Conflicts of Interest - Follow the Money
sMichael Andrew, Head of the Black Economy Taskforce
The late Michael Andrew was a partner in global accounting firm KPMG from 1988 and was the Chairman and CEO of their global company, KPMG International, from 2011-2014.
The Black Economy Report states Mr Andrew, “...has undertaken this role for no renumeration”, although the Taskforce's development and consultation period of the Black Economy Final Report spanned over a year and included an interstate ‘roadshow’. Was Mr Andrew’s role as Head of the Black Economy Taskforce charity work for the government? I find it ludicrous that a former global head of an international accounting firm would offer the Australian Government his services free of charge.
Particularly in light of the fact that the same year the Black Economy Final Report was completed, the Australian Government forked out $643 million in accounting fees to the ‘Big Four’ firms, which included KPMG.
KPMG
KPMG is one of the ‘Big Four’ global accounting firms. The Parliament’s website refers to their report The last frontier: shining a light on the black economy, which recommends "...making any transaction involving more than $10,000 illegal. It is highly unlikely that any legally compliant, practical benefit could be obtained from conducting a transaction involving such an amount using cash."
I believe this statement shows the disconnect between these large financial entities and everyday people. Australia has a large farming and rural population- these people cannot depend on digital payments infrastructure to always be available. Purchase of farming equipment is often conducted in cash. Cash is legal tender. It is the right of Australians to use cash if they wish.
KPMG has been convicted of numerous financial crimes, tax evasion and money laundering. KPMG is reported to have paid $500 million in fines alone for their financial crimes, several of these convictions occurring during the time of Mr Andrew's leadership, as global Chairman and CEO of KPMG International.
New Payments Platform
The Black Economy Final Report continually refers to the NPP (New Payments Platform) as a ‘ game changer’ and solution to the black economy, 'replicating some of the features of cash'. The NPP is a private company made up of thirteen large banks, (including Indue, the government's cashless welfare card!) coordinating with the Reserve Bank of Australia, to create the infrastructure for an intra-bank payments network. The NPP's website states it is a 'data rich' payments platform, and is being coordinated by KPMG.
Reserve Bank of Australia
The Reserve Bank of Australia played a significant role in establishing the NPP, and is a shareholder of its parent company NPPA (New Payments Platform Australia Ltd). The RBA "...is a direct participant in the NPP in its capacity as a transactional banker to the Australian Government and its Departments and agencies".
The NPP promotes ‘least cost routing’, where merchants can choose to have digital payments sent over the least expensive route. Given the NPP’s peer to peer transaction technology, built in conjunction with the RBA’s infrastructure- where will most, if not all, payments will be sent through? In my opinion, this would most likely the NPP- crowding out smaller businesses who can't compete with these financial giants, backed by the regulatory powers of the Reserve Bank of Australia.
The RBA appears to be using its regulatory powers to limit the options of payment providers and merchants who may not wish to use the NPP.
"In 2017, the ACCC authorised… the rights of NPPA to suspend and terminate NPP membership, membership eligibility criteria and the obligation to settle payments via the RBA's Fast Settlement Service. These provisions may have otherwise breached certain of the competition provisions under the Competition and Consumer Act 2010...The ACCC can grant authorisation if it is satisfied that the likely public benefits outweigh the likely public detriments.” (Emphasis mine)
The Black Economy Report also references digital currencies: “...Central banks, for their part, are also examining the feasibility of official digital currencies… The Government should keep an eye on these developments and examine the feasibility of Australia moving to a central bank issued digital currency over the longer-term.’ If the RBA issued a digital currency, facilitated through the NPP, I believe it would have an inordinate amount of control over the finances of the Australian people.
Black Economy Taskforce Conflict of Interest?
I am concerned that the authors of the Black Economy Final Report’s longstanding and high connections with global accounting firm KPMG may have influenced the direction of the Taskforce’s research and recommendations.
I believe KPMG stands to profit hugely from their role in coordinating the NPP. The participating financial institutions have a vested interest in restricting the public’s choice about where there money is held and in reducing the use of cash.
The RBA has a financial interest as a shareholder of the NPP's parent company the NPPA, and it appears they are using their regulatory power to further their own financial interests. It appears they are contravening competition provisions, but seemingly with the blessing of the Australian Competition and Consumer Commission.
