Unaoil Leightons Thiess Indonesian Graft Economics References Committee_2016_04!22!4381

COMMONWEALTH OF AUSTRALIA

Proof Committee Hansard

SENATE

ECONOMICS REFERENCES COMMITTEE

Foreign bribery

(Public)

FRIDAY, 22 APRIL 2016

SYDNEY

BY AUTHORITY OF THE SENATE

[PROOF COPY]

CONDITIONS OF DISTRIBUTION

This is an uncorrected proof of evidence taken before the committee.

It is made available under the condition that it is recognised as such.

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SENATE


Friday, 22 April 2016

Members in attendance: Senators Dastyari, Edwards, Ketter, McAllister, Smith, Xenophon.

Terms of Reference for the Inquiry:

To inquire into and report on:

a. the measures governing the activities of Australian corporations, entities, organisations, individuals, government and related

parties with respect to foreign bribery, with specific reference to the effectiveness of, and any possible improvements to,

Australia's implementation of its obligations under:

i. the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD

Convention), and

ii. the United Nations Convention against Corruption (UNCAC); and

b. as part of, or in addition to, paragraph (a), the effectiveness of, and any possible improvements to, existing Commonwealth

legislation governing foreign bribery, including:

i. Commonwealth treaties, agreements, jurisdictional reach, and other measures for gathering information and evidence,

ii. the resourcing, effectiveness and structure of Commonwealth agencies and statutory bodies to investigate and, where

appropriate, prosecute under the legislation, including cooperation between bodies,

iii. standards of admissible evidence,

iv. the range of penalties available to the courts, including debarment from government contracts and programs,

v. the statute of limitations,

vi. the range of offences, for example:

A. false accounting along the lines of the books and records head in the US Foreign Corrupt Practices Act,

B. increased focus on the offence of failure to create a corporate culture of compliance,

C. liability of directors and senior managers who do not implement a corporate culture of compliance, and

D. liability of parent companies for subsidiaries and intermediaries, including joint ventures,

vii. measures to encourage self-reporting, including but not limited to, civil resolutions, settlements, negotiations, plea

bargains, enforceable undertakings and deferred prosecution agreements,

viii. official guidance to corporations and others as to what is a culture of compliance and a good anti-bribery compliance

program,

ix. private sector whistleblower protection and other incentives to report foreign bribery,

x. facilitation payment defence,

xi. use of suppression orders in prosecutions,

xii. foreign bribery not involving foreign public officials, for example, company to company or international sporting

bodies,

xiii. the economic impact, including compliance and reporting costs, of foreign bribery, and

xiv. any other related matters.

WITNESSES

BROWN, Mr Bradley, Acting National Manager, Strategic Intelligence and Policy, AUSTRAC ................. 41

CROZIER, Commander Peter Barrington, Manager Criminal Assets, Fraud and Anti-Corruption,

Australian Federal Police .................................................................................................................................. 24

DAY, Mr Warren, Senior Executive Leader, Assessment and Intelligence, and Regional Commissioner for

Victoria, Australian Securities and Investments Commission....................................................................... 32

McCAIRNS, Mr Gavin, Deputy Chief Executive Officer, AUSTRAC ............................................................. 41

McCARTNEY, Mr Ian, Acting Deputy Commissioner Operations, Australian Federal Police ..................... 24

SASSE, Mr Stephen, Private capacity.................................................................................................................... 1

STOGDALE, Mr George, Senior Executive, Corporations and Corporate Governance Enforcement,

Australian Securities and Investments Commission ...................................................................................... 32

WHITTAKER, Mr Paul, Senior Manager, Corporations and Corporate Governance Enforcement,

Australian Securities and Investments Commission ...................................................................................... 32

WYLD, Mr Robert, Co-Chair, Anti-Corruption Committee, International Bar Association ........................ 17

ZICHY-WOINARSKI, Mr William Brind, Member and Consultant, Anti-Corruption Committee,

International Bar Association ........................................................................................................................... 17

Friday, 22 April 2016 Senate Page 1


SASSE, Mr Stephen, Private capacity

Committee met at 09:36

CHAIR (Senator Ketter): I declare open this hearing of the Senate Economics References Committee's

inquiry into foreign bribery by Australian corporations, entities, organisations, individuals, governments and

related parties. The Senate referred this inquiry to the committee on 24 June 2015 to report by 1 July 2016. The

committee has received 42 submissions so far, which are available on the committee's website. Two submissions

have been received as confidential.

These are public proceedings, although the committee may determine or agree to a request that evidence be

heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by

parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence

given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give

false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state

the ground upon which the objection is taken and the committee will determine whether it will insist on an

answer, having regard to the ground which is claimed. If a committee determines to insist on an answer, a witness

may request the answer be given in camera. Such a request may also be made at any other time.

I now welcome Mr Stephen Sasse. Thank you for appearing before the committee today, and I invite you to

make a brief opening statement, should you wish to do so, and then we will open it up for questions.

Mr Sasse: I think I am primarily here to answer questions.

CHAIR: Thank you. Mr Sasse, I am going to ask a number of questions then I am going to hand it to Senator

Dastyari. You were previously employed by Leighton. What was your role with that company?

Mr Sasse: My role with Leighton Holdings was as the general manager of organisational strategy.

CHAIR: Can you just start by giving a general overview of the corruption and probity concerns that you have

regarding Leighton Holdings and during what period you held these concerns.

Mr Sasse: I joined Leighton Holdings after the appointment of David Stewart as chief executive officer. He

took control of the position in January of 2011. Prior to that, as CEO-elect and before I formally started with the

company because I was on gardening leave from my previous organisation, he gave me a series of emails that

went back as far as 2008 and 2009 that dealt with a employer of the Leighton international business writing to all

sorts of senior leaders within the company, making allegations of misconduct, kickbacks and corrupt payments

mostly relating to the construction of what was known as a roll-on roll-off—a floating pontoon, if you like—that

was eventually destined for India. No-one had really responded properly to those concerns and allegations, and in

October 2010 I started a process of investigating what had gone on and what was underneath these allegations.

CHAIR: What did you conclude?

Mr Sasse: In 2008-09, the Leighton International business started the process of constructing an offshore

pipelay barge, which is a vessel that is designed to fix itself to the seabed using the anchoring system and then

weld together and drop pipes on the sea floor for offshore oil installations and facilities.

CHAIR: This is in Indonesia, correct?

Mr Sasse: The barge was fabricated in Batam in Indonesia, that is correct. In around 2009, the same business

unit within Leighton International received a tender to build a relatively small steel structure which I described

earlier as the RORO—the roll-on roll-off, facility. It was designed to go to the port of Mundra in India, which has

a relatively shallow depth. So the role of this RORO was to form, if you like, a little floating bridge between the

back of the roll-on roll-off car-carrying ship and the shore—so a relatively small piece of steel fabrication. Shortly

after the Leighton International group received that tender, managers involved in responding to that tender put in

a bid to build that RORO in their own capacity. So what had happened was the company had received an

invitation to tender and then, in parallel, executives of that company involved in managing that tender put in their

own private tender to build the RORO. They won the tender in their private capacity, and it was fabricated in the

same shipyard in Batan as was the pipelay barge known as the Leighton Eclipse.

What the whistleblower within Leighton International had been trying to make known throughout the group for

the two or three years preceding my involvement was that the steel that was being used to construct the RORO

had been purchased and allocated to the Eclipse. So we had a situation where not only had the entity constructing

the RORO stolen the work, if you like, from its employer but the entire construction of the RORO was funded or

procured through the cost code and systems that were building the Eclipse. To put it in a very gross way, the

profit margin on the RORO was 100 per cent of the expenditure, because no-one spent any money on the

components for the RORO.

Page 2 Senate Friday, 22 April 2016


I had more or less completed that investigation by about April 2011. I had reported it to the board. At around

that time I engaged a third-party specialist forensics firm to start looking further into what had happened in the

RORO situation, because as part of that investigation we also were starting to get indications that, within the

broader Leighton Offshore business, which was a subsidiary of Leighton International that dealt primarily worth

marine works for the oil industry, was what appeared to be a very odd relationship with a Singapore based

company that seemed to have an involvement in almost every contract that they bid. When I interviewed the

principal of that company as part of my barge investigations, I was never quite satisfied that I understood what his

role actually was. That was one of the reasons why I wanted competent forensics investigators involved.

CHAIR: Can I ask you about some recent media reports of a $15 million offshore payment signed off by Mr

Peter Gregg while he was CFO of Leighton Holdings?

Senator EDWARDS: Chair, you have moved to another thing. Can I have a follow-up on that? In your role at

Leighton, you had the authority to appoint third-party investigative accountants to investigate actions within the

company that you thought were not right?

Mr Sasse: I did, though I made that appointment with the knowledge and support of my chief executive

officer.

Senator EDWARDS: Who was surprised when you brought it to him. He had to sign off on expenditure. You

said, 'Something's not right here; I need to put an investigative accountant on this job. I'm authorised to do that,'—

that is, you were raising the alarm. Was it your chief executive of that division or of the company?

Mr Sasse: The chief executive of the company.

Senator EDWARDS: Which would suggest no knowledge of this.

Mr Sasse: He had been copied in to the whistleblower's emails, but no-one had taken any action, and it was

only when David Stewart was the CEO-elect that he made a decision to have it investigated. It had not been

looked at properly for two years. There had been two previous investigations—one internal; one by an external

third party—that were both characterised by their lack of rigour and lack of detail.

Senator EDWARDS: What do you believe was the quantum of the ultimate siphoning of funds?

Mr Sasse: On my numbers, the RORO was probably worth US$12 million to US$14 million. That would

have been the size of the theft.

Senator EDWARDS: In your time there, do you suspect that there may have been other ROROs?

Mr Sasse: The Leighton International business operated without any of the governance structures and

frameworks that I expected, having come from one of the other Leighton subsidiaries where I had worked for the

better part of a decade. I cannot say specifically that I came across other RORO examples, but there were

certainly some very odd practices in terms of governance, reporting and the way jobs were bid.

Senator EDWARDS: In that division, was there a person nominated within the company at that time to go to

for whistleblowing purposes?

Mr Sasse: The division had its own board. It did have a mechanism for whistleblowers and, as I mentioned

earlier, one of the investigations that that board initiated in relation to the whistleblower's complaints, which was

conducted by an external third party, seems to have been done specifically with the instruction not to get to the

bottom of it.

Senator EDWARDS: So it is like a suggestion box that does not have a lid. It just goes into the ether. It goes

into the shredder underneath.

Mr Sasse: If you have an absence of managerial will to get to the root of a problem, then there are lots of

ways of making sure you never get there.

CHAIR: Unless there are any further questions on that point, I was going to move to the recent media reports

of a $15 million offshore payment signed off by Mr Peter Gregg while he was CFO of Leighton Holdings. Have

you seen any evidence which shows that Mr Greg authorised this $15 million offshore payment?

Mr Sasse: I have, but not in my time as an employee of the Leighton Group.

Senator DASTYARI: How is that the case? Can you explain it to me?

Mr Sasse: I was instructed by ASIC to attend an interview with them in Melbourne in November 2014, and in

March this year I executed an affidavit for them outlining my very limited involvement in the transaction to which

that payment relates and putting a number of emails into evidence.

CHAIR: So you have seen a document signed by Mr Gregg?



Mr Sasse: Yes, I have.

CHAIR: Do you believe that payment to be a corrupt payment?

Mr Sasse: It is very difficult to characterise it any other way.

CHAIR: Do you want to elaborate on that for us?

Senator DASTYARI: What was the payment for, Mr Sasse?

Mr Sasse: The document is a two-page agreement between Leighton Administrative Services—which is a

subsidiary of the group whose primary role is to employ the corporate office staff and buy the paper for the

photocopier; it is not an operating company—and an entity called Asian Global Projects & Trading, based in the

UAE. The agreement purported to establish a single-vendor arrangement for the entire Leighton Group steel

consumption. There are numerous reasons why that agreement would raise concern and suspicion. Do you want

me to run through them?

Senator DASTYARI: Yes, do.

Senator XENOPHON: Can give us the context of steel consumption as well—which projects, where, and

where was the steel going to come from?

Mr Sasse: Firstly, of all of the products that you would aggregate in a construction contracting business from

a procurement perspective, steel is probably the most unworkable because it is used in such a wide range of

applications, from re-enforcement to piles to structural steel. There is an endless array of variation. That is the

first thing. The second thing is it is very hard to predict what your steel consumption is going to be. It is even

more challenging within the Leighton Group, where there are three local and two offshore operating businesses,

operating completely independently of one another. Culturally, to get a single procurement arrangement for

something as simple as air travel within the Leighton Group took them a lot of change management, for want of a

better term.

The second major point is that—

Senator XENOPHON: Sorry. Where was the steel going to be used? Which project was this?

Mr Sasse: According to the agreement, every Leighton Group project, of which at any one time there might

be 300 around the world.

Senator XENOPHON: Including projects in Australia?

Mr Sasse: Correct. The second odd thing about it is that, if you go to a vendor and say, 'I want to aggregate all

my purchasing through you,' you do that because you expect the aggregation to produce a lower cost. Normal

practice is that you say to the vendor, 'I expect to see a significant reduction'—it might be the market less 15 per

cent—'for everything I buy from you.' You certainly do not pay a prospective vendor for the privilege of

aggregating your purchases. You might pay a specialist consultant to have a look at what the steel consumption is

and how you might aggregate it, but that would be a spend of a couple hundred thousand dollars, not $15 million.

The other aspect of it is that the agreement was signed in August 2011. There had been absolutely no

discussion amongst the operating companies or the holding companies as to whether or not there was any appetite

or capacity for us to aggregate our steel purchasing, and at exactly that time we had received a draft report from a

very detailed organisational review that was conducted by a third-party management consulting firm which

concluded categorically that it was just not feasible to do that. So when you see an agreement, given that

background, that time and the decisions that were being made at that time, it is quite clear that the agreement and

the payment associated with it are designed to do something other than what the document actually says.

CHAIR: And what was that?

Mr Sasse: In retrospect, and in the knowledge of the Fairfax reports, it appears that the signatory for the

counterparty to that agreement is associated with the Unaoil interests which have been raised recently in the

Fairfax press. But the payment itself appears to have been part of closing out an arrangement that the Leighton

international group had entered into in India in divesting, I think, 35 per cent of its subsidiary to a local

organisation. That was a very complicated transaction. There had to be, as part of that, a cash injection into the

joint venture after the divestment. There were limitations and rules in the Indian jurisdiction about how that could

happen, and it would seem to me that this was set up as a vehicle to bypass those rules and limitations.

Senator DASTYARI: It was a bribe?

Mr Sasse: I am not sure that you would conclude it was a bribe, but characterising a payment as something

that it is not is not a sign of good corporate practice.



CHAIR: What would you say that this transaction tells us about the culture and governance standards within

Leightons at the time—that this $15 million payment could be made in these circumstances?

Mr Sasse: That payment came from the holding company. I think that is of enormous concern, because the

holding company is domiciled here, operates here, has a reasonably well regarded board—or had. It surprises me

that that payment could be made in such a form from the holding company. As far as the Leighton international

businesses are concerned, nothing surprises me about what they got up to.

CHAIR: Could you explain why you formed that view?

Mr Sasse: The RORO investigation turned up numerous other issues that needed to be followed up and

tracked down: kickbacks to subcontractors, allegations about payments for the procurement of work—that is,

facilitation payments, which fall under the bribery heading. An almost overwhelming collection of issues came

out of that core RORO investigation.

CHAIR: Have you been interviewed or have you been spoken to by ASIC investigators about the $15 million

payment?

Mr Sasse: Yes. I was interviewed in November 2014. What it was all about was not apparent to me until I saw

the full suite of documentation in March this year.

CHAIR: How long do you think ASIC has been investigating this payment?

Mr Sasse: I would say they have been on the case for probably five or six years—certainly five years.

Senator DASTYARI: Having been on this committee for a couple of years and having seen different people

come forward—whistleblowers in banking or tax or other matters—it takes a lot to gobsmacked me, but your

evidence is truly extraordinary. What you appear to be saying, Mr Sasse, is that, when you were brought on to

look at one individual, isolated matter and you went through that process, you uncovered a culture and a type of

behaviour that ran through the entire Leighton Holdings. Is that fair to say?

Mr Sasse: Very much so.

Senator DASTYARI: I have some more specific questions. Before we get to those, there is the broad

framework. I want to put the counterargument to you which we all hear what we talk about it. Putting aside the

specific issue of Leighton Holdings, the broad issue on international corruption is always: 'But you don't

understand. This is how business is done. If we want to win contracts, we have to engage this way. That's how

they do business in these parts of the world. That's just how it's done. If you think that's not how it's done, you're

being naive.' What do you say to those kinds of arguments? I am sure you have heard them before, Mr Sasse.

Mr Sasse: There are probably two categories of answer to that. The first is that you can make a choice as to

which markets you want to operate in. Certainly at that time, there was a vast amount of construction

infrastructure work in jurisdictions such as this one where you could work without having to incur these kinds of

governance risks. The second is that, in my experience, you do not generally see this kind of conduct being

conducted in isolation. If you see this kind of behaviour, there are usually other unethical or unlawful things going

on at the same time.

Senator DASTYARI: The tip of the iceberg, Mr Sasse?

Mr Sasse: That is one way of putting it. The other aspect—

Senator EDWARDS: A pattern of this behaviour. Facilitation leads to: 'Okay, we've come this far. We might

as well go to the next stage and the next stage,' and then we are in another jurisdiction and it is a case of: 'We did

it there, so what's the difference?'

Mr Sasse: There is a question of degree that needs to be thought about. If you do need to get a truck off a

wharf in North Africa, you need to pay the guy who runs the gate US$5 to let you in. Maybe you tolerate that.

Once you are in the millions of dollars and it is starting to affect contract values very significantly, that becomes a

very different issue. The most important issue at the philosophical level is the rule of law question. Either you

have a law or you do not. Once you start diluting that, you start pulling apart the basic fabric of what makes

society tick. The second response to that is that there is clear evidence from the RORO investigation that the

facilitation payments and other payments to suppliers in a number of cases came back to individual executives.

That takes your scenario one step further down the road to perdition. It is all very well to say, 'You don't

understand. We have to do this to stay in business.' But, if we have to do this to stay in business and I am lining

my own pocket, you have gone into a whole new moral space.

Senator DASTYARI: You answered questions about being interviewed and spoken to by ASIC. I know there

have been some media reports to this effect, but I understand the Federal Police are investigating these matters as

well. Is that your understanding?



Mr Sasse: I had an interview with the Federal Police, probably in 2012, when this started to come out.

Senator DASTYARI: Have you heard from the Federal Police since 2012?

Mr Sasse: No.

Senator XENOPHON: What month in 2012? Earlier or later in the year?

Mr Sasse: May/June, from memory.

Senator XENOPHON: So almost four years?

Mr Sasse: Yes.

CHAIR: On that, what do you think about the ability of the AFP and ASIC to investigate these transactions?

Mr Sasse: In any investigation, no matter what you are investigating—from a workplace fatality to a case of

corruption allegations—you need to get the investigation underway and completed as soon as you possibly can.

The longer it takes, the more it is delayed—people lose things, they forget things and they create cover stories.

This stuff has to be acted on, more or less, immediately. In both cases, it seems to me that the AFP and, to an

extent, the regulator just do not act with the alacrity that one needs for these kinds of issues.

CHAIR: You say there is a lack of a sense of urgency in dealing with the issues?

Mr Sasse: I think that is a fair assessment. I think, in the case of the AFP, they have not the slightest

understanding, in my experience, of how corporations work. I think, to be able to investigate and identify—

Senator EDWARDS: That is a big statement. I would like you to flesh that out a little bit more. I have no

doubt that you have got examples of what would lead you to that, but that is fairly explosive.

Mr Sasse: I do not mean it to be that. Based solely on my four-hour interview with them in 2012 and the

nature of the questions—what was asked and what was not asked—my primary conclusion was that these guys

are playing in an area that they do not really know much about, which is hardly surprising. Your average AFP

officer does not have experience in corporate Australia.

Senator EDWARDS: Do you think that people with good corporate knowledge is an area which is missing

within the AFP?

