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Friday, March 8, 2013

Beefing up Canada’s anti-corruption legislation

On February 5, 2013, broad amendments to the Corruption of Foreign Public Officials Act (CFPOA) were tabled in the Senate through Bill S-14, which will effectively bring Canada’s anti-corruption regime more closely in line with the US Foreign Corrupt Practices Act (FCPA) by creating a “books and record” offence, and the UK Bribery Act by eliminating facilitation payments. Bill S-14 may move quickly through both the Senate and the House of Commons if the bill is given priority by the Senate.

In a recent article, Stephen Natrass and Alison G. FitzGerald of Norton Rose in Ottawa write, if Bill S-14 is enacted into law as presently drafted, it will make the following six major changes to the CFPOA, which could dramatically affect how many Canadians do business at home and abroad. The changes are listed in order of priority of potential effect. Bill S-14 is available online here.

Elimination of facilitation payments exception 

The present exception under the CFPOA for facilitation payments, generally small payments made to government officials to speed up or secure a routine administrative process, such as processing a work visa or issuing a permit, would be eliminated. This will bring Canadian legislation in line with the UK Bribery Act.

Facilitation payments are quite commonly made (and expected) in certain countries and the removal of this exception from the CFPOA regime could dramatically affect how many Canadians and Canadian entities conduct themselves abroad.

New books and records offence 

The proposed amendments create a “books and records offence,” similar to that which exists in the US FCPA. This new offence would cover maintaining accounts that do not appear in any books that are required to be kept in accordance with GAAP.

Criminal liability can arise for failure to record or inadequately recording transactions; recording expenditures that did not occur; incorrectly identifying the purpose of a liability; knowingly using false documents; and intentionally destroying books and records earlier than permitted by law. US authorities heavily rely on the similar FCPA provision to prosecute corruption and bribery – rather than the bribery offence – because it is easier to convict a person for having not accurately recorded a bribe payment.

It can be expected that Canadian authorities will follow suit.

Broader definition of “business” 

The definition of “business” is broadened under the proposed amendments by including any business, profession, trade, calling, manufacture or undertaking of any kind, whether for profit or not.

This proposed change may have two effects. First, it would close a loophole in the present CFPOA regime that implicitly allows certain conduct in the course of “business” abroad so long as the transaction or other conduct in issue is not carried out “for profit” but, if carried out for profit, would constitute an offence under the CFPOA.

Second, and perhaps more importantly, it would substantially widen the scope of application of the CFPOA to include, for example, charitable organizations and other non-governmental organizations (NGOs) that have historically been exempt from the CFPOA’s provisions.

Combined with the elimination of the facilitation payments exception, this proposed change could substantially affect how charitable organizations and other NGOs carry out their respective missions abroad.

Nationality jurisdiction – the long arm of the Canadian law 

The proposed amendments will make it easier to prosecute CFPOA offences by deeming any act or omission that, if committed in Canada, would constitute an offence under the CFPOA to have been committed in Canada for the purpose of prosecution. Such a change would eliminate the need to establish a territorial link to Canada and would allow the prosecution of CFPOA offences against Canadian citizens, Canadian permanent residents, and organizations that are incorporated or otherwise organized under the laws of Canada or of a province, located or operating anywhere in the world solely on the basis of their nationality.

Increased maximum sentence 

Under the current CFPOA, bribery offences are punishable by a maximum of five years’ imprisonment and unlimited fines. The proposed amendment would increase the maximum jail term to 14 years.

With the coming into force of certain sections of the Safe Streets and Communities Act on November 20, 2012, courts will no longer order a sentence of less than two years to be served in the community for convictions under the CFPOA, and individuals will have to wait 10 years to apply for a pardon after their sentences have expired.

Exclusive jurisdiction with RCMP 

Presently, any police officer in Canada may lay charges under the CFPOA, although in practice the RCMP handles the investigations. The proposed amendments would confer exclusive authority on the RCMP to bring CFPOA charges, and will therefore have little or no practical impact.

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