Crimes Legislation Amendment (Economic Disruption) Bill 2020

Introductory Info

Date introduced: 2 September 2020
House: House of Representatives
Portfolio: Home Affairs
Commencement: Sections 1 to 3 commence on Royal Assent. The substantial amendments contained in Schedules 1 to 7 commence on the day after Royal Assent.

The Bills Digest at a glance

What the Bill does

The Crimes Legislation Amendment (Economic Disruption) Bill 2020 (the Bill) implements a range of measures aimed at disrupting criminal organisations (especially with respect to money laundering operations) by introducing new penalties and enhancing law enforcement’s ability to gather relevant information, confiscate assets and prosecute individuals.

The Bill amends the Criminal Code Act 1995 (Criminal Code), the Crimes Act 1914, the Proceeds of Crime Act 2002 (POC Act) and the COAG Reform Fund Act 2008 (COAG Act).

The Bill’s amendments can be grouped as follows:

Schedule 1 amends the Criminal Code to introduce new and update existing offences with respect to money laundering
Schedule 2 amends the Crimes Act to clarify that certain obligations placed on investigating officials do not apply to undercover operatives
Schedule 3 amends the POC Act to ensure that the buy-back order scheme under that Act is not misused by criminal suspects and their associates
Schedule 4 amends the POC Act to clarify the definition of ‘benefit’ under that Act so that courts can make orders confiscating the value of a financial advantage gained through criminal offending
Schedule 5 amends the POC Act to clarify that courts can make orders in relation to property located overseas
Schedule 6 amends the POC Act to strengthen the enforcement of information gathering powers and expand the purposes for which information gathered can be disclosed
Schedule 7 amend the COAG Act and POC Act to enhance the powers of the Official Trustee and provides a mechanism for grants to be paid to the states and territories out of the Confiscated Assets Account.

The Government has noted that the Bill has been introduced in the context of broader attempts to disrupt transitional, serious and organised crime operations in Australia.

Committee view

The Bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee for inquiry and report by 10 November 2020. The Committee acknowledged that there were concerns around specific amendments in the Bill but noted that they believe the amendments are balanced by adequate safeguards. The Committee recommended that the Bill be passed.

Position of non-Government parties/independents

Australian Labor Party and Greens Senators formed part of the Senate Committee inquiry which recommended that the Bill be passed—it would appear that these parties generally support the Bill.

Stakeholder views

Stakeholders who provided submissions to the Committee such as the Police Federation of Australia, the Real Estate Institute of Australia, Retail and Trade Brand Advocacy and Synod of Victoria and Tasmania, Uniting Church in Australia expressed general support for aspects of the Bill.

Edward Greaves, proceeds of crime barrister expressed concerns around the proposed amendments to the POC Act made by Schedule 6 of the Bill, in particular the ability for information provided through the use of information gathering powers being disclosed to ‘loosely categorised and undefined group of entities called professional disciplinary bodies’. Mr Greaves also expressed concerns that the new offences may have consequences for innocent victims of cuckoo smurfing.

The Law Council commented on Schedules 1 and 2 of the Bill and made seven recommendations. The Government did not agree with the Law Council’s recommendations with the exception of preserving subsection 23V(3) of the Crimes Act (about the obtaining of admissions and confessions through undercover investigations), which the Government has noted it is considering. The Law Council’s concerns are discussed below under the heading ‘position of major interest groups’.

Purpose of the Bill

The purpose of the Crimes Legislation Amendment (Economic Disruption) Bill 2020 (the Bill) is to implement a range of measures aimed at disrupting criminal organisations (especially with respect to money laundering operations) by introducing new penalties and enhancing law enforcement’s ability to gather relevant information, confiscate assets and prosecute individuals.[1]

The Bill seeks to achieve this purpose by amending the Criminal Code Act 1995 (Criminal Code), the Crimes Act 1914, the Proceeds of Crime Act 2002 (POC Act) and the COAG Reform Fund Act 2008 (COAG Act).

Structure of the Bill

The Bill contains seven schedules. These Schedules primarily make the following amendments:

Schedule 1 amends the Criminal Code to introduce new and update existing offences with respect to money laundering
Schedule 2 amends the Crimes Act to clarify that certain obligations placed on investigating officials do not apply to undercover operatives
Schedule 3 amends the POC Act to ensure that the buy-back order scheme under that Act is not misused by criminal suspects and their associates
Schedule 4 amends the POC Act to clarify the definition of ‘benefit’ under that Act so that courts can make orders confiscating the value of a financial advantage gained through criminal offending
Schedule 5 amends the POC Act to clarify that courts can make orders in relation to property located overseas
Schedule 6 amends the POC Act to strengthen the enforcement of information gathering powers and expand the purposes for which information gathered can be disclosed
Schedule 7 amend the COAG Act and POC Act to enhance the powers of the Official Trustee and provides a mechanism for grants to be paid to the states and territories out of the Confiscated Assets Account.

A brief description of the operation of each Schedule of amendments is also set out at page 1 of the Explanatory Memorandum to the Bill with a more detailed summary of each Schedule at pages 2–5.[2]

Part 2 of Schedule 1 makes consequential amendments to the Criminal Code—those provisions commence the day after Royal Assent.[3] Part 2 of Schedule 7 makes amendments contingent on the passage of the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 and the amendments will not commence should that Bill not be enacted—at the time of writing this Bills Digest, that Bill had not been passed by Parliament.[4]

Background

Money laundering and the Criminal Code

Money laundering activities are those that involve hiding, disguising or legitimising the true origin and ownership of money used in or derived from committing crimes.[5] The Commonwealth Director of Public Prosecutions (CDPP) notes that money laundering is an ‘extremely diverse activity that is carried out at various levels of sophistication and plays an important role in organised crime’.[6] The CDPP also notes that money launderers ‘are imaginative and are constantly creating new schemes to circumvent the counter measures designed to detect them’.[7]

The Anti-Money Laundering and Counter-Financing Act 2006 (AML/CTF Act) contains some offences in relation to money laundering.[8] The main function of the AML/CTF Act with respect to money laundering is to prevent the activities themselves by imposing reporting, customer verification and other obligations on the financial sector, gambling sector, remittance (money transfer) services, bullion dealers and other professionals or businesses that provide certain relevant services.[9]

The main offences for money laundering in the Commonwealth jurisdiction however are contained in the Criminal Code. In 2002, the Criminal Code was amended to insert new offences around money laundering at Division 400. Prior to this, money laundering offences were contained in sections 81 and 82 of the Proceeds of Crime Act 1987.[10]

The Government’s rationale for moving money laundering offences to the Criminal Code was based on the policy of having very serious offences grouped together, putting the offences together with the general principles for criminal offences and putting the offences together with related offences.[11] The change also reflected a feature of the Model Criminal Code developed by Commonwealth, state and territory governments and favoured by the Australian Law Reform Commission.[12]

Money laundering prosecutions under the current framework can raise complex issues, including in relation to statutory interpretation.[13] Certain provisions within Division 400 and their operation can pose particular challenges to prosecutors.[14] These provisions are discussed further in the ‘Key issues and provisions’ section below. A substantial part of the Bill amends Division 400 of the Criminal Code in order to ensure that the offences are better suited to the modern context of modern laundering and new methods used by money launderers. In particular, the amendments are aimed at increasing the likelihood of prosecutors successfully prosecuting offences against money launderers.

