2.1
As outlined in chapter 1, the Crimes Legislation Amendment (Economic Disruption) Bill 2020 (the bill) seeks to amend the Crimes Act 1914 (Crimes Act), Criminal Code Act 1995 (the Criminal Code), the COAG Reform Fund Act 2009 and the Proceeds of Crime Act 2002 (the POC Act).
2.2
This chapter considers support for the bill as well as concerns about specific aspects of the bill or suggested amendments to the bill. A number of schedules did not raise concerns from submitters and are therefore not discussed. The chapter concludes with the committee's view and recommendation.
Support for the bill
2.3
Most submissions to the inquiry expressed support for the intent of the bill, and acknowledged the difficulties within the existing framework to address modern money-laundering. For example:
The Law Council [of Australia] supports the intent of the Bill to ensure that Commonwealth money laundering offences and investigative powers are adapted to the contemporary modus operandi of groups engaged in transnational serious and organised crime…The Law Council also acknowledges the significant difficulties identified in the explanatory Memorandum to the Bill in relation to the investigation and enforcement of money laundering offences in contemporary circumstances.
2.4
The Police Federation of Australia emphasised its general support for the bill, expressing specific support for Schedule 7:
We give specific support for Schedule 7, providing the Minister with alternative avenues to fund operations of state and territory police forces in activities that are consistent with Section 298 of the Proceeds of Crime Act 2002, in particular, for crime prevention and law enforcement issues.
This schedule will allow the Minister, to more expeditiously, fund state and territory police activities and operations in areas of support for the Commonwealth that might not be strictly seen as a core area of state police responsibility.
2.5
Retail and Trade Brands Advocacy similarly expressed broad support for the bill, with specific support Schedule 7 in line with the views of the Police Federation of Australia.
2.6
The Synod of Victoria and Tasmania, Uniting Church in Australia (the Synod) outlined support for a number of specific measures contained in Schedules 1, 2, 3, 4, 5 and 6 of the bill. The Synod recommended that the bill be passed 'subject to the Committee being satisfied that Schedule 3 will not result in unjustified hardship on innocent third parties', discussed at paragraph 2.36.
2.7
The Real Estate Institute of Australia considered the potential imposition of unnecessary regulatory burden on real estate agents, and supported the bill on the basis that:
It is possible that the proposed measures in tracking down and prosecuting launderers covered by the Bill increases the possibility that onerous responsibilities will not be imposed on tranche 2 sectors including the real estate sector.
2.8
Mr Edward Greaves submitted that 'many of the reforms proposed by the Bill are appropriate' and highlighted particular support for the intention to reform Division 400 of the Criminal Code.
Concerns raised in relation to the bill
2.9
While submitters generally supported the intention of the bill, a number of submissions qualified their support, raising specific concerns or recommending amendments to the bill.
Fault elements for the offence of attempt
2.10
In relation to the proposed amendments to the fault elements for the offence of attempt under the Criminal Code, the Law Council argued:
…the proposed amendment to the fault elements for the offence of attempt in relation to Division 400 offences is fundamentally inconsistent with the long-established character of the offence of attempt, as codified in subsection 11.1(3) of the Criminal Code...This is a significant diminution of the long-established requirement of proof for attempt offences, which require proof, to the criminal standard that a person had knowledge or intention in relation to the physical elements of the principal offence…Namely an attempt to commit an offence necessarily requires intention or knowledge, because purposiveness is the essence of an attempted crime.
2.11
The Law Council cited specific concerns raised by Model Criminal Code Officers' Committee of the (then) Standing Committee of Attorneys-General, including that applying the fault element of recklessness to the offence of attempt would widen the extension of criminal responsibility too far. The Law Council argued that 'the mere reason that law enforcement agencies consider that proof of knowledge or intention is too difficult in particular circumstances', is not sufficient justification for departing from established principles of criminal responsibility.
2.12
Accordingly, the Law Council argued that proposed section 400.14A be omitted and that the applicable fault elements for the offence of attempt in relation to Division 400 should be intention and knowledge.
2.13
The Department of Home Affairs emphasised that under the Guide to Framing Commonwealth Offences criminal responsibility, provisions may be departed from where there is sound justification to do:
The extension of criminal responsibility provisions in the Criminal Code have been carefully formulated. Consequently, these provisions should be relied upon unless there is sound justification to depart from them.
2.14
The department articulated two specific vulnerabilities in the existing regime that proposed 400.14A seeks to address:
First, under existing serious money laundering offences in sections 400.3-400.8, the prosecution must prove that property was actually proceeds of crime.
