National Integrity Spotlight – February 2023

The February edition of the National Integrity Spotlight considers updates to the Corruption Perceptions Index, the Privacy Act Review Report prepared by the Attorney-General’s Department, the ACNC National Fundraising Principles, the recent Senate Estimates, reform of the Administrative Appeals Tribunal and the Perth Mint saga.

Corruption Perceptions Index

Transparency International Australia (TIA) recently released its 2022 Corruption Perceptions Index (CPI).

The CPI ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and businesspeople. The CPI relies on 13 independent data sources and uses a scale of zero to 100 points, where zero is highly corrupt and 100 is very clean.

Australia placed 13th on the CPI, with a score of 75 points. This is a two-point improvement from the previous year, which was Australia’s lowest score in history, and it is speculated that Australia may be turning a corner following the establishment of the National Anti-Corruption Commission.

Notably, 68% of countries scored below 50 points and the average global score remains unchanged at 43. TIA recognised that countries with robust institutions and well-functioning democracies are generally placed at the top of the CPI. For example, Denmark was placed 1st with a score of 90 and Finland and New Zealand tied 2nd, scoring 87 points each.

Conversely, TIA acknowledged that countries suffering from conflict or where basic personal and political freedoms are highly restrained are generally the lowest ranked. Notably, Somalia was ranked last with a score of 12 and South Sudan and Syria tied 2nd last, scoring 13 points each.

Privacy Act Review

On 16 February 2023, the Attorney-General Department released the Privacy Act Review Report (the Report). The Report contains 116 proposed reforms aimed at bringing Australia’s privacy laws closer to Europe’s General Data Protection Regulation (GDPR) by strengthening the protection of individual’s personal information and increasing the level of control and access individuals have to their data.

A copy of the Report can be found here.

Background

The Report stems from the Australian Competition and Consumer Commission’s (ACCC) Digital Platforms Inquiry that commenced on 4 December 2017 (Inquiry). This Inquiry considered how and to what extent search engines and social media had on competition in media and advertising, including the effect on individual’s privacy when using these services. Specifically on this point, the ACCC recommended strengthening protections under the Privacy Act 1988 (Cth) (the Privacy Act), reform to the Australian privacy law framework, the introduction of a privacy code and a statutory tort for serious invasions of privacy.

Highlights

The comprehensive Report canvasses a broad range of privacy issues, including those considered and recommended by the ACCC. The Report’s proposed principle-based reforms are numerous and varied. Some of the more power recommendations include:

• clarifying and broadening the definition of ‘personal information’
• expanding enforcement powers and options, including civil penalty provisions
• introducing enhancements to the Notifiable Data Breach (NBD) scheme, including a mandated 72 hour reporting timeframe
• providing a direct right of action to enforce privacy rights and allow individuals to apply to the courts for relief in relation to privacy breaches
• introducing new individual rights, including the right of ‘erasure’, as well as a statutory tort for serious invasions of privacy; and
• introducing a new requirement to act ‘fairly and reasonably’ when collecting, using and disclosing personal information.

Feedback and Next Steps

The Government is currently seeking feedback in its response to the Privacy Act Review Report from public and private entities. The deadline for feedback is on 31 March 2023. Feedback can be provided by completing an online survey (available here) or in writing.

ACNC National Fundraising Principles

On 16 February 2023, the Australian Government announced that relevant Federal, State and Territory bodies have agreed a set of 16 nationally consistent fundraising principles for charitable organisations. The principles streamline State and Territory requirements on charitable fundraiser conduct and will give charities and donors a clear understanding of appropriate conduct.