Proceeds of Crime

The POC Act was enacted in 2002. The predecessor to this Act was the Proceeds of Crime Act 1987 (the 1987 Act).[15] The POC Act was enacted in response to an Australian Law Reform Commission review into the 1987 legislation that concluded the conviction-based proceeds of crime regime provided for by that Act was ‘largely ineffective’.[16]

The POC Act provides for a regime to:

… trace, restrain and confiscate the proceeds of crime against Commonwealth law. In some circumstances, it can also be used to confiscate the proceeds of crime against foreign law or the proceeds of crime against State law (if those proceeds have been used in a way that contravenes Commonwealth law)’.[17]

The regime also allows confiscated funds to be returned to the Australian community through the management of funds by the Australian Financial Security Authority on behalf of the Commonwealth.[18]

The POC Act does not always require a conviction for the regime to operate; the POC Act contains civil forfeiture provisions, which has a lower burden of proof to criminal conviction. This is one of the primary differences between the POC Act and the 1987 Act. The 1987 Act allowed assets to be restrained while criminal proceedings took place, however a final order for recovery could only be issued after a conviction was secured.[19]

The Bill makes various amendments to the POC Act, these are discussed in the ‘Key issues and provisions’ section below in this Digest.

Context of the current Bill

Transnational, serious and organised crime (TSOC) has been characterised by several Governments as a threat to national security.[20] In 2016–17, the Australian Criminal Intelligence Commission (ACIC) estimated the costs of serious and organised crime in Australia to be between $23.8 billion and $47.4 billion.[21] The ACIC identified the continuing role of money laundering in particular as a key enabler of criminal activity.[22]

The Government has introduced the Bill in this context. The Minister’s second reading speech indicates that the Bill is primarily intended to ‘disrupt’ the ability for TSOC actors to profit from their operations in Australia—especially with respect to money laundering:

The bill demonstrates the Morrison government's continued commitment to combatting TSOC and giving honest Australians a fair go. Key features of the bill include an overhaul of the Commonwealth's money-laundering offences in the Criminal Code to address the increasingly complex methods employed by TSOC actors. In addition, the bill includes crucial amendments to the Proceeds of Crime Act to strengthen and clarify provisions to ensure that law enforcement agencies can restrain and forfeit the profits gained by TSOC actors.[23]

The ‘Key issues and provisions’ section below sets out in detail how the Bill’s amendments are aimed at ‘disrupting’ criminal money laundering models.

Committee consideration

Senate Legal and Constitutional Affairs Legislation Committee

The Bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee for inquiry and report by 10 November 2020. Details of the inquiry are at the inquiry homepage.[24] The Committee recommended that the Bill be passed.[25]

The Committee noted they strongly support measures that disrupt business models used by TSOC actors.[26] The Committee acknowledged that there were concerns around specific amendments in the Bill but noted that they believe the amendments are balanced by adequate safeguards.[27] The Committee also stated that they are reassured by advice from the Department of Home Affairs that the departure from established principles of criminal responsibility in some cases in the Bill is appropriately justified.[28]

As part of the Senate Committee inquiry process, detailed advice was provided by the Department of Home Affairs in response to various questions on notice. These answers provide the Government’s views on issues highlighted by stakeholders, in particular, those concerns and recommendations highlighted by the Law Council of Australia (Law Council).[29]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) considered the Bill in its Scrutiny Digest 13 of 2020.[30] The Scrutiny Committee considered the Bill again following receipt of advice from the Minister in Scrutiny Digest 16 of 2020.[31] The Scrutiny Committee’s concerns in relation to specific amendments are discussed where relevant in the ‘Key issues and provisions’ section of this Bills Digest. The Government has tabled an addendum to the Explanatory Memorandum responding to some concerns from the Scrutiny Committee its 16th Scrutiny Digest of 2020.[32]

Policy position of non-government parties/independents

Australian Labor Party and Greens Senators formed part of the Senate Committee inquiry which recommended that the Bill be passed; accordingly, it would appear that these parties generally support the Bill.[33]

Position of major interest groups

Certain stakeholders provided submissions during the Senate Committee inquiry process into the Bill. Further detail on the provisions referred to in this section can be found in the ‘Key issues and provisions’ section below.

The Police Federation of Australia (PFA) supports the intent of the Bill, that is, ‘following the money’ for the purposes of targeting groups and individuals involved in serious and organised crime.[34] The PFA particularly supports the amendments in Schedule 7 of the Bill due as it will allow the funding of state and territory police operations in areas of support for the Commonwealth.[35]

The Real Estate Institute of Australia supports the Bill as it believes that the anti-money laundering measures increase the possibility that regulatory burden under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 will not be imposed on sectors including the real estate sector.[36] Retail and Trade Brand Advocacy (RTBA) hopes that the Bill will assist in resolving the constraints on effective criminal asset enforcement under the POC Act, but has made other recommendations including increasing the size of the Criminal Asset Confiscation Taskforce.[37] The RTBA indicated particular support for the amendments in Schedule 7 relating to the payment of grants and noted that it supported ‘expanded and innovative use’ of this funding model.[38]

The Synod of Victoria and Tasmania, Uniting Church in Australia (the Synod) noted that it ‘has taken a long interest in the need to reduce money laundering in Australia and globally’.[39] The Synod supports large parts of the Bill, including certain proposed amendments in Schedules 1–6.[40] The Synod however is concerned that the amendments under Schedule 3 that exclude ‘suspects’ from being granted buy-back orders may be too broad and may effectively exclude innocent third parties from applying for these orders. The Synod suggested the Senate Committee seek clarification on this point.[41]

The Tax Practitioners Board (TPB) notes that it is not directly impacted by the Bill, but considers some aspects of it are relevant to them and registered tax practitioners in the context of the Tax Agent Services Act 2009 (TASA).[42] The TPB notes that the anti-money laundering amendments in Schedule 1 may impact on TPB’s regulated population of registered tax practitioners—this would ‘raise serious concerns for the TPB regarding compliance with the TASA and may lead to flow-on regulatory impacts for the TPB’.[43] In addition, the TPB recommends that Item 10 in Schedule 6 of the Bill should include a new amendment, listing 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’.[44] The TPB notes that this would assist it in carrying out its regulatory functions including in relation to investigation applications for registration.[45] The Government has confirmed that the TPB qualifies as a ‘professional disciplinary body’ under item 10 of Schedule 6 and therefore an amendment is not required.[46]

