “effective, proportionate and dissuasive,” and to amend the CFPOA jurisdiction to ensure Canada’s ability to prosecute its nationals.
The proposed amendment expands the jurisdictional reach of the CFPOA by adding nationality-based jurisdiction, as recommended by the Working Group. Current law recognizes only territorial jurisdiction, requiring that a significant amount of the activities constituting a foreign bribery offense take place in Canada. The amendment would make it easier to prosecute violations of the CFPOA committed outside of Canada by Canadians. It would deem a violation of the provisions of the CFPOA committed outside of Canada to be within the jurisdiction of the law if committed by: i) a Canadian citizen; ii) a Canadian permanent resident now present in Canada; or iii) a public body, corporation, company, firm or partnership that is incorporated, formed or otherwise organized under the laws of Canada or a Canadian province. This provision is very similar in scope to that added to the U.S. FCPA in 1998.
Like the U.S. Foreign Corrupt Practices Act (FCPA), the CFPOA currently allows an exception for facilitating payments — payments made to expedite or secure the performance of acts that are part of a public official’s duties and are of a routine nature. The proposed amendment would eliminate this exception, bringing the CFPOA into line with the UK Bribery Act and the laws of most other OECD Convention member states. (Besides the United States, Australia also has such an exception.) This amendment is expected to come into force at a later date than the rest of the amendments in order to give companies time to revise their compliance procedures.
Books and records offense
The proposed amendments would create a new criminal offense, punishable by up to 14 years in prison, for falsifying books and records in connection with foreign bribery. Under the amendment, it is an offense, if done for the purpose of bribing a foreign public official, to: i) establish or maintain accounts that are not reflected in any books and records required to be kept by applicable accounting and auditing standards; ii) make transactions that are inadequately identified or not recorded in such books and records; iii) record non-existent expenditures or liabilities with incorrect identification of their object in such books and records; iv) knowingly use false documents; or v) intentionally destroy accounting books and records before permitted by law. This provision, unlike the FCPA’s books and records provision, is not limited to listed companies in Canada, but instead applies to all persons. However, its linkage to foreign bribery offenses makes it considerably more limited in scope than the FCPA’s accounting provisions, which apply to all expenditures of a listed company.
Definition of “business”
As recommended by the Working Group, the proposed amendments would eliminate the words “for profit” from the definition of “business” in the CFPOA. As a result, the CFPOA would apply to all business, whether or not for profit.
Enforcement authority and increase in penalties
The proposed amendments would grant exclusive authority to the Royal Canadian Mounted Police (RCMP) to prosecute offenses under the CFPOA with a maximum penalty of 14 years imprisonment, an increase from the prior five-year maximum. While there have been only three convictions under the CFPOA since its enactment in 1999, the RCMP has recently stepped up enforcement through its International Anti-Corruption Unit, and reportedly has approximately 35 ongoing investigations.
In light of the substantial strengthening of the CFPOA (assuming it is enacted as expected in the near future), and the heightened enforcement activity, Canadian companies and companies with Canadian affiliates or doing business in Canada should review their compliance programs to ensure that their anti-corruption procedures meet the proposed requirements and do not expose their operations to unmitigated compliance risk.