4. Committee comment
   1. Section 70 of the Foreign Influence Transparency Scheme Act 2018 (FITS Act) requires this Committee to review the operation, effectiveness and implications of the Scheme.
   2. Since the commencement of the Foreign Influence Transparency Scheme (FITS) in December 2018, the operation of the FITS, its impact on transparency of Australian governmental, parliamentary and democratic processes, and its position in relation to the overall countering foreign interference (CFI) framework has been the subject of debate and differing opinion.
   3. The former Committee carefully considered the Foreign Influence Transparency Scheme Bill 2017 (FITS Bill), including the need for a transparency mechanism such as the FITS, its potential impact on Australian society and its economy, and the potential for unintended impacts on both political and government processes as well as the free exercise of ideological and political representation in Australia.
   4. The original Bill’s scope was similar to that of the US Foreign Agents Registration Act 1938 (FARA) and would have had an exceptionally wide application to many elements of Australian society, including political and economic spheres. In recognition of significant concerns raised about this, the Committee’s recommendations limited aspects of the Scheme’s scope and application as legislated.
   5. The Committee notes with concern the very low number of registrations and minimal compliance and enforcement activity that has occurred in the six years since the establishment of the Scheme and the significant flaws in its design and implementation. Enforcement activity has focused almost exclusively on China with little success, while neglecting any material focus on other countries of significant concern (where there are no or very limited registrations). These include authoritarian nations like Russia and Iran which engage in malevolent foreign influence, as well as nations with which Australia has friendly and positive relations, such as India, which engage in foreign influence operations that should be transparently declared.
   6. Much of the evidence provided to the Committee in this review has argued that the Scheme’s operation has been constrained, its effectiveness has been limited, and its implications are inhibited transparency outcomes despite a high regulatory compliance burden.
   7. In essence the Scheme has failed to achieve its intended purpose with little of consequence apparent. The Scheme has plainly failed to ‘provide the public with visibility of the nature, level and extent of foreign influence on Australia’s government and politics’.[1] As noted in the Garnaut Report, more transparency on foreign influence has been achieved through investigative journalism and parliamentary inquiries than the FITS (see paragraph 2.101). There has been an ‘abject failure of enforcement’.[2] Universities have reasonably criticised the Scheme for failing to provide any additional information that is not otherwise captured by other compliance mechanisms while imposing a significant compliance burden.
   8. Some efforts have been made to improve the Scheme, including through the work of this Committee. However, given the significant flaws in the Scheme, the Committee concludes that the Scheme requires substantial reform if it is to meet its original intent and justify the compliance burden and resources required to administer it.
   9. Since the introduction of the FITS in 2017, lessons have been learned about the practical implications of that theoretical construct. This Committee undertakes statutory reviews such as this one precisely to reflect, learn and propose improvement to laws in operation in this way. The Committee has considered the range of opinions offered on the future path for the FITS, from minor adjustment to complete repeal.
   10. While some suggested that the FITS is not a useful tool providing transparency of foreign influence and is instead just a ‘tick the box’ exercise, the Committee considers, as did many who contributed to the review, that the Scheme’s objectives remain worthwhile and necessary.
   11. However, the Committee considers that as currently constructed the FITS Act is largely ineffective, with such meagre results that it would be difficult to justify the ongoing compliance burden and resources without major reform if it is to achieve its key objective – transparency of activities undertaken by Australian people and entities on behalf of foreign principals. In reforming the FITS, consideration should be given to the successful aspects of comparable schemes from other countries that appear more effective in bringing foreign influence to light (including the USA and comparable countries) while being mindful of minimising regulatory burden and focusing on the conduct of most concern.
   12. While the Committee supports the continued operation of the FITS, it is convinced that the weaknesses identified during this inquiry necessitate significant amendments to the FITS to ensure that it better meets its objective of improving the transparency of activities undertaken by Australian people and entities on behalf of foreign principals.

4.13The Committee recommends that, given the significant flaws in the Foreign Influence Transparency Scheme, substantial reform is required if it is to meet its original intent and justify the compliance burden and resources required to administer it. Mere tinkering will not be sufficient.

4.14The Committee is conscious that the goal of ensuring transparency of influence activities by individuals and entities undertaken on behalf of foreign principals is a worthy first step that should complement the CFI framework. However, the evidence received by the Committee indicates that several scenarios may be occurring:

1Entities that should be liable to register under the FITS as it is currently legislated are not registering – either through a lack of awareness or through deliberate non-compliance.

2Foreign influence activities that should be registered are not currently being captured due to the narrow scope of the definitions in the Act, or are not currently enforceable due to high evidentiary requirements.

3Activities of certain foreign actors in the Australian community are falling outside the first step of FITS registration and attracting attention as potential foreign interference, such as those identified in submissions to the review.

4Current exemptions are being interpreted in a way that gives confidence to certain individuals operating on behalf of a foreign principal that they do not need to register under the FITS. These exemptions may also be operating in an unintended way, or to an extent not desirable to achieving the aims of the FITS.

5Unclear application to sectors such as higher education and government relations professionals may be creating undue regulatory burden and/or cost, as well as potential duplication with other Commonwealth and State regulations.

6Obligations on certain position holders are creating an undue burden to register for already transparent activities, and diverting communications and investigation resources to activities that do not warrant attention.

7Investigation and enforcement of possible non-compliance with the FITS is not occurring with sufficient scale or precision, due to the design of the Scheme, a lack of resourcing, and the management of its administration within the public service.

4.15To address these issues, the Committee makes particular recommendations in this Chapter for amendments to better align the FITS with its intended objective and purpose, make the Scheme more effective, and strengthen its administration, complementing the Australian Government’s CFI framework.

