Australia Mr.McFarlane

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4th IAACA Symposium
Dalian, China, June 2012
Asset Recovery: Australia as a
Haven for the Proceeds of
Foreign Corruption
John McFarlane
Adjunct Fellow/Associate Investigator
Australian Research Council Centre of
Excellence in Policing and Security
Australian National University
Canberra ACT Australia
Jason Sharman
Professor/Director
Centre for Governance and
Public Policy
Griffith University
Brisbane QLD Australia
Australia’s Present Position concerning
Corruption
OECD Convention on Combating
Bribery of Foreign Public
Officials in International Business
Transactions (1997)
Ratified 18Dec99
United Nations Convention
Against Corruption (2005)
Ratified 07Dec05
G20 Anti-Corruption Working
Group initiatives (2011)
Drafting the National
Anti-Corruption Plan
Anti-Corruption agencies
Several state anticorruption agencies.
Commonwealth ACLEI
[Recent OECD Review concluded
that Australia has applied “little or
no enforcement” action]
Commentary on Inadequacies at the
Commonwealth Level
• ACLEI only handles Australian Federal Police,
Australian Crime Commission and Customs and
Border Protection Service. Nothing for Parliament,
the other Commonwealth Departments, the lobbying
sector, corporate sector, etc
• Two significant cases have attracted publicity and
critical commentary:
 The Australian Wheat Board and the Iraqi Oil-for-Food
scandal
 The Securency/Note Printing Australia case
• AFP is now taking initiatives on asset recovery
matters, at least domestically
The Australian Wheat Board and the Iraqi
Oil-for-Food Scandal
• In the investigation of the Iraqi Oil-for-Food Program (Volcker Inquiry)
reported in September 2005, the Australian Wheat Board paid US$222 million
(Aus$ 298 million) in “incentives” to the Saddam Hussein regime, through a
Jordanian trucking company, named Alia. The AWB was, by far, the largest
contributor to the Iraqi regime. A BHP subsidiary, Tigris Petroleum
Corporation, may also have been involved to the amount of Aus$8 million.
Other Australian companies were also named by Volcker.
• The AWB may also have been involved in paying “kickbacks” to customers or
governments in Pakistan, Yemen and Indonesia during the 1990s.
• Amongst other things, a judicial inquiry [The Cole Inquiry] looked at whether
the Australian Government was aware of what was being done by the AWB in
order to secure wheat sales. Report tabled 27Nov06. No charges laid, but
follow-up action recommended for a law enforcement task force.
• The Australian Taxation Office accepted payments made by the AWB under
the United Nations Food for Oil Program do not constitute bribes to foreign
public officials for the purposes of the Income Tax Assessments Act 1997. As
a result, the AWB claimed up to $300 million in kickbacks (“trucking fees”) to
the Iraqi Government as a tax deduction.
• Securency and Note Printing Australia manufacture and market polymer
banknotes.
• Allegations of widespread bribery and corruption at Securency and Note
Printing Australia, both (at the time) Reserve Bank of Australia (RBA)
subsidiaries. Currently being investigated by the AFP. Information from a
whistleblower. Seven former employees charged. Role of senior officials in
the RBA also under investigation. ASIC reviewed AFP investigation on the
basis of possible breaches of the Corporations Act, but has decided not to
proceed to a formal investigation.
• ABC Four Corners (24May10) claims Securency paid about Aus$50 million
since 2003 in commissions to “shady foreign businessmen” who bribed
central banking officials in Asia, Latin America and Africa to replace their
paper banknotes with Securency’s polymer banknotes.
• Countries targeted included Indonesia, Nigeria, Malaysia, Vietnam, and
Paraguay
Under Australian corporations law, a company can be held liable for the
actions of its employees and agents if it can be shown that its culture
directed, encouraged or led to corrupt conduct.
Australia as a Haven for the Proceeds of
Foreign Corruption
If you were a corrupt foreign leader, where would you hide
your loot? World Bank research suggests some answers:
1.Not in your home country in case political circumstances
change
2. The haven country should have a solid financial sector
and a strong currency
3.Cultural ties are an advantage, as in a common language
4.Aside from keeping money in the bank, real estate is a
popular investment option for stolen wealth
All these conditions exist in Australia to the advantage of
corrupt leaders in our region.
Australia and the Region
• Consider Papua New Guinea:
o Estimated that up to 50% of the national budget may be
o
o
o
o
misappropriated or stolen each year
Many politicians and senior officials have illicit wealth and/or
extensive real estate holdings in Australia
Real estate agents are not covered by AUSTRAC legislation, so
avoids Australian scrutiny
The Chair of the 2011/12 Task Force Sweep, examining
corruption in various PNG Departments said “foreign countries
like Australia .. are becoming … Cayman Islands, where
perpetrators (are) readily allowed to invest their proceeds of
crime.”
Prominent PNG politician reported to have channelled A$50
million into a bank account in rural New South Wales
• Consider China
o Former Governor of Yuanzhou, Yunnan Province, was found in
2011 to have invested alleged corruption proceeds in six
Melbourne properties
Australia as a Haven for the Proceeds of
Foreign Corruption
• Australian government officials rely too much on bank
customer due diligence and reporting
• Australian bankers seem not to believe that the
Commonwealth Government takes this issue seriously, so they
also take a relaxed view of the risks involved
• Banks probably consider that the proceeds of corruption are a
valuable deposit, and do little to stop it.
• A more vigilant role is required by both the banks and
government officials, especially AUSTRAC. More sharing of
information with the PNG FIU, Ombudsman, etc.
• Real estate holdings in Australia by foreign PEPs should be
identified. Overseas experience should be considered.
• Attitudes and practice in this area expected to improve under
the proposed NACP, but there is a lot to be done.
Recent AFP Experience
1.
2.
3.
4.
5.
6.
Identification of property in question (particularly derivative property)
may be very difficult
Often assets can only be purchased in certain states if a local person is
party to the purchase. These commercial arrangements complicates
the investigations
Bank accounts generally easier to investigate, but infrastructure bonds,
equity market instruments, etc, complicate the investigations
Generally the focus of the investigation has been on the transaction
itself, for which financial institutions may be receiving a fee. Conflict of
interest?
Inconsistency with which FIUs can use information received.
Sometimes the information, or the source of the information, is
classified. This raises barriers to the free flow of information necessary
to prosecute money laundering and related offences
AFP follows the profits of crime wherever they lead. AFP would always
welcome cooperation with any agency whose investigation of
corruption, fraud or money laundering indicates Australian connections
Conclusions
1. The identification, confiscation and return of assets
embezzled, stolen or misappropriated by
PEPs(politicians and officials) is of enormous
importance. Consider the drivers for the “Colour
Revolutions” and the “Arab Spring”.
2. For Australia, scandals involving the AWB and
Securency/Note Printing Australia demonstrate that, up
to now, Australia has done little to enforce the OECD
Convention, etc. This situation is changing.
3. Australian investigations in this area should, in future,
focus on the consequences of large scale corruption,
rather than apparently shielding the Government and
public agencies from embarrassment
4. Australia probably needs anti-bribery legislation along
the lines of the UK Bribery Act 2010, and also a
Commonwealth ICAC-type agency to investigate and
prosecute corruption at the Commonwealth level.
Recommendation
The authors thoroughly
recommend the book,
Barriers to Asset
Recovery by Kevin M
Stephenson and five
others, written in 2011,
as a StAR (World
Bank/UNODC)
initiative. This provides
a major contribution to
this discussion.
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