I do not believe these concerns are unfounded. In an interview with accounting body CPA Australia, Michael Andrew said:
“…So one of the underlying macro-strategies here is to shift from a cash-based economy into a non-cash economy by way of offering incentives and disincentives for people to operate in the cash system… The second one is to say can we actually shift from a cash to a non-cash society where we can therefore monitor and measure people's activities so we have to provide incentives and disincentives for people to operate a cash model.” (Emphasis mine)
Some Items of Interest
I found several recommendations in the Black Economy Final Report to be particularly interesting, given the above information:
The late Michael Andrew was a partner in global accounting firm KPMG from 1988 and was the Chairman and CEO of their global company, KPMG International, from 2011-2014.
The Black Economy Report states Mr Andrew, “...has undertaken this role for no renumeration”, although the Taskforce's development and consultation period of the Black Economy Final Report spanned over a year and included an interstate ‘roadshow’. Was Mr Andrew’s role as Head of the Black Economy Taskforce charity work for the government? I find it ludicrous that a former global head of an international accounting firm would offer the Australian Government his services free of charge.
Particularly in light of the fact that the same year the Black Economy Final Report was completed, the Australian Government forked out $643 million in accounting fees to the ‘Big Four’ firms, which included KPMG.
KPMG
KPMG is one of the ‘Big Four’ global accounting firms. The Parliament’s website refers to their report The last frontier: shining a light on the black economy, which recommends "...making any transaction involving more than $10,000 illegal. It is highly unlikely that any legally compliant, practical benefit could be obtained from conducting a transaction involving such an amount using cash."
I believe this statement shows the disconnect between these large financial entities and everyday people. Australia has a large farming and rural population- these people cannot depend on digital payments infrastructure to always be available. Purchase of farming equipment is often conducted in cash. Cash is legal tender. It is the right of Australians to use cash if they wish.
KPMG has been convicted of numerous financial crimes, tax evasion and money laundering. KPMG is reported to have paid $500 million in fines alone for their financial crimes, several of these convictions occurring during the time of Mr Andrew's leadership, as global Chairman and CEO of KPMG International.
New Payments Platform
The Black Economy Final Report continually refers to the NPP (New Payments Platform) as a ‘ game changer’ and solution to the black economy, 'replicating some of the features of cash'. The NPP is a private company made up of thirteen large banks, (including Indue, the government's cashless welfare card!) coordinating with the Reserve Bank of Australia, to create the infrastructure for an intra-bank payments network. The NPP's website states it is a 'data rich' payments platform, and is being coordinated by KPMG.
Reserve Bank of Australia
The Reserve Bank of Australia played a significant role in establishing the NPP, and is a shareholder of its parent company NPPA (New Payments Platform Australia Ltd). The RBA "...is a direct participant in the NPP in its capacity as a transactional banker to the Australian Government and its Departments and agencies".
The NPP promotes ‘least cost routing’, where merchants can choose to have digital payments sent over the least expensive route. Given the NPP’s peer to peer transaction technology, built in conjunction with the RBA’s infrastructure- where will most, if not all, payments will be sent through? In my opinion, this would most likely the NPP- crowding out smaller businesses who can't compete with these financial giants, backed by the regulatory powers of the Reserve Bank of Australia.
The RBA appears to be using its regulatory powers to limit the options of payment providers and merchants who may not wish to use the NPP.
"In 2017, the ACCC authorised… the rights of NPPA to suspend and terminate NPP membership, membership eligibility criteria and the obligation to settle payments via the RBA's Fast Settlement Service. These provisions may have otherwise breached certain of the competition provisions under the Competition and Consumer Act 2010...The ACCC can grant authorisation if it is satisfied that the likely public benefits outweigh the likely public detriments.” (Emphasis mine)
The Black Economy Report also references digital currencies: “...Central banks, for their part, are also examining the feasibility of official digital currencies… The Government should keep an eye on these developments and examine the feasibility of Australia moving to a central bank issued digital currency over the longer-term.’ If the RBA issued a digital currency, facilitated through the NPP, I believe it would have an inordinate amount of control over the finances of the Australian people.
Black Economy Taskforce Conflict of Interest?
I am concerned that the authors of the Black Economy Final Report’s longstanding and high connections with global accounting firm KPMG may have influenced the direction of the Taskforce’s research and recommendations.
I believe KPMG stands to profit hugely from their role in coordinating the NPP. The participating financial institutions have a vested interest in restricting the public’s choice about where there money is held and in reducing the use of cash.
