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Canada continues aggressive CFPOA enforcement in battle against corruption

During the first half of 2015, Canada’s Royal Canadian Mounted Police (RCMP) continued to employ the stronger enforcement measures and stiffer penalties secured with the 2013 amendments to Canada’s Corruption of Foreign Public Officials Act (CFPOA). The RCMP’s investigations and charges against some of Canada’s most reputable companies only serve to confirm the government is not only prepared to take bribery seriously, but willing to impose very real consequences for corruption.

The Canadian Parliament enacted the CFPOA in 1999 in order to ratify the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention and its objectives. The law drew criticism, however, after resulting in only one prosecution between 1999 and 2011, leading the public interest group Transparency International and the OECD Working Group on Bribery to rank Canada as the worst of the G7 nations in fighting bribery in 2012. In response, Parliament amended the CFPOA in 2013 to provide for stiffer penalties and strengthen its ability to combat corruption, thus bringing the Canadian law more in line with the U.S. Foreign Corrupt Practices Act (FCPA).

In its current form, the CFPOA prohibits offering, making or receiving a bribe, defined as any type of favor to influence a foreign official to obtain or retain a business advantage. Bribes do not have to be direct to be illegal, nor do they have to be successful to prompt a CFPOA violation. The law prohibits bribes made through a third party, or even those an official rejects, so long as the goal of the favor is to influence a foreign official for some business advantage. The CFPOA also prohibits the falsifying of records to disguise and conceal bribery in an entity’s books and records.

The CFPOA grants enforcement officials both territorial and national jurisdiction, allowing them to bring charges based on the nationality of the violator, as opposed to the location or circumstances of the bribe itself. As a result, Canadian citizens and permanent residents in Canada – as well as companies incorporated under Canadian laws – are subject to CFPOA enforcement regardless of where violations took place. Furthermore, authorities are not restricted by a statute of limitations with respect to CFPOA violations and may prosecute for any violations incurred since the CFPOA’s inception in 1999.

Further, the RCMP may only enforce the CFPOA through criminal prosecution, with convictions carrying the potential for very serious consequences. Individuals are subject to imprisonment for a period of up to five years for actions taken prior to June 2013, and up to 14 years for violations thereafter. CFPOA violations can also be very costly. The CFPOA provides no ceiling on corporate fines; rather, the size of the fine is at the discretion of the court. Canada’s criminal laws also prohibit those convicted from retaining the proceeds of their crimes, thus adding the forfeiture of the proceeds obtained from the bribery to the cost of violations. Finally, the Canadian government amended its procurement policies in March 2014 to subject those who commit an “integrity offense” – which includes violations of the CFPOA and the FCPA – to debarment from procurement contracts for up to 10 years.

Although the CFPOA has been in force for over 15 years, most investigations, charges and convictions have occurred within the past five years. Officials secured their first major CFPOA victory in 2011, imposing a penalty of $9.5 million in fines on a publicly traded company for bribing a foreign public official in an attempt to maintain its business relationship in the foreign country. Two years later, an oil and gas company incurred a $10.35 million fine – the largest penalty in Canadian history – for offering a $2 million fee as part of a “consulting agreement” that was only payable if the company was awarded exclusive rights to explore and develop in a specific area of the foreign country. Canada also secured its first conviction of an individual in 2014, imposing a three-year sentence on the agent of a Canadian security company for his involvement in a bribery scheme involving officials of Air India.

Canada’s aggressive enforcement of the CFPOA continued earlier this year with a search of the Toronto headquarters of a Canadian mining company based on allegations the company made improper payments to foreign officials in the Republic of Congo. The government initiated its investigation after receiving a tip from the company’s former in-house accountant – a Canadian citizen – in the Republic of Congo. The informant alleges the company asked him to approve a $12,000 cash payment to Congolese government officials to secure certain lands sought by the company; he also claims the company fired him when he refused to authorise the transfer. In addition to these allegations, the RCMP is investigating claims the company’s Congolese subsidiary made “under the table” or “black money” payments to reduce taxes payable and used two sets of accounting books to conceal the bribes.

One month later, the government brought charges in a long-standing investigation against Canada’s largest engineering and construction firm. The RCMP allegations include $47.6 million in bribes over a 10-year period to public officials in Libya, as well as $130 million in fraud connected to projects in Libya. The fact that the RCMP lodged such charges against an established and well-respected company indicates the extent of change in Canada’s view of corruption. While it used to be bribe payments were not only legal, but also tax-deductible as a legitimate business expense, things are now dramatically different.

The RCMP is currently investigating 34 international corruption cases involving Canadian companies and individuals. As a result, Canadian companies with foreign operations can no longer afford to treat bribes to foreign officials as the “cost of doing business,” but must be proactive in their anti-corruption compliance efforts. Continuing to assume the government will not enforce the CFPOA may only lead to significant reputational damage, economic loss and jail time for corporate executives.

About the author

Tiffany RobertsonTiffany Robertson is a legal writer and regular contributor to the Thomson Reuters blog. Using her experience as a practicing attorney, she writes about legal issues and how they relate to compliance in the workplace. Robertson received her undergraduate degree in International Relations from Boston University and a master’s degree in International Affairs from American University. She holds a law degree from American University’s Washington College of Law, where she was also a member of American University Law Review.

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