Australia’s major banks are funding large-scale illegal “land grabs” in the developing world and enabling illegal logging, child labour or other human rights abuses.
ANZ, National Australia Bank, Commonwealth Bank and Westpac have funded overseas companies investigated for illegally or improperly acquiring large tracts of land from local communities in developing countries, according to an investigation by NGO Oxfam Australia and European research and economics firm Profundo.
Responding to the investigation, the four banks have pledged to work with Oxfam to deal with the claims. It is believed that ANZ and Westpac are considering severing their ties with the companies accused of impropriety.
Financial records reveal that ANZ and Westpac have had financial relationships with companies found by a PNG commission of inquiry in 2013 to have abused a land leasing scheme.
One of these companies, Independent Timbers and Stevedoring, which controls 2 million hectares of PNG land via the leasing scheme, was in late 2010 issued a $240,000 bank guarantee by ANZ.
The PNG inquiry has accused ITS of engaging in “deceptive and clearly fraudulent” conduct to obtain large tracts of land from local communities and said the company should be probed for possible involvement in “international racketeering over land acquisition”. ITS has rejected the inquiry’s report.
PNG corporate documents reveal that Westpac’s PNG branch has had a 19-year funding relationship with subsidiaries of Malaysian logging giant WTK.
These subsidiaries were also accused of illegal land grabs by the PNG inquiry in 2013, while the Norwegian Government Pension Fund black-banned WTK’s parent company in 2012 because of the “unacceptable risk” the company was involved in illegal logging activities in Asia.
Head of PNG’s anti fraud and corruption taskforce, Sam Koim, said the revelations of links between banks and companies involved in alleged impropriety in PNG showed that Australian financial institutions were failing to conduct appropriate due diligence, despite the country’s extreme corruption risks.
“Without the help of these financial institutions, PNG businesses cannot engage in fraud or other alleged impropriety. Australian financial institutions have to be more diligent when conducting business transactions in PNG.”
Mr Koim’s taskforce has separately identified tens of millions of dollars of illicitly gained funds from corrupt PNG companies being laundered through Australian banks and its work has prompted NAB to freeze or close the accounts of some PNG businessmen.
The link between developing-world land grabs – which have spiked over the past few years due to a surge in the price of agricultural commodities – and Australian banks was first exposed by Fairfax Media in January, with revelations that ANZ was financing a Cambodian sugar plantation owned by the Phnom Penh Sugar Company that had used child labour and military-backed evictions and provoked food shortages.
But Oxfam has uncovered several more funding links and its chief executive, Helen Szoke, has accused the big four banks of failing to follow through on their rhetoric about sustainable and ethical behaviour.
“The big four banks are backing companies that are kicking people off the land and leaving them homeless. The banks have evidence that the companies they are investing in or supporting are involved in illegal or unethical practices, and yet the investment continues.”
Ms Szoke said Oxfam was not trying to “name and shame” the big four banks.
“We want to work with the banks as we work with other corporates to say, ‘this is the impact of your practices’. But you also have great potential to improve the lives of poor people in those countries in which you are making investments.”
Ms Szoke said the possibility that foreign governments and courts would shut down controversial land deals could leave the banks with “significant financial loss”.
Since 2010, NAB has loaned more than $200 million to controversial Asian palm oil giant Wilmar or its subsidiaries.
Wilmar has been the subject of several complaints and investigations over alleged land grabs and environmental destruction, with the World Bank suspending lending to the company in 2010.
Sustained criticism of Wilmar, including its ranking by magazine Newsweek as one of the world’s worst environmental performers, led the company in December to overhaul its environmental policies.
A recent Oxfam investigation into the links between Coca-Cola and agribusiness giant Bunge – which has ties to Commonwealth Bank – prompted the beverage giant to adopt a “zero tolerance to land grabbing” policy.
Bunge’s sugar milling operations in Brazil are under investigation by a local prosecutor over alleged links to land grabs and human rights abuses.
Commonwealth Bank has invested $14.2 million in Bunge and said it would “engage with relevant parties on the issues raised [about Bunge in Brazil] in accordance with our investment policies on responsible investment and stewardship”.
In response to questions about ties to land grabs, an ANZ spokesman said in a statement the bank had “exited customer relationships in the past in circumstances where the customer is unwilling to work collaboratively with ANZ towards meeting our standards”.
NAB declined to comment on its relationship with Wilmar “due to legal and confidentiality reasons” but stressed the bank “supports actions that promote better environmental and social outcomes for businesses and the communities in which they operate”.
Westpac said in a statement it “welcomed” Oxfam’s investigation and said it exposed “useful information in drawing further attention to the some of the complex issues the banking sector has long been managing as part of responsibly supporting the soft commodities sector”.
“In the past, Westpac has been prepared to exit customer relationships if we … have concerns around their environmental, social and governance activities. This includes ‘land grabbing’.”