Transparency International’s (TI’s) 2007 Corruption Perceptions Index reported that Australia has slipped out of the top 10 countries perceived to be corruption-free for the first time. While the Cole Royal Commission laid the blame for the $300 million in bribes paid to the Iraqi regime at the feet of AWB executives, the TI index, which tracks perceptions of public sector corruption, suggests the scandal has impacted Australia’s image as a whole.

“For the first time in a decade, we have slipped out of the top 10, from 9th to eleventh spot, with Canada moving into the top 10”, said Michael Ahrens, executive director of Transparency International Australia.

“Our national reputation has suffered. It’s a great concern. We think it is in response to the Iraqi oil-for-food scandal. If so, it shows that it only takes one act of international notoriety to damage the reputation of the whole country. The good work of so many Australian businesses and anti-corruption agencies counts for little against one damaging episode.”

Despite the drop, Australia still ranks well in terms of its peers, although New Zealand is viewed as the least corrupt Pacific nation in the index. However, among Australia’s Pacific neighbours and its major trading partners, corruption is a major issue, fuelling concerns that Australian exporters to those nations may be inadvertently funding corruption.

“There is trouble brewing in the Pacific” Ahrens said. “Investors and government need to pay close attention to the ratings. Australian businesses operating abroad, especially in countries pinpointed in thebottom half of the latest international rankings, need to implement clearly defined anti-corruption policies and practices.”

“Our largest trading partner, China, ranks with India and Brazil mid-way down the table” he added. “By value, about a third of Australian exports go to countries with a score of 5 or less out of 10.”

Additionally there are concerns that Australia may be allowing sanctions breaches due to a lack of aggressive enforcement.

Tim Phillips, leader at Deloitte Forensic, told Risk Management magazine earlier this year that while the Federal Government is proactive in terms of prohibiting dealings with organisations and countries subject to UN and US sanctions, regulatory enforcement is lacking both in Australia and overseas.

He used the example of Iran, which had two new rounds of UN sanctions imposed on it in December 2006 and March of this year.

“The UN identified, for example in March, Bank Sepah, an Iranian bank, as participating in the development of weapons of mass destruction. And all member nations of the UN then become obligated under that UN Security Council [UNSC] resolution to take action against Bank Sepah and any other designated person,” Phillips said.

“What you see happening is a quick response from governments — for example the Australian Government — who then reflect the UN sanctions and the US sanctions, and prohibit dealing with those individuals or those entities or those companies that are related. What you then don’t see happen is the level of aggressive regulation that occurs out of the US.”

A spokesperson for Alexander Downer, Minister for Foreign Affairs, said the implementation of sanctions is a whole-of-government effort, facilitated by the Department of Foreign Affairs and Trade (DFAT). “Other agencies regularly involved in the implementation and enforcement of sanctions are Customs, Defence, the AFP and DIAC [Department of Immigration and Citizenship],” the spokesperson said.

“Following the adoption of sanctions by the UNSC, the Minister for Foreign Affairs writes to the relevant ministers requesting additions or amendments to regulations in their portfolios, to give effect to the particular sanctions measure relevant to his or her portfolio. In almost all cases, DFAT itself promulgates new regulations under the DFAT-administered Charter of the United Nations Act, including ensuring the sanctions apply to the actions of Australians overseas.”

Stuart Fagg is the editor of Risk Management magazine. See www.riskmanagementmagazine.com.au