Senate Foreign Affairs, Defence and Trade Legislation Committee, , 2:51:06 to 3:17:19
Transparency International and KordaMentha discuss beneficial ownership, corruption in supply chains, and enforcement failures regarding Tiger's Realm Coal.
Topics: National security, International law
Speakers: Clancy Moore, Gail Carter, Hon Sarah Henderson, Jessica Collins, Julie Heckscher
Committee is now in session and I would like to welcome representatives from Transparency International Australia and Qua Mentha. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. For the handside record, could you please state your full name and the capacity in which you appear here today?
>> Thank you, Senator. My name is Clancy Moore and I'm the chief executive officer of Transparency International Australia. Thank you.
>> Thank you very much, Mr. Moore.
>> Good afternoon, Senator. My name is Rachel Bren. I'm a partner that financial crime that caught me up and I do apologize I am losing my voice.
>> Oh dear. It sounds like you've been hard at work around the clock. >> Thanks, Miss Waldron.
>> And thank you, Senator. My name is Gail Carter. I'm an executive director um focusing on sanctions and compliance risk management at quarter member, working with Rachel within the financial
>> Uh thank you very much, Miss Carter. I'd now like to invite each of you to make an opening statement starting with Transparency International Australia.
Thank you, Senator. On behalf of Transparency International St. I'd like to begin by acknowledging the traditional owners of the land that I'm living on, the Wandry people of the Cooler Nations, and pay my respects their elders past and present. I'd also like to thank the committee for the opportunity to appear today. So, as a representative of the Australian arm of Transparency International, which is world's leading anti-corruption movement, we work very closely, Senator, with colleagues from Transparency International Ukraine and also Transparency International Russia. Uh staff from TI Ukraine report regular drone attacks and bombing while staff from TI Russia who are now operating in exile are fearing for their safety after the organization was repeatedly named by Vladimir Putin as an enemy of the state and have been targeted for their advocacy outlining how corruption fuels the Russian state but also the war in So our submission focuses on the loopholes that limit the effectiveness and the enforcement of Australia's sanctions on the Russian Federation. This includes a lack of transparency on the specific information available to the public about the number of individuals or the value of Russian assets frozen, noting that the Australian government has provided an estimate of around $100 million in frozen assets as well. Other issues covered in our submission include issues around enforcement and regulatory gaps. This includes a lack of a Commonwealth publicly accessible beneficial ownership register which is a register who ultimately owns and controls and benefits from corporate structures. We know this gap is often exploited by corrupt figures to conceal the ownership of assets, the proceeds of crime and avoid to uh avoid detection. So I'm happy to take any further questions on our submission and the recommendations
>> Uh thank you very much for that. Um, I'd now like to ask if Camea has an opening
>> We do. Thank you, Senator, and thank you for the opportunity to appear. Camera is an independent and trusted advisory firm providing specialist financial crime, forensic accounting, restructuring, cyber security, performance improvement, and real estate services. In 2002, Corda has been entrusted with some of the region's most complex and sensitive commercial situations. We work together to solve the challenges facing companies, financiers, lawyers, private investors and government clients. The views provided in this submission are made on a general basis. As a technological and politically neutral firm, Porta supports the development of regulation that offers consistency and alignment with international best practice, clear guidance for business and effective supervision and enforcement of the regulatory regime. In our submission, Australia's sanctions against the Russian Federation are principled, legally robust, and aligned with key international partners. However, based on our experience supporting sanctions compliance, their practical effectiveness is constrained by structural limitations in detection and enforcement. Australia's independent economic leverage over Russia is inherently limited. Even prior to February 22, Australia's trade and financial exposure to Russia was minimal due to historically low trade and financial exposure. As a result, Australian sanctions are most effective as part of a coordinated multilateral action contributing to collective pressure, signaling and deterrence rather than operating as a standalone economic lever. A key factor constraining the effectiveness of Australia's sanctions regime is the opacity in the beneficial ownership and control. Russian linked actors frequently employ complex multi-layered ownership structures involving intermediaries, shell entities, nominee arrangements and multiple jurisdictions where ownership and control are obscured. The practical effect is that sanctions entities can continue to access global markets despite the legal prohibitions. The absence of clear prescriptive beneficial ownership expectations within the FRA framework creates a structural vulnerability limiting the regime's practical effectiveness. We acknowledge the Australian sanctions office has materially increased its guidance on sanctions compliance in recent years, particularly in relation to Russia sanctions, which has supported improved awareness across industry. However, limited guidance on vessel based sanctions compliance remains. Uncertainty around reflging, ship-to- ship transfers, ownership changes, automatic identification, system manipulations, and shadow fleet indicators lead to inconsistent due diligence practices across industry. Clear operational vessel screening standards would materially improve compliance consistency and reduce inadvertent exposure. Enforcement is further constrained by the absence of the Australian Sanctions Office investigatory powers. In contrast, comparable agencies such as the United States or Office of Foreign Assets Control and the United Kingdom's Office of Financial Sanctions Implementation have direct investigator and civil enforcement powers. Reliance on referrals to other agencies creates gaps with capacity and capability and creates risk that suspected breaches may not be effectively investigated. Granting investigatory authority or establishing a dedicated sanctions investigation capability would significantly strengthen sanctions evasion deterrence and increase effectiveness. Thank you very much.
