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STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE
21/11/2008
Economic and security challenges facing Papua New Guinea and the island states of the southwest Pacific

CHAIR —I welcome officers from the Attorney-General’s Department. A copy of today’s opening statement has been provided to you. Do you have any questions regarding that document?

Mr Marshall —No, thank you, Chair.

CHAIR —The committee has before it submission No. 40 from A-G’s. It is a public document. Do you wish to make any amendments to your submission?

Mr Marshall —No, thank you, Chair.

CHAIR —I now invite you to make a brief opening statement and then we will turn to questions.

Mr Marshall —Thank you. First, we would like to thank the committee for giving us the opportunity to contribute to this inquiry. Our submission, as you would have noted, is relatively short. Essentially, we have sought to summarise the key activities and programs which are being undertaken by the Attorney-General’s Department, as well as the Australian Customs Service, in PNG and in the island states of the southwest Pacific. From the department’s perspective, the brevity of that submission probably reflects the fact that, when you compare our involvement with some of the other agencies from whom you have been hearing, the extent of our involvement in matters which are directly relevant to the inquiry’s terms of reference is relatively modest.

CHAIR —Yes.

Mr Marshall —That involvement is primarily directed towards specific measures to strengthen the law and justice sectors in the Pacific, in particular measures to strengthen the rule of law, which we see as a key component in broader initiatives to meet economic and security challenges. This includes activities such as the provision of technical assistance in the establishment of anti-money-laundering and counterfinancing of terrorism systems throughout the region. It also includes the provision of legal policy and legislative assistance on police and crime related issues. It includes support in the drafting of legislation and the training of drafters in the region, as well as measures to improve access to legal information.

The department is also actively involved in cooperative measures to prevent the manufacture and trafficking of amphetamine type stimulants, as well as their precursor chemicals. Where appropriate, the department also contributes to whole-of-government assistance programs such as the law and justice sector component of the Strongim Gavman Program led by AusAID in relation to PNG.

Although our contribution is targeted and the outcomes may be incremental, we consider that these efforts do assist broader Australian government initiatives to address economic and security challenges in the region. We were considering which various parts of the department should be represented here. I have brought the key people along, but there may well be some issues which we would be happy to take on notice and come back to the committee on if that arises.

CHAIR —Fine. Thank you, Mr Marshall. I just intend to work through a range of the issues that you have identified in your submission, really trying to get a bit more flesh on the bones, so to speak. In terms of providing legal and legislative assistance under the two headings that you identify, the anti-money-laundering and the counterterrorism financing, can you be a bit more specific about the type of assistance the department is providing.

Mr Marshall —In relation to money laundering and terrorism funding?

CHAIR —Yes.

Mr Marshall —I might defer to the head of our Anti-Money Laundering Assistance Team, Nick Morgan, who is more across the detail.

Mr Morgan —The Anti-Money Laundering Assistance Team is a multidiscipline team that was established within the Attorney-General’s Department. It includes a former police officer, a former prosecutor, some people with expertise in financial matters, and also legal matters. We provide technical assistance to the 14 Pacific Island countries attached to the Pacific Islands Forum on the whole spectrum of introducing anti-money-laundering and counterfinancing of terrorism arrangements. That starts with legislation. All of the 14 Pacific Island countries attached to the forum have some form of legislation in place. We have done some work reviewing some of that legislation.

It also involves assisting with the establishment or development of financial intelligence units within those countries. Each of those countries now has a financial intelligence unit and we have assisted several of them in establishing those units, including working with those units to get the reporting of suspicious transactions from reporting entities through to the FIUs.

Moving on from there to the financial investigations, we have got a mentor who has been doing work on assisting these countries with financial investigations and, in relation to prosecution, we have done work on proceeds of crime training for prosecutors in the region. We have even worked with judges in the region on explaining proceeds of crime laws and so on to the judiciary.

Senator FEENEY —I am just interested in—

CHAIR —Before you do that, Senator Feeney, I welcome officers from Customs, and apologise. We finished the lunch session early, so we decided to bring this on early. At an appropriate break in questioning, we will ask you if you have an opening submission and to make it then. But I will let Senator Feeney go now and then we will come back to you.