4.16Ultimately, the recommendations in this report aim to achieve the following improvements, in recognition of the shortcomings and challenges outlined above:

• Increase the coverage of the FITS to capture both recognised and covert influence activities from known state actors and their proxies;
• Allow the FITS to adequately interrogate and register the activities of the United Front Work Department (to the extent possible) and other known influence entities that choose to conceal or obfuscate their activities;
• Increase transparency without unduly burdening specific sectors of the community or economy, or unintentionally targeting high-profile former political figures; and
• Ensure the Australian Government rigorously assesses the effectiveness of the FITS, including in relation to the overall CFI machinery.

Particular amendments to the FITS Act

4.17As outlined above, the Committee believes that the FITS has a legitimate objective. Providing public scrutiny of registrable arrangements and activities is a legitimate first pillar in Australia’s framework for countering malign foreign influence as well as foreign interference.

4.18The Committee agrees with observations from submitters and witnesses that legitimate and transparent foreign influence is a welcome element of Australia’s open society and democracy. When the connection between a foreign principal and the actions of a person acting on their behalf is not clear, then the registration of that relationship and the resultant activities is warranted.

4.19However, it became evident to the Committee during the review that the FITS is not effectively capturing all the entities and relationships it should. Particularly problematic are the current concepts and definitions of a foreign principal and how they relate to commercial entities and other complex relationships of foreign government control.

Definitions

4.20The concepts of a foreign government and foreign political organisation are relatively straightforward for the purposes of FITS operation and registration. However, the concepts of foreign government related entities (FGRE) and foreign government related individuals (FGRI) as defined in the Act cause administrative and investigatory difficulties when trying to satisfy the evidentiary elements of control currently required.

4.21As outlined in Chapter 3, the Attorney-General’s Department (the Department) made a number of suggested amendments to these definitions that could improve the ability to identify, investigate and enforce transparency of FGREs and FGRIs that currently are not being captured under FITS registration requirements, or are not being targeted for enforcement action.

4.22Summarised again, these suggested amendments were to:

• broaden the definition of FGRE to capture a wider range of company, governance and management structures that can enable a foreign principal to exercise control over an entity;
• expand the scope of paragraph (c) of the definition of FGRE so that it better reflects the ways in which foreign governments may legislate to embed political control or influence in entities; and
• extend the definition of FGRI to cover Australian citizens and permanent residents, consistent with the approach that the Act currently takes to Australian companies and organisations which may be FGREs.
  23. The alternative path suggested to the Committee, both by the Department and other submitters and experts, was to revert the definition of a foreign principal back to something much broader, similar to what was proposed in the original FITS Bill and is used in the US FARA and some elements of the UK National Security Bill that passed in 2023. This would essentially remove the focus on foreign governments, instead extending registration requirements to individuals or entities that exercise influence on Australia’s political and government processes acting on behalf of any foreign entity or individual.
  24. The Committee accepts the argument that the current construct of a foreign principal for the operation of the FITS does not capture the breadth of entities or individuals that the Committee would expect to be registered or subject to enforcement actions.
  25. The small quantum of registrations, and almost non-existent use of transparency notices and other enforcement options under the FITS Act, suggest that there is a fundamental flaw in the tests that either the parties liable to register must apply to themselves, or that the Department has to satisfy in its investigations in order to pursue transparency or enforcement actions against those entities.
  26. The Committee acknowledges the extensive analysis and discussion that the former Committee undertook during the FITS Bill inquiry, and recognises that its support for a focus on governmental and political influence was aimed at ensuring that the FITS did not adversely impact on civil society or the economy in an unintended way.
  27. However, the Committee agrees with submitters to the present review that this contraction of the scope and considerations for liable entities has rendered the FITS ineffective in achieving its intended objective.
  28. To this end, the Committee supports amending the definitions of a foreign principal under the FITS Act, but does not support the reversal of these definitions back to include all foreign entities and individuals. Given the realities of the modern globalised economy, the Committee believes a FARA-style approach would not only place administrative burden on a range of economic and social actors whose registration will add little value to the Scheme, but would also lead to a potential situation of significantly expanded but unfocused registration activity which would dilute rather than enhance the effectiveness of the FITS.
  29. Rather, the Committee supports the Department’s suggestions to implement targeted improvements to the existing definitions to capture the identified company, governance and management structures, foreign mandated political control or influence in entities operating in Australia (especially in commercial entities), as well as the extension of the FITS’ definition of a FGRI to Australian citizens and permanent residents.
  30. The Committee acknowledges, as did the Department, that these improvements alone will not change the FITS’ coverage of circumstances where an individual or an entity deliberately conceals a link to a foreign government or foreign political organisation. They will, however, make the relationships included within registration requirements truer to the objectives of the Scheme.
  31. Therefore, the Committee recommends that the definition of FGRE under section 10 of the FITS Act be amended as set out in the following recommendation.

