- Tougher Canadian Foreign Corruption Law Raises the Stakes for Officers and Directors
- July 3, 2013 | Authors: Milos Barutciski; Matthew S. Kronby
- Law Firms: Bennett Jones LLP - Toronto Office ; Bennett Jones LLP - Calgary Office
Canada has significantly strengthened its Corruption of Foreign Public Officials Act (CFPOA) including by adding a new offence that will expand the grounds for criminal liability for corporations and their directors, officers and employees. As a result of the amendments to the CFPOA:
- Canadian companies and individuals who are involved in the bribery of foreign public officials will be subject to Canadian law regardless of where the acts constituting the offence took place, and even if there is no connection with Canada other than their nationality.
- The maximum penalty for individuals has been increased from five years to 14 years imprisonment;
- Companies and their directors, officers and employees now face a separate criminal “books and records” offence for misrepresenting or concealing the bribery of foreign public officials in their record-keeping;
- The RCMP now has exclusive authority to lay charges under the CFPOA;
- The bribery offence has been clarified to apply to all business activities, whether or not they are for profit;
- The exception allowing “facilitation payments” (small payments made to an official for the purpose of securing the performance of routine administrative acts that are part of the official’s duties or functions) will be eliminated at a future date to be determined by Cabinet order.
When the amendments were introduced in early February of this year in Bill S-14, we issued an update describing the implications of each of them (Canada Moves to Strengthen Anti-Bribery Legislation). The amendments as enacted are unchanged from those we described then.
From a corporate compliance standpoint the most significant of the amendments are the creation of the books and records offence and the phasing out of the facilitation payments exception.
New Books & Records Offence
The Canadian books and records offence relies on a criminal law approach rather than the administrative and civil law approach adopted under the U.S. Foreign Corrupt Practices Act (FCPA). This will limit the flexibility of the Canadian enforcement agencies, the RCMP and the Public Prosecutions Service of Canada (PPSC), compared to the U.S. Securities and Exchange Commission, which enforces the books and records provisions of the FCPA. More specifically, Canadian investigators and prosecutors will need to establish their case on the criminal “beyond a reasonable doubt” evidentiary standard rather than a civil standard used in the U.S. As a practical matter, however, this may not make much of a difference for corporate boards and management. For the first time, liability under the CFPOA will potentially flow from conduct relating to the financial records of a corporation made after an alleged corruption offence. CFOs and corporate boards and executives will take little comfort in the heavier criminal evidentiary burden under Canadian law from a day-to-day compliance standpoint. Rather, they can be expected to require the same level of diligence in the recording of transactions, or in the face of red flags that give rise to concerns about potential unlawful payments or efforts to conceal them, as would be expected of corporate officials under the U.S. FCPA.
In keeping with best practices, many companies already prohibit facilitation payments in their anti-corruption policies. However, since these payments are ubiquitous in large parts of the world and are not currently prohibited under the CFPOA and FCPA, many other companies do not expressly prohibit them. The Government has indicated that the delay in declaring the prohibition of facilitation payments in force is intended to give companies a grace period to allow them to review and revise their anti-corruption policies and implement procedures and training programs to eradicate facilitation payments. Companies with established business in parts of the world where facilitation payments are commonly expected should promptly conduct an internal audit to determine whether and to what extent such payments are made by their personnel and foreign subsidiaries and take steps to bring about their elimination.
The new books and records offence and the elimination of the facilitation payments exception will have the most direct impact on corporate compliance practices. However, the rest of the amendments will make investigation and prosecution of CFPOA offences easier and raise the stakes for corporate officers and directors. By increasing the maximum penalty for individuals from five to 14 years, Parliament is sending a clear signal that it views foreign bribery to be on a par with some of the most serious criminal offences under Canadian law.