Paul Baxter, Head of Litigation & Regulatory Team and Partner at DLA Piper delivered the following address at the 2015 AIMS Conference held in Hobart.

"Thank you for inviting me to speak at your annual conference and for bringing me to this lovely town in such tropical conditions compared to my home state Queensland.

Today I have been asked to enlighten you on some of the more general and current hazards and pitfalls of business life, Bribery, Corruption and Money Laundering and the Ethical Issues that intertwine with these. 

Bribery and corruption are as old as history, money laundering is a relatively new phenomenon in the days of ease of funds transfer but closer financial oversight and tracking, but both are facing increasing scrutiny and regulatory involvement.  Australia is not leading the field in this area, but with strong links into the UK and Europe, especially some of the traditionally strong shipping nations, you may feel some indirect effects and we can be certain further reforms in our own region are not far away.

So Bribery and Corruption, let's look at the current state of play.  I think it is fairly generally accepted that graft is a drag or parasite on an efficient and productive economy.  It equates to a fouled hull with masses of barnacles and weed weighing and slowing down profitable business.  If you do profit from bribery then it is at the expense of a competitor or customer and the overall good of the community suffers.  So let's have a look at the current state of play.

This map shows the perceived levels of corruption throughout the world based on the research of Transparency International.  Australia does quite well, but we are by no means top of the tree.  The Scandinavians and New Zealand are ahead, followed by us, Canada, the Netherlands and Switzerland.  But there are certainly some surprising staistics here.  Britain, Germany, Japan and the United States, financial power houses all have some greasing of the wheels going on leaking productivity.  China has widespread corruption which they are now trying to target as their standard of living lifts.  The PIGS states of Europe are burdened by widespread corruption.  And then our northern neighbours PNG, Indonesia, the Philippines, all the SE Asian mainland countries and India (Malaysia being slightly better) have heavy levels of corruption as well as Russia, and most of  Africa and South America.  And of course corruption is rife in countries where effective government and policing has broken down such as Somalia, Sudan, Iraq, Syria and interestingly North Korea

There is a strong correlation between corruption levels and standard of living.  Many ask which is the chicken which is the egg and indeed in some of the more anarchistic States organised crime provides a substitute form of stability and security that the government is completely unable to offer due to lack of resources or will from their leadership.  But it is definitely an option of last resort prone to gross inefficiency and abuse.

So with the advancement of globalisation, countries like the UK are leading the charge in enforcing reform.  The Bribery Act 2010 applies primarily to British businesses, it also extends to multi-nationals with a close connection to the UK.  It is for this reason international organisations, like DLA Piper are finding themselves having to comply with the Act across all their global operations.  This will become more and more common.  The Act also extends to foreign companies that operate in the UK.  Marine Surveying by its nature has more of a cross border flavour and so this will be of particular relevance to your sector either now or very shortly.

The Bribery Act makes it an offence to bribe someone, to accept bribery in return for improper performance of a relevant function or activity and for an organisation to fail to prevent bribery.  Furthermore for a company to defend against bribery charges it must have adequate procedures in place to prevent bribery.  Otherwise a company is liable for the conduct of its agent or employee.

Penalties for individuals are jail terms of up to 10 years and potentially unlimited fines for corporations.

So what precisely is bribery?  Historically there has been a spectrum with a blurred line between proper and improper conduct.  From brown paper bag drops through facilitation payments, lavish gifts, extravagant hospitality down to the simple business lunch.  Where is the line drawn?

The Bribery Act codifies what was previously a nebulous common law concept.

A bribe is the giving, offering or promising of an advantage with the intention of persuading the recipient to act improperly. They can be made directly or indirectly by someone on your behalf. the recipient might not be the ultimate doer of the act but has some influence. The bribe need not always be financial, just a benefit. The 2 key elements are the offer of advantage and the intention to influence.

So let's look at some scenarios. Corporate hospitality. The Act does not seek to restrict this as a legitimate business activity however it does draw the line where the intent is to influence the recipient to act improperly.  Showing that intent will of course be very difficult and reliance is placed on how the activity is viewed objectively and ultimately what a jury would make of the activity.