Mr Sasse: Yes. Not just a corporate knowledge that is learnt from sitting in law school learning a corps act,

but knowledge that comes from working and living in those environments.

Senator DASTYARI: We will put that to the AFP when we see them. Can I quickly take you to Indonesia?

Not physically—we are here today.

Senator EDWARDS: Teleport me to Indonesia! That will be a good trick!

Mr Sasse: Sounds like the perfect vacation, Senator Dastyari!

Senator DASTYARI: What is your knowledge of corruption or illicit payments involving Indonesian

operations outside the RORO structure that we have already talked about?

Mr Sasse: I have no direct knowledge of Leighton group activities in Indonesia other than the RORO and the

Eclipse construction.

Senator DASTYARI: If I can take you to Iraq for a moment. You interviewed a Leighton consultant called

Srikumar?

Mr Sasse: I did.

Senator DASTYARI: What did Srikumar do for Leighton Holdings and in what countries?

Mr Sasse: Srikumar was based in Singapore around a business called Lye.

Senator DASTYARI: Appropriately.

Mr Sasse: He seemed to be involved in almost every single project that the Leighton offshore business bid on

and won. His name was all through the RORO issue and when I concluded my interview with him, which I think

was in Kuala Lumpur as part of my RORO investigations, I was never ever satisfied with his explanation of what

he was actually doing for us. He would say, 'Well, I have got all of these resources that help you win the project,'

and I said: 'Well, what kinds of resources? Are they people? Are they plant and equipment? Technology?' I was

never able to get a straight answer on what he actually did. It was at that point, as I mentioned earlier, that I

wanted to hand this thing over to proper forensic accountants.

Senator DASTYARI: In hindsight, is it your suspicion that he was—I am going to use the term 'facilitator'—

a middle person who would be looking at the kinds of payments that would otherwise be kept off the books of a

company like Leighton international?



Mr Sasse: Yes. There is no doubt about that in my mind at all.

Senator DASTYARI: The go-to guy to pay bribes, kickbacks, secret commissions or whatever is necessary?

Mr Sasse: To assist in winning the work, yes.

Senator DASTYARI: And to win this work, that would require—are we talking about bribes, facilitation

payments, kickbacks, secret commissions?

Senator EDWARDS: All of the above I suspect.

Senator DASTYARI: Or all of the above?

Mr Sasse: One of the reasons I needed specialist assistance in being able to answer that question myself was

that it is not easy to track payments or big costs through projects if someone has a mind to hide them or set them

up in some kind of misleading way, which is why I wanted these experts in to have a look at it.

Senator DASTYARI: When did you first hear of these allegations inside Leighton Holdings that bribes had

been paid in Iraq or in other places?

Mr Sasse: In terms of Iraq specifically, I had my first involvement—that is, a very loose term because it was

just a very brief conversation—in August 2012 when the then CEO, who had brought me in, was very abruptly

terminated.

Senator DASTYARI: This was David Stewart?

Mr Sasse: This is Mr Stewart. There was no proper handover and, in the absence of that, he basically left a

whole lot of notebooks and papers with me on his last day and said, 'Well, here's all the stuff and, by the way,

there's a page here'—dealing with the conversation he had had with the head of Leighton international, which has

been reported very extensively. That was really the first I had known about it.

Senator DASTYARI: Was it reported extensively at that time or was it subsequently reported extensively?

There have been some stories about this for a while and I am just trying to get the dates right.

Mr Sasse: It got into the media in 2012.

Senator DASTYARI: That was the first information you had about bribes being paid in Iraq? There was no

conversation with you at that time; it was just the notes of the conversations left with you?

Mr Sasse: Correct.

Senator DASTYARI: Do you have any knowledge of investigations carried out by a firm called Concorde?

Can you explain to me the role of Concorde?

Mr Sasse: Concorde were the organisation I appointed, after the RORO—

Senator DASTYARI: This is the forensic team that you appointed?

Mr Sasse: Yes.

Senator DASTYARI: You brought in the company Concorde.

Mr Sasse: Yes.

Senator DASTYARI: They did an investigation.

Mr Sasse: Yes.

Senator DASTYARI: What did they find?

Mr Sasse: I left Leighton Holdings in October 2012. But from the point David Stewart left in August, I was

effectively frozen out of any kind of activity at all. My knowledge of what happened with these kinds of issues

from August is the same as anybody else who reads the Fin.

Senator DASTYARI: You left, but is it fair to say you were pushed out, you were made unwelcome?

Mr Sasse: Yes, that is probably one way of putting it.

Senator DASTYARI: Did you feel you were made unwelcome because of what you were uncovering?

Mr Sasse: I certainly had a very strong impression that investigations into the international business were not

supported by the board. Certainly, no-one seemed to have the energy to investigate the ramifications of some of

these facilitation and other suspicious payments through Srikumar and others, and my impression is that once I

left the work Concorde was doing was pretty quickly shut down as well.

Senator DASTYARI: Did you see any of the Concorde reports or any of the work they concluded?

Mr Sasse: Only the very early aspects of what they were doing. Again, they would have finished, or should

have finished, what they were doing around August-September-October 2012 and I had gone by then.



Senator DASTYARI: It sounds like you went on a journey where you began with an investigation of an

individual item to look at whether or not there was something—I am using the word 'dodgy' or 'improper' here—

as the result of the whistleblower. You go through this process of investigation and at the conclusion of it you feel

there is so much here that requires more extensive investigation that you set up a process for a more extensive

investigation. Then both the CEO and yourself are terminated, or made unwelcome or asked to go. What does it

say to you about the type of conduct and behaviour of Leighton international at that point in time?

Mr Sasse: The conduct and governance of Leighton international was, without question, unacceptable. The

issue of why Mr Stewart and my termination from Leighton Holdings occurred with such suddenness is—I can

only speculate. They are really questions you need to ask the board at the time.

Senator DASTYARI: I think we will have a chance to do that.

Senator XENOPHON: So we will or we won't?

Senator DASTYARI: I said we may have a chance.

Senator EDWARDS: So we invite the board in?

Senator DASTYARI: Yes, invite the board in. Your view on the corruption does not fill us with confidence.

The bit that I am concerned about here, and I want to ask you about is, there are two issues here. One is how was

the international Leighton's company behaving and conducting itself? That is one issue, and there seems to be

extensive evidence from what has been revealed in papers for people to have concern, and these people are

entitled to their days in court and I am sure they will get that at some point. But there is another question: to what

extent was the Australian operation turning a blind eye, and not asking the right questions—either it was

intentional or a failure? It sounds like, Mr Sasse, your concern is that this was an intentional decision to turn a

blind eye?

Mr Sasse: I cannot speak for other people's intentions. The facts are that the Leighton international business,

despite the fact that it had its own board, which comprised at least three members of the main board—that being

the board of Leighton Holdings Ltd—operated completely outside the standards that we expected from the

Australian operating companies, and that there was, in effect, no governance framework whatsoever in terms of

this kind of activity. Now, insofar as the duties of boards and directors are to exercise some level of due diligence

to make sure that those governance frameworks are in place and are effective, then the board failed dramatically.

Senator XENOPHON: Was it a wilful blindness or a wilful ignorance, in your view?

Mr Sasse: Again, I am not comfortable making these sorts of comments about other people's intentions, but

there is no argument about the facts.

Senator EDWARDS: I have googled you to find out that you are gainfully employed now and everything is

going all right for you. I am concerned about how it all faired for you because that was obviously a complete

blindside activity, in a corporate sense, after extensive experience in this industry. It must have been very

disappointing to be at this phase of your life, with what would have been an aspirational company to work for,

and to find what you did. Is that fair?

Mr Sasse: Yes, it was. It was a challenging time indeed.

Senator EDWARDS: What has it done for you personally and professionally since that time? Have you been

able to move on, head held high without any kind of corporate ramifications?

Mr Sasse: My head is indeed held high. I probably took the view that I was not that interested in getting

involved in a corporate role anymore. I think the lack of support for people trying to uncover issues of

wrongdoing, particularly when they are systemic, was a bit depressing in some respects, and I took the view that I

would rather work in more of a portfolio approach doing my own thing, where I can choose who I work for and

what I do.

Senator EDWARDS: You are going exactly where I want you to go, because it is how whistleblowers are

treated in this country. When they do blow the whistle, they are in senior positions. Obviously you held a very

senior position with the company and, indeed, you were acting appropriately calling the people in. In fact, can you

explain to me what Dr Ferguson's role was in your time when you were bringing all of these matters to the

company's attention? She was the go-to person that was employed by Leighton with the ethics committee chair,

wasn't she?

Mr Sasse: I have not met Dr Ferguson, and I am reasonably certain that she was appointed to the board after I

left.

Senator EDWARDS: Had you not raised anything directly with her then, at that time? She was gone?



Mr Sasse: No. She was not on the board when I was there.

Senator EDWARDS: Did you approach the ethics community, or was the ethics committee a new structure

after you left as well?

Mr Sasse: No, the board has had an ethics committee for some time. Its primary role was oversight of work

health and safety issues, but these issues went to the board pretty much immediately I got to the point that I

realised the magnitude of the problem. I think the first written report to the board was probably about Leighton

international and the RORO was probably April or May 2011.

Senator EDWARDS: So it goes back a while. The ethics committee in the organisation was looking after

heights of ladders and gangways and things like that, not the corporate culture.

Mr Sasse: It was more around if there was a group fatality, the opco would have to come in and essentially

present to them on what had happened and what they had done to mitigate the findings of investigations and

reports and that kind of thing.

Senator EDWARDS: So there was nowhere really to go for any kind of reporting of commercial

inappropriateness or impropriety?

Mr Sasse: If I could put it this way: if the board is not interested, that is kind of the end of the line.

Senator EDWARDS: Yes, it is the end of the line. That establishes that. I will come back to you on that final

thing for some advice for this committee on how you think whistleblowers should be treated. But your comments

on the AFP interest me. They are our next witness. They are by their very nature looking to enforce the laws that

we give them. As policymakers, we debate legislation and give them laws. But they have to understand what they

are looking for. Your suggestion is that there are not enough AFP officers who can go through a series of years on

a balance sheet or look at the operations of a company and its expenditure and be able to identify what you would

with your course of knowledge over the many years of running contracts as beacons or alarms bells for them to

further investigate.

Mr Sasse: I think that is absolutely right. I do not make my comments about the AFP with any intention of

derogating—

Senator EDWARDS: We love the AFP. We just want them to be the best they can be.

Mr Sasse: If you compare the types of regulatory authorities that look after this area in the UK and the US, we

are not playing in the league in terms of the capacities of the AFP in particular, and the track record is pretty poor.

At the end of the day, that is what speaks volumes.

Senator EDWARDS: You would assert that the United States Department of Justice is all over us when it

comes to these types of things?

Mr Sasse: I do not think I would be alone in making that conclusion.

Senator EDWARDS: We have a shortfall in resources there and perhaps a lack of focus that we should be

looking to fill rather than criticising the operations of the AFP. We are saying that perhaps they are not focused on

these areas as much as they should be.

Mr Sasse: It may be an issue of focus, but I do think it is an issue of skill and experience.

Senator EDWARDS: You had four hours with them and your take from that four hours was the assessment

which you gave earlier. Is there anything you want to add?

Mr Sasse: No, I think I covered that.

Senator EDWARDS: All right. If you could provide us with some gratuitous advice—I do not mean any

disrespect there—and tell us what you believe is lacking with whistleblower laws in this country, from your own

personal perspective.

Mr Sasse: I do not characterise myself as a whistleblower. I raised a series of what I regarded as unacceptable

behaviours and reasonable suspicions as to broader issues. That investigation was effectively shutdown. The then

CEO—

Senator EDWARDS: By the board?

Mr Sasse: It is the board that does the termination of the CEO, so one has to conclude that. There are a couple

of issues that arise in corporate wrongdoing generally. The first is that, in my experience, the decision to pursue

and investigate wrongdoing within companies tends to be one of the discretion of the senior leadership at the

time. I think that there needs to be some kind of mechanism that takes discretion away and says that if there is

reasonable evidence of wrongdoing, it must be investigated and brought to conclusion. That is the first piece of

gratuitous advice, if you like, that I would make. How you do that as a lawmaker, I will leave to you.



Senator EDWARDS: It seems like you were summarily dealt with, you and Mr Stewart, for raising these

issues. It seems hardly equitable.

Mr Sasse: It is not but then corporate life rarely is.

Senator DASTYARI: Not like our business!

Senator EDWARDS: Yes.

Senator XENOPHON: Just to recap, effectively we are talking about a $15 million payment that was, in

effect, a bribe, a corrupt payment? How would you best characterise that payment?

Mr Sasse: I do not think it is correct to characterise it as a bribe. If we are talking about the payment between

Leighton Admin Services and Asian Global Projects—

Senator XENOPHON: Yes.

Mr Sasse: that $15 million—it seems to have been constructed to bypass the Indian regulatory framework as a

minimum—so, to make a payment for one thing that is really for something else, which is a breach in itself.

Whether or not it was properly authorised by the various authorities within Leighton Holdings at the time, I

cannot answer but I would be amazed to find out that it was.

Senator XENOPHON: Would you characterise it as an improper or unlawful payment?

Mr Sasse: Without question.

Senator XENOPHON: Okay. You do not want to characterise yourself as a whistleblower, but it seems to me

you raised these issues at the highest levels of the company and you were summarily told to leave, or you were

forced out of, the company—is that a fair characterisation?

Mr Sasse: It is pretty correct, yes.

Senator XENOPHON: So, in a sense, you were punished for coming forward with your concerns?

Mr Sasse: I think so, yes.

Senator XENOPHON: In terms of the culture of Leightons, back then when you were there, would you

describe it as a toxic culture? Would you regard it as a culture where there was a cavalier disregard for following

the rules? How would you, in the best and fairest way, describe the culture within Leightons at the time?

Mr Sasse: I would not want to make this comment about the operating companies, because my experience at

the operating company level is that they were generally very well managed. The holding company seemed to lack

the necessary appetite to, almost, be suspicious. When something looks odd, someone should put their hand up,

have a look and ask questions. It seemed that those sorts of questioning, challenging, investigative approaches at

board level simply were not there. It is as if people like the fees and flying around at the front of the plane, but

when it comes to interrogating the businesses, the subsidiary boards and management as to what is actually going

on I did not detect any great level of appetite for doing that effectively.

Senator XENOPHON: You made a reference to the rule of law and the question of what happens when

society does not follow the rule of law. Do you think they were abiding by the principles of the rule of law in

Leightons, within your knowledge?

Mr Sasse: Not to the standard that I would regard as acceptable in this country.

Senator XENOPHON: Which leads to what you described as the road to perdition?

Mr Sasse: Yes.

Senator XENOPHON: I want to ask you questions about the AFP. This is not a criticism of the AFP. I want

to reflect on Senator Edwards' remarks that we value the role that the AFP play. Is it fair to say, in terms of their

resources or their structure, that when you were interviewed by them almost four years ago it was the case that

you were educating them rather than them obtaining information from you?

Mr Sasse: I think it is quite a good way of characterising my concerns.

Senator XENOPHON: Did it worry you that you were telling them the basics of dealing with what appear to

have been widespread unlawful payments and advances?

Mr Sasse: Yes, it did.

Senator XENOPHON: So, the people who interviewed you did not have the expertise to deal with these

matters, in your view?

Mr Sasse: No.

Senator XENOPHON: And that is not a criticism of them.



Mr Sasse: No, they did not.

Senator XENOPHON: Okay. Again, I want to emphasise that I think Australians can rightly be proud of the

AFP. But in your view they were out of their depth?

Mr Sasse: That is right, and I do not think that is a criticism, in the same way that if you take another

regulator out of their comfort space and ask them to look at something else they are probably not going to do it

effectively.

Senator XENOPHON: I just want to move on quickly to the issue of ASIC. When were you interviewed by

ASIC; on how many occasions?

Mr Sasse: I had one formal interview with them in Melbourne in November 2014 and then a further

discussion with them in March this year to finalise the affidavit I referred to earlier.

Senator XENOPHON: Hang on. You see them in November 2014 and then there is a period of some 16

months before you have to finalise an affidavit?

Mr Sasse: Yes.

Senator XENOPHON: That is quite a gap, you know, between an interview and doing an affidavit, which

seems to be the logical next step of an interview. Did you contact ASIC beforehand; were you in touch with them

beforehand?

Mr Sasse: No. I think that really is a question for them, because I do not know when and how they got their

hands on various documents. I notice in this morning's paper Fairfax has been visited by them, so maybe there is a

link to what they have been doing. I cannot really answer that question.

Senator XENOPHON: Are you surprised that it took so long—some 16 months—from the time of being first

interviewed by ASIC to the time you were asked to do an affidavit?

Mr Sasse: I go to my earlier answer in respect of what a good investigation looks like: a good investigation

starts quickly and finishes quickly.

Senator XENOPHON: It started not so quickly and has not even finished yet.

Mr Sasse: There is your point.

Senator XENOPHON: Finally, in relation Mr Wal King—did you have any dealings with Mr Wal King

while you were there at Leightons?

Mr Sasse: Not directly. I had met Wal off and on through my time in John Holland, but he was out of the

chair when David officially took the reins in January 2011.

Senator XENOPHON: I think Senator Dastyari might want to follow this up, but do you have any views on

the requirement benefits that were paid to Mr King?

Mr Sasse: There was some debate internally at the time that I was in Leighton Holdings as to the structure of

some of those benefits.

Senator XENOPHON: What sort of debate?

Mr Sasse: There were two post-employment placements: one, which was a consulting arrangement; the other,

which was a success fee for the transition to a new executive. The chairman wanted to terminate both of those. In

looking at the documentation that gave legal effect to those entitlements, there were some widespread concerns as

to whether or not this should have got shareholder approval before it went into the system.

In parallel with some of the work we looked at earlier with the Leighton international business—it was at that

point that I was removed from the involvement in remuneration, which had previously been my responsibility and

then we are in August, which was when I was kind of quarantined out of pretty much everything.

Senator XENOPHON: You asked questions about the remuneration of Mr King and then you were removed

from that committee?

Mr Sasse: The then chairman asked me a series of questions, and I gave him the best answers that I could

backed up with third-party legal advice. As you probably realised, the chairman left on the came day that Mr

Stewart did.

Senator DASTYARI: Who was the then chairman we are talking about?

Mr Sasse: It was Mr David Mortimer.

Senator XENOPHON: Thank you.

CHAIR: Senator McAllister, you have a couple of questions, then Senator Smith.



Senator McALLISTER: Thanks for your evidence, Mr Sasse. I would like to ask you more about the relative

roles of the board of Leighton Holdings, the board of the subsidiary companies and the executives, because the

interplay between executives and boards is obviously critical. I do not ask you to reflect on people's

motivations—you have made it clear you do not want to do that—but I am interested in factual information about

what people knew. So you were providing information during the course of your employment to Dave Stewart,

who was the CEO of Leighton Holdings at that time?

Mr Sasse: Yes.

Senator McALLISTER: Is it your understanding that that information was being passed on to the board of

Leighton Holdings?

Mr Sasse: Without question. Some of the memoranda that I penned were to the board as a whole.

Senator McALLISTER: Right. So certainly, the holding company understood the nature of your

investigations.

Mr Sasse: Yes, it did.

Senator McALLISTER: It is it your understanding that that information was communicated to the boards of

the subsidiary companies?

Mr Sasse: You would not normally have the main board send that kind of information back to the subsidiary

companies, because there would be no real purpose in doing so. However, I think I am going to answer your

question a different way by saying: every operating company board had members on it who are on the main

board. So that is, I think, where you are going, yes.

Senator McALLISTER: Nonetheless, directors' duties require the main board to properly oversee the

activities of the subsidiary companies that they own. To your knowledge, what efforts were made by the main

board to pursue these issues with the subsidiary companies with the board members of the subsidiary companies?

Mr Sasse: On the matters that I was involved with, there seemed to be a distinct lack of interest.

Senator McALLISTER: Are you aware of any action taken by the board to pursue these issues with any of

the subsidiary companies, including Leighton international?

Mr Sasse: No.

Senator McALLISTER: You have, I think, made one recommendation from a legal perspective, or a policy

reform perspective, about the obligations that you think ought to be placed on company directors to conclude

investigations of matters of wrongdoing. Can I clarify whether you see that as an obligation under the criminal

law or the Corporations Act.

