Ethical Standards to Combat Fraud, Bribery and Corruption
Widespread fraud, bribery and corruption undermine the rule of law and erode justice, driving other domestic and transnational crimes such as trafficking in people, money laundering and drug dealing. Fraud, bribery and corruption are also bad for business. The practices distort prices, reduce competitiveness, introduce uncertainty and risk into the market, and erode fair and transparent business practices. When it involves the public sector, it can divert resources away from key priorities such as health, education and infrastructure, which impacts economic and social development.
New Zealand has robust anti-corruption laws, and the Serious Fraud Office (SFO) is committed to proactively detecting, investigating and prosecuting both public and private sector corruption. However, the private sector also
has an important role to play in solving this global problem.
There is no legally binding definition of corruption in New Zealand. However, the SFO relies on Transparency International’s definition of corruption as “the abuse of entrusted power for private gain.”
Corruption often involves bribery which is the giving or receiving, whether directly or indirectly, of something of value to influence a transaction. Bribery and corruption can take many forms including:
•Payment, receipt or solicitation of bribes or secret commissions (kickbacks)
•Manipulation of tendering or procurement processes
•Undisclosed conflicts of interest (we’ve seen many omissions of undisclosed conflicts recently)
•Willful blindness in respect of the activities of agents overseas
•Failure to put in place adequate systems and controls to mitigate the risk of bribery
•Extravagant corporate hospitality or gifts
•Undisclosed giving or receiving of gifts
Relevant Anti-Corruption Legislation
New Zealand businesses, particularly those operating abroad, need to be aware of the overlapping laws that may apply to their operations. In addition to New Zealand legislation, businesses should familiarise themselves with the laws of the local jurisdiction(s) in which they operate and any applicable ‘long-arm’ laws of other countries.
New Zealand Legislation
Scope and Jurisdiction
New Zealand criminalises fraud, bribery and corruption in both the public and private sectors, challenging traditional conceptions that corruption is purely a public sector issue. Importantly, all New Zealand’s fraud, bribery and corruption offences apply to individuals and legal persons. This means that an act of fraud, bribery or corruption committed by an employee, agent or other intermediary on behalf of an organisation may result in a prosecution against the individual in their personal capacity, as well as a prosecution against the organisation.
This is important, as seeking accountability from individuals who perpetrate illegal or unethical acts is one of the most effective ways to tackle corporate wrongdoing. Further, all fraud, bribery and corruption offences apply both domestically and extraterritorially. This means that the SFO can prosecute New Zealand citizens, residents, and entities incorporated in New Zealand for acts of fraud, bribery and corruption that occur outside of New Zealand, including when the bribe is paid through a foreign intermediary. Bribery under the Crimes Act occurs when a person corruptly gives, receives, accepts or obtains a bribe (whether directly or indirectly) for themselves or any other person, with intent to influence that person to act or refrain from acting in their official capacity.
Overseas Anti-Corruption Legislation
With growing awareness of the threat posed by corruption, developing countries are adopting anti-corruption laws in line with those required under the UN and OECD Conventions. It is therefore imperative that New Zealand businesses and organisations operating abroad understand the local anti-corruption laws in any country in which they operate and are aware that they may be more restrictive than New Zealand’s.
Guiding Principles
Robust anti-corruption compliance procedures are essential for preventing, detecting and responding to corruption and ensuring businesses, organisatons or institutions are not held liable where employees, agents or other intermediaries engage in corrupt conduct.
Ethical standards and guiding principles are intended to encourage and assist New Zealand businesses, organisations or institutions to establish,
implement, monitor and improve their anti-corruption compliance procedures. These are not legally binding and may stand on their own or be incorporated as part of an organisation’s wider compliance programme.
The foreign bribery offence in the Crimes Act now provides that businesses that take ‘reasonable steps’ to prevent the offence will not be held liable. However, similar considerations will apply to all forms of corruption. Businesses and organisations are therefore encouraged to implement anti-corruption procedures of general application that apply broadly to all relevant anti-corruption laws. Whether or not a business or organisation has taken reasonable steps to prevent corruption is a question for the courts based on the individual circumstances of each case.