>> Uh thank you very much for your opening statements. Uh I will um kick off by asking first of all to um Transparency International, Mr. more. to what extent do you think that these various supply lines into Australia uh are riddled with or underpinned with
>> Um, thank you for your question, Senator. It obviously depends on the particular supply chain and the country of origin. In relation to the Russian Federation, we know that many of the country's uh economic interests, key uh commodities are either owned by the state or um statebacked kleptocrats. And that the Russian state, you know, historically has used corruption as a tool not only to uh piler the the country's resources at the expense of its citizens, but also to, you know, further their own um pockets as well. We're looking issues of coal, oil, gas as some examples. So it depending on depends on the commodity. I think the main issue that's been raised today is the issue of Russian crude and oil entering Australia and the issue of um that commodity coming by um third party
>> And do you have any view as to and this has been expressed by many that many Australians would like to see Russian funds and assets being stripped and handed over to Ukraine. And are there any pathways that you believe could effectively achieve that?
>> Under Australia's current legal regime, the easiest and not the easiest, but the most probable way is through uh asset classific asset classification laws. Sorry, bit of a mouthful and proceeds of crime. So where money has been stolen from Russian citizens or um in the case of Ukraine if those proceeds of crime are being used in Australia um under asset confiscation laws those assets could be returned. It is a very complex legal process takes many many years but that is one potential avenue for it to happen. We would encourage the government to consider an asset return program to return assets not just to communities in the countries mentioned but other communities have had their assets or or funds stolen from them and then end up parked in Australia.
>> And Mr. Clansancy, what do you believe the Australian government should be doing right now to address these uh gaps in our sanctions regime?
Look, I think first and foremost, we need to know the amount of money that's been frozen or under under Russian sanctions. Um, we did submit an FOI request to the government back in 2023 Australia under the um repo task force. Uh, other partners have actually identified how much money has been frozen. So, that's a good first step. And then I think
>> Sorry. Sorry, Mr. Clinty. When you say other partners have identified it, you mean do you mean in other countries or do you mean here in Australia?
>> Yes. Sorry. Sorry. Other international partners under that um international task force have also identified.
>> So we've heard evidence today that we're talking or the government has spoken in the vicinity of hund00 million. Do you are you able to add anything more to that figure or is there any further information?
>> It's pretty broad figure. Senator be good to know how many individuals, what type of assets, the the the value of assets. You can look at the the Australian sanctions uh list and kind of try and add up the number of entities and individuals, but it's a very thorough list, a very extensive list as well. But it' be good to have those numbers in the public domain. That would build trust, I think, with Australian citizen, but also show that our sanctions are working and that there's some um you know, kind of tangible output from from a lot of the work that
>> and Yeah. Sorry. So, go on, Mr.