Mr Sasse: It is an interesting question. I do a lot of work in the work health and safety space. One of the

reasons why that regulatory framework is quite effective in this country is that it sits in a criminal jurisdiction. If

you as a director fail to discharge your due diligence duties and there is a serious incident you can be imprisoned.

That tends to focus people's minds. Working in the safety space, I find that quite helpful.

Senator SMITH: As part of the project planning et cetera there would have been risk radars and risks

assessment. As part of the project management how would you categorise the understanding of risks generally

and were risks around facilitation payments, briberies et cetera identified in those risk radars?

Mr Sasse: No. The group had a very comprehensive risk and opportunity analysis platform for looking at

projects and bids. Obviously—

Senator SMITH: Do you mean an electronic platform?

Mr Sasse: No, a management approach, a system. Indeed, one of the group's great strengths was its ability to

identify contract risk and manage it, generally. Obviously that does not have application to onshore subsidiaries.

There was no policy, no procedure, no risk system for facilitation payments and the like offshore. We started

drafting that in probably May, June or July 2011. So I assume it is in place now.

Senator SMITH: I notice that in 2014 the board made a decision to merge the external review committee and

risk committee with the audit committee. That struck me as unusual. It was, if you like, a bit of a lead that perhaps

some of the governance structures generally at the board level were inaccurate—so there was a problem not just

with the board but with the structure of the board. To not have a comprehensive and dedicated audit and risk

function until 2014 strikes me as unusual.

Mr Sasse: I have been out of the organisation for a long time. It is now majority owned by a Spanish

company. They have put in place a very wide range of changes—divestments, mergers. What you know from the

paper is all I know about what—



Senator SMITH: I am interested in pre-2014 and what your observations were. Having gone to the CEO,

having written memos to the board trying to raise this issue, did you have confidence at that point in the audit and

risk arrangements at the board level, or were you concerned that they were inappropriate or not substantial

enough?

Mr Sasse: I was surprised at the lack of interest, the lack of support and, eventually, the fact that the whole

investigative processes were shut down.

Senator SMITH: So you had confidence in the risk and audit functions at the board level up until the point

that you tried to utilise, or have your concerns raised with, the board?

Mr Sasse: Yes. I was probably naive.

Senator SMITH: Who was on the risk committee at the board level when you were the executive general

manager?

Mr Sasse: I would have to check that. I would not limit my comments just to the risk committee. The board as

a whole was made aware of these issues in some depth.

Senator SMITH: Going back to Concorde, how did you identify them?

Mr Sasse: I had worked with them previously when I worked for a Leighton subsidiary—John Holland

Group. We used them extensively to check our systems. Every year, we would give them one or two projects at

random and send them in to see what they could find. They were a uniquely qualified and skilled operation.

Senator SMITH: And other Leighton groups had been satisfied with their work?

Mr Sasse: I do not know whether their client base includes other then Leighton subsidiaries but, in my view,

they were perfectly qualified. They were probably one of the only organisations that could go and look at some of

this Leighton international stuff and find it quickly.

Senator SMITH: And why was that?

Mr Sasse: Because the principals are two very, very experienced people who come out of construction. They

know what to look for.

Senator SMITH: Industry experts.

Mr Sasse: Yes.

Senator DASTYARI: There are a few things that I specifically want to cover, and then one bigger thing

generally. Mr Sasse, you spoke earlier about the retirement package that was put forward for Mr Wal King, who

was the long-term CEO before Mr Stewart took over. You outlined that there were some concerns relating to that

package that were expressed by the incoming CEO. Do you know if that matter was ever raised with ASIC or

referred to ASIC for investigation?

Mr Sasse: Yes. ASIC did interview me about that matter. They advised me, as part of that process, that they

did not intend to pursue it.

Senator DASTYARI: Then why interview you if they are telling you it was part of that process? Was it at

your insistence or other's insistence? Did you initiate it?

Mr Sasse: No, they contacted me. That was one of the things that we discussed at my interview with them. In

my discussion with them in March this year, when I executed the affidavit on the $15 million payment issue, they

mentioned that they were not pursuing that matter further.

Senator DASTYARI: Do you know if they are pursuing the other matter: the $15 million payment? Do you

know if they intend to charge Mr Greg?

Mr Sasse: They made that very clear, yes.

Senator DASTYARI: So they made it very clear that they intend to charge Mr Greg?

Mr Sasse: Yes. I was told that.

Senator DASTYARI: You were told they are going to charge Mr Peter Greg?

Mr Sasse: Yes. The reason why they wished for me to sign the affidavit was to bring the emails into evidence.

Senator DASTYARI: Are you aware of whether the handwritten note you referred to that was left for you by

Mr Stewart was handed in to the authorities or ASIC or not? Are you aware of what happened to that or whether it

had been previously raised? This is the note about the Iraq bribes.

Mr Sasse: Only from what has been in the press, because I had gone from the organisation. My understanding

is that it was handed across to the AFP and that is what triggered that first wave of media around all of this stuff.



Senator DASTYARI: I have one very broad question in two parts: I want to ask you specifically about what

was happening at Leighton at the time, and then one final, broader question. I say this as someone who has been

on this committee for a few years now: what you are saying is sensational in that it outlines a culture of behaviour

and conduct that goes beyond isolated incidences. But, Mr Sass, it also looks like what you are saying is that at

every point of time where you or others tried to raise concerns and address these issues you were removed from

being able to do so. How could that fill us with confidence in the processes that were in place, which included

bringing people like you on board? When you actually start to uncover things, everything starts getting covered

up.

Mr Sasse: I agree. That is ground for concern from a public policy perspective.

Senator DASTYARI: You have done in this area and internationally. One of the big issues that we are going

to look at as a committee is whether or not we need to go down the path of the Americans and the United

Kingdom with a Foreign Corrupt Practices Act. As you know, that the Americans have the Foreign Corrupt

Practices Act, and the UK have the Bribery Act. That relates to two parts. One part of that is how documents are

retained and what documents need to be retained, and the other part is about the chain of command responsibility.

I do not know how much interaction you have had in jurisdictions and with companies that have had to work

within those kinds of regulations, but should we have a Foreign Corrupt Practices Act in Australia, or some

variation of it?

Mr Sasse: I think it is an area that needs greater regulation. What that regulation and enforcement looks like is

not a question I would like to answer off the cuff. There are a lot of issues that come into this. In the light of your

considerations about where you are going with recommendations and changes to policy and changes to

legislation, the issue of corruption is broader than just bribes and facilitation payments, as you heard when we

talked about the RORO incident. There also needs to be some mechanism and framework that ensures that that

wrongdoing is uncovered and it gets some kind of consequence. That, to me, is equally as important.

Senator EDWARDS: You appeared before a royal commission late last year. That was well reported and,

from all accounts—and from where I saw it—you were very credible and the evidence that you provided was

relevant and true to your experience. I think they described you as 'an assiduous record keeper' in the media after

that. Did those books and those notes and those contemporaneous notes ever turn up, from John Holland?

Mr Sasse: No, they did not.

Senator EDWARDS: You hear the ASIC Commissioner, Greg Medcraft, talk about culture, culture culture

all the time, and it is about corporate culture. We are seeing a delinquency here which is anecdotally evident in

evidence that we are getting. Given the context of what I am talking to you about, were there times at this

company where you felt that there were other domestic facilitation payments or what you would consider, in the

context of what we have been talking about this morning, bribes going on?

Mr Sasse: I am not aware of bribes with the Australian operations. Every now and then the operating

companies have had issues with people misusing resources and assets and, in almost every case, I think the group

has a very good track record in responding to and having those people prosecuted. It was the international

business area where the problem lay.

Senator EDWARDS: So you never had any unusual requests from contractors or trade unions or anything for

resourcing any of their businesses?

Mr Sasse: That is kind of traversing the ground of the royal commission—

Senator EDWARDS: Well, let's traverse it.

Mr Sasse: to an extent.

Senator EDWARDS: If we are talking about bribery and facilitation and everything like that, then in the

context of what we have been talking about, this company has what appears to be a bad culture. Was there any

kind of what you would call a facilitation payment or an enabling payment made to contractors, trade unions or

that in your time at John Holland?

Mr Sasse: There were at John Holland, but I only became aware of those payments as a result of the royal

commission process. The royal commission has disclosed quite a few occasions where contractors or property

developers have made payments to unions. That is in the public domain.

Senator EDWARDS: For anybody who missed the royal commission, what was the use of those payments

for? What would they typically be for operational issues?

Mr Sasse: In the industrial area it is essentially a permit to operate or a way of making an industrial relations

problem go away.



Senator EDWARDS: Is that not a facilitation payment?

Mr Sasse: In that respect, yes, it probably is.

Senator EDWARDS: So this culture is alive and well within Australia, within John Holland—where you

facilitate a payment to a union to make things go. You are a credible witness; you are now aware that that took

place in your time at John Holland.

Mr Sasse: I think the answer to your question is actually the Cole royal commission, which made it

abundantly clear that there are systemic failings within the industrial relations framework of the construction

industry. Part of the recommendations of that royal commission were a three-pronged intervention to fix the

problem, and that worked very, very effectively. If you take that three-pronged intervention away then the

systemic issue will return.

Senator EDWARDS: In your time at John Holland, did you lead any discussions with any trade unions that

did make a direct request for you to subsidise their operations?

Mr Sasse: Yes. I have been involved in meetings of that nature.

Senator EDWARDS: Who were they with?

Mr Sasse: With Bill Shorten, with Cesar Melhem.

Senator EDWARDS: His successor at the Australian, the AWU—

Mr Sasse: He was the his assistant when he was state secretary of the Victorian branch.

Senator DASTYARI: Just a point of clarification—

Senator EDWARDS: Excuse me. And so—

Senator DASTYARI: No, I am not going to get shooshed. A point of clarification—

Senator EDWARDS: I did not interrupt you.

Senator DASTYARI: I am asking for a point of clarification. Chair?

CHAIR: Let's have the point of clarification.

Senator DASTYARI: This is referring to evidence that you have already given to the trade union royal

commission—is that right, Mr Sasse? You gave this evidence to the trade union royal commission?

Mr Sasse: Yes, I did.

Senator DASTYARI: That is all. I just wanted to check.

Senator EDWARDS: I was not at the trade union royal commission, so that is why I am interested in it here.

So you, in your time, had a personal experience of being strongarmed by the trade unions to provide facilitation

payments for their operations—what, for the running of cars, or 'training programs' and training programs that

never got delivered? Was that your experience at John Holland?

Mr Sasse: There was one case where that occurred, which was the case that was traversed in some depth in

the royal commission.

Senator EDWARDS: So this culture of facilitation at John Holland is alive and well domestically as well, as

you assert, as offshore. What is the difference between a trade union strongarming John Holland and some shady

character out of the Middle East doing it?

Mr Sasse: Can I just make one clarification? Of all of the major contractors, John Holland probably has the

strongest track record of resisting these kinds of behaviours and issues. I do not want them coming out of this

looking like—

Senator EDWARDS: No, no. That is a very fair statement, given all of your testimony against them. That is

fair enough. So you reckon that they are the least involved and that that is the tip of the iceberg compared to the

other activity in the area.

Mr Sasse: What I think they are trying to do is pull together what I regard as a systemic regulatory failure in

the construction industry which requires a particular intervention, and I do not think that it is helpful to combine

the Leighton international experience with that, because they are two quite different environments and two—

Senator EDWARDS: Okay. What if I put it to you this way: we are here trying to traverse this space of trying

to get protection for whistleblowers and stronger protections in place for facilitation and bribery, yet the trade

union movement is involved in it alive and well, and is actively pursuing it in this country.

Mr Sasse: Predominantly, in the construction industry.



Senator EDWARDS: Well, there you go. We have this little thing going on in Canberra at the moment called

the Australian Building and Construction Commission.

Senator DASTYARI: But we do not have it going on!

Senator EDWARDS: Well, we do not have it going on.

Senator McALLISTER: On a point of order, Chair.

Senator EDWARDS: I would have expected you all to have interrupted well before now, because this is

amazing in evidence.

CHAIR: Well, it is not really, because it has already been traversed on the record.

Senator EDWARDS: Well, it is. But it is called—

Senator SMITH: It is gobsmacking, shocking, horrific news.

Senator EDWARDS: Yes, gobsmacking. This is outrageous. How can this possibly be going on in this

country—a first-world country?

Senator McALLISTER: I am seeking to make a point of order, Chair.

CHAIR: Senator Edwards, Senator McAllister would like to make a point of order.

Senator EDWARDS: I am sure she does, as well as all of you.

Senator McALLISTER: Chair, the terms of reference of the committee go to the legislative framework

around combating foreign bribery. We have limited time—and, in fact, we are over the time allocated for this

witness. Can I ask you to ask Senator Edwards to return to the terms of reference.

CHAIR: I think he has finished now.

Senator EDWARDS: I am done. I do not need to return to the terms of reference at all. Corruption is

corruption, no matter what jurisdiction you are talking about.

CHAIR: I just have a follow-up question. Mr Sasse, in terms of the corruption that your experienced within

Leighton Holdings and on a scale of union corruption versus corporate corruption, where would you see the

balance there?

Senator EDWARDS: It is like being a little bit pregnant—corruption is corruption.

Mr Sasse: I do not disagree with the point that Senator Edwards makes. I am strongly in support of an

effective corporate watchdog where there are meaningful sanctions for people who either misbehave or allow

misbehaviour to occur, and do not follow it up. I am also on the record for almost 15 years supporting the

regulatory framework of the ABCC, the Building and Construction Industry Improvement Act and the 2014 code,

which is not in force yet.

Senator DASTYARI: On that, I just want to bring back to this. Mr Sasse, I do want to thank you for being so

forthcoming with the evidence that you gave today. I know that these are not easy matters to deal with. On the

cultural challenges that were seen at Leighton Holdings' international arm during your time there, again, I am

asking you perhaps for an opinion; if you cannot comment, I understand. The question that we will have to be

asking ourselves as part of the policy response is: through the work that you did in the investigations that you

conducted and the interactions that you started having with people like Mr Kumar and others within the firm, and

in looking at the specific example of the one barge, or RORO project, that led you to start suspecting more

broadly, in your opinion are we looking at a couple of isolated incidences in one firm's international arm or do

you think this is, perhaps, a more widespread practice and a more widespread problem than just the isolated

example of Leighton Holdings international? Is this systemic?

Mr Sasse: I can only talk about my own experiences. I have only worked in the international arena with the

Leighton group. I have not had any experience, or any relevant experience, with other companies offshore. So my

answer to that question is really the same as anybody else's, I guess, who reads the paper. There seems to be an

issue—that is the way I would answer it.

Senator DASTYARI: And the broader policy evidence you have given us today is that we need a stronger

framework. We need to help the regulator in this space, the AFP. You have made some suggestions about how

that can be done, but obviously that is a policy decision for us.

Mr Sasse: Yes, it is. I cannot sit here on the other end of a question-and-answer session like this and give you

a coherent, structured response as to what the regulatory framework ought to look like.

Senator DASTYARI: But your personal experience is that there is a problem.

Mr Sasse: Yes, without question.



Senator DASTYARI: Deep seated?

Mr Sasse: In my personal experience, yes.

CHAIR: I have one final question. How many other executives were forced out of Leighton Holdings for

exposing corruption or probity concerns? You have detailed a number. Is there a figure?

Mr Sasse: I cannot answer that specifically, but there were a number of highly regarded individuals who left

Leighton Holdings in rapid succession after I did. How and why they left are questions that really need to be

answered by them.

CHAIR: Thank you very much, Mr Sasse, for appearing before the committee.

Senator EDWARDS: Thank you very much. That was very interesting.



WYLD, Mr Robert, Co-Chair, Anti-Corruption Committee, International Bar Association

ZICHY-WOINARSKI, Mr William Brind, Member and Consultant, Anti-Corruption Committee,

International Bar Association

[10:52]

CHAIR: I now welcome Mr Robert Wyld from Johnson Winter and Slattery and Mr Zichy-Woinarski from

the Victorian bar. Do either of you two gentlemen have an opening statement that you would like to make before

we open it up to questions?

Mr Wyld: Mr Chair, we sent to your committee a short opening statement, which you may have. It is a two-

page statement which thanks you for the opportunity given to us to appear today. It reinforces, I think, some of

the observations made by members of this committee—that is, that corruption and foreign bribery is a serious

endemic problem and Australia is not immune from it. It draws to your attention what we think are a number of

useful and constructive developments that have happened over the last few months, particularly the notion of how

whistleblowers in this country should be treated. Otherwise, we are happy to take questions, which Mr Woinarski

and I will try and divide between ourselves as best we can. Do not hesitate to ask one or either of us if you wish.

We are happy to take questions.

CHAIR: I apologise for keeping you waiting.

Mr Wyld: That is perfectly fine.

Senator DASTYARI: Mr Wyld, thank you for your opening statement. I think that covers a lot of it, but not

everyone here would have had a chance to see it and read it. To cut to the chase, one of the broad questions that

we as a committee need to look at within our terms of reference is the issue of whether we need to have an

Australian legislative framework based on the American Foreign Corrupt Practices Act, which is obviously a

fairly old law. I think it is from 1974 and forgets to mention there is an internet because it did not exist at the time.

Senator XENOPHON: Before Al Gore.

Senator DASTYARI: Before Al Gore. We must consider whether we need a more modern framework like

the UK Bribery Act. To cut to the chase, is it your opinion that that is where we should be heading as a nation?

Mr Wyld: I think the law of itself, the criminal code, particularly as some more recent amendments have been

made, is a substantial improvement on what it has been since the law first came into effect in 1999. I am not

convinced we need a separate law. There are wide-ranging state criminal laws which cover domestic bribery and

corruption. There are extensive provisions in the criminal code that cover it insofar as it concerns the

Commonwealth—Commonwealth officials or Commonwealth money. Foreign bribery, of itself, is a discrete

offence. We have yet to see, as has been remarked, any ultimate published judgements in how that can be applied.

I think the real benefit that we can learn, particularly from the United Kingdom, is in some of the provisions in

the Bribery Act. In particular, section 7—which, as I understand it, was subject to some review by the United

Kingdom government—effectively deems a corporation to be liable for the conduct of its associates and places

the onus on the company to establish that it had adequate procedures in place. That, I think, is something that is

missing here but, in broad terms, I am yet to be convinced that we need a separate law.

Senator DASTYARI: This is the 'chain of responsibility' provision—you are responsible for the behaviour of

a subsidiary or related company in another jurisdiction—

Mr Wyld: Anybody—an associated person. It does not have to be a company. It can be anybody. An

'associated person' is defined very broadly and it does not have to be a corporate relationship.

Senator DASTYARI: One of the defining principles of the US Foreign Corrupt Practices Act is that whole

idea of being able to hold the executives responsible for how others behave within their firm at different levels

and in different jurisdictions.

Mr Wyld: Certainly the United States Department of Justice has taken a very broad view on who it will hold

responsible under the Foreign Corrupt Practices Act. Again, however, there have been limited cases—because the

majority of cases in the United States settle because they are corporate cases with a different structure that is

under consideration by the Attorney-General's Department as we speak. It is only over the last few years that

individuals have started to test some of the propositions that the Department of Justice wishes to make. But yes,

broadly speaking, the Americans will actively hold individuals accountable and do so in a very prompt and

proactive way.

Senator XENOPHON: You said that in the last few years there has been a challenge to that. Can you

elaborate on that. Is it now under siege by some who are challenging the US laws?



Mr Wyld: It is a classic example. Where a company in America is faced with prosecution under the FCPA,

there are real material incentives for it to settle because of the escalating fines and penalties that can be imposed

under the federal sentencing guidelines and the Alternative Fines Act. That means they invariably settle the case

and enter into a non-prosecution agreement or a deferred prosecution agreement. That traditionally has not been

available to individuals—or has not been offered to them. So now individuals who are being prosecuted

criminally and therefore face imprisonment are defending the cases and challenging the Department of Justice's

view about the extent of the law and the scope of the law—for example, whether it applies offshore and, if so,

how, and to what extent foreign nationals in foreign countries who have never been to the United States should be

amenable to US law. So those cases are still progressing. That is probably the best answer I can give.