Money laundering organisations, however, typically operate in a manner to intentionally make it impossible to determine whether property actually came from crime. These organisations frustrate tracing efforts by disguising the criminal origins of property behind complex legal and administrative arrangements, encrypted communication services (often with exclusively or near-exclusively criminal user bases), and other methodologies employed to severely frustrate law enforcement's efforts to identify predicate offending.
Even where law enforcement is successful in tracing the origins of property, criminal organisations can still ensure that it is impossible to prove that property was actually proceeds of crime by committing predicate offences in countries that are unwilling or unable to cooperate with Australian law enforcement…
Second, even if authorities pursue a prosecution for attempting to commit a money laundering offence, which does not require the prosecution to prove that property was actually proceeds of crime, they must also prove that the defendant knew or believed that the property was proceeds of crime. This is frequently impossible to prove, as money laundering organisations practice strict information compartmentalisation, ensuring that participants remain wilfully blind to predicate offending, preventing them from knowing or believing that property came from crime, even under the expanded definition of 'proceeds of general crime'.
2.15
The department stated that the existing offences under section 400.3-400.8 are 'practically unworkable…when applied against modern money laundering syndicates'. The department argued that combined, amendments will better reflect the typical awareness of a participant in money laundering, that is, there is a substantial risk that property they are dealing with was generally derived from crime.
2.16
Further, the department submitted that Section 400.14A is analogous with section 300.6 of the Criminal Code, which made similar amendments in the context of serious drug offences, whereby law enforcement officials would intercept unlawful drugs in customs inspections or other covert settings, and substitute illicit substances with imitations. According to the department:
The proposed amendment at section 400.14A, however, is also designed to support a very similar technique used in money laundering investigations. Commonwealth investigators may pose as customers of money laundering organisations, holding out property unconnected to criminal offending as 'proceeds of crime' to infiltrate these organisations and gather evidence on their activities.
As law enforcement does not actually use property that is 'proceeds of crime' when posing as a customer, the prosecution cannot currently make out the substantive elements of the offence when this investigative technique is used. In these cases, the suspect must be charged with an attempt to commit an offence, and the proposed amendment at section 400.14A is necessary to ensure that such a charge can be substantiated against typical money laundering organisations.
2.17
The department submitted that its policy intention was 'effectively and clearly achieved by amending subsection 11.1(3) of the Criminal Code as it applies to particular money laundering offences'.
Concept of 'proceeds of general crime'
2.18
The Law Council raised concerns with the proposed introduction of the concept of 'proceeds of general crime', on the basis that in combination with other amendments, it will criminalise conduct that is not demonstrably connected with TSOC actors:
The Law Council is concerned that the combination of the proposed 'proceeds of general crime' offences in proposed section 400.2B and existing sections 400.3 and 400.4, and the removal of particularisation requirements in proposed subsection 400.13(1), will create nebulous offences that effectively criminalise conduct that is generally suspicious or dubious, rather than demonstrably connected with criminal offending by serious and organised crime groups.
2.19
The Law Council submitted that the concept of 'proceeds of general crime' removes the requirement for the prosecution to establish even the general type of offence from which the money or other property was wholly or partly derived, whether directly or indirectly.
2.20
The Law Council also argued that the concept of 'proceeds of general crime' as proposed, 'may increase the prospects of lengthy and complex appeals against convictions' due to its vagueness.
2.21
Accordingly, the Law Council recommended retaining the requirement for the prosecution to:
Prove that the money or other property was, in fact, the proceeds of a specific offence or a specific type of offence; and the defendant believed the money or property to be proceeds of general crime, or was reckless or negligent in relation to this circumstance (as applicable to the tier of offence charged).
2.22
Further, the Law Council highlighted the importance of particularity in criminal charges, arguing that:
…the new offences also propose to relieve the prosecution of the requirement to establish, beyond reasonable doubt, that the money or other property is, in fact, the proceeds of an identified type of offence (if not a specific offence). The Explanatory Memorandum does not offer a coherent justification for the proposed dilution of the existing requirements of proof about this fact. It simply states that it is presently difficult to identify a type of indictable offence because of the use of encrypted communications and complex distribution chains through multiple jurisdictions. It does not explain why it is impossible to identify any type of offence…
…the proposal to enact 'proceeds of general crime' offences would have the effect of making it possible to prosecute in circumstances in which any such charges against any existing offence provisions would presently fall severely short of critical requirement of particularity…
…rigorous justification is needed for the dual proposal to relieve the prosecution of the requirement to particularise to least the type of predicate offending from which the money or other property was in fact, derived; in addition to the proposal to also relieve the prosecution of the requirement to provide the defendants fault in relation to the type of predicate offence.