4.32The Committee recommends that the definition of foreign government related entity (FGRE) under section 10 of the Foreign Influence Transparency Scheme Act 2018 be amended to:

• Recognise a relationship of control through chains of holding and subsidiary companies between the target FGRE and the foreign government or foreign political organisation, no matter how many subsidiaries are involved;
• Recognise influence that may exist through a ‘relevant interest’ in shares or securities in an entity, similar to the approach taken in sections 608 and 609 of the Corporations Act 2001, to capture foreign principals that have influence over shares or securities in a FGRE, but not direct holdings;
• Add a new test to capture companies where there is any significant overlap in personnel between the membership of the board, executive committee or senior leadership of that company and a foreign principal’s board membership, executive committee membership or senior leadership. This should apply to all incorporated and unincorporated associations;
• Clarify that ownership or control for the purpose of satisfying the tests to establish an entity as an FGRE includes where multiple foreign principals from the same foreign state are appointed as directors or executive committee members;
• Amend subparagraph (a)(v) and (b)(ii) of the definition of FGRE to replace the requirement for ‘total or substantial control’ from a foreign principal over an entity with wording to constitute a test of whether the foreign power has the opportunity or ability to direct or control, or actually directs or controls, the entity’s activities in whole or in part; and
• Amend paragraph (c) of the definition of FGRE to reflect the multiple ways that political party control or influence can be exercised over an entity, by also recognising an entity as an FGRE when:

• the foreign principal is a foreign political organisation;
• a branch of the foreign political organisation has been established in the entity; and
• the entity is required by law to assist or facilitate the activities of the branch of the foreign political organisation.
  33. The Committee further recommends that the definition of FGRI under section 10 of the FITS Act be amended to change the requirement for ‘total or substantial control’ to one of practical direction or control; and to include Australian citizens and permanent residents.

4.34The Committee recommends that the definition of foreign government related individual (FGRI) under section 10 of the Foreign Influence Transparency Scheme Act 2018 be amended to:

• Amend current subparagraph (b)(ii) of the definition of FGRI to replace the requirement for ‘total or substantial control’ from a foreign principal over an individual with wording to constitute a test of whether the foreign power has the opportunity or ability to direct or control, or actually directs or controls, the individual’s activities in whole or in part; and
• Remove paragraph (a) of the definition of FGRI, to allow for Australian citizens and permanent residents to be considered an FGRI for the purposes of the FITS Act.
  35. The Committee notes that the existing exemptions in the FITS Act will continue to apply, where relevant, to Australian citizens and permanent residents that become liable to register as a result of the above recommendation.
  36. The Committee also acknowledges the comments made by submitters and witnesses regarding the application or suitability of other definitions under the FITS Act, including the definitions of undertaking activity on behalf of a foreign principal, activity for the purpose of political or governmental influence, and communications activity under sections 11 to 13. However, the Committee does not consider that any other definitional changes are required at this stage to improve the operation or effectiveness of the FITS.
  37. The Committee believes that the improvements in application and identification of FGREs and FGRIs liable to register as a result of the above recommended amendments will lead to better application of these other elements of the FITS Act to foreign influence behaviour and activities.

Exemptions

4.38The Committee received evidence regarding the current scope and application of exemptions under the FITS Act and whether their application may be vulnerable to manipulation to avoid registration, or have had unintended consequences.

4.39The evidence presented to the Committee regarding the inequitable application or potential misuse of exemptions under section 25 (legal advice or representation), subsection 25A(c) (statutory office holders), section 29 (foreign government employees and commercial or business pursuits), and section 29C (registered charities), including some classified evidence not outlined in this report, indicated that some elements of the exemptions framework under the FITS Act require amendment.

4.40The Committee supports the intention of the current exemptions in the FITS Act, noting that many of them ensure that legitimate conduct of government, commercial, diplomatic and religious entities is exempt from the regulatory burden of registration under the FITS when their activities are legitimately and transparently conducted on behalf of a foreign principal.

4.41However, the Committee also recognises that whenever there is a defined boundary applied to an exemption some parties will seek to exploit that mechanism, or as time passes it can become clear that an exemption may apply in an unintended and inequitable manner. The Committee acknowledges that to some extent this can create a dilemma: for example, in seeking to making the Scheme more reasonable and fair in its application to legitimate charities, while also ensuring there is no tolerance for covert malign influence under charitable guises.

4.42To this end, the Committee recommends that the issues identified regarding exemptions in the FITS Act should be rectified as proposed by the Department in its evidence to the Committee, to address the following issues:

• The current disconnect between the actions of a statutory office holder and their employment for the current subsection 25A(c) exemption to apply. Subsection 25A(c) should be amended to state that a person is exempt if the activity undertaken on behalf of a foreign principal is ‘undertaken by an office holder in association with their office or appointment under a law of the Commonwealth, or under a law of a State or Territory’, or words to a similar effect. This would remove the current potential application of the exemption to those people regardless of whether the activity is undertaken due to their employment or not.
• The broad application of the current section 29 exemption for foreign government employees and commercial or business pursuits, to ensure that the exemption only applies to the regular activities of the employee in relation to their employment or the current operation of the commercial business or pursuit. Nevertheless, any lobbying or influence activities that may benefit the future state of that foreign principal’s interactions with Australian governmental or commercial interests, either through regulation or tender processes, should not be exempt from registration under the FITS.
• The inequitable application of the registered charities exemption under section 29C, to ensure that any person undertaking activities for a charitable purpose within the meaning of Part 3 of the Charities Act 2013 is exempt from registration under the FITS, not just those that can register under the Australian Charities and Not-for-profits Commission Act 2012. To ensure that this expansion is not potentially used for malign purposes, the Committee recommends that subparagraph 29C(d) be amended as well to require that the activity undertaken must be disclosed to the public, removing the ‘apparent to the public’ factor that could be relied on.
  43. The Committee acknowledges the evidence regarding some potential issues with the way that the exemption for legal advice or representation under section 25 of the FITS Act may have been used. The Government should consider the issues raised in reforming the Scheme while ensuring that legal advice and representation remain an important safeguard, provided that the exemption is limited to the provision of legal services.

