Are Australia and New Zealand corrupt?

charteredaccountantsanz.com/futureinc
ARE AUSTRALIA AND
NEW ZEALAND CORRUPT?

Copyright © August 2015 Chartered Accountants Australia and New Zealand. All rights reserved.
DISCLAIMER This document was prepared by Chartered Accountants Australia and New Zealand with the assistance of Dr Lisa Marriott. The information in this
document is provided for general guidance only and on the understanding that it does not represent, and is not intended to be, advice. Whilst care has been taken
its preparation, it should not be used as a substitute for consultation with professional accounting, tax, legal or other advisors. Before making any decision or
taking any action, you should consult with an appropriate specialist or professional.
Chartered Accountants Australia and New Zealand. Formed in Australia. Members of the organisation are not liable for the debts and liabilities of the organisation.
ABN 50 084 642 571
Chartered Accountants Australia
and New Zealand
Chartered Accountants Australia and New
Zealand is made up of over 100,000 diverse,
talented and financially astute professionals
who utilise their skills every day to make a
difference for businesses the world over.
Members of Chartered Accountants Australia
and New Zealand are known for professional
integrity, principled judgement, financial discipline
and a forward-looking approach to business.
We focus on the education and lifelong learning
of members, and engage in advocacy and
thought leadership in areas that impact the
economy and domestic and international
capital markets.
We are a member of the International Federation
of Accountants, and are connected globally
through the 800,000-strong Global Accounting
Alliance and Chartered Accountants Worldwide
which brings together leading Institutes in
Australia, England and Wales, Ireland, New
Zealand, Scotland and South Africa to support
and promote over 320,000 Chartered
Accountants in more than 180 countries.
About Dr Lisa Marriott
Dr Lisa Marriott is an Associate Professor of
Taxation at Victoria University of Wellington’s
School of Accounting and Commercial Law.
Lisa is a Chartered Accountant and a member
of Chartered Accountants Australia and New
Zealand. Lisa has publications in a range of
international refereed journals and is the
author of The Politics of Retirement Savings
Taxation: A Trans-tasman Perspective. Lisa
was recently awarded a Royal Society of
New Zealand Marsden Grant to investigate the
different treatments of tax evasion and welfare
fraud in the New Zealand justice system. Lisa
has worked in industry in the private sector in
the United Kingdom and in the New Zealand
public sector. For the past eight years, Lisa
has worked in academia.
0415-45

FOREWORD
In Australia and New Zealand we
have long traded on our reputations
for high ethical standards. They are
reputations that have supported
strong positions in the global economy.
This latest paper from future[inc]
questions whether or not we deserve
our squeaky clean reputations, and
what we should be doing to protect
them. Not only do reports indicate that
rates of corruption in our two countries
may be rising, we are also doing more
business with countries that have
different ethical frameworks from
our own.
With reference to data and case
studies from both New Zealand and
Australia, and from the public and
private sectors, the paper looks at
what our areas of weakness are, what
anti-bribery and corruption tools we
have in place, and whether they are
being used effectively.
Regulation alone doesn’t appear
to be the solution. I encourage you
to consider the “suggestions for the
way forward” discussed in the paper.
Don’t think of them as answers, but
as catalysts for stimulating debate.
We need to be more proactive in
the fight against corruption and
send the message that we take
the issue seriously.
Rethink what you thought you knew
about corruption.
Read on and join the debate.
Fred Hutchings
President,
Chartered Accountants ANZ

ARE AUSTRALIA AND NEW ZEALAND CORRUPT?
4
CONTENTS
05
SUMMARY
06
INTRODUCTION
10
WHAT DO WE KNOW
ABOUT CORRUPTION?
22
WHAT DO WE KNOW
ABOUT CORRUPTION
IN AUSTRALIA AND
NEW ZEALAND?
31
WHAT SHOULD WE
BE DOING ABOUT
CORRUPTION?
34
CONCLUSION
36
REFERENCES

SUMMARY
Relying on our historic reputation as
“fair dinkum” countries is no longer enough.
We need to not only be better in reality at
addressing corruption than other countries –
we also need to be perceived to be better.
Our two countries need to be more
proactive in the fight against corruption.
In this report, we examine what we are
currently doing to mitigate corruption in
Australia and New Zealand and what
we should be doing. We then present ten
options for consideration; our aim is to
start a broad debate on corruption and
the role of Australia and New Zealand in
the international context.
Australia and New Zealand perform well in
global measures of corruption, and both of
our countries trade on reputations for honesty
and integrity. However, rates of corruption
are reported to be rising and we are trading
increasingly often with countries that are
considered to be highly corrupt. Additionally,
despite our positive survey rankings, Australia
and New Zealand have been subject to harsh
criticism in recent years for what is perceived
to be a lackadaisical approach to corruption.
How justified are our good reputations?
Countries such as the United Kingdom
(UK) have been lauded by international
organisations for initiatives such as the
Bribery Act 2010, a tough anti-bribery and
corruption law. We need to consider how
Australia and New Zealand are currently
perceived in the domain of global corruption
and how we wish to be perceived in the future.
5future[inc]

INTRODUCTION
Global reports suggest that rates of corruption
are low in Australia and New Zealand. Is this
view warranted? A brief look at newspaper
headlines would suggest not. Cases already
reported in the media in 2015 include the
payment or receiving of bribes,1
misconduct in
public office,2
and undisclosed gift-giving and
receiving.3
The Australian media has reported
over the past few months that “Australia’s slide
into corruption must be stopped”, while New
Zealand’s media recently labelled the Minister
of Justice as the “Minister of Corruption.”4
We have even become accustomed to media
reports about corruption on the sports field,
including recent accusations of bribery and
match fixing in football and cricket.
We set out to ask not only are we corrupt?
But also how corrupt are we? And perhaps
more importantly, what are we doing about it?
6

What should we be paying more attention
to: statistical rankings or national reports?
We set out to ask not only “are we corrupt?”
but also “how corrupt are we?” And
perhaps more importantly, “what are
we doing about it?”
Before we start, we need to clarify what
we mean by “corruption.” The definition of
corruption used by the Asian Development
Bank is “Behaviour on the part of officials
in the public or private sector in which they
improperly and unlawfully enrich themselves
or those close to them, or induce others to do
so, by misusing the position in which they are
placed.” This definition of corruption is also
used by the New Zealand Serious Fraud Office.
The victims of corruption may be individuals,
private sector organisations or public sector
institutions. Corruption may be considered
a subset of fraud, and incorporates a broad
range of activities (see Figure 2). For the
purposes of this paper we consider financial
crime to be a subset of corruption.
FIGURE 1: CORRUPTION IN AUSTRALIA AND NEW ZEALAND
CORRUPTION: the abuse of public
or private office for personal gain.
82% increase in fraud, bribery and
corruption over $1 million in
Australia and New Zealand5
300% increase in losses due to economic
crime in Australia and New Zealand
between 1997 and 20127
194,454
fraud, bribery and corruption
incidents in Australia and
New Zealand in 20128
PwC survey respondents
report experiencing
economic crime in 20146
33% 57%
OF NEW ZEALAND OF AUSTRALIA
+
7future[inc]

FIGURE 2: ASPECTS OF CORRUPTION9
But what impact does corruption have
on the Australian and New Zealand general
public and our businesses? Perhaps the
most important financial incentive to
minimise corruption is the reduction of
reputational risk. In the private sector, a
strong reputation means lower costs of
doing business, a lower cost of capital, and
easier access to international markets.10
Corruption can impact on employee morale,
business relations and an organisation’s
share price. The public sector also
benefits when corruption is minimised:
government resources are increased and
greater investment can be made in health,
education and other services.
The issue of corruption – and what can
be done about it – needs to be debated.
Can we be comforted by our positions in
international rankings, or do we need to
determine for ourselves whether the level
of corruption in our society is acceptable?
Are we doing enough to combat corruption
in Australia and New Zealand?
CORRUPTION
Conflicts
of interest
Purchasing
schemes
Sales
schemes
Bribery
Bid rigging
Invoice
kickbacks
Illegal
gratuities
Economic
extortion
8

FINANCIAL CRIME
is the foundation for most
serious crime.
11
JULIE READ
DIRECTOR AND CHIEF EXECUTIVE OF THE
SERIOUS FRAUD OFFICE IN NEW ZEALAND.
9future[inc]

