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AVVs and conflict of interest

Introduction

Decisions to verify vehicles and enter them on the Register of Approved Vehicles (RAV) directly impacts on the safety of Australians using our roads.

As an authorised vehicle verifier (AVV) approval holder, you will have a position of trust in the regulation of road vehicles in Australia.

Given the important role AVVs have as gatekeepers to the RAV, it is critical that you do not verify vehicles that should not be verified.

The Road Vehicle Standards Rules 2019 (the Rules) recognise that situations will arise where an AVV may feel pressured to make a decision to verify a vehicle.

AVV approval holders are responsible, as a condition on their approval, to have effective procedures in place to identify and manage situations where there is, or may be, pressure (whether real or perceived) to verify a vehicle that should not be verified. That is, they must effectively manage conflicts of interest.

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Conflict of interest obligations for an AVV

Under the Rules, require the following obligations must be met by an AVV to prevent unacceptable conflict of interest situations from occurring:

  • the corporation does not hold a registered automotive workshop (RAW) approval
  • neither the corporation nor any member of its key management personnel holds shares or has any financial interest in a corporation that holds a RAW approval
  • the key management personnel of the corporation are not key management personnel, or employees, of a corporation that holds a RAW approval, and
  • the corporation has effective arrangements in place to reduce the likelihood of conflicts of interest in relation to activities undertaken under the AVV approval, and to ensure that any such conflicts that arise are appropriately managed.

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What is a conflict of interest for an AVV?

A conflict of interest, for an AVV, is a conflict between the obligations an AVV has under the Rules and their private interests. A conflict of interest exists whether it is:

  • actual—it currently exists
  • potential—it may arise, under certain circumstances, or
  • perceived—it could reasonably be viewed that a conflict exists, or could arise, that may improperly influence the performance of an AVV's regulatory obligations now or in the future.

A private interest can be direct or indirect:

  • a direct interest is a conflict of interest by an AVV, a member of its key management personnel or an employee of the AVV
  • an indirect interest is a conflict of interest held by a relative or close associate of a member of its key management personnel or an employee of the AVV, for example:
    • an immediate family member (e.g. spouse, partner, child, parent, siblings)
    • a regular household member (e.g. someone who normally resides with a member of the AVV's key management personnel or an employee of the AVV), or
    • another close associate (e.g. friend, relative, business associate).

A private interest can also be financial, non-financial, or a mixture of both:

  • Financial interest—includes actual, potential or perceived financial gain or loss. Money does not need to change hands.
  • Non-financial interest—may arise from personal or family relationships or from involvement in sporting, social or cultural activities. They include a tendency towards favour or prejudice resulting from friendship, animosity or other personal involvement with another person or group. A non-financial interest also includes a personal relationship. A personal relationship may involve:
    • family relationships (siblings, parent/child, husband/wife, de facto spouses, partner, cousins, relations by marriage such as brother- or sister-in-law)
    • emotional relationships (including sexual relationships and close friendships) or
    • financial relationships (commercial relationships where pecuniary interest is present).

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Examples of conflicts of interest for an AVV

The following are examples of unacceptable conflicts of interest:

  • AVV is a registered authorised workshop (RAW) or their key management personnel are a key management personnel, or an employee, of a RAW
  • AVV or any member of its key management personnel holds shares or has any other financial interest in a RAW
  • AVV or their staff inspect and verify vehicles in which they have a financial interest.

The following are examples of potential conflicts of interest that an AVV should have effective strategies to manage:

  • family member of an AVV staff member seeks verification through the AVV
  • family member of an AVV staff member has a direct or indirect relationship with a RAW
  • close business relationship between AVV and RAW means the AVV feels they have to approve vehicles to maintain customer base
  • AVV shares a premises, block, or warehouse with RAW workshop or are in close proximity to each other (e.g. neighbours, same business park etc)
  • the AVV has close associations with entity involved in fraud, vehicle theft, rebirthing and odometer tampering.

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Developing effective procedures to reduce conflicts of interest arising

An AVV must have effective procedures to manage conflicts of interest accessible by their key management personnel and employees.

An AVV should also provide conflict of interest training, including awareness and understanding sessions, with periodic refresher sessions, to its key management personnel and employees.

The procedures should include:

  • a statement about who the conflict of interest procedures are for, essentially for all key management personnel and other AVV employees who could be in a position where a conflict of interest may arise
  • a description of what a conflict of interest is
  • examples of conflict of interest situations key management personnel and employees of an AVV may experience and
  • an explanation of the procedures all key management personnel and employees of an AVV must follow to:
    • reduce the likelihood of a conflict of interest arising
    • disclose personal interests that may contribute to a conflict of interest, registering those interests and conducting regular reviews
    • avoid and control a conflict of interest in connection with a vehicle verification
    • report conflicts of interest, maintain records and describe how to escalate where required
    • regularly declare in writing, (at least annually), any financial or other interests, including immediate family members, with periodic review of the declarations
  • information and steps to seek independent advice, where required.

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Techniques for managing conflicts of interest

As an AVV approval holder, you must have effective arrangements in place to identify and manage situations where there is, or may be, pressure (whether real or perceived) to verify a vehicle that should not be verified.

Effective arrangements include identifying conflicts of interest (or potential conflicts of interest) that either exist in the way the corporation is structured or that may arise over the course of operating under your AVV approval.

AVVs must strive to establish an ethical and accountable workforce that embraces reporting of conflicts as they arise and manages these conflicts appropriately. Honesty and transparency in dealing with conflicts of interest is an important part of creating such a culture.

All types of conflicts of interests should be managed by implementing a management strategy to:

  • avoid a conflict of interest
  • accept and reduce a conflict of interest.

Avoid a conflict of interest

Avoiding a conflict of interest posing an unacceptable risk to, or impacting on, the AVV's interests is the preferred strategy.

To avoid a conflict of interest, the AVV may need to reject a request to verify a vehicle from a RAW where a family member of an AVV employee has a direct or indirect relationship with that RAW.

Accept and reduce a conflict of interest

A conflict of interest may be reduced by not allowing an AVV employee, who has an interest in a vehicle, to verify that vehicle.

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How does an AVV become aware of an actual, potential or perceived conflict of interest?

AVVs should require all their key management personnel and employees to declare, in writing:

  • a conflict of interest as soon as practicable
  • any actual, potential or perceived conflict of interest that may arise
  • annually, their financial interests and those of their immediate family as well as personal relations that could involve a conflict of interest.

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What should the AVV do when an employee declares a conflict of interest?

When an AVV receives a conflict declaration from an employee, the relevant management personnel must decide whether there is, or could be, a conflict of interest and what action is appropriate to resolve the conflict. These factors must be considered when deciding whether a conflict of interest needs to be managed:

  • the nature of the actual, potential or perceived conflict
  • the ability of the employee to influence an outcome relevant to the declared interest.

The AVV key management personnel delegated to consider a conflict of interest situation must consider whether the employee should continue in their duties subject to certain conditions, or be reassigned to ensure the interests of the AVV are not compromised.

The processes undertaken to resolve a conflict of interest, including discussions held and the outcome, need to be fully documented. Written advice on any decisions or action to be taken to manage a conflict of interest is required to be provided to the employee concerned.

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Consequences of failing to declare an interest

A failure to declare, or to take reasonable steps to avoid, a conflict of interest should give rise to the AVV considering disciplinary action against the employee, as the conflict of interest could result in the department revoking the AVV's approval.