National Fundraising Principles

When conducting fundraising activities, charitable organisations must ensure that their employees, volunteers, contractors and anyone else who they engage or arrange to raise funds on their behalf conduct themselves in accordance with the National Fundraising Principles. Key principles include requirements to:

• always explain the purpose of their charity and the purpose to which the funds raised will be applied in ways that are appropriate for the audience
• never mislead, deceive or knowingly use false or inaccurate information when fundraising
• never place undue or unreasonable pressure on a person when fundraising, or act unconscionably in any way to obtain a donation
• never exploit the trust, lack of knowledge, lack of capacity, apparent need for care and support, or vulnerable circumstances of any donor
• make it clear whether a donation is a one-off or an ongoing donation, and clearly explain how to end an ongoing donation; and
• for commercial fundraisers engaged to fundraise for a charitable organisation, never accept a donation without having explained that they are part of an organisation that makes a profit from fundraising as well as how they are paid.

Conduct of Charitable Organisations

At all times, charitable organisations must:

• conduct all reasonable due diligence when engaging third parties to assist, support or deliver fundraising activities on its behalf
• take all reasonable measures to protect the health, safety and wellbeing of fundraisers employed or directly engaged by them, as well as members of the public, when fundraising
• establish and maintain a complaints process that allows for proper investigation and redress of fundraising complaints
• ensure information covered by the Privacy Act is collected, used and managed in accordance with the Australian Privacy Principles where required; and
• always ensure remuneration to commercial fundraisers engaged to fundraise for a charitable organisation is not excessive when compared to money or goods received for the charitable purpose of the fundraising.

If you are a charitable organisation we recommend that your review your organisations’ policies and guidelines to ensure they support the principles in anticipation of the upcoming regulatory changes.

Senate Estimates

Senate Estimate Hearings were recently run across four weeks in early 2023. Recent issues considered in the hearings relating to money laundering, transparency issues, and corruption. While Australia’s newest integrity institution, the National Anti-Corruption Commission, will look into corruption and hold companies to account, the role of the Senate increases day to day accountability of government departments, and is one of Australia’s oldest integrity institutions, as can be seen through the recent examples below.

Is Australia’s real estate sector conducive to money laundering?

In the Senate estimates hearing of the Legal and Constitutional Affairs Legislation Committee (Committee) held on 14 February 2023, the Committee called members of the Australian Transaction Reports and Analysis Centre (AUSTRAC), seeking AUSTRAC’s feedback regarding its success in detecting money laundering in Australia.

The Committee noted that previously, in 2015, AUSTRAC raised the issue of money laundering through real estate as a risk, where AUSTRAC stated:

“Compared to other methods, money laundering through real estate—both residential and commercial—can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate.”

Before the Committee, the acting CEO of AUSTRAC, Mr Peter Soros, confirmed that money laundering through real estate remains a risk in Australia given the limited reporting requirements placed on those in the real estate industry who may come across suspicious transactions. Comparatively, there are relatively strong reporting requirements placed on banks and other financial institutions who come across transactions, deposits, or the like, where there are suspicions that money is being laundered.

Senator Shoebridge noted that Australia has not yet enacted “tranche two reforms”, being reforms where the AML/CTF Act would extend to ensure reporting requirements are placed on those in the legal profession, real estate industry, and the accountancy sectors.

While AUSTRAC does not have full visibility over money laundering in the real estate sector, other governmental organisations have uncovered criminal syndicates who have laundered money through the property sector. In February 2023, the Australian Federal Police uncovered an alleged international criminal syndicate and seized 20 properties across Sydney, which included two houses worth $19 million, and a block of land worth $47 million.

First referrals to the National Anti-Corruption Commission referred to in Estimates

In November 2022, concerns were raised regarding government contracts awarded to companies who were receiving advice from lobbying firm Synergy 360. It was reported that a former Government Minister had used his status to assist the lobbying firm sign up corporate clients with the promise of arranging meetings with key senior government officials. It is also alleged that the same Minister’s friends were charging up to $100,000 to arrange meetings. In the Senate Estimates held on 15 February 2023, there were suggestions that this matter may be referred to the National Anti-Corruption Commission, making it one of the first potential matters publicly referred.