We know an issue has become significant
when it has a day named after it, and
even its own acronym. The United Nations
has an annual designated “International
Anti‑Corruption Day” – 9 December –
aimed at raising awareness of corruption.
Meanwhile, anti‑bribery and corruption
activity has become commonly known by
the acronym ABC.
It is difficult to measure corruption
accurately. As will be seen, many reports
are based on perceptions of corruption,
rather than absolute measures. These
perception surveys are seen as the most
reliable method for comparative analysis
of international corruption. Many corrupt
activities will not be captured in crime
statistics, as they are by their nature hidden.
Nonetheless, we can attempt to assess the
harm caused by corruption.
WHAT DO WE KNOW ABOUT
CORRUPTION?
10

AUSTRALIA AND NEW ZEALAND IN THE GLOBAL CONTEXT
PUBLIC SECTOR
Both nations rank favourably in
global surveys of fraud and corruption,
New Zealand even more so.
Perhaps the best-known international
organisation addressing corruption is
Transparency International; its annual
Corruption Perceptions Index “ranks
countries and territories based on how
corrupt their public sector is perceived
to be.”12
Figure 3 lists the top sixteen
countries in the 2014 rankings, from
least corrupt to most corrupt. At the
present time, New Zealand and Australia
are well placed on this index, ranking
second and eleventh respectively.
Transparency International describes global
public sector corruption as “alarming.” In the
most recent Perceptions Index more than
two‑thirds of the 175 measured countries rank
below 50 on a scoring system ranging from
0 (highly corrupt) to 100 (not corrupt).13
What is also important to note from
this survey, however, is a visible trend (see
Figure 4): both countries have dropped from
their 2013 ranking. New Zealand, having
occupied the first position for many years,
is now in second place. Australia’s position
has dropped for two consecutive years,
from seventh equal in 2012, to ninth equal
in 2013 and eleventh in 2014.
RANK COUNTRY SCORE
1 Denmark 92
2 New Zealand 91
3 Finland 89
4 Sweden 87
5 Norway 86
5 Switzerland 86
7 Singapore 84
8 Netherlands 83
9 Luxembourg 82
10 Canada 81
11 Australia 80
12 Germany 79
12 Iceland 79
14 United Kingdom 78
15 Belgium 76
15 Japan 76
Ranking is from least corrupt to most corrupt; scale for score is 0-100, where 0 means extremely corrupt and 100 means not corrupt.
SOURCE: Corruption Perceptions Index 2014 Transparency International.
FIGURE 3: TRANSPARENCY INTERNATIONAL 2014 CORRUPTION PERCEPTIONS INDEX12
MOSTCORRUPTLEASTCORRUPT
11future[inc]

These findings are also reflected in the
results of the 2014 World Justice Project
(WJP) Rule of Law Index. WJP publish
an annual index of 99 countries using
47 indicators based around eight themes.
One of the themes is corruption. Like
Transparency International, this Index is
concerned with corruption in the public
sector, including behaviours such as
bribery, extortion, and misappropriation
of public funds or resources. The Absence
of Corruption measure produced by the
Index, ranks countries on a scale of 0 – 1,
with higher values indicating lower levels
of corruption. In 2014, New Zealand scored
an impressive 0.91, with Australia lagging
slightly at 0.86.15
PUBLIC AND PRIVATE SECTORS
In Figure 5 we look at perceptions of
corruption in a range of institutions – this
time including both the public and private
sectors. Results are taken from Transparency
International’s Global Corruption Barometer.
Respondents were asked to what extent
they saw each of the institutions as being
affected by corruption. The scale is 1 to 5,
where 1 means not at all corrupt and 5
means extremely corrupt.
FIGURE 4: TRANSPARENCY INTERNATIONAL INDEX RESULTS FOR AUSTRALIA AND NEW ZEALAND 2012–201414
2012 2013 2014
Ranking 7=/176 1=/176 9=/177 1=/177 11/175 2/175
Score 85/100 90/100 81/100 91/100 80/100 91/100
12

What is apparent is that New Zealand
scores lower than Australia for each of the
institutions. In most cases, both Australia and
New Zealand scored lower than the global
rating. The media was perceived to have
higher levels of corruption than the global
scale in both countries. Non-government
organisations and the business/private sector
scored higher than the global average in
Australia but lower than the global average
in New Zealand.
In both Australia and New Zealand, the media
and political parties were perceived to be the
most corrupt institutions. Globally, the most
corrupt institutions were perceived to be
political parties and the police.
Trade unions – though not included in Figure
5 – are also perceived to have high levels
of corruption in Australia.16
Indeed, a Royal
Commission into Trade Union Governance
and Corruption is ongoing in Australia in 2015.
The Interim Report, published in December
2014, raises multiple issues with governance
among trade unions in Australia, including:
• conflicts of interest with funds held for a
variety of purposes
• fraudulent and other misconduct by former
union officials, and
• improper use of funds.17
FIGURE 5: PERCEPTIONS OF CORRUPTION IN MAJOR INSTITUTIONS18
PUBLIC OFFICIALS/CIVIL SERVANTS
POLICE
MEDICAL/HEALTH SERVICES
JUDICIARY
EDUCATION SYSTEM
BUSINESS/PRIVATE SECTOR
RELIGIOUS BODIES
MEDIA
NON-GOVERNMENT ORGANISATIONS
MILITARY
PARLIAMENT/LEGISLATURE
POLITICAL PARTIES
1 2 3 4 5
SCALE 1-5, where 1 means not corrupt and 5 means extremely corrupt
New Zealand Australia Global
SOURCE: Global Corruption Barometer 2013 Transparency International.
13future[inc]

CORRUPTION ON THE INCREASE?
CRIMINAL CONVICTIONS FOR
DECEPTIVE PRACTICES
Australia and New Zealand use the same
standard classifications for criminal offending.
Corruption is not measured as a category in
itself. However, within the broader category
of “fraud, deception and related offences”, a
measure is captured for “deceptive business/
government practices.” This includes illegal
non-fraudulent trade practices, fraudulent
trade practices20
and misrepresentation
of professional status. Figure 6 reports on
the number of adults convicted in court for
this offence over a 14-year period in New
Zealand being from 2000-2013, and over a
5-year period in Australia, from 2008/9 – to
2012/13. During this period in New Zealand,
the average number of offences was 55 per
year. No clear trend is apparent amongst
the undulating results. Neither is a clear
pattern visible in Australia, although the
most recent year reported (2012–13) shows a
significantly lower level of convictions for this
crime category than for previous years. When
adjusted for the different population sizes,
Australia and New Zealand report similar
proportions of convictions in this category.
CONFLICTING REPORTS
Figure 6 suggests that convictions for
corruption offences are not increasing in
Australia and New Zealand. However, in its
Global Economic Crime Survey 2014, PwC
reported that every region surveyed (99
countries in total) observed an increase in
cases of bribery and corruption between
2011 and 2014.21
Moreover, threats of bribery
and corruption were reported as having risen
more quickly than most other categories of
economic crime.22
PwC’s survey showed an
increase in reported bribery and corruption
in New Zealand from 7% to 15% between 2011
and 2014, and a global increase from 24%
to 27%.23
Other studies support this finding,
with an Australian study finding that 43% of
respondents believed that corruption had
increased in the three year period to 2012;24
and Transparency International reporting
that 53% of respondents perceive corruption
has increased or significantly increased
over the previous two year period.25
Why
aren’t convictions for corruption increasing
in line with threats and observed cases
of corruption?
“Every year, WESTERN BUSINESSES pay huge
amounts of MONEY IN BRIBES to win friends,
influence and contracts.”19
Dr Susan Hawley
14

FIGURE 6: CONVICTIONS FOR “DECEPTIVE BUSINESS/GOVERNMENT PRACTICES” IN AUSTRALIA AND NEW ZEALAND
350
300
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
New Zealand Australia
“We believe that one driver of the HIGH REPORTED FIGURES
OF BRIBERY AND CORRUPTION may be the megatrend of the
shift in wealth from the developed economies of the West to the
emerging high-growth economies of the South and East.”
PwC Global Economic Crime Survey 201428
SOURCE: Adapted from “Statistics New Zealand, Customised Dataset – Charges prosecuted against adults by offence type. Data extracted 30 October 2014”26
and “Australian Bureau of Statistics, Recorded Crime – Offenders, Principal offence (divisions and selected subdivisions) 2008-09 to 2012-13, Table 4,
Commonwealth of Australia, 2014.”27
15future[inc]