Edward Greaves, proceeds of crime barrister, also had some comments on the Bill. Mr Greaves supported the reforms to Division 400 of the Criminal Code but submitted that the purpose could have been achieved with simpler drafting.[47] Mr Greaves expressed concerns around the proposed amendments to the POC Act made by Schedule 6 of the Bill, in particular the ability for information provided through the use of information gathering powers being disclosed to ‘a loosely categorised and undefined group of entities called professional disciplinary bodies’.[48] Mr Greaves also expressed concerns that the new offences may have consequences for innocent victims of cuckoo smurfing, and proposed amendments to the POC Act to address this.[49]

The Law Council only provided comment on Schedules 1 and 2 of the Bill. In relation to Schedule 1, the Law Council had the following concerns:

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
overbreadth and vagueness in the concept of ‘proceeds of general crime’, and the absence of any requirement for the prosecution to establish that the money or property was, in fact, the proceeds of a particular type of offence (quite apart from the defendant’s state of mind in relation to the connection between the money or property and a particular offence or offence type)
the imposition of a disproportionately harsh maximum penalty of life imprisonment for the ‘tier 1’ offences in the ‘proceeds of general’ crime offences in proposed subsections 400.2B(2) and (3), having regard to the dilution of requirements of proof and particularity in relation to the predicate offending and the application of absolute liability to the value of the money
the proposed amendments to the partial defence of ‘mistake of fact as to value’ in section 400.10 highlight an existing problem in the definition of ‘deals with’ in section 400.2, to the extent that it purports to deem passive possession of money or other property as a form of ‘dealing’ that is criminalised by the Division 400 offences. Given the significant expansions of criminal liability proposed in the Bill, it would be appropriate to address this difficulty as part of the proposed tranche of amendments to Division 400, namely by creating separate possession offences
technical drafting issues concerning the proposed definition of ‘exercises control’ (as used in the proceeds of general crime offences) in which there is a need to improve clarity of legislative expression.[50]

In relation to Schedule 2, the Law Council does not support the repeal of the ‘safeguard’ in section 23V of the Crimes Act ‘in the absence of a compelling justification’.[51] This provision relates to the obtaining of admissions and confessions through undercover investigations.

The Law Council made seven recommendations for improvement to address its various concerns. The Law Council also made a further recommendation in relation to consultation with the legal profession on draft legislation given concerns that the Bill had not been consulted on prior to introduction.[52] The Department has stated in response that it consulted extensively with qualified members of the legal profession within the Commonwealth, including the Commonwealth Director of Public Prosecutions, the Australian Government Solicitor and specialists within the Commonwealth agencies. However, the Department was of the view that the Bill deals with ‘highly sensitive matters’ and it was therefore not appropriate to engage in public consultation before the Bill was introduced.[53]

The Government did not agree with any of the Law Council’s recommendations for change, with the exception of preserving subsection 23V(3) of the Crimes Act, which the Government has noted it is considering.[54]

Financial implications

The Government has assessed that the measures in the Bill have no financial impact.[55]

Special appropriation

Schedule 7 of the Bill makes amendments to the way in which the Official Trustee takes custody and control of property that is forfeited to the Commonwealth. If property is forfeited to the Commonwealth, the Official Trustee must generally dispose of the property and transfer the proceeds to the Confiscated Assets Account (CAA) established under the POC Act.[56]

Section 297 of the POC Act provides the purposes for which payments can be made out of the CAA. Items 51–53 of Schedule 7 amend the POC Act to expand the cost recovery purposes for which payments can be made from the CAA. Specifically:

item 51 and 52 allow payment out of the CAA to recover the Official Trustee’s remuneration and other costs and expenses and
item 53 of Schedule allows transfers out of the CAA to pay GST liabilities associated with the disposal of property[57]

Item 50 of Schedule 7 also amends section 297 of the POC Act to enable amounts to be transferred from the CAA to the COAG Reform Fund for the purposes of financial assistance grant payments to states and territories for the purpose of crime prevention and related areas—this proposed grant framework is discussed in the ‘key issues and provisions’ section below.[58]

Prior to passing the House of Representatives, a message from the Governor-General recommending an appropriation in relation to the Bill was announced.[59]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[60]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights (PJCHR) initially reported on the Bill in its eleventh report of 2020.[61] Following the receipt of certain responses from the Minister, the PJCHR subsequently concluded its consideration of the Bill in its thirteenth report.[62] The PJCHR expressed various human rights concerns in relation to the Bill. The PJCHR’s concerns in relation to specific amendments are discussed where relevant in the ‘Key issues and provisions’ section of this Bills Digest. The Government has tabled an addendum to the Explanatory Memorandum responding to some concerns from the Scrutiny Committee in its thirteenth report of 2020.[63]

Key issues and provisions

Schedule 1: new proceeds of crime offences

Current proceeds of crime offences

Division 400 of Part 10.2 in Chapter 10 of the Criminal Code relates to money laundering. Sections 400.3 to 400.8 relate to dealing with money or property that are the proceeds of crime—these sections differ based on the value of the money or property involved. The subsections of these provisions also vary according to the relevant mental element that needs to be met for the offence to occur (ranging from belief to recklessness to negligence).[64]

‘Proceeds of crime’ is defined at section 400.1 of the Criminal Code as relating to proceeds from indictable offences against a law of the Commonwealth, state or territory or a foreign country. An ‘indictable’ Commonwealth offence is an offence against a Commonwealth law punishable by imprisonment exceeding 12 months.[65] States, territories and foreign governments make their own provisions regarding what are considered indictable offences.[66] Indictable offences however are generally more serious offences, such as illicit drug importation for example.

When proving an offence against any of these provisions, it is necessary to identify the class of indictable offences from which the money or property is alleged to have been derived or realised from (proceeds of crime) or the class of indictable offence to which it is intended, or is alleged to be at risk of, being used in the commission or facilitation of (instrument of crime).[67]

The Criminal Code creates offences for dealing in proceeds of crime in relation to the following categories:

dealing in proceeds of crime in relation to money or property worth $1 million or more
(section 400.3)
dealing in proceeds of crime in relation to money or property worth $100,000 or more
(section 400.4)
dealing in proceeds of crime in relation to money or property worth $50,000 or more
(section 400.5)
dealing in proceeds of crime in relation to money or property worth $10,000 or more
(section 400.6)
dealing in proceeds of crime in relation to money or property worth $1,000 or more
(section 400.7) and
dealing in proceeds of crime in relation to money or property of any value (section 400.8).

In effect each of the above sections are organised into tiered categories of offences with increasing penalties depending on whether:

the person believes the money or property is proceeds of (indictable) crime or intends for the money or property to become an instrument of crime
the person is reckless to the fact that the money or property is proceeds of (indictable) crime or the fact that there is a risk that the money or property will become an instrument of crime or
the person is negligent to the fact that the money or property is proceeds of (indictable) crime or the fact that there is a risk that the money and property will become an instrument of crime.

