I INTRODUCTION

Australia is generally considered to be a highly regulated business environment and there are a number of specialist regulators with the power to investigate and take enforcement action in relation to corporate conduct. Key corporate regulators include:

a the Australian Securities and Investments Commission (ASIC), which is Australia's corporate, markets and financial services regulator. It is responsible for the administration and enforcement of the Corporations Act 2001 (Cth) (the Corporations Act) and other corporations legislation. ASIC also has responsibility for supervision of trading on Australia's markets including the Australian Stock Exchange;

b the Australian Competition and Consumer Commission (ACCC) whose role is to administer and enforce Australian competition and consumer protection laws, in particular the Competition and Consumer Act 2010 (Cth) (CCA) and Australian Consumer Law (ACL);

c the Australian Transaction Reports and Analysis Centre (AUSTRAC), which is Australia's financial intelligence agency with regulatory responsibility for anti-money laundering and counter-terrorism financing; and

d the Australian Tax Office (ATO), which is responsible for revenue collection for the Australian government and administers Australia's taxation and superannuation legislation.

Australia is a federal system and the regulation and enforcement of corporate conduct occurs at both the Commonwealth level and the state or territory level. The above regulators all operate at the Commonwealth level but there are additional authorities at state and territory levels that also have varying investigatory powers. There are additional Commonwealth regulators such as the Australian Prudential Regulation Authority (APRA), which oversees banks, credit unions, building societies, insurance companies and superannuation companies, the Australian Border Force, which is responsible for the administering the Customs Act 1901 (Cth), and the Department of Foreign Affairs and Trade (DFAT), which is the responsible authority for administering Australia's Autonomous Sanctions and United Nations Security Council sanctions.

In addition to these specialist regulators, the Australian Federal Police (AFP) is responsible for the investigation of all criminal activity at a Commonwealth level, but in the corporate context the AFP's current most high-profile priority is the investigation of bribery of foreign public officials or Commonwealth officials. While the AFP investigates such offences, the prosecution of criminal offences is undertaken by the Commonwealth Director of Public Prosecutions (DPP).

All of these regulators have the power, to varying degrees, to require individuals and companies to provide documents and information and also the power to obtain warrants to search and seize documents including through dawn raids. The ACCC and ASIC in particular regularly use their powers to require the production of documents and information,2 and to require individuals to attend for examinations.3 These powers can be exercised against companies under investigation as well as against third parties who may hold relevant documents or information. The enforcement regime of ASIC, including the adequacy of ASIC's information gathering powers, is currently being reviewed by a Treasury Taskforce that is expected to provide its report to the Australian government during 2017.4

In circumstances where a regulator has exercised its statutory powers to require the production of documents or information or for persons to attend for examination or to undertake a dawn raid, it is usually a criminal offence if the individual or company does not cooperate.

All of the Australian regulators encourage companies to cooperate in relation to investigations. Although there are a number of tools available to regulators to try to resolve issues directly with companies, for example by entering into enforceable undertakings or issuing infringement notices, Australian regulators do not generally have the power to impose penalties or other remedies on companies and are required to commence court proceedings to seek such orders. Further, for criminal matters, Australia currently does not have deferred prosecution agreements (DPAs), which therefore limits the options available for regulators and companies to reach an agreed resolution where there are allegations of criminal conduct. As a result, it is still common in Australia for companies and regulators to become involved in court proceedings, which may be lengthy, adversarial and costly.

II CONDUCT

i Self-reporting

While all Australian regulators encourage businesses to self-report wrongdoing, the extent to which there is any formal system of incentives for self-reporting, consequences for not self-reporting, or guidance in relation to self-reporting, varies between regulators.

Generally there is no obligation for companies to self-report to ASIC, however, companies that hold an Australian financial services licence are subject to a regime of mandatory breach reporting. This requires the licensee to report any significant breach, or likely breach, of its obligations within 10 days of becoming aware of the breach or likely breach5 and a failure to comply with this obligation is an offence. Market participants also use this process to self-report breaches of the market integrity rules of the Australian Stock Exchange. The Australian government is currently consulting in relation to the self reporting regime as it has ‘come under scrutiny over the last decade or so in the media and in a series of inquiries into banking or banking and financial services related misconduct'.6

Similarly, there is no obligation for companies to self-report to the ACCC. The ACCC does, however, have a policy of offering immunity or leniency to companies and individuals who disclose illegal conduct or cooperate in its investigations, as a means of incentivising those companies and individuals to report cartel and other anticompetitive conduct, as well as other breaches of the laws.7 The ACCC may grant immunity from civil prosecution. The DPP, however, is responsible for considering whether to grant immunity or leniency in relation to criminal conduct.8 To be eligible for immunity, a company must meet certain criteria, including that it must be the first to apply for immunity in relation to the particular cartel conduct, must have engaged in the particular conduct and must admit that the conduct may be illegal cartel conduct.9 Parties not eligible for ‘first-in' immunity may apply to the ACCC to ‘cooperate' in the ACCC's investigation into particular cartel conduct and, in return, the ACCC will make submissions to the court for more lenient treatment for that party.