Senator SMITH: For the record, how do we explain the absence in the Australian Criminal Code of the UK

legislation's associated person provision I am trying to understand what some of that legal tension might be.

Mr Wyld: When the Criminal Code was amended in 1999, it drew largely from the OECD anti-bribery

convention and mirrored to a large extent the obligations under those articles to criminalise foreign bribery. At

that time, it did not have the benefit of what the United Kingdom did, which was to have an extensive review of

its old prevention and corruption legislation which went back to about 1991. It held many parliamentary hearings.

It heard from many practising lawyers, academics and NGOs about what needed to be done in this day and age.

Part of our committee's view is that the terms of the foreign bribery offence in section 70.2 of the Criminal Code

need to be re-looked at because there have been developments that need to be considered and we need to, in a

sense, bring it up to date.

Senator SMITH: So it is not a conscious omission?

Mr Wyld: I do not believe so.

Senator SMITH: Perhaps Mr Zichy-Woinarski has a view about that.

Mr Zichy-Woinarski: I do not believe it was. I just think things have moved on in the last 18 or 20 years and

people are starting to realise the need—particularly as companies become more multinational and have more

subsidiaries.

Senator DASTYARI: Your broad advice, Mr Wyld, is that there are things that can be done and that we

should be looking at doing, and necessarily having a standalone piece of legislation may not be the best way of

achieving that. I think that is valuable evidence. I want to bring you to a couple of provisions that submissions

have raised with the committee. There seems to be a view amongst some of the larger international companies

who have made submissions—and that includes the big mining companies—that those who are listed on the US

or UK stock exchanges and operate within those jurisdictions have a higher standard applied to them than what is

placed on Australian firms. They point to the availability of facilitation payments as a clear example of that. I

know it is something that has been criticised a fair bit in the press and international transparency groups have real

issues with the facilitation payments and the permission of them under Australian law. Could you briefly explain

what they are and what your view on them is?

Mr Wyld: Facilitation payments grew out of the request by US companies before the US Congress when the

FCPA was enacted to permit them to continue, in effect, to pay what most people thought of as small bribes

because that is what happened. As Mr Sasse has said, there are ways that some people believe business is done in

some parts of the world that mean you just have to pay money and get on with it. The American Congress

accepted that and committed facilitation payments as a defence. However, in my view, they play such a small,

insignificant role it is hardly worth mentioning as a defence because they are of an incredibly limited nature. They

are effectively a minor payment for performance of a routine government action, something that you are already

in effect entitled to such as accelerating the connection of your electricity or getting your phone connected or

getting something cleared from customs.

Senator DASTYARI: Mr Sasse gave the example of paying US$5 to get across a bridge.

Mr Wyld: Effectively, something like that. Having said that, if you are asked to pay $5 to get over a bridge by

a policeman with a gun that happens to be slung over his shoulder, pointing not inconsequentially towards you,

then that is probably not even a facilitation payment; it is probably something else. It is probably a bribe and it is

probably something that you are paying under duress or extortion.

Senator DASTYARI: Sure. Where is the line?

Mr Wyld: That is the problem.

Senator DASTYARI: Where is the line between what is a facilitation payment and what is a bribe?

Mr Wyld: There is no line.



Senator DASTYARI: But if I have to pay a million dollars to get this contract because it is routine business I

am dealing in, such as with an oil contract or a construction contract or some other one—

Senator SMITH: And it might be different to what they tolerate the next year.

Senator DASTYARI: Yes—I am paying a million dollars to get that contract. Explain to me where the line

is?

Mr Wyld: There is no line.

Senator XENOPHON: Are there degrees?

Mr Wyld: There is probably an argument under the Criminal Code that there are degrees because the

Criminal Code gives about a half a dozen examples of what it says is a facilitation payment, the sort of thing I

have just given you as a connection to something you are already entitled to, or something of some similar nature.

That is what they say. The Americans make it quite clear. They say that if any payment involves something over a

certain US dollar, anything of a regular payment or something that is unusual, they simply do not regard it as a

facilitation payment. They keep their view of the defence incredibly narrow. But there is no definition and there is

no line. It is very subjective; that is the problem.

Senator XENOPHON: Is there a threshold in the US legislation?

Mr Wyld: No, not in the US legislation. It is a policy view that the US set out in the FCPA resources guide.

Senator XENOPHON: What is their policy? At what level does it go from being actionable?

Mr Wyld: They do not like to say. But my experience in dealing with the US Department of Justice and US

lawyers is that it ranges, depending on the investigator, between US$100 and US$200. Anything over that, they

simply do not regard as a facilitation payment.

Senator McALLISTER: From a social perspective in a developing country, even $100 or $200 may have

quite corrosive impacts on the norms established around commercial activity and the nature of public service in

those countries. Is that a proposition you accept?

Mr Wyld: Absolutely. Also, the other defence of course is that, if a payment is made, it must be recognised

and reflected in a written law of that country. If a payment you have to make of $500,000, $1,000 or $500 is not

in fact a requirement under the law of that country, there goes that defence and you are left simply with the

payment being a bribe or a facilitation payment.

Senator McALLISTER: Thank you.

Senator EDWARDS: It seems to me that, if you are prepared to pay a facilitation payment of some degree, it

has the potential to spiral. If I go into a local government office here in Australia, lodge an application for a block

of apartments and say to them, 'How much time do you think it will take to get this apartment plan approved?' and

they say, 'Eight months,' and then you say, 'Is there any way that I can have that assessed earlier?' and they say,

'Oh, yes, there is the fast-track process, but that will cost you another $14,000,' what is that?

Mr Wyld: If that is supported by relevant regulation or legislation or decree by whatever authority is

administrating it, I have no problem with that.

Senator EDWARDS: It is legislated facilitation.

Mr Wyld: Effectively, yes. You get the fast track and the slow track. If it is not, then I think in any country

you have to ask the question: 'Why am I being asked this? What is it for?'

Senator EDWARDS: I had better check some of the council regulations. That is all I have.

Senator DASTYARI: Why is it that, whenever the senators come to Sydney, they start talking about

property?

Senator EDWARDS: Apparently it is going down here.

Senator XENOPHON: I have long advocated for a compensation scheme for whistleblowers. It was terrific

that Greg Medcraft, as the chairman of ASIC, spoke about that last year. It is something that members of this

committee have had a longstanding interest in. In the US it seems to work, in terms of whistleblowers getting a

percentage of the fines, because the fines are so huge in the US. One person got $10 million or $100 million, but

ended up spending a long time in jail as well.

Mr Wyld: That was a particular tax revenue matter.

Senator XENOPHON: How do we have a scheme that would work for Australian circumstances? The

concern I have is that, if someone comes forward, as a general rule, it ruins their career, it ruins their life and it

means they cannot pay the mortgage. Is it a combination of a percentage of any fines or a statutory scheme and a



global fund of fines imposed? There is the economic loss basis and common law principles. You cannot get a job

and there is a link between your evidence, your work and your whistleblowing. How do you see a scheme

working in an Australian context that would be effective?

Mr Wyld: I think the best starting point is to look at the rules under the Securities Exchange Act in the US

which set up the Office of the Whistleblower. Those rules are some 300-odd pages and set out, in very

comprehensive detail, the commission's assessment of many submissions which dealt with exactly those issues:

how you quantify payments, how whistleblowers should be treated and what responsibilities they should have to

cooperate. You need to try to assess their genuineness, in effect, of coming forward with a legitimate complaint. I

think it should be on a statutory basis. I think you need to have it clearly articulated and set out. The framework

that you can look at is already in the United States. The regulators from the SEC that I have spoken to—and I

know from Mr McKenzie's submission that he has spoken to them; as part of his Churchill Fellowship he looked

into these issues—see it particularly as a game-changing process that a whistleblower is, in fact, actively

protected and actively compensated. From an Australian perspective, it is better to look at compensation. I think

that if you start looking at reward and bounties, it becomes very emotive. I know Mr Medcraft and Mr Sims have,

in the past, expressed concerns about bringing that sort of system into the criminal justice system here. I think

there is a very legitimate role for it if it is statutorily enacted with a scheme that is transparent and administered

by somebody who looks at these people independently and assesses it based on what they have suffered.

Senator XENOPHON: What about the cause and effect? It could be that a person is about to lose their job

because they have behaved badly in respect of—they have not been an exemplary employee in one area, but they

have actually come forward with some very valuable information. That is what has been put to me in some cases

when I have been privately advocating for whistleblowers—they have said they were going to lose their job

anyway because they did something that, on an objective basis, could lose them their job. I am just paraphrasing,

but that seems to be the argument that we dragged out.

Mr Wyld: That may well be the case, and I think we should not shy away from it, but I think the reality is that

if, in fact, somebody blows the whistle and gives information, and that information leads to a conviction, and that

information leads to sentence imposed—as it does in the US—of an award, then that whistleblower, irrespective

of anything else, should be entitled to some compensation.

Senator XENOPHON: Fine. Thank you.

Senator DASTYARI: It seems that part of the frustration for those who have been monitoring these issues or

looking at these issues from outside is the failure of successful prosecutions. While every individual deserves

their right in court and every individual case has to be assessed on its individual merits, the simple fact that so few

people have been effectively prosecuted over a long period of time on an issue that, frankly, every couple of

months will bob its head up and we will have examples of in the media—again, I do not want to go to any of the

individual examples, because there may be individual reasons in each individual case. There are others who have

made commentary to the effect that we have, effectively, become a soft touch on these issues. I know

international regulatory agencies have made that observation about Australia, as have some of the NGO groups

around transparency and others around Australia. Could you comment on that? Is it a policy failure or is it

because it is not a problem? Should be concerned about the sheer lack of successful prosecutions in this area?

Mr Wyld: In my opinion, yes, but I think there are some very complexity reasons as to, perhaps, why that is

the case. Our submission tried to canvass some of those.

Senator DASTYARI: It does.

Mr Wyld: In broad terms, I think we have to look at—and Mr Sasse was perhaps correct in one point, and I

agree with him. Historically, the experience of some of the investigators has, in my experience, likewise, been

less than knowledgeable of what they are looking into. Effectively, you are, in a sense, educating the investigator.

To be fair, I think that has substantially changed over the more recent years and I think a lot of credit has to go

partly to the government's initiative in getting the AFP to focus on this sort of work, and, in turn, the AFP

themselves in reorganising their internal affairs to dedicate time and people to develop that experience—which

takes a long time. The Americans have been doing it for 30 to 40 years. They have directly expressed to me, and I

have read elsewhere, their amazement, if I can use that word, at the diffuse nature of the way in which foreign

bribery is investigated in this country; at our lack of a dedicated agency dedicated to that task, with people who do

that task with vigour, experience and a pride that the Americans—who are never short in selling their own

pride—say that they do. There is that aspect of it.

There is also the aspect of resourcing and consistent dedicated resourcing that is a policy issue across

governments. I have looked at this area and worked in it for nearly 30 years. Generally, I have seen that the



approach is to cut and move money elsewhere. Things change over time—and things change gradually—but

never quickly enough. Then I think that the real problem with a lack of prosecutions is the sheer complexity, now,

of international finance, international commerce and the way transactions are conducted in an opaque way—at

one level under legal systems, tax systems and corporate structures that are perfectly legal, but are then used, in

effect, for another purpose. That is part of the problem to address. One of the issues is about how long

investigations take. The OECD has certainly recognised now that these sorts of investigations can take up to

seven years—and these are ones that have settled, let alone been prosecuted.

The way countries interact with each other, the mutual legal assistance scheme and the processes for admitting

evidence from one country into Australia under the Foreign Evidence Act is technical, is convoluted and is rife

with the process that all good defence lawyers and they will strike out, or attempt to strike out, whatever they can

because it does not comply with quite strict procedures when you are involving a criminal trial. A lot of processes

and procedures partly explain why, for example, it can take 18 months or two years before witness A has one

interview and another interview. It is a significant process, and one that I do not think any of us should

underestimate. I know that from working on cases across the world over 20 years.

Senator DASTYARI: The question for us is: should we change that process? It seems to be, Mr Wyld, that

you are saying we should look at ways of improving it.

Mr Wyld: Absolutely. I think there are always ways that can be improved, and many investigators I know

from across the world, particularly in Europe, will be the first to say that the best way to facilitate these sorts of

things are the interagency relationships, the interagency communications and the network that is being built up

amongst the regulators so that they know before anybody else knows, generally, what is going on. They share

information, they work together on task forces. What has come out of Panama, for example, is a perfect example

of the way regulators will, if they did not know about it beforehand—and I know from other information that

what is going on in Panama has been there for quite some time. But now it has become public the regulators are

acting with at least some alacrity to get the documents together and then work out what, if anything, was done

legally or illegally. That is the problem.

CHAIR: We have touched on a range of the reasons as to why there has not been successful AFP prosecutions

in this area of whistleblower protection, lack of a specialist agency, expertise. For the sake of completeness, are

there any other barriers that you want to identify that could explain the lack of prosecutions in this area?

Mr Wyld: Not that I can immediately think of. Our submission probably covers it in sufficient detail, and I do

not think I need to add anything further unless members have any questions.

Senator SMITH: I have two questions. The first goes to the deferred prosecution agreement that the

government has announced by way of discussion paper. From the submission, if I have read it correctly, you are

supportive of that initiative. Can you elaborate on why that would be a positive addition?

Mr Wyld: Under our criminal justice system there is no obligation to report any criminal conduct. The one

exception is in New South Wales under a very underused provision in the Crimes Act which imposes an

obligation on a person who has formed a view that a serious offence has been committed, and therefore it is an

offence yourself if you fail to report that. Otherwise there is no such obligation. The first question that I am

always asked by companies and individuals is, 'Should I report and, if not, does any consequence flow from that?'

The short answer, as a matter of law, is no. Consequences may flow if, however, you do not report something and

then it comes out in another form later on. Then you have the famous Washington papers—Watergate—example

of the cover-up being worse than the offence itself.

Having said that, international corporations, large successful Australian companies, generally have extensive

policies, procedures, codes of conduct and stated ethics that say, 'We have zero tolerance to this type of conduct.'

Then they are hit with an investigation or they are hit with a prosecution. The issue for a company as opposed to

an individual—the company being the sum of the individuals and representing its shareholders and those with

interests in it—is: 'What do we do? We can't go to prison, but what is it going to do to our value, to the people we

employ, to the people who have invested in us? How can we best manage what might be a real problem that we

have to admit to, or a real problem that we don't admit to and we want to fight?'

Now, if you want to fight it, you can fight it. But I think many companies that I have been exposed to, particularly

companies from Asia, from Europe, from America, who have interests in and around Australia and the Asia-

Pacific region have a very strong ethical view that says, 'If we find out about this conduct, then we will investigate

to the point that we need to and then we will, and want to, report it.'

The problem is that when you report it, what happens? The short answer, under Australian criminal, is you do

not really know. You are in the general hands of the criminal justice system. You can ultimately try and persuade



the prosecutor, the police, not to lay a charge, but if a charge is laid the general philosophy of the DPP, reflected

in the prosecution policy of the Commonwealth, is that they prosecute, they want a conviction and that anything

you wish to say in defence is largely a matter of mitigation of sentence. That is it. That means that for a company

it is a very unpredictable process and essentially it has to go through a criminal trial and a conviction.

Now, some legitimately say, why should not a company do that as much as an individual? I think there is

considerable merit in that view, that all entities, incorporated or not, should be treated equally, but a company is a

different legal creation. I think ultimately there is an interest in the company admitting that if it has done

something wrong, that it should act on that. It should have a structured framework, particularly, in my view, the

United Kingdom framework—that, however, has some quite discreet issues that I think need to be addressed

constitutionally—but it is a framework which allows for negotiation to take place, for sentences to be imposed,

for payments to be made of a very broad nature as compensation, as fines, as compensations to victims, as

proceeds of crime disgorging profit, and any other type of supervisory role such as the appointment of a monitor,

or somebody as a third party to supervise then what a company should, or should not, do over the next one, two or

three years. I think in broad terms, we will be making a submission to the Attorney-General's Department on that,

and in broad terms, I think we agree with you. Do you?

Mr Zichy-Woinarski: Yes. I do. Can I just add that if you can have a deferred arrangement situation, it will

in many cases save the AFP, the CDPP, whoever the respective agency is that is responsible, a lot of money also,

so you have a better use of your resources. We have touched upon it briefly, but one of the real problems, first of

all, is you have to find out where foreign bribery is occurring, but when you do it is a very expensive thing to do

and the demands on any of the agencies involved in these are very high.

Senator SMITH: Finally, going to the issue of urgency, in your submission you make the comment that

Australia might be at risk of being 'blase', which is the word in the submission. Just going back to the earlier

conversation about the United Kingdom's associated person provision, how would you characterise the urgency of

updating or improving Australia's legislative response to foreign bribery?

Mr Wyld: I think the committee's view is that it should be done sooner rather than later. I think economic

financial crime of this nature and scale dwarfs, in a dollar sense, any other type of crime. You do not need to go

beyond figures from the OECD and the World Bank to look at the, not billions, but trillions of dollars they

attribute to fraud and corruption generically across the world. I think it is a credit that this committee is looking at

it, but I think really what needs to come is something concrete, something positive and something that allows

companies, particularly Australian business, to know what they are doing and to be treated very much in a similar

way as they are across in the United States and the UK. Most international companies will require their Australian

subsidiaries to comply with the English guidelines, with the English requirements; therefore no facilitation

payments, no payments that are not properly authorised, and any associated person has to be looked at incredibly

carefully to understand what they are doing. I think we should bring our laws up-to-date and our practice.

Senator McALLISTER: Thanks for your written submission, which is very comprehensive and very helpful.

Could I ask you about one specific observation you make there, which is:

There is one significant failing in Australia’s laws in relation to foreign bribery—there are no comparable books and

records and internal controls offences in Australia as there is under the FCPA …

Could you talk us through, practically, what that means in terms of company behaviour and the ability of

investigative authorities to bring a prosecution successfully.

Mr Wyld: Certainly. The Australian Criminal Code only looks at foreign bribery: the criminal offence of

intentional bribing of a foreign public official. It very much reflects the US FCPA; it reflects the English Bribery

Act. What, however, we lack is what the US have had for 40 years, and that is what they call their books and

records and internal controls provision. That is the civil part of the FCPA, which permits the SEC, as the

corporate regulator, to piggyback, as they always do, on any and almost every foreign bribery investigation. There

will be a joint DOJ and SEC look at the question to determine whether it is criminal or civil.

Those provisions are drafted in a much broader way than any law we have here, to effectively say that there

must be just and accurate records kept by a company, reflecting the use or disposition of its assets. Importantly, in

addition, there must be appropriate internal controls within a company to effectively allow that to happen. What

you find, if the DOJ proceed with a criminal prosecution, is that that generally takes priority and that runs the

process until there is a decision, be it a settlement or a prosecution and a judgement—although there have been no

judgements against companies.

The SEC, however, will run a parallel investigation. In a number of the oil for food program cases involving

US companies they would invariably, if they could not establish a criminal case, would say they were satisfied



and a company would admit in the process that its books and records did not accurately reflect the payments made

through third parties to the Iraqi government for the provision of humanitarian relief and say, 'We have breached

those provisions.' Therefore, they pay, similarly to the criminal process, a very large fine. The US SEC take the

view that those books and records offences coupled with the internal control provisions create, as I understand it

from US lawyers, an almost strict liability provision, so there is not a question about subjectivity of the

organisation under investigation; it either is materially or it is not. And, if it is not, basically that is it.

Having said that, there has been a considerable improvement as from the beginning of March this year with the

new false accounting offences introduced to the Criminal Code. They, I think, supplement the old state provisions

that existed under state criminal law for a long time and were in fact used against Mr Ellery, the former CEO of

Securency, who pleaded guilty to a false accounting offence involving an invoice to a Malaysian intermediary.

So, they did exist, but at the Commonwealth level they did not exist. The question will remain. Now they are in

the Criminal Code they will fall under the auspices of the AFP. Therefore we now have some armoury for them to

look at whether somebody acted intentionally or recklessly in terms of making, altering, concealing or disguising

an accounting document—not any document but an accounting document—in a way that facilitated or disguised

the giving or receiving of a benefit or the loss that somebody incurred in that transaction.

