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Parliamentary Joint Committee on the Australian Commission for Law Enforcement Integrity - 08/08/2012 - Integrity of overseas Commonwealth law enforcement operations

NORMAN, Dr Kenneth Raymond, Private capacity

[16:06]

CHAIR: Welcome, Dr Norman. I note that we have received a submission from you. Thank you for that.

Dr Norman : My apologies for the lateness of it.

CHAIR: No, it is very good to have it. Thank you. I now invite you to make an opening statement.

Dr Norman : I appreciate that the lateness of the response does not give the committee adequate time to have read my submission in any detail, but the essence is really very simple. It relates to advocacy for a nationalised approach to anticorruption consistent with our requirements of the UNCAC convention, and to recognising that the scope of ACLEI as it stands is too restrictive even with the ambitions set out in the current terms of reference. These, too, I would consider as too restrictive. Lastly, the need for better measures in accountability mechanisms in both integrity and probity systems right across the Commonwealth and industry, because what we have at the moment is not good enough.

CHAIR: Thank you. Would you like to expand upon the delivery of improved national approach to anticorruption, particularly in relation to ACLEI?

Dr Norman : To pick up on that, Chair, the example I use or draw on is the one in relation to fraud. Firstly I would caveat that with the fact that fraud—and noting that not all frauds are corruption related. Nevertheless just to use that because that is what is represented in much of the reporting across the Commonwealth. So when we look at the national capacity of ACLEI we see it confined to a number of those key agencies currently, and most of those agencies are already, if you like, self-regulating or self-governing. They are not perfect. Certainly even the ambitions to change that to AQIS and the ATO, all those have mechanisms within them—again, not perfect at all.

But what I am suggesting is: what of those other agencies? I am only picking two, not to focus on them specifically. It is just that they have portfolios that are exposed to quite predatory governance environments. So the assertions within much of the reporting across the public sector is that everything is good and that there is no problem,or fraud and corruption, does not pass the first litmus test. Just as we spoke about in the earlier section, if you do not lift that rock and ask the questions you will never know.

So using the example of fraud and the low rates that are on record from the AFP Commissioner stated that fraud reporting is likely to be at three to five per cent. There is a lot of time and effort invested in looking at the value of fraud and really, the figure on what the level of fraud is at is a nonsense. The issue is about what are we missing and what are we detecting. If we extrapolate that out, it conveys a sense that we are missing a great deal of the reporting particularly in looking forward in any agency and not just focusing on any specific one. So I am not here to suggest that ACLEI should not exist or should not be doing it; in fact, I am advocating a much greatly expanded role, capacity and ability to do its job. But also to do it better. Whether that is ACLEI or a combination of other agencies, what meets our requirements under UNCAC. There are a number of very good parts from each of the states that we could draw on. The key premise is around the protection. Protection kicks in at different periods depending on the state in which it occurs, but there should be immediate protection for the witness, ensuring that there is a filtering process to ensure that it is not scurrilous or vexatious reporting and that there is an investigative and analytical capacity to respond to it and to manage that environment.

It does, fundamentally, take a fairly mature type of governance. In developed country environments it just takes the right imperative to do it. But in developing country environments, such as in many of the African countries and even across Asia, it simply means that you can identify the protagonist or the troublemaker earlier on. So we have to be careful in advocating that without a level of maturity in many of the other mechanisms, not just the whistleblower framework but also the other systems—from human rights through to all the other legislative measures that might support, protect and enforce those issues. I cannot offer you a one-size-fits-all on the whistleblower framework because, at a national level, our requirements will be subtly different from those of the states.

Mr ZAPPIA: Thank you.

CHAIR: In your submission you note that the distinction between the public and non-public sector is less distinguishable than ever before and that 'key dependencies by government on major contracts and commercial agreements further affirm the need to approach corruption as a national strategy'. At the moment we are grappling with the idea of a national approach to the public sector. I do not know how far away we are from looking at the private sector but it is clearly an area that needs to be looked at. Would you like to expand on that?

Dr Norman : You are absolutely right, Madam Chair. It is very ambitious; I accept that. But the challenge you have is that so many of our public sector departments depend on—take just the IT contracting for DIAC alone. I suspect most of its budget goes there so to turn around and say, 'We're only dealing with issues of the public sector,' is very difficult to manage and apply. Where is the drop-off point on that? It is hard to distinguish. Most of our business and many other small, medium and large businesses depend on that. The Tenix example brings to mind both the retrospectivity of the issues and the challenges in distinguishing between the public sector and private sector. Simply describing an environment that only applies to public sector officials constrains the process.