In relation to bribery offences, the AFP has prepared a Draft Self-reporting Guideline that is due to be consulted upon, but at this time there remain no published guidelines to assist companies to understand what benefits are available from self-reporting or what the AFP requires by way of disclosure and cooperation from a company that self-reports.

While there are no mandatory self-reporting requirements in respect of the potential breach of export control and sanctions laws, the relevant regulators do encourage self-reporting and the failure to self-report and any later discovery of a breach by a relevant authority may have consequences for:

a the likelihood of prosecution for any offence committed and the penalty sought;

b the likelihood of any broader audit of the company's operations; and

c the ability to obtain future permits in respect of the movement of goods into and from Australia. In addition, errors made with customs declarations often result in a strict liability offence but there are some voluntary disclosure provisions that allow for self-reporting, which can have the effect of no offence having been committed.

For entities that are reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act), generally an annual compliance report must be submitted to AUSTRAC, which provides a self-assessment of the reporting entities' anti-money laundering and counter-terrorism financing compliance for the year. Entities that fail to lodge a compliance report could be subject to penalties and AUSTRAC may regard such entities as ‘higher-risk'.

ii Internal investigations

It is common in Australia for companies to undertake internal investigations, either prior to a regulator's involvement (e.g., if the matter has come to the company's attention through an internal whistle-blower) or at the same time as the regulator (e.g., if a whistle-blower has reported directly to the regulator who has then made enquiries of the company).

If a company has undertaken its own internal investigation, there is no general obligation to share the results of that investigation with the regulators. The extent to which a regulator can seek to compel the production of any documents produced during an internal investigation will depend primarily on whether the documents created during the internal investigation can be said to be covered by either legal advice privilege or litigation privilege. While communications involving in-house lawyers can be protected by privilege it can be harder to establish privilege for in-house lawyer communications, for expert reports commissioned by in-house lawyers, or for documents created by in-house lawyers recording information obtained from witness interviews. For example, the New South Wales Court of Appeal has rejected a claim for privilege in relation to an expert report into an accident prepared by a third party that was commissioned by an in-house lawyer. The Court of Appeal held that it did not have evidence in relation to the ‘mind' of the company and its dominant purpose in commissioning the report, and that it was not sufficient to establish the in-house counsel's dominant purpose for commissioning the report.10

While the position in relation to the provision of privileged material to regulators varies between regulators, the general position is that unless the statute containing the regulator's power to obtain information clearly abrogates privilege, then privileged information is not required to be provided.11 Legal privilege can be asserted against most key regulators, including ASIC, the ACCC and ATO. Many regulators have produced guidance notes for companies that seek to withhold information on the basis of privilege. 12

Even if a company is entitled to claim privilege in relation to internal investigation materials, it may choose to waive that privilege as part of self-reporting and cooperating with regulators. By way of example, when dealing with the ACCC on a cartel immunity application, a company may choose to provide some of its internal investigation materials to the ACCC to help support the application for immunity. However, regulators do not generally require the provision of privileged material as part of corporate cooperation.

When undertaking an internal investigation, consideration must also be given to the fact that Australian employment relationships are highly regulated. Employers generally have policies that require them to investigate matters or set out how an internal investigation must be carried out. A failure to comply with such policies may, in some circumstances, amount to breach of contract. Further, where an investigation relates to complaints of employee conduct, it is important that the employee being investigated is afforded procedural fairness - for example, that the investigation is conducted without undue delay, that the employee is given notice of the relevant allegations against them and allowed an opportunity to respond, and that the employer otherwise makes all reasonable enquiries to establish the relevant facts. In cases where the employee may be exposed to personal prosecution, it will usually be appropriate to ensure that the employee has an opportunity to obtain independent representation. A failure to properly investigate and provide procedural fairness may result in legal claims against the employer under Australia's employment legislation.

iii Whistle-blowers

In Australia, different protections apply in relation to public and private sector whistle-blowers. While the protections for public sector whistle-blowers have been the subject of recent legislation,13 it is generally considered that protections available for private sector whistle-blowers are too limited and require reform.

