Speech to the 5th Annual Border Security Conference
25 November 2013
Michael Pezzullo
Chief Executive Officer, Australian Customs and Border Protection Service
The Unseen War – Transnational Organised Crime and the Assault on Australia’s Borders and Way of Life
E&OE
Today there is a spectre haunting Australia and its way of life. Transnational organised crime is increasingly mounting an assault on our borders and our way of life. It is an unseen war – there are no enemy aircraft bombing Darwin; or submarines slipping into Sydney Harbour; or enemy troops invading islands to our north, threatening our supply lines and interdicting our shipping.
The threat to our national security and well-being posed by transnational organised crime is more insidious and over the long term just as harmful as the effects of war. Global supply chains and the information revolution, which are bringing so much prosperity and wealth to our society, are also affording these transnational criminal groups the necessary tools to form powerful cross-border networks – which they can use to attack us in order to pursue their sole motivating goal: the insatiable pursuit of illicit profits.
Earlier this year (in July 2013), the Australian Crime Commission published the latest edition of its survey of Organised Crime in Australia. As a member of the Board of the Australian Crime Commission, and as chief of the nation's Customs and Border Protection Service, I have a duty to reinforce to audiences such as this the key messages of this survey by the nation's premier criminal intelligence and assessment authority. In today's short-attention span media culture, such reports receive a brief 'run' (as they are known) in the media cycle before disappearing into the nation's on-line archive after a day's worth of superficial prominence. This is what happened with the ACC assessment of organised crime in Australia.
This morning, I plan to sound the alarm – an alarm based in this, and other reports. We need to heed these warnings before it is too late. The ACC found that globalisation has been embraced and is being exploited by transnational organised criminal groups, which are increasingly able to capitalise on the way in which globalisation is greatly expanding international communication, cross-border linkages, trade, travel, investment and financial flows. In a world of nation-states, transnational crime knows no borders and is unconstrained by geography.
The world-wide web enables global networking, and has enabled the establishment of global 'virtual black markets' for illegal and illicit goods such as drugs, firearms, identity documents and child exploitation material. In ACBPS, for instance, we are seeing an alarming rise in what are termed 'scatter importations' of drugs, ordered through on-line forums and delivered unwittingly by legitimate distributors such as air express couriers and Australia Post.
Australian-based criminal groups, working with transnational organised crime associates, are involved in a range of illegal activities across the border environment, which includes, in addition to drug importation, other crimes such as revenue evasion, tobacco smuggling, money laundering, people smuggling and human trafficking, firearms trafficking, as well as trade in performance and image-enhancing drugs, fake medicines and counterfeited 'rip off' goods.
To dive into one example, new global supply chains are in evidence in traditional drug markets such as cocaine. The journey of cocaine to our shores is becoming increasingly sophisticated and complex, with various transnational criminal alliances and joint ventures having been established in recent years - which will challenge law enforcement in ways that we have not had to deal with before now.
If one were to examine the 'upstream' source of cocaine, one would encounter the sociological dislocation that is being witnessed across parts of South and Central America, were rural-to-urban migration is breaking down the infrastructure of many cities which are simply unable to cope with the mass of people aspiring for a better life. Without a platform of good governance, urban poverty and social exclusion and dislocation become the norm. Crime, conflict and social isolation alienate local populations, where the people either join, or are at the mercy of, criminal groups. And in many cases, these groups fill the vacuum by providing 'justice' (or a form of it) and 'services', in a way that the state cannot.
If we were to peer into the dark world of drug manufacturing and supply you will discover thousands of urban and semi-urban communities, largely functioning outside the realms of government control, and sustained through the illicit drug trade. What may look like 'slums' to our eyes are often dynamic urban environments which provide sanctuary and security for transnational organised criminal groups which use such places to reach out into the global network of trade and travel.
And as the planet continues to urbanise remorselessly, as populations continue to centralise in coastal cities, and as international connectively enables globalised communications and the global movement of people and goods, the transnational organised criminal threat against nation states like Australia will only increase. Critically, while these cities suffer from a lack of good public governance and the enforcement of laws, they are connected to the global network through airports, seaports, communications cables and financial centres.