CORRUPT TRADING PARTNERS?
Corruption is a global issue, and organisations
doing business with countries that have
high levels of corruption are more likely to be
exposed to corrupt practices. Australia and
New Zealand both trade in a large number
of jurisdictions: KPMG report that Australian
organisations operate in 171 countries outside
Australia, and New Zealand organisations
operate in 169 countries outside New
Zealand.30
Survey results reported by PwC
indicate that 50% of organisations around
the world operate in areas identified to
have a high corruption risk.31
Australia and New Zealand have the
same top ten trading partners, some of
which, such as Thailand and China, rank
poorly in Transparency International’s Global
Corruption Index (see Figure 7). China, the
number one trading partner of both Australia
and New Zealand, is ranked 100 out of
176 countries on the index, scoring 36/100
(where 0 is highly corrupt and 100 is not at all
corrupt). Thailand’s measure is only slightly
better at 38/100.
COUNTRY
TRADING POSITION
(AUSTRALIA)
TRADING POSITION
(NEW ZEALAND)
TRANSPARENCY
INTERNATIONAL
RANKING (2014)
TRANSPARENCY
INTERNATIONAL
SCORE (2014)
CHINA 1 1 100/176 36
USA 3 3 17/176 74
JAPAN 2 4 15/176 76
REPUBLIC OF KOREA 4 5 43/176 55
SINGAPORE 5 6 7/176 84
UNITED KINGDOM 7 7 14/176 78
GERMANY 10 8 12/176 79
MALAYSIA 9 9 50/176 52
THAILAND 8 10 85/176 38
Ranking is from least corrupt to most corrupt; scale for score is 0-100, where 0 means extremely corrupt and 100 means not corrupt
FIGURE 7: TOP TRADING PARTNERS OF AUSTRALIA AND NEW ZEALAND – TRANSPARENCY INTERNATIONAL RANKINGS29
16

KEY RISK AREAS
THIRD PARTIES
International trade presents significant
challenges to multinational organisations.
One practice identified with an increased
risk of corruption is the use of vendors or
third parties. In 2013, around 90% of cases
reported under the United States (US) Foreign
Corrupt Practices Act involved third parties.
Third parties are also seen as generating the
highest compliance risks for businesses.33
The three most significant bribery and
corruption challenges reported in a survey
of 214 UK and US executives were: auditing
third parties for compliance; issues in
performing due diligence on foreign agents
or third parties; and variations in different
jurisdictions on issues such as facilitation
payments (see page 20).34
Figure 8 extracted from EY’s 2013 Asia-
Pacific Fraud Survey examines compliance
options for third-party contracts. The
survey data has been collected from 681
professionals and executives across eight
Asia Pacific countries, including Australia and
New Zealand. What it shows is that most of
these tools are not widely used. Just over a
quarter of respondents had no processes
at all to monitor third parties. Only 37% had
an approved supplier database and 38%
had a background checking system – these
are two of the fundamentals of good control
systems. Also surprising is the low percentage
of respondents that were regularly auditing
third parties with which they were doing
business. Even more surprising is that most
of these companies were not small: 32%
of respondents had over 500 employees,
55% had between 50 and 500, and only
10% had fewer than 50.
HIGH-RISK INDUSTRIES
The highest levels of bribery and corruption
worldwide are reported in engineering,
construction and energy, utilities and mining.
Professional services and hospitality are two
examples of industries that fall below the
global average of 27% across all industries.35
“While it is not the most common form of crime
reported, of all the types of fraud covered in
our survey, BRIBERY AND CORRUPTION MAY
POSE THE GREATEST THREAT TO GLOBAL
BUSINESSES because of the number of
business processes it threatens.”
PwC Global Economic Crime Survey 2014.32
17future[inc]

FIGURE 9: REPORTED BRIBERY AND CORRUPTION WORLDWIDE, BY INDUSTRY
ENGINEERING AND CONSTRUCTION
ENERGY, UTILITIES AND MINING
GOVERNMENT/STATE OWNED ENTERPRISES
TECHNOLOGY
PHARMACEUTICALS AND LIFE SCIENCES
COMMUNICATION
TRANSPORTATION AND LOGISTICS
INDUSTRIAL PRODUCTS
GLOBAL
RETAIL AND CONSUMER
HOSPITALITY AND LEISURE
INSURANCE
OTHER INDUSTRIES
FINANCIAL SERVICES
PROFESSIONAL SERVICES
ENTERTAINMENT AND MEDIA
0% 10% 20% 30% 40% 50% 60%
50%
42%
35%
32%
31%
30%
30%
28%
27%
25%
24%
24%
22%
19%
18%
14%
FIGURE 8: SYSTEMS AND CONTROLS FOR MONITORING THIRD PARTIES36
BACKGROUND CHECKING SYSTEM
APPROVED SUPPLIER DATABASE
CHECK ON OWNERSHIP OF THIRD PARTY
EXTERNAL PROVIDERS TO RUN CHECKS
NO PROCESSES
AUDIT RIGHTS OF THE THIRD PARTY
TECHNOLOGY BASED CHECK OF THIRD PARTY
OTHER
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
38%
37%
29%
28%
26%
23%
22%
18%
SOURCE: PwC Global Economic Crime Survey 2014.
18

CORRUPTION – THE PRICE
OECD publications suggest the cost of
corruption is in excess of 5% of global GDP,
or US$2.6 trillion. A significant portion of this
figure (US$1 trillion) is made up of bribes.37
In recent international survey results from
PwC, 53% of respondents believed that
the greatest economic crime risk was from
bribery and corruption.38
The level of concern
was slightly higher in the Asia Pacific region,
with 56% of respondents believing the highest
relative economic crime risk was from bribery
and corruption.39
Corruption is estimated to cost the private
sector around 5% of revenues each year.
Added to these losses are the costs of
detecting corrupt activity, the costs incurred
in reputation damage (including reduced
share prices), increased costs of doing
business and diminished employee morale.
Corruption within the public sector is no less
damaging. Instead, the costs are reflected
in increased taxes or reduced services. The
significant financial impact of corruption is
outlined in the case studies below.
CASE STUDY 1: Public sector corruption in New Zealand
The Chief Information Officer (CIO) of the Otago District Health Board (DHB), together with a
Queenstown surveyor, defrauded nearly NZ$17 million from the DHB over a period of six years.
The offenders raised 198 invoices from associated companies to charge the DHB for IT-related
services that were not provided. The corruption was discovered in 2008. Both offenders received
prison sentences: nine years and six months for the former CIO and four years and three months
for the surveyor.40
CASE STUDY 2: Insider trading
in Australia
In 2014, the Australian Federal Police and
the Australian Securities and Investments
Commission engaged in a joint investigation
into an insider trading scheme involving a
National Australia Bank employee and an
employee of the Australian Bureau of
Statistics. They found that the National
Australia Bank employee had made use of
market-sensitive statistical information
to engage in foreign exchange derivative
contracts. Both employees were charged
with insider trading, money laundering,
corruption and abuse-of-office offences. As
a result of the investigation, the Australian
Federal Police restrained cash and property
worth AUD$7 million.41
CASE STUDY 3: Finance company
corruption in New Zealand
Finance companies have been particularly
prominent as settings of corruption in New
Zealand in recent years. Company directors
have been prosecuted for a wide range of
offences, including making false statements
in offer documents, false accounting, and
theft by a person in a special relationship.
Corruption in finance companies causes
significant losses to many individuals.
The Bridgecorp group collapse in 2007 left
NZ$460 million outstanding, representing
14,500 investors. The Hanover Finance
collapse in 2008 left 13,000 investors with
losses totalling NZ$465 million. These are
just two of the 66 finance company collapses
reported in New Zealand since 2006.42
19future[inc]

CORRUPTION AND WEALTH
Real GDP per capita has been described
as “the most important determinant of
corruption.”43
Research has found that
as a country’s wealth increases, corruption
decreases.44
New Zealand’s corruption
ranking challenges this finding, as
New Zealand typically falls outside the
top 20 countries in terms of GDP per
capita (based on purchasing power parity).
For example, the IMF place New Zealand’s
GDP per capita at 31 out of 183 countries45
and the Social Progress Index positions
New Zealand’s GDP per capita at 21 out of
133 countries.46
Australia ranks 16/183 and
11/133 under the same measures.
It is problematic to attempt to explain
New Zealand’s low levels of corruption by
pointing to its wealth: by the same rationale
we would expect Australia to be less corrupt
than New Zealand when it is reported
consistently to be more corrupt.
Other determinants of corruption include
inflation (periods of high inflation are linked
to increased corruption),47
and development
(more developed economies have lower
levels).48
This second point may be somewhat
circular, as it is widely understood that
corruption hinders growth. The OECD has
stated that “Corruption is one of the main
obstacles to sustainable economic, political
and social development, for developing,
emerging and developed economies alike.”49
WHEN IS A BRIBE A
“FACILITATION PAYMENT”?
Transparency International defines a bribe
as “a favour or gift offered or given with the
intention of influencing behaviour or opinions
of the recipient.”50
The OECD, however,
classifies “facilitation payments” separately.
Facilitation payments are made to expedite
an outcome rather than to change it. While
bribery is illegal in most countries, the legality
of facilitation payments is jurisdiction-specific.
OECD publications suggest the cost of
corruption is in excess of 5% of global GDP,
or US$2.6 trillion. A significant portion of this
figure (US$1 trillion) is made up of bribes.51
In New Zealand… payments to INFLUENCE FOREIGN PUBLIC OFFICIALS ARE NOT
ILLEGAL if their purpose is ‘ensuring or expediting the performance by a foreign public official
of a routine government action; and the value of the benefit is small as defined in legislation.
20

