Of recent time, the media seems to be bursting with stories of shady deals and illegal activities. Alleged bribery here and overseas (some including alleged misconduct by Australian Government officers) circumvention of the most fundamental corporate governance rules and Government security, the use of illegal performance enhancing drugs by our sports stars and continued examples of corporate fraud make the business world a very dangerous environment within which to operate.
The response from the Australian Federal Government has been extensive including the introduction of integrity testing for Commonwealth officials, increased resources to the Australian Crime Commission and the establishment of the Customs Reform Board among other initiatives. The changes to the Australian Customs and Border Protection Service ("Customs") may well represent the "lightning rod" of changes that may take place elsewhere. Against a backdrop of arrests and search warrants closely related to activities allegedly involving Customs officers, the new CEO of Customs was the first employee to take a mandatory drug test – which testing will be rolled out to all employees. At the same time a new blood alcohol limit was adopted and employees encouraged to report suspicious behaviour.
That response has not been confined to Government and has also been imposed to those in the private supply chain by way of changes to qualifications for the issue of Aviation and Maritime Security identification cards, changes to licensing requirements for licensed customs brokers and those operating licensed premises. This includes the imposition of new conditions aimed at improving IT and physical security, ensuring that no inappropriate persons work in those parts of the supply chain or have access to Customs systems as well as compulsory reporting of offences.
In addition, new laws have been passed increasing controls of goods for export including those used for defence activities or those which would have a military end-use.
Penalties for those in the private supply chain from failure to comply are heavy. They include significant financial penalties, possible imprisonments as well as threats to the licences held by parties such as licensed customs brokers and operators of licensed premises together with the intervention in the movement of goods through their supply chain.
Further, there are significant business risks to employers who employ people with dubious histories or who don't observe company policies or the law. Those risks can run from the theft of intellectual property to fraud, to breaches of privacy and other nasty consequences for the businesses. All of these can have significant adverse reputational risks even if no convictions are recorded.
So it's overdue to review business practices to minimise these risks.
At the least, these should include the following steps.
- Undertake proper homework before employing staff or service providers and doing work for customers. This should include steps to verify the identity of parties and their past experience and history. Many customers expect your staff to have been properly checked and Customs now has detailed expectations that customs brokers or those operating licensed premises should be able to verify the integrity of those working in those businesses. It is worth reviewing Customs guidance as in ACN 2012/43. We can recommend clients who can assist in this area.
- Ask service providers for customer references.
- Develop proper practices within the operation of the business including developing and adopting manuals as to handling various issues and making sure they are observed.
- Regularly advising employees, service providers and customers as to changes to legislative requirements and associated practices. This is mandated by Customs requirements.
- Continually monitoring operations to ensure that they are being completed appropriately. External independent review of operations is advisable. Early voluntary disclosure of problems is welcomed by all Government agencies and those operating as customs brokers are now required to advise of any apparent breaches of the law.
- Be prepared to remove employees or service providers engaged in questionable activities or to stop work for clients whose business practices are not acceptable.
- Secure and maintain appropriate insurances.
- Have a plan for adverse developments at any time whether it be fraud, financial risk or illegal activities by employees or customers.
- Have a good accountant and a good lawyer on call and don't be afraid to involve them in all stages of the operation, not just when things have gone wrong.
As always, we would be delighted to assist with these issues.