28 September 2016
by Karen Middleton

Department of Immigration and Border Protection's lack of preparedness on organised crime

Immigration Minister Peter Dutton

The focus on asylum seekers has left the immigration department lacking intelligence capabilities and measures to combat crime.

Back on June 8, with the election campaign at its midpoint and federal policymaking in hiatus for the caretaker period, the board of the Australian Crime Commission quietly authorised a new special operation into organised crime in Australia’s migration system.

The representatives of the nation’s law enforcement agencies who made up the commission’s board were then preparing for its merger with information-sharing body CrimTrac, and authorised the resulting Australian Criminal Intelligence Commission to begin the special policing and intelligence operation as soon as the new agency was established. It would be focused on the criminal exploitation of the migration system overall.

The operation began on July 1 and was designed to identify “vulnerabilities” – legislation, regulations or other rules that are being “exploited or circumvented” by organised criminal organisations.

The establishment of this operation amounts to an admission that while the public emphasis in immigration and border protection policy in recent years has been on stopping asylum-seeker boats, a different kind of problem has emerged.

About the same time as the special operation was being set up – perhaps by coincidence, perhaps not – two separate external reports to government were blowing the whistle on exactly the vulnerabilities the operation highlights.

There were pre-merger shortfalls across all five areas it examined: intelligence, investigations, detention, integrity and corruption. Last week, the Productivity Commission’s study of Australia’s migrant intake identified two classes of high-end business visa it says are effectively offering an easy shortcut to Australian residency for rich foreigners – most of whom are Chinese – and exposing Australia to the real risk of foreign money laundering.

Separately and less publicly, United States-based global think tank RAND Corporation has just finalised a root-and-branch examination of Australia’s Department of Immigration and Border Protection, a year after it was formed through the merger of the old immigration department with customs and border protection. The RAND report highlights how inadequate the intelligence capabilities and staff-vetting procedures have been.

The joint agency’s chiefs, departmental secretary Michael Pezzullo and Australian Border Force commissioner Roman Quaedvlieg, initiated the RAND study in May, on the first anniversary of the instigation of the merger, and published its results 10 days ago under the media release headline “Review finds integrated department more efficient and effective”.

The review certainly says positive things about efforts to make changes, efficiency and “doing more with less” in the face of funding and job cuts.

But it also raises serious concerns about the deficiencies – including in intelligence and anti-corruption measures – that have prevailed in both agencies despite a decade of warnings, deficiencies that continue to potentially undermine the way Australia’s migration program is run.

The remarkably frank 80-page RAND review details the full names and summary findings of an array of other reports into immigration and customs, including the detention system, many of which it acknowledges are classified.

The review not only examines how well the immigration–customs merger has performed in its first 12 months, but casts back more than a decade to 2005, when two disastrously mishandled cases – the unlawful detention of mentally ill German-born Australian resident Cornelia Rau, and the wrongful deportation of Australian woman Vivian Alvarez Solon to the Philippines – turned the spotlight on management and administration in immigration.

The review has identified what it calls “systemic shortfalls” in both of the original organisations in the decade before their merger.

It finds that despite the problems identified through the Rau and Alvarez cases, immigration “had not developed adequate control mechanisms to reduce the risk of future systemic failures of process” and that both agencies lacked the “professionalisation” required of a modern border force.

Even after the merger, there were no clear goals, objectives or milestones set and “an absence of a solid plan” for executing the integration.

And the benchmarks the department has set for measuring progress in its post-merger action plan did not include any in the refugee and humanitarian area, nor any on countering violent extremism, cybersecurity, protection against invasive species nor information-sharing. The review says the department has noted the finding and is working on it.

Historic inter-departmental difficulties
The RAND review finds there were pre-merger shortfalls in immigration and customs across all five areas it examined: intelligence, investigations, detention, integrity and corruption.

The review finds that, historically, immigration and customs had “difficulties working with each other, and across government”, didn’t share intelligence and had no centralised data-storage capacity.

While customs had a division that was focused on “tactical intelligence”, immigration’s intelligence efforts were lacking and it had prioritised other issues, including visa overstayers and managing asylum seekers, above security threats.

“Immigration only had a small team with limited maturity, looking for noncompliance with the Migration Act 1958 and illegal maritime arrival screening rather than national security concerns.”