This is a vexed question because at its core corporate hospitality is designed to derive a benefit, the critical question is whether it induces improper behaviour.  Therefore it needs to be demonstrably proportionate and with at least arguable wholesome intentions.  A lunch to provide a relaxed setting to improve personal relationships is perfectly legitimate, however where the type of lunch become so lavish that it is remarkable, then the risk of impropriety rises.  However if you have a high wealth client a higher standard might be required to secure acceptance or the desired legitimate response to the hospitality.  The question you must ask is would someone viewing this hospitality from one side consider there was reasonable expectation of it influencing a decision relevant to the business.

So keep you bottles of wine commensurate with the setting and your guest and the extent of your relationship and do not try to impress by over extravagance.  It is a difficult line to walk but common sense will be a strong guide.

Facilitation Payments  

In Australia these are unheard of but in developing and 3rd world nations they are common.  They are payments to government employees or the like to speed up an administrative process where the outcome is predetermined.  "Grease payments" are permitted by many countries and organisations, notably the USA.  Whilst there is some logic to permitting these on the other hand they blur the lines and the British government has decide to take a hard line.  The payments by the AWB for shipments into Iraq, is a high profile example of a facilitation payment gone wrong.  In many cases it is almost essential to viable business operations and competitiveness in a region, yet it is now unlawful under the UK Bribery Act.  It will be interesting to see what becomes of this competitive inequality and whether market forces will get behind the UK high moral ground.

Corporate culture and enforcement.  Noting the corporate offence of failing to prevent bribery organisation will now need to demonstrate what measure they took to stamp out the practice.  A corporation can defend a charge if it shows it had adequate procedures in place designed to prevent bribery.  These measures will vary depending upon geography and culture, type of industry and susceptibility to bribery activities.

Some steps that can be taken.

 In Australia Commonwealth Criminal Code bribery offences limited to public officials.  Various state laws make it an offence to accept or give rewards to influence behaviour.

Money Laundering 

Probably not a high risk situation for Marine Surveyors but important to be mindful of the factors.

It is designed to obscure the criminal source of income so that it can be used in the mainstream economy without retribution.  Terrorist and organised crime are the targets.  Rose to prominence after 9/11 and the recognition of the increasing financial resources of disruptive illegal organisations.  Currently in Australia, legislative requirements are limited to the financial sector and gambling operators and bullion dealers.  But this is expanding.  Once again the UK leads the way with more widespread regulations extending through various professional bodies such as the Law Society.  Requirements of the regulations are to:

For lawyers, a common money laundering ploy is the receipt of random offshore instructions to pursue an outstanding debt.  Soon after instructions are received the debt is miraculously paid with little fight.  The money passes through the lawyers trust account and is laundered.  be on the lookout for transactions or requests that don't smell right or are too good to be true, especially where you do not know the entities involved.  In a Marine Surveying context the opportunities for money laundering are less obvious.  Be wary of transactions where payments or values just don't seem right. For example, the purchase of a vessel for what seems an exorbitantly excessive price where you may be asked to perform a valuation or survey.  it is wise to keep clear of these transaction or report them to the Australian Federal Police.

Integrity and Ethics

The last point raises an interesting issue, what is your obligation to positively do anything where you know of or suspect improper conduct?  The answer is, absent aiding or abetting a crime or being an accessory after the fact, you do not have a positive legal obligation to report suspect behaviour. However if you feel a moral obligation, then there is nothing to stop you from reporting suspected unlawful behaviour to the authorities provided this is not malicious or vindictive.  

There are always issues of confidentiality and possible defamation to be mindful of.  Sensitive information that comes into your possession may have express or implied confidentiality attaching to it the breach of which could expose you to civil liability in damages.  Similarly, publication of allegations damaging to someone's reputation can give rise to civil liability in defamation.  However communication to a relevant enforcement authority in good faith will usually be protected from suit.

So that is a brief overview of some topical issues in the world of global business that may impact upon you all.  Good luck in negotiating the minefield.  If you have any doubts, call a good lawyer.

 Thankyou."