OPINION_ Where does the buck stop in Reserve Bank scandal?

Where does the buck stop in Reserve Bank scandal?
August 11, 2011


Glenn Stevens. Photo: Rob Homer

THEY knew. Two years before The Age reported allegations of bribery by Reserve Bank subsidiaries, senior officials kept in-house information about activities that have led to criminal charges. In 2007, senior bank officials on the board of wholly owned subsidiary Note Printing Australia saw documented evidence of bribery. Not until 2009, after Age reports involving half-owned subsidiary Securency, were those bribery allegations, but not the NPA matters, formally referred to police.

The Reserve Bank has long denied any prior knowledge of the bribery concerns. In the RBA's 2009 annual report, governor Glenn Stevens expressed confidence in its subsidiaries. In May 2009, when The Age inquired about the money trail, deputy governor Ric Battelino said: ''If this is happening, it is against all the policies and procedures that the RBA has put in place.'' But there was no ''if'' about the flouting of rules. Both companies intend to plead guilty to charges of bribing officials in Malaysia, Vietnam and Indonesia, covering a period from 2000 to 2006.

It is extraordinary that Reserve Bank subsidiaries, with RBA officials on their boards, should be the first companies charged under the 1999 foreign bribery laws. Australian Federal Police charged an eighth former executive yesterday. It is even more extraordinary that after The Age's reports on Securency, the bank did not hand over its reports on NPA's activities, which compelled the company to sack sales agents in 2007, until the AFP requested these.

Advertisement: Story continues below When the first charges were laid last month, Mr Stevens said: ''The Reserve Bank deeply regrets that the governance arrangements and processes in the companies at that time were not able to prevent or detect the alleged behaviour that has led to today's charges.''

Also open to question is testimony to a parliamentary committee in February when Mr Stevens suggested that the Age reports were the first anyone at the bank or on its board knew about any allegations of corrupt dealings. ''A question would be: is there any way that anyone in the RBA ever knew anything?'' he said. ''I am pretty sure the answer to that is no.'' But the answer is emphatically yes.

In May 2007, Mr Battelino and the NPA board, including four senior Reserve Bank members, saw evidence that sales agents had paid bribes to secure currency printing deals. The potential breach of Australian law was identified by the bank's chief auditor, who reported to the RBA board's audit committee, which Mr Battelino headed in 2007. Audit committee minutes are circulated to the board. Law firm Freehills was called in to assess evidence of offences.

The audit report and Freehills report were made available to police, at their request, only last year. Dubious practices had continued at Securency - which shared several board members with NPA - for another 2½ years. Had the Securency revelations not triggered a police investigation, NPA may well have avoided scrutiny and charges.

The Age has called for an inquiry since 2009. The major parties shut down attempts to launch a Senate inquiry and may not welcome scrutiny of events that happened under both Coalition and Labor governments. The AWB scandal was politically embarrassing, too, but the global fallout compelled the calling of a royal commission to investigate payments to Iraqi dictator Saddam Hussein's regime.

As with AWB, NPA and Securency were actively supported by politicians, trade officials and diplomats. AWB, however, was not a subsidiary of the Reserve Bank, which must set the standard for integrity. An entirely independent inquiry is needed to establish how the central bank failed in its oversight then did not immediately refer such serious allegations to police. A parliamentary inquiry is no longer adequate for such a task. The integrity of Australian governance is at stake.


Read more: http://www.theage.com.au/opinion/editorial/where-does-the-buck-stop-in-reserve-bank-scandal-20110810-1impt.html#ixzz1UfWJhyxO

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