Customs had a head start, focusing more on intelligence after 2011. Several subsequent classified reports called for better information-sharing to tackle “drug-trafficking and other illicit activities”.

RAND says reports leading up to the merger were “consistent regarding the need for intelligence reform”.

The merged organisation has, RAND says, made “major strides” on intelligence but the reform “is certainly not complete”.

It reveals that a classified review of intelligence capability conducted this year made 107 further recommendations, including for better co-ordination, further information-sharing and another overhaul of immigration’s intelligence functions and structures “to manage the increasing complexity and number of interactions at the borders”.

Vetting and internal corruption
Despite the preoccupation with asylum cases, there was a “very large backlog” of those cases before the agencies merged “and a lack of evident operational and fiscal discipline”.

The report says that the outsourcing of onshore detention resulted in “inadequate immigration control and accountability over detention operations”. Following this, the management of offshore detention was also outsourced.

And while customs had been working to address corruption within its ranks after examples of it had come to light – most notably involving officers at Sydney Airport – immigration, as a “facilitative, social-policy organisation” not allocated national security responsibilities, “had never formally identified issues of this kind”.

Before the merger, immigration did not universally enforce the requirement that its officers obtain a minimum baseline security clearance, nor did it conduct standard training and development programs on integrity and corruption. Some officers, RAND found, could not operate basic equipment, including closed-circuit television cameras.

In fact, awareness in the pre-merger immigration department of issues around corruption was “low and largely limited to overseas operations”.

“This resulted in blindness and a less-than-robust response to the risks of corruption in immigration decision-making,” the RAND report says.

In customs, which was then already a law-enforcement agency, “no system existed for universally vetting officers prior to 2010”.

Customs prosecuted some of its officers in 2012-13 on charges of abuse of office, bribery and conspiracy over an import racket through Sydney Airport involving steroids and other drugs, which operated in 2007. A report found they had used their inside knowledge to thwart airport surveillance systems.

The joint in-depth investigation that followed resulted in an interim report in February 2013 that said there was “inadequate preparation for the change in risk” relating to corruption – a finding the RAND review describes as “prescient”.

“In particular, this emerging threat was said to come from the increased threat of corrupt compromise and infiltration by organised-crime groups,” the RAND review says.

The final report, a year later, detailed an incident in which eight customs officers faced criminal charges, including three whose charges related to giving intentionally false evidence to the integrity commissioner. Five more officers were disciplined and the report highlighted further possible corruption issues.

Now the merged department, along with other law enforcement agencies, is turning its attention to the criminal threat not just in relation to customs but in the migration system, too.

“A systemic approach was required to address the root causes of the issues,” RAND finds. “These efforts are under way.”

It says more than 100 corruption case investigations are pending and more comprehensive screening of the workforce is under way, although one senior official warned that at the current pace, “it will take eight years to achieve”.

“Failure to vet individuals – both initially and during the course of their service – had created a culture with a lack of accountability,” the RAND review says. Workforce screening was now focused on “looking for people with links to organised crime” and “identifying networks within the workforce”.

The new Australian Criminal Intelligence Commission operation into organised crime in the system aims to boost the “strategic intelligence picture” of the extent and nature of the threat of migration and visa fraud: how, where and why it occurs, who is involved and what sort of other crime it facilitates.

Money laundering risks
Deputy chief executive officer Nicole Rose told The Saturday Paper that the commission was working with Department of Immigration and Border Protection to “target those highest-risk individuals who seek to target Australia for illicit purposes”.

Rose said the new operation’s purpose was to “disrupt serious organised crime groups”.

She declined to comment further on the nature of the threat, including on the findings of the Productivity Commission that the lack of proper scrutiny within investor visa classes exposed Australia to criminal risk.

“We do not comment on ongoing investigations and we do not comment on matters relating to intelligence,” Rose said.

Last week, treasurer and former immigration minister Scott Morrison tabled in parliament the Productivity Commission’s study of Australia’s migrant intake.

Within its 713 pages is a warning that two visa classes in particular – the significant investor visa and the premium investor visa – are vulnerable to money laundering.

“There is a risk that SIV and PIV might be used as a pathway for investing ‘dirty money’ in Australia,” the commission says.

