Corruption Down Under (Part I): Australia, Not What It Seems

I can remember giving a training session several years ago on overseas corruption and bribery. After the presentation, a couple of coworkers came up and thanked me. What struck me most was this comment, “It is a good job we don’t have much corruption in Australia!”

This comment was and still is a misconception among Australians. In Transparency International’s most recent report, Australia ranked 13th out of 180 countries (with a score of 75), up two places from the previous year. Australia still ranked favorably compared to the global average CPI score of 43, which has remained the same for over a decade, and to countries like the UK (which ranks 18 with a score of 73) and the U.S. (ranked 24 with a score of 69). But it ranks below some other large Asia-Pacific countries, such as New Zealand (with a score of 87), Singapore (83) and Hong Kong (76).

Corruption undermines a government’s ability to protect people and erodes public trust, provoking more and harder-to-control security threats. On the other hand, conflict creates opportunities for corruption and subverts government efforts to stop it. The problems are only compounded when governments themselves become willing or incidental players in corruption, especially when it comes to international corruption and a play to elevate a country’s geopolitical ambitions.

So, after years of decline, and with the recent upturn in its ranking, what is the current state of corruption in Australia?

Current perception

A recent survey of bribery and corruption in Australia and New Zealand revealed that 91% of leaders perceived bribery and corruption to be a risk to their organization. Of the respondents, 76% from the public sector, 66% from the private sector and 67% from nonprofit organizations perceived bribery and corruption as a risk in their sector. However, the survey also revealed that only 27% of all respondents felt their organization had a clear investment in anti-bribery and corruption cultures and that this was still very much underestimated by organizations.

Undisclosed conflicts of interest 56%, undisclosed and out-of-policy gifts, entertainment and hospitality 38%, favoritism in recruiting 30% and bribes to employees (21%) were the main areas of concern. Not much has changed since a similar survey in 2015, where the most common types of domestic corruption cited by respondents included undisclosed conflicts of interest, supplier kickbacks, personal favors and inappropriate gifts/hospitality. 

What is of significance for Australia as a major exporting country are concerns over bribery and corruption for organizations with offshore operations. Many Australian organizations have operations in high-risk jurisdictions, and 34% of these have reported experiencing offshore bribery and corruption incidents. The risks of bribery and corruption in the mining and resource industry, which is key to Australia’s economy, present a perfect storm.

Notable cases

Among the Australian people, undue influence of government officials (42%) and self-interest by officials (40%) were the most commonly cited types of corruption that came to mind when they were asked to consider whether corruption is a problem in the country. Significantly, only a tiny percentage (2.5%) mentioned issues related mostly to non-governmental corruption like money laundering or banking fraud.

Despite public perceptions that corruption is only an issue with public officials, several notable cases of corruption, both public and private, have reached the international arena in the past few years:

• In August 2016, New South Wales’ anti-corruption commission heard allegations from a member of parliament that he’d been offered $10,000 in a brown paper bag by a city mayor and a local developer; the MP also said he’d given another developer a Christmas present that the developer later offered to buy.
• In October 2021, a former NSW resources minister, his son and another former minister, were jailed for a conspiracy over a coal license in what was described as “corruption on a scale not seen since the days of the Rum Corps.” At the time the conspiracy was uncovered, $30 million had already been paid — this was never recovered.
• Another investigation that probed corrupt conduct by officials in the Victorian Education Department concluded with the director being sentenced to almost four years in prison. The director and his co-conspirators were found to have engaged in a plan to defraud the department. Senior departmental officers misappropriated funds through false and inflated invoicing as well as the arranged payment of inappropriate expenses including excessive hospitality, travel and personal items, the investigation found.
• And earlier this year, the Federal Court handed down the largest-ever penalty against a company for breaching continuous disclosure laws in its statements to the Australian Securities Exchange, ordering GetSwift Limited to pay a penalty of $15 million. The former director, CEO and executive chairman was also ordered to pay a penalty of $2 million and disqualified from managing corporations for 15 years.

Hidden corruption

Within Australia and despite the seemingly clean country image portrayed by the 2022 Transparency International index, warning signs have been showing up in relation to more subtle forms of corruption (especially in government) and in many cases with international linkages. Public policies and resources should not be determined by economic power or political influence, and there is an urgent need to control political financing, managing conflicts of interest and regulating lobbying activities.

Money laundering has and still is an area of concern for Australian regulators. A transparency report on anti-money laundering — “Doors Wide Open” — identified several problems that have enabled corrupt individuals and other criminals to easily purchase luxurious properties anonymously and hide their stolen money in Australia. Historically in Australia, real estate agents have not been subject to the provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Other professionals like lawyers and accountants, who may also play a role in the sector, were also not covered. This means that properties could be bought and sold without any due diligence being conducted on the parties. 

Legislation is changing, but real estate ownership can change hands via opaque offshore companies and continues to be marred by secrecy. Shell companies can sometimes be incorporated in Australia just a couple of months before properties are purchased, as was the case with a million-dollar property tied up in the Horizon Oil scandal.

