Chapter 4Committee views and recommendations
4.1The Perth Mint is of vital importance to the economy of Western Australia and Australia more broadly. It refines around 80 per cent of the gold mined in Australia and is the primary producer of Australian bullion.
4.2However, The Perth Mint's activities as a commodity trading enterprise mean that it is potentially exposed to organised crime and terrorism financing. Such exposure may carry enormous risks for the Australian and international community if an organisation's executive management and Board are not actively reducing the potential risks.
4.3The committee heard from two of Australia's leading risk management expert organisations, the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian National Audit Office (ANAO), that GoldCorporation (trading as The Perth Mint) was not appropriately managing its Money Laundering/Terrorism Financing (ML/TF) risks. This not only put Australia at heightened ML/TF risk but has also raised the possibility that Western Australian taxpayers would need to finance any monetary penalties that ThePerth Mint may be liable to pay for those breaches.
4.4Witnesses, including the ANAO, provided broad advice on 'best practice' expectations for public sector governance. The ANAO advised that audit committees—and ultimately the Board—should be undertaking appropriate risk oversight and management, including by keeping the relevant minister apprised of any issues of concern or relevant risk events. The ANAO further noted that, for The Perth Mint, this appears to not have occurred in a timely way.
4.5AUSTRAC provided a wealth of evidence around the number of times the risk oversight and management profile was not appropriately set by the entity and its Audit and Risk Management Committee, leading to breaches of the Anti‑Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTFAct). These are outlined in Chapter 3 and discussed further below.
4.6The committee was told by the WAAuditor General that, in her view, ThePerth Mint was distracted from its core business and had 'exposed itself and, therefore, its owners—the Western Australian public—to unnecessary risk'.
4.7Together, these three expert views paint a picture that the governance mechanism for Gold Corporation was wholly unable to perform its most basic function—horizon scanning for risk to keep the Australian public safe.
Lack of cooperation
4.8Before examining the evidence further, the committee expresses its deep dissatisfaction with the lack of cooperation when seeking evidence from some WesternAustralian entities and individuals.
4.9The committee notes that while the former and current Ministers for Mines and Petroleum—the Hon Bill Johnston MLA and the Hon DavidMichaelMLA— made themselves available to the committee, the Western Australian Treasury, which holds an ex‑officio Director position on the Gold Corporation Board, repeatedly refused to appear before the committee, offering only to respond to written questions on notice.
4.10Senate inquiries perform an important function within Australian democracy, and it does not put the Western Australian Treasury in good light to shy away from the legitimate and important scrutiny function of a Senate inquiry. Carefully crafted responses to written questions do not allow for the iterative examination of evidence that would be required to tease out the complicated regulatory history of The Perth Mint.
4.11Further, the committee extended an invitation to appear at a hearing to the former Premier, the Hon Mark McGowan AC, who was the responsible Minister during the period between the 2018 and 2020 audit reports. Thecommittee is disappointed that the former Premier did not acknowledge or reply to this invitation.
4.12As a result, the committee considers that it has been constrained in its ability to fully undertake this important oversight function on behalf of the Australian public. This is not an acceptable outcome.
Findings
4.13It is agreed without contention that The Perth Mint operating environment is complex, requiring it to comply with Western Australian, Australian and international legislation and rules. However, full and proper compliance with these requirements lies at the core of The Perth Mint maintaining high levels of public and commercial confidence and is the combined responsibility of the Chief Executive Officer, the Board and, ultimately, the relevant Western Australian Minister.
4.14It is entirely unacceptable that, in addition to the reputational damage done to the state, that Western Australian taxpayers remain potentially liable for significant financial penalties due to compliance failures at The Perth Mint arising from the risk management failure at all three of these responsible levels.
4.15In February 2024, witnesses from AUSTRAC confirmed to the committee that the risk of financial penalties being imposed remains possible, saying: '…until they're compliant, that's right; they're always at risk of a penalty' but further qualified that 'it is unlikely to occur if they comply with the enforceable undertaking'.
4.16It is equally unacceptable that Gold Corporation and its trading entity, The Perth Mint, now operates under an Enforceable Undertaking, the purpose of which is to ensure the governance mechanism performs the functions that it was supposed to be undertaking in the first place.