For example, in relation to dealing with proceeds of crime worth $1 million or more, a person could be liable for a maximum penalty of:

imprisonment for 25 years, or 1500 penalty units, or both in the case of believing the property to be the proceeds of an indictable offence
imprisonment for 12 years, or 720 penalty units, or both in the case of being reckless to the fact that the property was the proceeds of an indictable offence
imprisonment for 5 years, or 300 penalty units, or both in the case of being negligent to the fact that the property was the proceeds of an indictable offence.[68]

The Government notes however that these offences are very difficult to prove in the modern world, especially due to the need to prove a link to an indictable offence:

Proving that money or other property was actually derived or realised from a ‘class of indictable offence’ is often impossible as these networks distance property and money from predicate offending by moving it through foreign jurisdictions and complex legal and administrative arrangements, and by employing encrypted communication services and other methodologies. It is also often impossible to prove that the defendant believed, was reckless or was negligent as to whether money or other property was derived or realised from a ‘class of indictable offence’, as these networks exercise strict information compartmentalisation to keep their members wilfully blind as to the criminal origins of money or other property.[69]

The Government notes that the available evidence means that often only a lesser offence against section 400.9 of the Criminal Code can be pursued.[70] This section relates to dealing with money or property that is only reasonably suspected of being proceeds of crime—the offences against this section attract lesser penalties (a maximum penalty of 3 years or 180 penalty units or both if the value of the money or property is $100,000 or more, or a maximum penalty of 2 years imprisonment, 120 penalty units or both if the value is less than $100,000).

New proceeds of general crime offences

In response to the above issues with the current proceeds of crime offences, the Bill creates a new category of ‘proceeds of general crime’ offence with a lower threshold for the prosecution to prove. Item 3 of Schedule 1 inserts a new definition of proceeds of general crime. When read in conjunction with section 400.11 and proposed section 400.13 inserted by item 75, the prosecution will have to establish one or more of the following for money or property to be considered ‘proceeds of general crime’:

that the money or other property was wholly or partly derived or realised, directly or indirectly, by any person from the commission of a particular offence against a law of the Commonwealth, of a state or territory or of a foreign country
that the money or other property was wholly or partly derived or realised, directly or indirectly, by any person from the commission of a kind of offence against a law of the Commonwealth, of a state or territory or of a foreign country[71] or
evidence of the circumstances in which the money or other property was handled are such as to give rise to the ‘irresistible inference’ that the money or property is wholly or partly derived or realised, directly or indirectly, by any person from crime generally (without the need to specify a particular offence or kind of offence).[72]

The last of this list of circumstances is particularly important as it significantly lowers the threshold for this element of the offence to be made out—in other words, the prosecution does not have to show that the money or property in question is derived from a particular offence or even a general type of offence.[73]

Instead the rules of circumstantial and inferential evidence can be used to prove that the money or property was wholly or partly derived from the commission of an offence and to show that the accused person believed, or was reckless or negligent to the fact the money or property were proceeds of general crime.[74]

Drawing inferences and circumstantial evidence

The new proceeds of general crime offences no longer require a link to an offence or kind of offence to be established. The Law Council notes that this will likely require juries to draw complex inferences from circumstantial evidence about an organised crime operation and the accused’s conduct and the circumstances in which it occurred to establish beyond reasonable doubt that:

the money or property was proceeds of general crime and
the accused believed the money or property was proceeds of general crime, or was reckless or negligent in relation to this fact.[75]

Where the prosecution relies on circumstantial evidence, the inference drawn from such evidence must be the only reasonable conclusion open on the facts.[76] This is likely the ‘irresistible inference’ that the Government refers to in its explanatory materials.[77]

The Government provides the following example of how a combination of certain circumstances could together give rise to the conclusion that money or property is proceeds of general crime:

the money and other property involved in the conduct cannot be linked to a legal source—for example an inheritance, a loan, a gift
the money and other property involved in the conduct is, in the opinion of the trier of fact (such as a jury or judge), grossly out of proportion to the defendant's income and expenditure over a reasonable period within which the conduct occurs
the money and other property involved in the conduct is linked to unjustified increases of assets and movements of assets which do not follow any regular commercial purpose and are not connected to any legal activities, such as the legitimate exchange of goods and services and
there is a strong nexus between the defendant and known criminal entities.[78]

Proceeds of general crime offence provisions

Item 1 inserts a definition of proceeds of general crime offence provision as being an offence against certain proposed provisions as inserted by the Bill (these are inserted by items 9, 13, 17, 21, 27, 31 and 35 of Schedule 1).[79] Schedule 1 therefore creates new proceeds of general crime offences in the same vein as the tiered proceeds of (indictable) crime offences that exist under the current framework.[80] In addition a new category of high value money laundering offences (where the value of the proceeds of general crime is $10 million or more) is created.

Similar to the existing money laundering offences, the penalties will differ depending on whether the person believed the money or property was proceeds of general crime, or whether they were reckless or negligent to this fact, when engaging in conduct in relation to that money or property.

Meaning or recklessness and negligence

The meaning of recklessness and negligence is set out at sections 5.4 and 5.5 of the Criminal Code. A person is reckless with respect to a circumstance or result:

if the person is aware of a substantial risk that the circumstance exists or will exist, or that the result will occur and
it is unjustifiable to take the risk, having regard to all the circumstances known to the person.

A person is negligent with respect to the physical element of an offence if their conduct involves:

such a great falling short of the standard of care that a reasonable person would exercise in the circumstances and
such a high risk that the physical element exists or will exist

that the conduct merits criminal punishment for the offence.

In the context of the Bill, being reckless to the fact that money or property is proceeds of crime is considered less serious than intent or belief. In turn, being negligent to the fact that money or property is proceeds of crime is considered to be less serious than recklessness. This is reflected in the proposed penalties and tiering of offences under both the current provisions and the Bill’s proposed amendments.

The penalties also differ based on the value of the money or property involved. Absolute liability applies to the circumstance of the value of the money or property for each of the proposed offences—thereby removing the need for the prosecution to prove fault in relation to the value of the money or property.[81] The Guide to Framing Commonwealth Offences notes that the justification for the applying absolute liability should be ‘carefully outlined in the explanatory material’.[82] The Government’s justification for absolute liability here is found at pages 22, 26 and 29–30 of the Explanatory Memorandum to the Bill. Despite the application of absolute liability, the Bill inserts a partial defence where there is mistaken but reasonable belief as to value of money or other property in relation to proceeds of general crime offences (this is discussed further below in this Bills Digest).[83]

Engaging in conduct

Under the current framework, offences are based on ‘dealing with’ money or property that is the proceeds of indictable offences. However the new offences instead centre on ‘engaging in conduct’ in relation to the money or property that is proceeds of general crime. For the proposed offences to be triggered, the ‘conduct’ engaged in must have concealed or disguised any of the following:

the nature of the money or property (for example mischaracterising assets in a tax declaration)
the value of the money or property (for example through falsifying receipts)
the source of the money or property (for example moving funds through third parties)
the location of the money or property (for example by using transport services with little regulatory oversight)
any disposition of the money or property (for example through the sale or transfer of the money or property)
any movement of the money or property (for example moving money through multiple recipients)
any rights in respect of the money or property (for example by purchasing assets through companies created using false identification details)
the identity of any person who has rights in respect of the money or property and
the identity of any person who has effective control of the money or property (for example by ensuring that family members, companies with dummy directors or trusts have legal title to property that is controlled by another anonymous person).[84]

What is meant by ‘effective control’ under the Bill’s amendments?