2.23
The department refuted the assessment that 'proceeds of crime offences' would be so nebulous as to criminalise conduct that is not demonstrably linked to TSOC actors. The department argued conduct will only be criminalised where the evidence gives rise to an 'irresistible inference' that property is derived from crime:
All elements of these offences must be proven beyond reasonable doubt, and circumstances that are merely 'suspicious or dubious' will not be sufficient to establish that property is actually 'proceeds of general crime'. In practice, finders of fact will be required to examine all relevant evidence to determine whether it gives rise to an irresistible inference that property is wholly or partly derived or realised, directly or indirectly, from crime generally.
2.24
The department opposed the Law Council's recommendation, arguing that it would undermine the policy intent of introducing 'proceeds of general crime' offences by:
…allowing criminal syndicates to avoid criminal liability by committing predicate offences in 'haven' jurisdictions that are unwilling or unable to cooperate with Australian law enforcement.
Law enforcement experience indicates that, even if proceeds of crime can be traced to a 'haven jurisdiction' in which predicate offending occurred, the evidence required to prove that these proceeds came from a specific type of crime will either be solely contained within this 'haven jurisdiction' or won’t be held at all.
The proposed 'proceeds of general crime' offences, by requiring the prosecution to only prove that property was derived from crime generally, overcome this barrier by allowing a finder of fact to find that property was actually proceeds of crime without relying on evidence from 'haven jurisdictions', and instead relying on circumstantial or indirect evidence outside these jurisdictions. The finder of fact may rely on all relevant evidence, including evidence obtained from law enforcement's tracing efforts (outlining how money was moved between jurisdictions) and regarding the manner in which property was dealt with in Australia.
2.25
The department noted that the United Kingdom has made comparable amendments to its proceeds of crime legislation to overcome challenges similar to those experienced by Australian prosecutors, and has not experienced an increase in lengthy and complex appeals against convictions.
2.26
Responding to concerns raised in relation to particularising predicate offending, the department did not share the Law Council's concerns regarding 'proceeds of general crime' offences:
Practically, the Commonwealth Director of Prosecutions does not anticipate there being any difficulty in identifying the necessary particulars of 'proceeds of general crime offences' including details of the particular offence with which the defendant is charged and the time, place and manner of the defendant's acts or omissions that supported the charge. The prosecution is required under common law in all prosecutions, to provide sufficient particulars of the acts, matter or thing alleged as the foundation of the charge.
From a policy perspective, departing from the existing requirement to particularise a specific predicate offence or type of predicate offence is also justifiable.
There is no clear moral justification for allowing a person to knowingly deal with property that is derived from crime generally or for confining money laundering offences only to situations in which a person deals with property derived from a specific type of indictable offending. Particularising predicate offending on this basis is out of step with the agile nature of modern globalised criminal networks, which are not confined to particular kinds of predicate offending, and instead shift their offending to avoid detection and maximise profit.
Penalties for 'proceeds of general crime' offences
2.27
The Law Council was concerned about the proposed maximum penalty of life imprisonment for the offences in subsections 400.2B(2) and (3) of the bill:
Proposed subsections 400.2B(2) and (3) (item 7 of Schedule 1 to the Bill) contain 'proceeds of general crime' offences covering money or property valued at $10 million or more, where the defendant believes that money to be proceeds of general crime. The proposed maximum penalty is life imprisonment.
However, the proposed maximum penalty of life imprisonment for the offences is proposed subsections 400.2B(2) and (3) is disproportionate to the criminal conduct covered by those offences.
2.28
The Law Council asserted this view on the basis that:
the proposed concept of ‘proceeds of general crime’ significantly dilutes the requirements of particularity and proof in relation to predicate offending…
the application of strict liability to the physical element that the money or other property was valued at $10 million or more; and
no justification is offered for equating these offences with the maximum penalty for offences like murder or terrorism offences...
2.29
The Law Council argued that combined, these factors increase the risk that persons are imprisoned for life for relatively benign conduct.
2.30
The Law Council also highlighted a gap between the maximum penalties for tier 1 and tier 2 offences. The offences in tier 2 impose a maximum penalty of 15 years imprisonment while the maximum penalty for tier 1 offences is life imprisonment. The Law Council recommended reducing the maximum penalty for tier 1 'proceeds of general crime offences' in proposed subsections 400.2B(2) and 400.2B(3) to 20 years' imprisonment, and adjusting the proposed 'proceeds of general crime' offences in section 400.3 and 400.4 consequentially to ensure appropriately gradated maximum penalties.
2.31
The department argued that the maximum penalties in the bill are necessary to deter money laundering in Australia and minimise its damaging effect:
Part 3.1.1 of the Guide to Framing Commonwealth Offences provides that a high maximum penalty will be justified where there are strong incentives to commit the offence, or where the consequences of the commission of the offence are particularly dangerous or damaging. The high maximum penalties under the 'proceeds of general crime offences' are necessary to overcome the strong incentives that currently exist to commit money laundering. Transnational serious and organised crime (TSOC) groups are primarily motivated by profit, and money laundering is an essential component of their criminal business model...