NEW ZEALAND
In New Zealand, section 105C(3) of the
Crimes Act 1961 covers bribery of foreign
public officials. Under this legislation,
payments to influence foreign public
officials are not illegal if their purpose is
“ensuring or expediting the performance
by a foreign public official of a routine
government action; and the value of the
benefit is small.” The Income Tax Act 2007,
section DB 45, provides for such payments
to be tax deductible outside New Zealand
if they are not illegal in the country where
the funds are received and (using the
same phrasing as the Crimes Act 1961),
the payment is small, and is intended to
ensure rather than change an outcome.
AUSTRALIA
In Australia, division 70.4 of the Criminal Code
Act 1995 covers bribery of foreign public
officials. This section provides a defence for
facilitation payments where: the value of the
benefit was minor; “the person’s conduct was
engaged in for the sole or dominant purpose
of expediting or securing the performance
of a routine government action of a minor
nature”; the conduct was documented; and
the documents have been retained.
The Australian Federal Police have said the
facilitation payment defence is currently
being considered for repeal.52
Nonetheless,
facilitation payments remain tax deductible in
some situations. Section 26.52 of the Income
Tax Assessment Act 1997 specifies that an
amount is not a bribe (to a public foreign
official) where the value of the benefit is minor
and, using the same language as the Criminal
Code Act 1995, the payment is made to
ensure an outcome rather than to change it.OECD publications suggest the COST OF
CORRUPTION IS IN EXCESS OF 5% OF GLOBAL
GDP, or US$2.6 trillion. A significant portion of this
figure (US$1 trillion) is made up of bribes.
21future[inc]

WHAT DO WE KNOW
ABOUT CORRUPTION IN
AUSTRALIA AND
NEW ZEALAND?
It is widely believed that Australia and
New Zealand have relatively low levels
of corruption. New Zealand is perceived
consistently to be less corrupt than
Australia, but Australia is still seen as
less corrupt than most other countries.
Rankings aside, levels of corruption are
reported to be rising in both countries,
and we are trading increasingly often with
countries that are more corrupt than ours.
The issue of corruption can no longer be
dismissed. Even New Zealand, long regarded
as one of the least corrupt countries in the
world, is “not immune from the threats
associated with bribery and corruption.”53
Assuming we wish to maintain and
potentially improve our reputations for
honesty and integrity, we need to ask what
we are doing about corruption. Is it enough?
22

What are we doing about corruption?
Despite our strong international rankings,
Australia and New Zealand have recently
been called on to pay greater attention to
corruption. For example, PwC argue:
New Zealand CEOs should be more
cognisant when it comes to considering the
risks associated with this type of economic
crime. Not only are the numbers of reported
occurrences increasing but, of the three
economic crimes falling under government
enforcement, almost half of our survey
respondents (49%) perceived bribery and
corruption as having the most severe impact
on their corporate reputation.54
This section considers how we are fighting
corruption in Australia and New Zealand, and
the methods being used in other countries.
INSTITUTIONS
The public sector institutions in New Zealand
that are most involved in combatting
corruption are the New Zealand Police
and the Serious Fraud Office (SFO). New
Zealand Police is the institution with primary
responsibility for investigating fraud and
corruption. Within the police, the Financial
Intelligence Unit assists with the detection and
investigation of serious financial offending
(including money laundering and the financing
of terrorism) by collecting and analysing
information that is used by a range of other
entities, such as Interpol, the Inland Revenue
and the New Zealand Customs Service.
The SFO is responsible for the investigation
and prosecution of complex or serious fraud.
While it does not have a mandate to look for
fraud, it does have mechanisms for active
monitoring within the corporate environment.
The SFO gives priority to cases of multi‑victim
fraud; fraud involving those in positions
of trust, such as lawyers or accountants;
matters of bribery and corruption; and
cases that could significantly damage
New Zealand’s reputation for fair and free
financial markets.55
23future[inc]

TRANSPARENCY INTERNATIONAL “PILLARS”
Under its National Integrity System, Transparency International describes the important “pillars” for a
nation’s governance (see Figure 10).56
If the pillars are well formed and function as intended, corruption
levels are likely to be lower. According to Transparency International’s assessments, all of these pillars
function well in Australia and New Zealand.
FIGURE 10: PILLARS OF NATIONAL INTEGRITY57
Public sector
Ombudsman
Political parties
Anti-corruption agencies
Law enforcement
Media
Audit institution
Judiciary
Business
Civil society
Electoral management body
LEGISLATIVE BRANCH OF GOVERNMENT EXECUTIVE BRANCH OF GOVERNMENT
Other New Zealand institutions purposed
with combating fraud include the Financial
Markets Authority (FMA), the Commerce
Commission, the Office of the Auditor
General, and Audit New Zealand.
There is no equivalent to the New Zealand
SFO in Australia. Instead, corruption is
investigated by state or territory police
or the Australian Federal Police (AFP).
The AFP investigate fraud and corruption
against Commonwealth law, which applies
nationwide. These are likely to be serious or
complex cases. The state police prosecute
fraud under local legislation. Some cases
may involve breaches of both state and
Commonwealth legislation.
The Australian Securities and Investment
Commission (ASIC) administers and
enforces laws relating to financial markets,
financial services organisations and financial
professionals.
Among the many other organisations
that work to combat fraud in Australia (both
public and private sector), are the Insurance
Fraud Bureau of Australia, the Australian
Cybercrime Online Reporting Network,
and the Australian Prudential Regulatory
Authority (APRA). The Commonwealth Fraud
Control Framework outlines the Australian
Government’s approach toward fraud control.
24

TOOLS TO DETECT CORRUPTION
In general, academic research tends to
agree that greater likelihood of detection
is a stronger deterrent to non-compliant
behaviour than increased severity of
punishment. Where corruption is concerned,
detection methods are directly related to
prevention.59
Figure 11 shows survey results
from 214 executives in the US and the UK, who
reported on the measures their organisations
had in place to detect and monitor bribery
and corruption risk. The methods most
frequently adopted were monitoring and
internal audit, communication and training,
whistle-blower mechanisms, and anti-bribery
and corruption (ABC) policies.
WHISTLE-BLOWING
Reports indicate that the most common
method of detection for economic crime in
Australia and New Zealand is whistle‑blowing.
A 2014 PwC survey of private sector
organisations found that in Australia, 29% of
organisations were detecting economic crime
through tip-offs and formal whistle‑blowing
initiatives.60
The figure was even higher in
New Zealand, where tip-offs and formal
whistle‑blowing initiatives detected 37%
of discovered economic crime.61
Anonymous tip-off lines for reporting fraud
and corruption are used in both the public
and private sectors. For example, KPMG
has an Ethics and Compliance Hotline,
which is a mechanism for reporting illegal
or unethical activity or improper conduct
as outlined in the KPMG Code of Conduct.
Insurance companies, banks and consumer
organisations also provide tip-off lines.
Perhaps unsurprisingly, organisations with
whistle-blower hotlines reported more
instances of fraud than those without.62
FIGURE 11: UK AND US ANTI-BRIBERY AND CORRUPTION STRATEGIES (2010)58
None
Full-time ABC officer
ABC committee
Periodic compliance certification
“Right to audit” in third-party contracts
ABC compliance risk assessment
Continuous monitoring and internal audit
Communication and training
Whistle-blower mechanisms
ABC policies
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
US UK
25future[inc]