4.44The Committee recommends that exemptions under Part 2, Division 4 of the Foreign Influence Transparency Scheme Act 2018 be improved by:

• Amending subsection 25A(c) to state that a person is exempt if the activity undertaken on behalf of a foreign principal is ‘undertaken by an office holder in association with their office or appointment under a law of the Commonwealth, or under a law of a State or Territory’, or words to a similar effect;
• Amending section 29 to remove the broad application of the current exemption for foreign government employees and commercial or business pursuits, to ensure that the exemption only applies to the regular activities of the employee in relation to their employment or the current operation of the commercial business or pursuit. Any amendment related to this exemption should ensure that lobbying or influence activities that may benefit the future state of that foreign principal’s interactions with Australian governmental or commercial interests, either through regulation or tender processes, are not exempt from registration under the FITS;
• Amending the registered charities exemption under section 29C to ensure that any person undertaking activities for a charitable purpose, within the meaning of Part 3 of the Charities Act 2013, is exempt.

• To ensure that this expansion is not used for malign purposes, subparagraph 29C(d) also be amended to require that the activity undertaken must be disclosed to the public.
  45. The Committee has identified in this report that classified evidence was provided to it regarding exemptions. Broadly, this evidence related to the ability of foreign actors to use charitable organisations or other exemption categories to exercise malign influence on Australian society and its democratic processes. This, coupled with the fact that the Committee received limited unclassified evidence on certain contentious exemption categories, limits the ability of the Committee to make definitive recommendations on amending exemptions under the FITS.
  46. The Committee is aware that cases of potential misuse or problems with exemptions beyond those in the public evidence provided to the Committee are likely to have become apparent to the Department through its investigative work since the FITS’ commencement. The Committee therefore recommends that when formulating any legislative changes in response to this report and its recommendations, the Australian Government review all current and potential exemptions, and bring forward any other suggested amendments or revisions that it may consider are warranted, as part of legislation to reform the FITS. Such a Bill would be expected to be referred to this Committee, allowing for further scrutiny of the exemptions.

4.47The Committee recommends that the Australian Government review all current and potential exemptions under the Foreign Influence Transparency Scheme Act 2018, with a view to including any further amendments to exemptions that may be warranted as part of legislative changes proposed to the FITS.

The Committee further recommends that any future Bill put forward to amend the FITS Act, in response to this review or otherwise, be referred to this Committee for review and report.

Former Cabinet Ministers and designated position holders

4.48As outlined in Chapters 2 and 3, the Committee received evidence regarding the FITS Act’s focus on former Cabinet Ministers and designated position holders.

4.49The Committee believes that some of the early activity under the FITS was misguided and contributed to a negative perception of the practical usefulness of the FITS in providing transparency of relevant foreign influence; focusing instead on innocuous public activity by high-profile political figures. The intent of regulating specified activities of former politicians and senior office holders is accepted, as these people’s influence and knowledge can make activities on behalf of a foreign principal particularly sensitive, although the primary focus of the Scheme should be to capture less transparent cases of influence by foreign entities and foreign government related persons.

4.50The Department identified two potential improvements to better focus the obligations on former ministers and designated position holders: modifying the requirement to register communications activity when a foreign principal’s activity is apparent and the activity is not for the purpose of political or government influence in Australia; and reducing the timeframe after leaving office for these two cohorts to have to register their activities.

4.51The Committee sees merit in both proposals, subject to some modification of the Department’s suggestion on the latter.

4.52Amending the requirement to register communications activity is sensible as the majority of arguably unnecessary registrations for these cohorts have been in relation to communications activity undertaken where the foreign influence potential is low, or the involvement of the foreign principal has been apparent (such as a former politician appearing on the BBC).

4.53Therefore, the Committee is recommending that the current section 22 and 23 registrable activities obligations on former Cabinet Ministers and recent designated position holders be amended to preclude communications activities from requiring registration where a foreign principal’s involvement in that activity is apparent or declared and where the activity is not for the purposes of political or governmental influence in Australia.

4.54In terms of timeframes for the obligations, the Department noted that the original 2017 FITS Bill proposed obligatory registration periods of 3 years and 18 months respectively on these cohorts. The Committee does not consider that the timeframes should be shortened to that extent, but does agree that they could be reduced from the lifetime and 15-year periods currently imposed. In reviewing the timeframes for obligatory registration periods, the Committee considers that a lifetime period should be retained for former Ministers who were members of the National Security Committee of Cabinet, and were therefore particularly engaged in sensitive national security matters.

4.55The Committee therefore recommends that the Act be amended to apply to Cabinet Ministers for fifteen years and designated position holders for ten years after leaving their respective positions; while continuing the lifetime obligation in respect of former members of the National Security Committee of Cabinet.

4.56The Committee recommends that the Foreign Influence Transparency Scheme Act 2018 be amended in the following ways to improve compulsory registration obligations on former Cabinet Ministers and recent designated position holders:

• Section 22 and 23 registrable activities obligations on former Cabinet Ministers and recent designated position holders be amended to preclude communications activities, as defined in section 13 of the Foreign Influence Transparency Scheme Act 2018, from registration where a foreign principal’s involvement in that activity is apparent or declared and where the activity is not for the purposes of political or governmental influence in Australia; and
• Section 10 definitions, and related provisions as necessary, be amended so that registration obligations would apply to:

• Ministers who are former members of the National Security Committee of Cabinet for their lifetime;
• other former Cabinet Ministers for fifteen years; and
• recent designated position holders for ten years.

Enforcement options

4.57The Committee was concerned to note the very low level of compliance and enforcement activity that has occurred under the FITS since its commencement.

4.58The very low success in issuing transparency notices under the Act is indicative of the difficulties that the Department faces in establishing the evidence of control or direction required to issue these notices to entities within Australia. Similarly, the lack of any referrals for prosecution may be attributed, at least in part, to the evidentiary burden required to make the current enforcement options under the FITS Act operational.