…Money laundering systematically devastates the health, wealth and safety of Australia's citizens through the conduct it enables, such as illicit drug trafficking, terrorism, tax evasion, people smuggling, theft, fraud, corruption and child exploitation.
2.32
The department stated that while 'proceeds of indictable crime' offences require a defendant to intentionally deal with property, 'proceeds of general crime' offences require the prosecution to prove beyond reasonable doubt that a person intentionally engaged in conduct that resulted in concealing or disguising the money or property in some way, and the person was reckless as to whether their conduct would product this result. The department justified the maximum penalty of life imprisonment for both offences on the basis that:
Imposing the same penalty under each offence-type can be justified as the conduct that a defendant must engage in under 'proceeds of general crime offences' is far more serious than that required to satisfy the 'proceeds of indictable crime’ offences.
A person who engages in conduct to conceal or disguise information relating to property, while believing, or being reckless or negligent as to whether, this property is proceeds of crime, is far more culpable and complicit in the underlying offending than a person who merely deals with these proceeds.
2.33
The department did not accept the argument that the most serious 'proceeds of general crime offences' (under subsections 400.2B(2) and (3)) would subject individuals to a maximum penalty of imprisonment for life for relatively benign conduct. The department argued that 'proceeds of general crime' offences would only be triggered by the most serious forms of money laundering conduct, and the elements that the prosecution will be required to prove beyond reasonable doubt ensure that offences:
…only apply where a person has a high degree of awareness as to the criminal origins of the property, but nevertheless chooses to engage in conduct to conceal and disguise relevant information in relation to the property and either does not make reasonable inquiries as to the value of this property or is aware of its true value.
2.34
The department did not support the Law Council's recommendation to narrow the gap between the maximum penalties for tier 1 and tier 2 offences. The department argued that the offences proposed under the bill accord with the existing penalty structure of money laundering offences in Division 400 of the Criminal Code. The department stated that the maximum penalty for both the existing and proposed offences are clearly structured to reflect:
…the level of awareness a defendant has as to the link between property (which includes money) and criminal activity; the seriousness of their conduct in relation to this property; and the value of the property.
2.35
The department supported retaining the existing maximum penalties for offences under subsections 400.2B(2) and (3) on the basis that they are:
…of similar seriousness to existing offences punishable by life imprisonment, including potential predicate offences such as drug trafficking, as the consequences of committing these offences are often just as, if not more, damaging.
Precluding suspects from attempted buy-backs
2.36
In relation to buy-backs covered by Schedule 3, the Synod was concerned innocent third parties may be captured by the definition of 'suspect' and therefore precluded from attempting to buy back forfeited property:
…the definition of a person being a 'suspect' may be too broad…The Synod is unclear how a court will determine that a person is legitimately suspected of having committed an offence. The Synod suggests that the Committee seek clarification on this point to ensure that innocent third parties will not be placed in unnecessary hardship by this provision.
2.37
According to the explanatory memorandum, 'Schedule 3 makes amendments to the POC Act to address a number of recent issues that have arisen in relation to buy-back applications'. This includes circumstances where suspects in proceeds of crime matters or people thought to have knowledge of the offending underpinning restraint and forfeiture, have attempted to buy back forfeited property.
2.38
To address this issue, proposed paragraphs 57(1)(d) and (e) of the bill provide:
…that the court must be satisfied that a person applying to buy back an interest in property must not be a 'suspect' in relation to the forfeiture order or, in the case where the property was covered by a restraining order when the forfeiture order was made, must not be a 'suspect' in relation to this restraining.
2.39
Under section 338 of the POC Act, suspect means:
(a) in relation to a restraining order (other than a restraining order made under section 20A) or a confiscation order (other than an *unexplained wealth order)—the person who:
(i) has been convicted of; or
(ii) has been charged with, or is proposed to be charged with; or
(iii) if the order is a restraining order—is suspected of having committed; or
(iv) if the order is a confiscation order—committed; the offence or offences to which the order relates; or
(b) in relation to a restraining order made under section 20A or an unexplained wealth order—the person whose total wealth is suspected of exceeding the value of wealth that was lawfully acquired.
Disclosure of information to professional disciplinary bodies
2.40
The Tax Practitioners Board submitted that new offences introduced by the bill may result in 'a greater likelihood that amendments may impact on the entity's regulated population of registered tax practitioners', and as such:
Any implications for registered tax practitioners under these amendments would raise serious concerns for the TPB regarding compliance with the Tax Agent Services Act 2009 (TASA) and may lead to flow-on regulatory impacts for the TPB.
