This Charity Law Bulletin provides a brief overview of some of the foreign corruption issues involving
bribery that Canadian charities operating outside of Canada need to be aware of.
“Bribery” is generally understood to mean “offering, promising or giving
someone a financial or other advantage to encourage them to perform their
functions or activities improperly”. The United Nations
Convention Against Corruption denounces bribery of national public
officials, foreign public officials and officials of public international
organizations, as well as bribery in the private sector. It is
unlikely, although not impossible, that charities might encounter this type of
corruption domestically. However, in some areas of the world, bribery may be so
prevalent that the employees and agents of a charity operating in those areas
may be put under pressure to provide bribes of one sort or another in order to
accomplish their intended charitable programmes.
Charities, of course, are prohibited from engaging in
bribery, since to do so would constitute giving an unacceptable private benefit in
violation of the charity’s charitable purpose. Any charity involved in such activities could face loss of charitable status,
as well as allegations of breach of trust through the misapplication of
charitable property. This in turn could leave the directors and officers of the
charity open to personal liability for the misapplication of charitable funds
or property that had been paid out as a bribe.
B. CANADA’S CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT
Charities also need to be aware of the possible
application of Canada’s Corruption of Foreign Public Officials Act to their operations. In this regard, section 3(1) of the Act prohibits bribery
of foreign public officials when the bribe is intended “to obtain or retain an
advantage in the course of business”. In section 2, “business” is defined as
“any business, profession, trade, calling, manufacture or undertaking of any
kind carried on in Canada or elsewhere”. This definition, and in particular the
reference to “undertaking of any kind”, could impact charities carrying on activities
outside of Canada where their programs in a foreign jurisdiction include a
“related business” activity permitted under the ITA, or a charitable program that involves an
inherently commercial element like microfinance, or simply constructing a hospital
or a school. The seriousness of the Corruption of Foreign Public Officials
Act is found in section 3(2), which states that every person who
contravenes section 3(1) is “guilty of an indictable offence and liable to
imprisonment for a term of not more than 14 years”. As well, there is a similar
indictable offence under section 4(2) of the Corruption of Foreign Public
Officials Act for falsifying books and records for the purpose of bribing a
foreign government official or for hiding such bribery in contravention of
section 4(1) of the Act.
Bill S-14, An Act to amend the Corruption of
Foreign Public Officials Act, that received Royal Assent on June 19, 2013, introduced two important
amendments to the Corruption of Foreign Public Officials Act with regard
to charities operating outside of Canada. One of the amendments removed the
words “for profit” from the definition of “business”, referenced above,
resulting in the prohibitions on bribery applying to organizations involved in
any business or undertaking in a foreign country, regardless of whether that
undertaking was conducted for profit.
The second amendment repeals the “facilitation payment”
exemption provision of the Corruption of Foreign Public Officials Act on
a date to be fixed by order of the Governor in Council. Currently, subsection
3(4) of the Act permits “facilitation payments” to be undertaken “to expedite
or secure the performance by a foreign public official of any act of a routine
nature that is part of the foreign public official’s duties or functions...” by
excluding these situations listed therein from the prohibition on bribery.
However, the amendments introduced by Bill S-14 will repeal this exemption on a
date to be fixed by order of the Governor in Council, which means that in the
future charities could be exposed to possible criminal liability for activities
which, up to now, would have been permitted under the “facilitation payment” exemption.
This could leave charities operating in foreign jurisdictions where “facilitation
payments” might be considered necessary under limited certain conditions that,
if ignored, could impede humanitarian aid, in an untenable predicament.
C. OTHER SOURCES OF LIABILITY CONCERNS
The laws of the jurisdiction in which a charity operates
may also serve as a source of criminal liability for a charity’s employees and
agents who engage in bribery. Many countries dealing with bribery have
far-reaching anti-bribery legislation and in this regard the CRA Guidance reminds charities that “being registered in
Canada does not exempt a charity from the laws in the jurisdiction where they
operate”. Also, sections 465(1) and 465(3) of Canada’s Criminal Code make it
illegal to conspire to commit an indictable offence and state that if an
individual conspires, while in Canada, to commit an act outside of Canada that
is an offence both inside Canada and where the individual plans to commit that
act, the individual will be deemed to have conspired to commit that act in
A Canadian charity might also fall under the jurisdiction
of the U.S. Foreign Corrupt Practices Act if it makes payments through the U.S. banking system or sells goods of U.S.
origin or with U.S. content. In this regard, it is possible that a Canadian charity that has any of these
affiliations to the U.S. and is engaging in bribery could be subject to the
anti-bribery provisions in the U.S. Foreign Corrupt Practices Act.
Charities should also note that the Department of Foreign
Affairs, Trade, and Development (DFATD), formerly the Canadian International
Development Agency (CIDA), now includes anti-corruption clauses in its requests
for proposals, contract documents, and loan or contribution agreements. As a result, charities that collaborate with the DFATD on foreign
activities are contractually bound to refrain from engaging in bribery.
D. SIX PRINCIPLES FOR PREVENTING BRIBERY
Canadian charities wanting to prevent their organization
from becoming involved with bribery may wish to consult some of the resources
generated by the United Kingdom (“UK”) Ministry of Justice. After the UK
adopted the Bribery Act 2010, the Ministry of Justice recommended six principles for preventing bribery, which the Charity Commission for England and Wales has since reiterated. These
principles are paraphrased below for ease of reference:
1. Proportionate procedures:
Organizations should adopt bribery
prevention procedures that are proportionate to the bribery risks they face and
to the nature, scale and complexity of their activities.
2. Top-level commitment:
Leaders of organizations should committed
to preventing bribery and foster a culture in which bribery is unacceptable.
3. Risk assessment:
Organizations should periodically assess
the nature and extent of its exposure to risks of bribery and document these
4. Due diligence:
Organizations should apply due diligence
procedures, using a proportionate and risk based approach, to mitigate
identified bribery risks.
5. Communication (including training)
Organizations should use communication and
training to ensure their bribery prevention policies and procedures are
embedded and understood throughout their organization
6. Monitoring and review
Organizations should monitor and review
their bribery prevention policies and make improvements where necessary.
The violation of anti-corruption laws
carries severe consequences, including criminal liability, the possible loss of
charitable status, and the potential for personal liability on behalf of
directors. In this regard, charities should use their best efforts to ensure
that they are not involved in activities prohibited by anti-corruption laws,
including bribery, domestically or abroad. This includes, for example,
understanding the six principles outlined by the UK Ministry of Justice.
Charities also need to be mindful of Canadians laws, including the Corruption
of Foreign Public Officials Act and its amendments, together with the Criminal
Code, among others, as well as the laws of any foreign
jurisdictions in which they operate. Charities making payments through the U.S.
banking system or selling goods of U.S. origin or content will need to be
particularly wary not to be caught under the U.S. Foreign Corrupt
Practices Act. Finally, charities need to consider the
implications that may result from the repeal of the “facilitation payment” exemption
under the Corruption of Foreign Public
Officials Act as of the date to be fixed by order of the Governor