CODES OF ETHICS
It is inevitable that there will always be
some individuals who will engage in corrupt
behaviour. To minimise the risk, organisations
can use mechanisms such as codes of
conduct and codes of ethics to guide their
members in knowing the behaviours that
are expected and acceptable. However,
as reported in our recent publication Why
business ethics matter to your bottom line,63
just having a code of ethics is not enough.
Organisations need to go further and create
an environment that supports employees to
make ethical decisions. In these environments,
corruption is unlikely to thrive.
The argument is made that business
needs to completely rethink the way we
approach the management of business
ethics. This situation is generated from
increasing globalisation; the changing
use of technologies in business; and the
fallout from what is now known to be poor
ethical decision-making playing a role in
the Global Financial Crisis. Our publication
argues that business ethics in Australia (and
therefore presumably also in New Zealand)
is less mature than other parts of the globe.
Thus, what appears to be a reliance on the
presence of a code of ethics, rather than a
strong enforcement of the code of ethics,
appears to dominate in Australia and
New Zealand.
While professions such as accountancy
and law have utilised written codes of ethics
for decades, such codes have recently been
applied across many other sectors.64
Codes
of ethics exist for a number of reasons:
they establish acceptable practices, outline
approaches to managing both ethical
dilemmas and unethical behaviour, and
signal to stakeholders outside the organisation
the standards of behaviour they may expect.
Research suggests that employees of
organisations with codes of ethics rate their
companies more highly for ethical support
and feel more satisfied with the outcomes
of ethical dilemmas.65
Research also suggests a link between
financial performance and an increased
emphasis on ethics. A study from the US
reports that the 27% of the 500 largest
public companies that committed to ethical
behaviour toward their stakeholders, or who
emphasised compliance with their code of
conduct, had significantly improved financial
performance compared to those that
had not.66
New Zealand has been criticised for
paying comparatively less attention to
codes of ethics than other countries.
Transparency International claimed in
2010 that in New Zealand “few companies
augment their [ABC] policy with an
adequate system to encourage a culture
of compliance with anti-corruption policies.”
They cited research carried out by CAER
(Corporate Analysis, Enhanced Responsibility)
in 2009 (see Figure 12), which showed that
only 16% of NZX companies had a corporate
ethics system that rated as advanced. “The
bottom line of this research” Transparency
International observes, “appears to be
that many of New Zealand’s largest listed
businesses don’t pass some fundamental
best practice ethics tests.”67
“THERE IS ALWAYS FRAUD. That is not a function
of society being corrupt: that is a function of
individuals being corrupt.”
Julie Read, Director and Chief Executive of the Serious
Fraud Office, New Zealand
26

A CULTURE OF CORRUPTION
The culture of an organisation may be said to be corrupt if it either supports corrupt activity
or fails to address corruption. One of the best-known examples in Australia is the case of the
Australian Wheat Board (see Case Study 4). In this case, a culture of corruption created by
the individuals in power at the time allowed the illegal activity to continue over a long period.
CASE STUDY 4
The Australian Wheat Board held a monopoly over
Australian wheat exports and was the largest supplier
of humanitarian goods to Iraq during the Oil-For-Food
Programme. In the mid-2000s, the Australian Wheat
Board was found to have been paying “kickbacks” to
Saddam Hussein’s regime, in exchange for valuable
wheat contracts. This contravened the United Nations
sanctions that were in place at the time (including a
financial and trade embargo), as well as Australian
law and the OECD anti-bribery convention. A number
of successful civil prosecutions were taken against
individuals in response to the scandal. One civil case,
taken by shareholders of the Australian Wheat Board,
was settled for AUD$39.5 million in 2010.
The Australian Wheat Board case has become
synonymous with corrupt corporate culture. Research
has shown how the culture within the Australian Wheat
Board created an environment where senior managers
placed performance measures above the sanctions
that were clearly established by the United Nations68
.
Subsequent reviews of performance at the Australian
Wheat Board clearly established the link between the
culture at the organisation and the illegal activity: “The
conduct of AWB and its officers was due to a failure in
corporate culture.” The subsequent Cole report69
was
damning of the organisation, stating: “The answer is
a closed culture of superiority and impregnability, of
dominance and self-importance. Legislation cannot
destroy such a culture or create a satisfactory one. That
is the task of boards and the management of companies.
The starting point is an ethical base. At AWB the Board
and management failed to create, instil or maintain a
culture of ethical dealing.“70
(page xii).
FIGURE 12: CODES OF ETHICS SYSTEMS FOR THE NZX 50
%ofcompanies 40
35
30
25
20
15
10
5
0
ADVANCED INTERMEDIATE BASIC LIMITED
SYSTEM RATING
Companies prohibiting bribery Companies prohibiting facilitation payments Overall
27future[inc]

ANTI-BRIBERY POLICIES
Transparency International has also found
New Zealand companies to be wanting in
their ABC policies. Figure 13, taken from a
report issued by Transparency International
in 2010, compares the proportion of New
Zealand companies that prohibit giving and
receiving bribes to that in other countries.
Less than half of NZX-listed companies
had policies prohibiting bribery, ranking
New Zealand below the UK, the US, Europe
and Australia on this measure.71
The same
report found that only 18% of New Zealand
companies had policies on facilitation
payments. New Zealand’s poor showing
may perhaps be expected when the NZX
listing rules do not require specific policies
on bribery and corruption.
REGULATION
NEW ZEALAND
Perhaps the best-known legislation
aimed at minimising fraud and corruption
in New Zealand is the Protected Disclosures
Act 2000, more commonly known as the
whistle-blowing act. The protection offered
under the legislation is that no civil, criminal
or disciplinary proceedings may be taken
against a person who makes a protected
disclosure. Since the introduction of the
Protected Disclosures Act there has been
wider acknowledgement that employees
should have the opportunity to report corrupt
activity without potential repercussions.
The Organised Crime and Anti-corruption
Legislation Bill was introduced to the New
Zealand Parliament in June 2014. The
objectives of the bill are:
• to ensure that law enforcement agencies
have the power to deal with organised
crime and corruption
• to improve New Zealand’s ability to
collaborate with overseas agencies
in combatting organised crime
and corruption.
Key measures introduced by the Bill include:
• the requirement for entities such as
banks to report all international transfers
above NZ$1,000 and all physical cash
transactions above NZ$10,000 to the
Financial Intelligence Unit within the
New Zealand Police Department
• increased information sharing with
other jurisdictions
• increasing penalties for bribery and
corruption in the private sector, and
• updating the definition of crime involving
dishonesty in the Crimes Act 1961 to
ensure that those convicted of corruption
offences cannot hold positions of trust in
the community.
Other legislation with relevance to economic
crime in New Zealand includes the Crimes
Act 1961 (which is relevant to public sector
corruption); the Secret Commissions
Act 1910 (which relates to the giving and
receiving of gifts or other forms of payment
in exchange for the rewarding of contracts);
the Commerce Act 1986 and the Financial
Markets Conduct Act 2013.
AUSTRALIA
Legal commentators have observed that
Australia has a plethora of regulatory tools
for fighting corruption.72
Commonwealth
legislation includes the Criminal Code Act
1995, which covers bribery of public officials,
and the Crimes Legislation Amendment
(Serious and Organised Crime) Act 2010,
which increased the penalties for bribery
offences. Individuals may now be sentenced
to up to 10 years in prison or a fine in excess
of AUD$1 million for such offences, and
companies a fine of up to AUD$17 million or
three times the value of benefits obtained by
the bribery, whichever is the greater.73
Other Commonwealth legislation with
relevance to corruption includes the Public
Service Act 1999, the Commonwealth
Electoral Act 1918, the Financial Management
and Accountability Act 1997 and the Proceeds
of Crime Act 2002. Each state and territory
has its own anti-corruption provisions and
whistle-blower legislation.
28

INTERNATIONAL CONVENTIONS
Australia and New Zealand are both
signatories to the OECD Convention on
Combating Bribery of Foreign Public Officials
in International Business Transactions. The
41 countries that have signed up to the OECD
Convention account for 80% of world exports.
Both countries have also signed the United
Nations Convention against Corruption,
although New Zealand is one of only a few
countries that have not yet ratified the
United Nations Convention.
Signatories of the two conventions are
required to have strong mechanisms in
place to address bribery and corruption.
Signatories to the OECD Convention must
have legislation making bribery of foreign
public officials a criminal offence. Obligations
under the convention also extend to
investigations and prosecutions.
These conventions, however, have been
criticised by some as being “split between
keen sleazebusters and countries like
Russia and China.”75
WHAT ARE OTHER
COUNTRIES DOING?
Perhaps the most notable action to address
corruption in recent times has been the
introduction of the Bribery Act 2010 in the
United Kingdom. This piece of legislation is
widely cited as a game changer in setting the
standard for corruption on a global basis.
The Bribery Act, which has been in force since
July 2011, departs from prior legislation in
three key aspects:
• significant increases in the seriousness of
penalties: unlimited fines, confiscation of
property, disqualification of directors and
up to 10 years in prison
• broad coverage: prosecutions can extend
to those who have links to the United
Kingdom, regardless of where the corrupt
activity took place
• extension of criminal liability to
organisations that fail to prevent bribery.
FIGURE 13: PERCENTAGE OF COMPANIES FROM NZ (NZX 50), AUSTRALIA, UK, US AND EUROPE THAT PROHIBIT
GIVING AND RECEIVING BRIBES74
72%
69%
57%
44%
47%
AUSTRALIA
NEW ZEALANDUNITED KINGDOM
UNITED STATES
EUROPE
29future[inc]