What this means for Australia, amongst other things, is that we are now up against serious and violent criminal syndicates which are well resourced, innovative, flexible, focussed – and 'over-the-horizon', beyond the reach of Australian law enforcement acting in isolation. These groups adapt to changing threats to their business models, in order to maximise and create new opportunities. Australia represents a very profitable market for transnational organised crime groups. Prices for illicit drugs in Australia are among the highest in the world. The average cost of a kilogram of cocaine in Australia can be up to $300,000, as compared with Colombia, where the price per kilogram is estimated at $2500 and in Mexico, where it is around $12,500. We are currently seeing a myriad of attempts to bring cocaine across the border – from multiple and scattered air express and postal packages, travellers with cocaine embedded into the sides and bottoms of their luggage, through vast quantities concreted into the hulls of small craft, we are constantly being challenged to stem the cocaine invasion into the nation. It is big business - as was evidenced in August 2013, when 750 kilograms of cocaine were seized from a sophisticated concealment in the bottom of a yacht docked in Port Vila (Vanuatu) in a joint operation involving ACBPS, the AFP, and the US Drug Enforcement Agency. I am particularly concerned about trans-Pacific cocaine importation – either by way of recreational smallcraft or through transhipment by way of containerised sea cargo which follows difficult-to-track supply chains from the Americas to Australia via Asia.
If you only read one book over the Christmas break, I would urge you to read a modern masterpiece by David Kilcullen, Out of the Mountains: The Coming Age of the Urban Guerrilla (2013). Dr Kilcullen is an acclaimed Australian counter-insurgency expert who has written and practised extensively in the field of guerrilla warfare and insurgency. In Out of the Mountains, he has turned his attention to the challenges posed by four powerful mega-trends: global population growth, urbanisation, coastal settlement and global connectivity. He argues that future conflict is likely to occur in sprawling coastal cities that are enveloping many regions of Africa, Latin America, the Middle East and parts of Asia. In these environments, non-state armed groups such as drug cartels, street gangs and local warlords draw their strength from local populations, and hide amongst them. They embed themselves into legitimate networks of commerce and adopt a lawful and laundered face, which they present to the global network of trade and travel.
In other words, transnational organised crime has embedded itself into the networks of our globalised world. And it is big business – very big business. In 2011, the United Nations Office of Drugs and Crime estimated that profits from transnational organised crime amounted to 1.5 per cent of global GDP in 2009. This means that transnational organised crime groups have access to enormous resources, with which they can fund elaborate networked capabilities, which involve front companies, complex business and financial structures, and sophisticated communications and transport arrangements. As the ACC has stated, these groups are actively targeting Australia, and linking with local criminal elements which have detailed 'on-the-ground' knowledge of Australian conditions. The local criminals provide the distribution networks and 'the muscle', as we see with Outlaw Motor Cycle Gangs and a number of Middle Eastern and Asian crime groups. (In this context, it is vitally important that Australian law enforcement continues to band together against criminal gangs, through initiatives such as the National Anti-Gang Task Force, which is being led by the Australian Federal Police, and is composed of federal, state and territory law enforcement agencies, as well as ACBPS, the Australian Taxation Office, the Departments of Human Services and Immigration and Border Protection, and other key partners.)
If this indeed was a visible war, we would have mobilised our armed forces and put the nation on the highest state of security alert. Instead it is an unseen war, were the enemy does not have a singular or discernible face and does not march under a flag.
In this war, we have a number of tremendously valuable assets. These include our law enforcement agencies, which are world class, and which as I have just indicated are working ever more closely as one national team. It also includes our border system, which is a strategic national asset, and a very valuable one which should be actively managed and developed as such. We cannot, and should not seek to, close our borders off from the dark and dismal world that I have portrayed in the first half of this address. The supply chains and travel pathways connecting Australia to the world are our tickets to prosperity and growing incomes. Our economic competitiveness and productivity is enhanced by the fostering of rapid movement and border entry or exit, and the nation relies on the daily operation of sea cargo, air cargo and international postal systems for our economic, commercial and indeed private prosperity.
In the near future – before 2020 – our border systems will need to cope with an unprecedented increase in air cargo volumes as well as very significant increases in containerised sea cargo, parcels and other forms of international mail, and of course the number of international travellers. Sooner than that, by 2017, we are facing a 85 per cent increase in air cargo, a 20 per cent increase in containerised sea cargo and a 25 per cent increase in international traveller numbers. And as cargo volumes increase, trade patterns become less predictable as goods are sourced and being delivered through more complex supply chains. Those supply chains are becoming much more dynamic. New and emerging complexities are increasingly obscuring the true point of origin for goods and making the determination of intent behind cross-border movements a much more challenging task. These increasing complexities in trade means there is increased potential for organised crime groups to camouflage themselves within supply chains.
