Canada’s Anti-Corruption Legislation Gets a Makeover

The country’s reputation for below-par bribery investigation and enforcement will likely follow

Posted by Dawn Lomer in on March 12th, 2013

It’s been almost two years since I wrote a blog post about Canada’s dismal reputation for bribery enforcement, referring to the fact that there had been only one prosecution under Canada’s 1999 Corruption of Foreign Public Officials Act (CFPOA). At the time, the OECD had released a scathing report criticizing Canada’s record of foreign bribery detection, investigation and prosecution, noting that even in the one prosecution that was successful, the fine turned out to be less than the amount of the bribe.

Since Canadians doing business overseas are no less exposed to demands for bribes than their counterparts from other jurisdictions, it seems safe to say that Canada’s dearth of prosecutions was at least partly due to a lack of commitment to fighting corruption. Experts were quick to point out problems with the legislation that also made bribery more difficult to prosecute.

While Canada’s record has improved since then, with two high-profile prosecutions involving fines of $9.5 million and $10.35 million and some 35 cases under review, its reputation has not fully recovered. Compared to other countries, Canada’s anti-bribery regime is still lacking.

But last month, the Canadian government announced amendments to the CFPOA that could change all that.

Territoriality Principle

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One of the problems with the legislation, which makes it difficult to enforce, is that prosecutors in these cases have to show a “real and substantial link” to Canada. This territoriality principle doesn’t apply in most other developed countries, including the US and the UK, which have an unquestioned ability to prosecute their own citizens no matter where the offense is committed.

The establishment of two dedicated anti-corruption units of the RCMP, in Ottawa and Calgary, showed that the government was taking a more determined approach to bribery. Several large prosecutions followed the OECD report, but enforcement was still sluggish and problems with the legislation weren’t addressed until recently.

Proposed Amendments

The recent announcement of important amendments to the CFPOA is encouraging for the future of Canadian anti-bribery enforcement and for the country’s reputation as a straight-shooter.

The proposed amendments include:

  • Nationality jurisdiction for CFPOA offenses, meaning that prosecutors would no longer need to prove a “real and substantial link” with Canada
  • Elimination of the facilitation payments exception
  • Introduction of a books and records offense
  • An increase of the maximum penalty for bribery from five to 14 years
  • Exclusive authority for the RCMP to lay charges under the CFPOA
  • Clarification of the definition of “business” for the purposes of the bribery offence

The New Prosecution Environment

The amendments, which are expected to pass, make the CFPOA bribery offence one of the few Canadian criminal offenses that doesn’t include the territoriality principle. This will mean that Canadians and Canadian companies engaged in bribing foreign public officials will be liable under Canadian law no matter where the bribery occurs and even if the only connection to Canada is their nationality.

The amendments also propose the eventual elimination of the exception for facilitation payments (small payments made to foreign public officials for performing administrative tasks that are part of their regular duties), even though the US FCPA will continue to include this exception. This will remove some of the “grey” areas in determining whether a bribe has occurred.

A separate “books and records” offense will make it illegal for companies to conceal the bribery of foreign public officials in their record-keeping. This is one of the most effective sections of the current FCPA and could help to encourage better financial reporting and controls for Canadian companies.

These amendments demonstrate that Canada is finally taking seriously its commitment to anti-corruption, and Canadian companies doing business internationally will have a new standard to comply with.

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.