Is Australia doing enough to fight bribery and corruption?

Natalie Faulkner, Director, Fraud
Natalie Faulkner, Director, Audit, Assurance & Risk

Transparency International’s ‘Corruption Perceptions Index’ (CPI) for 2017 has been released[1], and the results are not surprising. The CPI ranks 180 countries by their level of perceived corruption and bribery, on a scale of 0 to 100, where 100 is highly corrupt and 0 is very clean. Globally, the average score is 43, which is quite low, yet not unexpected. Over the last five years, there has been a steady decline in many countries’ fight to end corruption, and unfortunately, Australia is one of them.

Australia has maintained its 2016 ranking of 13th, the country’s equal lowest ranking in the 20 year history of the CPI. Whilst a ranking of 13 might not seem too disappointing, a mere five years ago, Australia was in the Top 10 for best performance, ranking in at number 7. When considering that, compared to countries like Canada, who is ranked 8th, and New Zealand who is ranked 1st, it is obvious that Australia has more to do to combat corruption.

From an ASPAC perspective, Australia’s ranking of 3rd out of 31 countries may not seem too grim, but it is important to understand which countries Australia is compared to in this region. 23 of the countries have a score below 50, meaning that 74% of this region is perceived as corrupt. New Zealand and Singapore are ahead of Australia in first and second place respectively.

Compared to other countries in the ASPAC region, Japan is ranked 20th on the CPI, and is not generally considered a corrupt country. Therefore, whilst Australia’s ranking of 13 may be the lowest ranking in the last 20 years, we are still perceived to be generally not a corrupt nation.

Both political parties seem to be serious about the introduction of a Federal Anti-Corruption body, similar to the anti-corruption bodies that exist in most states. The successful introduction of such a federal body would likely help to further reduce corruption and bribery within Australia, and bring our ranking back up towards the Top 10.

It is not all doom and gloom within Australia. Following a 2017 report released by the OECD[2], which reviewed and evaluated Australia’s Anti-Bribery & Corruption (ABC) regime, there have been clear steps taken to reduce the risk of foreign bribery and corruption within Australia. One, of utmost importance, is that there has been an increase in the level of enforcement of foreign bribery offences by the Australian Federal Police (AFP). This came with the first successful foreign bribery prosecution, where seven offenders were convicted in December 2017. Three of these perpetrators were sentenced to four years imprisonment.

Other steps include:

  • The establishment of Fintel Alliance, which was launched by the Ministry of Justice in March 2017. This Alliance is a public-private partnership, which was created to enhance the fight against money laundering, terrorist financing and organized crime. The institution also focuses on streamlining ‘smarter regulation’ in regards to corruption and bribery.
  • The Commonwealth Director of Public Prosecutions (CDPP) increasing their foreign bribery expertise, and maintaining a close partnership with Parliament to introduce a new Bill that amends Australia’s foreign bribery offence. This Bill not only introduces a Deferred Prosecution Agreement, but also implements a new corporate offence for failing to prevent foreign bribery.
  • In December 2017, the Federal Government introduced a Bill to strengthen Australia’s whistleblower protections law. The Bill proposes safeguards for those individuals who disclose corporate or taxpayer misconduct, including the right to confidentiality, enforced by significant penalties.

Australia has also taken substantial steps to enhance the framework for detecting and investigating cases of potential foreign bribery.  These include the creation of the AFP Fraud & Anti-Corruption Centre. This strengthens inter-agency cooperation and outreach levels, to expand the role of the AFP’s Foreign Bribery Panel of Experts using the additional funding received by the AFP to establish two teams devoted to investigating claims of foreign bribery.

While Australia is taking measures to reduce the risk of corruption and bribery, the aforementioned measures have not yet done enough to have an impact on Australia’s ranking.

The OECD has reported some significant concerns that remain within Australia. One of these concerns is the high level of exports with countries that are considered high risk for corruption. Policies should be put in place to manage the risk of corruption and bribery from entering into Australia.

In addition, Australia has close economic interests in a number of countries that have a high risk of corruption. For example, Australia has a longstanding economic and strategic ties with Papua New Guinea (ranked 135th on the CPI) which may cause a flow on effect of corruption to Australia.

There is also a potential inward flow of corrupt proceeds through Australia’s real estate sector and it is important to improve the detection of these funds. Australia’s real estate market is attractive for foreign investors, and is at significant risk for money laundering[3]. While there are no current reporting requirements in this sector from an Anti-Money Laundering (AML) perspective, an expansion of the AML regime to cover real estate and other sectors is currently under consideration.

Until measures are put in place to counter the impact of these concerns, we will continue to see Australia’s ranking on the CPI fall, as corruption and bribery continues to embed itself into everyday practices.

[1] https://www.transparency.org/news/feature/corruption_perceptions_index_2017

[2] OECD Phase 4 Report: Australia, Implementing the OECD Anti-Bribery Convention, 2017.

[3] http://www.fatf-gafi.org/media/fatf/documents/reports/mer4/Mutual-Evaluation-Report-Australia-2015.pdf

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