‘Effective control’ of money or property is defined at proposed section 400.2AA as inserted by Item 7 of Schedule 1 of the Bill. In effect, a person can have effective control:

whether or not the person has a legal or equitable interest in the money or property, or a right, power or privilege in connection with the money or property or
if the money or property is held on trust for the ultimate benefit of the person.

Regard can be had to the following when determining whether or not a person has ‘effective control’:

shareholding, debentures over or directorships of a company that has an interest (whether direct or indirect) in the money or property[85]
a trust that has a relationship to the money or property
the family, domestic and business relationships between persons, companies, trusts with an interest in the money as well as other persons. Family relationships include de facto partner relationships, parent/child relationships and relationships traced through these relationships.

More than one person can have effective control of money or property – for example all persons with control of a jointly controlled bank account can be said to have ‘effective control’.[86]

The proposed offences therefore address the issue of ‘wilful blindness’ in relation to money laundering offences, where money laundering networks practise information compartmentalisation and participants are ‘wilfully blind’ to the criminal origins of money or property.[87]

The specific details of the new proceeds of general crime offences are set out below.

Tier one proceeds of general crime offences

The person commits an offence where they engage in disguising or concealing conduct in relation to money or property that the person believes to be proceeds of general crime. The relevant maximum penalties are as follows:

where the money or property is worth $10 million or more at the time of the conduct —imprisonment for life[88]
where the money or property is worth $1 million or more at the time of the conduct—imprisonment for 25 years, or 1500 penalty units, or both[89]
where the money or property is worth $100,000 or more at the time of the conduct—imprisonment for 20 years or 1200 penalty units or both.[90]

Each of the above categories are also triggered where a person engages in conduct on two or more occasions in relation to money or property and which is collectively valued at the relevant dollar figure.[91]

Tier two proceeds of general crime offences

The person commits an offence where they engage in disguising or concealing conduct in relation to money or property and the person is reckless to the fact that the money or property is proceeds of general crime. The relevant maximum penalties are as follows:

where the money or property is worth $10 million or more at the time of the conduct —imprisonment for 15 years or 900 penalty units or both[92]
where the money or property is worth $1 million or more at the time of the conduct—imprisonment for 12 years, or 720 penalty units, or both[93]
where the money or property is worth $100,000 or more at the time of the conduct—imprisonment for 10 years or 600 penalty units or both.[94]

Each of the above categories is also triggered where a person engages in conduct on two or more occasions in relation to money or property that is the proceeds of general crime and which is collectively valued at the relevant dollar figure.[95]

Tier three proceeds of general crime offences

The person commits an offence where they engage in conduct in relation to money or property and the person is negligent to the fact that the money or property is proceeds of general crime. The relevant maximum penalties are as follows:

where the money or property is worth $10 million or more at the time of the conduct—imprisonment for 6 years or 360 penalty units or both[96]
where the money or property is worth $1 million or more at the time of the conduct—imprisonment for 5 years, or 300 penalty units, or both[97]
where the money or property is worth $100,000 or more at the time of the conduct—imprisonment for 4 years or 240 penalty units or both.[98]

Scrutiny committee concerns

The Scrutiny Committee sought more detailed justification from the Minister for the maximum penalties imposed by the proposed proceeds of general crime offences, as well as the new offences inserted by item 62 (discussed further below).[100] The Minister’s detailed advice noted that the high penalties are required to overcome the strong incentives to commit money laundering, which has a particularly dangerous and damaging impact on society.[101] The Minister further advised that the maximum penalty of life imprisonment in relation to laundering to the value of $10 million or more is of similar seriousness to other offences that attract this penalty, such as terrorism and people smuggling offences.[102]

In light of the Minister’s detailed advice, the Scrutiny Committee has left the appropriateness of the penalties imposed by the Bill for the Senate to consider. The Scrutiny Committee requested that the Government table in Parliament an addendum to the Explanatory Memorandum containing the Minister’s advice on the appropriateness of the maximum penalties, as this can be useful in understanding and interpreting the relevant law.[103] The Government subsequently tabled this addendum—justification of these penalties are at pages 1–4.[104]

Proceeds of indictable crime

While creating a new category for ‘proceeds of general crime’ offences, the Bill largely retains the existing provisions relating to proceeds of indictable offences. The Bill amends various provisions to omit the term ‘proceeds of crime’, replacing it with the term ‘proceeds of indictable crime’.[105] This has no material effect on the offences under the current framework, but allows these offences to be distinguished from the proposed ‘proceeds of general crime’ category.

In line with the new proceeds of general crime offences outlined above, a new category of high-volume money laundering offences is also proposed by the amendments for proceeds of indictable offences valued at $10 million or more. The new offences and maximum penalties for dealing with money or property valued at $10 million or more at the time of the dealing are as follows:

the person believes the money or property to be proceeds of indictable crime or intends for the money or property to become an instrument of crime—imprisonment for life[106]
the person is reckless as to the fact that the money or property is proceeds of indictable crime or the fact that there is a risk that the money and property will become an instrument of crime—imprisonment for 15 years or 900 penalty units or both[107]
the person is negligent to the fact that the money or property is proceeds of indictable crime or the fact that there is a risk that the money or property will become an instrument of crime—imprisonment for 6 years or 360 penalty units or both.[108]

In addition, item 62 amends section 400.9 to create two new offence provisions where a person deals with money or property where it is reasonable to suspect that the money or property is proceeds of indictable crime. The offences under section 400.9 present a much lower threshold for the prosecution to prove than the offences at existing sections 400.3–400.8. The new offences are:

where the person deals with money or property worth $10 million or more at the time of dealing—imprisonment for five years or 300 penalty units or both
where the person deals with money or property worth $1 million or more at the time of dealing—imprisonment for four years or 240 penalty units or both.[109]

Item 67 amends subsection 400.9(4) so that absolute liability applies to these offences—meaning that the prosecution is not required to prove fault in relation to ‘reasonably suspecting’ that money or property is the proceeds of indictable crime, or the value of the money or property.[110] The Government’s justification for applying absolute liability is found at pages 31–32 of the Explanatory Memorandum to the Bill.

Under subsection 400.9(5), the offences in section 400.9, including those proposed by the Bill, do not apply if the defendant proves that they had no reasonable grounds for suspecting that the money or property was sourced directly or indirectly from some form of unlawful activity. In effect this reverses the traditional burden of proof where normally it is the prosecution that is required to prove the elements of an offence.

Both the PJCHR and the Scrutiny of Bills Committee expressed concerns around these amendments to section 400.9 of the Criminal Code.

