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Australia in 2018 bypassed sweeping national security laws that ban covert foreign interference in domestic politics.
China protested the laws, arguing their intention was prejudiced against China and had poisoned the atmosphere of China-Australia relations.
Attorney-General Christian Porter told Parliament on Thursday that the first investigations were being conducted in New South Wales state under the foreign interference laws, which carry penalties including up to 20 years in prison.
Two entities have been formally asked why they had not applied for registration as agents of influence working for a foreign principal, Porter said.
Porter did not identify the entities receiving the notices or the countries they are suspected of acting for.
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The proposed legislation would give Payne power to scrap international deals struck by state governments, public institutions such as universities and at local government level, sister-city partnerships.
It would also create a national register of such deals.
Future deals would need federal government approval and could be revoked later.