Australian bank denies Securency coverup

By Kate Tilley
Correspondent

Published: September 26, 2012 6:00 am ET

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Companies & Associations

SYDNEY (Sept. 26, 11:55 a.m. ET) — The Reserve Bank of Australia has denied it covered up bribery allegations against two Australian companies that manufacture the country’s plastic banknotes and market the technology internationally.

Committal proceedings are being held to determine whether there is sufficient evidence that Securency International Pty. Ltd. and Note Printing Australia Ltd. conspired with sales agents in Indonesia, Malaysia and Vietnam to bribe officials to secure contracts to produce plastic banknotes for those countries.

The Canberra-based Australian Federal Police last year charged Melbourne-based Securency and Note Printing of Craigieburn, and seven senior executives with either company, with the alleged offenses.

Proceedings began Aug. 13 in the Melbourne Magistrates’ Court of Victoria. A Victoria Justice Department spokeswoman said the charges are currently being heard together.

Securency — a joint venture formed in 1996 between Sydney-based Reserve Bank and plastic film maker Innovia Films Ltd. of Wigton, England — manufactures and markets a biaxially oriented polypropylene substrate used in Australian banknotes since 1988. Securency has sold the technology to 30 other countries.

Note Printing, wholly owned by Reserve Bank, operates the printing works where Australia’s banknotes are printed. Australia’s media has speculated about when the bank knew about the allegations.

On Sept. 11, Australian Broadcasting Corp.’s TV program 7.30 reported that the Note Printing board, including Reserve Bank’s assistant governor, Frank Campbell, approved almost $US1.2 million in secret commissions in 2007 and 2008 to a Malaysian arms dealer.

The Reserve Bank of Australia responded to the program, saying the bank’s executives acted in good faith and with integrity. “It is completely without foundation to suggest otherwise.” It said the bank has made no attempt to hide information from authorities.

After the program aired, Australian Greens party federal politician Adam Bandt again demanded Australian Treasurer Wayne Swan initiate a judicial inquiry into what senior bank officials knew.

“The growing cloud over RBA and its governance will not clear until a full inquiry is conducted,” Bandt said.

Reserve Bank of Australia’s governor, Glenn Stevens, told the Parliament’s House of Representatives Economics Committee on Aug. 24 that the bank condemns all corrupt or questionable behavior. “We have done a lot of work to tighten controls in the two companies. We have sought at all times to deal appropriately with all issues that have arisen, and cooperate with legal authorities.”

He said the bank first inquired about Note Printing and Securency’s policies for using overseas agents in 2006. Consequently, policies at both companies were strengthened.

Note Printing’s board audited its past practices and compliance in 2007 after the bank requested an update. Stevens said the audit raised “several very concerning” issues and recommended the role of management and staff in dealing with agents be urgently investigated to ensure compliance with Australian law. The board decided to stop using agents and commissioned Sydney-based attorneys at Freehills international law firm to assess standards and compliance.

Stevens said Freehills was highly critical of Note Printing’s practices, but concluded, based on available information, there was no evidence of Australian law breaches.

The Securency board also audited its procedures in 2007 and terminated one agent, whom it shared with Note Printing. The audit found that, unlike Note Printing, Securency had a “good, robust process” for international agent contracts and payments. Another 2008 audit produced the same finding. Stevens said at that time, there was no reason for Securency to stop using agents.

He said Reserve Bank was “completely surprised” when a whistleblower claimed in May 2009 that as much as $US47.7 million in bribes were paid by Securency’s foreign agents to sell the plastic banknote technology globally. After the allegations emerged, Securency approached the Australian Federal Police to investigate and engaged audit and advisory firm KPMG to examine its policies for employing international agents.

“We now know critical information regarding use of agents was withheld from the audit teams and the Securency board in 2007 and 2008,” Stevens said.

He said it is “without foundation” to suggest Reserve Bank’s actions — including audits, independent legal reviews, implementing recommendations, and relying on independent advice — are a “coverup.”


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Australian bank denies Securency coverup

By Kate Tilley
Correspondent

Published: September 26, 2012 6:00 am ET

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