PJCHR concerns

The PJCHR’s initial view on the amendments in items 62, 65 and 67 was that they engaged and limited the right to be presumed innocent until proven guilty. The PJCHR sought further advice from the Minister on these amendments.[111]

In relation to the application of absolute liability, the Minister advised that ‘framing these offences with reference to an objective test … rather than requiring proof of the defendant's subjective knowledge or suspicion, is necessary and appropriate to deal with the activities of money laundering networks’.[112]

In relation to the defendant’s legal rather than evidentiary burden of proof under the defence, the Minister advised that such a burden is necessary because money laundering networks frequently establish a paper trail that could be used to establish a reasonable possibility of legitimacy, which in many cases would be sufficient to meet an evidential burden.[113]

On the basis of the Minister’s advice, the PJCHR concluded there was no less ‘rights restrictive way’ to meet the objective of the measure (dealing with the activities of money laundering networks), but considered it useful for a more detailed explanation to be included in the Statement of Compatibility with Human Rights.[114]

Scrutiny Committee concerns

The Scrutiny Committee expressed some concerns as to the application of absolute liability to the offences inserted by item 62 through the amendments at item 67.[115] Given the detailed explanation provided in the Explanatory Memorandum, the Scrutiny Committee left the appropriateness of this amendment for the Senate to consider.[116]

The Scrutiny Committee also expressed concerns around the amendments made by item 62 in relation to reversing the traditional burden of proof and requested advice from the Minister ‘as to why it is proposed to reverse the legal burden of proof in this instance and why it is not sufficient to reverse the evidential, rather than legal, burden of proof’.[117]

The Minister advised that a legal burden of proof is higher than an evidential one and that this higher threshold is necessary to ‘pierce the veil of legitimacy’ used by money laundering networks in disguising their criminal activities.[118] The Scrutiny Committee requested that an addendum to the Explanatory Memorandum be tabled in Parliament with this information provided by the Minister, and has left it to the Senate to consider the appropriateness of reversing the legal burden of proof under the defence.[119] The Government subsequently tabled an Addendum to the Explanatory Memorandum with some of this information.[120]

Addressing arm’s length dealings

The Government notes that the amendments in Schedule 1:

extend money laundering offences to controllers of money laundering networks, who do not deal with money or other property directly and instead conduct dealings at an arm’s-length by sending instructions to third parties, often through encrypted communication services, to individuals who then deal with the money or property on their behalf.[121]

The Bill achieves this by expanding the definition of dealing with money or other property in the context of proceeds of indictable crime offences. Item 6 inserts proposed subsection 400.2(2) so that a person is taken to have dealt with money or property if the first person engages in conduct which substantially causes another person to deal with the money or property, and the first person is reckless as to whether this conduct would lead to this occurring. The identity of either person does not need to be established.[122] This conduct could include for example texting the location of money to a cash handler with the knowledge that this would lead to the handler dealing with the money in a certain way.[123]

The new proceeds of general crime offences refer to ‘engaging in conduct’ rather than ‘dealing with money or other property’. As such those proposed offences will also extend to ‘arm’s length’ dealings.[124]

Mistaken but reasonable belief as to value of money or other property

Currently section 400.10 of the Criminal Code provides a partial defence to proceeds of crime offences where the person had a mistaken but reasonable belief about the value of the money or property at or before the time of dealing with it, and the incorrectly assumed value would trigger a lesser penalty under Division 400 of the Criminal Code.

In Singh v the Queen, the Supreme Court of Victoria found the phrase ‘at or before the time dealing with the money or property’ in section 400.10:

… should be treated as a composite expression meaning at any time up to and including the time of the act of dealing upon which the prosecution relies. Accordingly, where the act of dealing relied upon is receipt of money [for example], an accused can discharge the evidential burden under s 400.10 if there is evidence that he or she had a mistaken but reasonable belief that the value of the money was less than $100,000 either before receiving the money or at the time of receiving the money or both. However, if, at the conclusion of all the evidence, it is established that the accused did not have such a belief at the time of receipt — when the offence is committed — the partial defence in s 400.10 will not be made out even though the accused held such a belief before that time. (Emphasis added and addition in square brackets)[125]

The Government notes that this interpretation of the provision means that once the elements of an offence are made out, a person who continues to deal with money or property and subsequently discovers its true value can continue to rely on the partial defence if they were originally mistaken to its value.[126] Items 70 inserts proposed paragraph 400.10(1)(aa) so that the mistaken belief must be held throughout a period where the dealing with money or property continued.

Item 72 inserts proposed subsection 72(1A) to extend the partial defence to the new proceeds of general crime offence provisions created by the Bill. Proposed paragraph 72(1A)(b) clarifies that where a person engages in conduct in relation to money or property, the mistaken belief must be held throughout the period of the conduct.

The Government provides the following example of how this amendment could operate in practice:

For example, if before a person possessed a suitcase of money they had a mistaken but reasonable belief that it was valued at $100,000, they must maintain this belief for the duration of their possession of the money to rely on the exemption. If the person opens the suitcase while it is in their possession and discovers that it actually contains $1,000,000, they cannot rely on the partial exemption under section 400.10 and can be found liable for dealing with, or engaging in conduct in relation to, money valued at $1,000,000 or more.[127]

Recklessness as relevant fault element for attempted offence

Under the Criminal Code, a person who attempts to commit an offence is punishable as if the offence had actually been committed.[128] The relevant fault elements that must be proved for an attempted offence are intention and knowledge in relation to each physical element.[129]

Item 76 inserts proposed section 400.14A which lists various offence provisions under Division 400 (as amended by the Bill)—these listed provisions all stipulate that a person commits certain proceeds of general crime offences or certain proceeds of indictable crime offences where the person is either reckless or negligent as to the fact that the money or property is proceeds of crime.

Proposed section 400.14A provides that when trying to prove that a person has attempted to commit these offences, recklessness will be the relevant fault element in relation to the physical element of whether:

the money or property is proceeds of indictable crime or
the money or property is proceeds of general crime.

This means that a person can be found to have attempted to commit these offences without necessarily having intention and knowledge with respect to whether the money or property is proceeds of crime. The Government provides the example of a person who attempts to commit an offence and is ‘aware that, for example, there is a substantial risk that his or her conduct will involve a controlled or border controlled substance and that taking this risk is unjustifiable in the circumstances’.[130]

The Government notes the rationale for these amendments as follows:

… it is very difficult to satisfy the requirement in prosecutions for attempted offences under Division 400 that the person had actual knowledge or a belief that the money or other property they dealt with was proceeds of crime, unless the person has made a direct admission.

Applying recklessness as the fault element for attempted offences listed at subsection 400.14A(1) is necessary to ensure that the offences at Division 400 keep pace with criminal methodologies.