2.41
In order to carry out its function of investigating conduct that may breach the TASA, the Tax Practitioners Board requested that it be specifically listed as a recipient for information sharing purposes collected by law enforcement.
2.42
The Tax Practitioners Board suggested that:
Consistent with the approach taken for professional disciplinary bodies, the TPB suggests that Item 10 in Schedule 6 of the Bill should include a new amendment that specifically lists the TPB as an authority that would receive disclosures of documents or information obtained under the POC Act for the purpose of enabling or assisting the TPB to perform any of its functions. This would ensure that the TPB has more effective information sharing arrangements in place and receives evidence of serious misconduct to assist in its investigations.
2.43
Mr Edward Greaves also raised a concern in relation to the disclosure of information to professional disciplinary bodies under Schedule 6 of the proposed bill:
I oppose the addition of item 6 to the table in s266A(2) entirely. The compulsory examination of a person on oath, in circumstances where the right to silence and legal professional privilege are abrogated, and where non-compliance attracts criminal sanction, is an extraordinary power. It is, in the scheme of the Act, arguably justified. But proposed item 6 will go a lot further by allowing material obtained in examination (and otherwise) to be shared with a loosely categorised and undefined group of entities called professional disciplinary bodies.
2.44
Mr Greaves suggested that where there is evidence of potential criminal activity by a professional, existing provisions in the POC Act allow for the referral of evidence to appropriate investigate bodies and argued that:
…the introduction of proposed item 6 will allow the AFP (or any other disclosing authority) to disclose highly confidential information in circumstances where the AFP does not even believe that the conduct of the lawyer, accountant or other professional might be criminal. If the conduct is so trivial as not to be potentially 'criminal' it is not conduct that in my view justifies breaching the secrecy of the examination process.
2.45
In relation to concerns raised by the Tax Practitioners Board, the department asserted that:
The term 'professional disciplinary body' covers a wide range of institutions, including TPB. As 'professional disciplinary body' is not defined under the POC Act, it will be interpreted pursuant to its broad ordinary meaning, being generally understood as a body whose functions include taking disciplinary action against members of a vocation or occupation.
The legislative functions of TPB under section 60-15 of the Tax Agent Services Act 2009 (TASA) include disciplinary functions…Where coercively gathered information is obtained by authorities under the POC Act, these authorities will therefore be able to disclose this information to TPB to enable or assist TPB in performing any of its statutory functions.
2.46
The department also noted that 'professional disciplinary bodies' had been intentionally used to avoid creating an exhaustive list of organisations and allow necessary flexibility as the list of disciplinary bodies evolves.
2.47
Responding to the concern raised by Mr Greaves, the department said that conduct need not rise to the level of criminality for it to be relevant to the functions, and therefore disclosed to, professional disciplinary bodies:
It is not necessary for conduct to rise to the level of 'criminality' for it to be relevant to the functions of professional disciplinary bodies. Given their trusted gatekeeper status, TSOC groups will seek to exploit and infiltrate professional service providers in order to enable or facilitate criminal conduct and to conceal or launder the proceeds of crime. While some professional facilitators may be voluntary enablers of such activity, others may be coerced into providing services through extortion or intimidation or provide services that facilitate organised crime entirely unwittingly.
Allowing disclosures to ‘professional disciplinary bodies’ under item 6 will ensure that practitioners are provided with the necessary support services should they be unwittingly exploited by serious and organised crime.
2.48
The department also stated that the amendment accords with a number of recent observations made in independent inquiries, which have highlighted the need for law enforcement to improve information-sharing with professional disciplinary bodies, including the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the 2017 Black Economy Taskforce Final Report.
2.49
The department added that existing provisions in the POC Act do not enable the Australian Federal Police (AFP) to disclose information to professional disciplinary bodies in relation to breaches involving professional advisers, as it does not allow disclosures to a 'professional disciplinary body' unless that body is considered to be a Commonwealth, state or territory authority with responsibility for investigating or prosecuting offences.
Repeal of subsection 23V(3) of the Crimes Act 1914
2.50
The Law Council voiced reservations regarding the repeal of subsection 23V(3) of the Crimes Act, which obliges investigating officials to provide suspects with recordings of admissions or confessions that were obtained as part of a covert investigation, at a time when disclosure or access would not cause prejudice to a covert investigation.