Senator McALLISTER: But it will not be a strict liability offence, as it is in the United States?

Mr Wyld: It is not a strict liability, but it is a significant improvement in terms of creating two levels of

offences, one an intentional offence and the other a reckless offence, which will be more objective. Therefore—I

know from having spoken to a number of senior AFP officers—they will be looking with great interest at a

number of transactions, both present and in the future. It is a piece of legislation that they have lacked at a

Commonwealth level, even though the Corporations Act has had some old-style offences of a fairly paltry nature

in terms of fines—although one offence does hold a term of imprisonment, so that should not be discounted.

Mr Zichy-Woinarski: There is one issue, if I could just raise it. It is because of what you have just been

saying about the false accounting. It comes back to corporate liability. In the submission, on page 27, we do make

reference to a decision of the High Court in Krakowski v Eurolynx. What was said there by the court is probably

obiter—in other words it is not strictly part of the decision. The question is: there is a view by some courts that

when it comes to determining corporate liability, one has regard to the person who can make the decision in that

particular area and that person's knowledge. Often that person may only have a limited knowledge and there is a

very strong argument, because of the artificial nature of a corporation, that one should be able to aggregate the

knowledge of the individuals within the company, so together they have the knowledge. In some ways, that is one

of the things that may make it easier to be able to prove a case against a corporation for foreign bribery and

corporation. It is something that really does need to be looked at as well as some of the other issues that Mr Wyld

mentioned earlier to assist in making it easier for these matters to move forward more quickly and for them to be

prosecuted.

Senator McALLISTER: Would a legislative intervention of that kind bring us in line with other

jurisdictions?

Mr Zichy-Woinarski: It certainly would in some jurisdictions, yes.

Senator McALLISTER: Thank you.

CHAIR: Thank you very much, Mr Zichy-Woinarski and Mr Wyld, for appearing before us today.



CROZIER, Commander Peter Barrington, Manager Criminal Assets, Fraud and Anti-Corruption,

Australian Federal Police

McCARTNEY, Mr Ian, Acting Deputy Commissioner Operations, Australian Federal Police

[11:40]

CHAIR: Welcome. Thank you for appearing before the committee today. I invite you to make a brief opening

statement, should you wish to do so, and then we will open it up for questions.

Mr McCartney: No, sir.

CHAIR: You have probably heard some of the testimony this morning, specifically in relation to, perhaps, the

lack of prosecutions in this area. Would you like to respond to that evidence?

Mr McCartney: We are happy to respond to that evidence. The AFP has recognised the need to enhance our

capability in relation to fraud and anticorruption in foreign bribery investigations. Since the establishment of the

FAC in 2013-14, which I believe you are aware of, we have seen a substantial increase in referrals in relation to

foreign bribery . We have four matters currently with the DPP in relation to our investigations and we have two

matters before court. I think we need to say that, at a practical level, the investigation of foreign bribery offences

is a complex and protected area. That has been a common theme from all people who have submitted to this

inquiry. Given what we have put in place with the FAC—our enhanced capability and our enhanced focus on

expertise for our own people—we believe we will see a positive flow-on in terms of future prosecutions in

relation to foreign bribery.

In terms of the issue of our focus, it is not just our capability. The real importance of what we are doing in the

FAC, which is the lead-on from what we did at Wickenby and the Serious Financial Crime Taskforce, is bringing

all the agencies to the table to leverage off the capability of those agencies. So it is not just the AFP's focus. In

this space, we jointly work with ASIC and have a seamless approach. The joined approach has been extremely

beneficial. We also leverage off our foreign international partners. The AFP are part of the International Foreign

Bribery Taskforce. Obviously, with all the recent reporting on unit oil and Leightons, those are examples where

the AFP has engaged, through the taskforce, with our international partners.

An important point to make is that the work we do in law enforcement is not the single silver bullet to foreign

bribery. The private sector is acknowledged in the role that they need to play in terms of governance and

adherence to these sorts of issues. It is also important to put on the table that these are not just our views. I would

like to refer to the recent OECD report in relation to Australian foreign bribery. In 2015, the OECD released its

report on Australia. The working group commented that it acknowledged Australia is taking steps to implement a

number of recommendations, with 16 out of the 33 recommendations fully implemented and nine partially

implemented. In particular the working group commented that the AFP had strengthened its enforcement on

foreign bribery by establishing the interagency Fraud and Anti-Corruption Centre. It also improved its

cooperation with other agencies, including ASIC and international bodies. There was a follow-on meeting from

that on 8 June in Paris and there was some positive oral feedback from the OECD. There were a couple of key

points. It stated that, over the last 12 months, they have seen the results of the work that Australia has put into

increasing and improving their investigations and upcoming prosecutions on foreign bribery. Australia has

approached this task with a whole-of-government approach and agencies have actively work together in

determination of making the best effort to improve their investigations into foreign bribery. It is acknowledged

that Australia has no prosecutions underway on foreign bribery offences and it noted that Australia now has a

robust evaluation and quality assurance review framework to ensure allegations are not prematurely closed.

CHAIR: I want to ask you about the Leightons investigation. I know you do not want to comment too

specifically on what is happening, but we understand that those investigations have been going on for something

like five years without charges at this stage. Can you tell us where that is up to?

Mr McCartney: Again, I do not want to delve into individual investigations. I can say that it is progressing

well. I can say it has been an incredibly complex investigation, and that is linked into how long and how

protracted it has been, but from our perspective we are positively progressing that investigation.

CHAIR: Can we expect to see some developments in the near future?

Mr McCartney: You can.

Senator DASTYARI: Thank you, Mr McCartney and Commander Crozier. I want to use the example that we

talked about this morning, which was Leighton Holdings, to make a broader point and get your opinion. We heard

evidence this morning that Mr Sasse was interviewed by you in 2011. Is that correct? Or 2012?

Mr McCartney: It was 2012.



Senator DASTYARI: He was interviewed in 2012, but I take it that 2011, or earlier than that point, is when

you started looking at this matter; is that correct?

Mr McCartney: It was 2012.

Senator DASTYARI: In 2012 you started looking at the Leighton Holdings matter?

Mr McCartney: In 2012 we started the active investigation into the Leightons matter.

Senator DASTYARI: We are here four years later and that matter is still ongoing. I completely accept, Mr

McCartney and Commander Crozier, that it is in your interests, as it is in everyone else's interests, for these

matters to be dealt with as quickly as possible. You want these matters dealt with quickly. It is not in your

interests to drag these things out unnecessarily—correct?

Mr McCartney: Correct.

Senator DASTYARI: So, what does it take on a policy level, or what policy changes need to be made, for us

to have what you rightly describe as complicated matters dealt with quicker?

Mr McCartney: I think there are a couple of important points to make. The issue of long, protracted

investigations on foreign bribery is not just isolated in Australia. If you look at the OECD reporting, the common

term of an investigation, from investigation to prosecution, is between five and 7½ years, so this is an issue that is

identified around the world. I think from a policy perspective we have been supported. I note the evidence this

morning from the witness in terms of their technical expertise in terms of our people. What I can say is what we

have done since then in terms of the work of the FAC, not just from a capability perspective but from an expertise

perspective. What I can say in relation to that investigation is that it is a high priority and we are committed to

seeing the end through.

Senator DASTYARI: But Mr McCartney, there are certain things that have been raised today that have

outlined why these delays have been taking place. There was an observation—criticism is probably the wrong

word—that the type of people who tend to work in the Australian Federal Police in these kinds of units may not

have the relevant experience. Your evidence is that that is something you are aware of and have being addressing?


Senator DASTYARI: There was also other evidence this morning, from Mr Wyld and others, about the rules

of evidence, what information can and cannot be used, and what powers you do and do not have. There are two

specific points that I wanted to raise with you, because the policy questions for us are: firstly, the complexity and

difficulty of being able to use admissible evidence and whether you think that is an area this committee should be

reforming; and, secondly, the idea—and, again, we had some experts here previously who were very supportive

of it—of perhaps looking down the American and British path, where executives in companies in Australia will

be held more responsible, or to a higher standard of responsibility, for their activities. Are they two measures that

could actually result in more successful prosecutions and better evidence being entered?

Mr McCartney: Just on your first point: in terms of expertise, I think the point I have made is that we have

identified the need for greater expertise and capability in the AFP. With regard to how we operate in this space

from a cultural perspective: to be frank, a number of years ago there was a silo approach between agencies, but

now, with the work through Wickenby and the work through the Serious Financial Crime Taskforce, in fact it is

very much a joined-up approach. In terms of expertise, we bring agencies such as ASIC to the table who have

significant expertise in relation to corporate crime, and everything we do in this space is joint. In terms of

legislation, obviously that is an issue for the Attorney-General's Department, but we have provided significant

input and we have seen positive developments. As mentioned by the previous witness, Mr Wyld, we have seen

the false accounting legislation brought in, which is a significant benefit to the work that we have done. The

government has just released a discussion paper on deferred prosecutions, and that is a piece of work that the AFP

strongly supports.

Senator DASTYARI: You support deferred prosecutions, don't you, Mr McCartney?

Mr McCartney: We do.

Senator DASTYARI: And you have been on the record as doing that?

Mr McCartney: Yes. We are on the record as doing that. With some of those askbacks, again, obviously we

have seen what is happening overseas and we have learnt from what happens well and what happens not so well.

But it does puzzle me at times. At times we do have an inferiority complex—that because it comes from the UK

or the US then it must be a better model. I think we have some aspects to learn from these countries but, in terms

of the task force arrangements that we have put in place in Australia, from my perspective some of that is world's

best practice.



Senator DASTYARI: How many effective prosecutions have there been for foreign bribery in this country in

the past 15 years?

Mr McCartney: There are two matters before court at the minute.

Senator DASTYARI: But how many successful prosecutions—sorry, convictions—have there been?

Mr McCartney: There has been a number of convictions in relation to these two matters. The significant one

is securancing, and there has been a number of convictions in relation to individuals in that matter.

Senator XENOPHON: Not pursuant to this law?

Senator DASTYARI: Pursuant to this law? Pursuant to the Foreign Bribery Act?

Mr McCartney: Correct. Going back to what the previous witness said, I think one of those persons was

convicted on a state false accounting charge, but I will clarify that point and come back to you.

Senator DASTYARI: You have four matters before the DPP?


Senator DASTYARI: And two matters before court?


Senator DASTYARI: How many matters are there more broadly? I assume you have a triage system.

Mr McCartney: We do.

Senator DASTYARI: Are you able to go a bit further down the triage?

Mr McCartney: We have 18 active matters. Those 18 include four that are with DPP and two that are at

court.

Senator DASTYARI: How many staff do you have? How big is your team that is doing this? I know you

work with other agencies as well, but how many are there in your team?

Mr McCartney: I am happy to provide on notice to you the exact numbers, but within the FAC centre we

have 110 AFP. Again, it is a concept of jointly working with other agencies and other areas within the AFP.

Senator DASTYARI: So you have a staff of 110 which has 18 active matters, not including the four that are

with the—

Mr McCartney: No, that is including the four.

Senator DASTYARI: So you have 12 then that are active—the other six are obviously active—four of them

are with DPP, and I imagine they come back and forth to you; and then two with the court.

Mr McCartney: Yes.

Senator DASTYARI: Going back to what I said, you have come out in favour of deferred prosecutions.

Having prepared these types of documents for the DPP, and given the evidence that we heard earlier was that one

of the areas that should be looking at reform is how evidence obtained from foreign jurisdictions is received and

accepted, is that something we should be looking at?

Mr McCartney: I think there has been some legislative reform on that issue in the past, but it is a continuous

discussion with DPP and the Attorney-General's Department.

Senator DASTYARI: Give me an example of what happens with this evidence. Say you are doing an

investigation and, let's say, a bribe or something has allegedly happened with X Third World nation and you are

trying to get some kind of, say, banking documentation or whatnot—I am using this as an example. Is the problem

then that you may not be able to get that information in the style that would be accepted by the Australian courts

as a standard?

Mr McCartney: I think part of the problem is some of the delays. To obtain that evidence we simply cannot

go to that country and ask for that evidence and bring it back; we have to obtain that evidence under a mutual

assistance request. That process can be lengthy, depending on the country we are dealing with—particularly in the

UK—it is a much more streamlined process.

Senator DASTYARI: Another are of work of this committee has been in the tax space. If you are dealing in,

say, a secrecy jurisdiction then, of course, that becomes harder again. There are some more rogue players in this

international market than the British or the Europeans. Correct?

Mr McCartney: Correct. I think it is mixed but it is improving. In terms of the work that we do

internationally and going back to the false accounting legislation, why that is really beneficial is that if we cannot



prove that a foreign bride has actually been paid we can fall back to the false accounting charge and charge a

person with that.

Senator DASTYARI: So that is the bit about documentation. You have made the point that there are

challenges in being able to accept and look at the right documentation. That is more a matter for the DPP and

Attorney-General's, but, as someone who collect this data, you have outlined what your frustrations are or the

difficulties and challenges in obtaining that. That is completely understandable. The second point that I raised

goes to this idea of responsibility and chain of command of responsibility. We have talked about the American

and British legislative frameworks in this area. There is a notion around the responsibility of senior executives for

the conduct and behaviour of subsidiaries and employees and others—more of a kind of chain of responsibility.

Some of the criticisms that have been made in the submissions to our inquiry have been that perhaps one of the

unintended consequences of the Australian law is that it facilitates an environment whereby not knowing is a way

out, effectively. Whereas that does not exist in other jurisdictions—there is more of a responsibility to know and a

responsibility to be able to account.

Senator XENOPHON: Where ignorance is a defence, basically.

Senator DASTYARI: Where ignorance is a defence. Is that a fair criticism? Is that something we should be

looking at as we are looking at laws going forward?

Mr McCartney: Again, we continue to look at those issues but I think ignorance is often a defence for every

crime we investigate. It is an issue for us to prove and, again, to prove beyond reasonable doubt that there is

knowledge and intent in relation to that aspect.

Senator DASTYARI: Sure, but under the Foreign Corrupt Practices Act or the UK Bribery Act, there is a

greater standard of responsibility to know than there is under the Australian law. That is the evidence we have

been given.

Mr McCartney: Within the Australian jurisdiction in terms of corporate culture, there is no specific offence

for corporate culture but, through the foreign bribery legislation, we can charge companies in relation to these

offences if we show that there is an intention and there is direct knowledge by the board to direct the activities—

Senator DASTYARI: Have you ever?

Mr McCartney: I will take that on notice. I believe the company Securency was actually charged by DPP in

relation to that. I suppose what I am saying—

Senator DASTYARI: That is one example, perhaps.

Mr McCartney: Perhaps, but again it is an example where that legislation has been utilised. The important

aspect in terms of accountability and responsibility of directors—again that is where the very productive

relationship we have with ASIC comes in, in terms of them looking at that aspect in terms of the governance and

culpability of directors in relation to foreign bribery investigations.

Senator DASTYARI: You talked about 12 ongoing investigations. There are media reports that the matters

that have been outlined in the Fairfax media regarding Unaoil are obviously one of them. Is that correct?

Mr McCartney: An aspect in relation to Unaoil, and we are on the record to say it is relating to Leighton.

Senator DASTYARI: And you are looking at that?


Senator DASTYARI: But the aspect of the Unaoil that you are looking at is the Leighton component?

Mr McCartney: Yes. I think the other important aspect—and again I believe this is positive in terms of

obviously you read in the media in relation to Unaoil, previous to that we have been actively working through the

International Foreign Bribery Taskforce, particularly with our partners in the UK in relation to that aspect.

Senator DASTYARI: Is where we are at with the Panama papers a point at which it has kind of fallen on

your desk yet or is it still going through that?

Mr McCartney: I heard the evidence yesterday of the commissioner and he spoke about the Serious Financial

Crime Task Force. From our perspective, once we became aware there were a number of high level meetings with

tax the process is that that is their expertise. So we are working with tax at the minute. They are going through an

assessment process. Through that assessment process they may identify particularly what we are after in that

space, and there is a need to organise some facilitators that may be referred from the tax office, after their

assessment of the papers, to the AFP for investigation.



Senator DASTYARI: I am not normally one to quote the Prime Minister at that these kinds of hearings, but I

wanted to, without prejudice, put the Prime Minister's comments of this morning to you. You have seen in the

media, obviously, with Channel Nine this alleged payment in Lebanon. The Prime Minister said today:

I've got no doubt it will be of interest to various regulatory agencies.

He said that on the 2SM John Laws program this morning when asked whether he supported the idea of an

investigation into that matter. Have you had any discussions with anyone about that matter? Is that news to you?

Mr McCartney: We have seen the media report. We have not received a referral in relation to that matter.

Our understanding is that the authorities in Lebanon, where the alleged crime has been committed, still have an

active investigation.

Senator DASTYARI: How does that work? They would have to refer it to you? Is that how it works?

Mr McCartney: We would have to engage the Lebanese authorities because, when you step back and look at

it, the offence has actually occurred in Lebanon; it has not occurred in Australia. Whether we would have the

ability to investigate that under legislation within Australia is obviously something we would have to assess.

Senator XENOPHON: I have a direct follow-up question on the issue, because it is something that journalists

have asked us about today. There is obviously a dilemma for the Nine Network—that they have got their crew in

Lebanon. In fact, there are some people that were involved in trying to seize the children who are still in custody.

You can understand why Nine would want to get their own. I am sure any network would feel the same way. To

what extent do you take into account the rule of law, or the lack of rule of law, in another country? One of the

contentions here is that there were family court orders here and orders in Lebanon that conflicted with each other.

Do you take that into account when you decide whether to go down the path of prosecuting a case or investigating

a matter further?

Mr McCartney: We will look at the circumstances of each case, but I think what is important with this is that

it is media reporting. In terms of factual information being put on the table, that has not occurred. Again, in

answer to your question, we will look at the circumstances of each case.

Senator SMITH: You have talked a lot about the cooperation between you and other agencies et cetera.

Staying with the issue about policy change and legislative change—and you did talk about continuous discussion

with the Attorney-General's Department—how would you characterise the responsiveness of the Attorney-

General's Department to your discussions or continuous discussions around possible legislative reform that could

assist you with investigations and prosecutions?

Mr McCartney: It has been very positive. Within the AGD, they place a high priority on this form of crime.

Engaging with AGD on various opportunities for legislative reform has been very productive.

Senator XENOPHON: I am not sure if you heard Mr Sasse's evidence this morning. Did either of you hear

it?

Mr McCartney: I did not hear it.

Senator XENOPHON: The short issue was that he was quite surprised. I want to emphasise the context. It

was not a criticism of the AFP. He just said that it is a specialised field that it requires intensive resources, and he

was surprised at the lack of knowledge when he was asked questions about four years ago. He felt that he was

educating the AFP more than the other way around. Again I emphasise this was not a criticism. What can be done

about that in terms of—sorry, Senator Smith?

Senator SMITH: It might have been an investigation technique.

Senator XENOPHON: It might have been. I do not think Mr Sasse thought it was an investigative technique.

Senator SMITH: That proves that it might have been a very effective investigation technique.

Mr McCartney: Thank you, Senator.

Senator XENOPHON: I cannot top that, in terms of Senator Smith coming to your assistance. The issue is

this: it does seem to most members of the public observing this to have taken a very long period of time. It took a

considerable period of time since the initial investigation—serious allegations, four years and no prosecutions

launched. You can understand why the public would wonder. If they get picked up on a potential offence, matters

are dealt with fairly quickly. Why is something like this taking so long? Have things improved in that four-year

period in terms of the resources and expertise you need to be able to tackle these things effectively?

Mr McCartney: I think I have answered that question in terms of our recognition that we needed to enhance

that capability and how we work seamlessly with ASIC, with their expertise, and some of these other aspects.

Again, I do not want to be seen to be making excuses—it is long and protracted—but we have spoken about



MARs. One of the other issues is legal professional privilege. That is an area that we have focused on and

invested quite heavily in, in terms of working with some of these companies to improve this process. There have

been improvements on that issue in dealing with some of these—

Senator XENOPHON: Yesterday, the issue of legal professional privilege was a matter that was raised with

Mr Jordan, who talked about people being gamed and stooged. One of the other senior officials from the ATO did

make a point of saying they were frustrated that sometimes claims of legal professional privilege, a bedrock of

our legal system, appeared to have been reckless claims that would be stretched out and impede, in effect, an

investigation—in other words, is there a fast-track mechanism for fairly dealing with claims of legal professional

privileges? Is that a view that the AFP shares?