Furthermore. Yeah. Furthermore, I would talk about I would add just the coordination need to um as as we've seen in the UK and um the EU just to ban Russian oil coming from indirect countries, indirect imports. It's probably been mentioned by other um witnesses today as well. I think also the government could consider alloc allocating more resources and staff and staff both to the Australian sanctions office and the AFP noting that there has been a recent um budget allocation I think around $25 million to the ASO to follow up with enforcement and compliance as well. And there are some other recommendations more broadly that I can talk to if you
>> Sure. So in relation to the ASO where are they not where are they falling down in terms of enforcement of the current sanctions which are in place
I think there's a couple of things and it's probably a question best put to the Australian sanctions office as my colleagues from court meant did mention there have been some real significant improvements in the performance of the Australian sanctions office there've been updated guidance um the sanctions list is in a more accessible and transparent um format which is great uh they provided detailed guidance particularly under thematic sanctions around Magninsky as well to all stakeholders. So they are doing some good work. Um I think there's a lack of investigative and enforcement capacity at the moment in the ASO and that's partly a legal uh issue as well. And just to give you one um case study that that's entered into our submission which could also point to a lack of political will. Um there was a ASX listed company called Tiger's Realm that was trading in a sanctioned good Russian coal. um continue trading in that good despite the fact that Russian coal was designated a san a san san san san san san san san san san san san san san san san san san san sanctioned good for you know quite a period of time and this is despite the fact that the sanctions office was aware of this it was commented publicly in the media um and I mean I would note that the company did also take the commonwealth to court as well so that probably could have blocked further enforcement action there but there was a clear potential breach um but we're yet to hear any kind of enforcement on that particular case
Um, Miss Waldron and Miss Carter, uh, can I ask the same question of you? What could the government be doing immediately to address these gaps in our in our sanctions regime and the
>> Okay. So, we're playing tag team because of the voice problems. So, that's Gail speaking. Um, I think one of the the the points that Clancy has just highlighted is the lack of visibility around what assets are actually frozen within the Australian jurisdiction. Um, there are obligations on individuals and entities who come into contact with assets that are subject to u prohibition to be reporting those to the AFP and that information being shared with the ASO. But what we don't have is collective view of what is the total sum of that. I think that would go a long way toward helping understand the effectiveness of the sanctions. And to your point earlier, Senator, around the ability and and a desire within the Australian community to be collecting um the the frozen assets and distributing or redistributing them to Ukraine, a a register of some sort would go a long way to supporting that outcome. Um when it comes to the Australian sanctions office more generally the lack of uh enforcement audit um powers is very very difficult. They are reliant on other agencies and they're also reliant on uh industry participants and individuals to identify where they've uh either knowingly or unknowingly breach sanctions laws and that's not likely. Um and then
>> could you just sorry just to stop you there could you give me some examples of where they're falling down on enforcement uh clearly as you say they may not be the enforcement agency but could you just give some examples of sanctions where there should be proper enforcement there hasn't been enforcement who's responsible I just really want to understand this issue of failure to enforce the current
sanctions in place Yeah, look, I I think the uh example that Clansancy has shared with Tiger's Realm is a really really good one. There was there was clearly a judgment within the Australian legal framework that that um activity was likely in breach of Australian sanctions laws and to date we haven't seen any enforcement action against that entity as a result of that judgment. I do suspect there is some consideration to the fact that that is an Australian company and the potential impacts into the commercial and business environment. But that said, there was perfect opportunity for precedent in that instance and that wasn't taken. And it certainly would have provided opportunity then for other businesses to have a lot more clarity around the compliance expectations and the legal standards in in the sanction space.
So just looking at that case and the federal court ruled in the Tiger's Realm Coal Limited and Commonwealth of Australia case Tiger's Realm had breached Australian sanctions by transporting Russian mined coal. So what should have happened in that case? Because there was a judgment handed down. The court ordered Tiger's Realm to pay the Comwalth's legal costs. What are you suggesting should have happened in that case?
>> In that so that to to just clarify that was actually Tiger's Realm taking that case to the courts having a different view to the ASO and DEFAT. uh what should have happened as a result of that judgment was for the government to immediately counter with uh enforcement action for non-compliance with the sanctions laws and that would have to under the legal framework at the moment be done through a referral to the Australian Federal Police and the Australian Federal Police then would need to determine uh whether or not that was a case to pursue in the courts.
>> And so what are the options for the AFP? Could you just explain what consequences you believe should have flowed in that
>> Oh, I that perhaps is something for um for the legal people to be pondering on. I do think though that um there certainly should have been a a case to answer for within the courts that the government could have taken that company to account or held them to account within the legal system and and pursued either fines um penalties in that process and in doing so would be setting a a perfect example of deterrence. Um, you know, we really do need to not have people in the Australian community understand that if you are in breach of sanctions laws, there will be consequences and we're not seeing consequences generally speaking in the in the Australian context.
>> Senator, I might just quickly add if there's time to provide another >> Thank you, Senator. Just to provide another example where there's a potential risk of of sanctions breach and um a potential gap that is hopefully going to be filled. Um there's been recent reporting and recent research which um suggests that uh Russian diamonds uh sold by a sanctioned uh Russian entity Al Rosa. Their co has also been sanctioned under Australian law could be um entering into the Australian market via uh distributor in Western Australia via a third country. um under the current regime, we just don't know if that supply chain has had these um diamonds from this particular sanctioned entity entered into them. Russia is a very large provider of diamonds. Uh Russian diamonds aren't sanctioned, but this one entity is. However, I would like to note and for the record that Australia's new um AML and CTF laws, anti-moneyaundering and counterterrorism financing laws do have and will have a requirement from July 1 that regulated entities including banks, financial institutions, gemstone dealers, etc. will have to screen for sanctions as part of their customer due diligence. So, we will see some tightening of those loopholes hopefully under the AML regime, but that's a different set of laws than the sanctions regime at the moment.
And so just in relation to Tiger's Realm, what what are you proposing should have happened after their obviously their action seeking a declaration that they were not in breach was was clearly not
>> Yeah, I mean it's it's a question for the government obviously, but there could have been a referral to the AFP for further investigations and then to the CDP for some sort of legal action.