It consulted organisations, including law enforcement agencies, which had “raised concerns about the potential for money laundering and other nefarious activities”.

The commission recommends scrapping both visas – something both the department and the federal government trade agency, Austrade, says would be premature.

The significant investor visa class has existed since 2012 and was overhauled in 2015 because of concerns its investment requirements were not tight enough.

Designed to encourage foreign investment, it is open to applicants specifically recommended by state governments who are prepared to put at least $5 million into eligible investments in Australia for four years.

Some 1228 visas were issued in that class between November 2012 and February 2016 – only six since the tightened criteria were introduced last year.

The premium investor class was introduced in only July last year and is reserved for applicants willing to invest $15 million in Australia for just 12 months.

Both classes are supposed to benefit the Australian economy. But the commission finds they don’t. It suggests the applicants are so keen to access permanent residency that they are willing to accept low returns on their investments – effectively parking their money in Australia for the required period – and that risks affecting returns overall and undermining Australian investors.

And it says the tax concessions available for venture capital investments can mean the net gain to Australia is close to nil.

On top of that, neither investor visa class requires applicants to pass a points test as other visa classes do.

While applicants do face security checks, the visa classes don’t demand any minimum English language capability and the requirement for residency in Australia is much lower than for other types of visa – just 40 days a year over four years for the significant investor visa and none at all for premium visa-holders who’ve maintained their $15 million in an eligible investment in Australia for the required 12 months.

After the investment period, the visa-holders can apply for permanent residency. Those in the first group whose significant investor visas were issued in 2012 will be entitled to claim residency from November this year.

Once granted permanent residency, there is no requirement that their money stay in Australia.

The premium visas can be issued only on the special recommendation of Austrade. Thus far, none have been issued, but the category remains open.

The Productivity Commission advises that 90 per cent of investor visa recipients – and indeed 70 per cent of those migrating to Australia on business visas overall – come from the People’s Republic of China.

The commission warns that the relatively lax criteria in the investor classes mean Australia is effectively handing out residency, with inadequate compliance rules, to those who can pay.

“The perception that visas are being ‘sold’ to wealthy foreigners could reduce community acceptance of the overall migration program,” the commission warns. “…In fact, visas are being given to foreigners so long as they hold their personal assets in a particular form, with no direct revenue flow to the Australian government.”

Lack of NZ-style ‘chain of custody’
Responding to the commission’s interim report earlier this year, the Department of Immigration and Border Protection said it was too soon to assess the effectiveness of the investor visa system, especially since the criteria were tightened just a year ago.

“One purpose of the SIV is for the families of high-net-worth individuals to anchor themselves in Australia, and to pass on generational wealth and expertise,” the department’s submission said.

“…The purpose of the SIV and PIV is to boost the Australian economy through an increased inflow of investment. Since the commencement of the program on 24 November 2012, $A5.375 billion has been invested in complying investments.”

It foreshadowed a previously scheduled review of the premium investor visa in the second half of this year.

New Zealand has a similar system of offering visas in return for significant investment but it differs in several respects, not least that there are “chain of custody” rules requiring their money to be tracked at every stage from source country to destination.

While the Australian application process includes detailed vetting of the source of funds, there isn’t the same tracking requirement in the Australian system, although changes last year removed a loophole that was allowing investors to borrow back against their investments, effectively reducing the net gain to Australia to zero.

Immigration New Zealand area manager Darren Calder told The Saturday Paper the “chain of custody” rule was an especially important protection against dirty money.

“We hear a lot of evidence from agents that operate in New Zealand and Australia that Australia has less onerous requirements,” Calder says. “They’re not worried about how the money actually gets to Australia.”

New Zealand requires the funds to be transferred direct from recognised institutions in source countries into established banks, which are separately required to verify that the money is legitimately owned and not being transferred in breach of the source country’s foreign currency laws.

“You can’t introduce new funds, you can’t borrow against the funds offshore, you can’t give them to your brother to bring in, you can’t send them through a company,” Calder says.

As in Australia, 90 per cent of the applicants for New Zealand investor visas come from China. He says the 2009 introduction of anti-money-laundering laws placed a greater onus on banks to check the sources of funds.

Immigration New Zealand had noticed a slowing of applications in the past 12 months since the Chinese government had also been scrutinising applicants’ funds transfers more closely at their source.