The Bribery Act is being credited for a
significant increase in both public and private
sector ABC compliance programmes in the
UK (from 57% to 86% of surveyed respondents
in the period from 2009 to 2011). This increase
is attributed to the potential liability for
organisations that do not have robust ABC
policies and procedures in place.76
It is possible
that the Bribery Act could result in prosecution
for Australian or New Zealand individuals
who make facilitation payments in the UK
(see discussion page 20).
The equivalent legislation in the US is the
Foreign Corrupt Practices Act 1977. While
the US legislation doesn’t have the same
reach as that in the UK, its objectives are
similar in that it makes companies and
officials criminally liable for bribery. Like the
UK Act, the US legislation applies to those
who are connected to the US, regardless of
whether the corrupt activity takes place there.
Penalties include substantial fines (up to
US$100,000 for an individual or US$2 million
for a company) and prison sentences of up to
five years. Further penalties that may follow
under the Foreign Corrupt Practices Act
are the withdrawal of export approvals and
exclusion from government contracts.77
ARE WE DOING ENOUGH?
Australia and New Zealand have both
recently been criticised for what is perceived
to be a lackadaisical approach to addressing
corruption. Transparency International
has been quick to comment on Australia’s
slip in rankings in their corruption index.
Australia’s Independent Broad-Based
Anti‑Corruption Commission was criticised
for being “far too limited” in its scope, and
the Independent Commission against
Corruption received similar criticism for
not being at a Commonwealth level.78
Nor
does New Zealand escape censure, with
Transparency International observing,
“statistics indicate there are gaps in the
way New Zealand companies are tackling
bribery and corruption.”79
The OECD is more direct in their criticism of
New Zealand, making the following comments
on New Zealand’s introduction of the OECD
Convention on Combatting Bribery:
“While the Working Group welcomes New
Zealand’s recent efforts to implement the
Convention, it has serious concerns about
the lack of enforcement of the foreign bribery
offence. Since becoming a Party to the
Convention in 2001, New Zealand has not
prosecuted any foreign bribery cases. Only
four foreign bribery allegations have surfaced.
New Zealand opened its first investigations
into two of these allegations in July 2013.”
It reiterates its earlier recommendation
that New Zealand broaden its criteria for
the liability of legal persons to allow for the
effective prosecution of such entities for
foreign bribery.
The low number of foreign bribery allegations
raises concerns on the levels of awareness,
reporting and detection. There are further
concerns surrounding outdated perceptions
that New Zealand individuals and companies
do not engage in bribery may undermine
detection efforts.80
Australia was chastised by the OECD in
2013 for failing to enforce, among other
things, foreign bribery laws: “out of 28
foreign bribery referrals that have been
received by the Australian Federal Police,
21 have been concluded without charges.”81
The same report recommended that New
Zealand increase its efforts to investigate
and prosecute foreign bribery.
30

Australia and New Zealand perform well
on global measures, but are simultaneously
criticised for a lack of action. In this final
section of the report, we review a range of
options that could be adopted in Australia
and New Zealand to address corruption and
protect our future reputations as honest
countries in which to do business.
WHAT SHOULD WE BE DOING ABOUT
CORRUPTION?
31future[inc]

WILL REGULATION HELP?
Increasing regulation is unlikely to be the
solution to corruption. Regulation is good
for establishing the practices that are, and
are not, acceptable in society. It is also good
for communicating the consequences when
unacceptable practices are discovered. It is
less good in the prevention and detection
phases. Nonetheless, regulation has a place
in the toolkit to address corruption. Perhaps
the best example is the introduction of the
Bribery Act 2010 in the United Kingdom.
OPTIONS FOR THE WAY
FORWARD
We need to be sending the message that we
are taking the issue of corruption seriously in
Australia and New Zealand. Below, we raise
ten options for consideration: options with the
potential to enhance our global reputations as
countries with low levels of corruption.
1. INCREASE TRANSPARENCY IN
AWARDING PUBLIC SECTOR
CONTRACTS
The public sector is particularly
vulnerable to accusations of bribery
and corruption. Increased transparency
can assist – particularly when it comes
to the awarding of lucrative contracts.82
Actions such as disclosing bids once public
sector contracts have been awarded
will result in greater accountability in
the contracting process.
2. NO PUBLIC SECTOR
CONTRACTS FOR THOSE
WITH PAST CONVICTIONS
Prohibit the awarding of public sector
contracts to organisations, individuals,
or their affiliates, where they have
corruption or fraud convictions.83
Canada
has adopted this approach, which has
been discussed more widely for some
time (for example, not awarding public
sector contracts to organisations or
individuals with tax debts) but is yet to
receive traction in either Australia or
New Zealand.
3. NO PUBLIC SECTOR CONTRACTS
FOR COMPANIES WITHOUT
CORRUPTION POLICIES
Require organisations bidding for public
sector contracts to have effective integrity
initiatives in place.84
The OECD provides
good practice guidelines in relation to
internal controls, ethics and compliance.85
4. INCREASE USE OF ASSET
CONFISCATION
While there is legislation that allows
for asset confiscation in certain
circumstances, there has been little
visible appetite to follow through with
this action. A working group set up by
the G20 in 2010 has drawn up rules
on seizing corrupt assets (and denying
visas to corrupt officials).86
32

How we move forward in the FIGHT AGAINST
CORRUPTION needs to be prominently debated.
5. ENCOURAGE ABC POLICIES AND
PRACTICES IN THE PRIVATE SECTOR
The key tools for detecting corruption
include control of third parties, frequent
compliance audits, forensic data analytics,
clear corporate policy and training
programmes.87
6. REWARDS FOR WHISTLE-BLOWERS
We have mechanisms in place to support
whistle-blowers when they disclose illegal
activity. Should we go further and reward
them? This practice has a formal term in
the legal system: a writ of qui tam is where
an individual helps with a prosecution
and receives some proportion of either
the penalty imposed, or any fraudulently
obtained funds eventually collected. Some
countries already offer rewards for tax
whistle-blowing.
7. BETTER CROSS-BORDER
COOPERATION ON BRIBERY
The OECD recommends enhancing cross-
border cooperation, particularly on foreign
bribery investigations and prosecutions.
We have already noted the criticism of
both Australia and New Zealand for their
failure to prosecute foreign bribery.
8. HARSHER SANCTIONS,
APPLIED MORE BROADLY
The OECD notes that “effective
enforcement also goes hand in hand with
effective, proportionate and dissuasive
sanctions; in this regard, the range of
sanctions available for foreign bribery in
New Zealand may be insufficient.”88
The
UK Bribery Act 2010 is a good example
of how harsher sanctions, applied to
a broader range of offenders, may
assist with reducing corruption. It is also
important that where sanctions exist,
they are seen to be followed through.
9. LIMIT TAX DEDUCTIBILITY OF
“FACILITATION PAYMENTS”
There appears to be a fine line between
what is a bribe (illegal) and what is a
facilitation payment (legal). The fact that
facilitation payments are tax deductible,
provided that they are minor and not
illegal in the country of receipt, sends
the signal that they are acceptable.
10. REQUIRE ABC POLICIES IN NZX
AND ASX LISTING RULINGS
Transparency International recommends
including bribery and facilitation payment
guidance into the NZX Corporate
Governance Good Practice Code. This
recommendation could also be extended
to the ASX Corporate Governance Council.
We could go even further and require all
listed companies to have ABC polices.
The importance of having a concerted
and cohesive effort to address corruption
has been widely noted.89
33future[inc]

Australia and New Zealand are not highly
corrupt: at least, not yet. But we are trading
increasingly often with countries more
corrupt than our own, and we have been
criticised by global bodies for our apparent
lack of attention to corruption. This lack
of attention may be responsible, at least
in part, for low numbers of prosecutions
and convictions.
Australia and New Zealand have a –
potentially small – window of opportunity
to ensure that we keep our good reputations.
How we move forward in the fight against
corruption needs to be prominently debated,
with a focus on improving communication of
good ABC policies (such as those outlined
by the OECD); strengthening transparency
in the public sector; increasing enforcement
action where corruption is discovered; and
expanding sanctions for corrupt activity.
CONCLUSION
We have no shortage of legislation, institutions,
and frameworks tasked with addressing the issue of
corruption. BUT ARE THESE TOOLS BEING USED?
Are they STRONG ENOUGH TO TAKE ACTION
when issues arise?
34