Senator FEENEY —Thank you. Could you just explain to me the command and control of those teams. We have heard from various agencies about how Australian officers are inserted into local governments, local apparatus, and report to local officials. I am interested to learn to what extent those teams are provided to sovereign states and their existing structures and to what extent do Australian teams such as the ones you have described remain under Australian command and control?

Mr Morgan —The Anti-Money Laundering Assistance Team is entirely under Australian command and control. It is public servants working for the Attorney-General’s Department, most of whom are actually based in Canberra. We have one officer who lives in Fiji, who works in the Pacific Islands Forum Secretariat offices. He has an office there but provides some mentoring to the Fiji police. But he works regionally with countries. The rest are based in Canberra and they travel and provide intermittent mentoring to the countries that we are working with.

Senator FEENEY —To what extent are they then dependent on other agencies in other sovereign states in terms of intelligence, personnel, support and the jurisdictions where charges might be laid and so forth?

Mr Morgan —I should clarify that it is a technical assistance program, not an operational program, so we are not gathering intelligence. We are there in a technical assistance capacity, so where I have someone working in a mentoring capacity on a financial investigation—

Senator FEENEY —So it is capacity building, basically.

Mr Morgan —That is right, yes.

Senator FEENEY —Do you then have any measures about how that capacity building is successful? Is that realised then in convictions?

Mr Morgan —It is a fairly new area, so there have been relatively few prosecutions or convictions in anti-money-laundering or proceeds of crime in the Pacific, although there have been a few. So that is one measure, but it is a bit early to be looking at that measure, I would suggest. We collect information as we go, I suppose.

Part of the way that we deliver the assistance is delivering regional workshops, where we collect evaluation forms at the end of those workshops and get feedback from participants. But in a lot of the countries that we work with, we have an ongoing technical assistance program. For example, in PNG we have been working with them since, essentially, they had nothing but a piece of legislation through to the establishment of a financial intelligence unit, which has now received, I think, around 80 suspicious transaction reports from the reporting entities, so there is another measure that it is now operational and reporting is occurring. In PNG the FIU sits within the police, so the people collecting this information are also the people investigating it, so we are confident that the investigations are actually happening as well. There are those sorts of measures as we go, as well as, as I say, collecting information from the countries we are working with.

We also have a six-monthly Strategic Priorities Reference Group meeting. We bring our key stakeholders together every six months to talk to them about our progress, our work program, to get feedback. That includes ANZ and Westpac banks as well as Pacific stakeholders, the foreign secretariat, AUSTRAC, AFP and DFAT and so on.

Senator FEENEY —All the usual suspects.

Mr Morgan —The usual suspects, I guess, in our territory.

Senator FEENEY —In your report you say:

... the press reported that billions of dollars in Russian Mafia funds had been laundered through off-shore banks in Nauru.

Mr Morgan —Allegedly.

Senator FEENEY —Your correction leads into my question. What can you tell me about that incident and what can you tell me about charges and convictions that arose? Perhaps more importantly, can you tell me how indicative it is of the scale of the problem that we are confronting?

Mr Morgan —I guess it is indicative of a time prior to the introduction of anti-money-laundering and counterfinancing of terrorism arrangements. Back in 2000 when they were black-listed Nauru had a number of, essentially, offshore banks which did not conduct any customer due diligence, did not keep track of the beneficial owners of them and all that. With the introduction of the AML/CFT arrangements and that black-listing process, or the listing of noncompliant countries and territories by the Financial Action Task Force, essentially all of the offshore banks have been shut down.

There still remain offshore financial centres, which are something different. There are trust company service providers in several countries in the Pacific. But offshore banks, as they are defined, do not exist any more. As a result, Nauru basically has no bank. Commercial banking in Nauru has also left and money now, to get into Nauru, comes in on boats. So, no, it certainly does not characterise the situation now. To be honest, I cannot tell you anything about what happened with the alleged billions of dollars of Mafia funds being laundered. That was a bit prior to my time.

