Is Your Company’s Anti-corruption and Bribery Program Ready for the Impact of the NACC?

Is your company’s anti-corruption and bribery program ready for the impact of the NACC?

In July of 2023, the commencement of the National Anti-Corruption Commission (NACC) saw the culmination of a decades long battle against bribery and corruption in Australia. For many businesses, the impact of the NACC’s establishment may not have been immediately obvious, largely because the focus of the NACC and its powers appear to relate to conduct in the Commonwealth public sector.

But make no mistake, the NACC heralds a new era for wider Corporate Australia. All businesses need to understand just how critical anti-bribery and corruption measures are to ensure success and avoid adverse compliance impacts- and what you need to do now to get your house in order.

 

The NACC: what Australian companies need to know

During the 2022 federal election campaign, both major Australian political parties proposed to establish a NACC if elected. Following the election of the Labor party, the Parliament passed (on 30 November 2022) the National Anti-Corruption Commission Act 2022 (NACC Act) and the National Anti-Corruption Commission (Consequential and Transitional Provisions) Act 2022 (NACC legislation), with both commencing on 1 July 2023. 

While the focus of the NACC Act is on corruption in the Commonwealth public sector, its broad scope means that private sector companies must also be prepared for potential impact, including by embedding anti-bribery and corruption measures.

 

Why was the NACC necessary?

Awareness of the need to join the international fight against corruption is nothing new. On 18 October 1999, Australia ratified the OECD Anti-Bribery Convention which establishes standards to criminalise bribery of foreign public officials in international business transactions.  On 17 December 1999, the implementing legislation commenced.  Yet, despite these efforts, the global perception of Australia’s stance on anti-corruption fell, with the nation’s ranking on the Transparency International Corruption Perception Index declining between 2012 and 2021, falling from 7^th to a distant 18^th.

Anticipation of the establishment of the NACC saw Australia’s global anti-corruption ranking improve across 2022, but the risk of bribery and corruption are ever present.  This is particularly so for Australian companies doing business in high-risk countries, sectors or environments such as where activities are carried on through joint venture or through agents and intermediaries.   

In its report, Exporting Corruption 2022: Assessing enforcement of the OECD Anti-Bribery Convention (2022), Transparency International identified multiple weaknesses in Australia’s anti-bribery legal framework arising from: 

• a lack of any central public registers identifying the beneficial ownership of companies and trusts; 
• inadequate corporate criminal liability, use of sanctions and confiscation of the proceeds of bribery offences;
• no exclusion guidelines for procurement agencies with respect to corporations or individuals convicted of bribery offences;
• inadequate public-sector whistle-blower protections;
• maintaining the facilitation payments defence;
• mutual legal assistance not being provided to other countries; and 
• a lack of transparency of enforcement information due to Australian enforcement agencies not publishing data or information on investigations, prosecutions or outcomes.

 

In addition to the global perception, research shows that, domestically, the Australian public’s trust in their government and public institutions has declined over recent years. The potential for corruption within government contributes to that decline in trust.

By establishing the NACC, the Australian Government is clearly seeking to prevent corruption, and address the erosion of public trust by: 

• investigating, preventing, detecting, and reporting on serious or systemic corruption in the Commonwealth public sector (and informing the public about what is discovered); and 
• educating the public sector (and the public) on how to prevent it in the future. 

Australian businesses need to understand the implications of the NACC’s extensive jurisdiction its broad powers, which have the potential to extend well beyond the public sector and impact directly on private sector companies.

 

NACC – overview and powers 

The NACC: 

• is an independent body;
• is subject to procedural fairness and judicial review;
• has powers to investigate (current and retrospective allegations of) serious or systemic corrupt conduct across the Commonwealth public sector by all politicians, officials and contractors;
• can hold public hearings (but only in exceptional circumstances and if it is in the public interest to do so); and
• can refer findings that could constitute criminal conduct to the AFP or the CDPP. 

Importantly, the NACC Act also provides strong protections for whistleblowers and journalists to remove the fear of consequences for whistleblowing or reporting on bribery and corruption. 

 

What is corruption? 

The NACC can investigate allegations of ‘serious or systemic’ corrupt conduct in the Australian Government public sector.  As the term ‘serious and systemic’ is not defined under the NACC Act, the Commissioner of the NACC can determine whether, in their opinion, a matter could involve serious or systemic corrupt conduct. 

The NACC has authority to investigate any person, if they have potentially done something that has or could adversely affect a public official’s honesty or impartiality in the way they carry out their official duties.  It can investigate ‘public officials’ if they: 

• adversely affect their own, or another public official’s honesty or impartiality in the way they carry out their official duties;
• breach public trust;
• abuse their office as a public official; and/or 
• misuse information they have gained in their capacity as a public official. 

The NACC will investigate corrupt conduct within the Commonwealth public sector, including by investigating allegations of serious or systemic corruption. This includes conduct that occurred before or after the NACC was established. 

This broad scope means that, in practice, the NACC can consider a wide range of matters such as, for example, contracts being awarded without due process, or ministerial decisions made to protect vested interests. 

 

What is corrupt conduct? 

 The NACC Act defines corrupt conduct to mean situations where a ‘public official’: 

• does something that breaches the public trust; 
• abuses their office as a public official; or 
• misuses information they have access to in their capacity as a public official. 

It also applies to the conduct of any person regardless of whether they’re a public official, who does, or tries to do something which could adversely affect a public official’s honesty or impartiality in their official capacity. 

 

What are the NACC’s powers?

