Foreign Correspondence

[fuagf]

Aussi .. Top bank snared in shady third world deals
Richard Baker and Nick McKenzie .. May 23, 2009

THE Reserve Bank has been involved in the payment of multimillion-dollar commissions
to shady middle-men in its drive to win banknote printing deals with foreign governments.

Securency, a Melbourne-based banknote supplier half-owned by the Reserve Bank, has made a substantial
number of "commission" payments to agents, including those previously implicated in corruption scandals.

The company, which has supplied polymer material to print money in Australia and 26 other countries, is
chaired by the bank's assistant governor, Robert Rankin. Its board features another two Reserve Bank
appointees, as well as executives from a British firm, Innovia Films, the owner of the other half of Securency.

Some of Securency's agents are closely tied to officials in countries ranked by Transparency International as highly corrupt.

Several agents have been named in official corruption investigations
in Africa and Asia. At least one has a criminal conviction for fraud.

Company insiders have raised concerns that the company's practices have left it exposed
to allegations that some commissions could be used to pay kickbacks to foreign officials.

The Reserve Bank's Deputy Governor, Ric Battellino, said yesterday that he would
demand an immediate response from Securency about its use of agents and payments to them.

"If this is happening, then it is against all the policies and procedures the RBA has put in place for this organisation," he said.

It can be revealed Securency has:

* Made payments to a London firm, Contec Global, which was accused in an official Ugandan inquiry of
having a corrupt relationship with a Ugandan minister found to be "fronting and lobbying" for the company.

* Been linked with a controversial South African casino tycoon, Vivian Reddy, who was embroiled in the recently
aborted corruption trial involving his friend, the President, Jacob Zuma. Reddy denies the allegations.

* Made payments to companies linked to a South African businessman, Don
McArthur, who last year was convicted for fraud. McArthur denied any link to Securency.

* Paid million of dollars in commissions to a Vietnamese company, CFTD, whose subsidiary, Banktech
was managed by the Vietnamese central bank governor's son at the time the bank decided to switch to polymer
notes in 2002. A 2007 Vietnam corruption inquiry found the governor's role in the deal was irregular.

A company insider also claims he was told that Securency had provided $US100,000 -
subsequently donated to an Indian political party in 2007 - while it was seeking a trial of
polymer notes. It is claimed the payment was recorded in accounts as "marketing expenses".

In a statement yesterday, Securency said it conducted a thorough due diligence process when appointing agents, which
included checks by the Federal Government agency Austrade and compliance with international anti-corruption conventions.

Securency said its agents - whose identities are disclosed to the Reserve Bank representatives
on its board had signed agreements forbidding payments to foreign officials and politicians.

In its statement, Securency acknowledged it had cut ties with agents
on a "number of occasions" when it was not satisfied with performance.

Securency denies any payment to Indian political parties or politicians.

In contrast to Securency, an associated company, Note Printing Australia - which is fully owned by the Reserve
Bank - said it no longer used agents because it was "more responsible" to deal directly with central banks.

Another Securency agent operating in Asia is a Melbourne barrister, Daryl Dealehr, who has ties to the
family of Cambodia's late police chief Hok Lundy and the Prime Minister, Hun Sen. Securency has yet to
win any contracts in Cambodia and Mr Dealehr has not been named in any corruption or criminal inquiries.

The revelation of Securency's payments to agents in developing countries has the potential to embarrass
the Government and the Reserve Bank, especially so soon after the Iraqi kickbacks scandal involving AWB.

Mr Battellino said the bank was aware Securency operated in countries with "bad reputations"
but was "conscious to ensure arrangements were in place to avoid corruption payments".

There is no suggesting Securency has engaged in bribery but its operations with agents
in corruption-prone countries raise concerns about its risk management procedures.

Company insiders claim Securency offers agents commissions of between 10 and 20
per cent of any deal they help win. The industry standard is from 2 to 6 per cent.

Securency said commission payments varied between its agents, and advice from
Austrade was sought to determine appropriate commissions for each country it operated in.

http://www.smh.com.au/national/top-bank-snared-in-shady-third-world-deals-20090522-bi9z.html?page=-1