Canada: Recent Criticism Of Corruption Enforcement And Calls For A 'Failure To Prevent' Offence In Canada

On November 9, 2023, Transparency International Canada (TI) released a white paper [PDF] titled, "Bringing a "Failure to Prevent" Offence to Canada". The paper highlights Canada's poor record for enforcement and key shortcomings of the current anti-bribery and corruption regime. In its conclusion, the paper recommends Canada adopt a "failure to prevent" corruption offence as part of its efforts to counter corruption.

The TI report follows similar comments in the Organization for Economic Co-operation and Development's (OECD) Phase 4 report [PDF] released October 19, 2023, regarding Canada's performance under the OECD Convention on Combatting Bribery. That report criticized Canada for its lack of successful enforcement of bribery-related offences and supported the establishment of a separate "failure to prevent corruption" offence in Canada. Further details of the OECD's Phase 4 report can be found in our previous blog post.

Findings

Mirroring many criticisms and recommendations in OECD's Phase 4 report, the TI report set out several issues concerning Canada's anti-corruption enforcement. The report found, among other things, that

• Canada carried out only "limited enforcement" activities under the Corruption of Foreign Public Officials Act (CFPOA) between 2018 and 2021, which was substantially less than its peers of the United States, Germany, United Kingdom and Australia
• funding of Canada's enforcement agencies is insufficient to its needs, which contributes to limited enforcement
• Canada has inadequate protection for whistleblowers, which TI considers crucial to detecting foreign bribery and other white-collar crimes
• there are weaknesses in Canada's remediation or deferred prosecution framework in regulating corporate non-trial resolution, which likely impacts the willingness of companies to disclose wrongdoing or cooperate with enforcement authorities
• Canada's enforcement suffers from the absence of a "failure to prevent corruption" offence

Canada has often been criticized in recent years for its perceived lack of enforcement of corruption and similar offences, and has faced calls to establish a similar "failure to prevent" offence. Proponents of bringing in such an offence argue that it would propel enforcement and serve as an additional tool for prosecution.

Current anti-bribery and corruption offences in Canada

Foreign and domestic corruption are currently prohibited under Canadian law by the CFPOA and the Criminal Code, respectively. Specifically, the CFPOA criminalizes directly or indirectly bribing or offering to bribe a foreign public official to obtain or retain an advantage in the course of business, and the Criminal Code contains a number of public and private corruption offences.

Several other jurisdictions have gone a step further, establishing "failure to prevent" offences that create a positive obligation on companies to prevent corruption within their organization. For instance, the U.K.'s Bribery Act 2010 (the Bribery Act) includes a "failure to prevent bribery" offence that holds companies responsible if bribery is committed anywhere in the world by an "associated person" with the intention of benefiting the organization, even without the organization's knowledge. The U.K. offence includes a defence of demonstrating that the organization had "adequate procedures" to prevent bribery.

On October 26, 2023, the U.K. passed similar legislation to create a "failure to prevent fraud" offence under the Economic Crime and Corporate Transparency Act 2023. The offence will make an organization liable if it fails to prevent a specified fraud offence from being committed where an employee or agent commits the fraud and the fraud is intended to benefit the organization or a person to whom services are provided on behalf of the organization.

Unlike the U.K. and other jurisdictions, Canadian legislation does not include such a "failure to prevent" offence for either corruption or fraud. Instead, corporate criminal liability for acts committed by representatives of the company is subject to the "senior officer" test set out under section 22.2 of the Criminal Code. Under section 22.2, a company may be party to a criminal offence based on involvement or knowledge of the offence (including wilful blindness) by a "senior officer." Following the Québec Superior Court decision in Pétroles Global,¹ a "senior officer" is any individual with responsibility for managing an important aspect of the company's business, which may include middle management.

Section 22.2 encompasses certain circumstances where an organization has failed to take proper steps to prevent corruption within the organization. For instance, subsection 22.2(c) makes an organization responsible if a "senior officer" becomes aware of an offence that is being or about to be committed but does not take all reasonable measures to stop it. The presence or absence of adequate compliance policies, procedures and internal controls is also a significant factor that enforcement authorities consider when issues arise.

However, proponents of a "failure to prevent" offence suggest that an explicit offence creating a positive obligation on the company to prevent corruption would be an important additional tool in enforcing and prosecuting corruption in Canada. The TI report argues that such an offence would reduce the Crown's enforcement challenges by limiting the evidentiary burden of establishing involvement of senior management, and placing reasonable expectations on companies to have procedures to address bribery risks.

Current bribery offences require the Crown to prove knowledge of the corrupt conduct or wilful blindness by the company to a criminal standard of proof. "Failure to prevent" offences, meanwhile, are generally strict liability offences requiring the prosecution to prove only that an act of corruption has occurred, following which the burden shifts to the accused company to establish that it had adequate procedures in place to prevent the corruption.

Takeaways

If enacted, a "failure to prevent" offence in Canada would effectively oblige many companies to establish and maintain effective anti-corruption compliance programs going forward. Even in the absence of such a formal obligation, companies should assess and monitor their risk for corruption and other forms of economic crime, and should have effective policies and procedures in place to ensure compliance throughout the organization and to mitigate those risks.

Footnote

1. R. c. Pétroles Global inc.. 2013 QCCS 4262.

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