Senator FEENEY —When these island states complied with those regulatory requirements and were de-black-listed—if that is the right phrase—can you help me understand that process? Did that mean that existing financial institutions in those countries started to comply with certain international standards, or does it mean those institutions stopped trading? In the process of compliance, were there entities that were revealed as being money launderers? Reading your report, it looks like a large portion of the problem disappeared, but to what extent was their malfeasance previously detected?

Mr Morgan —The list of noncompliant countries and territories was a Financial Action Task Force initiative.

CHAIR —What is that?

Mr Morgan —It is essentially the international standard centre for money laundering. It had this list of noncompliant countries and territories, which is often referred to as the black list. There are no countries on that list any more. The list does not essentially exist any more. A decision was taken by the FATF—

Senator FEENEY —But a short while ago plenty of countries were on it.

Mr Morgan —Yes.

Senator FEENEY —There were Nauru, the Cook Islands, the Republic of the Marshall Islands.

Mr Morgan —That is right. The primary concerns, if you look at the FATF documentation, was around the offshore banking, the secrecy provisions and not keeping track of beneficial owners’ details, which was allowing money laundering to go on unfettered, essentially. That is what has changed and, as a result, they have come off the black list or the NCCT list. In effect, there is no more NCCT list.

Senator FEENEY —Sure.

Mr Morgan —In terms of looking at compliance against the international standards set by the FATF, there are 40 plus nine, or essentially 49 international standards. Members of the FATF and its regional style body, the Asia/Pacific Group on Money Laundering, are evaluated on a rolling basis against those standards. Some of the Pacific Island countries have been evaluated and others are joining. There is an increasing number of Pacific Island countries joining the APG. No countries, including Australia, are scoring 100 per cent compliance against those standards. It is an evolving process. But the political commitment certainly has been there in the countries.

Senator FEENEY —But is there a financial institution in one of these countries that was exposed as a significant money launderer by virtue of the fact that the host country began to comply with international standards? Did financial institutions simply comply, adapt, evolve and continue to operate, or in fact were some institutions driven out of these countries? I am trying to understand how a country can move from being black-listed to not being black-listed and yet there be no convictions. How transformational was it?

Mr Morgan —Essentially, the offshore banks were shut down, but they were offshore banks in that there was not really any onshore presence in the countries anyway.

Senator FEENEY —Were they private banks?

Mr Morgan —Yes. To be honest, I do not have the details. I can go back and look up some more information for you on that point, but the point is that the banks were shut down. It was not like an entity operating in the country that was identified as a dodgy entity.

Senator FEENEY —So they were, effectively, branches of entities that existed elsewhere?

Mr Morgan —Or established purely as an offshore bank, yes.

CHAIR —The legal structure was established by someone.

Senator FEENEY —Yesterday we heard some evidence about how, in some of the countries we are looking at, there is a particular nexus between money laundering and illegal logging. Can you tell me whether you are aware of that nexus and, if so, explain to me what it is about illegal logging that makes it an activity that is associated with money laundering.

Mr Morgan —There are two areas where the nexus exists. One is that money laundering is the laundering of value, so the logs themselves have value and the logs can be laundered by, for example, labelling them as being worth something that they are not. So the value can be laundered through the product. It is known as trade based money laundering.

Senator FEENEY —Who is the beneficiary of that arrangement?

Mr Morgan —I do not know. In the Pacific, I could not tell you who is the beneficiary from that, but whoever ends up getting the value is the beneficiary, if you know what I mean. It can be under- or over-invoicing in trade based money laundering, depending on which way you are trying to get the value to go.

Senator FEENEY —Presumably that activity would be associated then with corrupt officialdom.

Mr Morgan —I was going to say that the second area where money laundering can be involved is, as you say, through corrupt activities that lead to the logging being deemed legal, so corrupt granting of licences and so forth. The proceeds of that corruption can be picked up through your anti-money-laundering systems. In fact, anti-money-laundering arrangements must pay extra attention to what are known as politically exposed persons or, essentially, people who are in a position to benefit from corruption.