4.59The Committee believes that the definitional changes recommended earlier in this chapter will ease the burden that the Department faces in issuing transparency notices as well as potentially pursuing referral and prosecution of the most egregious cases of non-compliance under the FITS Act.

4.60Another reform which would help the Department pursue greater compliance with the FITS would be to establish mid-spectrum options short of criminal prosecution within the legislation. This would allow the Department to take meaningful administrative action to make transparent the actions of individuals or entities that are not compliant with the Act but are not necessarily at the level of committing a criminal offence. The Committee endorses the proposals put forward by the Department to address this, by introducing graduated enforcement options to impose registration or transparency on non-compliant entities or individuals.

4.61Creating the ability for the Secretary of the Department to register a person who is liable to register but has failed to do so is a sensible approach. Similarly, the suggestion to provide a mechanism for the Secretary to identify on the register a person or entity who has been non-compliant with their obligations is a good registration incentive.

4.62The Committee therefore recommends that the FITS Act be amended to include two new enforcement options in Part 5 of the Act, which would allow the Secretary of the Department to register a person where they are liable to register but have failed to do so; and to place information on the register about any person who the Secretary considers should be registered but has not registered voluntarily, or has otherwise not complied with the Act.

4.63In implementing these options for enforcement of the Act, the Committee strongly urges the Secretary and the administrators of the Scheme to prioritise analysis and monitoring of United Front Work Department activities, in cooperation with National Intelligence Community agencies as appropriate, in order to identify and proactively ensure the registration of UFWD activities and proxies that should be falling within the Scheme.

4.64The Committee recommends that the Foreign Influence Transparency Scheme Act 2018 be amended to insert two new enforcement options into Part 5 of the Act, to enable the Secretary of the Department to:

• Register a person (meaning an individual or entity) when they are liable to register but have failed to do so. The Secretary must be required to invite a submission within a reasonable timeframe from the person regarding their apparent liability to register, and if still satisfied after considering any submission that registration is required, then the Secretary is required to register that person; and
• Place information on the register about any person who the Secretary considers should be registered but who has not registered voluntarily, or has otherwise not complied with the Act.

Transparency notices

4.65Whilst not strictly an enforcement mechanism under the FITS Act, the Committee considers transparency notices an important part of the overall framework that allows the Department to ensure that registration is occurring and that the appropriate sunlight is being shone on those entities that are not complying with their obligations.

4.66As mentioned above, there have been very few transparency notices issued since the commencement of the FITS Act, with the provisional transparency notice issued to the Confucius Institute at the University of Sydney having been revoked and only one other notice having been issued and finalised, regarding the Australian Council for the Promotion of Peaceful Reunification of China (ACPPRC) Incorporated.

4.67The Committee believes that the definitional changes that will result from the earlier recommendations in this chapter will enable more transparency notices to be issued and so does not believe that fundamental changes are required to the transparency notice framework in Part 1 Division 3 of the FITS Act.

4.68However, the Committee does consider that the transparency notice process could be strengthened by the changes suggested by the Department in its 2023 submission to the review, as outlined in Chapter 3, to require additional information in published transparency notices, and extend the timeframes for submissions and for finalisation of transparency notices.

4.69Accordingly, the Committee recommends that relevant provisions in Part 1 Division 3 and Part 4 Division 2 of the FITS Act be amended in line with the recommendation below.

4.70The Committee recommends that the Foreign Influence Transparency Scheme Act 2018 be amended to:

• Require the Secretary, when issuing a transparency notice, to not only state that the subject is a foreign government related entity or individual, but also identify the relevant foreign principal and foreign jurisdiction to which the notice relates;
• Allow the Secretary to set an appropriate timeframe, of no less than ten business days, for the subject of a notice to make a submission under section 14C of the FITS Act; and provide that a provisional transparency notice becomes final 20 business days after the date set in the invitation to submit if not revoked by then; and
• Amend section 14D and subsection 43(2A) to repeal the requirement that provisional transparency notices be published, and instead provide that only final transparency notices are published and taken to be in force for the purposes of the Act.

Technical and minor amendments

4.71The Committee noted the other technical and minor amendments suggested by the Department in its submissions and supports amendments to improve the functionality and administration of the FITS.

4.72One set of technical amendments raised by the Department has not been endorsed by the Committee. The Committee is not convinced that amendments to section 69 to reduce the detailed information required in its annual reports on the FITS are necessary, and would be wary of a potential perception that the Government’s own transparency is being reduced in relation to the Scheme.

4.73The Committee recommends that the Foreign Influence Transparency Scheme Act 2018 be amended to:

• Clarify the definition of ‘on behalf of’ in section 11 so that it only captures circumstances where the person undertaking the activities knew or should reasonably have known that the activities would benefit the foreign principal, either directly or indirectly;
• Clarify information requirements under sections 16, 39, 45 and 46 to explicitly state that the power of the Secretary to request information is limited to the extent of information required for administration of the Act;
• Amend Division 3 of Part 4 to clarify that the Secretary cannot issue information gathering notices for any information other than what is required for the administration of the scheme; and
• Amend section 50 to preclude information gathered from the public domain as ‘scheme information’ for reporting purposes.

Regulatory burden and duplication

4.74The Committee notes the concerns of certain submitters and witnesses regarding the potential for undue regulatory burden from the application of the FITS to them.

4.75The university and higher education sector raised significant and detailed concerns regarding the cost and time required to be invested into testing FITS compliance for research and other endeavours, which has generally resulted in advice that the activity does not need to be registered.

