Speech to the 11th Annual National Security Australia Conference
25 February 2013
Michael Pezzullo
Chief Executive Officer, Australian Customs and Border Protection Service
E&OE
Good morning ladies and gentlemen; thank you Clive for that introduction.
Clive was far too modest in that introduction. Far from being former colleagues as such, he was actually my first boss in Defence, which was quite a while ago. He probably doesn't remember it as acutely as I do, but for a newly recruited graduate in the Department of Defence, walking into your first job and being brought to meet the Director of the section. It was a time of great terror and anxiety as you pretended to be entirely competent and calm as you were ushered into the Director's office. Clive was, as he is now, a very empathetic and engaging person and indeed as a boss, so thank you Clive - you set me on the path.
I'd like to thank Professor Williams for his introduction and to the opportunity presented to speak today. Events such as these build greater ties between the public service, the academic world, and industry, and they're invaluable for all of us who are planning for the future of national security practice.
The border is what I'm going to speak about this morning. It's fundamental both to our national security and to our economic prosperity. That's why there is a significant reform process underway within Customs and Border Protection right now, and I'll speak about that at some length later.
The National Security Strategy, recently released by the Prime Minister has the border as a pillar of national security. In the Asian Century White Paper, released somewhat before the National Security Strategy, it acknowledges that economic prosperity to be gained from the Asian Century won't be achieved without appropriate border settings. This morning I'm going to try to make sense of all of that.
More than ever before managing the security and integrity of Australia's borders is essential for the prosperity and protection of the Australian community. I'd also like to suggest to you today that the border is much more than that; it is in fact a strategic national asset, and a very valuable one at that.
The very idea of the border is intrinsically linked to the idea of sovereignty. Borders demarcate sovereign political units, which in today's world are of course nation states. Borders are legal delineations of dominion, where state dominion begins and ends. Borders are not, in today's world at least, walls which completely seal one sovereign political unit from another. How could they in a world of international trade and travel?
So in addition to being lines and borders, there are also spaces where sovereign political units control the flow of people and goods in and out of their dominion. These regulated ports of entry and exit are where cross-border flows of people and goods take place. They are vitally important control points where sovereign political units are able to determine who and what has the right, or gift of entry or exit, and under what conditions. In this sense, control of border movement is a crucial national function, and one which can be exercised and managed for a multiplicity of purposes, including: the levying of customs fees and duties, the checking of travel identity and intention, and the interdiction of illegal or prohibited goods.
In recent years we've made great strides in maximising the national value and benefit of our system of border control. In the case of the Customs and Border Protection Service, of which I am the CEO, we serve a growing number of federal, state, and territory authorities, as their trusted border agency. In other words, we do not just administer and enforce the Customs Act - as important a function as that is - but working on behalf of dozens of other agencies we apply border controls as a national asset, for national security, law enforcement, and community protection purposes.
So, what are the challenges that we must face in seeking to maximise the value of this asset? The number of travellers and goods which cross our border are now so large that new methods are going to be required for us just to keep up. The complexity of trade and travel routes has made our task so much more complex. The use of the internet for trade and personal consumption is also changing our environment in a very profound way. And our adversaries, those who are trying to breach the border, circumvent our systems, and who on occasion seek direct insider support for their activities, are quick to adapt and prepared to use infiltration and corruption as a strategy. I'll have more to say about that in a moment.
Let's just consider some numbers first. In 2012 - the calendar year just ended - approximately 30 million international travellers passed through our airports. By 2020 that figure is expected to be 40 million, and that's only seven years away. In 2012 around 2.2 million sea containers arrived, and in 2020 that figure will potentially surpass five million, which is more than doubling in seven years' time. Last year around 11 million air consignments arrived, and by 2020 this figure could reach 22 million air consignments. These volumes are already so large that it has resulted in a transformational shift in how we have to operate at the border.
We have already left mass screening behind, and have embedded a targeted intelligence-led, risk based approach into our work, before, at and after the border. The ongoing, sustained and in some cases, accelerated increase in volume necessitates more than just a refinement of this approach. We are going to have to consider, in the very near future, more transformative approaches. And as I've stated it's not just the numbers that are increasing, but trade and travel patterns will continue to increase in their complexity.
As the world grows richer and as a new middle class emerges, particularly in Asia, we're seeing an increase in ports, airports and other infrastructure hubs being used in many new and different ways. Supply chains and travel routes are becoming much more dynamic. This makes the task so much harder. It can obscure the true point of origin of goods and travellers, and it makes determining the intent behind cross-border movements a much more sophisticated and challenging task.
The increase in trade and travellers also creates demands for border enforcement and trade facilitation, both at the same time, in new places - many of them remote. In a transactional, labour intensive border model, this stretches our resources. As I mentioned earlier, the internet also is affecting us in very concrete ways. Our client base is also expanded, not only in the form of companies importing more goods, but also by consumers who are buying online directly from foreign suppliers. These small shipments, usually through the air, that cover a wide variety of goods, are becoming increasingly as important to society as the traditional sea cargo shipments that we see delivered to warehouses and port hubs. As a result, we need to adapt our intelligence facilitation and border targeting practices to ensure that we continue to protect the community, while ensuring that their goods are received without unnecessary delays.
