Allegations about widespread bribery and corruption at Securency, a Reserve Bank of Australia subsidiary which produces and supplies polymer banknotes, have raised serious concerns about the company’s management and corporate culture amidst an ongoing Australian Federal Police (AFP) investigation.

The allegations, which recently aired on the ABC’s 4 Corners program, centered on Securency’s payment of nearly $50 million in the form of commissions to shady foreign middlemen, who then bribed central banking officials in countries through Asia, Latin America and Africa to replace their paper notes with Securency’s polymer banknotes.

The allegations were made by a Securency insider – now a key witness in a major corruption investigation – who witnessed much of this behaviour firsthand. The allegations of corrupt payments have clear implications for the Reserve Bank and the Government, as well as implications for Australian companies doing business overseas.

Greg Williams, a litigation and dispute resolution partner at Clayton Utz, said that Australian companies that engage in corrupt business practices overseas not only risk having their activities uncovered, but face a greater risk of prosecution in the current global regulatory environment.

“Under Australian law, a company can be held liable for the actions of its employees and agents if it can be shown that its culture directed, tolerates, encouraged or led to corrupt conduct,” he said.

“If Australian companies operating internationally want to avoid the consequences of regulatory investigation or prosecution – which can be commenced in any number of countries, regardless of whether the company's head office is based in Australia – they need to examine their own practices and where necessary take action to change their internal culture.”

Williams said that Australian companies vary significantly when it comes to corporate governance and compliance practices, “from companies that are very proactive about this sort of stuff, to companies that are really walking risk zones because the Board doesn’t appreciate the importance of the issue”, he said.

“Specifically, with reference to this question of bribery and corruption, I think that we’re in a transitional phase in Australia, where this is going from a theoretical issue to a real issue. We’ve had the laws on the books for 10 years but no one has ever been prosecuted.

“But if you go to the US or the UK, this question is, for many companies, one of the top three issues that any Board has to face.”

Williams predicted that this trend will be repeated in Australia. “I think we are in a phase where Boards have to come with grips just how serious the potential for exposure is, if there is bribery or corruption going on in their organisation,” he said.

Alf Esteban, general manager of SAI Global, said that fraud and corruption are undoubtedly becoming increasingly important to businesses from both a loss prevention and reputation perspective.

“Increasingly sophisticated technology and criminal activity has increased the potential for fraud, and a heightened globally competitive landscape can lead to an increase in corrupt practices,” he said.

“All the research suggests that it is internal tip offs that are the most effective means of preventing and reducing the size of frauds. Risk chiefs need to support activities that actively encourage staff, customers and suppliers to report their suspicions.”

Corruption also presents serious challenges for risk chiefs of businesses, regardless of size, said Esteban, who added that the US Foreign Corrupt Practices Act and the recently introduced UK Bribery Act have in place severe penalties for organisations and individuals who engage in corrupt practices.

“Risk chiefs again need to strongly support initiatives that reinforce an ethical culture and provide every opportunity for key stakeholders to report suspicious transactions and behaviours,” he said.

“Corruption risk assessments of countries, suppliers, business partners, customers and acquisitions are also going to be essential tools in mitigating corruption risks that can result in massive fines, prohibition from government work and reputation damage. Once again, the Board needs to walk the talk and ensure that governance of the business drives a strong ethical culture.”