4.76The Committee was intrigued to note that the Department identified that the FITS had ‘limited application to universities’,[3] but whether that was an observation based on limited registrations, or rather reflected legal advice on the application of the FITS, was not clear to the Committee.

4.77The Committee also noted the concerns raised by universities regarding potential duplication between the FITS and the Foreign Arrangements Scheme (FAS) administered by the Department of Foreign Affairs and Trade (DFAT). Whilst the Committee acknowledges that these two schemes may have some crossover application to the same work or research, the intended function and outcome of the two schemes is dissimilar and both have legitimate need for engagement from relevant entities.

4.78The Committee noted that most universities that engaged with this review are part of the University Foreign Interference Taskforce (UFIT) steering group, which brings them together with relevant security and intelligence agencies, as well as the Department. Whilst this forum was identified as a potential mechanism for working through concerns regarding the FITS’ application to universities, the Committee does not believe this is the appropriate avenue to address the specific concerns expressed to it during this review. The UFIT should be focused on foreign interference in the higher education sector.

4.79The Committee also notes that the resources available on the Department’s website related to the application of the FITS do not include any tailored information for the education sector to assist its considerations of whether the FITS applies to educational institutions and in what circumstances.

4.80Accordingly, the Committee is recommending that once any legislative amendments are made to the FITS Act resulting from this report, the Australian Government convene a working group between the Attorney-General’s Department, DFAT and nominated university and higher education stakeholders to discuss the application of both the FITS and the FAS and what resources could be developed to ease regulatory burden in complying with both schemes.

4.81The Committee recommends that, within three months of any legislative amendments to the Foreign Influence Transparency Scheme Act 2018 resulting from this report coming into effect, the Australian Government establish a working group including the Attorney-General’s Department, the Department of Foreign Affairs and Trade and nominated university and higher education stakeholders to review the application of both the Foreign Influence Transparency Scheme and the Foreign Arrangements Scheme, and identify good practice and options to ease the regulatory burden on the sector in complying with both schemes.

4.82The Committee also notes that in 2023 it reviewed the Foreign Influence Transparency Scheme Amendment Rules 2023, that amended FITS Rules to allow the Secretary to communicate scheme information under section 53 of the FITS Act to DFAT for the purposes of the administration of the FAS, where the same entity is under consideration by both schemes.

4.83The above forum could be used in due course to communicate any information relevant to the application of those Rules, as well as to update stakeholders on the implementation of two-way notification and communications improvements identified in the Committee’s review of the Rules.

Country agnosticism

4.84The Committee took great interest in the evidence provided to it regarding the country-agnostic basis for the FITS Act and its administration.

4.85It is evident to the Committee that the greatest benefit to be achieved by the FITS in providing public transparency of foreign influence activity is through registration, either voluntary or enforced, of activity that could influence our democracy and society. Whether registration should be prioritised by areas of higher risk or concern is a complicated question.

4.86The majority of current registrations relate to the country that the bulk of evidence identified that the FITS should be focusing on, China. However, the Committee notes that other authoritarian regimes or countries known to be engaged in foreign influence operations are not attracting registrations – at all or to any significant degree. In fact, throughout the history of the operation of the FITS the next highest numbers of registrable activities have related to Japan and the USA – significant commercial, security, and diplomatic partners to Australia, and liberal democracies.

4.87This may indicate that the FITS’ current scope does not adequately capture the activities of malign actors from authoritarian states. On the other hand, it may be argued that it simply, and accurately, reflects the diverse nature of political and governmental dialogue and interaction undertaken by Australia in the globalised world.

4.88The Committee has carefully considered this issue and concludes that the current country-agnostic design of the FITS remains appropriate in terms of future legislation. The Committee would expect that future implementation and administration of a reformed FITS would see public reporting and attention on a broader range of countries of interest and concern (i.e. that captures more than just Chinese-affiliated entities).

4.89The Committee accepts that the potential risk from certain foreign states and their proxies is higher than from other like-minded jurisdictions. However, this does not warrant changing the FITS to focus on a limited number of foreign states. A key problem with adopting a country-specific path is the likely signal that would be sent to malign actors from other foreign states which could more effectively target Australia for influence or interference. The Committee considers that the amendments suggested earlier in this chapter to the definitions of a FGRE and FGRI will allow for more foreign principals from countries of concern to be covered by the FITS, and the recommended extra enforcement options will facilitate more registration and transparency, without limiting the list of countries to which a reformed FITS applies.

4.90The Committee does not naively believe that these—or perhaps any—amendments to the FITS will alone solve the issue of malign influence and deliberate avoidance of registration, or attempts to modify entities to avoid the requirement to register. However, the Committee considers that with significant reforms, including changes proposed in this report, a redesigned Scheme can better meet its objectives.

4.91Rather than limit the Scheme’s operation via legislation, as a matter of common sense it would also be expected that in administering the FITS, including compliance activities, agencies would adopt a risk-based approach in prioritising investigation and enforcement actions within finite resources. This is preferable to the complexity and issues associated with country-specific regulatory frameworks. The Committee would expect that influence activities on behalf of authoritarian states who seek to conceal their activities as well as those countries identified as most active and posing the greatest risks within the CFI framework would naturally be prioritised for greater attention. As a corollary, influence from countries that are assessed as proposing little or no security risk would be a lower priority for compliance and enforcement activities.

Government administration of the FITS

4.92In the evidence received for this review, the Committee was presented with varying points of view regarding the most suitable agency or department to administer the FITS.

4.93The Committee acknowledges the genesis of the FITS within the Attorney-General’s portfolio and understands the intended efficiencies of co-locating FITS staff within the section that also administers the Australian Government Register of Lobbyists and associated code of conduct.