During the Productivity Commission’s investigation into the Australian investor visas, watchdog Transparency International warned that “no level of screening and vetting can provide complete assurance as to the integrity of the source of funds accessed by the applicants for those visas”.

But the New South Wales, Victorian and Queensland state governments, where many of the investments flow, support retaining the investor visas. The immigration department has also rejected the Productivity Commission’s call to scrap them.

Internal investigation doubts
On the broader question of monitoring criminal activity within immigration, the RAND review casts doubt on the department’s capacity to conduct investigations, flagging that as recently as six months before last year’s merger, a “number of reports” indicated it lacked the necessary law-enforcement and other skills.

This was despite having been warned in 2013 via an internal memo from a senior investigations officer, Wayne Sievers, that the investigations teams were becoming “unviable”.

The RAND review says Sievers’ document also warned that the Australian Federal Police “did not have the resources to conduct criminal investigations into all public service agencies” and so were outsourcing their investigations to the agencies themselves.

And it warned that immigration “emphasised visa cancellations over criminal investigations and focused too much on ancillary activities over core investigation business (such as the successful prosecution of high-value targets)”.

A further KPMG review in 2013 backed that assessment. A planned “system-development program” might have helped had it succeeded, it said. But instead its failure cost $700 million.

After the merger, new measures were taken to enforce standards, ensure impartiality in investigations and eliminate corruption, including the appointment of an “integrity referral officer” to “assist as a point of contact”.

On this, the RAND review says: “Of note, this position has since been eliminated.”

Background checks are now being conducted before staff appointments to the immigration department but there is a backlog of officers “who have been in the department for some time but have never had such a background check”.

The RAND assessment also reveals more changes are pending to the detention system to address “major shortcomings” and speed up processing of asylum seekers not deemed high risk.

“A significant review of detention capability is under way,” the RAND report says. “A departmental report is in the process of being finalised that will provide recommendations to further strengthen the efficiency and cost-effectiveness of detention operations as well as recast the role of detention into a more strategic context, connected to detention priorities and focused on the detention of higher-risk persons while enabling status resolution of others in the community.”

Detainee operations
RAND reveals several other reviews in 2015 had identified “major shortcomings in the area of detention operations”, including an internal audit in April last year that looked into, among other things, “management of detention services providers and procurement and contract management”.

These were subsequently the focus of a recent damning Australian National Audit Office report, whose findings were detailed in The Saturday Paper last week.

“Also being implemented are a new detention placement model and better risk assessments and management of detainees,” the RAND review says.

“Efforts are under way to address all aspects of the detention system.”

It says a “strategy handbook” has been developed.

“Such areas as escapees, the wellbeing of detainees (with a particular focus on the protection of children and families) and the mental health of detainees are being considered within the newly developed documentation.”

RAND quotes a classified report from May this year, “Making Children Safer: The Well-Being and Protection of Children in Immigration Detention and Regional Processing Centres”, which says there has been “a profound change to the immigration detention environment” in Nauru.

It says this report “put in place a capability in the immigration detention network to address potential child abuse” – just four months ago.

The same report recommended that officers needed to better understand their own roles and authorities, and that this increased structure and guidance “will be important to building the professionalism necessary for dealing with detainees”.

The RAND review finds performance in the department is improving but morale and professionalism remain the biggest issues.

It has identified negative perceptions of senior leadership as an impediment and says “unforeseen challenges” including disparities in pay and working conditions are causing unhappiness.

The report says that although the government expected the merger to take only a year, it will be up to five years before it is complete.

The RAND review says progress has been made but impediments remain – especially in the department’s investigative capability.

“Investigations are hindered by the lack of unified platforms, including integrated information technology systems,” it says. “The ongoing intelligence integration at the department level has yet to be fully pushed down to the regional commands. Building of a single department culture has been hindered by lack of progress in the learning and development area. Infrastructure – particularly related to detention activities – was cited as another issue requiring attention. All of these shortfalls have a direct effect on the ability to conduct investigations in the field.”

All in all, the fine print reads quite differently to the headline under which the RAND review was published: “Review finds integrated department more efficient and effective.”

It is little wonder the Australian Criminal Intelligence Commission is stepping in.