Senator FEENEY —Is that typical of a lot of the money laundering operations you are concerned exist? I have always understood money laundering in a simplistic, stereotypical sense to be the conversion of the proceeds of crime into legal and allegedly transparent moneys. But you are describing something that is quite different, aren’t you? You are describing, essentially, how a resource is exploited without paying presumably proper licence fees and those kinds of things. You are not talking about money from outside the region being laundered inside this region, are you?

Mr Morgan —Not in that example per se. It could be, depending on where the logs are going to, as well. But certainly the proceeds of corruption, where corruption is the predicate offence, entering the financial system is just straight money laundering.

CHAIR —Going back to that capacity building you were outlining at the beginning, Mr Morgan, is that funded through normal appropriations or is that funded through that Pacific Judicial Development Program you refer to?

Mr Morgan —No, that is a normal departmental appropriation.

CHAIR —We participate in the Pacific Judicial Development Program, jointly funded by AusAID and NZAID to improve governance, rule of law and access to justice. What is your assessment of the development of that program?

Mr Marshall —I am afraid that is one of the questions which we probably did not bring exactly the right representatives to comment on. That particular program, as you have noted, is one that is funded by AusAID. It does involve portfolio agencies, including the Federal Court and the High Court. I am not aware of any departmental based assessment of how that program is going.

CHAIR —Are A-G involved as line officers doing the instruction? So it is nothing to do with A-G per se?

Mr Marshall —No, they are separate portfolio agencies. We included it, I suppose, as part of the representative of the portfolio package, given that we were not expecting the Federal Court or the High Court to be providing you with a direct submission.

CHAIR —That would be a fair assumption.

Mr Marshall —Anecdotally, I understand that, in the context of broader Australian support to the law and justice sector, the program has been well received. I am just not really in a position to provide any quantitative measurements as to its performance.

CHAIR —No. I was interested in an assessment, and we might have to ask that question of AusAID in due course, since they are the ones that are funding it and are presumably keeping an overview of it.

We might take a break here and welcome our colleagues from Customs. Do you have an opening statement you wish to bring to our attention?

Ms Wimmer —Yes. I have something that I thought might be useful to share with you. Customs’ engagement in the Pacific is largely focused on Papua New Guinea and the Solomon Islands. We see our engagement particularly with Papua New Guinea as very important, because we have a shared border. A lot of the work that we do, particularly with PNG, is about managing the risk to Australia while we are building their capacity. Obviously there is a strategic interest there, but we are also largely involved in trade facilitation and assisting in revenue collection.

In a lot of developing countries Customs administrations are based on revenue collection rather than border security, and a significant proportion of our work, particularly in PNG and the Solomon Islands, is focused on the revenue collection elements and stopping ‘revenue leakage’, as it is termed. Obviously, that is critical for the Australian government in helping them to build their economic sustainability. That was all I wanted to say.

CHAIR —We had extensive evidence from Immigration before about their heavy involvement in PNG. Is your level of involvement on a similar scale?

Ms Wimmer —I do not know at what level Immigration is involved. I can give you an outline, though, of what we do in Papua New Guinea, which might assist.

CHAIR —They outlined their involvement as heavy numbers of officers around the country, embedded officers, training down here and an extraordinary amount of capacity building at all levels of the value chain within the PNG migration department. Before you give us an outline, do you liaise with Immigration or are you stand-alone silos?

Ms Wimmer —No, we are part of the Strongim Gavman Program, the AusAID program, and through that the border agencies definitely have engagement—Immigration, Transport and Customs, and the AFP to some extent. We are trying to formalise some of that, but we have an informal sectoral grouping as well that meets regularly so that we are joined up.

CHAIR —A lot of their work would link directly with your activities.

Ms Wimmer —Absolutely, particularly at the airports.

CHAIR —You might give us an outline of the capacity building work you are doing.

Ms Wimmer —Sure. We have four people under the Strongim Gavman Program based permanently in PNG. One of them is the Deputy Commissioner of Customs.

