Canada Outlaws Facilitation Payments

Photo Credit: Four Season Canuck

On October 31, 2017, the Government of Canada amended its anti-corruption law to explicitly bar facilitation payments. This move is part of an ongoing effort by Canadian authorities to tighten its anti-corruption regulations.

The aggressive move to improve both Canada’s legal regime and its enforcement of anti-corruption stems from several significant developments in 2011. In March of that year, Canada was shamed by the Organization for Economic Cooperation and Development (OECD), which criticized Canada for its relatively weak framework and limited enforcement actions in combatting foreign corruption. In October of that year, the Government of Quebec appointed the “Charbonneau Commission”, which uncovered significant governance lapses and corruption in the contracting of public works in the province.

Since that time, tolerance for corruption in Canada and for improper dealings by Canadian firms abroad have steadily diminished. The Corruption of Foreign Public Officials Act (CFPOA), which was passed in 1999, bars bribery of foreign public officials when the act occurs wholly or partially in Canada. Amendments to CFPOA adopted in 2013 imposed a “nationality jurisdiction,” which empowered the Government of Canada to charge Canadian entities and individuals with bribery, regardless of whether the actual illicit payment was made in Canada. It also included “books and records offenses,” which criminalized the falsification of accounts for the purpose of making or hiding bribes.

A persistent criticism of the CFPOA was that it did not bar “facilitation payments.” Facilitation payments are fees paid, typically to low-level officials, to expedite the performance of routine government actions to which the recipient is legally entitled, such as obtaining permits and processing government documents. However, many view this as a bribery loophole, and it is now no longer allowed.

Looking ahead, the Government of Canada has two outstanding public consultations. The first is the review of its “Integrity Framework“, which was first introduced in 2012 and was refined in 2014 and 2015 to ensure that it is both effective and appropriately targeted. The framework is meant to ensure that the Government of Canada is only purchasing from firms that engage in proper business practices.

The second ongoing consultation relates to the establishment of a Deferred Prosecution Agreement (DPA) mechanism in Canada. Both the United States and the United Kingdom have often utilized DPA mechanisms in place. DPAs allow companies charged with malfeasance to seek a monitored, carefully overseen restructuring in lieu of prosecution. Companies convicted often face debarment (on a mutual recognition basis) in many parts of the world, which can be a commercial death sentence. Adding a DPA mechanism and strengthening the Integrity Framework are the next logical steps in Canada’s quest to go from laggard to leader in the global anti-corruption movement.

Eric Miller is Senior Advisor to CIPE’s Trade Practice, President of Rideau Potomac Strategy Group, and a former Vice President responsible for anti-corruption measures at the Business Council of Canada