Changes in the digital environment are something that we also have to keep an eye on. Because any change in the larger economy and society at large affects how we approach border management and control. We are keeping an eye -for instance - on emerging manufacturing technology such as 3D printing; not just because of the potential for criminals to take advantage of this technology to circumvent import controls on restricted goods such as firearms and other like goods, but more generally because new manufacturing methods shape the economy and society, and thus the border.
Those trying to breach our borders are highly adaptable and endlessly opportunistic. Organised crime continues to be increasingly sophisticated, well-funded and resilient. Almost all major crime organisations have some form of international connection. This makes the border crucial for our operations and efforts against organised crime. Previous efforts to combat organised crime have had significant success, however the ongoing and pervasive threat associated with organised crime requires that our approach is also dynamic, targeted, comprehensive and integrated, in our case, with law enforcement partner agencies - both domestically and internationally. It also requires that our workforce is highly professional and resilient in the face of corruption opportunities, and I'll have more to say about that in a moment.
The tactics of our adversaries are as much a part of the border environment as the increasing volumes of cargo and travellers; and we cannot be blind to this reality. These drivers have already shifted the way in which we operate at the border. Our core strategy already revolves around highly-targeted, intelligence-led interventions, as I've mentioned, and we've increasingly adopted automation such as the SmartGate face-to-passport recognition system and the integrated cargo system for the movement of imports and exports. We've also improved our intelligence capability - not by as much as I'd like - and certainly we'll be doing more in that area in the very near future. These and other changes which have been steadily built under my two predecessors over 20 years provide a solid foundation upon which to build.
But before I move on to talk about the reform program that will embrace and encompass all of Customs and Border Protection, we'll have to ensure that we continue to deliver in the day-to-day emerging border environment. In order to do both long-term reform and run the businesses of today, I'd like to tackle one of the enduring questions that the community, the Government, and even our own officers have, and that is: what is our identity and what is our role? And wrapped around those questions is: what is our culture?
As I outlined at the start of this presentation, as a national asset the border is fundamental to both national security and to economic prosperity. This can lead to a false dichotomy that our role is either to facilitate trade on the one hand or to enforce the border, and that you have to choose how much weight is given to one or the other objective. I don't see it that way at all. While the national security and law enforcement focus - particularly in conferences such as this - is clear, and we have to focus on our adversaries who are attempting to breach the border, we also in fact have two other equally important roles. These are to both ensure a streamlined flow of legitimate goods and travellers, and to support Australia's open economy by applying internationally-agreed and permitted trade rules.
Our role is therefore crucial in maintaining and enhancing Australian competitiveness. The benefits to be gained for instance, in the Asian century, will not be realised without appropriate border settings that facilitate economic integration, both with the region and the wider world.
Customs and Border Protection therefore has an important role to play in ensuring that the benefits of global and regional economic integration flow to Australian traders, manufacturers, investors and consumers. Our contribution therefore to economic policy is to ensure compliance with the rules of trade, ensuring that everyone pays the correct amount of revenue for instance. This helps keep the system fair, as does the efficient administration of tariff concession schemes for instance. The Government and the service is committed to a robust and transparent trade remedy system and is implementing government reforms to make this system stronger, with the introduction of the new Anti-Dumping Commission.
We also collect vital trade statistics, without which the Government and relevant agencies would be missing a fundamental part of the evidence base required to steer the economy. This means that while in the last decade we've experienced higher government and community expectation in enforcement areas, we continue to have to improve our facilitation record and our contribution to the economic and trade system of Australia.
Facilitating legitimate trade and travel, remaining vigilant for national security, law enforcement and community protection purposes and using border controls as an extension of economic revenue and industry policy, are not opposed operational processes and policy objectives.
To the contrary, they are and should be integrated into a single system of processes and decision-making. All of these drivers in our broader environment – the increasing volumes, the complexity, the digital environment, the threat of sophisticated criminal activities, the complexity of our role - of course affects the way in which we carry out our role at the border. That's why we've developed the three-track strategy of reform for the service, and I'd like to speak about that this morning.
This process was already underway when, in December of 2012, the Minister for Home Affairs Jason Clare announced the need for further comprehensive structural and cultural reform of the service. His announcement in December ensures that the requisite political authority and mandate clothes (sic) the reform strategy and underpins it. The first two tracks of change are modernising our business systems and processes and cultivating a new enforcement agency model.
Let me deal with modernisation first. In the future we will see even greater automation or self-processing options for border transactions, supported by investment in a much more sophisticated intelligence capability, which is able to effectively exploit big data analytics and opportunities associated with big data analytics. Increased exploitation of e-services and business process re-engineering are also on my agenda.
