Reserve Bank of Australia under scrutiny

James Glynn

Pressure built on the Australian government Wednesday to investigate claims that senior central bank officials covered up corruption at a money-printing subsidiary.

Opposition deputy leader Julie Bishop said in an interview with The Wall Street Journal that the onus was on the Reserve Bank of Australia to respond to allegations in local newspapers that officials in 2007 and 2008 suppressed information about payments made to win printing contracts in Nepal and Malaysia. The allegations, earlier reported in the Sydney Morning Herald and the Age newspapers, involve payments allegedly made by agents of Securency International Pty. Ltd., a subsidiary of the central bank.

"The government should take responsibility for a comprehensive investigation," Ms. Bishop said.

Earlier, Green Party lawmaker Adam Bandt said he will seek to have central bank Gov. Glenn Stevens called before the House Economics Committee to explain the newspaper reports. "The Reserve Bank is a central institution in protecting our economy from global financial instability," Mr. Bandt said. "We must ensure that there is complete confidence in its governance."

A spokesman for Treasurer Wayne Swan, the government's top finance official, declined to comment, saying in an emailed statement that matters detailed by the newspapers "are still under investigation by the appropriate authorities and there are court proceedings pending."

The Australian federal police confirmed they are looking into alleged corruption within the central bank subsidiary, but didn't provide further details.

Melbourne-based Securency, which makes a plastic used in bank notes in 27 countries from Bangladesh to Zambia, has faced allegations originally reported to Australian police by the RBA following local media reports in May 2009 that members of its staff engaged in bribery and misconduct. In July, eight people and two companies were charged by Australian and Malaysian authorities with bribery related to money-printing contracts won by Securency, which is a joint venture of the central bank and Innovia Films, a U.K. company.

Officials at Securency weren't reachable to comment. The office of Innovia Films in Melbourne referred all inquiries to the U.K.

A spokeswoman for the RBA declined to comment further on a denial published with the newspaper reports, which allege that Deputy Gov. Ric Battellino and two others knew of the corruption concerns in advance of their becoming public. Mr. Battellino declined to comment on the matter.

Among the governments that use Securency's polymer banknotes are Australia, Brazil, Mexico and Indonesia. In the U.K., the Serious Fraud Office last year raided eight residential properties and a commercial site, resulting in the arrests of two men in relation to a global probe into Securency employees. At the time, the SFO said its investigation "involves the activities of employees and agents of Securency International Pty. Ltd. and their alleged corrupt role in securing international polymer banknote contracts."

Courtesy: Wall Street Journal