Rising From The Dead: Anti-Corruption Enforcement In Canada

by Michael Volkov

I find the so-called “vampire” cultural phenomena scary – I do not understand what is so entertaining about “ordinary” people who can suddenly turn into vampires, let alone enter into “serious” relationships with each other or with so-called “normal” humans.

Maybe I am stuck in the past when “Night of the Living Dead” was more my cup of tea.  Whatever your attitude toward death and the dark side, the analogy of “rising from the dead” certainly applies to Canadian anti-corruption enforcement – you have to give me some credit for the turn of phrase on these ideas!

Sometimes the prognosticators can get it right.  Canada has been the frequent “black sheep” of G-7 anti-corruption enforcement.  The Organization for Economic Co-Operation and Development (OECD) and Transparency International often cite Canada for its lackluster enforcement of anti-corruption laws and adherence to the Anti-Corruption Convention. 

Over the last few years, Canada trumpeted its new, aggressive anti-corruption enforcement program.  In 2008, the Royal Canadian Mounted Police established two new offices in Canada in Ottawa and Calgary dedicated to anti-corruption enforcement.  The RCMP has played an active role in World Bank meetings devoted to improving global coordination among law enforcement and anti-corruption investigators.

An often cited “fact” in the last few years was that Canadian law enforcement had approximately 20 pending anti-corruption investigations/cases.  Recently, the RCMP confirmed that it had 34 active investigations/cases, an increase of 14 or 70 percent, in enforcement activity.

Canadian resource companies are most at risk for enforcement.  They are dependent on foreign governments for their livelihoods and are regularly interacting with foreign officials. 

Recently, Canadian law enforcement officers conducted raids at SNC-Lavalin offices in Canada, and a high-ranking officer was arrested in Switzerland related to this ongoing investigation. 

Last year, Canadian law enforcement assisted in the raids of a Canadian company’s offices in Mexico related to an investigation of alleged bribes made to a Mexico mayor. 

Canada’s Corruption of Foreign Public Officials Act (“CFPOA”), which was adopted in 1999, is modeled after the US FCPA with two significant exceptions.  First, the CFPOA does not include a “books and records” requirement like the FCPA.  Second, the CFPOA has a more restrictive jurisdictional reach which is keyed to a “real and substantial connection” to Canada. 

The CFPOA prohibits, in order to obtain or retain business or to retain or obtain an advantage in the course of business, the offering, giving, or agreeing to give or offer a loan, reward, advantage, or benefit of any kind, directly or indirectly, to a Foreign Official, or to any person for the benefit of a Foreign Official, (1) as consideration for an act or omission by the Foreign Official in connection with the performance of the Foreign Official’s duties or functions; or (2) to induce the Foreign Official to use his or her position to influence any acts or decisions of the foreign state or public international organization for which the Foreign Official performs duties or functions.   

While the CFPOA does not contain a specific provision requiring a company to maintain accurate books and records, Canadian companies must comply with the Canada Business Corporations Act and provincial corporate and taxation statutes and securities laws requiring that companies keep accurate books and records and that financial statements be prepared in accordance with generally accepted accounting principles.

Payments through third parties with the corporation’s knowledge that some or all of the payments will improperly go directly or indirectly to a Foreign Official or private person are also prohibited. 

It is not necessary to have actual knowledge that an improper payment will be made to a person by a third party.  Deliberate ignorance or conscious disregard of the facts can also constitute knowledge of a payment.  Thus, it is important for a company to conduct “due diligence” of third parties (i.e. reasonable inquiries) when retaining third parties.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov

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