Accounting for Law
Administrative & Government, Competition

Ban on facilitation payments most important part of new law

A ban on so-called facilitation payments, included in a proposed new law outlawing the bribery of foreign officials, sends a loud signal that Canada is getting serious about regulating businesses' complicity in foreign corruption, says Toronto lawyer Andrew Faith.

Along with prohibiting the payments, the new law, proposed by the Conservative government, will allow authorities to prosecute Canadians even if they pay the bribe outside the country – closing a loophole that has made it harder for police to file charges, the Globe and Mail reports. It will also increase the maximum sentence for bribing a foreign official to 14 years, from the current five-year maximum, the report says.  Read Globe and Mail

“The two most interesting aspects of this bill are not the increased penalties or its wider reach to citizens operating abroad, although these are important steps,” says Faith, partner with Polley Faith LLP. “The changes with the greatest impact on Canadian businesses will be the ban on facilitation payments and the books and records provisions.”

Facilitation payments are relatively small sums paid to foreign officials or bureaucrats to expedite or obtain services that they lawfully provide to the public or industry, says Faith.

“The distinction between these payments and bribes has always been dubious, but it is one that will continue in the U.S. Foreign Corrupt Practices Act.”

Faith says he expects the introduction of the provision will be delayed because of the scale of its impact on Canadian companies operating abroad.

“In many countries, facilitation payments are so ingrained in the delivery of public services that routine services like mail delivery, building inspections and customs clearances are not possible without them,” he says.

“The bill's introduction of a books and records offence - essentially criminalizing accounting practices that conceal bribery - will also seriously impact Canadian businesses that are not currently exposed to similar U.S. SEC provisions. Canadian business not listed on a U.S. exchange, for example, will likely be unfamiliar with these requirements.”

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