The way that ACBPS currently operates will not be good enough to protect the border in the future. The increasing volume of cargo and traveller movement, the complexity of supply chains and travel routes, the threat of sophisticated criminal activities, combined with internal challenges around culture, integrity and corruption, all contribute to the clear need for a comprehensive programme of reform for the Service.
Incremental changes and tinkering at the edges just will not cut it – we need to undertake a complete transformation and all-consuming reform of the way we operate and the way we do business.
Earlier this year, we launched the Australian Customs and Border Protection Service Blueprint for Reform 2013-2018 , which is a five year blueprint that provides the roadmap for our root-and-branch reform. This initiative arose from our own internal thinking about the future as well as a number of reports from respected external bodies: the Australian Commission for Law Enforcement Integrity, the Australian Public Service Commission and the Customs Reform Board, which was established in December 2012 by the former Minister for Home Affairs, the Hon Jason Clare MP. All of these reports have drawn attention to corruption issues within the Service as being a driver for root-and-branch reform of the Service, alongside other issues which require aggressive and transformative attention: concerning our people and operating model, our systems (including ICT) and processes, and our culture and leadership.
Last week I appeared before the Senate's
Legal and Constitutional Affairs Committee, and I was able to report to the Committee that within our current level of resources, we are getting on with as much root-and-branch reform as we can pursue. We are doing much in the area of integrity and professional standards, and I will not have time to canvass that today – although I intend to say more about this later during the week when I address another forum which is looking at anti-corruption issues. In addition, we are redesigning our approach to investigations, compliance and enforcement (our ICE function), in collaboration with the AFP and other law enforcement agencies. We are on track to deliver the National Border Targeting Centre in 2015-16. I will say more about these initiatives in a moment. We are piloting new command and control systems and procedures (in Queensland, to be followed soon by Western Australia), in order to focus all of our firepower where it matters most – the frontline. Earlier this month (on 15th November), I announced the establishment of internal task forces to examine and deliver different aspects of our future operating model – the Border Force (which will be the uniformed element of ACBPS from 1st July 2014), the ACBPS College, the future traveller system, amongst others.
Let me briefly touch on some features of this
Blueprint for Reform which bear most directly on my topic today. In short, we are going to overhaul our people and operating model, modernise our systems, harden our defences against corruption and criminal penetration and get into the border intelligence business in a major way. On the latter, we will be looking at new advanced analytics and intelligence systems, and maximising opportunities to automate our risk analysis, profiling and targeting activities. We will aim to better connect our systems with those of the private sector, and improve our ability to share classified information with trusted partners.
To support this effort, we are building a new National Border Targeting Centre to provide an enhanced approach to identifying high-risk international travellers and cargo through the application of better data integration and analysis tools. The Centre's initial focus will be on improving the Service's targeting processes and capabilities, and designing a multi-agency operating model for coordinating border intelligence. Through the National Border Targeting Centre we will work closely with border protection, intelligence, law enforcement and regulatory agencies with border interests, and collaboratively with regional partners and similar targeting centres in the United States, Canada, the United Kingdom and New Zealand.
Just this past month, we have finalised arrangements for two ACBPS officers to be posted to US Customs and Border Protection, with a view to strengthening intelligence capabilities and arrangements between our countries. I also met with our partners at the Canada Border Services' Agency where we was agreed to similarly develop a programme of joint activity.
Australia is engaged with what is known as the Border Five, created some years ago by the Customs administrations of Australia, Canada, New Zealand, the United Kingdom, and the United States to discuss and partner on issues of mutual interest and priority. Through the Border Five we are working to strengthen border controls, share best practice through joint initiatives and information sharing, and leverage partnerships to increase efficiency.
In another key area, we have already begun to transform our enforcement capability and I am personally very proud that the cornerstone of our enforcement transformation will be our strategic partnership with the Australian Federal Police in fighting border crime.
The Australian community expects our Service and the AFP to work together to defeat attempts to illegally import goods at the border. Artificial agency lines cannot be put around crime, and it is therefore incumbent upon us to ensure that our approach to crime at the border is holistic and cohesive. As a first step under the Reform blueprint we are piloting a new model for undertaking border crime investigations. This new model combines the skills, intelligence and investigative resources of ACBPS and the AFP, and enhances our shared understanding of criminal impacts at the border, to inform our proposed future joint operating model.