4.17The committee notes the importance of government entities operating with transparency. It is with great concern that the committee notes that, regardless of the financial risk posed, transparency around compliance failures at The Perth Mint would have remained invisible to Western Australian taxpayers, Western Australia and Federal Parliamentarians, the media and other interested stakeholders without this Senate inquiry.
4.18The responsible Western Australian Government Minister for the period from 2018 to 2022 was the former Premier, the Hon Mark McGowan. In March 2021, the Minister for Mines and Petroleum, the Hon Bill Johnston MLA took over as the responsible Minister, followed by the Hon David Michael MLA from December 2023.
4.19Prosecuting this matter should have been the role and responsibility of the Western Australian Parliament, but the State Government failed to take this initiative. In the absence of meaningful Western Australian Parliamentary oversight, it has been correct and necessary for the Senate to act where the Western Australian Government has not.
4.20Despite attempts by some, including the then Western Australian Premier, to dismiss the scale of matters at The Perth Mint, AUSTRAC's decision to impose the Enforceable Undertaking demonstrates the seriousness of the situation.
4.21In announcing the Enforceable Undertaking on 23 November 2023, AUSTRAC said it was:
(a)… a necessary step to ensure that Gold Corporation addresses Anti‑Money Laundering/Counter Terrorism Financing (AML/CTF) deficiencies through its remediation program; and
(b)binding Gold Corporation to undertaking various remediation activities under enhanced oversight from AUSTRAC and an independent third‑party expert for the period up to April 2025.
4.22Critically, the Enforceable Undertaking specifically noted that AUSTRAC:
… remains concerned that reporting entities in the Gold Corporation DBG [designated business group] may have failed to comply, and may remain non-compliant, with provisions of the AML/CTF Act.
4.23This was reiterated in evidence from AUSTRAC's National Manager of Regulatory Operations, Mr Bradley Brown on 2 February 2024, when he stated:
… the enforceable undertaking operates until April 2025. Those concerns will continue until Gold Corporation uplifts and remediates the matters that the enforceable undertaking seeks for it to do.
4.24While the committee does not believe The Perth Mint Board and management consciously chose to ignore or fail to comply with their legal obligations under AML/CTF legislation, an AML/CTF compliance blackhole clearly existed at ThePerth Mint until 2020.
4.25In evidence to the committee, The Perth Mint confirmed AML/CTF compliance issues had been identified in The Perth Mint's internal assurance audit reports in 2010, 2014 and 2018.
4.26More specifically, the 2010 internal assurance audit report identified six findings related to inadequate AML/CTF processes and/or their application at that time in relation to customer risk rating methodology, transaction monitoring, training of staff, Know Your Customer processes for a subset of customers and timeliness of reporting to AUSTRAC. These matters were rated as either 'low' or 'medium' and The Perth Mint advised it took action to address them.
4.27In the 2014 internal assurance audit report, there was one finding identified regarding the enhancement of AML/CTF processes and/or their application at that time in relation to AUSTRAC reporting timelines. This matter was rated 'low' and The Perth Mint advised that it took action to address the finding.
4.28The 2018 internal assurance audit report identified five findings related to opportunities for the enhancement of AML/CTF processes and/or their application in relation to training of staff, transaction monitoring, documentation of enhanced customer due diligence and review methodology for the AML/CTF Program. These matters were rated as either 'low' or 'medium' and, as it did in response to previous audit reports, The Perth Mint advised it took action to address the findings.
4.29Chair of The Perth Mint Audit and Risk Management Committee, MrJohnO'Connor, gave evidence regarding this process:
… there was a series of internal audits, regular internal audits, conducted in the organisation prior to the 2020 internal audit report.
4.30Mr O'Connor also noted the process, saying that these audits:
… identified a number of matters that were not significant to our AML/CTF systems. Each of these matters that were identified, either by the internal audit function, which was run by or operated by the Gold Corporation or by AUSTRAC and their assessments, each of those matters was addressed and remedial actions put in place.
4.31The committee acknowledges the steps taken when AML/CTF matters were identified in the internal audits referenced above. However, having received evidence of various shortcomings in the period 2010 to 2018, these should have triggered adjustments to the scope of each subsequent internal audit project.
4.32Evidence to the committee also confirmed internal audit work during much of this period was undertaken by a contractor, PwC.