CHAIR —Our Customs or theirs?

Ms Wimmer —Theirs, so he answers directly to the commissioner. That is, I suppose, the framework. Then we have two programs which complement that. One is a border security project, which is effectively providing PNG Customs with the tools to do some of the capacity building under the Strongim Gavman Program. Our team has done a needs analysis and now they are using the border security project to support that. The other thing we do is a twinning program, where we take officers from Australia and place them in PNG to work alongside their local counterparts. They do things like developing manuals and standard operating procedures and they might help out doing some analysis in an area so that we can identify where we might need to assist in the future. We also, conversely, send people from Papua New Guinea back to Australia to work in Australian Customs so that they understand how a modern customs organisation does work.

CHAIR —On the border security project, there is a longstanding—going back probably since European settlement—interchange between people from PNG and the northern parts of Australia, as far as Darwin or Cape York, as you know, particularly the islands. Apart from that sort of people movement thing, which is recognised by other protocols, is the illegal importation of goods and, hence, evasion of customs revenue a major issue up there, or are your concerns more of a security nature?

Ms Wimmer —It is a bit of both. I am not entirely familiar with the detail. I can probably find out, but I would say it is both. Logging is an issue in PNG as well, so there is an evasion of revenue issue with that. We have been trying to get the relevant agencies in Papua New Guinea to work together to do patrols of the border, with assistance from Australia, and one of those patrols identified an oil tanker—

CHAIR —Our border or the Indonesian border?

Ms Wimmer —Our border—the maritime border, not the land border. The patrol identified a tanker, I think it was, that had not paid the relevant duties or royalties, or whatever it is, which in PNG was a significant amount of money. So there are movements of a revenue nature, but there are also some drugs, and we are concerned about PNG becoming a transit country for some other illicit substances—weapons and that kind of thing.

CHAIR —How significant a problem is that?

Ms Wimmer —I could not tell you. I would have to get some more information.

Senator FEENEY —You touched very briefly then upon illegal logging. How would your people come into contact with illegal logging? Presumably that is an activity entirely within PNG.

Ms Wimmer —It would be where they detect something irregular at a port or some kind of paperwork perhaps where something is not declared properly. It would be either through paperwork or some kind of intelligence activity, where they see that something is not right.

CHAIR —These are the products coming to Australia?

Ms Wimmer —Not necessarily. Because they are embedded in PNG, they are seeing products moving across the border.

CHAIR —Heading west up into—

Ms Wimmer —Yes.

Senator FEENEY —When one of the officials is embedded in PNG’s customs operations and becomes aware of a problem or a potential problem in that capacity, is there any mechanism for them informing Australia as well as PNG of the problem?

Ms Wimmer —You are referring to a problem that might affect Australia, or any problem?

Senator FEENEY —I will rely on your answer, I guess. Does an Australian working for PNG in PNG reporting to PNG officials have the discretion to inform Australia as well as remain faithful to their own reporting lines? Does that make sense?

Ms Wimmer —It is a difficult one. I would say it is something that our staff balance very carefully. I would say they use their discretion in terms of the size or the nature of whatever it might be. The Strongim Gavman Program is a joint program. I cannot think of any examples where we have actually had that situation occur. So, yes, it is probably one to be tested.

Senator FEENEY —But if it has not been tested to date, that presumably means officers believe they have a discretion and exercise it where they feel appropriate.

Ms Wimmer —Perhaps.

CHAIR —Your submission gives an overview that the Pacific Island states are being used as transhipment points for the flow of various illicit drugs between suppliers in Central and South America and South-East Asia and distributors in this country, New Zealand and North America. How prevalent is such activity and which states are most often used as the transhipment points for narcotics?

Ms Wimmer —I would have to get some more information and get back to you on that. I am not familiar enough with all of those movements.

CHAIR —All right, then.

Senator FEENEY —I certainly have some related questions for Attorney-General’s on illicit drugs, if you want me to move to that.

CHAIR —Is that a Customs question or an A-G’s question?

