|October 16, 2013|
Previously published on October 15, 2013
Over the past decade, the U.S. government has levied billions of dollars in penalties in connection with enforcement actions involving violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), the very broad U.S. law that criminalizes the payment of bribes by U.S. citizens and corporations to government officials anywhere in the world. Many countries have enhanced their anti-corruption laws in the wake of this increased enforcement activity against some of the world’s largest and most well-known companies. Canada is among the latest.
Canada’s anti-corruption legislation is the Corruption of Foreign Public Officials Act (“CFPOA”), which has been in effect since 1999. The CFPOA provides for civil and criminal penalties for Canadian individuals and companies who bribe or offer to bribe a foreign government official in order to obtain a business advantage. Until this year, loopholes and jurisdictional limitations severely limited the effectiveness of the CFPOA and, as a result, very few cases have been brought over the years. Recent amendments to the CFPOA that went into effect in June 2013, however, have transformed the CFPOA into a law that mirrors the FCPA in most respects, which will undoubtedly increase the number of corruption-related investigations and prosecutions in Canada.
Increased Jurisdiction to Capture Conduct Outside of Canada
The aspect of the pre-2013 CFPOA that most hampered its effectiveness was the requirement that the corrupt conduct (such as the planning or giving of a bribe) occur in Canada or at least have a “real and substantial link” to Canada. This territorial nexus requirement prevented prosecutors from bringing cases in circumstances when most or all of the corrupt activity took place outside of Canada, which was often the case. The amendments to the CFPOA eliminated this loophole by extending jurisdiction to the conduct of all Canadian citizens and companies incorporated in Canada - no matter where in the world the conduct takes place. This brings the CFPOA in line with the FCPA, which is frequently used to bring actions based on conduct that takes place entirely abroad.
The Addition of a “Books and Records Offense”
The June 2013 amendments to the CFPOA also added “books and records” offenses that carry civil and criminal penalties. Similar to the FCPA, the CFPOA now makes it unlawful to (1) have any off-books accounts or records, such as slush funds, (2) falsify any books or records in order to conceal bribery, (3) use false documentation, such as fake invoices or expense reimbursement forms used to generate funds that could be used for an improper purpose, or (4) destroy any business records earlier than permitted by law. In the U.S., prosecutors have used similar “books and records” provisions to bring cases in circumstances when it would be very difficult to prove in court that a bribe was paid (for example, because key witnesses are located abroad), and prosecutors in Canada will likely use these new provisions of the CFPOA for similar strategic reasons.
Increased Criminal Penalties
The modifications to the CFPOA increased the maximum prison sentence for individuals from 5 years to 14 years, and financial penalties can be imposed at the discretion of the judge. Importantly, these penalties apply to both the bribery offenses and willful violations of the “books and records” provisions.
Elimination of the “Facilitation Payment” Exception
Another major change to the CFPOA is the elimination of the so-called “facilitation payment” exception. “Facilitation payments”, which are still permissible under the FCPA, are nominal payments made to a public official in order to secure performance of routine acts, such as issuing non-discretionary permits and licenses, processing visas, clearing shipments through customs, and providing ordinary government services, such as mail delivery. While the original law permitted “facilitation payments,” the June 2013 amendments eliminated them. Importantly, while the rest of the CFPOA is already in effect, the date on which “facilitation payments” are no longer permissible has yet to be fixed. Rather, the law provides that the Canadian government will establish an effective date for this provision at a later time, which has the effect of giving companies a “grace period” to update their policies and procedures accordingly.
The recent high-profile arrests of employees of SNC-Lavalin Group Inc. in connection with a bribery scheme to obtain a bridge-construction contract in Bangladesh have made Canada’s anti-corruption efforts front-page news. These events, combined with the overhaul of the CFPOA, are likely to increase the number of anti-corruption cases brought in Canada. These developments highlight for all companies with operations in Canada why they need to have an effective anti-corruption policy. Additionally, companies with policies based on the original CFPOA should revamp their policies and procedures with an eye towards ensuring compliance with the new “books and records” provisions of the CFPOA and ensuring that company policies prohibit.