I appreciate that I am being far too ambitious than what is currently described in the terms of reference. We are just talking about another four or five agencies. I am an advocate of that but, if I had to describe most of those agencies in a risk profile, it would be lower risk, CrimTrac process and transaction based. They are not meting out.

As I described before, even the AFP and the ACC have in place processes and systems. They are not perfect, but they are pretty good, particularly when I compare them internationally. But the other agencies are operating in a complete vacuum and while they may receive corruption training or for an induction period for new people joining the agency, and there may also be a little bit here and there scattered amongst the organisation, largely it would be invisible. So, when you hear assertions about there being no corruption, it does not stand the first test of zero tolerance, as I mention in the submission. Constraining it too much limits the purview.

It may also be related to an earlier point, that anticorruption measures are not necessarily best run by police. They are good at the investigation and/or prosecution aspects, but anticorruption is much wider than simply the application of law enforcement measures to investigate. You see in the Hong Kong ICAC most of the measures are not law enforcement related. I do not want to keep going back to that just as the perfect example, because there are still limitations in that model. Nevertheless, if I use the Singapore model, they have good systems and controls. They have very strong legal mandates and good training and education systems that reach out to industry and the public and make sure that they are aware of both the punitive measures and also what measures they may set in place. So when we deal with companies, and I am thinking of one in particular, most of the companies want to do the right thing and would happily report activities, but the point of contact and the difficulties in reporting are very challenging too. The simple issue of what is involved in a police check to vet a person is hard enough in Australia, but it is more difficult when we want to set up a Hong Kong office or an office in Qatar and put some integrity to it and make sure that we are not compromised by some stupid action on the part of an overly enthusiastic or corrupted employee. It is very difficult. Even within an Australian context it is still hard to manage.

My point is simply that, if we were to frontload much more of the effort into education and training—and I understand that those are easy statements to make—there is certainly a better outcome in terms of potential. You cannot do everything and you cannot be across every agency. They have to take responsibility for their own actions. That is why you pay these people. If I might use the term, there is a 'learned helplessness' across many of the public sector agencies in relation to corruption. They are really good in some areas so it is not the issue of complacency. I think it is a factor of complacency, and also of ignorance, which is possibly a harsh term.

When I see a lot of academic work put into perception surveys, I disregard most of the outcomes because you are asking people about things that they may neither care about nor want to know about. In fact, this is the struggle that you have. Many of the financial sectors and the banking services are disincentivised, if you like, because there is no value in declaring fraud. They would rather declare it as a bad debt because it is covered by different provisions and insurances and their ability to get that money back is quite differently managed. So you have this complex situation that disincentivises the ability to collect accurate and credible information on fraud and corruption and to then assert that we do have a corruption problem or we do not.

CHAIR: Do you think the US system of offering financial incentives to people to report corruption, as in a percentage of the fraud, should be looked at?

Dr Norman : That is an issue that has become more and more topical. It is being introduced and discussed in some Asian corruption legislation frameworks. I would have to say that, until there is a maturity—we cannot now even properly manage whistleblower frameworks. If you then add money and incentives around it you will be flooded with all the tyre kickers and ratbags, and it will be hard to then discriminate between the genuine and the disingenuous.

CHAIR: So we should just get the basics right?

Dr Norman : Yes. That would be my advice.

CHAIR: I take your point about training and education. We had an issue in the WA health department, where some extraordinary percentage of employees had been accepting gifts from pharmaceutical and other medical type equipment companies and were taking trips and not declaring them, not even knowing that there was anything wrong with that, at the same time as giving out contracts. I think that is where the education comes in.

Dr Norman : Absolutely. Gift-giving is a good thing. In Asia it is part of their culture, but there are tolerances and boundaries very clearly about how that must be managed.

CHAIR: Yes. In your submission you point to properly targeting efforts as well. You mentioned the Department of Education, Employment and Workplace Relations, which is delivering Indigenous training and grant programs in difficult and remote governance situations with very few anti-corruption measures. I absolutely see your point there. We need to get much better in what we are doing.

Dr Norman : I guess there is great expectation on the committee around that, but it is a very difficult choice at the end because there is only so much resourcing that you can allocate to an ACLEI and/or another organisation. It is challenging, and I guess that is why I am sitting on this side of the table and you are on the other side of the table.

CHAIR: We do not get to decide those things either. All we can do is make recommendations. In your overseas dealings, have you noticed any issues about Australian officials moving out of government agencies and into private firms, moving backwards and forwards—say, working for Austrade one day and then the next day working for a company that they have helped get a deal? You can speak in general terms.