Mr Marshall —The transhipment point I suspect is a Customs question, but if Senator Feeney has other questions about the precursor chemicals and so on, that is more of an A-G’s question.

CHAIR —Okay. Can you take on notice: how prevalent is the transhipment activity of narcotics and weapons; which states are most often identified as being used, and the transhipment points for narcotics and weapons; and, given that A-G’s and others have outlined the heavy load that is being done on capacity building, could you give us an overview of existing capacity, if any, of the relevant Pacific Island states to investigate and pursue through to prosecution those involved in such offences? If the answer to that is minimal or negative, can you advise whether our government has any plans to provide funding either through line departments or AusAID to take account of that necessity?

Ms Wimmer —We will do our best.

CHAIR —Yes, that is fine. I understand. Senator Feeney, you had some questions on this issue?

Senator FEENEY —Referring to the Attorney-General’s submission, illicit drugs formed a significant part of the work you reported on. Although you were justifiably cautious with your language, it could be read that you were painting a picture of a very serious threat to Australia. The manufacture, trafficking and consumption of illegal drugs are significant security challenges to PNG and Pacific Island countries:

Illicit drug production and the trafficking of precursor chemicals are a consistent threat to the Australian community.

                         …                   …                   …

The threat posed to Australia from regional illicit drug markets, including the diversion of precursor chemicals, is reduced if countries in the region have effective control measures …

Then you allude to the fact that some of those control mechanisms and legislation do not exist in some of these jurisdictions. I am interested in hearing from you, if you could just paint a general picture, what you think the state of play is. Then I am interested in understanding how we cooperate with some of these sovereign states in operational terms, in law enforcement terms—if that question is not appropriate for you, then so be it—and what we are doing, I suppose.

At its most dramatic, the fact that significant syndicates—and you do talk at one stage about an Asian crime syndicate—are based in these countries, obviously has the capacity not simply to be a threat to Australia but to create, as is the nature with such syndicates, a breakdown in law and order, an environment of violence and perhaps corruption and, of course, one criminal activity can become a host to other criminal activities. I am interested in hearing from you on those issues.

Ms Smyth —I will only be able to respond from a policy perspective and would look to my Customs colleagues to be able to provide the operational overview of what is happening in the area. What we have found, based on the information obtained from working with our portfolio agencies—with Customs and AFP and the Australian Crime Commission—is that, as we tighten our controls domestically and tighten the access to precursor chemicals specifically, that will in turn then create a threat from the countries where there is a lack of legislative control and a lack of awareness of these precursor chemicals specifically.

From a policy perspective, we have looked to the Pacific to try and raise some awareness of the threat that they are exposed to at this point in time. I am not able to provide a response on the specifics of crime syndicates. Again I would look to my operational colleagues to be able to provide that response to you.

Senator FEENEY —In your policy work do you look to where such syndicates might come from? In your brief words, then you suggest Australian crime syndicates may try and base themselves in these countries.

Ms Smyth —I am unfortunately not really in a position to be able to respond, but I can take that on notice, if you would like. The work we do from a policy perspective in the South Pacific is quite new. It is really in its infancy. We set up the South Pacific Precursor Control Forum last year, so it is a relatively new forum. That forum specifically looks to raise awareness with our South Pacific colleagues on the exposure they have with a lack of legislative capacity within country, a lack of customs capacity—my Customs colleagues may be able to give you more information there—and also that there is a lack of general awareness and understanding of the ramifications of not having these controls in place in-country.

The forum has had three meetings so far. The latest one was a legal workshop that we held in Samoa in September of this year, which was primarily aimed at raising that awareness in relation to the legislative capacity that is necessary in order to combat this threat. It was extremely well received and my colleagues from the Pacific Section were also present at that. I would like to note at this point in time that the South Pacific Precursor Control Forum is not a funded activity. We have a number of initiatives we would like to continue in the region, but at this point in time we are not funded to do so, so any initiatives for moving forward from today would obviously require funding. We are looking for alternative sources of funding, but at this point in time it is unfunded, despite being an area that we internally think is an important area to engage in.