Mr McCartney: It is. I think it might have been you, Senator, who mentioned that it is a privilege. It is not a

blanket claim. If we go in and a conduct a search warrant, it is not a blanket claim on every document. In one of

the cases that we looked at it took four years from the search warrant to actually get our hands on the legal

professional privilege.

Senator XENOPHON: So, could I invite the AFP, on notice, to give further information and thoughts on this,

as the ATO will.

Mr McCartney, you talk about the false accounting legislation, which you say is quite helpful in terms of doing

your work, but isn't the US and the UK legislation more comprehensive in its approach to dealing with these

matters? Is that a fair summary of that in the sense that there are more tools in the toolkit—to borrow from Chris

Jordan's evidence yesterday—than simply having false accounting laws in place?

Mr McCartney: As you would be aware, they are very different legal systems, particularly with the US. In

terms of—

Senator XENOPHON: Not so much the UK, though.

Mr McCartney: There obviously are some differences. The process that has happened over the last couple of

years is for us to sit back and learn from some of the positive aspects and defer prosecutions. Again, it is one we

are on the record as heavily supporting.

Going back to legal professional privilege, what we learnt through the case that took four years is that there is

an onus on us, from an AFP perspective, to improve our internal practices, and we have. Particularly on these

large corporate crime matters, we actually sit down with the company to work through the issue of legal

professional privilege right at the start. I am not forgiving some individuals who have put blanket claims, but

there has been significant improvement within the AFP in terms of internal practices. It is an issue we are happy

to provide to you in terms of—

Senator XENOPHON: But you are up against it in terms of resources, aren't you?

Mr McCartney: On legal professional privilege it is not an issue of resources; it is an issue of legal argument

and planning. If we get our planning right at the start and if we engage the company and the individual in the right

way, I think that is the way to go.

Senator EDWARDS: Do you ever benchmark what you do against your colleagues that do the same thing in

other jurisdictions? Do you look enviously at what some of those jurisdictions are able to cover, at what they are

doing, and think, 'Wouldn't it be good'—whether it be in a legislative environment or in resources and capacity?

Mr McCartney: I spoke before about the International Foreign Bribery Taskforce. Peter has had closer

involvement with that. I will get him to answer that question.

Cmdr Crozier: The capacity to look at what other agencies are doing and some of their experiences has been

very valuable for us, not just when we talk about legislation; that is a different issue. It is more about capacity and

the way that we might respond to investigations and the methodology we put in place to try to work through some

of these investigations. As the Assistant Commissioner just mentioned, one of the activities that has been very

good for us is the early engagement with some agencies that we are dealing with, both those that we work with

closely and those that we might be undertaking investigations on. The capacity for us to cooperate with some of

those agencies has been very positive for us. A lot of that comes from the exchange of experience and the

exchange of methods.

I would also make the comment that we have been able to positively contribute to that as well. It has not just

been a situation where the AFP is there or our partners are there taking all the information; it is actually us

injecting some positive contributions to what we are doing in terms of methods and the way that the AFP is

structured. It is not just our investigation capabilities; it is some of our other technical capabilities and the way

that we work with our other partners' capabilities in that area.



Senator SMITH: There is obviously a tension between the speediness of resolution of an investigation and

ensuring that the investigation is thorough enough that you can get a prosecution. You could probably hasten the

conclusion of many investigations and be able to say in a KPI that you have delivered investigations below the

OECD average, or whatever the case is, but that does not necessarily mean you will get the thoroughness around

the prosecution. Indeed, the court process requires you to be very, very thorough. Can you explain a bit more

about this tension between the speediness of an investigation and the thoroughness needed to ensure that you get

the prosecution in court?

Mr McCartney: I do not think it is so much a tension as a requirement. It is the rules of evidence. Again,

particularly with each of these offences, we have to obtain evidence from overseas. I have spoken about some of

the delays with mutual assistance requests in working through this process. In these matters, at times we are

dealing with and charging people at the high end of town—let me put it that way. The legal representation is at a

very high level, so everything that we do from day dot will be challenged right through that process. We know the

requirement to push these along, but we want have a successful prosecution at the end of the day, rather than

being hasty or tardy or lacking process in that investigation.

Senator McALLISTER: We heard from the International Bar Association earlier and in their written

submission they drew our attention to the OECD reviews of our compliance with the OECD convention. Their

assessment is that, of those three reviews, each one has been more critical than the last. That is their perspective.

There are a number of issues where the OECD, it seems, continues to express concern about our approach to

corruption and foreign bribery. One of those requires us to ban facilitation payments. In your investigative work,

or in the cases that you are presently working on, how significant is the facilitation payment defence?

Mr McCartney: On your first point, I probably do not share the view of the previous witnesses about the

view of the OECD. I note that there have been some highly positive comments in terms of the OECD but I also

note there has been criticism about prosecutions that have actually been brought in relation to these offences. In

relation to facilitation payments, obviously Australia allows facilitation payments under legislation but

discourages them, but we are talking about minor amounts. Definitely at no stage in any of the prosecutions, and

not in any of the matters coming through, do we think that will be a viable defence in these sorts of matters.

Senator McALLISTER: The Attorney-General's Department's submission, which I gather you contributed

to—


Senator McALLISTER: talks about the AFP's role in educating corporate Australia about the nature of the

facilitation payment defence. But what is it that you tell corporate Australia when you are communicating about

this question?

Mr McCartney: I might throw to Peter, who is engaged with the private sector a bit more than me.

Cmdr Crozier: Obviously we would talk about the legislative frameworks and the Australian government's

expectations of agencies working overseas. But one of the positives that we are finding from some of the private

industries is their capacity to talk to their colleague agencies about their experiences, about the challenges that

they have in some of the locations that they work in. Not only is it about the AFP engaging; it is also about

bringing some of those companies together to talk about some of these issues.

From my experience, one of the real positives is that, whilst the message gets across with a regulator or a law

enforcement agency being at the front of the table saying, 'You shouldn't do this; you shouldn't do that,' the

message seems to get across a lot more effectively if it is one of their colleague agencies or companies talking

about some of the experiences that they have had. It is almost like a 'lessons learnt' opportunity, where they will

speak about some of the key challenges that they might have experienced to ensure that the company that comes

in after them is better placed than they were and may not experience the same potential challenges that they

experienced.

In terms of what the AFP will do, we are looking to talk about what the expectations would be of law

enforcement, of regulators and of the government positions. Importantly, we would emphasise that things that are

occurring are potentially occurring in another jurisdiction and they are subject to the jurisdictional requirements

of that location.

Senator McALLISTER: On the specifics of the facilitation payment defence, I do not wish to

mischaracterise their evidence, but I think the general tenor of the previous witnesses' evidence was that it is

presently too broad and policy guidance from your agency to narrow and clarify the nature of a facilitation

payment would be one intervention that might support a stronger culture of compliance.



Mr McCartney: It is an issue that we have obviously engaged on. You spoke about AGD's submission on the

issue of facilitation payments, but what I can say to you is it has not been an impediment to any of our

investigations or prosecutions. It has not been put out there as a defence.

Senator McALLISTER: Do you have a view about the size of a payment beyond which you might rule a

line, a threshold?

Mr McCartney: In terms of the nature of facilitation payments, I think they need to be minor payments. With

each case, you need to have a look at the circumstances of the case and usually the facts at the table. In the

investigations we have outlined, the significant funds that have been paid could in no way be claimed as

facilitation payments.

Senator XENOPHON: In relation to the fact that former ASX chief Elmer Funke Kupper quit his job in the

face of an investigation involving what he knew of a $200,000 payment to family of Cambodian Prime Minister

Hun Sen, can you advise us where that investigation is at?

Mr McCartney: It is an active investigation. It is a priority investigation.

Senator XENOPHON: You cannot tell us whether it is going to be six months, 12 months or two years

before that will lead to action or nonaction?

Mr McCartney: No, we cannot.

Senator XENOPHON: How many active investigations are there within the AFP at the moment into foreign

bribery and corruption? I do not want to know the details of them, but how many lines of inquiry and active

investigations are there in terms of separate allegations of foreign bribery and corruption?

Mr McCartney: Senator Dastyari raised this point before. There are 18. Four are with the DPP and two are

currently being prosecuted through the courts. So there are 12 active investigations.

CHAIR: Thank you very much, gentlemen, for appearing. We will have a short break and then we will

resume.



DAY, Mr Warren, Senior Executive Leader, Assessment and Intelligence, and Regional Commissioner for

Victoria, Australian Securities and Investments Commission

STOGDALE, Mr George, Senior Executive, Corporations and Corporate Governance Enforcement,

Australian Securities and Investments Commission

WHITTAKER, Mr Paul, Senior Manager, Corporations and Corporate Governance Enforcement,

Australian Securities and Investments Commission

[12:19]

ACTING CHAIR: Welcome. Thank you for appearing before the committee today. I invite you to make a

brief opening statement, should you wish to do so.

Mr Stogdale: I understand copies of my statement have been distributed. Bribery of foreign officials falls

under the Criminal Code Act 1995 and is a law mainly enforced by the AFP, not by ASIC. This means it is the

AFP who are responsible for investigating foreign bribery and corruption and for taking criminal action through

the courts. They are the bribery specialists. They have a dedicated fraud and anticorruption centre. They have

officers in foreign jurisdictions as well as forensic accountants and lawyers. They have access to international

intelligence such as INTERPOL. The Organisation for Economic Cooperation and Development recognised this

in its report on Australia's anti-bribery regime. It also noted that ASIC does not have legislated jurisdiction in

relation to foreign bribery. Here, our role is limited to investigations about the corporations legislation.

We work closely with the AFP and have recently signed an MOU with them. It spells out the who, what, why

and how of our relationship. It also deals with bribery and how we coordinate with them to achieve the best

enforcement outcome we can for the Australian public, whether this is through criminal or civil action. In the

small number of cases where a company is involved in bribery, it might mean the directors are liable for breaches

of the Corporations Act—for example, their directors' duties. Then it will be an issue for ASIC. Any directors'

duties investigation will ordinarily happen after the criminal investigation. That is because it is a fundamental

principle that a defendant in a criminal prosecution has a right to silence. This would be compromised by

allowing civil proceedings with civil effects to take place if a person is also a defendant or a witness. Courts will

protect this right by delaying the civil action until the criminal case is completed. Then there are the penalties.

Under the civil penalty provisions in the Corporations Act, the maximum penalty for a directors' duties breach is a

$200,000 fine and banning as a director. In comparison, the maximum for the criminal offence of bribing a

foreign public official is 10 years jail or a $1.8 million fine or both, and then, after they get out of jail, they are

automatically banned from being a director for five years. ASIC's view is that, in any foreign bribery

investigation, criminal proceedings are the main game. ASIC cannot and will not do anything to jeopardise the

success of criminal actions taken by the AFP.

It is often extremely difficult to run parallel investigations. It results in duplication of resources and added

pressure on witnesses, who may already be reluctant to help. In turn, it will typically result in investigators

tripping over each other, achieving unsatisfactory outcomes for both the AFP and ASIC. However, ASIC will

take action and run a parallel bribery investigation concerning directors' duties when warranted. Factors that we

consider include: if there is a risk that the six-year time limitation for civil proceedings will prevent ASIC

bringing proceedings; the impact of the conduct on the market and retail investors, including whether the conduct

is ongoing or the relevant directors are still on the board; if the bribery materially damages the company; if the

bribery involves a public listed company; if ASIC's investigation will not adversely impact AFP's criminal

investigation; and, then, whether we consider that AFP action alone is an appropriate response. We also consider

factors that we take into account for all enforcement action, and these are: the extent of the loss or harm; the cost

versus the regulatory benefit, including the alternative action that is available; and, importantly, the available

evidence. ASIC currently has one major investigation concerning directors' duties related to alleged foreign

bribery; another matter late last year concluded in court and a judgement is expected this year. ASIC is currently

assisting the AFP generally on other foreign bribery matters—for example, requesting material from the US SEC,

providing advice in relation to listed companies, and providing support for the AFP in the FAC centre and in

training and outreach facilities.

The whole-of-government response demonstrates that there is substantial effective cooperation and

collaboration between government agencies, particularly ASIC and the AFP, and that it is improving.

Enforcement is a contested process that takes time and resources. It is not always simple and rarely swift. Foreign

bribery cases are no different. We are prepared to run civil proceedings alongside the AFP's criminal ones, when

it is warranted. Taking enforcement action is fundamental to ASIC and to our priorities of ensuring investor and

consumer trust and confidence, and fair, orderly, transparent and efficient markets.



ACTING CHAIR: Thank you very much. How will the resourcing announcements made on Wednesday by

the Treasurer affect you?

Mr Day: In terms of the matters at hand?

ACTING CHAIR: Correct.

Mr Day: It needs to be stressed that the announcements made earlier this week have a focus on specific areas

of ASIC's focus. They have a specific focus on wealth management, financial services and data analytics.

Senator XENOPHON: It is not primarily corruption.

Mr Day: No. Clearly, they were in relation to those things. That is not to say that it does not assist more

broadly, because it does take pressure off other things, but at the same time, they are not announcements or

funding that relate to this. That is obvious from the announcements that have been made.

ACTING CHAIR: The suggestion to follow on then is that you are ably resourced; you are conducting the

function of what you are chartered to do, and that you are ably carrying that out as we speak. It is business as

usual at ASIC. There is no extraordinary pressure on you, but there is no deficit in resources in capacity to carry

out those functions.

Mr Day: I would say that there is always extraordinary pressure on ASIC in everything that we do. I am

taking your point that in relation to these matters, we are working hand in glove with the other agencies in a

whole-of-government response. As Mr Stogdale outlined, through the MoU, things are improving, and we are

working through those things. As they come up, we are dealing with them.

ACTING CHAIR: But you are often diminished in the public eye, and invariably as an arm of government,

there are those who would say that you are not able to carry out your function and you are missing things by

virtue of the way you are structured and resourced. What would you say to that?

Mr Day: I think it is true that those things are said publicly. It depends on the matter that we are talking about

at the time. A question like that is one probably better answered by our chairman. He apologies; he wishes he

could be here today.

ACTING CHAIR: I miss him.

Mr Day: I am sure you do. I am sure Senator Dastyari does as well! But in relation to those things, that is

something that we do. We have to prioritise our resources. We have to work out the ultimate priorities that we

need to address. That does mean that some things get deprioritised and other people then might make a judgement

saying that we are not doing enough in a particular space. The commission has its objectives and its mandate, and

it does it to the best of the ability with the funding it has.

Senator DASTYARI: That was a very topical introduction. Broadly, this inquiry is looking in part at how we

can improve the legislative framework. One of the concerns that resulted in this inquiry coming about was the

lack of prosecutions in this area of foreign corruption and foreign bribery in recent years. Mr Stogdale, I want to

clarify this: primarily, the lead agency with responsibility for prosecution is the AFP—correct?

Mr Stogdale: Yes.

Senator DASTYARI: You, through your memorandum of understanding, support them where you have

expertise.

Mr Stogdale: That is correct.

Senator DASTYARI: From time to time, the AFP will run a case at a fairly high standard to get a criminal

conviction and if that fails, there may have been lesser—I use the term 'lesser'—offences that may have also

occurred which were breaches of the Corporations Act in director duties and other failures that may not be as

serious as blatant bribery and corruption, but are corporate failures that may require prosecution through ASIC—

is that correct?

Mr Stogdale: Yes.

Mr Day: Senator Dastyari, I would not want to approximate it as some form of consolation prosecution

because we cannot get the other thing or that is unsuccessful—that therefore our actions are some form of double-

jeopardy consolation prize. As Mr Stogdale outlined in the opening statement, we work with the AFP to the high

standard that the law requires. That the prosecution is or is not possible is one consideration. If there are other

things that we think are appropriate in the circumstances and on the evidence, our point is that the law and the

legal issues that exist mean that that criminal prosecution will go first. Anything done civilly by us would

effectively be stopped by the courts in any event, so we have to wait. So it is not a resulting activity that we take



but one that is, by law, slowed down, if you like, or deprioritised for that time while that criminal prosecution is

on foot.

Senator XENOPHON: Is that because the civil prosecution would be seen to be prejudicing a criminal

prosecution?

Mr Day: That is one reason. I would have to take this on notice. I believe there is a section in the ASIC Act

that says that, in those circumstances, prosecutions criminally, if they were by ASIC, have to go first. The civil

things have to go second, awaiting the criminal prosecution.

ACTING CHAIR (Senator Dastyari): There seems to be a fair bit of evidence. We had hearings yesterday

about taxation matters and the Tax Commissioner. We heard from some legal experts this morning. The AFP

expressed a view on this. Part of what we would be interested in seeing, where the committee could look at areas

to support the work you do, is in the area of how evidence is obtained and used. I understand that for the past few

years there has been an MOU between the AFP and ASIC on these matters. Is that correct?

Mr Stogdale: Yes.

ACTING CHAIR: I used to be of this view and it turned out to be the wrong view. When the AFP and the

police produce a file which has in it sworn statements, evidence given, interviews and all that type of material,

you are not in a position to be able to use that information in that way. You obviously can work out where to go

from where they have been, but you have to go back to the start and built that evidence up for yourself. Could you

go into detail about how that information can be used between both the criminal prosecution that may be taken by

the AFP and the double-up work that sometimes has to happen to meet correct evidence standards?

Ms Whittaker: There are some issues in relation to that and there are issues with sharing information between

the AFP and ASIC as well, in relation to how each agency obtains that information. The other issue is that the

evidence is taken in a different format for the purposes of criminal proceedings as opposed to civil proceedings.

In criminal proceedings you have witness statements which witnesses sign; in civil proceedings you have

affidavits, which are in a different format. So that of itself necessarily means that we have to go back to the

witness. The rules of evidence are different and there are different acts which govern how evidence is admitted in

relation to both proceedings. It is a complicated area. It may seem a simple issue, but, when you get down to—

ACTING CHAIR: Mr Day, you talked about the incredible pressures ASIC is under. ASIC is always under

incredible pressure and everyone will want you to do more than you can do with the resources that you have.

Putting aside the debate about whether your resources are enough, you will do as much as you can with the

resources that are available. I want to get your take on this. The AFP said that it is an area we should be looking

at. The ATO said yesterday that getting successful prosecutions around tax matters is an issue we need to look at.

There is the idea of how we can perhaps make it easier for the sharing of information and evidence. It must be

frustrating. You have seen a criminal case being undertaken, you have seen the AFP doing incredible work in

putting together an entire case, and then you have to get it done again simply because it is a witness statement and

not an affidavit. That seems to be a lot of work that does not seem to be producing—

Ms Whittaker: The issues are exactly the same. It would not be too much work in terms of converting it from

a witness statement into an affidavit. Invariably, the issues are not identical and there would be no further reason

to talk to that witness and interview them about matters. The documents that we have may be slightly different as

well. There are a whole range of issues that are involved in a criminal or civil process.

Mr Day: It gets down to the purpose by which that information was collected and the legislation under which

it was collected. That puts certain restrictions around it. I have not heard the other testimonies you have referred

to, but that is just a constant problem in the jurisprudence of the land. It might be something that you might be

better off taking up with the Attorney-General's Department.

Mr Whittaker: For example, with a search warrant, , which is the sort of normal method that the AFP would

use for a criminal investigation, there are restrictions under the Crimes Act as to that being provided to other

agencies, and then what that agency can do with it. There is a basic rule that if it is received under a search

warrant, if we obtained it we could only use it for a criminal matter and we could not use that information for civil

purposes.

ACTING CHAIR: Really?

Mr Stogdale: That of course affects the nature of any work we would be doing in this area. Because of its

nature—the director's duties aspect to it—we would generally be looking at a civil penalty proceeding from a civil

perspective. If the material has been gathered by the AFP for a criminal proceeding then there would be this

additional work.