It is not appropriate to continue with different fault elements for primary and attempted offences against Division 400. The distinction could allow individuals who are involved in money laundering networks to escape liability by employing strict information compartmentalisation often used by these networks, which limit the information available to a participant as to the illicit origins of the money or property they are dealing with.[131]

As noted in the ‘Position of major interest groups’ section above, the Law Council had issues with this amendment, and noted that it represents ‘a significant diminution of the long-established requirements 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’.[132] The Law Council argues :

Such a radical departure from long-established, fundamental principles of criminal responsibility should not be undertaken lightly, and certainly not for the mere reason that law enforcement agencies consider that proof of knowledge or intention is too difficult in particular circumstances.[133]

Application of amendments

The amendments made in Part 1 of Schedule 1 that relate to dealing with money or property or that relate to other conduct that is engaged in by a person only apply to a dealing or conduct that takes place after commencement (that is the day after Royal Assent).[134]

Schedule 2: amendments relating to covert operations

Part 1C of the Crimes Act provides for various obligations for investigating officials in relation to people arrested or investigated for Commonwealth offences. Examples of relevant obligations include:

cautioning persons who are under arrest or protected suspects (section 23F)
informing persons who are under arrest or protected suspects that they have the right to communicate with a friend, relative or legal practitioner (section 23G)
informing a representative of an Aboriginal legal assistance organisation if the person under arrest or protected suspect is believed to be an Aboriginal person (section 23H)
not questioning a person who is under arrest or a protected suspect who is under eighteen years old (or reasonably believed to be) without an ‘interview friend’ being present and not before the person has been allowed to communicate with that friend confidentially (section 23K) and
providing a person under arrest or protected suspects the right to an interpreter where they suspect the person does not have adequate knowledge of the English language (section 23N).

In addition Division 2 of Part 1C sets out obligations for investigating officials in relation to the arrest and detention of persons.

Proposed changes

The amendments in Schedule 2 clarify that these obligations do not apply to undercover operatives. To this end items 2–4 make amendments to the definition of investigating official at section 23B of the Crimes Act so that Australian Federal Police (AFP), relevant state and territory police and other relevant officials who are ‘engaged in covert investigations under the orders of a superior’ are not considered investigating officials for the purpose of Part 1C.

Item 1 creates a new category of designated official (a member of the AFP, state and territory police or officials empowered to make arrests for Commonwealth offences) and makes a related amendment to paragraph 23B(4)(a) at item 5. The effect of item 5 is that a person ceases to be an arrested or protected suspect if the designated official believes them to be voluntarily taking part in a covert investigation into another person. This is an existing requirement with respect to investigating officials; the amendments are aimed at ensuring clarity due to the amendment made to the definition of investigating official which excludes covert police operatives.[135]

Subsection 23V(3) currently allows covertly operating investigating officials to defer compliance with certain requirements around tape recording of confessions and admissions until a point where they would not prejudice the covert investigations.[136] Item 6 repeals this subsection—the Government notes that this section will cause ‘unnecessary confusion’ as it will be redundant following the amendments made by items 2–4.[137]

It should be noted however that the Law Council is of the view that section 23V should be retained as it ‘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.’[138] The Law Council notes :

… the proposed repeal of subsection 23V(3) would remove a substantive safeguard that has been fashioned specifically for circumstances in which:

a person (‘suspect’) who has not been arrested is in the presence of a police officer or another law enforcement officer who is acting as an undercover operative (‘operative’) in a covert investigation into whether the suspect has committed a Commonwealth offence;

the operative is asking the suspect questions about their involvement (or otherwise) in the commission of that offence, which may include attempts to actively elicit an admission or confession;

the operative believes that the suspect has committed the offence and

the suspect makes an admission or confession to the law enforcement officer.[139]

PJCHR concerns

The PJCHR noted that the amendments in Schedule 2 engage and limit the rights of the child as undercover operatives will not be required to follow certain procedural requirements for child suspects.[140] The Minister subsequently advised that requiring undercover operatives to question child suspects only after allowing them to communicate with another person ‘would severely jeopardise operations targeting serious criminal behaviour of individuals under the age of 18 years.’[141]

The PJCHR subsequently concluded that the proportionality of the measure in the Bill:

… would be assisted were the bill amended to provide that the minister should consider, by legislative instrument, issuing guidelines setting out when it is appropriate for a child suspect to be interviewed by undercover operatives, taking into account the rights of the child, in particular the obligation to consider the best interests of the child as a primary consideration.[142]

Schedule 3: proceeds of crime—buy-back orders

Buy-back rights

Sections 57 and 89 of the POC Act allows a person to buy-back their interest in property forfeited under a court order where it would not be contrary to the public interest to do so and there is no other relevant reason for not doing so. Similarly, where property has been forfeited due to the conviction of a serious offence, sections 103–105 of the POC Act allow a person to buy back their interest in property. Where a buy-back order is not obtained, a person would generally need to complete with other buyers at an auction to reacquire any property.[144]

The Government notes that current sections 57 and 103 do not explicitly prevent:

… a court from issuing a buyback order to a person who was involved in, or knew of, the predicate offending underpinning restraint or forfeiture, nor does it explicitly prevent courts from issuing a buyback order to a person who will likely purchase the property, whether directly or through servicing loan repayments, using proceeds or instruments of crime. This undermines the principal objectives of the Act, which include depriving persons of the proceeds, instruments and benefits of offences.[145]

Changes to buy-back order process

The Bill repeals existing section 57 and replaces it with proposed sections 57 and 57A (item 1). Proposed section 57 relates to property that the person had an interest in immediately before a court made a forfeiture order.[146] Under proposed section 57, the court must be satisfied of the following in order to make a buy-back order in relation to the property:[147]

the person claiming the interest in the property is not a suspect in relation to the forfeiture order, or in the case where the property was covered by a restraining order, the person is not a suspect in relation to the restraining order[148]
the person had no knowledge of the conduct, where the forfeiture was in relation to serious offences or conviction of indictable offences under sections 47 and 48 of the POC Act[149]
where the property was the proceeds of an offence or the instrument of an offence, the person had no knowledge of the conduct constituting the offence[150]
the amount paid to the Commonwealth would not be derived from unlawful activity and the person’s financial circumstances would allow the person to pay back any loan used to buy back the property while still meeting their living expenses and debts[151] and
it would not be contrary to public interest and there is no other reason not to transfer the property to the person.[152]

Proposed section 57A provides for procedural requirements for buy-back applications. In particular, proposed subsection 57A(1) provides that a person can apply for a buy-back order prior to a forfeiture order being made, where a forfeiture application has been made to the Court. While it is possible under the Bill’s proposed amendments to make an application following the making of a forfeiture order, proposed subsections 57A(2)–(5) effectively incentivise an application to occur prior as a Court must first give leave if a person wishes to apply following the forfeiture order being made. The Government notes that these amendments have been made in order to ensure timely resolution of matters as:

In recent buy back cases, applicants have sought to unnecessarily delay POC Act proceedings by making buy-back applications only after the courts have resolved relevant forfeiture orders and applications for exclusion and compensation.[153]

The Bill makes amendments in similar terms to the above by repealing current section 103 and replacing it with proposed section 103 and inserting proposed section 104A (items 2 and 5).

Proposed sections 181A and 181B (item 6) and the amendments made to current sections 187 and 202 (items 7–11) allow for examination orders or productions orders to be made so as to obtain information relevant to a buy-back application. As discussed above, the proposed criteria to be considered for buy-back applications are quite expansive and would require information on the person’s financial circumstances for example.