CHAIR —Observing, monitoring and tracing penetration of, arguably, Australian crime syndicates up into Pacific areas when we force them offshore: is that a job for ACC, AFP, A-G, or who?

Mr Marshall —I would not want to exclude any of the relevant law enforcement agencies from having an interest in these matters, but I dare say your best answer is going to come after we have left when the AFP give evidence, because they are responsible for Australia’s engagement with the Pacific Transnational Crime Network, which I imagine may assist in addressing some of Senator Feeney’s operational questions.

Senator FEENEY —That is a nice segue into my next question. Do the AFP provide you with intelligence to inform your policy work in this regard?

Ms Smyth —We do work closely with our operational agencies and we base our policy response on the information obtained from them. So, from information obtained to date, we have found that tighter domestic control is forcing the issue offshore and is causing those Pacific countries without sufficient awareness and legislative capacity to be exposed to this threat.

CHAIR —Are you talking drugs and narcotics now or more generally?

Ms Smyth —I am talking my area of expertise and the work of my section that relates to illicit drugs, specifically precursor chemicals.

Mr Marshall —If I may, Chair, the branch which I had has a Pacific section which works very closely with the AFP in terms of various policy related initiatives. The AFP have a lot more people on the ground in the Pacific than the department does and we rely quite strongly upon them for their views as to where various needs in combating crime might be best addressed.

Senator FEENEY —Is the AFP best placed to provide this committee with the nature of the threat in terms of illicit drugs?

Ms Smyth —I would say so. They may not appreciate that, but from an operational perspective, I do not feel I can give you sufficient information.

Senator FEENEY —I am not interested in state secrets.

Ms Smyth —No, I do not feel I can give you sufficient information to inform your questions.

CHAIR —Are there further questions on criminal activity and illicit drugs?

Senator FEENEY —No, I think I am done.

CHAIR —Can I just go back to some of the activities of the anti-money-laundering team. Why are we getting so involved in Kiribati and what is our progress to date?

Mr Morgan —We are not getting heavily involved with Kiribati. We have done some work with them and it has essentially been around the establishment of some systems, so the financial intelligence unit. The approach you have to take in the money laundering area is that you just do not want to have gaps in the system, because where there are gaps and money comes into the system, it gets into the international financial system and it is hard to track. If you can stop it at its entry point, that is the best point to do it. You want to close all the gaps, whether they be Kiribati, or even Niue with a population of 2,000 people.

CHAIR —What is the population of Kiribati?

Mr Morgan —I do not know.

CHAIR —Are they part of the PI Forum?

Mr Morgan —Yes.

CHAIR —So our involvement there was primarily driven by a need to plug gaps. Is that what you are telling me?

Mr Morgan —We have a set of principles for determining our priorities, which include whether a country is one of Australia’s aid priorities in the Pacific; the extent to which there is anti-money-laundering and counterfinancing of terrorism systems in place, or not; the extent to which other donors are already operating in those countries; the risk of financial crime in the country—for example, Fiji is a larger economy and has a higher risk of financial crime, despite having a bigger money laundering system already in place; also some practical things; and where our skills can best meet the needs of the country.

In the early days of establishing the program, demand from the countries that we were introducing ourselves to for the type of assistance we were offering was also one of the principles for us in determining where we went. As we have developed a program and our networks across the Pacific have developed, we are able to work more where we want to work on the priorities as we see them, rather than the countries that are putting their hand up. Certainly in the case of Kiribati, it was a country under the criteria of not having anything in place. That was a good enough reason, I think.

CHAIR —What stage are we at now?

Mr Morgan —Kiribati does have a financial intelligence unit and legislation in place. We have worked with them to get their procedures and processes up and running and, as with a number of the countries in the region now, the FIUs are in place, with the processes, and the reporting and so on is there. The next phase is targeting those systems to better manage where the high risk of money-laundering comes from, and to work on analysis of the information they are collecting, and investigation and so on.