Uh, all right. Look, thank you very much for that, Mr. Moore. Look, I will now hand over to Senator Collins who has some questions. Senator Collins.
>> Thank you, Chair. And I've just got a couple of uh follow-up questions from that. Um, uh, Mr. Moore, the just on the the question of lack of enforcement of actions and the precedents um in sending money to Australia. We heard from uh the witnesses just in the previous uh session that that money is being sent from transferred from Russia to Australia and uh it is currently not in breach of any sanctions even if it does come from a sanctioned person. Is that
>> Uh I would need to know more details of the sanctioned entity and and the type of financial instrument but yes I guess that could be the case. I mean there's there's a lot of money that is flowing between the two countries. Some of it um perfectly for you know perfect legal reasons, some of it potentially at risk of being listed financial flows.
>> Thank you. And uh does does Ora share so traces CDF? Does it track um sanctioned
>> Um you would probably ask my colleagues at Camement. They do track um financial transactions between countries. Also the ATO has a lot of data around um monies being held by uh Russian entities in bank accounts in Australia as well. But maybe my colleagues from Camementa having I think previously worked at OSRA can shed a bit of light on that question
So, so definitely OSRA has u available to it extensive big data around transactions that are flowing into and out of Australia um and in relation to the various parties to those transactions including intermediaries. So there is a a deep um knowledge base I guess of of information there around that the the Fintel alliance which is an initiative out of um AMLCTF legislation um does include consideration for sanctions risks and including uh terrorist financing type activity. um there's probably an opportunity there for that to be a lot more extensive when it comes to sanctions compliance more broadly for Australia. Um and so I I do think there's an opportunity there. I think the one thing to be aware of is that under the AMLCTF regime that is only there are only certain um entity types that are subject to that legislation whereas the sanctions laws apply to all individuals entities organizations uh in Australia or that fall within the Australian jurisdiction of law. So you do have a situation where the OSRA and Fintel alliance arrangement is only going to capture one part of the picture. It's not going to give you everything, but I certainly think there's a great opportunity there to look at how that could be better utilized for sanctions compliance and effectiveness um type data.
>> Thank you. That's very helpful. So the knowledge is there. It's been captured by OSRA. They're tracing every transaction over a dollar uh I believe and uh but the gap is there in the sanctions compliance which is obviously on other entities. Uh can I ask about uh the you know we we we heard just heard your evidence Mr. Moore about the uh the example of the diamonds the the supply chain and diamonds coming from Russia being sold in Western Australia. Uh is this just a case of I mean I believe we have legislation that is supposed to track this sort of you know these these dirty supply chains um these gaps that we have these these these um bits of trade that are coming into the country. We heard last week as well with the the te trade coming in from Myanmar that's fueling the war there too. Um is this something that's broadly um impacting Australia? I mean, we we've we've got these examples, but how just how deep is this issue that we're getting dirty supply chains here in
I mean depends on the commodity obviously in the country of origin. I think in this particular example with Alroa which is one of the Russian um states kind of main supplier of diamonds, we know that Russian diamonds have a significant share of the global market. Um, noting that Russian diamonds as a commodity aren't actually a sanctioned good, um, but Al Rosa, the company I mentioned, is a sanctioned entity, as is their CEO. Um, it points to, I guess, a weakness in the system where those final um, the final part of the supply chain aren't currently required to do those checks on um, sanctioned entities or politically exposed persons, which also can and point to a you know, corruption risk as well. As I mentioned earlier, um, under the new AML CTF laws, they will be, which is a fantastic initiative and a really strong reform, but it's only for those regulated entities as my colleague from quarterin mentioned. So, banks, financial institutions, and those other entities that have just come on board, lawyers, accountants, real estate agents, and gemstone dealers amongst others. So, there could still be some gaps. Um, yep.
>> Okay. Thank you. And uh my final question uh is you know I guess on the the sanctions frameworks of our allies and um I know Mr. Moore you're particularly familiar with the Myamar sanctions and how Australia is lagging behind in terms of that. So, can you just give a sense of uh here in Australia in terms of the Russian um uh sanctions framework, how much we're lagging behind our allies, particularly the United States?
>> Um, look for specific numbers. I have to take that question on notice. I think the government has been on the front foot though in terms of designations against the Russian Federation and their entities in comparison to other
Uh, Senator Collins, that's your no further questions. That being the case, uh, that being the case, I just want to, uh, thank both witnesses very much for, uh, your appearance today. Uh, for any questions on notice, if you could, please provide those by Friday, the 27th of February, 2026.
>> Thank you very much, Senator, and thank you. again.