The NACC can exercise a range of investigative powers, including to: 

• require the production of documents and undertake property searches;
• conduct private, and (if it is in the public interest and exceptional circumstances justify doing so) public, hearings; and
• access a range of investigative capabilities, such as intercepting telecommunications. 

The NACC also has retrospective powers. While the NACC itself only came into existence on 1 July 2023, it can investigate allegations of corruption from before its establishment. 

 

Who can the NACC investigate? 

The NACC can investigate alleged corrupt conduct involving Australian Government public officials (not including state, territory or local government officials, judges, the Governor-General or Royal Commissioners). ’Public officials’ are otherwise broadly defined under the NACC Act to include: 

• members and senators of the Commonwealth Parliament including Ministers, and their staff;
• employees and contractors of Commonwealth agencies and Commonwealth companies; and 
• holders of Commonwealth statutory offices. 

 In addition, the NACC will also be able to investigate any person, even if they are not a public official, who does something that causes or could cause a public official to carry out their official duties in a dishonest or biased way. 

 

Who is a ‘contracted service provider’?

The broad definition of ‘public official’ is one of the key reasons why private sector companies may be impacted by the NACC. It’s important for businesses that engage with the Australian government to understand that, under the NACC Act, people who are responsible for providing goods or services (or who carry out functions) under a Commonwealth contract are ‘public officials’ and therefore fall within the NACC’s jurisdiction. These people, or the organisations they work for, are known as ‘contracted service providers’.

 A person is considered a contracted service provider (and within the NACC’s jurisdiction) if they are responsible for carrying out functions, or providing goods or services, under or in connection with the Commonwealth contract. In that case, the person will be treated as a staff member of the Commonwealth agency that is responsible for the contract.

 This includes people who are responsible for carrying out functions or providing goods or services under a Commonwealth contract (for example, a consultant) because they are:

• a party to the contract themselves;
• an employee of a contracted service provider who is responsible for doing something required by the Commonwealth contract; and/or
• a subcontractor to a contracted service provider who is responsible for doing something required by the Commonwealth contract.

The wide breadth of this scope means that many private sector Australian organisations may now need to consider whether their conduct (or that of their employees) may be subject to the NACC’s equally broad powers. Now is the time to ensure your company’s anti-bribery and corruption program is robust and effectively implemented.

 

Why is anti-bribery and corruption vital to ESG?

In addition to the impact of anti-bribery and corruption laws and investigative body powers, many high performing companies now recognise that addressing corruption has benefits well beyond pure compliance- in particular, because anti-bribery and corruption measures are so critical to ESG.

It’s now widely understood in the corporate sector that ESG refers to the range of criteria that a business’ stakeholders (including investors, customers, staff, suppliers, vendors and, increasingly, regulators) use to assess a company including to determine the company’s risk profile, sustainability, corporate behaviour and ethical values.

Corruption can have significant implications for ESG factors. Specifically, corruption can impact ESG components by undermining sustainability, social progress, and good governance practices.

1. Environmental (E): Corruption can negatively impact the environment in many ways, with sustainability measures particularly vulnerable to bribery and corruption risks. For example, corrupt practices might lead to the misallocation of natural resources or failure to adhere to environmental standards, which can result in significant environmental damage. Corruption can also impede environmental regulation and enforcement, for example, if a company is able to bypass environmental legal or policy requirements in exchange for bribes.
2. Social (S): Corruption can have extremely negative social consequences. When funds intended for assistance programs, social support services, or infrastructure development are diverted or misallocated through corrupt practices, it deprives communities of vital resources and services. This can stall or slow social progress, increase inequality, and restrict access to education, healthcare, and other basic needs. Corrupt practices can also contribute to criminal human rights abuses, such as modern slavery practices, being perpetrated or remaining undetected.
3. Governance (G): Corruption undermines an organisation’s governance, accountability and transparency. Corruption can adversely impact organisational decision making, particularly where individuals working within an organisation prioritise their personal gain over the interests of the organisation. Investors are likely to view corruption as a significant governance risk and be reluctant to invest in companies or countries which present a potential corruption risk.

Addressing corruption risks through robust anti-bribery and corruption measures is essential for promoting sustainable and responsible business practices and achieving positive ESG outcomes. Accordingly, the success (or otherwise) of a company’s entire ESG program can be impacted by its anti-bribery and corruption measures (or lack thereof).

 

Is your business’ house in order? 

Given the broad scope of the newly established NACC and its powers, all Australian companies should recognise how critical it is to ensure anti-corruption mechanisms are in place and working well.

Important anti-bribery and corruption measures to implement include:

• taking care to avoid any conduct that could be construed as a bribe or corrupt conduct;
• reviewing and updating anti-bribery and corruption risk assessment and management processes to ensure they are appropriate to identify and manage risks, including those risk specific to dealing with government;
• reviewing and updating anti-bribery and corruption policies to ensure they reflect best practice approaches and the broad application of the NACC Act; and
• ensuring anti-bribery and corruption training for employees, contractors and suppliers is up-to-date.

 

How we can help

Leveraging our decades of experience advising businesses, including large corporates and Commonwealth service providers, Peripheral Blue has developed a revolutionary software platform, “ComPotency” for ESG management.  ComPotency creates value from your company’s ESG strategy, data and reporting while delivering a range of solutions including access to:

• policy and procedure templates designed for ESG compliance (including Anti-bribery and Corruption; Conflict of Interest and Whistleblower documents);
• scalable online anti-bribery and corruption training for the Board, staff and third-party contractors;
• task allocation and updates; and
• reporting dashboards to help your business monitor and action any compliance gaps and identify corruption risks.

 Contact us today to find out how we can help embed your anti-bribery and corruption program- and get your house in order- TODAY!