4.33It is clear that the 2020 internal audit was the first realisation by the Board and management that there were significant matters of AML/CTF compliance requiring attention.
4.34No credible explanation has yet been given to explain why the internal and external audit contractors did not more thoroughly consider the auditing of compliance obligations of The Perth Mint under the AML/CTF legislation prior to 2020.
4.35This is especially concerning given AML/CTF and Know Your Customer requirements were included in the audit programs and scopes, and the audits themselves.
4.36It was not until the 2020 internal audit that the audit experts in these fields felt these matters were important enough to raise. The committee again notes that these matters were so serious they resulted in an Enforceable Undertaking being imposed by AUSTRAC.
4.37This point was stressed to The Perth Mint Chair, Mr Sam Walsh AO. and MrJohnO'Connor during the committee's public hearing on 19 February 2024:
CHAIR: Wow. This enforceable undertaking is shameful. It's a blight on the organisation. Do you agree with that, Mr O'Connor?
Mr O'Connor: I agree that the findings—
CHAIR: It is unfortunate.
Mr O'Connor: No, they're not unfortunate. The findings are not good, and we've acknowledged those weaknesses and shortcomings, which were identified in 2020. As you would expect of an audit committee and a board, we then sought to address those weaknesses and shortcomings that were then identified.
Mr Walsh: We have acknowledged the shortcomings of the organisation …
4.38Despite these admissions from Mr Walsh and Mr O'Connor, the committee maintains that both have failed thus far to provide an acceptable response to why AML/CTF compliance failures were not apparent to The Perth Mint before the internal audit of 2020. It may be that other witnesses, who have been invited to participate in the committee hearings but have not yet made themselves available, can assist in providing important information on this key point.
4.39Again, it is reasonable to expect that the AML/CTF issues raised in earlier internal audits would have resulted in greater focus on these matters and the scope of subsequent internal audits being tailored accordingly. This was not the case, with Mr O'Connor confirming the scope of the internal audit reports was 'broadly comparable', meaning proper consideration had not been given, or necessary adjustments made, based on the AML/CTF compliance issues identified.
4.40Mr O'Connor has laid the burden of responsibility on management:
CHAIR: It's a very significant failure of governance
Mr O'Connor: I don't accept that proposition. In terms of governance, from the perspective of the audit and risk committee, we ensured that internal audits were done and we've addressed the findings as they have arisen. It was a failing of management. The failing occurred between 2018 and 2020. The board doesn't live in the business day in and day out. The audit and risk committee doesn't live in the business day in and day out. We are non-executive directors. Our focus is on process and what have you. So the failure which occurred was of the management team to do what the procedures required them to do. That was where the actual failure was.
4.41However, AUSTRAC is of a different view. It is AUSTRAC's position that regulatory compliance failure falls squarely on The Perth Mint Board and its Audit and Risk Management Committee.
4.42This is evidenced by an exchange between the Chair, Senator Dean Smith, and Mr Bradley Brown on 2 February 2024:
CHAIR: And which subcommittee of the board would have responsibility for the AML/CTF requirements? The audit and risk committee. Is that correct Mr Brown?
Mr Brown: I would assume it's – absolutely.
4.43The committee agrees with the position taken by AUSTRAC on this matter and believes The Perth Mint Board has fallen short of its responsibility to ensure proper and fulsome compliance with its AML/CTF obligations. Despite the shortcomings identified in the internal audit reports in 2010, 2014 and 2018, it failed to apply a greater level of scrutiny to AML/CTF matters at The Perth Mint prior to the findings of the 2020 audit report.
4.44Given these concerns and the omissions, the committee remains interested to better understand:
The level of activity and depth of engagement between The Perth Mint Audit and Risk Management Committee and other internal and external audit processes;
The extent to which the Audit and Risk Management Committee gave proper attention to:
the findings of the 2010, 2014 and 2018 internal audit reports and how (or if) they shaped the audit scope; and
the findings of the 2010 and 2014 AUSTRAC reviews;
How The Perth Mint Board's risk statement, risk profile and risk register were adjusted to account for:
the 2010, 2014 and 2018 internal audit findings; and
the findings of the 2010 and 2104 AUSTRAC reviews;
The extent to which the statutory audit program undertaken by the Office of the Auditor General of Western Australia and agreed by The Perth Mint Audit and Risk Management Committee and the Board reflected the recurrence of AML/CTF compliance matters identified in the 2010, 2014 and 2018 internal audit reports; and
The relevance of relationships between The Perth Mint and the internal auditor contract with PwC, and the engagement and audit work undertaken by PwC.