Mr Day: It does not mean that we cannot talk about it and it does not mean that we cannot discuss those

matters. That is still possible, so those types of barriers are not there. Not to talk to the other side of the book,

Senator, but civil libertarians would have their own view about things that are compulsorily forced out of people

by way of information and then being used for a civil case. There is a standard of proof and there is a standard

collection set of issues.

ACTING CHAIR: On top of that, you mentioned—and I have seen this elsewhere in other submissions—

there is a six-year window that you have on these matters. Is that correct?

Mr Day: That is the standard. It is not just on ASIC.

Senator XENOPHON: Is there an ability to extend time in terms of material facts? Or is that a sudden death

of six years?

Mr Stogdale: No, there is not.

ACTING CHAIR: Part of the frustration then must be, from what Mr Day is saying—and it is completely

understandable—on one hand the criminal component will take precedent. That we heard from the AFP earlier

today. The average they quoted was five to seven years. That was the fact they gave today. Then you cannot

really proceed until that has been done, understandably. At the same time, then, at the end of that there are

questions about what evidence that has been produced can and cannot be used anyway, which may mean you

have to go to witnesses and get new evidence or evidence in a different form. That makes it very hard to be able

to obtain in that period of time perhaps the outcomes that people in the public would expect.

Mr Day: Mr Stogdale or Mr Whittaker might be able to give you further information about this. It does not

prevent us from starting the case; it just prevents us from furthering the case. If you like, we nearly reserve our

rights. We can file, but the thing cannot continue. Those are considerations ASIC makes every day on a whole

range of matters—'Do we file now so that we are effectively reserving our spot in time and complying with the

law?' Again, there are rules about how quickly after filing that case we have to then action it.

ACTING CHAIR: It might be worthwhile for the committee to look at some of these kinds of things.

Senator XENOPHON: What is the time limit once you have filed to actually act on it? You can be struck off

for lack of progressing the case, can't you?

Mr Day: Yes.

Mr Stogdale: Yes, you can.

Senator XENOPHON: So what is the general rule?

Mr Stogdale: The general rule is that once the action is stayed it is stayed. I do not think we have had one

where we have actually struck out because of the length of time that has elapsed since it was commenced.

Senator XENOPHON: How much time do you have up your sleeve, as a general rule?

Mr Stogdale: I do not think there is a general rule.

Mr Day: I can take that on notice, if you like.

Mr Stogdale: It would be a number of years.

ACTING CHAIR: I am wondering if you have any of the stats and figures when we talk about these kinds of

director duty penalties and this broader field of corruption and bribery. Understanding that the lead agency here is

obviously the AFP, in terms of what you are responsible for do you actually have any figures on successful

actions that have been taken by ASIC in this area?

Mr Day: We might want to take that on notice. We have to go back and have a look at it. I assume you just

want from the start of ASIC for those types of numbers.

ACTING CHAIR: The figures that will allow us to determine to what extent some of these challenges may

be preventing the agency from being able to effectively pursue these matters. If you can give me an indication of

how many matters have been successfully pursued it will allow us to frame that perspective.

Mr Day: We will take that on notice, if we can.

Mr Whittaker: Just on the limitation period, that is from the actual conduct having taken place, not from

when it is discovered by the AFP or ASIC. It if from when the actual misconduct was allegedly taking place.

ACTING CHAIR: It is not from discovery?

Mr Whittaker: No. Anything that happened pre-2009 is pretty much out of ASIC's remit in terms of any

civil—

ACTING CHAIR: You are kidding. So for something like fraud it is when it is discovered. Is that correct?



Mr Whittaker: On a criminal basis.

ACTING CHAIR: But you are saying it is 60 years from the action itself and not the discovery of the action?

Mr Stogdale: Yes, for civil proceedings. That is why, from time to time, if there were to be parallel

proceedings or if there was to be a civil proceeding, then it may be considered desirable to commence a

proceeding, notwithstanding the fact that the AFP are still investigating the criminal side of things. But it does not

happen often and the existence of the FAC allows consideration of which is the better course to take—whether it

is a criminal case and whether there is enough to refer to ASIC to possibly commence or look at the civil aspect of

things.

Senator XENOPHON: On the issue of civil versus criminal, it is a case of either/or at the moment, isn't it? In

the event that there is a criminal case, you cannot proceed to a civil case. Is that correct?

Mr Day: No. The point we are making is that we could file but we cannot further—

Senator XENOPHON: That is right, but you cannot proceed—

Mr Day: Correct.

Senator XENOPHON: Is this the same approach adopted in other comparable jurisdictions like the UK, US

and Canada? I am trying to see whether—

Mr Day: We would have to take that on notice.

Mr Whittaker: I think that in UK it is a similar position, but I do not know about the US.

Senator XENOPHON: If you could take that on notice. There is the sort of double-jeopardy argument.

Mr Day: Certainly.

Mr Stogdale: That is the point. You do not want to have double jeopardy. So what you do is—

Senator XENOPHON: It is not really double jeopardy, though, is it?

Mr Stogdale: No. Well—

Senator XENOPHON: Let Hansard record the waving of the hand!

ACTING CHAIR: I am not sure if you heard the evidence this morning but Mr Stephen Sasse, who I am

describing as a Leighton Holdings whistleblower, gave evidence. In addition to the Unaoil matters that have been

through the Fairfax press recently, is there an ongoing investigation into Leighton at the moment? Are you

looking at them or are you waiting for the AFP to deal with them first?

Mr Stogdale: There is an investigation on foot at the moment in connection with Leightons which I do not

particularly want to talk about. It has been on foot, I think, since March 2014. That is about as much as I can tell

you.

ACTING CHAIR: When Mr Day said that there is one major matter being looked at. Is it this matter or not?

Mr Day: I did not say that. Mr Stogdale said it.

Mr Stogdale: I think I said it, and that is the one.

ACTING CHAIR: So there is one 'major matter'—you used that word. It has been traversed through the

press. So, without you having to speak to it, I think there is a framework understanding of what we are talking

about. It relates to matters to do with Leighton Holdings and that investigation has now been going on for two

years—correct?

Mr Stogdale: Yes.

ACTING CHAIR: We heard from the AFP this morning that they are conducting their own investigation as

to whether criminal activity took place as part of that. They have been in touch with you about that?

Mr Stogdale: Yes, we have liaised with them in relation to our investigation.

ACTING CHAIR: Is this one of the examples where, should they choose to proceed, you would be held back

from proceeding until they have completed their process?

Mr Stogdale: Were we to be investigating exactly the same matters, yes.

Mr Whittaker: The matters are slightly different then, of course. The foreign bribery angle might be taken

criminally by the AFP but if there are other issues then ASIC may take—

ACTING CHAIR: But these types of matters tend to have overlap, by their nature.

Mr Stogdale: Yes, but if they are separate then no issue arises.



Mr Day: Senator, as a point of clarification: it is part of the liaison discussions that we sort those things out.

That is the thing, through the arrangements, that we get the opportunity to actually invigilate and to ask whether it

is something we can still run without any harm to what we are trying to do.

ACTING CHAIR: You may not want to comment on this but I have one broader policy question and one

specific question, and then I am done. Some of the discussion here has been around what would constitute a

Foreign Corrupt Practices Act or a UK-style Bribery Act here in Australia. Different elements have been

discussed and there is a question about whether you have a separate piece of law or just do it with bits of law. One

of the interesting parts of that legislation is the requirement of directors. To quote Senator Xenophon, using the

ignorance defence is much harder under those legislative frameworks than it is under our legislative framework.

Is that something that ASIC have previously expressed a view on or have a view on?

Mr Stogdale: I do not know that we have previously expressed a view on that.

ACTING CHAIR: Do you have a view?

Mr Stogdale: Not just at the moment, no.

Mr Day: We run into the ignorance issue in a large number of our prosecutions and enforcement activities.

With the early release of self-managed super funds and those types of things we have run into this before. We

have run into those sorts of ignorance defences around the place. The relation of those is probably a matter for the

Attorney-General's Department and Treasury as to their policies in this space.

ACTING CHAIR: Fair enough. Finally, the Prime Minister this morning was making some comments—I

think it was on 2SM's John Laws program. He was asked whether he supported the idea of financial regulators

ASIC—and I am not sure why ASIC's name was put in there by the journalist—investigating these matters which

have been traversed in the press in recent days regarding an alleged payment made in Lebanon. The Prime

Minister said:

I've got no doubt it will be of interest to various regulatory agencies.

Is that correct? Is there anything there?

Mr Day: I think, by the sounds of what you are telling me, the quote is correct. I do not know whether the

outcome is correct. Bribery of foreign officials is under the act; the lead agency is the AFP; we stand ready,

willing and able to assist on any matters in relation to that where they need our advice and support. Outside of

that, I do not know that we have much more comment to make.

ACTING CHAIR: That is right; in fairness to the Prime Minister, the journalist may have framed the

question wrongly. Of the various regulatory agencies, that would be primarily the AFP on that front, wouldn't it?

Mr Day: I think you have answered your own question.

Senator SMITH: To be more precise, I think Senator Dastyari was talking about the 'associated person'

provisions that exist in the British foreign bribery act. Do you have a view about the suitability of those in the

Australian context: whether or not they would assist ASIC?

Mr Day: I think we would probably have to take that on notice.

Senator SMITH: Is ASIC involved in any investigations involving the allegations around Malaysia's Prime

Minister Najib?

Mr Day: Not to my knowledge. I am happy to take that on notice if you like.

Senator SMITH: But ASIC was involved in some investigations around Avestra—that is correct, isn't it?

Mr Day: I think that might be right, yes.

Mr Stogdale: Yes, I think so.

Senator SMITH: That is right. And there have been allegations in the parliament of Malaysia that Avestra

was holding about $2 billion—American $2 billion—worth of funds under the control of Prime Minister Najib.

Are you aware of those?

Mr Day: I am not aware of those reports. Again, as I said, I am happy to take the question on notice if you

like.

Senator SMITH: If ASIC are involved in the issues around Avestra, why would they not be—

Mr Day: We have been in the past. Whether or not we are still at the moment I do not know, myself, but I am

happy to go back to the organisation and take the question on notice and get you a better answer about that.

Senator SMITH: That would be good. And, if so, over what period of time have you been involved? I will

wait to see the answer.



Senator McALLISTER: I want to ask you about two aspects of the legislative framework, essentially around

the Corporations Act. I was surprised in some ways by the list, which you provided in page 2 of your opening

remarks, of considerations when you are considering whether or not to commence action around a breach of

directors' duties. I assume that is based on your experience in the courts and how courts have approached these

questions?

Mr Stogdale: Yes. These are practical questions that we have to deal with on a day-to-day basis, not just in

relation to bribery and corruption but in many other matters as well.

Senator McALLISTER: From a non-legal perspective, it seems quite straightforward that a company

director's failure to respond adequately to evidence pointing towards foreign bribery in the company is a

dereliction of directors' duties; however, it seems from your evidence that it is a little more complex than that.

Mr Day: It is, and a lot of those factors are about some of the legal issues that we deal with. You are quite

right. Harking back to a question that was posed earlier by Senator Edwards, some of those things are about us

prioritising the work that we do, but we also take into account the extent of harm or loss. We have to look at that

as well.

Senator McALLISTER: Can I interrupt you to ask about that specifically? Is there a paradox here? If we are

to believe even part of the information published by Fairfax, foreign bribery can in fact be terribly lucrative for

your business. Is there a paradox whereby engaging in foreign bribery does not in fact materially damage the

company but rather helps it financially?

Mr Day: I can definitely see the argument about that, but we do not weigh it up from that perspective. We

really are weighing it up, again, from all those other factors that have been listed and mentioned by Mr Stogdale,

and also, what the broader impact on the general public is. The extent of harm or loss is also about that broader

public interest.

Senator McALLISTER: This question about whether or not the relevant directors are still on the board—

how did it come about that that is a factor in your consideration when you are making a decision?

Mr Day: Sorry, I hope I am not putting words in your mouth: you are saying: in circumstances where

someone who may, on the view, have been involved with bribery of foreign officials but is no longer on the

board, we take that into account, because we say, 'What's the point of the prosecution at that point, because they're

not in control of the company?' We think that is one of the factors. It is not the only factor but is one of the factors

we have to take into account. That is really following one of our general principles about: is the harm continuing

or is there a chance that the harm will continue in that space? It may be that the board has dealt with it, the person

is off the board and no longer a director and other things may have been done to them, or are likely to be done to

them, by the AFP or other people—

Senator XENOPHON: What about accountability? Does that mean, when they are off the board, or no longer

in a senior position, it exculpates them from responsibility for their conduct?

Mr Day: Not completely, but again—

Senator XENOPHON: But it is a factor though, isn't it?

Mr Day: Absolutely. There is no denying that. We then have to take up the cost-benefit analysis of that.

Again, a prosecution is an expensive exercise and what benefit is there to the Australian public, using its

resources to then go and prosecute those people? I am saying it is a complex picture that we have to consider

when we are making those decisions to prosecute. I am not saying that removes it completely—and again, I want

to stress it is not a single factor—but I am saying it is a complex matrix of things we have to take into account in

making that prosecution decision.

Senator McALLISTER: You may wish to take this on notice, but thinking about foreign bribery and the role

of directors in preventing that within their companies, should this committee be thinking about the way that

directors' duties are defined in the legislation? Is there scope for us to revisit that, to require more of directors?

Mr Day: I think it would be good to take that on notice. I think it is hard for me to answer that question

because, on the face of it, without context, it looks like directors should have defined requirements for every little

thing that they do. Whether or not that is practical in the day-to-day cut and thrust of commercial life—I do not

know if we are placed to answer that. I do not know that the full mind of ASIC is placed to answer that. That

really is a broader consideration, potentially, for government and yourselves maybe in considerations with other

persons.

Senator McALLISTER: I will try to be quick. The International Bar Association was here earlier—I think

you were here for their evidence—and we had a discussion about record keeping and the fact that, I think, in the



United States, there is a strict liability civil offence associated with a failure to keep accurate financial records. In

Australia that offence is found in the criminal jurisdiction and is associated with knowingly or recklessly failing

to keep the necessary records.

In your work, either in relation to foreign bribery or indeed to other questions that ASIC considers, would you be

assisted if there were additional requirements on directors or company executives to keep full and accurate

financial records?

Mr Day: Yes, I think we would. We would definitely be assisted in that. It is also a question of the penalty.

My understanding is that it is a very minor penalty as well, but some description of what the nature of that would

be would obviously be of assistance in that space.

Senator SMITH: Going back to the widely-reported—both here in Australia and internationally—situation

around Prime Minister Najib and allegations surrounding himself and his family, the ASIC affidavit in regard to

the Avestra matter did disclose that Avestra had illegally funded the takeover of Harvest Court, which is listed on

the Malaysian stock exchange. My question is: was ASIC aware that the son of Prime Minister Najib is a director

of Harvest Court? You might care to take that on notice.

Mr Day: Thank you, Senator.

Senator XENOPHON: Can I follow through on that, Acting Chair? In relation to the Malaysian government

and the serious allegations of corruption—and indeed of serious criminal activity insofar as there are Australian

companies that may be linked with the activities of the Malaysian government and Prime Minister Najib in

particular; in fact, there have been allegations that a prosecutor was murdered and that others have been murdered

in the context of these murky financial transactions—what role does ASIC have to investigate those matters

insofar as they relate to Australian companies that may have been a conduit for some of the funds?

Mr Stogdale: Certainly we have the power to do so. We would need a basis upon which to conduct such an

investigation, so there would need to be a referral or information coming to our attention in order to do so. But the

nature of the matters that you raise would probably warrant us looking at it.

Senator XENOPHON: But you are familiar with the Four Corners investigation?

Mr Stogdale: I cannot say that I am, personally.

Senator XENOPHON: Right. Maybe we might ask you to be cognisant of that. It is a country I can no longer

visit, but I suggest you look at the transcript of the Four Corners program.

Senator SMITH: They still know who you are, though, Senator Xenophon.

Mr Day: In relation to that, there is a view that that needs to be looked at. We are happy to do so. We would

obviously then speak to Malaysian counterparts in relation to the—

Senator XENOPHON: Who? Government? You are not going to get any answers from them. You may want

to speak to the opposition—but not the opposition leader, because he is in jail at the moment on trumped up

charges.

Mr Day: Then maybe if I speak more in generalities: we have lots of different relationships with different

agencies across a large number of Asian countries and, if you do need to get access to those details, we can. In

relation to Australian companies doing those things, then obviously they need to lodge certain details with us. We

have more power in relation to those.

Senator XENOPHON: Perhaps I will write to you, only to ensure my continued barring from that country.

Mr Day: If that is what you want, Senator, I am happy to assist.

Senator XENOPHON: No, it is not what I want.

Mr Day: Sorry. I misunderstood.

Senator XENOPHON: Going to the issue that was referred to earlier by Senator Dastyari about the issue of

Channel 9, which was referred to in the Prime Minister's interview on the John Laws program this morning: how

does ASIC weigh these matters where you are dealing with a jurisdiction where the rules of law and, indeed, the

rule of law, is not the same as the rules and rule of law as we know it? Given the controversy over the

circumstances of that, to what extent do you weigh that as a factor given that this was, at the heart of it, an

acrimonious custody battle with allegations that Australian laws and Australian Family Court rules had breached,

then local Lebanese laws were breached with the attempted seizing of the children. To what extent do you take all

those murky factors into account in determining whether there ought to be further investigations?

Mr Day: Are you asking what weight we give those factors?

Senator XENOPHON: Yes.



Mr Day: That is difficult to say. I do not want to speak hypothetically or speculate about those things, but the

starting point is obviously bribery of foreign officials. We would speak to the AFP in general matters and they

would determine if there is something they need to look at and then whether we need to act in relation to any

direct things that are done here. We would speak to the AFP about that and take all of those factors into account.

Mr Whittaker: One factor we take into account when starting an investigation is the ease of obtaining

evidence potentially from overseas or from a jurisdiction that may not have the facilities in place to provide that

evidence.

Senator XENOPHON: And whether the evidence-gathering was robust. Perhaps on notice—because I think

we are out of time—in terms of the toolkit for dealing with foreign bribery and corruption, is there a view that, if

we adopted or adapted some of the laws in the UK and the US, that would make the work of ASIC easier in order

to deal with these matters? Not easier, but it would mean a more effective enforcement regime for foreign bribery

and corruption. It seems to me that we lack some of the tools that they have in the US and the UK, for instance.

Mr Day: I think that is a question that is aimed more globally at the whole situation, the relationships and

those things. It might be better to take that on notice, if that is okay.

Senator XENOPHON: It is not so much global; it is also about Australian law.

Mr Day: By 'global' I mean across the whole context of the Australian law enforcement circumstance.

Senator XENOPHON: Finally, there were the very welcome comments, in my view, of your chairman in

November last year about whistleblowers being compensated. Is that something that you have pursued or you

have raised with the federal government from a policy point of view to deal with these matters so that there can be

an effective whistleblower compensation regime in place?

Mr Day: The chairman has made the comments that he has made. We have discussions with Treasury and the

government as we need to about whistleblowers. In our submission to the Senate inquiry into ASIC's

performance, we gave a written submission about the areas that we think, in relation to the Corporations Act, need

to be improved. We have made statements about that. In relation to compensation, the chairman has said what he

said about that and they are the subject of discussions about those things.

Senator XENOPHON: Thank you.

ACTING CHAIR: Thank you Mr Day, Mr Stogdale and Mr Whittaker.



McCAIRNS, Mr Gavin, Deputy Chief Executive Officer, AUSTRAC

BROWN, Mr Bradley, Acting National Manager, Strategic Intelligence and Policy, AUSTRAC

[13:02]

ACTING CHAIR: I now welcome representatives from AUSTRAC. Thank you so much for coming on such

short notice. We really appreciate the agency making itself available to us. Did you want to make any opening

remarks?

Mr McCairns: Yes, please, Senator. I would love to make some opening remarks. First of all, apologies from

our Chief Executive Officer. He is dealing with Five Eyes international contemporary matters at the moment.

ACTING CHAIR: I completely understand that, and you have come here with short notice.