There is currently some protection for whistle-blowers under the Corporations Act. There are protections against victimisation and termination of employment, as well as statutory immunity for having made the disclosure (but not immunity from being prosecuted for the offence itself). However, the protections only apply when:

a the disclosure is in relation to an actual or potential contravention of the corporations legislation. Therefore, a whistle-blowing report in relation to alleged bribery of a foreign public official would not be protected unless it also involved a contravention of the corporations legislation (for example, the offence of false accounting);

b the whistle-blower is a current officer or employee of the relevant company or a current contractor. Where the whistle-blower is making a report in relation to another entity within a corporate group then there is a risk that the protection will not apply;

c the disclosure is made to ASIC, the company's auditor or a nominated person within the company and it is made in good faith; and

d the whistle-blower is not anonymous.

There are some similar protections available in relation to institutions supervised by APRA14 and some limited protection is provided to tax whistle-blowers via taxation confidentiality provisions.15 In December 2016 the Australian government sought public comment in relation to ‘the introduction of appropriate protections for tax whistle-blowers and in assessing the adequacy of existing whistle-blower protections in the corporate sectors', including whether they should be harmonised with existing whistle-blower protections in the public sector.16 A parliamentary inquiry has been established into whistle-blower protections in the corporate, public and not-for profit sectors and is due to report by June 2017.

There are no specific whistle-blower protections in relation to competition and consumer protection law (other than the protections against prosecution under the ACCC's immunity and cooperation policies). The ACCC has made public submissions calling for the introduction of equivalent whistle-blower protections for the CCA to those available under the Corporations Act.

There are no provisions in Australia that provide for whistle-blowers to receive monetary rewards or other incentive programmes after providing information although this is one aspect being considered under the parliamentary inquiry.

III ENFORCEMENT

i Corporate liability

Corporations can be subject to criminal or civil liability based on the actions of its employees through both common law principles (i.e., vicarious liability) and various statutory provisions that apply to the relevant conduct. For example, under the CCA, any conduct engaged in on behalf of a body corporate by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority, or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent, is deemed to have been engaged in also by the body corporate.17 There are similar provisions for certain liability provisions under the Corporations Act18 and the ASIC Act.19

In cases where the relevant offence is subject to the Criminal Code 1995 (Cth) (the Criminal Code), such as bribery of foreign public officials, then the Criminal Code applies to bodies corporate in the same way that it applies to individuals, but with modifications as set out in the Criminal Code.

If the physical element of an offence is committed by an employee, agent or officer of a body corporate acting within the actual or apparent scope of its employment or within its actual or apparent authority, the physical element can also be attributed to the body corporate.20

If intention, knowledge or recklessness is a fault element in relation to a physical element of an offence, that fault element must be attributed to a body corporate that expressly, tacitly or impliedly authorised or permitted the commission of the offence. Such an authorisation or permission may be established by proving one or more of the following:

a The body corporate's board of directors intentionally, knowingly or recklessly carried out the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence.

b A high managerial agent of the body corporate intentionally, knowingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence. However, this is excusable if the body corporate proves that it exercised due diligence to prevent the conduct, or the authorisation or permission.

c A corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision.

d The body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.21

It is not uncommon for both civil and criminal actions to involve allegations against both companies and their employees or officers. While it is possible for more than one defendant to be represented by the same legal representative, whether that is appropriate will depend on all of the circumstances in the case, including areas of potential conflict, the insurance position and the contractual arrangements between the company and the individuals.

ii Penalties

There are a range of penalties and other sanctions that may be imposed for unlawful corporate conduct, which vary according to the nature of the relevant contravention or offence. These include:

a fines. Most statutory offences have specified maximum fine limits. Sometimes this is stated in the legislation in dollar amounts (e.g., under the CCA, the maximum financial penalty for corporations for both civil and criminal contraventions of the CCA is A$10 million per contravention) and sometimes they are stated by reference to penalty units (for example, for the offence of for bribery of a foreign public official the current maximum fine for corporations is 100,000 penalty units,22 which currently equates to A$18 million but will increase to A$21 million on July 2017). In both cases the fine can be increased to three times the total value of the benefits obtained by the conduct (or, if the benefit cannot be readily ascertained, 10 per cent of annual group turnover in Australia) if that is higher than the statutory maximum fine;

b confiscation of proceeds or disgorgement of profits including in relation to insider trading and taxation offences;

c injunctions to restrain the party in contravention from engaging in conduct;

d bans from operating (e.g., licences regarding environment breaches); and

e infringement notices, which are an administrative action that can be administered by ASIC, the ACCC, AUSTRAC and the ATO for certain specified contraventions. They are designed to provide a fast remedy for less serious breaches without the need for court action and usually require the company to pay a specified penalty sum but without an admission of liability.