4.45The committee believes it is of critical importance that the Board of the Gold Corporation provides a clear public statement that outlines how the risk management and regulatory failures occurred, and how the steps taken will ensure the public is never put at such risk again. Such a statement would send a message that the required cultural change within the Board has occurred. Without a clear acknowledgement and understanding of the causes of past mistakes, there can be no guarantee that these mistakes won't be repeated in the future.
4.46In addition, the committee notes the Board of Gold Corporation does not appear to have been following standard best practice in public sector governance (as articulated by the ANAO earlier in this chapter). Accordingly, the committee considers that there needs to be regular and transparent reporting by GoldCorporation to the responsible Western Australian Minister and, in turn, the Western Australian Parliament, given the ultimate owners of GoldCorporation are the Western Australian public.
4.47The committee recommends that the Board of Gold Corporation (trading as The Perth Mint) publicly acknowledge that the failure to comply with the Anti‑Money Laundering and Counter-Terrorism Financing Act 2006 is the responsibility of the Board and, in particular, members of the Audit and Risk Management Committee.
4.48The committee recommends that Gold Corporation publish a clear statement identifying the governance failures that ultimately led to breaches of the Anti‑Money Laundering and Counter-Terrorism Financing Act 2006, and that the public statement specifically reference:
a)the events that lead to anti-money laundering and counter-terrorism financing compliance failings identified in the 2020 Internal Audit Report dated August 2020;
b)the extent to which the Gold Corporation Board informed the Western Australian Government of failures to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006; and
c)the extent to which the Assistant Under Treasurer, Mr Richard Watson, as a member of the Gold Corporation Board, informed the Western Australian Government of failings in Gold Corporation’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
4.49The committee recommends that Gold Corporation table before the Western Australian Parliament the 2020 Internal Audit Report dated August 2020.
4.50The committee recommends that Gold Corporation table before the Western Australian Parliament a report every two months on its compliance with the Enforceable Undertaking, and that this reporting continues until one month after the Australian Transaction Reports and Analysis Centre formally releases Gold Corporation from the Enforceable Undertaking.
4.51The committee recommends the Parliament of Western Australia initiate its own inquiry into matters related to the decision by the Australian Transaction Reports and Analysis Centre to impose an Enforceable Undertaking over Gold Corporation, post 30 April 2025.
4.52Returning to the potential financial risk to Western Australian taxpayers from non-compliance with matters contained in the Enforceable Undertaking, the committee notes several recent Australian matters concerning AML/CTF compliance issues.
4.53In September 2020, Westpac and AUSTRAC agreed to a $1.3 billion proposed penalty over Westpac's breaches of the AML/CTF Act.
4.54In that matter, Westpac admitted that it failed to properly report International Funds Transfer Instructions, pass on information relating to the origin of some of these international funds transfers, keep records relating to the origin of some of these transfers, appropriately assess and monitor the risks associated with the movement of money into and out of Australia, and carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
4.55In July 2023, Crown Melbourne and Crown Perth (Crown) were ordered by the Federal Court of Australia to pay a $450 million penalty over two years after AUSTRAC launched civil penalty proceedings against them for breaches of the AML/CTF Act.
4.56As part of the settlement, Crown admitted that it operated in contravention of the AML/CTF Act, including that Crown Melbourne and Crown Perth's AML/CTF programs were not based on appropriate risk assessments, did not have appropriate systems and controls to manage their risks, and were not subject to appropriate oversight by their Boards and senior management. Despite Crown's ongoing efforts to address the AML/CTF failings, AUSTRAC still imposed penalties on the entity.
4.57This is of significant concern to the committee, as AUSTRAC have advised that firstly, The Perth Mint has also breached its requirements under the AML/CTFAct, and further, that financial penalties for such breaches remain a possibility as long as the need for the Enforceable Undertaking is still live. However, in this case the committee notes that it is not shareholders of a commercial venture who are liable for a financial loss through penalties; it is the unaware taxpayers of Western Australian who would be liable.