2.51
The Law Council detailed the legislative history of section 23V(3) and emphasised the role of the provision in protecting suspects from potential impropriety during the course of an undercover investigation:
Section 23V, including the specific obligation in subsection 23V(3) for admissions or confessions in covert investigations, was enacted in 1991, as part of 'a system of safeguards to ensure that the introduction of a reasonable period of pre-charge detention [also contained in that legislation and now in Part IC] is not subject to abuse'…
The Law Council considers that this provision continues to perform an important protective function, which actively promotes propriety by law enforcement officials in obtaining (especially by actively eliciting) admissions and confessions in undercover investigations…The potential risk for abuse or other impropriety, to which the Australian Parliament was very evidently alive in 1991, remains as real now as it was then. The events that prompted the establishment of the Victorian Royal Commission into the Management of Police Informants ('Lawyer X Royal Commission') are a salient reminder of such risks.
2.52
The Law Council refuted the characterisation of the repeal as a consequential amendment, suggesting that repealing the provision would remove a 'substantive safeguard' that has been fashioned for very specific circumstances.
2.53
The Law Council further highlighted the importance of a person charged with an offence having access to, and the opportunity to challenge the admissibility of, evidence:
Given the extraordinary nature of covert investigations that are established to actively elicit a confession from a suspect, without the normal safeguard of a caution that would apply in an overt context, it is critical that a person who is ultimately charged with an offence is given a full opportunity to challenge its admissibility, especially on the basis of unfairness, or impropriety in obtaining that evidence. The access obligations in subsection 23V(3) help to provide this opportunity.
2.54
The Law Council deemed these protections particularly important in covert investigations that utilise 'scenario evidence' techniques:
…in which undercover law enforcement operatives deploy extraordinary measures to actively and deliberately elicit an admission or confession from the suspect of the investigation.
2.55
Ultimately the Law Council argued that in the absence of a substantive rationale, the bill should preserve amendments to section 23V that preserve the existing obligation on law enforcement officials.
2.56
The department advised the committee that it is considering this recommendation.
Safeguards for 'scenario evidence' techniques
2.57
The Law Council raised concerns that amendments in Schedule 2 of the bill, including repealing section 23V(3), may reflect an intention to increase the use of covert investigations in the nature of 'scenario evidence' techniques. The Law Council recommended that the committee seek further information as to whether the inclusion of Schedule 2 measures reflects an intention to make greater use of covert investigations, or may facilitate greater use of such techniques in the investigation of Commonwealth offences.
2.58
The department advised that these amendments do not reflect an intention to make greater use of covert investigations, rather they are intended to strengthen undercover operations:
These amendments are critical to achieve the legitimate objective of maintaining public order by ensuring that any evidence gained by undercover operatives is not considered to have been obtained unlawfully by reason of the fact that an undercover officer did not comply with the Part IC procedures.
…and ensure that evidence gained by operatives is admissible (subject to the court's ultimate discretion).
2.59
The department also noted existing safeguards governing the use of covert techniques including training for undercover operatives, stringent vetting and internal approval processes for covert operations and independent oversight of law enforcement agencies by the Commonwealth Ombudsman.
Protection for victims of cuckoo smurfing
2.60
Mr Greaves raised concerns that new offences may have consequences for innocent victims of cuckoo smurfing, a method of money laundering used to move large sums of money with criminal origins from regulated first world countries to safe havens, and countries where drugs are sourced. Cuckoo smurfing exploits people seeking to legally and legitimately transfer money to Australia who are, unknowingly, doing so via corrupt alternative remitters. In particular, Mr Greaves highlighted the decision of the High Court in Lordianto v Commissioner of the Australian Federal Police; Kalimuthu v Commissioner of the AFP (2019) 266 CLR 273, which held that:
…families who had used alternative remittance to transfer money to Australia should lose their money, because unbeknownst to them their funds had been highjacked by a cuckoo smurfing syndicate.
2.61
In order to ensure that innocent victims of cuckoo smurfing do not have their property restrained or confiscated, Mr Greaves recommended a number of amendments to subsection 29(3) of the POC Act, which relates to the exclusion of property from certain restraining orders in limited circumstances.
2.62
Mr Greaves suggested expanding subsection 29(3) to include Commonwealth money laundering offences under Division 400 of the Criminal Code:
First none of the offences in Division 400 of the Criminal Code are mentioned in the opening words of s29(3). The entirety of Division 400 of the Code should be included in s29(3)…
If the AFP has a reasonable suspicion someone is engaging in tax fraud, drug dealing etc, that will enable restraining orders under ss 17—19 POCA and can lead to forfeiture under ss 47 – 49 POCA.
At present the AFP frequently (literally week in and week out) obtaining restraining orders based on suspicion of 'money laundering' under Division 400, particularly s 400.9...if the AFP genuinely have no suspicion of underlying criminality, and a targeted person has substantial wealth the origins of which seem dubious, unexplained wealth is the appropriate route for the AFP to follow.