4.94However, the creation of the Department of Home Affairs in 2018 and the subsequent machinery of government changes around national security policy coordination, as well as the creation of a coordinated National Intelligence Community (NIC) at the same time, throws into question whether the administration of the FITS would be better managed in an agency that sits within the NIC and its intelligence network.

4.95Additionally, the Committee acknowledges that the strategic review undertaken into the FITS found that the FITS was not achieving its purpose, and that more demonstrable transparency outcomes had been achieved through media reporting and other inquiries than by the Scheme.

4.96The Committee sees potential benefit in keeping the FITS separate from the NIC and the CFI effort, so the staff conducting investigations and making assessments are not unduly influenced by other intelligence or diverted to countering foreign interference or other national security priorities.

4.97The Committee does not recommend that the administration of the FITS be removed from the Attorney-General’s Department, noting that machinery of government arrangements are ultimately a matter for Executive Government and Secretaries and may change from time to time. Rather, the Committee recommends that, as part of the ongoing evolution of both CFI work and the NIC, the Government give consideration to reviewing the appropriate administering agency for the FITS. This review could be undertaken as a separate independent review, in the context of considering any relevant reviews already commissioned, or considered as part of the current 2024 Independent Intelligence Review.

4.98Independent of the commissioning or outcome of any review, if undertaken, the Committee is conscious that the implementation of the recommendations in this report would potentially have workload and resourcing implications for the Department.

4.99The Committee considers that the current staffing resource allocations outlined by the Department are inadequate and recommends that the Department—or any other agency that was to administer the FITS in future—be appropriately resourced to enable the timely and efficient administration of the FITS. This means not only a sufficient number of staff, but also ensuring the necessary capabilities are within, or available to, the team administering the FITS, including investigation skills, high-level knowledge of relevant foreign jurisdictions and languages, and effective public engagement including online.

4.100The Committee recommends that the Government review the resourcing of the administering department of the Foreign Influence Transparency Scheme Act 2018 to ensure that both the level and capacity of staffing is sufficient to support the timely and efficient administration of the Scheme, including any workload increases arising from the recommendations of this report.

Oversight of the FITS

4.101The Committee did not receive any direct evidence to this review regarding current oversight of the Department’s administration of the FITS. The annual report process was identified as a means of providing public visibility of the results of the FITS, but the Committee does not view this as oversight per se.

4.102The Committee notes that the Auditor-General may conduct performance audits of the FITS, either specifically or within a general audit of programs administered by the Department. Additionally, the inclusion of provision for this review in section 70 of the FITS Act was seen as another oversight mechanism by the former Committee in its consideration of the 2017 Bill. The former Committee did not see value in imposing extra oversight mechanisms on the scheme in its early days and identified that the adequacy of oversight mechanisms should be considered by this review.[4]

4.103Acknowledging the commentary and recommendation above about the appropriate agency or department to administer the FITS, the Committee does believe that there is value in third-party oversight of the administration and operation of the Scheme. However, the Committee does not believe that an independent sovereignty commissioner, or a similar body, needs to be established at this juncture.

4.104To this end, the Committee is recommending that the Auditor-General consider the commencement of a performance audit of the administration and outcomes of the Department’s management of the FITS to date. Should the Government accept most or all of the recommendations of this report, such an audit or a follow-up audit may also be warranted once relevant legislative amendments have been made and had the chance to take effect.

4.105As part of any performance audit/s of the FITS, the Australian National Audit Office might also consider the performance of FITS administration within the Department and whether the flow of information and investigations processes are adequately supported and resourced.

4.106The Committee further considers that there would be value in the Auditor-General considering the value of a broader cross-agency audit, at an appropriate time, into the operation of the Government’s CFI framework as a whole.

4.107The Committee recommends that the Auditor-General consider undertaking a performance audit of the administration and outcomes to date of the Foreign Influence Transparency Scheme before and/or after the implementation of any changes in response to this report.

Legislative reform and statutory reviews

4.108The Committee observes that in evidence to this review, the legislative framework for the FITS has been identified as deficient in a number of areas. Moreover, it is clear that key stakeholders both within and outside Government have recognised it as such for some time. The Committee is somewhat concerned that the FITS Act has not been more substantially amended since its commencement, with only two substantive minor amending Acts having been passed,[5] and no clear action in response to the strong findings of the 2021 strategic review.

4.109Whilst the original FITS Bill included a proposed provision for a review of the scheme to be conducted before the end of five years of the scheme’s operation, this was amended as a result of the recommendation of the former Committee to be a review by this Committee to commence by the third anniversary of the commencement of the Act.

4.110The provision for this review three years after the Act’s commencement did not abrogate the responsibility on the Department or the Government to identify or progress amendments to the Act if a deficiency or improvement is warranted.

4.111The Committee recognises that in recent Parliaments the recommendations of bill reviews conducted by this Committee often result in a statutory review to be conducted by the Committee into the operation, effectiveness and implications of the new legislation (as in this review), or the granting or extension of intelligence or law enforcement powers into existing statute. These recommendations are made to ensure that the Committee has the legislative right to review the legislation, independent of a referral from the relevant Minister – the only other current option for review under the Intelligence Services Act 2001.

4.112The Committee is concerned that the inclusion of provisions in national security legislation for PJCIS review may be resulting in a ‘wait and see’ approach from some departments and agencies instead of progressing necessary improvements of their own accord and in a timely way.

