4 October 2017: Unearthing Corruption Risks in Mining Approvals in Australia

Australia is a mining giant of a nation, with governance systems in place that many countries across Africa and the Asia Pacific seek to copy.

Transparency International Australia (TIA) is leading a global program (Mining for Sustainable Development – M4SD) across 20 countries, including Australia, to identify and assess corruption vulnerabilities in the mining approval process.

Today TIA releases its report: Corruption Risks: Mining Approvals in Australia.  The report identifies vulnerabilities in both the Western Australia and Queensland approvals process that could enable corruption to occur.

“Understanding corruption risks in the mining approvals process is vital to ensuring mining contributes to sustainable development, and shared benefits”, said Serena Lillywhite, CEO of Transparency International Australia.

“If corruption risks are identified, and acted upon, before mining activities get underway, better outcomes for impacted communities, the natural environment and all citizens, could be achieved”, said Lillywhite.

Elements of transparency and accountability in the approvals regime for exploration licenses, and mining leases, do exist in WA and QLD, but there are weaknesses in the system that could enable corruption to occur.

The TIA research has identified the following corruption risks in WA and QLD:

  • Inadequate due diligence into the character and integrity of applicants for approvals, including investigation into who the real and beneficial owner of the company is
  • No requirement to declare the company’s track record and compliance with laws outside of Australia
  • Discretionary powers for some senior government officials
  • Industry / external influence and the associated risks of state and policy capture
  • Inadequate regulation of donations and lobbyists and ‘movement of staff’ between government and industry
  • Limited transparency of the content of State Agreements until enacted, and between Native Title parties and mining companies
  • Inadequate independent verification of Environmental Impact scientific modelling

Inadequate due diligence investigation into the character and integrity of an applicant company and its principals was assessed as a high corruption risk for mining leases in Western Australia and Queensland.

“Without adequate due diligence – even basic research into the track record of mining applicants -there is a high risk that permits will be awarded to companies with a history of non-compliance or corruption, including in their operations in other countries.”

The TIA research identified a high potential for industry influence and state and policy capture in the awarding of mining approvals. “Greater regulation of political donations, lobbyists and the movement of staff between government and industry, would help reduce risks that could enable corruption to occur. The ‘revolving doors’ and ‘culture of mateship’ could enable inappropriate influence to occur in the approval of State Agreements in Western Australia, and Coordinated Projects in Queensland”, said Lillywhite.

The mining industry has disclosed donations of $16.6 million to major political parties over the last ten years (2006-07 to 2015-16). As of September 2016, of 538 lobbyists registered by the Depart­ment of the Prime Minister and Cabinet, 191 are former government representa­tives. Industry associations are not required to register as lobbyists.

Large infrastructure projects, such as the Adani Carmichael mine, were assessed as having a high number of aggregated and compounded risks, which heightens the likelihood for corruption to occur – and Australia’s reputation as a mature mining jurisdiction to be eroded.

 

For further information please contact:

Serena Lillywhite, CEO, TIA

0403 436 896

serenalillywhite@transparency.org.au

4 August 2017: TI Australia comments on CBA case

Transparency International Australia (TIA) commends AUSTRAC, Australia’s financial intelligence agency, for investigating and pursuing all cases of alleged breaches of money laundering and counter-terrorism-financing laws.

This is the first time AUSTRAC has stepped up and tried to sanction one of Australia’s banks, and only the second time AUSTRAC has pursued a major corporation in Australia – TABCORP, being the first.

‘We may well be at a tipping point in AUSTRAC’s capacity to combat money laundering and the proceeds of crime to finance terrorism in Australia’, said Serena Lillywhite, CEO of Transparency International Australia.

The reporting of suspicious transactions by financial institutions is fundamental to ensuring the risk of money laundering is mitigated and managed. However, the CBA case, if proven, indicates it is no longer appropriate for banks just to report, but to act, including by closing accounts.

‘Money laundering and counter-terrorism financing systems and controls within banks, need to be more tightly regulated and enforced, and extended to non-financial entities, including real estate agents, lawyers, and accountants’, said Lillywhite.

The CBA case, if proven, highlights the risk of illicit financial transactions, often the proceeds of crime, being laundered through Australia and other major financial markets. It also highlights the speed, and apparent ease, with which suspicious transactions and the transfer of funds can occur with anonymity. The CBA case will be investigated as a civil rather than criminal case, with the potential for hefty fines, rather than possible criminal charges.

‘Money laundering appears far too easy in Australia’, said Lillywhite. ‘More needs to be done to understand who is making the transactions, where funds have come from, and who will benefit from the transactions. The principle of “know your customer” seems obvious, and reporting of suspicious transactions is required by law, but closing accounts may be the necessary next step’.

