Conducting Business in Africa: The Impact of Canada’s Corruption of Foreign Public Officials Act
According to statistics released by the International Monetary Fund, 12 of the 20 fastest-growing economies into 2015 will be African nations. Opportunities are thriving for investors seeking to tap into Africa’s increasingly attractive business environment. While there have been improvements in governance and security in the past decade, the region’s history of instability and corruption continues to be a source of concern for companies operating in this region.
- Expansion of jurisdiction: Prior to the amendments, the CFPOA contained a significant loophole since some part of the formulation, initiation or commission of the offence had to take place in Canada. Since the CFPOA is directed at bribery occurring in foreign countries, this significantly hampered the ability of Canadian authorities to enforce the CFPOA in cases where the bribery occurred entirely in a foreign country. Under the amended provision, Canadian authorities can now prosecute any Canadian company or individual for a bribe occurring in a foreign country, even if the transaction takes place outside of Canada.
- Increased penalties: The amendments significantly increased the penalties for a violation of the CFPOA. The maximum imprisonment for a violation of the CFPOA is now 14 years, as compared to five years prior to the amendments. The maximum monetary penalty is still unlimited.
- Implementation of a books and records offence: This provision makes it an offence to conceal bribery in accounting records. While this new offence shares some similarity with the books and records provisions of the U.S. Foreign Corrupt Practices Act (FCPA), it is unlikely to have the same impact in Canada as it has had in the United States. In the U.S., a large number of FCPA settlements have been made pursuant to the books and records provisions, which includes civil resolution options, and are subject to a lower civil burden of proof. Conversely, in Canada the new books and records provisions are criminal, meaning that the authorities must prove an offence to the higher standard of proof. There remains no CFPOA civil resolution option in Canada.
- Removal of facilitation payment exception: Previously, facilitation payments, which are small payments made to low-level officials to secure or expedite performance of “acts of a routine nature,” were exempted from the CFPOA. Under the amendments, this exception will eventually be removed, subject to a further order of the governor in council. Once this is made, the CFPOA will be brought in line with the U.K. Bribery Act, which also prohibits facilitation payments. Critics say these amendments will pose a great challenge for Canadian companies operating in parts of Africa, where facilitation payments are often seen as a cost of doing business. For additional information on the amendments to the CFPOA, please see our June 2013 Blakes Bulletin: Canada Strengthens International Anti-Corruption Legislation.
- Conduct a risk assessment: An important first step is to identify the corruption risks faced by a company. Once areas of risk are identified, assess these risks, their likelihood and potential impact, prioritize resources accordingly and develop a compliance program.
- Develop an internal anti-corruption policy: The cornerstone of any compliance program is a clearly articulated corporate policy against corrupt behaviour. The policy should send a strong message from senior management that corruption is unacceptable. It should also establish limitations and thresholds and provide guidance on risk areas.
- Train employees and enforce an anti-corruption policy: An anti-corruption policy is only as effective as the rigour with which it is implemented and enforced. The goal is to create a top-down attitude of compliance. All employees should receive periodic compliance training on anti-corruption laws and the company’s anti-corruption policy.
- Utilize internal controls to identify and correct issues: Another component of an effective anti-corruption policy is a system of internal controls aimed at preventing corruption from occurring. The goal is to develop and implement internal audit mechanisms, including accounting practices, and to identify and correct issues if and when they arise.
- Develop best practices for dealing with foreign agents and joint-venture partners: The best practice is to only engage a foreign agent where necessary and only with pre-approval from your company’s compliance officer. Adequate due diligence should be conducted and documented prior to hiring a foreign agent and/or before establishing a partnership abroad to ensure the foreign agent or joint-venture partner is reputable, properly qualified, and does not employ foreign officials.
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