In addition to these sanctions, enforceable undertakings are an administrative means by which the regulator and company may agree to resolve an enforcement matter instead of through court proceedings. An enforceable undertaking is generally only used for less serious breaches and will usually include an undertaking by the company to either take an action or refrain from taking certain action as well as compliance measures (such as a commitment to implement or upgrade a compliance programme). ASIC,23 the ACCC24 and AUSTRAC25 all have the power to agree to enforceable undertakings and have used that mechanism in relation to a number of companies. Enforceable undertakings are not available for criminal matters and currently Australia has no system of DPAs, although the Australian government is currently consulting in relation to their introduction.26

In March 2017, the Senate Economics References Committee published its report into ‘inconsistencies and inadequacies of current criminal, civil and administrative penalties for corporate and financial misconduct or white collar crime'.27 The Committee's recommendations included making infringement notices available to ASIC for a wider number of breaches, increasing the current level of civil penalties or setting the penalty as a multiple of the benefit gained or loss avoided.

iii Compliance programmes

There are certain corporate offences in Australia where a compliance programme is directly relevant to whether the company will be liable or not. For offences where the Criminal Code applies, if the prosecution seeks to establish criminal liability on the basis that the company impliedly authorised the conduct by failing to create and maintain a corporate culture that required compliance with the relevant provision, then the compliance programmes adopted by the company would be relevant to determine whether the company is criminally liable for the offence. There is no guidance either from the regulators or from case law in Australia in relation to the type of compliance models that need to be adopted to fulfil the requirements of the Criminal Code.

In respect of Australia's sanctions laws, a defence exists for certain specific offences if the body corporate can establish that it took reasonable precautions, and exercised due diligence, to avoid contravening the particular provision. An active compliance programme is essential to enable this defence to be available to the corporate entity.

The existence of a compliance programme will also be relevant to the assessment of penalty. For example, for breaches of the CCA, the existence and effectiveness of a compliance programme is one of the factors that the court takes into account in determining the appropriate level of penalty. However, programmes to which little commitment is shown or to which mere ‘lip-service' is paid will be of little benefit to companies arguing for a reduction in penalties.

The implementation or improvement to existing compliance programmes may also form part of any sanction or remedy. Where regulators such as ASIC, the ACCC or AUSTRAC use their powers to accept an enforceable undertaking to resolve an enforcement matter, the undertaking may include provision for the establishment of a compliance programme as well as the appointment of an independent compliance expert to monitor and report on this for a number of years. Australian courts also have the power to order the implementation and monitoring of a compliance programme on corporates as part of the remedies imposed for certain contraventions, including under the CCA.

iv Prosecution of individuals

Depending on the nature of the contravention, regulators may also take enforcement action against individual directors, officers or employees for the same offence as the company. Enforcement action may be taken against individuals on the basis that they were involved in the company's contravention (e.g., if they aided or abetted, were knowingly concerned in, induced or conspired with others to effect the contravention), or they might be charged for a separate offence such as breach of director's duties.

In Australia, directors and officers of a company have a duty of care and diligence, and they are obliged to act in good faith in the best interests of the company and for a proper purpose (Sections 180 and 181 Corporations Act, which are civil penalty offences). In addition, if directors or officers have been reckless or intentionally dishonest when they fail to exercise their powers in good faith and for a proper purpose, this can result in a criminal penalty.

Depending on the contravention in question there may be statutory restrictions on the company's ability to fund legal costs of its directors and officers in defending such proceedings. For example, a company cannot indemnify its officers for legal costs incurred in defending criminal proceedings in which the person is found guilty, or defending proceedings brought by ASIC for a court order, including a civil penalty order, where that order is made, although the limitation does not apply to legal fees incurred during the ASIC investigation but before commencing proceedings.28 As this limitation only applies to individuals that are found guilty or where the court order is made, in some circumstances, companies provide loans to officers for their legal fees which are repayable in the event that they are found guilty or the court order is made. A similar provision applies in relation to civil penalty proceedings under the CCA and ACL.29

IV INTERNATIONAL

i Extraterritorial jurisdiction

The extraterritorial reach of Australian laws, and the extent to which Australian regulators have the ability to investigate and take action in relation to conduct that occurs outside Australia, will depend on the particular legislation. While Australia is generally not considered to have a ‘long arm' approach to enforcement, there are a number of areas where action can be taken in relation to extraterritorial conduct.