Senator FEENEY —When they analyse the information that they collect, how do they interface with Australia? Obviously, there was the legislation and the capacity building that gave rise to them having this capability in the first place. How do they then work on an ongoing basis with Australian agencies?

Mr Morgan —There are various ways. There is informal police-to-police cooperation. Within the financial intelligence units, AUSTRAC has agreements with several other countries to share information; not so many in the Pacific. There are a couple of Pacific FIUs located within the police, so you can talk to the AFP about them. There is also the mutual assistance formal route. There are various ways to cooperate. Our program is more about the technical assistance side of things, rather than the operational side.

Senator FEENEY —Is there automatic data sharing, for instance?

Mr Morgan —No. My understanding with AUSTRAC is that, before they will enter into a data sharing agreement or an agreement with another country, that country has to be a member of the Egmont Group of FIUs and meet a set of criteria to ensure data security and so on. I think there are only two Egmont members in the Pacific at the moment.

CHAIR —Is that because it is still—why are there only two Egmont members in the Pacific?

Mr Morgan —I am not sure if you were about to say ‘because it’s early days’.

CHAIR —Yes, I was.

Mr Morgan —That is the answer, yes.

CHAIR —There are still developmental pathways.

Mr Morgan —Yes. I think there are a couple that are keen to become members, and I am sure that we will see more joining as time goes on. I think that particularly our Melanesian neighbours are very keen to share information with Australia.

CHAIR —Transparency International has ranked PNG as one of the most corrupt countries in the world, just ahead of nations like Iraq, Democratic Republic of Congo, Zimbabwe and Somalia. Can you advise us how your participation in the Strongim Gavman Program is helping to remediate that type of aspect. I suspect that money is a real driver of both of your level activities up there.

Ms Atkinson —The Attorney-General’s Department has 11 officials currently embedded with PNG agencies under the Strongim Gavman Program. Those officials are embedded within the Department of Justice and Attorney-General, which includes the Solicitor-General’s office, the Office of the Public Prosecutor and the corrections service. In terms of breaking that down a little bit further, we have two legal policy advisers who are recruited from within Attorney-General’s Department and placed within the Department of Justice and Attorney-General, and an adviser to the Solicitor-General and also a senior litigator within the Solicitor-General’s office, a senior prosecutor and four prosecutors within the Office of the Public Prosecutor, and two advisers in the corrections service.

Corruption and anticorruption are a major focus of the non-policing law and justice component of the Strongim Gavman Program. In particular, the officials working in the Solicitor-General’s office and the Office of the Public Prosecutor have a key role to play in that; particularly the Office of the Public Prosecutor officials play a key role in many of the corruption trials that are currently under way, and have been under way, in PNG.

Senator FEENEY —Can you tell us a bit about the corruption trials?

Ms Atkinson —I am not familiar with the detail of them, but we can take that on notice and provide you with some information.

Senator FEENEY —Thank you.

Ms Atkinson —The Solicitor-General’s office also plays a very important role in defending PNG against vexatious claims, and so our officials there are working with their counterparts to strengthen their capacity to defend PNG against those types of claims, which are a major source of lost revenue for the country.

CHAIR —Vexatious claims?

Senator FEENEY —I do not understand either.

Ms Atkinson —PNG has an entrenched lack of capacity within its judicial system, so there are large numbers of backlogged cases and claims against the state. Often people take advantage of the fact that judges do not have the time or the resources to properly hear cases, and also the Solicitor-General’s office is under-resourced in terms of being able to actually attend court hearings. Often people will take advantage of that and make vexatious claims against the PNG government and, when the Solicitor-General’s office litigators cannot get to a court because they are booked in five other courtrooms at the same time, the court has no choice but to award in favour of the claimant. So the Solicitor-General’s office plays a fairly key role in stopping that.

Senator FEENEY —How bizarre! Was there any allegation of corruption around this vexatious claims activity?

Ms Atkinson —Not that I am aware. It is merely, I think, people taking advantage of a situation that exists up there.

CHAIR —There being no further questions, I thank the officers of A-G and Customs for attending. Thank you for your assistance and your submissions.

[2.05 pm]