CORRUPTION IS THE ENEMY
OF DEVELOPMENT, and of
good governance. It must be
got rid of. Both the government
and the people at large must
come together to achieve this
national objective.
90
PRATIBHA PATIL
FORMER PRESIDENT OF INDIA
35future[inc]

REFERENCES
1. Reported in the Sydney Morning Herald, 19 January 2015, “Ausgrid
employee received $300,000 in allegedly corrupt kickbacks.” The case
involved an Ausgrid employee who received cash and gifts for helping
businesses win contracts.
2. Reported in the Australian Financial Review, 6 February 2015, “Obeid
made to give up passport.” Mr Obeid is facing charges of misconduct
in public office relating to the misuse of his position as a Member
of Parliament.
3. The receipt of an A$1195 Montblanc pen by former New South Wales
Premier Barry O’Farrell in relation to bids for major construction contracts
in Sydney. The gift was not declared on the parliamentary register of
interests as required.
4. Dominion Post, “Judith Collins dubbed ‘Minister of Corruption’”,
16 April 2014.
5. KPMG (2013) A Survey of Fraud, Bribery and Corruption in Australia
and New Zealand 2012. Retrieved 12 March 2015, from https://www.
kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/
Documents/fraud-bribery-corruption-survey-2012v2.pdf.
6. PWC (2014) Economic Crime: What you don’t know can hurt you.
Retrieved 21 November 2014, from http://www.pwc.co.nz/PWC.NZ/
media/pdf-documents/publications/pwc-global-economic-crime-survey-
new-zealand-supplement-feb-2014-final2.pdf.
7. KPMG (2013) A Survey of Fraud, Bribery and Corruption in Australia and New
Zealand 2012. Retrieved 12 March 2015, from https://www.kpmg.com/AU/
en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/
fraud-bribery-corruption-survey-2012v2.pdf.
Zealand 2012. Retrieved 12 March 2015, from https://www.kpmg.com/AU/
en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/
fraud-bribery-corruption-survey-2012v2.pdf.
9. Adapted from Figure 3, Association of Certified Fraud Examiners (2014)
Report to the Nations on Occupational Fraud and Abuse: 2014 global fraud
study. Retrieved 18 November 2014, from http://www.acfe.com, p.11.
10. Fox, Jacqueline (2014) “Corruption: Is enough being done to combat
corruption in Australia and New Zealand?” Acuity, Vol 1(3), p.38.
11. Personal interview between Dr Lisa Marriott (Author), and Julie Read,
Director and Chief Executive of the New Zealand Serious Fraud Office
14 November 2014
12. Transparency International (2014) Corruption Perceptions Index 2014:
Results Retrieved 26 March 2015, from http://www.transparency.org/
cpi2014/results.
13. Transparency International (2014) Corruption Perceptions Index 2014,
Retrieved 20 February 2015, from http://www.transparency.org/.
14. Transparency International (2013) Corruption Perceptions Index 2013
Retrieved 10 November 2014, from http://www.transparency.org/; and
Transparency International (2014) Corruption Perceptions Index 2014
Retrieved 9 December 2014, from http://www.transparency.org/.
15. World Justice Project (2014) World Justice Project Rule of Law Index 2014,
Retrieved 2 March 2015, from http://www.worldjusticeproject.org/rule-of-
law-index.
16. Australian National University (2012) Perceptions of Corruption and Ethical
Conduct, ANU Poll October 2012. Canberra: Australian National University
College of Arts and Social Sciences, p.13.
17. Royal Commission into Trade Union Governance and Corruption
(2014) Royal Commission into Trade Union Governance and Corruption
Interim Report – Volume 1. Retrieved 4 March 2015, from http://www.
tradeunionroyalcommission.gov.au/reports/Pages/default.aspx.
18. Transparency International (2013) Global Corruption Barometer. Retrieved 2
March 2015, from http://www.transparency.org.
19. Dr Susan Hawley, Exporting Corruption; Privatization, Multinationals and
Bribery, The Corner House, June 2000
20. Fraudulent trade practices are those “carried out as part of trade or
commercial activity that are intended to deceive consumers, stakeholders or
other interested parties” (e.g. false advertising); Illegal non-fraudulent trade
practices are “acts intended to obtain financial gain or advantage through
dishonest or unscrupulous means, not involving fraud” (e.g. selective supply
of a product by a manufacturer to business entities operating in competition).
Definitions from Australian Bureau of Statistics, Subdivision 093 Deceptive
Business/Government Practices.
21. PWC (2014) Economic Crime: A threat to business globally. PwC’s 2014 Global
Economic Crime Survey. Retrieved 27 November 2014, from http://www.pwc.
com/gx/en/economic-crime-survey/, p.16.
Economic Crime Survey. Retrieved 27 November 2014, from http://www.pwc.
Economic Crime Survey. Retrieved 2 March 2015, from http://www.pwc.com/
gx/en/economic-crime-survey/, p.6.
24. Australian National University (2012) Perceptions of Corruption and Ethical
Conduct, ANU Poll October 2012. Canberra: Australian National University
College of Arts and Social Sciences.
25. Transparency International (2013) Global Corruption Barometer 2013.
Retrieved 2 March 2015, from http://www.transparency.org.
26. Statistics New Zealand, Customised Dataset – Charges prosecuted against
adults by offence type. Data extracted 30 Australian Bureau of Statistics,
Recorded Crime – Offenders, Principal offence (divisions and selected
subdivisions) 2008-09 to 2012-13, Table 4, Commonwealth of Australia,
2014 October
27. Australian Bureau of Statistics, Recorded Crime – Offenders, Principal
offence (divisions and selected subdivisions) 2008-09 to 2012-13, Table 4,
Commonwealth of Australia, 2014
Economic Crime Survey. Retrieved 12 March 2015, from http://www.pwc.
36