Although the Corporations Act provides that each of the provisions of the Act applies in relation to acts and omissions outside of the jurisdiction and to natural persons and corporations that are resident outside of the jurisdiction, the reality is that extraterritorial enforcement is relatively limited due to many offences being restricted to companies registered in Australia.

The CCA and ACL both apply to the extraterritorial conduct of companies incorporated in Australia or ‘carrying on business' in Australia, Australian citizens and persons ordinarily resident in Australia. Notwithstanding this, generally there must be some nexus with Australia. For instance, for certain prohibitions in the CCA, the conduct in question must have the purpose or effect of restricting competition in Australia in order that the company may be prosecuted under the CCA.

For offences to which the Criminal Code applies, there will usually only be jurisdiction where the relevant offence is conducted wholly or partly in Australia, or where the result of the offence occurs wholly or partly in Australia.30 However, there are four categories of extended geographical jurisdiction, including a category where jurisdiction is unrestricted so that action can be taken whether or not the conduct occurs in Australia and irrespective of whether the offence would be an offence in the country in which it occurred.31 For example, the offence of bribery of a Commonwealth public official has that unrestricted extended jurisdiction.32

ii International cooperation

A number of Australian regulators cooperate with other countries' equivalent regulators, often pursuant to cooperation agreements or memoranda of understanding.

ASIC and the ACCC are party to various bilateral or trilateral arrangements or memoranda of understanding with other countries' international and governmental agencies to allow mutual assistance, cooperation and coordination to facilitate the implementation and enforcement of laws and policies. ASIC has entered into numerous memoranda of understanding with foreign regulators for mutual cooperation and to render assistance to investigations and exchange information.33 Similarly the ACCC has entered into various cooperation agreements with foreign competition law regulators for the mutual administration and enforcement of competition laws with the purpose of developing a cooperative relationship.34 In addition, Australia is party to treaties with countries, including the United States, to allow both countries to exchange evidence and assist with each country's competition law enforcement activities.35

There are, however, some restrictions on the release of information gathered from investigations that have been authorised under Australian law. For example, in providing assistance to business-regulating authorities, ASIC can only exercise its compulsory powers to obtain documents information or testimony after receiving authorisation from the Attorney-General.36 Conversely if ASIC intends to exercise its compulsory powers to request investigative assistance in foreign countries (for example, to take evidence, obtain production of documents or for search and seizure in that foreign country), then the request must be made through the Attorney-General pursuant to the Mutual Assistance in Criminal Matters Act 1987 (Cth).

In relation to tax enforcement, Australia is party to a number of bilateral income tax treaties for the exchange of information about overseas' Australian residents' income and vice versa, foreign residents' income in Australia. Australia is also party to a number of tax information exchange agreements (TIEA) with non-OECD offshore financial centre jurisdictions as those jurisdictions support international tax avoidance and are a real and ongoing risk to Australian revenue. The aim of the TIEAs is to establish effective information exchange and improve transparency of taxpayers' financial arrangements or transactions for tax purposes.

In order to assist the investigation of bribery offences, the AFP joined the International Foreign Bribery Taskforce (IFBT) in May 2013.37 The IFBT signifies a relationship between Australia, Canada, the United Kingdom and the United States to combat foreign bribery. The purpose of the IFBT is to enable the agencies and the countries to work collaboratively to strengthen investigations into foreign bribery offences as part of the support for the OECD and United Nations Anti-Bribery Conventions. The IFBT partnership is intended to provide a platform for each country's agencies to expeditiously share knowledge, skills, methodologies and leverage off the lessons learnt from previous investigations across international borders.38

Australia is also a party to a number of extradition treaties (bilateral and multilateral) as well as non-treaty extradition arrangements. The Australian government processes all incoming and outgoing extradition requests in accordance with the Extradition Act 1988 (Cth). Australia may only accept an extradition request from countries that have been declared as an extradition country.39 Australia can, however, make extradition requests to any country without any bilateral or multilateral treaty or arrangement in place, but whether that request would be accepted depends on the domestic laws of that country. Notably, China is still not a country that has extradition arrangements in place with Australia. A China-Australia extradition treaty was signed by China and Australia on September 2007 but it has not yet been ratified. In December 2016 the Joint Standing Committee on Treaties Report recommended that the treaty be ratified but with four additional recommendations designed to strengthen the protection of human rights, and the government accepted that recommendation.40 However, in March 2017 the government announced that it would not press for the ratification at this stage given the opposition party would not have supported the ratification.41

iii Local law considerations

There are a number of local law considerations that may have implications for multi-jurisdictional investigations.