It is about breaking down silos that exist around combating crime and expanding our approach to tackling crime at the border. The joint triage model will be piloted for a few more months, then reviewed and evaluated early next year before the model is applied nationally.
Before I conclude, I wish to place on the record my assessment about the Service's financial capacity to deal with these challenges. Since 2008-09, the Service has provided over $560m of savings and offsets, including $165m in 2013-14. From 2014-15, and across the forward estimates to 2017-18, additional programmed cuts of $733m, or just over 15 per cent of funding per year, will be applied to our budget.
In line with the funding reductions, the Service's staffing levels have been in a period of decline since 2007-08. Over this period, the number of officers in the Service has decreased from over 5,740 in 2007-08 to 5,000 today. The funding levels programmed over the forward estimates will see our staffing numbers drop further, with staffing levels of less than 4,400 being affordable by 2017-18. Our current operating model is not sustainable and our Reform programme business case is being developed as a means to navigate our challenging future – which I will not be able to discuss in any detail as I do not wish to pre-empt Government decision-making through the normal budget process.
Given the high operational tempo being experienced across many areas of the Service, we are trying to maximise our expenditure on front line resourcing (for example to deal with illegal maritime immigration and remote area border patrols in northern Australia), while making space to develop our Reform programme. I am of course committed to managing my budget as best I can within the allocation provided by government and the Service's achievement of significant funding reductions over recent years is testament to this commitment. Over recent years, we have achieved savings in all of the areas expected of agencies - whether that be travel, contractors and consultants, ICT, SES levels, legal expenditure or property expenses. Not all savings can be achieved, however, in the 'back of office', and last year we reduced staffing in our frontline regional port offices, with 37 frontline positions abolished.
Meeting the requirements asked of our Service, and meeting fiscal policy directions will require very tough choices to be made. However, given the efficiencies that we have already identified and achieved, many of these choices have already in effect been made. With the programmed reductions that are in the forward budget, we are not talking about cutting fat, or even muscle and tissue. We will soon be going through bone and out the other side. That is why root-and-branch reform is also about building a sustainable business model for the Service - one which, for example, takes full advantage of modern technology (such as automation, analytics and biometrics) to move us away from a labour intensive model of working.
I am gratified to be able to say that governments have acknowledged the level of savings which have been applied to the ACBPS budget in recent years. Savings were not required in the 2013-14 Budget to fund certain maritime capabilities, and the National Border Targeting Centre, which was announced earlier this year. I also welcome the Coalition Government's pre-election commitment to exempt the Service from further cuts, as I do the new Government's proposed injection of $100 million from 2014-15 to increase the rate of cargo screening and examinations at the border.
Ruthless, energetic and well-resourced criminal syndicates are turning their attention to Australia as they realise the immense profits to be made out of our wealthy nation. These criminal syndicates are truly international in nature and sophisticated enough to breach vulnerabilities in our border systems. Given the global economy, the international nature of trade and travel and of transnational criminal organisations, sovereign states can no longer work in isolation to defend their borders.
Just as like-minded nation states have come together in years past to defend their homelands against armed aggression, in future we will have to increasingly pool our resources and our capabilities to take on these transnational criminal organisations, which are waging an unseen war against our communities and our way of life – and assaulting our borders in order to do so.
In conclusion, I would commend to this audience the Customs and Border Protection
Blueprint for Reform, which you can find online at www.customs.gov.au. While it had its genesis as an internal corporate response to the problem of workforce, culture and integrity issues within the Service, it is my resolute belief that we need to approach the issues outlined in the Blueprint in a strategic manner, with the full weight and authority of the Australian Government behind it. In this context, I am delighted to be able to report that our new Minister, the Hon Scott Morrison MP, has been a strong backer of the Reform programme from day one, and is very keen to see it develop into a costed business case for his consideration. This will be crucial because the Blueprint cannot idle along as an agency-level corporate plan. It needs to become a national strategy for strengthening our borders. This goal relates very directly to the nation's security and the relevant issues are ones for the entire nation to consider.
Accordingly, I invite all interested parties to get involved and to help us to build a comprehensive response to the challenges of ever increasing travel and trade volumes, complex supply chains and criminality at the border. I would very much like to hear from all interested parties about how we might best enhance and improve our operating model, our workforce capability, and our systems and processes. These are not matters just for ACBPS. They are matters for the nation as a whole, especially in this age of the unseen war.
