OECD Proposals Mean Increased Vigilance For Canadian Businesses

by Glen Shapiro, LawAndTax-News.com, New York

18 April 2011

Big Four firm Ernst and Young has commented on the Organization for Economic Co-Operation and Development's recent criticism of Canada's anti-corruption regime with a warning that businesses ought to prepare themselves for increasingly vigorous fraud investigations.

The OECD report, published by its Working Group on Bribery on March 28, stated that while improvement has been made in investigative and enforcement areas, Canada's regime for enforcing its domestic legislation, the Corruption of Foreign Public Officials Act (CFPOA), remains problematic. The report also raised concerns that while advancement has been made in the investigation of bribery of foreign public officials by Canadian businesses, only one prosecution has been made since the CFPOA was enacted in 1999.

Important recommendations made in the report advocate that Canada:

• Amend the CFPOA so that it is clear that it applies to bribery related to the conduct of all international business, not just business "for profit";
• Ensure that sanctions applied in practice for CFPOA violations are effective, proportionate and dissuasive;
• Take such measures as may be necessary to prosecute Canadian nationals for bribery of foreign public officials committed abroad; and
• Clarify that police and prosecutors may not consider factors such as the national economic interest and relations with a foreign state, when deciding whether to investigate or prosecute allegations of foreign bribery.

In response to the report, Ernst and Young has outlined the challenges the OECD's attitude towards the regime is likely to bring for Canadian businesses. Mike Savage, Canadian Fraud Investigation and Dispute Services Leader at the firm, said that despite the general recognition of Canada as a country in which very little corruption occurs, the OECD has clearly identified areas in which improvement can occur.

He added that: "Many Canadian businesses already conduct their international business safely above the minimum standards set by law. If Canada implements the OECD recommendations, the main implications for businesses will be how payments to government officials are recorded in their books. We can also expect enhancements to compliance programs and internal controls to prevent or detect violations."

Consequently, in order to protect themselves in the face of tighter anti-corruption laws and an increased risk of prosecution, Savage suggests businesses incorporate such corruption risks into their compliance programs, and conduct periodic reviews of their international operations in industries vulnerable to corrupt payments.

In conclusion, Savage noted that: "What this means for Canadian businesses is that they’ll need to be extra vigilant when recording the true nature of their accounts and transactions to defend against accusations of bribery from all ends. Depending on how Canada responds to the OECD’s report, businesses may also need to review or realign their organization’s overall fraud risk management strategy".

The OECD also recommended that Canada report back on progress in October, 2011. Also, following the usual process, Canada is to make an oral report within one year, and a further written report within two years.

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