In terms of the potential sharing of information with overseas entities (whether this is an overseas regulator, another member of the same corporate group or other third parties), a key consideration of Australia law is the Privacy Act 1988 (Cth) and the Australian Privacy Principles (APPs). APP 8 requires that where personal information is sent from an Australian entity that is subject to the APPs, to an overseas recipient, the sender of the information must take such steps as are reasonable in the circumstances to ensure that the overseas recipient does not breach the APPs in relation to the information.

An exception to this requirement is where the disclosing entity reasonably believes that the overseas recipient of the information is subject to a law, or binding scheme, that has the effect of protecting the information that is at least substantially similar to the APPs. This, therefore, requires a consideration of how the overseas privacy protections compare with the APPs.

An overseas recipient does not include the entity disclosing the information so where a company is sending information to an overseas office of the same corporate entity the restriction does not apply, but it will apply where the information is being sent to a subsidiary or a related body corporate of the sender. It is, therefore, essential in multi-jurisdictional investigations to consider this issue before, for example, determining whether the investigation will be conducted at a ‘head office' level or within the local office.

The APPs apply to regulatory agencies as well as to companies, although APP 8 does include some provisions which seek to ensure that agencies fulfil their obligations under international treaties and permit disclosure for law enforcement activities.

V YEAR IN REVIEW

The last year has seen a relatively high level of enforcement action by many of Australia's key corporate regulators.

There has been a particularly high level of investigation and enforcement action focused on the financial services sector in recent years, and as a result there has been consideration of whether a Royal Commission into the banking sector is required. ASIC has also commenced a number of proceedings against financial institutions, including against the big banks in Australia in relation to alleged manipulation of the bank bill swap rates, and has foreshadowed further actions in relation to lending practices.42 The ACCC also took action against two Australian banks for attempted cartel conduct in relation to the fixing of a certain foreign exchange benchmark.

ASIC continues to have prosecuting insider-dealing offences as one of its areas of focus, including taking action against an overseas holding company.43 This is the first time that an Australian court has determined a civil penalty for a company's (rather than an individual's) breach of the insider trading provisions. It was found that the overseas holding company engaged in insider trading as a result of extending the completion date for the acquisition of shares by its Australian subsidiary in another Australian company at a time when it had insider information about that other company's financial performance. The Court accepted that the contravention was one of ‘carelessness and inadvertence, rather than actual knowledge and deliberateness' but found that it was a serious failure by the overseas holding company to put in place appropriate systems and procedures resulting in the capacity to undermine the integrity and efficiency of the market. The overseas holding company was ordered to pay a financial penalty of A$400,000 as well as ASIC's legal costs.

ASIC also continues to focus on the duties of directors and officers in ensuring good corporate conduct. In December 2016, the Victoria Supreme Court finally delivered its decision in relation to proceedings commenced by ASIC in 2007 for breaches of directors' duties by the former Group General Manager and the former Chairman of AWB Ltd arising from investigations into AWB in connection with its supply of wheat to Iraq under the United Nations Oil for Food Program.44 The Court found that the former Chairman breached his duties by failing to make proper enquiries about the propriety of certain fees and therefore failed to stop AWB from engaging in improper conduct. The Court found that the former Group General Manager did not breach his duties but ASIC has appealed this decision.

The ACCC has continued to take enforcement action for a range of alleged anticompetitive conduct. This has included in the last 12 months, the first two criminal cartel prosecutions since the introduction in Australia of the criminal cartel provisions in 2009. In the first matter, the respondent pleaded guilty and the court's sentencing decision is currently reserved.45 In November 2016, the Commonwealth DPP brought criminal cartel charges following the ACCC's investigation into alleged cartel conduct concerning the international shipping of cars, trucks, and buses to Australia,46 and the proceedings are ongoing.

In March 2017 the highest ever civil penalty in corporate Australian history of A$45 million was ordered against Tabcorp for non-compliance with AML/CTF Act. The CEO of AUSTRAC commented that ‘such contraventions are not to be taken lightly and this unprecedented civil penalty highlights AUSTRAC's resolve to take enforcement action against reporting entities that engage in significant and systemic non-compliance.'47

While there continues to be an absence of prosecutions in relation to bribery of foreign public officials, the Commonwealth government did pass legislation introducing new false accounting offences, including an offence based on recklessness rather than intent. These offences have been introduced primarily to implement Australia's obligation as a party to the OECD's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

VI CONCLUSIONS AND OUTLOOK

Regulator scrutiny of corporate activity has been progressively increasing in recent years and that trend is expected to continue. However, in comparison to countries such as the United States, which has the ability to resolve criminal allegations against corporates through the use of DPAs, the Australian regulators have more limited tools and also more limited resources as compared to the US where DPAs frequently are accompanied by multimillion-dollar fines.