The reported scale ($77m worth of suspicious transactions), the systemic nature (53,700 reported transactions), and ease of the alleged CBA money laundering transactions, support TIA’s call for strengthened anti-money laundering laws, the establishment of a publicly accessible register of beneficial ownership, and the need for a national anti-corruption agency.

Note: CBA is a member of TIA. TIA will engage directly with the bank, to encourage the strengthening of their internal systems and controls, and compliance with AML laws and the criminal code.

 

For further information please contact:

Serena Lillywhite, CEO, TIA

0403 436 896

serenalillywhite@transparency.org.au

TI Australia welcomes ALP’s Proposed Fairer Tax System Reform

Transparency International Australia (TIA) welcomes the Australian Labor Party’s (ALP) commitment to national tax system reform and strengthened integrity framework. In a recent media release from MP Andrew Leigh, A Fairer Tax System for Millions, Not Millionaires, the ALP pledges to “restore integrity to the Australian tax system and increase enforcement and civil society oversight” via a proposed nine-point Fairer Tax System plan.

Read TI Australia’s media release.

16 May 2017: TI Australia welcomes ALP’s Proposed Fairer Tax System Reform

Transparency International Australia (TIA) welcomes the Australian Labor Party’s (ALP) commitment to national tax system reform and strengthened integrity framework. In a recent media release from MP Andrew Leigh, A Fairer Tax System for Millions, Not Millionaires, the ALP pledges to “restore integrity to the Australian tax system and increase enforcement and civil society oversight” via a proposed nine-point Fairer Tax System plan.

Serena Lillywhite, CEO of Transparency International Australia said “The Fairer Tax System plan is much more than taxation reform. It can help tackle illicit financial flows and money laundering, and strengthen Australia’s integrity framework through identifying who the real owners of companies are.”

TIA has played an integral role in pushing for the 15 ambitious transparency and accountability commitments for business, government, and civil society highlighted in the Open Governments Partnership National Action Plan, as well as petitioning for strengthened whistleblower protection.  TIA is confident the new ALP fairer tax plan will help achieve these goals.

Linked to TIA’s work on whistleblower protection, public reporting, disclosure and accountability, TIA endorses the below five points from the nine the ALP has proposed:

2. Public reporting of country-by-country reports. High-level tax information about where and how much tax was paid by large corporations (over $1 billion in global revenue) will be released publicly.

3. Whistleblower protection and rewards. Provide protection for whistleblowers who report on entities evading tax to the Australian Taxation Office. Where whistleblowers’ information results in more tax being paid, allow them to collect a share of the tax penalty (a reward of up to $250,000).

4. Mandatory shareholder reporting of tax haven exposure. Companies must disclose to shareholders as a ‘Material Tax Risk’ if the company is doing business in a tax haven.

5. Public reporting of Australian Transaction Reports and Analysis Centre (AUSTRAC) data. Require the annual public release of international cash flow data.

8. Publicly accessible registry of the beneficial ownership of Australian listed companies. This will allow everyone to find out who owns our firms. Shareholders should not be able to use complex structures and sham ownership to avoid complying with corporate transparency rules.

Media contact:

TIA CEO Serena Lillywhite

M: +61 403 436 896

E: serenalillywhite@transparency.org.au

 

Corruption and Real Estate in Australia, Canada, the UK and the US

A Transparency International report released on 30 March 2017 said that the governments of Australia, Canada, the UK and the US need to close glaring legal loopholes to prevent the corrupt elite from laundering the proceeds of grand corruption in their local real estate markets.

The impact of overseas investment in Australia’s real estate is not limited to elevating home prices.  There is clear evidence that such investment in Australian property is also an easy and convenient way to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime.

In a report released today Doors Wide Open Corruption and Real Estate in Four Key Markets, in advance of the Anniversary of the release of the Panama Papers, Transparency International calls on the Governments of Australia, Canada, UK and USA to close the legal loopholes to prevent the corrupt elite from laundering the proceeds of grand corruption in their local real estate markets.

READ MORE in the TI Australia press release

30 March 2017: Doors Wide Open: Corruption and Real Estate in Four Key Markets

The impact of overseas investment in Australia’s real estate is not limited to elevating home prices.  There is clear evidence that such investment in Australian property is also an easy and convenient way to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime.

In a report released today Doors Wide Open: Corruption and Real Estate in Four Key Markets, in advance of the Anniversary of the release of the Panama Papers, Transparency International calls on the Governments of Australia, Canada, UK and USA to close the legal loopholes to prevent the corrupt elite from laundering the proceeds of grand corruption in their local real estate markets.

