Third Dimension: Not-for-Profit Exemptions under the Foreign Influence Transparency Scheme

By Amelia Cameron, Seasonal Clerk

The Foreign Influence Transparency Scheme Act 2018 (Cth) (Act) commenced on 10 December 2018, following a number of amendments to the Foreign Influence Transparency Scheme Bill 2017 (Bill). The Bill in its original form was heavily criticised by the not-for-profit sector, with concerns about creating more compliance obligations for the ‘good guys’, rather than catching those persons disrupting Australia’s democratic process.

The Foreign Influence Transparency Scheme (Scheme) as established by the Act, was introduced in response to growing fears surrounding an increase in covert foreign influence on activities in Australia. The legislation establishes a new registration system, providing greater visibility of the extent of foreign influence over the Australian Government and democratic process. Actors undertaking certain activities on behalf of foreign individuals or entities are required to register or face severe penalties, including imprisonment for up to five years.

The initial Bill would have included registration requirements for most charities that receive foreign funding. In submissions to the Government, the Australian Charities and Not-for-profits Commission (ACNC) argued the Bill placed an ‘unnecessary regulatory burden on charities’ that already report and are monitored under strict regulatory frameworks. Further, there was a danger that the added regulation may discourage advocacy work, as charities may be unable to meet the increased regulatory burden and would not want to risk the penalties for non-compliance. The amount that charities already spend on administration is significant and the Bill would have imposed even greater costs for the not for profit segment that receive overseas funding.

In response to submissions from various agencies, the Government amended the Act to exempt many charities and not-for-profits from having to register. A key element of the scheme is its intention to capture covert foreign influences, rather than preventing any and all foreign influence on the Australian Government. ‘Foreign influence’ refers to foreign countries trying to sway Australian Government decisions, such as official diplomatic negotiations, which are legitimate. However, when foreign states operate outside these official interactions, by using a third-party, their attempt to impact decisions may be hidden, which could be detrimental to Australia’s national interests. This is why greater transparency of foreign influences on Australia was required.

The new scheme involves registration and reporting obligations on individuals or organisations who partake in ‘registrable activities’ aimed at influencing politics or Government, on behalf of, or connected to ‘foreign principals’ such as a foreign organisation, company or government. There already exists a variety of exemptions, including some activities of a registered charity with the ACNC.

Who has to register?

Generally, a person (company or individual) must register under the Scheme when all of the following conditions set out in the Act are satisfied:

  1. Involvement of a foreign principal defined in section 10 as:
    1. a foreign government;
    2. a foreign organisation; or
    3. a foreign government related entity or individual.
  2. Under section 11, the person acts ‘on behalf’ of that foreign principal.
  3. The undertakings on behalf of the foreign principal constitute a ‘registrable activity’ under Division 3, such as:
    1. parliamentary lobbying;
    2. political lobbying;
    3. communications activity;
    4. disbursement activity; or
    5. the engagement of specific persons such as a Cabinet minister on behalf of a foreign principal for certain activities.
  4. The person undertakes the registrable activity for the purpose of ‘political or government influence’, such as an activity undertaken for the purpose of influencing a Government election process, Government decision-making, proceedings of a House of Parliament, or a process regarding a political party.

Exemptions

Division 4 of the Act outlines a number of circumstances where organisations are exempt from reporting and registering. While the 2018 amendments have reduced much of the red tape from the original Bill, not-for-profit organisations may still be required to register and report if the organisation is a foreign principal undertaking a registrable activity.

Some of the Division 4 exemptions are more relevant to not-for-profit organisations than others. In relation to the not-for-profit sector, the Act provides exemptions from reporting and registering if the organisation meets all of the following conditions:

  1. Under section 27, the registrable activity is a religious activity undertaken in good faith.
  2. Under section 29C, the organisation is a registered charity with the ACNC, the activity is undertaken for a charitable purpose, rather than a disbursement activity, and at the time of the activity, it is apparent to the public that the activity is on behalf of a foreign principal and the identity of that foreign principal.
  3. Under section 29D, the organisation’s purpose relates to the arts, the activity is in pursuit of the organisation’s artistic purpose, rather than a disbursement activity and at the time of the activity, it is apparent to the public that the activity is on behalf of a foreign principal and the identity of that foreign principal.
  4. Under section 25, the activity relates to the provision of legal advice.
  5. Under section 29A, the activity is undertaken by an industry representative body in the way of representing its members.

Conclusion

The amendments go some way to addressing the not-for-profits sector’s concerns with the 2017 Bill. However, not-for-profit organisations should be careful not to assume they are exempt simply because they are a registered charity with the ACNC. If the organisation does not fit into an exemption, if it is funded by foreign entities and is engaging in activities in the pursuit of influencing the Australian political or governmental sphere, it may be required to register. Professional legal advice should be sought if an organisation is unsure if they are captured by the Act.

For further information, please do not hesitate to contact us.

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