The RBA has a financial interest as a shareholder of the NPP's parent company the NPPA, and it appears they are using their regulatory power to further their own financial interests. It appears they are contravening competition provisions, but seemingly with the blessing of the Australian Competition and Consumer Commission.
I do not believe these concerns are unfounded. In an interview with accounting body CPA Australia, Michael Andrew said:
“…So one of the underlying macro-strategies here is to shift from a cash-based economy into a non-cash economy by way of offering incentives and disincentives for people to operate in the cash system… The second one is to say can we actually shift from a cash to a non-cash society where we can therefore monitor and measure people's activities so we have to provide incentives and disincentives for people to operate a cash model.” (Emphasis mine)
Some Items of Interest
I found several recommendations in the Black Economy Final Report to be particularly interesting, given the above information:
- No 'Name and Shame': The Taskforce considered recommending that a register be established to publish the details of deliberate tax evaders, using the risk of public exposure as a tool to deter tax evasion, but decided against it. “...A register would also allow companies, consumer and employees to make better judgements when deciding who they should conduct business with. However, we consider that... name and shame is not necessary at this stage." (I assume that if a 'Name and Shame' register for tax evasion existed in Australia, some high profile names may be on it)
- No reverse onus of proof for banks: The report recommends 'reverse onus of proof' should apply to people who are non-compliant with cash restrictions. Interestingly, they do not recommend reverse onus of proof to apply to financial institutions, as they "...should already be reporting transactions greater than $10,000." Even though later in the report they describe money laundering to involve “...large quantities of cash are deposited into Australian bank accounts and transferred offshore or used to purchase investments." Australians may be jailed for two years for transacting in cash amounts over $10,000- why aren't banks kept to the same standards as everyday people?
- No ‘fit and proper’ ABN holders: The Taskforce considered requiring ABN holders, or the directors, partners and other key associates of ABN holders, to be ‘fit and proper’ persons. But they decided, “…We do not consider that a reform of this nature is needed at this time… down the track, it may be appropriate for Government to further consider this proposal as a way to further improve ABN integrity.” (How many banking and financial officials would a ‘fit and proper person’ test disqualify from holding an ABN? Would a 'fit and proper person' test deter companies from employing people with prior financial crime convictions, if the company wished to keep their ABN?)
- Government contracts: The report recommends that government contracts should include a clause specifying that a contracted business "…does not have a judicial or tribunal decision against it for tax evasion over the past five years (not including decisions under appeal or where there was a genuine dispute over interpretation of tax laws).” (Emphasis mine). I believe this provision may allow large multi-national corporations the legal ‘wiggle room’ to continue to be awarded large government contracts, even with a history of tax evasion.
- Statutory Declaration: “...Businesses which have not previously been required to pay tax in Australia could be required to provide a statutory declaration that they do not have a bad tax record applying the criteria above.” No other documentation required to prove the entity has a clean tax record? Compared to the recommended intrusive surveillance and data collection on the financial activites and private lives of everyday Australians, this minimal requirement of multi-national corporations seems laughable.
- Government contracts and corruption: “...Companies that have been convicted of bribery or corruption should be debarred from Commonwealth Government contracts for a 2-year period. This should not apply where individuals within companies have been convicted, but not the company itself.” (Emphasis mine). I found this an interesting exclusion, as I believe it would allow companies who are repeat offenders to continue to be awarded lucrative government contracts, as long as they’ve been able to foist the blame and conviction onto an employee.
- Making tendering agencies responsible, instead of the ATO: The report recommends that tendering agencies should have the duty of ensuring that that there are no grounds for debarment of a tenderer prior to signing a Government contract. I found their reasoning peculiar: “ ...Making government agencies responsible for checking would mean that most of the action takes place behind the scenes. Placing the onus on tenderers is more likely to bring the need for a good tax record to the fore and change behaviour... this option would also require changes to tax secrecy provisions which could be a significant barrier.” However, the Taskforce seemingly had no issue with recommending changes to our current privacy and secrecy laws, to allow the increased collection and sharing of Australian citizens' private, financial and biometric data. Why the double standard? Why shouldn’t the ATO and the government be responsible for checking the backgrounds of their own tenderers? In my opinion, I believe this is to limit government liability and ‘handball’ this responsibility over to tendering agencies.