29. Transparency International (2014) Global Corruption Barometer, Retrieved
5 March 2015, from http://www.transparency.org/research/gcb/overview.
Nine countries are shown here as Australia and New Zealand are each in
the top ten trading partners of the other country.
Zealand, Retrieved 3 March 2015, http://www.kpmg.com.au, p.36
31. PWC (2014) Economic Crime: A threat to business globally. PwC’s 2014
Global Economic Crime Survey. Retrieved 27 November 2014, from
http://www.pwc.com/gx/en/economic-crime-survey/, p.18.
Global Economic Crime Survey, p.19. Retrieved 12 March 2015, from
http://www.pwc.com/gx/en/economic-crime-survey/.
33. EY (2013) Knowing Your Third Party: Asia-Pacific Fraud Survey 2013.
Retrieved 10 March 2015, from http://www.ey.com/AU/en/Services/
Assurance/Fraud-Investigation---Dispute-Services/EY---Asia-Pacific-
Fraud-Survey-Report-Series---Volume-2---Knowing-your-third-party.
34. KPMG (2011) Global Anti-Bribery and Corruption Survey. Retrieved 12
March 2015, from http://www.kpmg.com/US/en/IssuesAndInsights/
ArticlesPublications/Documents/kpmg-global-anti-bribery-corruption-
survery-2011.pdf, p.2.
Global Economic Crime Survey. Retrieved 27 November 2014, from http://
www.pwc.com/gx/en/economic-crime-survey/, p.19.
36. EY (2013) Knowing Your Third Party: Asia-Pacific Fraud Survey 2013.
Retrieved 10 March 2015, from http://www.ey.com/AU/en/Services/
Assurance/Fraud-Investigation---Dispute-Services/EY---Asia-Pacific-
Fraud-Survey-Report-Series---Volume-2---Knowing-your-third-party
(modified).
37. OECD (2014) Background Brief: The rationale for fighting corruption.
Retrieved 6 March 2015, from http://www.cleangovbiz.org.
Global Economic Crime Survey. Retrieved 27 November 2014, from
http://www.pwc.com/gx/en/economic-crime-survey/, Figure 17.
39. PwC (2014) Global Economic Crime Survey, Chart Pack, Retrieved 24
February 2015, from http://www.pwc.com/gx/en/economic-crime-
survey/downloads.jhtml.
40. For more discussion see Clarkin, Luisa and van Peursem, Karen. Otago
District Health Board: Accountability in Absentia? Retrieved from http://
docs.business.auckland.ac.nz/Doc/Otago-District-Health-Board-
Accountability-in-absentia.pdf, 4 March 2015.
41. Australian Federal Police (2014) Annual Report 2013–14, p.56. Retrieved
23 February 2015, from http://www.afp.gov.au/~/media/afp/pdf/a/afp-
annual-report-2013-14.pdf.
42. Deep Freeze List – Finance Industry Failures, Retrieved 21 October 2014,
from http://www.interest.co.nz.
43. Paldam, M. (2002) “The Cross-Country Pattern of Corruption: Economics,
culture and the seesaw dynamics”, European Journal of Political Economy,
18:215-240, p.237.
44. O’Connor, S. and Fischer, R. (2012) “Predicting Societal Corruption across
Time: Values, wealth, or institutions?” Journal of Cross-Cultural Psychology,
43(4):644-659.
45. International Monetary Fund, April 2015, World Economic Outlook
Database, Report for Selected Countries and Subjects, Retrieved 29 April
2015, from http://www.imf.org/;
46. Porter, Michael, E., and Stern, Scott. 2015. Social Progress Index 2015.
Retrieved 29 April 2015, from http://www.socialprogressimperative.org/
18:215-240.
48. Treisman, D. (2000) “The Causes of Corruption: A cross-national study”,
Journal of Public Economics, 76:399-457.
49. OECD (2014) CleanGovBiz: Integrity in practice, CleanGovBiz is an initiative
led by the OECD to support governments in addressing corruption. Retrieved
23 February 2015, from www.cleangovbiz.org.
50. Transparency International (2010) As Good As We Are Perceived? A review of
the approach to bribery and corruption by New Zealand business. Retrieved 10
March 2015, from http://transparency.org.nz/docs/2010//As%20good%20
as%20we%20are%20perceived%20.pdf, p.3.
51. OECD (2014) Background Brief: The rationale for fighting corruption. Retrieved
6 March 2015, from http://www.cleangovbiz.org.
52. Australian Federal Police (2014) Foreign Bribery – Fact Sheet. Retrieved
22 March 2015, from http://www.afp.gov.au.
Economic Crime Survey. Retrieved 27 November 2014, from
Economic Crime Survey, p.9. Retrieved 27 November 2014, from
55. Serious Fraud Office (2014) What Does the SFO Investigate? Retrieved
1 December 2014, from https://www.sfo.govt.nz/faqs.
56. Transparency International National Integrity System.
www.transparency.org/whatwedo/nis. Retrieved 2 March 2015.
57. Transparency International. National Integrity System.
www.transparency.org/whatwedo/nis. Retrieved 2 March 2015.
58. KPMG (2011) Global Anti-Bribery and Corruption Survey. Retrieved
12 March 2015, from http://www.kpmg.com/US/en/IssuesAndInsights/
survery-2011.pdf.
59. Association of Certified Fraud Examiners (2014) Report to the Nations
on Occupational Fraud and Abuse: 2014 global fraud study, p.18. Retrieved
18 November 2014, from http://www.acfe.com.
60. PWC (2014) Corruption: From the backroom to the boardroom. Retrieved
21 November 2014 from, http://www.pwc.com.au/consulting/assets/risk-
controls/global-economic-crime/Global-Economic-Crime-AU-May14.pdf.
61. PWC (2014) Economic Crime: What you don’t know can hurt you. Retrieved
21 November 2014, from http://www.pwc.co.nz/PWC.NZ/media/pdf-
documents/publications/pwc-global-economic-crime-survey-new-zealand-
supplement-feb-2014-final2.pdf.
62. PWC (2011) Public Sector Fraud Awareness Survey – Findings. Retrieved
25 November 2014, from http://www.pwc.co.nz/forensic-services/
publications/public-sector-fraud-awareness-survey-findings/.
63. Institute of Chartered Accountants Australia (2013) Why business ethnics
matter to your bottom line. Sydney: Institute of Chartered Accountants
Australia.
64. KPMG (2008) Business Codes of the Global 200: Their prevalence, content and
embedding. The Netherlands: KPMG.
65. Adams, J.S., Tashchian, A. and Shore, T.D. (2001) “Codes of Ethics as
Signals for Ethical Behavior”, Journal of Business Ethics, 29:199-211, p.207.
37future[inc]

66. Verschoor, C.C. (1998) “A study of the Link Between a Corporation’s
Financial Performance and its Commitment to Ethics”, Journal of Business
Ethics, 17:1509-1516.
67. Transparency International (2010) As Good As We Are Perceived? A review
of the approach to bribery and corruption by New Zealand business, p. 2.
Retrieved 10 March 2015, from http://transparency.org.nz/docs/2010//
As%20good%20as%20we%20are%20perceived%20.pdf.
68. Fallon, F., and Cooper, B. 2015. “Corporate Culture and Greed – The case
of the Australian Wheat Board.” Australian Accounting Review, 25(1):71-83.
69. Report of the Inquiry into certain Australian companies in relation to
the UN oil-for-food Programme. Volume 1: Summary, recommendations
and background. November 2006. Retrieved 24 April 2006, from
http://www.oilforfoodinquiry.gov.au/
70. Report of the Inquiry into certain Australian companies in relation to
the UN oil-for-food Programme. Volume 1: Summary, recommendations
and background. November 2006. Retrieved 24 April 2006, from
http://www.oilforfoodinquiry.gov.au/ page xii
71. Transparency International (2010) As Good As We Are Perceived? A
review of the approach to bribery and corruption by New Zealand business.
72. Bronitt, S. (2013) Policing Corruption and Corporations in Australia: Towards
a new national agenda? Keynote Address: Fifth contemporary criminal
justice forum, Third annual session of the China branch of the International
Association of Penal Law, August 19-20 2013, Suzhou, PRC.
73. OECD (2011) Steps taken to implement and enforce the OECD Convention
on Combating Bribery of Foreign Public Officials in International Business
Transactions: Australia, Retrieved 1 December 2014, from http://www.oecd.
org/daf/anti-bribery/anti-briberyconvention/42096919.pdf; and Australian
Federal Police (2014) Foreign Bribery – Fact Sheet. Retrieved 22 March
2015, from http://www.afp.gov.au.
of the approach to bribery and corruption by New Zealand business, p.6.
75. The Economist. The Politics of Corruption: Squeezing the sleazy,
15 December 2012.
76. KPMG (2011) Global Anti-Bribery and Corruption Survey. Retrieved 12
March 2015, from http://www.kpmg.com/US/en/IssuesAndInsights/
survery-2011.pdf.
78. Transparency International (2014) Transparency International News,
December 2014 No. 80. Retrieved 6 March 2015, from http://www.
transparency.org.au.
80. OECD (2014) OECD Working Group on Bribery: Annual Report 2014, p.60.
Retrieved 9 March 2015, from http://www.oced.org.
81. OECD (2012) OECD Working Group on Bribery, Phase 3 Report on Implementing
the OECD Anti-Bribery Convention in Australia. Paris: OECD, p.5.
85. OECD (2010) Good Practice Guidance on Internal Controls, Ethics, and
Compliance. Retrieved 12 March 2015, from http://www.oecd.org/
investment/anti-bribery/anti-briberyconvention/44884389.pdf.
86. The Economist. The Politics of Corruption: Squeezing the sleazy,
15 December 2012.
87. EY (2013) Knowing Your Third Party: Asia-Pacific Fraud Survey 2013. Retrieved
10 March 2015, from http://www.ey.com/AU/en/Services/Assurance/
Fraud-Investigation---Dispute-Services/EY---Asia-Pacific-Fraud-Survey-
Report-Series---Volume-2---Knowing-your-third-party; and OECD (2010)
Good Practice Guidance on Internal Controls, Ethics, and Compliance. Retrieved
12 March 2015, from http://www.oecd.org/investment/anti-bribery/anti-
briberyconvention/44884389.pdf.
88. OECD (2014) OECD Working Group on Bribery: Annual Report 2014, p.60.
Retrieved 9 March 2015, from http://www.oced.org.
18:215-240, p.238.
90. Source: http://www.dnaindia.com/india/report-corruption-is-enemy-of-
good-governance-pratibha-patil-in-farewell-speech-1719205
38

Follow and tweet us
@Chartered_Accts #futureinc
Join the conversation
charteredaccountants.com.au/myCommunity
Follow us
Chartered Accountants Australia and New Zealand
Follow us
Chartered Accountants Australia and New Zealand

Are Australia and New Zealand corrupt?

Recommended

Recommended

More Related Content

What's hot

What's hot (17)

Similar to Are Australia and New Zealand corrupt?

Similar to Are Australia and New Zealand corrupt? (20)

More from Chartered Accountants Australia and New Zealand

More from Chartered Accountants Australia and New Zealand (20)

Recently uploaded

Recently uploaded (15)

Are Australia and New Zealand corrupt?