Mr McCairns: That is absolutely appropriate. We are always happy to help the committee. AUSTRAC is

Australia's financial intelligence agency and anti-money-laundering and counterterrorism financing regulator. Our

purpose is to discover money-laundering and terrorism-financing threats and risks, provide an understanding of

these threats and risks, respond to these threats and risks in partnership with industry and government agencies in

Australia and overseas, and regulate industry effectively. Collaboration, domestically and internationally, is at the

core of AUSTRAC's approach to develop actionable financial intelligence.

Intelligence. AUSTRAC provides actionable financial intelligence to domestic and international partners—45

domestic partner agencies across law enforcement, national security, revenue protection and corruption; and

formal arrangements are in place with 83 international jurisdictions. The provision of intelligence captures the

spectrum of criminality, including foreign bribery.

The Australian Federal Police, through the Fraud and Anti-Corruption Centre, of which AUSTRAC is a

participating agency, is the key partner for any intelligence on allegations of this nature. We have provided 11

intelligence products to the FAC in the last 12 months. In addition, our international engagement has involved in

excess of 50 exchanges on corruption and related matters. Over 3,300 officers within Australia's 45 partner

agencies have direct online access to query AUSTRAC's database. There are 820 users within the AFP. In the last

financial year, those officers conducted over 1.8 million searches—over 200 searches in every hour of every day

of the year. AUSTRAC is involved in the analysis and the evaluation of relevant material being referred to as the

'Panama papers'. As this matter is in its infancy, AUSTRAC is unable to further comment. AUSTRAC utilises its

powers to seek additional information from business to enhance the intelligence picture. AUSTRAC has in place

specific monitoring profiles in relation to identified high-risk jurisdictions.

Education. Apart from our intelligence capability, an important component of our work is in enhancing the

understanding of risk within the 14,000 entities we regulate. In July 2015, AUSTRAC published a strategic brief

titled Politically exposed persons, corruption and foreign bribery to provide information about money-laundering

methods, vulnerabilities and indicators associated with PEPs and laundering the proceeds of corruption, including

foreign bribery. To support the broader understanding and education on corruption, AUSTRAC created a

dedicated page on its website which directs businesses to Australian and international resources. This paper and

those resource links provide information to assist businesses in embedding red flags and indicators within their

own transaction monitoring, and due diligence processes to surface potential suspicious activity for reporting to

AUSTRAC.

Legislative framework. The objects of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006

include Australia's international obligations, which reference, among other international conventions, the United

Nations Convention against Corruption. The AML/CTF framework imposes a range of compliance and reporting

obligations which underpin our prevention, detection and disruption efforts, including Know Your Customer;

customer due diligence obligations, including identification and verification of beneficial ownership, control of

customers and politically exposed persons and their source of funds; the obligation to support suspicious matter

reports, noting that this obligation has an all-crime approach and is not specific to money laundering and terrorism

financing; and the reporting of international funds transfer instructions.

In the last year, 91 million transactions with a value in excess of $4.6 trillion were reported. Within this

quantum of information are both the opportunity to exploit rich data and the challenge to differentiate between

legitimate and illegitimate activity. At its core, partnerships between AUSTRAC, domestic and international

partners, and regulated businesses provide the most effective ability to combat these crimes. This is never more

important than at a time in which we are witnessing rapid advances in technology, increasing digital disruption,

enhanced digital identity and biometrics.



We recognise that innovative and contemporary approaches are required, including strengthened traditional

partnerships and also new non-traditional partnerships. AUSTRAC is committed to enhancing the types and

quantity of information and intelligence made available to the private sector in order to maximise the subsequent

intelligence and investigative benefits.

Finally, international. AUSTRAC has an extensive international network of ties which enables AUSTRAC to

facilitate the exchange of financial and other intelligence between Australian agencies and overseas counterparts.

AUSTRAC is providing active international collaboration on areas of related interest. We have an effective

working relationship with our counterpart FIU Pusat Pelaporan dan Analisis Transaksi Keuangan, PPATK, in

Indonesia through technical assistance and training that has been undertaken since 2002 which involves a current

intelligence exchange program. In November 2015, AUSTRAC, together with the PPATK, hosted the first

counterterrorism financing summit in the Asia-Pacific region, which brought together officials and international

experts from multilateral organisations and 19 countries. The resulting 'Sydney communique' is driving our

collective action and response in the lead-up to the 2016 summit, to be hosted by our Indonesian counterparts. We

are building capacity and knowledge in the PNG FIU through the Combating Corruption: Strengthening the

Financial System against Money Laundering and Recovering Proceeds of Crime in Papua New Guinea program,

which is sponsored by the Attorney-General's Department and scheduled to conclude in August 2016. Senior

AUSTRAC officials have recently presented on enhanced data analytics to our colleagues in Malaysia. We are

working with regional partners to develop the first regional terrorism financing risk assessment. In 2014-15, we

worked with FIU, law enforcement and corruption authorities in Thailand, Cambodia, the Philippines,

Bangladesh, Nepal and Sri Lanka. Thank you for the opportunity to make those opening remarks and, yes, we do

have copies for the committee.

ACTING CHAIR: I have a couple of specific questions, but I want to get to some broader policy issues as

well. Yesterday, the tax commissioner, Chris Jordan, gave evidence to a separate but related inquiry regarding tax

minimisation matters. He made reference to the Panama papers, the Mossack Fonseca document leak, which you

mentioned. An observation he made that perhaps makes sense in hindsight—but at the time I was probably

looking at it through a more naive prism—was that 80 or so of the names that had already been identified were

people who were known by the Australian Crime Commission as serious criminals or people who warrant looking

at. Mr Jordan made the observation that, to get on these types of lists, we are not talking about people who forgot

to pay a parking fine or did not drop off the car keys one day—minor kinds of offences.

Mr McCairns: Yes, I listened to him.

ACTING CHAIR: These are potentially serious criminals and some of them are serious criminals. We have

been looking at secrecy jurisdictions from the point of view of them being tax havens. Mr Jordan was obviously

implying that there are other reasons, as well as tax, why these kinds of jurisdictions are being used in this way. If

you are hiding criminal behaviour or money laundering, a benefit may be tax minimisation. Another benefit may

be not going to jail for moving blood money. I would like you to explain how secrecy jurisdictions work in

relation to broader issues. We have looked at them through the prism of tax. Obviously, there are other

consequences of all this.

Mr McCairns: Absolutely. I will get my colleague, Mr Brown, to talk about that in more detail, but we are

absolutely involved in this. We are liaising with all agencies including the tax office. We are, in this case, not a

regulator, per se, but an intelligence agency, so you can understand I would not be able to give you much

information in the public domain in that sense. Suffice to say we are actively involved in this, and you are

absolutely right: bank accounts or financial arrangements overseas are often not just for one purpose.

Mr Brown: I think the only thing that I would add is that you are absolutely correct in that secrecy havens can

be used for a myriad of potential crimes, the disguising of potential crimes and the parking of potentially illicit

funds. From our perspective, the information that we collect through the international funds transfer

instructions—the 91 million transactions that Mr McCairns referred to—is the benefit and perhaps the power that

we bring to the investigative options, I think, of law enforcement in Australia and the intelligence that we can

assist with across that spectrum of criminal activity, and not purely just the taxation.

Senator DASTYARI: You obviously follow the money—that is what AUSTRAC is known for. You follow

the money but do you follow individuals attached with money as well—or is your scope limited to the financial

transactions themselves?

Mr McCairns: That is a key question.

Mr Brown: Both. All of the above. We have systems in place to look at individual entities and networks of

criminals in relation to the movement of funds.



Senator DASTYARI: One of the criticisms is that there has been a failure of successful prosecution. That is

because a lot of matters—it is difficult getting documents and getting the right information is difficult. But part of

it also seems to be—and I wonder if this is an issue you also encounter?—the admissibility of evidence that is

obtained from international sources. Could just explain how you get that information? Using a hypothetical: let us

say there is what you suspect, or your assisting agency suspects, may be a corrupt payment made offshore in a

'lower' information jurisdiction—not a blatant secrecy jurisdiction, but in a Third World place where the standard

may not be to the standard that we expect. I am not saying America or the UK; I am saying Africa or an Asian

nation which may have a lower standard. How do you get that information? Can you just run through a

hypothetical of how you would get that information—say, you think there has been a $50 million bribe paid?

Mr Brown: Not necessarily wishing to avoid the question, I think that in terms of the evidentiary standards

we probably possess less information that can provide real value to the committee. But, purely based on the fact

of what we will do and what our international arrangements actually permit us to do, we would seek intelligence

information. If we obtain that intelligence information it is then a matter for the investigators, whichever agency

might be involved, to then have a look at how they could effectively obtain the evidence. I think that sort of

action—

Senator DASTYARI: If the money has never gone through an Australian account—let's say it has gone from

bank account A in a foreign country to bank account B in a foreign country but we believe that payment was for

services from committing a crime in Australia, or a bribe or some kind of foreign corruption—how do you obtain

that information if it has never been in Australia? Is it just through the goodwill of the other agencies? Is there an

international agreement that this would fall under?

Mr McCairns: Certainly, in terms of financial intelligence and the Egmont Group of Financial Intelligence

Units, which is currently 155 countries, Australia and AUSTRAC are chairing the information exchange working

group of that. The key outcome of that group is the ability to share information. There obviously has to be a

purpose and a reason behind the sharing of that information. More often than not it will actually relate to a

specific matter or an inquiry, as opposed to an incredibly large fishing expedition. That opportunity exists for us.

Again—

Senator DASTYARI: For those 155 nations?

Mr McCairns: That is correct.

Senator DASTYARI: Then, depending on where the UN is up to at that point in time, there are another 40 or

so nations?

Mr McCairns: Yes. In terms of Australia, we have arrangements with 83 jurisdictions at the moment. We do

not have relations with all 155. They are developed over time. Our legislation permits us, under our secrecy and

access, to exchange information with the broader ones but it would be on a case-by-case basis, as opposed to the

actual relationships and partnerships that we have established.

Mr Brown: To give you context, because it is a great question—very much so—we are about intelligence. We

are about gathering intelligence and providing actionable intelligence to other entities, either onshore or offshore

as it were. Quite frankly, we will enter into legal relationships with anyone who will provide us with decent

intelligence. The answer, hypothetically, to your $50 million question is 'yes'. We might get that intelligence but,

yes, you are right: it is on the behest on the other nation or the other entity. We would then gather that

intelligence—obviously, the trade craft I will not reveal.

ACTING CHAIR: Of course.

Mr McCairns: We would use our own trade craft to consider that intelligence and then provide it to other

onshore or offshore entities that may find that useful.

Senator McALLISTER: Thank you very much for your evidence this afternoon. I actually wanted to ask you

about one of your definitions. I am interested in what a 'politically exposed' person is. I think that was a new term

for all senators.

Mr McCairns: That is quite old news now, Senator. My colleague, Mr Brown, will absolutely be happy to

explain that.

Mr Brown: The Financial Action Task Force, which is the global body that sets out the standards for anti-

money-laundering and counterterrorism financing, was established in 1989. Within its 40 recommendations, one

of those—recommendation 12, in fact—relates to the fact that you are required to identify politically exposed

persons, and they actually have a specific definition. In the report we produced in July 2012 we have a definition.

There is now a definition in the Anti-Money Laundering and Counter-Terrorism Financing Act. It includes heads



of state or government, senior government officials, high-ranking members of the armed forces, board chairs,

chief executives and chief financial officers in state enterprises or international organisations, and it also includes

immediate family members and close associates of a politically exposed person.

Mr McCairns: This is a public document, so we are happy to make it available. In fact, it is on the website.

Senator McALLISTER: I suppose that is a subset of the things that we might be interested in here in terms of

thinking about foreign bribery. In some instances it might be a politically exposed person, but in other instances it

is simply a public official who is not involved in politics in that way.

Mr McCairns: Absolutely.

Senator McALLISTER: Your brief extends beyond that. It is only one element of your brief as well; you are

interested in the full gambit of criminal activity.

Mr McCairns: If that is report is useful to you it might give some context on our lens on that specific matter.

Thank you, Senator.

Senator XENOPHON: In AUSTRAC's role, it monitors and analyses financial transactions in more than 100

countries. Does that include countries such as Panama, where there are secrecy provisions in respect of their tax?

Mr Brown: We have the capability to monitor the activity that is coming in and out of Australia of all other

countries in the world.

Senator XENOPHON: Including Panama?

Mr Brown: Including Panama.

Senator XENOPHON: That is music to my ears. One of the questions I put to Commissioner Jordan from the

ATO is whether there ought to be almost a reverse onus of proof or a presumption that if a company is operating

in a tax secrecy haven there ought to be consequences flowing from that, including much tougher questions and

the like. So you are able to give useful information in respect of those jurisdictions where tax secrecy applies?

Mr Brown: We can certainly provide the information insofar as where we find the link in the transactions

between Australia and that particular jurisdiction. There are some challenges in relation to it because oftentimes

there may be funds that have moved through third-party countries. So it goes from country A to B to C to D—

Senator XENOPHON: But you can still track them; it just means more work.

Mr Brown: More work and ultimately the relationships that we have with other countries in the world.

ACTING CHAIR: There is just a follow-up I have, Mr Brown: what can occasionally happen, you were

saying earlier, is it goes into a black hole. So you can follow it to the US, the UK, China and countries we have

relations with, but then, if it suddenly goes, you can suddenly lose it at some point.

Mr Brown: Absolutely. That certainly can be the case.

Mr McCairns: We have to be careful that we do not stray into matters of policy. That is for our host

department, the Attorney-General's Department—

Senator XENOPHON: I would never want you to do that; I just want to know what you guys can do.

Mr McCairns: the minister, the government or, indeed, the parliament.

Senator XENOPHON: I would never want you to stray into matters of policy. But the fact that you can

monitor jurisdictions which have enveloped tax secrecy is very useful.

Mr Brown: Again, to clarify, it specifically relates to the transactions that are reportable from our 14,000

reporting entities, which obviously includes the major financial institutions, on activity in and out of Australia.

Senator XENOPHON: Without straying into matters of policy, because I would never want you to get into

trouble with your minister—

Mr McCairns: The department is more scary.

Senator XENOPHON: The department is more scary? I think ministers are usually scared of their

departments, as a general rule. In respect of that, has AUSTRAC received useful information either directly or

indirectly from whistleblowers in order to be able to do your work?

Mr Brown: We might have to take that particular question on notice.

Mr McCairns: Let me give context while you are considering it, Brad. We also have a call centre, for want of

a better term, and we take calls from anyone. It could be the public, but it could be an institution seeking

clarification about the regulatory environment.



Senator XENOPHON: But without you commenting on policy, if people came forward with inside

information about dodgy practices—to put it bluntly—you would not be against the receiving that information if

it helps you with your lines of inquiry.

Mr McCairns: As we are an intelligence agency we are avaricious about any sources of information or intel

that can provide help paint a picture to assist others.

Senator XENOPHON: And some of us here are avaricious about whistleblowers to receive compensation for

the protection. So our mutual avarice may have a public benefit.

Mr McCairns: As usual!

Senator McALLISTER: I have a follow-up on that same question about how you determine your priorities.

There is obviously an enormous volume of data and you must make priorities about what you examine and how.

Is that a supply-side or a demand-side proposition? Is it your partners coming to you saying, 'We would like

actionable financial intelligence on this bundle of things,' or is it you examining a pile of data and identifying

anomalies and alerting partners?

Mr McCairns: A great question again. It is both, in actual fact. Again, without revealing tradecraft, we would

have tradecraft around intelligence, tradecraft around regulation and tradecraft around compliance and what we

would follow rather than set on the backburner. But the answer is absolutely both. So we can be required or

requested by a partner agency onshore or offshore to look into something—and we would almost certainly always

do that—or indeed, via our own tradecraft we would then have a priorities matrix, as you say, and we would

follow that matrix. However, we want to be really agile here. If I can be bold: an old-fashioned regulatory model

is kind of an inorganic, Cartesian framework.

Senator McALLISTER: That sounds dreadful!

Mr McCairns: We want to be an organic, agile framework.

Senator XENOPHON: Agile? It is an interesting word, agile.

Mr McCairns: I mean that in the technological sense.

ACTING CHAIR: It is a Turnbull word. Senator Xenophon is being facetious!

Mr McCairns: In a technological sense. I would not be discussing anything the Prime Minister may say or

may not say. Agile in the sense of—what I was trying to get at—just because we are down one pathway, if

something new came in that we thought was very, very useful, we would absolutely grab that and run with that.

Senator McALLISTER: Finally, I ask what the governance structure is for you in terms of oversight. Who

do you answer to?

Mr McCairns: The Minister for Justice, but we are hosted under the Attorney-General's portfolio.

ACTING CHAIR: I am conscious of time, but there are two quick matters I would like to touch on—one

specific and then one broader one. I think we have a broad understanding of how the work AUSTRAC does in

monitoring Australians and Australian money, but if there is to be a major international purchase of an Australian

asset—you know, potential big foreign investments—do you then look at where the money for those transactions

comes from on the other side of it, or do you not? Do you see where I am coming from? Let us say there is an

energy retailer, a big farm or something that is been looked at by the Foreign Investment Review Board. Do you

play a role in seeing where the money for that project is coming from as well?

Mr Brown: We certainly have a relationship with the Foreign Investment Review Board and we may be able

to provide assistance to them, where possible, in relation to that. There are, no doubt, challenges in relation to

working backwards. The example of where you move from one jurisdiction to the next describes that challenge

that we do face, but it is also not insurmountable that we cannot go back to a jurisdictional partner and seek to get

additional intelligence information from them in relation to source of funds et cetera, if it is available to them.

Mr McCairns: Indeed, I can give an example.

ACTING CHAIR: But you do it on their request? They can come to you?

Mr Brown: Yes. I would just clarify—in terms of the FIRB?

ACTING CHAIR: Yes.

Mr McCairns: To give you an example—I just joined AUSTRAC three months ago from a small boutique

agency called 'immigration', and I am glad I am not answering questions to Senator Xenophon on foreign crew

movements!

Senator XENOPHON: I think Senator McAllister will probably have more interesting questions!



Mr McCairns: But that was another time and another place. For example: the special investor and premium

investor visa that the Department of Immigration and Border Protection launched at $5 million—and I think it

was $10 million or $15 million; I cannot remember now—the source of funds was one of the key things I looked

at from that perspective, and my partner in doing that back then was AUSTRAC.

ACTING CHAIR: Okay. One last question. Australian companies obviously have reporting obligations under

the Anti-Money Laundering and Counter-Terrorism Financing Rules and that is seen as one of the proactive

measures. Without going to your tradecraft, I imagine you have algorithms that you run on this stuff and that

things that are peculiar and strange obviously set off red flags.

Mr Brown: Absolutely.

ACTING CHAIR: Would you have any statistics—and I am not sure if they were in the first set of statistics

you read through—about how much information you receive and how many red flags there have been?

Mr Brown: Certainly, in the last financial year I do not think we mentioned the number of suspicious reports

that were provided to us independently—which is subjective reporting by the businesses—but I think there were

approximately 81,000 suspicious reports that were provided to us in 2014-15. Within each one of those reports,

the business will provide some indication of the type of misconduct that they thought they were assessing and

then our own capabilities, internally, will also provide our assessment of that as well, which can actually be both

manual and technological in terms of what our capabilities do.

ACTING CHAIR: Is failure to report a crime?

Mr Brown: Failure to report?

ACTING CHAIR: I just want to check whether it is in the Criminal Code Act or the Corporations Act. I

should know this, but I do not. If I am a business with a reporting obligation and there is what should be deemed a

questionable transaction—and that is obviously subjective, and that is a matter for the courts—I have a legal

responsibility to report, correct?

Mr McCairns: Correct.

Mr Brown: Yes.

ACTING CHAIR: If I fail to do that, is that a criminal or a civil penalty? Do you know if that falls under the

Corporations Act or where it falls? You can take that on notice.

Mr Brown: Certainly, there are offences under the Anti-Money Laundering and Counter-Terrorism Financing

Act for nonreporting and nonreporting against the requirements of our rules. There are various different offence

provisions that exist. Whether there are additional provisions within the Corporations Act, I could not comment

on that.

ACTING CHAIR: Thank you, Mr McCairns, and Mr Brown. That was a really interesting insight. Thank you

for coming on short notice. I now adjourn this meeting of the Senate Economics References Committee inquiry

into foreign bribery.

Committee adjourned at 13:33

Documents

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