It began with a tip-off to a Fairfax investigative journalist. It may end with the resignation of the Governor of the Reserve Bank.
As scandals sometimes do, the Securency scandal that has engulfed the Reserve Bank of Australia keeps on expanding. Initially thought to be some minor misdemeanors confined to dodgy foreign sales agents employed by a subsidiary of the RBA, the Securency affair is now a multi-national corruption scandal spanning four continents, multiple bribery arrests, and many of the world’s best-known tax havens. Follow the money? This scandal is about nothing else.
Securency is the firm that prints Australia’s bank notes. It is 50 per cent owned in a joint venture by the Australian government, through the Reserve Bank of Australia; the RBA has half the company’s directors. The multi-coloured plastic notes that carry billions of dollars of cash transactions every day were once considered an Australian success story. But it was the actions of those trying to export that technology to foreign climes that triggered the current affair.
Securency and another RBA-controlled firm, Note Printing Australia, appear to have pursued lucrative overseas contracts for the production of foreign currency bank notes with the assistance of some very big bribes. The affair is beginning to rival AWB as one of the biggest corruption scandals in recent Australian history. After all, AWB was a wheat company. The Reserve Bank of Australia is one of the most critical agencies in the Australian government.
The back-story of Securency is fascinating. It has already won Nick McKenzie and Richard Baker Walkley awards for their journalism, and will no doubt one day become a riveting movie or television series. Interested readers can catch up on the story with this 2010 4 Corners episode, as well as some of the many scoops McKenzie and Baker have published in Fairfax newspapers. (See here, here and here.)
Several facts have now emerged, however, that demonstrate the ongoing damage accruing to Glenn Stevens — and Wayne Swan. First, at least $23 million in bribes were paid by agents working for Securency. Second, key directors of the Reserve Bank, including a Deputy Governor, were responsible for Securency when this activity ocurred. Third, members of the RBA’s board should have known something was amiss, especially given the abundant warning signs. Finally, Glenn Stevens has consistently downplayed the seriousness of the scandal, and refused to announce an open, external inquiry.
It’s this final point that may well cause real problems for Stevens if, as seems likely, that decision eventually gets taken out of his hands. Even if the Governor knew nothing of the bribes being paid to Malaysian arms dealers under his watch, the payments of millions of dollars to some of the world’s less salubrious tax havens (including the Bahamas, Isle of Man and the Seychelles) by a company under the control of the bank in charge of Australia’s financial system is not, as they say, a good look.
It gets murkier. One of the central figures in this affair was former deputy governor of the Reserve, Graeme Thompson. Thompson went on to head the Australian Prudential Regulatory Authority, one of the key regulators of Australia’s finance sector. RBA assistant governor Frank Campell was told about a $427,000 payment to Malaysian arms dealer Abdul Kayum back in 2007 — payment made after Kayum was sacked on suspicion of corruption. Kayum was arrested in Malaysia last year for allegedly bribing the deputy governor of Malaysia’s central bank, the Bank Negara Malaysia, Datuk Mohamad Daud Dol Moin.
McKenzie and Baker have also established that the affair extends beyond Securency and Note Printing Australia to overseas trade agency AusTrade. AusTrade official Elizabeth Masamune was Australia’s senior trade commissioner in Vietnam and had a top-secret security clearance. She was also reportedly having an affair with Vietnamese intelligence officer Anh Ngoc Luong, a Colonel in the Vietnamese spy service. The Colonel was paid more than $20 million by Securency, which was also putting the son of the former governor of the Vietnamese central bank through Durham University in the UK.
The really worrying thing about the scandal is that Glenn Stevens’ denials are beginning to look increasingly threadbare. As late as Tuesday, the Reserve Bank was still running the line that there’s nothing to see here, folks (pdf). In a statement to the ABC and Fairfax, the RBA writes:
"Even if it were ultimately to be concluded, with the benefit of hindsight, that incorrect conclusions were drawn from the various investigations, the Bank and the NPA Board relied on the information available at the time and external legal advice. The Bank’s executives acted in good faith and with integrity. It is completely without foundation to suggest otherwise."
Good old hindsight. Greens MP Adam Bandt is calling for some to be exerted, via the benefits of a full formal and independent inquiry. "The growing cloud over the Reserve Bank and its governance will not clear until a full inquiry is conducted," he stated in a media release yesterday. "The silence of the Treasurer in the face of these new serious allegations must end. The Treasurer must act".
If Glenn Stevens is looking uncomfortable, so is Wayne Swan. The RBA is of course one of the most important responsibilities of Wayne Swan’s portfolio. The Treasurer has consistently argued that the Securency scandal is a matter for the Reserve Bank. He and Penny Wong are also leaning on that handy pretext of ongoing criminal trials against senior Securency executives.
That position is becoming increasingly untenable. Just as happened with AWB, the spreading stench of Securency will eventually force Swan to set up an independent commission of inquiry. If Swan doesn’t during the life of this government, you can bet that an incoming Coalition government will want to take a closer look.
And that could have all sorts of unintended political and economic consequences. Royal commissions have a nasty habit of turning up new evidence. How much the Reserve Bank’s board knew, when they knew it, and what they did about it are all topics likely to come under intense scrutiny. In a worst-case scenario, Glenn Stevens may even have to step aside. That, in turn, poses potential risks for financial markets, although Australia is at least blessed with a benign macro-economic environment in terms of interest rates just now.
Whatever the permutations, the Securency affair has a long way to run yet. Keep following the plastic money.
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