Real estate has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds. According to the Financial Action Task Force (FATF), real estate accounted for up to 30 per cent of criminal assets confiscated worldwide between 2011 and 2013.

This important report highlights the vulnerability of the Australian Real Estate market to money laundering. There have been reports in recent years of such activity by investors from PNG, Malaysia, China, Russia and South Sudan in real estate in our capital cities and on the Gold Coast.

The FATF evaluation of Australia in 2015 underscored this vulnerability and the Australian Government, informed by a Statutory Review of Australia’s AML/CTF Regime, has committed to take steps to address the vulnerabilities identified in Doors Wide Open.  While several commitments were made at the 2016 Anti-Corruption Summit in London and Australia’s first Open Government Partnership National Action Plan which would address current loopholes, action which would close the doors is proving too slow.

Anthony Whealy QC Chair of TI Australia urges strong and immediate action.  “We have urged the Australian Government to act on its previous commitments. We urge actions which would strengthen AML laws and empower relevant agencies and agents to respect and enforce the laws.

“TI Australia has called on the Australian Government to establish a public register of Beneficial Ownership and to ensure real estate agents, lawyers and conveyancers, as well as accountants are subject to AML/CTF rules, undertaking Customer Due Diligence and submitting Suspicious Transactions Reports to AUSTRAC,” Mr Whealy said.

TI Australia notes that, to a degree, changes to Foreign Investment Review Board processes in the past 12 months have strengthened protections. While the involvement of the ATO in processing FIRB applications is welcome, urgent action is needed to strengthen AML/CTF procedures. Urgent steps must be taken to prevent foreign real estate deals continuing to be a means to launder proceeds of corruption or criminal activity.

We are concerned that Australia, along with Canada and the US, rely almost exclusively on banks to stop money laundering. Here as in other countries real estate agents, accountants, tax planners, lawyers and others participate in deal-making. This makes all-cash deals, particularly prevalent in urban Australia, which do not require the involvement of a bank, especially difficult to track. There is urgent need for change!

 

Media Contact:

Hon. Anthony Whealy QC, TI Australia Chair:
0414 963 643

Download Report and 10 Key Commitments  Doors Wide Open

TI Australia supports the creation of a central new corporate register

TI Australia supports the creation of a central new corporate register to record beneficial ownership information. It submits that:

  • The new corporate register should be publicly available (open access) to increase opportunities for the public to verify and provide information and that the beneficial ownership information should be free of charge.
  • The central new corporate register could be maintained by either AUSTRAC or ASIC due to those agencies’ ability to collect information and to enforce against companies that fail to report information.
  • If there is any difficulty with defining the “beneficial owner” of a company, the definition of “beneficial owner” from Australia’s anti-money laundering framework should be preferred.

TI Australia acknowledges that there may be obstacles in implementing the central new corporate register including ensuring that trusts would duly report beneficial ownership information and ensuring that accurate information is collected and verified.

However, in light of the need for greater transparency, Australia cannot, nor should it, afford to wait for the perfect system before the central new corporate register is implemented. There is value and a need to have a central new corporate register of beneficial ownership in Australia – similar to the United Kingdom’s register of ‘People with Significant Control’ – such a register could be implemented in progressive stages ensuring that the system would continuously improve.

Taking these first steps to implement a central new corporate register would ensure that Australia complies with its international commitments to increase transparency and could have a beneficial flow on effect to minimising corruption and tackling illicit financial activities.

Click here to read TI Australia’s Submission on Increasing transparency of the beneficial ownership of companies.

National Integrity Summit opens the discussion on reform

TI Australia’s first biennial conference, National Integrity 2017, wrapped up on Friday 17 March. It brought together 160 government, business and civil society delegates from all corners of Australia, including senior legal figures, heads of integrity agencies, federal, state and local parliamentarians, community groups, corporate leaders and individual TI Australia members.

Our thanks to everyone for two days of stimulating discussion on all we value, and all we need to strengthen in Australia’s integrity systems!

Read more here including a new discussion paper: ‘A Federal Anti-Corruption Agency for Australia?’ arising from the conference. Subscribe to the TI Australia mailing list for more updates on our next National Integrity System assessment and future events, including the 2019 conference.

Queensland Integrity Commissioner, Richard Bingham, ANZ Banking Group’s Guy Boyd, the Crime & Corruption Commission’s Dr Rebecca Denning and Professor Janet Ransley of Griffith University talk corruption prevention at National Integrity 2017.