Strengthening of Anti-Bribery and Corruption (ABC) laws

Tougher Anti-Bribery and Corruption laws

New Zealand now has tougher foreign bribery laws.

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Lead Partner - Forensics

KPMG in New Zealand

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New Zealand has significantly strengthened its laws for the offence of foreign bribery following the enactment of the Organised Crime and Anti-Corruption Bill (‘OCAC Bill’) earlier this month. This has real relevance to New Zealand companies operating overseas, in particular, through ‘corporate liability’ for acts of employees or agents unless it can leverage the available defence that it has taken ‘reasonable’ steps to prevent it.
The new laws sharpen the focus for New Zealand businesses to have systems in place to mitigate their ABC risks, particularly those operating internationally.

Recent changes to the ABC laws

Under pre-existing legislation, the offer of a bribe to domestic and foreign public officials by New Zealand individuals and entities is an offence in New Zealand no matter in which country the offence takes place (Crimes Act 1961). Private sector bribery offences are dealt with in the Secret Commissions Act 1910.

The anti-corruption amendments in the OCAC Bill, which came into effect on 7 November 2015, enhance the foreign bribery offence. In particular, the new laws encourage New Zealand companies to have systems in place to mitigate their corruption risk, particularly those operating internationally.

Key changes include:

  • Introducing significant fines as penalties for foreign bribery of up to $5m or 3 times the commercial gain.
  • Making companies liable for the corrupt acts of their employees or agents unless they have taken ‘reasonable steps’ to prevent it.
  • Clarifying the circumstances when ‘facilitation payments’ can be made.
  • Removing the defence that an offence committed outside of NZ was not an offence under the laws of the foreign country where the person is situated.

Why this is important to NZ companies?

These changes follow international pressure to strengthen our framework for prosecuting foreign bribery. New Zealand companies are liable not just for our laws but are often vulnerable to others laws through extraterritoriality, e.g. via prosecution by the United States under the Foreign Corrupt Practices Act (FCPA) or the United Kingdom under the Bribery Act. New Zealand’s Serious Fraud Office has identified enforcement for foreign bribery as a priority.

Leaving debarment, reputation and investigation costs aside the financial sanctions imposed by overseas authorities for foreign bribery offences have been significant, as indicated by the analysis below of fines imposed globally for foreign bribery offences (particularly under the FCPA).

Source: OECD (2014), OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD Publishing. http://dx.doi.org/10.1787/9789264226616-en

Whether we like it or not, New Zealand companies increasingly operate in countries where bribes and ‘kickbacks’ to secure contracts is not uncommon. Our businesses have had particular success in growing in these markets.

The graphic below highlights where bribes to foreign public officials have been paid. This included sixteen of New Zealand’s top twenty 2014 export markets, further highlighting why New Zealand companies are now more vulnerable than ever.

Source: OECD analysis of foreign bribery cases concluded between 15/02/1999 and 01/06/2014 OECD (2014), OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, OECD Publishing. http://dx.doi.org/10.1787/9789264226616-en

What should NZ businesses do?

New Zealand companies need to act to prevent bribery and corruption by employees and agents to avoid the potential reputation and financial costs and to protect the strong reputation of New Zealand businesses.

Businesses that operate in multiple or higher risk jurisdictions, uses third parties such as agents, or have a complex supply chain are particularly vulnerable. Enforcement actions show this is not just an issue with the extractive, construction or pharmaceutical industries.

New Zealand’s laws like the UK have built in a defence that the business has taken “reasonable steps” to prevent offences. While further guidance in New Zealand is pending, we look to the UK for the six principles that regulators have articulated underpin a reasonable steps’ defence.

New Zealand companies should have an approach to bribery and corruption that leverages this guidance including:

  1. Risk assessment
  2. Tone from the Top – commitment from senior management.
  3. Developing proportionate policies and procedures
  4. Due diligence of third parties acting on their behalf
  5. Communication (including training).
  6. Monitoring and review of procedures.

Global trends

Globally, we are seeing ABC issues becoming more challenging. KPMG’s Anti-Bribery and Corruption Global Survey 2015 (Anti-Bribery and Corruption: Rising to the challenge in the age of globalization) showed a sharp increase in the proportion of respondents who say they are highly challenged by the issue of ABC, compared with a survey KPMG conducted almost five years earlier. As companies continue to globalise, their management of third parties pose the greatest challenge in managing ABC programmes. Global businesses also need to ensure that ongoing monitoring forms part of their ABC programme.

© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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