The cost of corruption in the federal government is estimated to be in the billions of taxpayer dollars each year. It is even less palatable when it is allowed to go unnoticed because influence by the political party that holds power ensures any claims of corruption within government are covered up by agencies that are relied on to be transparent and trustworthy. Case in point, a report by the auditor general indicated that a $389 million car park construction fund had been administered ineffectively. The minister had distributed the grants with “inadequate assessment” for eligibility to 77% of the commuter car park sites within the current government electorates, rather than in areas of real need with congestion issues. Previous governments have also been linked to corruption and misappropriation of funds.

Facilitation payments

The criminal code contains a facilitation payment defense. A facilitation payment, payment of a minor value to a foreign public official for the performance of a routine government action of a minor nature, is still permitted in some instances in Australia.

A corporation or individual that makes a facilitation payment must create records that detail the nature and recipient of the payment. Failure to adhere to the requirements will result in the defense not being available. Difficulties with enforcing against inappropriate use of this defense include identifying the exact recipient of the payment, as well as determining whether the payment was minor, especially when third parties become involved.

Gifts and entertainment

The provisions for gifts and entertainment also provide loopholes that can and are readily exploited in the course of business, including business with public officials. Australian state and territory laws do not exempt gifts or gratuities to public officials from their anti-corruption provisions. Any gift or gratuity may be considered a bribe. However, it does not constitute an offense in Australia if it can be shown that the gift falls below the threshold for criminal conduct — the threshold being that it may influence the public official in the performance of their duties. 

The same definition of “benefit” applies to Commonwealth public officials. Gifts, travel expenses, meals and entertainment can be classified as a bribe if the promise, provision or receipt of the benefit would tend to influence a Commonwealth public official in his or her duties. 

This is a very gray area and as international experience has shown, provides a loophole to be explored by those with ulterior motives. If a benefit like travel expenses or meals is given in connection with an existing business relationship (such as on an existing project), it may not attract any liability. In each case, according to the law, the individual circumstances must be considered, once again providing an “out” for criminal activity.

Two current examples that have captivated the Australian public’s attention demonstrate this. The first relates to charges against Sydney counselors for accepting bribes including cash payments and other benefits like flights, accommodation, luxury car transfers and escort services in China. One of the individuals, a former mayor, claimed he had no idea accepting flights to China from a property developer was considered corrupt behavior.

The second example relates to false, misleading and deceptive conduct against Qantas, (long-time icon of the Australian airways) and accusations of coercion between the government and the airline to block competition and allow Qantas to control landing slots at airports at an estimated cost of $1 billion a year. The scandal with Qantas has reached such heights that a senate inquiry was called and resulted in the forced resignation of the CEO two months earlier than planned. This was not without his multi-million dollar parachute and not before it was revealed that Prime Minister Anthony Albanese’s son had, for some reason, been gifted a membership to the Chairman’s Lounge, probably the most exclusive club in Australia. 

No matter which way you bend the rules of gifts, this is wrong on all accounts.

The new vision

Australia is one of seven countries (collectively accounting for 17% of global exports) listed as having moderate enforcement in a recent Transparency International report. Problems that were identified for nearly every country, such as serious inadequacies in their laws and institutions, hamper enforcement against foreign bribery. These include problems related to whistleblower protection, levels of sanctions, a lack of training and resources, the underfunding of key enforcement agencies, poor inter-agency coordination and the insufficient independence of prosecution services and the courts.

The establishment last year of a new anti-corruption commission, which is independent of government, and has direct reference to Australian Federal Police, is a positive step. In June 2023, the government tabled a bill targeting foreign bribery, Australia’s latest attempt to reform its foreign bribery laws. This represents the third attempt in recent years to strengthen these laws — first in 2017 and again in 2019.

Other areas of concern for Australia include a lack of public sector whistleblower protections and that the facilitation payments defense remains intact despite concerns that such payments are often de facto bribes. In addition, it appears that Australia has taken few steps to ensure that it can provide mutual legal assistance to other countries regarding foreign bribery offenses. For a country that is heavily dependent on its export business, particularly in the areas of minerals and resources, these are seen as major areas for attention.

It would appear that some top-scoring countries struggle to meet the challenge of increasingly globalized, networked corruption not measured by the corruption index. As a result, these seemingly “clean” countries may be enabling or even fueling cross-border corruption from other places further down the index due to a lack of adequately structured and executed anti-corruption programs on their home soil.

Hopefully the changes made to anti-corruption strategies in Australia will provide better protection against a potential increase in corruption that is likely to result as Australia increases its international trade with countries in the bottom half of the index. A recent, unprecedented meeting of Australia’s leading experts in anti-corruption and integrity expressed an urgent need to remove the “black box” around public service contracting, provide better protection for whistleblowers and strengthen its defense against money laundering. It was also reinforced that the challenges facing Australia from organized crime, falling standards of integrity and corrupt actors are profound.