2.63
Mr Greaves also recommended repealing paragraph 29(3)(a) of the POC Act, which requires that in order for a court to exclude property from a restraining order, there must be no reasonable grounds to suspect that property is proceeds of the offences listed at 29(3).
2.64
As a final recommendation, Mr Greaves suggested repealing or amending paragraph 29(3)(b) of the POC Act, which provides that property cannot be excluded from restraint if a person is charged with or convicted of any of the offences specified in subsection 29(3). Mr Greaves argued that:
There is no reason why the rights of an innocent victim should differ depending on whether the offender has been apprehended. Paragraph (b) should be repealed. If the purpose is to stop a person who has been convicted of an offence from utilising s29(3) then paragraph (b) should be re-worded to read “the applicant for the exclusion order has not been charged with or convicted of the offence, or any of the offences” or similar.
2.65
In responding to the recommendation that subsection 29(3) be expanded to include Commonwealth money laundering offences under the Criminal Code, the department stated:
This amendment would severely reduce the utility of the POC Act in targeting money laundering networks. This would undermine the principal objects of the Act, which under section 5 include (but are not limited to) undermining the profitability of criminal enterprises, preventing reinvestment of proceeds of crime in criminal activities and punishing and deterring persons from breaching laws of the Commonwealth.
…it is often impossible to determine whether funds handled by these networks were derived from a specific predicate offence and law enforcement will often only have evidence that a money laundering offence has been committed. In this context, it is vital that law enforcement retain the ability to justify restraint action on the basis of money laundering offences alone.
2.66
The department added that such an amendment would be contrary to international best practice as outlined by the Financial Action Task Force.
2.67
The department justified retaining paragraph 29(3)(a) on the basis that:
This amendment would be contrary to the principal objects of the POC Act, as it would prevent a court from considering the applicant's knowledge of, and involvement in, relevant offending before excluding property from restraint. In considering whether there are reasonable grounds to suspect that property is 'proceeds of crime', the court must consider a range of relevant circumstances, including whether the applicant acquired the property for sufficient consideration without knowing, and in circumstances that would not arouse a reasonable suspicion, that it was proceeds of an offence (see subsection 330(4))…
Removing paragraph 29(3)(a) would create a loophole in the POC Act, allowing an individual to remove property from restraint even if there were reasonable grounds to suspect that it was proceeds of crime at the time they acquired it.
2.68
The department similarly argued that repealing or amending paragraph 29(3)(b) would be contrary to the principles of the POC Act, and:
…would allow property to be removed from restraint where a charged or convicted individual does not have an interest in applicant's property, but still has it under their effective control (see section 18 of the POC Act). Money laundering networks frequently deal with property at an arm’s-length, granting legal title to third parties to avoid detection, and it is vital that courts remain compelled to look behind these legal structures to determine who is controlling and benefiting from this property.
The proposed amendment would also run contrary to the legislative intent underpinning subsection 29(3), which was only intended to provide protections in non-conviction based matters, namely matters where restraint is not supported by any particular charge or conviction.
2.69
Responding generally to concerns raised by Mr Greaves, the department emphasised that there are a number of existing safeguards in the POC Act to 'protect legitimately obtained interests in property, including those obtained by victims of cuckoo smurfing'.
Defining 'possession' of money or property as a form of 'dealing with' money or property
2.70
The Law Council cited concerns regarding what it considered to be an underlying issue with the framing of the money laundering offences in Division 400 of the Criminal Code, exposed in the decision in Singh v The Queen [2016] VSCA 163 (Singh). The Law Council argued that the decision in Singh revealed a lack of clarity about how the defence in section 400.10 would apply to a 'dealing offence' that is comprised by the mere possession of the relevant money or property. The Law Council described the underlying cause of the issue, namely that:
…the way in which 'possession' is covered by the substantive offence provisions in Division 400. (That is, the concept of 'deals with' conflates conduct constituted by acts with conduct constituted by states of affairs, and each, Division 400 offence criminalises these discrete forms of conduct in a single offence.)
2.71
The Law Council argued that proposed amendments to section 400.10 may result in further uncertainty without addressing an underlying issue with the framing of offences in Division 400. Rather than creating offences that apply to 'dealing' (a concept that includes both 'positive acts' and 'states of affairs' such as possession), the Law Council recommended:
Items 70 and 72 of Schedule 1 to the Bill (proposed amendments to section 400.10) should be omitted. Instead, the offences in Division 400 should be re-structured to enact specific offences for possession (as form of conduct constituted by a 'state of affairs', within the meaning of section 4.1) and specific offences for 'positive acts'.
2.72
Further, the Law Council recommended that the intended meaning of the expression 'engages in conduct' in the proposed 'proceeds of general crime' offences, be explained on the face of Division 400, or at least in the explanatory memorandum.