In order to address the big data challenge, the service needed to enhance its advanced analytics capabilities, its technical capacity to underpin those capabilities, and our information-sharing arrangements with many agencies. The service needs to be able to handle the large volume of information within its own holdings, and also those of other agencies, and indeed industry partners to which we get access. Information needs to be accessed in near real-time to ensure its effective use, and we have to overcome the issues involved in holding and manipulating a wide variety of data sets, being sympathetic always and complying to course with relevant legislative and regulatory stipulation. Such capability has to be backed up by expert, professional officers. For that reason I've created a new role of National Director for intelligence, who will also perform the role of our strategic Chief Information Officer. This will mean that the service's intelligence and analytics capability will be integrated with its information management capability and managed accordingly.
As good as our systems of modernisation will be if we get it right, we can't underestimate the edge that a uniformed border protection officer, with his or her intuition and presence, can give us at the border. As with military operations and policing, there'll always be a vital role for boots on the ground. Therefore, it's critical that I acknowledge that we are unashamedly a law enforcement agency. Our critical role in facilitation and trade support does not mean that our enforcement capability can be anything less than fully developed to the contrary.
Now to date, we have expanded our deployment in recent years of personal defensive equipment including firearms. We've developed appropriate career stream models and implemented a tailored leadership capability to improve our leadership command and control across all levels of the service. This is an ongoing process.
We will continue to embed an enforcement-orientated operating model based on the intelligence and risk assessment platform that I mentioned earlier, as well as crucial strategic partnerships and collaborative opportunities with other law enforcement agencies. We will introduce relevant command and control structures and enhance skills and capabilities of the uniformed workforce. We will strengthen capability and leadership skills through enhanced recruitment processes, active career management, and structured professional development, such as you would expect to find in a disciplined, uniform service. Staff engagement and consultation with other stakeholders will be crucial in this endeavour.
The third theme of our reform program to complement the modernisation and our agency model, is enhancing our resilience against the potential for corruption or serious misconduct within the service. Now clearly, all of you in this room will be aware of a number of matters which have received significant media coverage in recent months. While not wishing in any way to comment specifically on these matters, and certainly making no judgement on allegations which still must be tested in criminal court proceedings, let me be clear on this point.
There is no place within the Service for criminal behaviour, corruption or serious misconduct. There will be zero tolerance. The Parliament and the Australian community would expect nothing less.
We've already commenced the process of modernising our integrity measures in line with modern law enforcement practice. We now have integrity testing, mandatory drug and alcohol testing, and explicit mandatory requirements to report misconduct, corruption or criminal activity. I also have the power, as the Chief Executive Officer, to make determinations of serious misconduct in relation to an officer's conduct.
As such that officer's termination of employment in those circumstances would be accompanied by the relevant declaration of serious misconduct as having been the cause of that officer's dismissal. On my first day as CEO, which was Friday 15 February, I signed into force two new CEO powers - or orders – rather, a power granted under legislative changes last year. One related to the mandatory requirements for professional standards and the other related to the mandatory reporting of serious misconduct, criminal and corrupt behaviour.
These and other changes in governance oversight, processes and procedures, are necessary and important measures. They will not however, be sufficient if they do not tackle deeper workforce issues where more needs to be done. This is where the transformation of the agency's workforce into a disciplined uniformed service is critical. This change is not one which is foreign to the service.
Our own history is instructive here. Our history has shown us that the key to our success in the past has been to understand the nature and challenges of the times as they presented themselves and to look ahead, to plan, prepare for the future and make the necessary changes. I should add to that by saying that external scrutiny is the key to ensuring that our plans for the future are as good and robust as they can possibly be.
So as to better inform our reform program, Customs and Border Protection is now progressing through an intense period of external review. Last December the Minister for Home Affairs, Mr Clare, announced the establishment of the Customs Reform Board. This board is made up of three distinguished Australians with expertise in corruption resistance, law enforcement, and business systems - respectively the Honourable James Wood, Mr Ken Moroney and Mr David Mortimer.
The board reports directly to the Minister and will provide advice and recommendations to him for further reform relating to both improving business operations and our law enforcement model, as well as our integrity culture. I am very much looking forward to working with the board. At the same time back in Canberra the Australian Public Service Commission is undertaking a capability review of our agency, as they are doing over a five year period for other Commonwealth departments and agencies.
This forward-looking whole of agency review will provide us with a comprehensive understanding of the strengths and gaps in our current capability and will provide further advice to feed into the larger reform program. The internal work that we have done and continue to do, supported by the next period of robust and welcomed external scrutiny review, will set us on a reform path that will ensure that we are able to preserve the integrity of the Australian border in the face of the challenges that we are confronting now and in the near future.
It is my contention that Customs and Border Protection does a very good job today, but I believe that we can do even better. Indeed, we must do better given the challenges ahead. The realities that we are already facing at the border mean that we must continue to take the initiative in developing new systems and tools as well as the skills and professional competencies of our officers.
We have been talking about the challenges of the border in the future for some time. Well, that future has arrived. Customs and Border Protection will be transformed into a disciplined uniform service assisted by an advanced intelligence and risk assessment system, well-placed to protect our country and support our industry whilst facilitating legitimate trade and travel.
Our adversaries will increasingly feel our presence. Legitimate traders and travellers will be our partners as we work together to secure both our economic prosperity and our national security.
Thank you very much.