4.113The Committee stresses that this is not necessarily always the case.[6]

4.114However, in the case of the FITS Act, it seems that a number of the improvements that the Department suggested to the Committee during this review were already clearly warranted and could have been progressed for legislative amendment prior to the review. Also, the way some of the originally identified issues with the Act were outlined to the Committee in the Department’s initial submission was vague and unhelpful. Identifying an issue and suggesting that the Committee might like to consider it has limited value to the Committee’s process. This Committee does not write legislation; it makes recommendations based on expert evidence, and in this case the expert on the legislation in question was the Department.

4.115The Committee does acknowledge that the detail provided to the Committee in later submissions and in briefings and hearings from the Department improved as the review progressed, but notes that if similar levels of detail had been provided earlier in the review process, the Committee may have been able to finalise its review at an earlier juncture.

4.116The Committee makes no recommendation regarding this issue but wishes to highlight that in line with the concept of responsible government, relevant agencies and departments should not necessarily rely on the review processes of the Committee to pursue change to any piece of national security legislation. As an extension of the Executive, if a problem needs fixing, the public service should identify and propose legislative amendment to the Government for consideration by the legislature at the earliest opportunity, to ensure the best use of Commonwealth resources and the best outcomes for all parties involved.

Future statutory review

4.117Noting the comment above, the Committee considers that ongoing review of the operation, effectiveness and implications of the FITS is an important role for this Committee, including after legislative reform is undertaken to implement the recommendations of this review and any other improvements needed.

4.118The Committee recommends that section 70 of the Foreign Influence Transparency Scheme Act 2018 be amended to provide that the Parliamentary Joint Committee on Intelligence and Security initiate a further statutory review of the operation, effectiveness and implications of the Foreign Influence Transparency Scheme, including amendments resulting from the recommendations of this report. This review should commence not less than three years after legislative amendments resulting from this report come into effect.

Review of the effects of the National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018

4.119As identified in numerous points within this report, the FITS was introduced as part of a national security legislative reform package that included the National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 (EFI Act).

4.120The 2017 Bill that became the 2018 EFI Act was reviewed by the former Committee and was reported on in June 2018. This Act amended numerous Commonwealth legislation to reform treason, espionage, foreign interference and related offences, as well as secrecy provisions and offences, telecommunications offences and transitional amendments related to commencement of the FITS.

4.121This complicated amending Act was not recommended for further review by this Committee, rather recommending that after three years the Independent National Security Legislation Monitor (INSLM) be required to conduct a review of Division 82 (sabotage), Part 5.2 (espionage, foreign interference, theft of trade secrets), and Part 5.6 (secrecy) of the Criminal Code. The Committee’s recommendation outlined that a copy of the report on the independent review should be provided to the Attorney-General, who should be required to provide it to the Committee; and that any amendments proposed to be made to the laws as a result of the review should be referred to the Committee for inquiry.

4.122Six years after the commencement of the EFI Act amendments, the INSLM has commenced in January 2024 a review into Part 5.6 secrecy offences. INSLM reviews of Division 82 and Part 5.2 remain to be commenced. As a consequence, the Committee recommends that the Attorney-General refer a general review of the operation, effectiveness and implications of the amendments made by the EFI Act to this Committee for report. If referred, the Committee will work with the INSLM to minimise any potential duplication regarding the two reviews.

4.123Noting that the FITS concerns foreign influence not interference, the Committee recommends that the Government refer a review of the operation, effectiveness and implications of the amendments made by the National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 to the Parliamentary Joint Committee on Intelligence and Security. Such a reference should be couched in terms that allow the Committee to avoid unnecessary duplication or conflict with any relevant reviews being undertaken by the Independent National Security Legislation Monitor.

Concluding comments

4.124As stated earlier in this chapter, the Committee believes that the FITS has a legitimate purpose and objective and forms an important first pillar in Australia’s efforts to shine a light on both legitimate and malign foreign influence activities in our society.

4.125When influence activities potentially affect governmental and political processes, the need for transparency is greater. This is why the Committee has not recommended broadening the scope of the FITS to something similar to the United States’ FARA scheme. The direct targeting of activities intended to influence government and politics focuses the FITS on identifying and highlighting the activities that can have the greatest potential impact.

4.126International effort to create similar schemes, including in the United Kingdom and Canada, highlight that there is no ‘one size fits all’ option to providing transparency in this context.

4.127The Committee is of the mind that once the recommendations outlined in this report are actioned, the FITS will be able to enter a new, enhanced phase of operation as a more robust mechanism for shining light on the influence activities that it is intended to target.

4.128Ongoing monitoring, honest appraisal and future consideration by government of the operation and administration of the FITS should allow the scheme to continue to grow in its effectiveness and value.

Mr Peter Khalil MP

Chair

Footnotes

[1]Attorney-General’s Department, ‘Foreign Influence Transparency Scheme’, https://www.ag.gov.au/integrity/foreign-influence-transparency-scheme, viewed 6 March 2024.

[2]Australian Strategic Policy Institute, Submission 13, p. [2].

[3]Mr Simon Newnham, Deputy Secretary, Integrity and International Group, Attorney-General's Department, Committee Hansard, Canberra, 21 February 2023, p. 47.

[4]PJCIS, Advisory Report on the Foreign Influence Transparency Scheme Bill 2017, pp. 295-296.

[5]Foreign Influence Transparency Scheme Legislation Amendment Act 2018, commenced 10 December 2018 (with the principal Act) and the Foreign Influence Transparency Scheme Amendment Act 2019, commenced 6 April 2019.

[6]For example, substantial amendments to the Security of Critical Infrastructure Act 2018 were introduced in the 46th Parliament prior to the date for the Committee’s review of the legislation. As a result the Committee was able to consider the proposed amendments concurrently with its statutory review.