List of recommendations

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.

4.32The 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:

othe foreign principal is a foreign political organisation;

oa branch of the foreign political organisation has been established in the entity; and

othe entity is required by law to assist or facilitate the activities of the branch of the foreign political organisation.

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.

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.

oTo 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.

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.

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:

oMinisters who are former members of the National Security Committee of Cabinet for their lifetime;

oother former Cabinet Ministers for fifteen years; and

orecent designated position holders for ten years.

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.

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.

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.

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.

4.100The 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.

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.

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.

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.