There are, however, a number of regulatory reforms under consideration, which may increase the ability of regulators to reach negotiated resolutions with companies, or to more easily investigate and prosecute companies where resolution is not possible. The issues currently under consideration include:

a the introduction of DPAs. In March 2016 the Australian government released a public consultation paper in relation to whether DPAs should be introduced into Australia,48 and in March 2017 a detailed proposal of the potential scheme was released.49 The introduction of DPAs would permit authorities to reach negotiated settlements with companies for criminal offences, rather than go through lengthy court proceedings, although under the proposed scheme the approval of the Court would still be required, unlike in the US;

b proposed amendments to the foreign bribery offence in the Criminal Code. The Australian government has released an exposure draft on proposed amendments to the Criminal Code.50 The measures, if introduced, are likely to have the effect of making prosecutions more likely and it has been proposed that there would be a new corporate offence for companies that fail to prevent foreign bribery, which is similar to Section 7 of the UK Bribery Act. This means that a company would be liable for bribery by its employees, contractors and agents (including those who may be operating overseas) unless the company can show that it had proper internal controls and compliance systems in place;

c proposed changes to the penalty regime for white collar crime. As noted above, in March 2017 the Senate Economics References Committee published its report into ‘inconsistencies and inadequacies of current criminal, civil and administrative penalties for corporate and financial misconduct or white collar crime'.51 The Committee's recommendations included making infringement notices available to ASIC for a wider number of breaches, increasing the current level of civil penalties or setting the penalty as a multiple of the benefit gained or loss avoided;

d the potential introduction of improved protections for whistle-blowers. As noted above, in December 2016 the Australian government sought public comment in relation to ‘the introduction of appropriate protections for tax whistle-blowers and in assessing the adequacy of existing whistle-blower protections in the corporate sectors' including whether they should be harmonised with existing whistle-blower protections in the public sector.52 A parliamentary inquiry has been established into whistle-blower protections in the corporate, public and not-for-profit sectors and is due to report by June 2017;

e review of the enforcement regime of ASIC, including in relation to the adequacy of ASIC's information gathering powers, which is the subject of a Treasury Taskforce that is expected to deliver its report during 2017;53 and

f proposed amendments to the CCA that are currently before Parliament. The proposed amendments are to broaden the joint venture defence to cartel conduct, as well as other amendments to simplify the prohibitions against cartel conduct. There is also separate legislation before Parliament to substantially amend the prohibition against misuse of market power in the CCA.


1 Georgie Farrant and Georgina Foster are partners at Baker McKenzie.

2 Section 33 of the Australian Securities and Investments Commission Act 2001(Cth) (ASIC Act) and Section 155 of the CCA.

3 Section 19 of the ASIC Act and section 155 of the CCA.

4 www.treasury.gov.au/ConsultationsandReviews/Reviews/2016/ASIC-Enforcement-Review.

5 Section 912D of the Corporations Act. Guidance in relation to breach reporting is provided in ASIC's Regulatory Guide 78.

6 ASIC Enforcement Review: Position and Consultation Paper 1 Self-Reporting of contraventions by financial services and credit licensees 11 April 2017.

7 ACCC Immunity and Cooperation Policy for Cartel Conduct, September 2014 (ACCC Immunity Policy)

8 The CDPP exercises an independent discretion in accordance with the criteria set out in the criteria set out in Annexure B to the Prosecution Policy of the Commonwealth.

9 The criteria are set out in full in paragraph 16 of the ACCC Immunity Policy.

10 See Sydney Airports Corporation v. Singapore Airlines Ltd and Anor [2005] NSWCA 47.

11 See Daniels Corporation International Pty Ltd v. ACCC (2002) 213 CLR 543, where the court found that statutory provisions should not be construed as overriding common law rights, privileges or immunities unless there were clear words or a necessary implication to that effect.

12 For example: http://asic.gov.au/about-asic/asic-investigations-and-enforcement/claims-of-legal-professional-privilege/, www.ato.gov.au/Forms/Legal-professional-privilege-form-1---LPP1.

13 Public Interest Disclosure Act 2013 (Cth).

14 Found in the Banking Act 1959 (Cth), the Insurance Act 1973 (Cth), the Life Insurance Act 1995 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth).