2.73
The department did not support these recommendations, and argued that creating separate 'possession' and 'positive acts' offences would be premature because:
…the operation of section 400.10 in the context of the mere possession of money or property has not yet been determined by the courts, and was only considered in obiter in Singh v The Queen [2016] VSCA 163 (Singh).
The inclusion of the concept of 'possession' in the definition of 'deals with money or other property' in section 400.2 has been a feature of the money laundering offences under the Criminal Code since they came into force in 2002 and implements key recommendations of the Australian Law Reform Commission. Departing from this long-standing precedent in the absence of a judicial ruling on the issue is therefore questionable and could possibly prove counter-productive.
2.74
The department argued that the proposed amendments are intended to address a specific vulnerability identified in Singh, that a defendant who held a reasonable, but mistaken, belief at or before the time they dealt with the property could rely on a partial defence, even if the defendant discovered its true value while dealing with the property:
Paragraphs 400.10(1)(aa) and (1A)(b) address this issue by providing that, for the purposes of the reasonable mistake as to value exemption under section 400.10, a person must maintain their mistaken belief for the duration of their dealing with the property, or conduct in relation to the property, to rely on the exemption. These words will be given their ordinary meaning, essentially requiring a person to maintain their belief for the duration of time it takes to complete the dealing or conduct.
2.75
Addressing the Law Council's concerns about the intended meaning of 'engages in conduct', the department clarified:
This term is intended to have its meaning under subsection 4.1(2) of the Criminal Code, meaning to 'do an act or omit to perform an act'. The Department's policy intention was that the ordinary meaning of 'an act' should extend to possession, despite possession being a state of affairs. The Macquarie Dictionary relevantly defines ''an act'' as ''anything done or performed''.
Related issues
'Directorships'
2.76
For drafting consistency, the Law Council recommended amending paragraph 400.2A(3)(a) to include the term 'director', rather than 'directorships', in order to be consistent with the defined term 'director' in item 1 of Schedule 1. Alternatively, the Law Council recommended substituting the defined term 'director' with 'directorship' and retaining paragraph 400.2A(3)(a) as drafted. The Law Council noted comments from the courts regarding inconsistency in drafting expressions, 'which were identified as apt to create confusion or error'.
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The department considered this amendment to be unnecessary on the basis that:
…the definition of 'effective control', including the use of the word 'directorships' in section 400.2AA and the definition of ‘director’ in subsection 400.1(1), has been taken directly from sections 337 and 338 of the Proceeds of Crime Act 2002.
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While acknowledging that that there is some inconsistency between the word 'directorship' and the defined term 'director', the department submitted that it had not adversely affected the operation of the term 'effective control' in the POC Act.
Consultation
2.79
The Law Council raised concerns that the national legal profession was not consulted in relation to the bill prior to its introduction.
2.80
The department noted its extensive consultation with Commonwealth Director of Public Prosecutions, the Australian Government Solicitor and specialists within the AFP, Australian Transaction Reports and Analysis Centre (AUSTRAC), and the Australian Criminal Intelligence Commission. The department noted that public consultation prior to introduction would not have been appropriate, due to the risk of drawing attention to ongoing vulnerabilities with Australia's money laundering laws.
Committee view
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Transnational, serious and organised crime (TSOC) can cause significant harm to the Australian community, economy and national security. TSOC actors rely on money laundering to disguise illicit funds, and employ complex methodologies to avoid detection and prosecution.
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The committee strongly supports measures to disrupt the business models used by TSOC actors and acknowledges that submitters expressed broad support for the intent of the bill.
2.83
The bill will assist in addressing the methods used by TSOC actors to avoid prosecution by removing, for example, opportunities to rely on 'wilful blindness' and dealing with money or property at arms-length.
2.84
The committee acknowledges concerns regarding specific provisions and amendments contained in the bill. However, the committee considers that the amendments, including the introduction of new 'proceeds of general crime' offences, address deficiencies in the legislation. The committee is satisfied that the amendments are balanced by adequate safeguards to ensure that only serious conduct is prosecuted.
2.85
The committee is also reassured by the department's advice that any diminution from established principles of criminal responsibility is appropriately justified to address specific vulnerabilities in the existing regime, and to ensure that money laundering offences appropriately address methodologies employed by modern money laundering networks.
2.86
The committee further considers that the bill is sufficiently targeted to provide proportionate penalties for participants in money laundering networks, while ensuring appropriate protections for those with legitimately obtained interests in property.
2.87
The committee considers that the bill will assist Australia's efforts to combat TSOC and undermine the ability of TSOC actors to use and enjoy the proceeds of crime.
2.88
The committee recommends that the Senate pass the bill.
Senator Amanda Stoker
Chair