Dr Norman : I can think of one in particular at Immigration at the moment, who has moved to IBM. IBM was providing most of the major contracts. I am not suggesting at all that there was corruption, so please let me be absolutely specific there. But there is the inappropriateness of that as a public servant managing those contracts. Again, I am not suggesting that that person was involved in any such activity. But the question has to be asked when they are heading up IBM in, I think, Singapore; I have to question the conflict of interest. As to that investment in training and making sure we are training properly, I am not suggesting that a one-week course would have changed this person's mind. There are measures around that which set controls and expectations in the public sector, more so even than in industry, but you have to be absolutely beyond reproach in any of these issues. That is one case, just a casual instance, that I can relate. There is certainly still significant potential.

I am also an advocate of not stopping many of them. People have to make a living outside of the public sector when they move. There are some very talented people that industry would love to poach, but there are measures and controls around how that is to be conducted and they need to be clear to all of those people involved in the process. There could be an assertion from the Public Sector Commission, as an example. They could strongly advocate that that message be loud and clear and clearly understood by members of the public sector.

CHAIR: Are there any particular measures that you would like to tell us about that we should include in our recommendations in relation to Australia's overseas operations?

Dr Norman : By ACLEI, or in a broader sense?

CHAIR: In a broader sense.

Dr Norman : I think few of the agencies have an effective and appropriate risk management plan that even has considerations of corruption issues. Austrade, and there is also the firepower pill—I cannot recall the term. Not to pick on them but, their activities take them overseas and they are involved and engaged in a number of different commercial agreements where they cannot always have a high level of confidence. It is always going to be about risk, about introducing the naive Australian company to the predatory overseas company that seeks access or inroads into an opportunity that they may not be aware of. It may be an academic institution that is seeking to establish itself. They are not looking for that predatory mindset from these overseas agencies. Good risk management planning, good code of conduct, good integrity systems and controls and good planning 'if it does go wrong, what do we do?' so that there are not necessarily just whistleblower frameworks but also reporting frameworks and a point of contact. Who would do that?

At the moment, I do not think there would be any who could answer that other than going back to the agency, and many of those, if I might be so bold as to suggest, would be clueless about what to do with that sort of information if it were reported to them. 'That's your problem,' would be their response.

Mr ZAPPIA: Dr Norman, do you believe that education and training would make any significant difference to what I would refer to as the serious corruption and fraud that might be taking place?

Dr Norman : I do. I am not naive enough to believe that we are going to change the mindset of deliberate and organised crime that is targeting the public sector. But what I am aware of is that everybody across the public sector can do much more in their visibility and awareness because most of the organised natures of crime begin with very simple transactional activities, small compromised activities relating to allowing someone to get in and just see the information or passing on information, and it all appears innocent initially. It is like the handling national of national security documents. If we were to use that process—I am not suggesting in the same way—there are posters; it is in messages displayed loudly and clearly across the intelligence agencies about how to manage information, what they are to be aware of. It is not perfect, but it is a very good start. But they have been investing heavily in that for some time now. They still have mistakes, like the Wispelaere and Lappass incidents that occurred—of course: because human nature is involved in the process, there will always be major failings—but what you then step into is the punitive and custodial areas and make sure that there is strength in the investigative processes. But investigators need to be trained in the management of the organised and serious crime aspects so they know what to look for. So, when we apply investigators—and this goes back to the ACLEA issue—we make sure we do not send out a general investigator who is then going to be conducting detailed financial views and assessments, because they will be clueless, they will fail; if you set them up to fail, you can guarantee that they will. When you ask them to look at quite complex transactional data—for example, around telecommunications carriers and the potential for corruption in that sector—you make sure they are appropriately trained, educated and that they understand the environment. That comes at a cost, of course—and, again, one size does not fit with all investigators.

CHAIR: Thank you. One final thing, on the UK bribery model relating to facilitation payments: is that something that you think Australia should be heading towards?

Dr Norman : Absolutely. But we need to be very careful. That has very draconian measures attached to it and it would be very difficult to differentiate between normal commercial engagements, I would argue, as to actually what are compromised or corrupt activities. But, fundamentally, I think yes.

CHAIR: In principle, yes?

Dr Norman : Yes.

CHAIR: Thank you. Were there any further comments you wished to make?

Dr Norman : No. Thank you for the opportunity to address the committee.

CHAIR: Thank you very much for taking the time to come and address us today. And I want to thank all witnesses who appeared today. Before we close today's public hearing, I confirm that answers to questions on notice are due in three weeks—that is on 29 August. If members have any further questions, could they please advise the secretariat within one week and we will distribute by the same due date. Thanks to Broadcasting and Hansard for managing the complexities of us going in and out of camera today.

Committee adjourned at 16:47