15 Division 355 of the Taxation Administration Act 1953 (Cth).

16 See the government's consultation paper on the ‘Review of tax and corporate whistle-blower protections in Australia' dated 20 December 2016.

17 Section 84(2) of the CCA.

18 Section 769B of the Corporations Act.

19 Section 12GH of the ASIC Act.

20 Section 12.2 of the Criminal Code.

21 Section 12.3 of the Criminal Code.

22 A penalty unit pursuant to Section 4AA of the Crimes Act 1914 (Cth) is currently A$180 and this amount will increase to A$210 with effect from July 2017.

23 Sections 93A and 93AA of the ASIC Act and ASIC Regulatory Guide 100 dated 20 February 2012.

24 Section 87B of the CCA.

25 Part 15, Division 7 of the AML/CTF Act.

26 See Section VI below.

27 www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/WhiteCollarCrime45th/Report ‘Lifting the fear and suppressing the greed': Penalties for white-collar crime and corporate and financial misconduct in Australia.

28 Section 199A(3) Corporations Act.

29 Section 77A of the CCA.

30 Division 14 of the Criminal Code.

31 Division 15 of the Criminal Code.

32 Section 142.3 of the Criminal Code.

33 Countries include Brazil, Japan, South Africa, Taiwan, the United Arab Emirates, the United Kingdom and the United States. A comprehensive list of the various foreign memoranda of understanding ASIC is party to is available at: http://asic.gov.au/about-asic/what-we-do/international-activities/international-regulatory-and-enforcement-cooperation/memoranda-of-understanding-and-other-international-agreements/.

34 Foreign competition agencies include the Fair Trade Commission of Japan, the Ministry of Commerce of the People's Republic of China, the National Development and Reform Commission (China), the State Administration for Industry & Commerce of the People's Republic of China, the Competition Commission of India, the Federal Trade Commission or Department of Justice (United States), the Office of Fair Trading (United Kingdom), Taiwan Fair Trade Commission. A list of the various cooperation agreements and treaties that the ACCC is party to is available at: www.accc.gov.au/about-us/international-relations/treaties-agreements.

35 The treaties are the Australia United States Mutual Antitrust Enforcement Assistance Agreement and the Agreement between the Government of Australia and the Government of the United States of America relating to Cooperation and Antitrust Matters. Australia is also a party to free trade agreements with other countries like Japan, which include chapters on competition law.

36 Section 6(2) of the Mutual Assistance in Business Regulation Act 1992 (Cth).

37 www.abc.net.au/4corners/documents/RBA2013/AFP_statement.pdf.

38 www.afp.gov.au/news-media/media-releases/global-effort-tackle-foreign-bribery-and-corruption
-strengthened.

39 A comprehensive list of countries that Australia has a bilateral or multilateral treaty with is available at: www.ag.gov.au/Internationalrelations/Internationalcrimecooperationarrangements/Pages/default.aspx.

40 www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Extradition-China/Government_Response.

41 http://foreignminister.gov.au/releases/Pages/2017/jb_mr_170328.aspx?w=tb1CaGpkPX%2FlS0K%2Bg9ZKEg%3D%3D.

42 http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-183mr-asic-commences-civil-penalty-proceedings-against-national-australia-bank-for-bbsw-conduct/.

43 ASIC v. Hochtief Aktiengesellschaft [2016] FCA 1489.

44 ASIC v. Flugge & Geary [2016] VSC 779.

45 R v. Nippon Yusen Kabushiki Kaisha (sentence hearing on 11 April 2017 reserved).

46 Charges were laid against Kawasaki Kisen Kaisha (K-Line) alleging that K-Line has engaged in cartel conduct.

47 www.austrac.gov.au/media/media-releases/record-45-million-civil-penalty-ordered-against-tabcorp.

48 www.ag.gov.au/Consultations/Pages/Deferred-prosecution-agreements-public-consultation.aspx.

49 www.ag.gov.au/Consultations/Pages/Proposed-model-for-a-deferred-prosecution-agreement-
scheme-in-australia.aspx.

50 www.ag.gov.au/Consultations/Pages/Proposed-amendments-to-the-foreign-bribery-offence-in-the-criminal-code-act-1995.aspx.

51 www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/WhiteCollarCrime45th/Report ‘Lifting the fear and suppressing the greed': Penalties for white-collar crime and corporate and financial misconduct in Australia.

52 Review of tax and corporate whistleblower protections in Australia - 20 December 2016.

53 www.treasury.gov.au/ConsultationsandReviews/Reviews/2016/ASIC-Enforcement-Review.