NSW Bushfire Grant Scheme raised in Estimates

On 2 February 2023, the Audit Office of New South Wales published a finding that the NSW government’s administration of the Bushfire Local Economic Recovery (BLER) grants were done according to a process that ‘lacked integrity’ and the assessment process ‘lacked transparency and consistency’.

The Federal government funded $350 million of the $700 million required for the BLER arrangement. Allegations have been raised regarding pork barrelling, where some electorates were prioritised over others in the distribution of the funds. Further, it has been reported that all requests under $1 million were automatically deemed ineligible. It was reported this month that the NSW Department of Premier and Cabinet had handed a report to the Independent Commission Against Corruption (ICAC).

Questions may then be raised if this investigation would also fall into the ambit of the NACC. Section 13(3) of the National Anti-Corruption Commission Act 2022 (NACC Act) provides that State or Territory Governments are not contracted service providers for a Commonwealth contract, making them exempt from these provisions, unlike private companies. However, under section 41 of the NACC Act, the Commission has the power to investigate corruption issues jointly with State or Territory government entities.

AAT Reform

In late 2022 the Australian Government announced that the Administrative Appeals Tribunal (AAT) would be abolished and replaced with a new administrative review body.

The key features of the reform are stated to be to:

• implement a transparent and merit-based appointments process
• provide additional capacity to enable the rapid resolution of existing backlogs
• implement consistent funding and remuneration arrangements to enable the new system to respond flexibly to fluctuating case numbers
• improved the accessibility of merits review by providing additional support services and emphasising early resolution where possible
• implement a single, updated case management system to address critical business risks to the AAT; and
• introduce procedural efficiencies to ensure the efficient resolutions of cases.

This reform follows the significant backlogs of the AAT, with the most recent annual report of the AAT indicating that there were 67,720 cases awaiting finalisation as at June 30, 2022. This follows revelations at a Senate hearing late last year that revealed that 19 members of the AAT had been the subject of multiple bullying, harassment, or discrimination complaints over the last six years.

The specific design of the new federal body is still under review, with an advisory group to provide advice to the Government prior to the establishment of the new body, which is expected to be in place by the end of 2023.

The Advisory Group was announced on 17 February 2023 and consists of:

• Former High Court Justice, the Hon. Patrick Keane AC KC (Chair).
• Ms Rachel Amamoo.
• Emeritus Professor Robin Creyke AO.
• Professor Anna Cody.
• Emeritus Professor Ron McCallum AO.
• Former Federal Court Justice, the Hon. Alan Robertson SC.
• Emeritus Professor Cheryl Saunders AO.

The existing AAT will continue to operate until such time as the new body is established, with legislation expected to be introduced this year. We will continue to follow the reforms and provide updates as they arise.

Perth Mint

The Perth Mint, being the world’s only government-owned and guaranteed precious metals enterprise has recently received global attention after Four Corners aired an investigation into its affairs. It is alleged that the sale of gold to the Shanghai Gold Exchange did not meet the required purity standards, following the implementation by the Perth Mint of a dilution program designed to improve profit margins. This investigation also highlighted concerns regarding AML compliance and the possible use by money launderers to move funds.

In light of these allegations, some members of the Western Australian parliament have gone so far as to demand a royal commission into the affairs of the Perth Mint. Separately, multiple agencies have recently called for an investigation into the operations of Perth Mint, including the London Bullion Market Association who have commenced its own Incident Review Process. Consequences for the Perth Mint from this process may result in it being banned from selling gold in the London market and other commodity exchanges.

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Authored by:

Cinzia Lee Donald, Partner (Lavan)
Kathy Merrick, Partner
Kelly Griffiths, Partner
Daniel Maroske, Director
Anna Famelli, Associate
Kasia Jaruzelska, Associate
Sarah Maneckshana, Associate
Emma Bolton, Solicitor
Jethro Schoeman, Solicitor
Sophia Liu, Lawyer
Stefani Giangregorio, Lawyer