- To conceal the proceeds of corruption and foreign bribery, public officials use similar money laundering methods as those used by organised crime groups. These include the use of corporate vehicles, third parties, professional facilitators, international funds transfers and international trade in services payments.
- Reporting suspicious matter reports (SMRs) to AUSTRAC provides both an indication of the activity of PEPs in Australia and the extent to which reporting entities have identified suspicious activity. SMRs are submitted by banks, casinos, remitters, foreign exchange providers and others.
Corruption has significant effects on economic development, political stability and transnational crime (1). Similarly, the bribery of foreign officials (a form of corruption) is considered a widespread phenomenon in international business transactions, including trade and investment (2). Consequently, the Financial Action Task Force (FATF) has included corruption and bribery in the designated categories of offences for money laundering (3). To conceal the proceeds of corruption and foreign bribery, public officials use similar money laundering methods to those used by organised crime groups.
Corruption is the misuse of public office by an individual for private gain (4). It involves acts ranging from abuse of functions, position or influence, bribery of foreign or domestic officials, self-dealing, extortion, and embezzlement (5).
Money laundering can be carried out with reduced risk when public officials are incorporated into the process. The professional status of public officials enhances the legitimacy of transactions and financial activity and correspondingly reduces the risk of such activity raising suspicion. Consequently, the bribing of public officials can become a key part of criminal activity.
Bribery of foreign officials
It is a criminal offence under Australian law to bribe a foreign public official. Foreign bribery includes providing or offering a benefit to a foreign public official, or causing a benefit to be provided or offered to a foreign public official, where the benefit is not legitimately due. The benefit must be intended to influence a foreign public official in the exercise of their official duties for the purpose of obtaining or retaining business or a business advantage which is not legitimately due (6).
Bribing or attempting to bribe a foreign public official is a serious crime and attracts severe penalties for both individuals and corporations (7). The penalties reflect the serious nature of bribery and the detrimental effect it has on Australia’s trade and reputation, as well as international governance (8). Example 1 in the Appendix highlights a matter involving the bribery of foreign public officials.
Australian companies or individuals that bribe an official in a foreign country can also be prosecuted under the laws of foreign countries (9). Example 2 in the Appendix highlights an example of an Australian prosecuted in the United States for bribery.
Politically exposed persons
Under Australia’s AML/CTF Rules, a PEP is an individual who holds a prominent public position or function in a government body or an international organisation (10).
- heads of state or government
- senior government officials
- high-ranking members of the armed forces
- board chairs, chief executives or chief financial officers in State enterprises or international organisations.
The PEP definition also includes immediate family members and close associates of PEPs (11).
Obviously, the simple identification of an individual as being a PEP does not mean that they are corrupt. Rather, it is the potential for PEPs to be corrupt or corrupted that requires businesses and financial institutions which deal with them to exercise enhanced customer due diligence.
Examples 3 and 4 in the Appendix highlight how the Australian financial system can be exploited by foreign PEPs.
- Financial Action Task Force (FATF), Laundering the Proceeds of Corruption, July 2011, p. 9, viewed 11 February 2015
- Organisation for Economic Co-operation and Development (OECD), Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, (adopted on 21 November 1997), 2011, p. 6. Convention ratified by the Australian Government on 18 October 1999 and entered into force in Australia on 18 December 1999, viewed 11 February 2015
- FATF, International standards on combating money laundering and the financing of terrorism & proliferation, Paris, 2012, p.112
- This is a functional definition, not a legal definition. See fn. 1, p. 6.
- See fn. 1. p. 7 and pp. 16–17.
- Australian Federal Police, Foreign Bribery Fact Sheet, July 2014 and Attorney-General’s Department, Foreign Bribery Information Pack – Fact sheet: The foreign bribery offence, Australian Government. Also, see Division 70 of the Criminal Code Act 1995 (Cth).
- Section 70.2 of the Criminal Code Act 1995 (Cth).
- Department of Foreign Affairs and Trade (DFAT), Corruption, 2015, viewed 26 March 2015
- AUSTRAC compliance guide, Chapter 6: AML/CTF programs