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Q&A-Deloitte corruption expert criticises Canada's anti-graft laws

21 Apr 2011 18:35

Source: trustlaw // Luke Balleny

Canadian Prime Minister Stephen Harper's shadow is cast on flags while holding a news conference in Surrey, British Columbia March 15, 2011. REUTERS/Andy Clark

By Luke Balleny

LONDON (TrustLaw) – Canadian companies won’t start worrying about Canadian anti-corruption laws until they are enforced more vigorously, says anti-graft expert Peter Dent.

Dent, head of Deloitte’s forensic and dispute services practice in Canada and board member of Transparency International Canada, spoke to TrustLaw this week about Canada’s anti-corruption standing and lack of enforcement.

Q: Canada has been criticised by the OECD for its lack of enforcement of its anti-corruption laws. Is that criticism fair or are Canadian companies simply not that corrupt?

I don’t think that the level of enforcement in Canada reflects the amount of foreign corruption perpetrated by Canadian entities at all. It’s very hard to point to facts because of course if you don’t have enforcement in Canada, you don’t have facts.

If you look at the enforcement of (U.S. anti-corruption law) the Foreign Corrupt Practices Act (FCPA) just south of the border and you look at the list of companies that are being sanctioned under the FCPA, it is a veritable who’s who of the U.S. corporate world.

So how is it that we would be able to assert that Canadian companies are better able to manage their foreign corruption risk than their U.S. counterparts? I don’t think that’s a realistic argument that anyone would make.

Q: Why is it the case then that there has been a lack of enforcement? Is it because Canada’s Corruption of Foreign Public Officials Act (CFPOA) is inadequate or has it not been enforced because there’s a lack of political will or perhaps a lack of funding? What do you think the issue is?

The issue is all of the above.

The CFPOA is different from the FCPA in that the FCPA contains a ‘books and records’ provision (which says that U.S. listed companies must keep accurate records of business transactions). If you look at prosecutions under the FCPA, about 95 percent … are under the ‘books and records’ provision of the legislation, not under the actual bribery provision.

It’s much easier to prove a ‘books and records’ violation (because) a company that pays a bribe is not going to accurately reflect those payments in its books and accounts.

The Canadian regulators and the enforcement arm, which is the Royal Canadian Mounted Police (RCMP), do not have those capabilities. They have to prove the bribery and … that’s a much more difficult charge to prove.

The U.S. legislation (also) provides a civil or administrative process. There’s a voluntary disclosure aspect to the legislation, so companies can … acknowledge that something untoward has happened … receive a penalty and then go about their business.

In Canada, there’s no such programme, other than through a plea bargaining arrangement as part of a criminal process.  You get a criminal conviction and your directors can’t travel to the U.S., your ability to be awarded contracts in certain jurisdictions could be impacted.

There’s a whole bunch of ramifications that nobody really understands yet in the Canadian context.

There is foreign corruption within Canadian companies and … their approach, understandably, is “Come get us! We’re not going to come in and confess to you, we’re not going to make it easy. You come get us!”

Q: Does the RCMP have the resources to go out and ‘get’ Canadian companies?

They do not have the resources that are necessary for them to conduct very complex and lengthy transnational corruption cases.

Having seven officers in Calgary and seven officers in Ottawa and (being) responsible for enforcement across the entire Canadian private sector, it’s a tall order for them because of the complex cases that they’re being tasked with investigating.

Q: In January, the RCMP announced that they had 23 active bribery investigations. Is this the beginning of a take-off in anti-corruption enforcement, like the FCPA had in the beginning of the 2000s?

We’re all hopeful that it is.

The RCMP, by announcing that have also started a clock ticking. That clock is ticking now and every month that goes by and no charges made, it’s another blow to their reputation. Their credibility is on the line.

Q: U.S. companies have long had to take notice of the FCPA when creating risk management and compliance programs; now UK companies are doing the same after the UK Bribery Act. Do Canadian companies actively worry about the CFPOA?

No, they do not actively worry about the CFPOA. And they will not start worrying about the CFPOA until there are some enforcement actions in Canada.

If you talk to companies in Canada, they all know the FCPA and if you talk about what legislation they’re in compliance with they compare themselves to other organisations’ compliance programmes around the FCPA and not the CFPOA.

Q: Is Canada planning to make any changes either to its anti-corruption laws or to the way it enforces them?

There’s nothing on the books to do anything to the CFPOA at this point in time.

Q: Is there even a groundswell of people who say the CFPOA should be changed in the same way that the U.S. Chamber of Commerce is lobbying for changes to the FCPA?

In this case, I’ll speak for TI-Canada in that we think that the CFPOA should be strengthened. We do talk about this and there are elements in Canada that do talk about strengthening the legislation. There are interested parties and interest groups but nothing as organised as the U.S. and it’s certainly not something that’s top of mind with Canadians.