4.58The committee recommends the Western Australian Government detail to the Western Australian Parliament the extent of the potential financial liability to the Western Australian taxpayer if Gold Corporation fails to meet its obligations under the Enforceable Undertaking.
4.59The committee believes continued Senate oversight remains critical given the Enforceable Undertaking operates until April 2025, and the requirement imposed a regular monthly meeting between The Perth Mint, AUSTRAC and/or the external auditors. The committee notes the progress currently being made under the direction of AUSTRAC, which, if successful, may limit the need for continued scrutiny by the Senate to undertake a final review of the success of that remediation. However, the committee is of the view that some form of ongoing parliamentary oversight is required to ensure that, should the risk remediation progress falter, the Senate is immediately apprised and can urgently refer the matter for inquiry.
4.60The committee recommends that the Australian Transaction Reports and Analysis Centre provide a private briefing every two months to the Senators of this committee on the progress being made by Gold Corporation to implement the recommendations of the Enforceable Undertaking.
4.61Should concerns be identified through these briefings, the committee recommends a further public examination be conducted through a referral to the Senate Legal and Constitutional References Committee for extended inquiry and report on matters related to the corporate and regulatory compliance of Gold Corporation with Commonwealth legislation, with particular reference to:
a)current and historical compliance with Australian anti-money laundering regulatory requirements, specifically the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1);
b)events that led to the Australian Transaction Reports and Analysis Centre ordering the appointment of an external auditor to Gold Corporation under subsection 162(2) of the Anti-Money Laundering and Counter‑Terrorism Financing Act 2006;
c)matters concerning the corporate and statutory governance of Gold Corporation;
d)the potential financial liability to Western Australian taxpayers of failure to comply with the Enforceable Undertaking; and
e)any other related matters.
4.62The committee recommends that the Australian National Audit Office conducts an inquiry into the adequacy of the Australian Transaction Reports and Analysis Centre's oversight of anti-money laundering and counter‑terrorism financing compliance by medium to high-risk entities.
4.63The committee recommends any continuance of the Senate's inquiry into matters related to the corporate and regulatory compliance of Gold Corporation and its trading entity The Perth Mint, through the Senate Legal and Constitutional Affairs References Committee, hears evidence from the following witnesses:
a)the Hon Mr David Michael MLA, Western Australian Minister for Mines and Petroleum;
b)Ms Gaye McMath, Chair of Audit and Risk Management Committee (1 July 2016–30 June 2019);
c)Mr John O'Connor, Chair of Audit and Risk Management Committee (1 July 2019–present);
d)Mr Richard Watson, Assistant Under Treasurer, Western Australian Treasury (February2019–present), Board Director ex-officio, and Audit and Risk Management Committee member (2018–present);
e)Ms Kaylene Gulich, Audit and Risk Management Committee member (2016–2018);
f)Mr Mark Puzey, Audit and Risk Management Committee member (2018–2021);
g)other members of the Audit and Risk Management Committee from 2021 onwards; and
h)representatives of PwC, or any other external auditor, who participated or oversaw any audit work contracted by Gold Corporation in the period 2010 to 2021.
4.64The committee recommends that, consistent with the Enforceable Undertaking's acknowledgement that the Australian Transaction Reports and Analysis Centre (AUSTRAC) may from 'time to time publicly refer to this Enforceable Undertaking', AUSTRAC issues a statement (or statements) of progress that detail:
f)the tracking of activities regarding the completion of the Remediation Program;
g)the remediation of customer data in accordance with the timeframes and standards detailed in the Customer Data Remediation work stream;
h)the completion of any actions in the Customer Data Remediation workstream;
i)advice of any deviations to the actions or timeframes set out in the Remediation Program requested by Gold Corporation;
j)any permissions given by AUSTRAC for material deviations to the Remediation Program;
k)any failure to meet reporting requirements required in the Enforceable Undertaking;
l)any breach of the Remediation Program advised to AUSTRAC; and any other matters relevant to informing the Western Australian community about the level of risk, or efforts to mitigate against risks, of money laundering and the financing of counterterrorism by Gold Corporation or its trading entity, The Perth Mint.
Senator Dean Smith Chair Liberal Senator for Western Australia | Senator Dorinda Cox Deputy Chair Greens Senator for Western Australia | Senator the Hon Linda Reynolds CSC Liberal Senator for Western Australia |