A look at Canada’s ongoing efforts to combat bribery and corruption
In October 2023, the Working Group on Bribery in International Business Transactions for the Organization for Economic Co-operation and Development (OECD) released and adopted a report evaluating Canada’s enforcement of the OECD Anti-Bribery Convention. The OECD is a global policy forum and standard-setting organization that works to stimulate economic progress and world trade. Among its objectives is its work to strengthen and enforce anti-bribery laws at home and abroad through a peer-review monitoring system. The OECD report outlined a concerning picture of Canada’s ability to address foreign bribery and corruption. This article details numerous factors that have contributed to Canada’s shortcomings.
Failure to effectively enforce anti-bribery laws
Canada enacted the Corruption of Foreign Public Officials Act (CFPOA) in 1998 as an instrument to combat corruption and bribery by foreign public officials in international business transactions. However, despite this enactment, there have been very few convictions secured under the act in the past few decades. While Canada’s peers in the OECD are prosecuting foreign bribery cases at much higher rates (such as Germany and the US), Canada’s relative inaction has raised serious concerns about its commitment to combating corruption.
Under resourcing of law enforcement
Canada’s lagging enforcement under the CFPOA and other anti-bribery laws has been exacerbated by the under resourcing of Canadian law enforcement agencies. Without adequate funding, Canadian authorities lack the resources to investigate complex international bribery schemes, which require specialized knowledge, unique skills, and coordination across jurisdictions. As part of its reporting, the OECD has urged Canada to provide additional resources, training, and tools to ensure that law enforcement can effectively manage bribery cases involving Canadian companies throughout the world.
Whistleblower protection
Weak and inconsistently applied whistleblower protection laws also contribute to Canada’s weakness in combatting corruption. OECD’s report stresses its concern that individuals who come forward to report information on corruption are vulnerable to retaliation due to Canada’s inadequate whistleblower protections. The lack of fulsome and consistent protections for whistleblowers results in many individuals staying silent out of fear that they will face repercussions for their reporting, in turn allowing corrupt practices to continue unchecked.
Weakness in corporate liability
The OECD has called for reforms to more easily allow prosecution and conviction of bribery offenses by corporations. Among other things, OECD recommends that the legislation not require that a senior officer have knowledge of the bribery. The OECD also recommends liability for companies for failure to prevent foreign bribery by an employee, similar to the UK Bribery Act’s “failure to prevent” offense.
Steps the Canadian government is taking to combat corruption
In an effort to address the issues outlined above, the Canadian government utilized the 2024 Federal Budget to strengthen its fight against money laundering and terrorist financing concerns. The budget includes financing for the Canadian Financial Crime Agency (CFCA), a new federal agency focused on coordinating investigations of financial crimes across federal and provincial jurisdictions. The CFCA was first announced in 2022 with the goal of centralizing the investigation and enforcement of financial crimes. The announcement of funding for the agency in the Federal Budget highlights the government’s commitment to making serious strides in combatting financial crimes. This funding will be used to train specialized personnel, deploy advanced technologies for detecting and tracing illicit financial flows, and improve collaboration between the agency and other stakeholders, including banks, international partners, and law enforcement agencies. For more details on the establishment of the CFCA, read here.
In addition to funding the CFCA, the Canadian federal government recently introduced corporate transparency legislation, otherwise known as beneficial ownership reporting. Canada has long been viewed as a destination where it is easy to exploit anonymous business ownership structures in order to hide illegal activity through either shell companies or complex ownership arrangements. The situation has become so globally notorious that it has earned the nickname “snow-washing.”
The new corporate transparency law, created by amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, aims to address the snow-washing problem by requiring all businesses incorporated under the Canada Business Corporations Act to file information about individuals with “significant control” over the business. An individual with significant control is any person who directly or indirectly owns or controls 25 percent or more of a corporation. The law allows the government to impose stiff penalties on corporations and individuals that fail to report complete and accurate beneficial ownership information. By requiring reporting to a publicly accessible ownership registry, the law will help to prevent the use of shell entities to hide corrupt or unlawful dealings, making Canada a less enticing place to commit financial crimes.
While the Canadian government has taken important steps to address deficiencies in the enforcement of anti-bribery and corruption laws, the country still lags far behind its OECD peers. With increased funding and resources being directed to the new Canadian Financial Crime Agency and a strong focus on corporate transparency, there is renewed optimism that it will become more difficult for companies and corrupt individuals to engage in financial crimes within Canada.
For more information
Jordan Deering is the Chair of DLA Piper’s Canadian Corporate Crime Compliance and Investigations team. To learn more about how these updates may affect you or your business, please contact Jordan or your usual DLA Piper (Canada) attorney.