Strengthening of examination orders and notices

The Government notes that, in the context of the POC Act, ‘efforts to restrain and confiscate criminal assets are being delayed and frustrated by persons who refuse to comply with coercive information-gathering powers under Chapter 3 of the POC Act’.[154]

Chapter 3 of the POC Act relates to coercive information gathering powers, including examination orders and notices. Currently there are offences relating to failing to attend an examination (section 195), offences relating to failing to answer questions at an examination (section 195) and offences for giving false or misleading answers at an examination (section 197A).

Items 13 makes amendments to the meaning of serious offence (defined in section 338) so that the above offences are considered ‘serious offences’ when the person is the subject of an examination order under proposed subsections 181A or 181B (that is an examination order in relation to a buy-back application). This enlivens the possibility of expanded restrained and confiscation action under the POC Act where a person does not comply with examination requirements. The Government notes:

If a person is reasonably suspected of committing a 'serious offence', a court is able to make a restraining order against property under a person's 'effective control' and to forfeit this property unless the person can establish that, on the balance of probabilities, it was not derived from unlawful activity (see existing sections 18, 29, 47 and 73 of the POC Act). In addition, if a person is convicted of a 'serious offence', all property subject to a restraining order under existing section 17 or 18 will forfeit by operation of the POC Act six months after the date of conviction unless the person can prove it was not the proceeds of unlawful activity or an instrument of a serious offence (existing sections 29, 92 and 94 of the POC Act).[155]

Amendments in practice

The amendments in Schedule 3 of the Bill are aimed at ensuring that only persons with ‘clean hands’ can obtain a buy-back order.[156] The following case study from the Department of Home Affairs highlights the issue that the amendments in Schedule 3 are aimed at addressing (and how the Government intends for the amended scheme to operate).

Case example – Suspect delaying proceedings and buying back property with unexplained wealth[157]

Facts: The suspect attempted to import and possess a marketable quantity of heroin and had his family home confiscated under court order. The suspect and his wife then applied to buy back the property at the end of extensive forfeiture proceedings, further delaying resolution of the matter. As the applicants had been in receipt of Government benefits for approximately 20 years, the source of the funds to pay for the buy back and their ability to service any mortgage became the central issue in the proceedings. The suspect also produced evidence that they had been approved for an interest only loan, with an unusually high rate of payable interest.

Outcome: The applications were ultimately discontinued, but the proceedings were unnecessarily delayed by the last-minute applications at significant expense to the Commonwealth. If these applications had proceeded, it would have been open to the court to grant a buy back order, despite the fact that the applicants could not satisfactorily explain the source of the funds used to repay the loan.

Outcome under proposed reforms: The suspect would have been unable to apply for a buyback order. While the suspect’s wife would have been permitted to apply following confiscation, she would be required to seek the leave of the court to do so and could only obtain an order if she could prove that she could service the loan with legitimately obtained funds and did not know of the suspect’s offending. The AFP could also apply for an examination order and/or production order to ascertain the source of any funds used for the buy back and the wife’s knowledge of the suspect’s offending.

Application of amendments

The changes made by Schedule 3 commence the day after Royal Assent. However, applications and orders made under sections 57 and 103 of the POC Act before commencement are grandfathered and subject to the existing law. This includes orders made after commencement but in relation to applications made before commencement.[158]

Schedule 4: proceeds of crime: financial advantage

Meaning of ‘benefit’ under the POC Act

The definition of benefit under the POC Act is defined as including ‘service’ or ‘advantage’. This term is referred to throughout the POC Act, including in relation to:

calculating pecuniary orders payable to the Commonwealth based on the benefits a person has derived from an offence and other unlawful activity (Part 2-4)
calculating ‘literary proceeds’ orders payable to the Commonwealth based on the benefits that the person has derived due to commercial exploitation of their notoriety or the notoriety of another person in relation to an offence (Part 2-5)
determining whether a monitoring order to compel a financial institution to provide certain information on transactions should be made, based on various criteria including whether a person has benefited or is about to benefit from the commission of a serious offence (Part 3-4).

Proposed changes

The key amendment made by Schedule 4 is at item 3, which inserts a new definition into the POC Act at section 338. This item inserts the term financial advantage in the POC Act’s dictionary as including ‘the avoidance, deferral or reduction of a debt, loss or liability’. Item 1 makes a related amendment by inserting the term advantage as including financial advantage.

The amendments in Schedule 4 will allow courts to make orders confiscating the value of a financial advantage gained through criminal offending. The Government notes that the proposed definitions in this Schedule mean that criminals will not be able to benefit ‘in any way’ from the commission of an offence:

For example, this would include where a person has incorrectly declared the import of goods (such as tobacco or alcohol) in order to pay lesser excise or import duty, which would allow them to gain a commercial advantage. Similarly, it would cover where a person provides false information to the Australian Taxation Office in order to reduce their tax liability.[159]

PJCHR concerns

The PJCHR expressed some concerns around these amendments along with amendments made by Schedules 3 and 6 (in relation to the definition of serious offence) as they would expand the reach of forfeiture and restraint provisions under the POC Act—thereby engaging and limiting the right to a fair trial and hearing.[160] Following advice from the Minister, the PJCHR concluded that the regime in the POC Act is important and necessary but reiterated its concerns regarding the right to a fair hearing and trial ‘as although the regime established by the Proceeds of Crime Act for the freezing, restraint or forfeiture of property is classified as civil or administrative under domestic law, its content may be considered 'criminal' under international human rights law’.[161]

Item 4 of Schedule 4 provides that the amendments in relation to a ‘benefit’ derived by a person apply in relation to benefits that are derived before commencement.[162] Item 4 also provides that the amendments in this Schedule apply to court proceedings that are still pending at the time of commencement. The Government notes that ‘retrospective operation is required to ensure that asset confiscation action is not frustrated by requiring law enforcement agencies to obtain evidence of, and prove, the precise point in time at which certain benefits were derived’.[163]

The PJCHR expressed concern around this retrospective application, noting:

… the amendments to the definition of what constitutes a 'benefit' would apply retrospectively, such that matters that may not previously have constituted a benefit would now, regardless of when they occurred, be subject to the restraint and forfeiture processes. Article 15 of the International Covenant on Civil and Political Rights prohibits retrospective criminal laws, which requires that laws not impose criminal liability for acts that were not criminal offences at the time they were committed and that the law not impose greater penalties than those which would have been available at the time the acts were done. The prohibition against retrospective criminal law is absolute and may never be subject to permissible limitations. (Emphasis added)[164]

Following advice from the Minister, the PJCHR reiterated that retrospectively applying the proposed definition of ‘benefit’ could constitute retrospective criminal punishment.[165] The PJCHR noted that it was not able to ‘fully assess the compatibility of the expansion of the restraint and forfeiture powers with criminal process rights’ as the Minister’s response did not address this.[166]

Schedule 5: proceeds of crime—foreign property

The amendments in Schedule 5 intend to clarify that courts with proceeds of crime jurisdiction can make orders in relation to property located in foreign jurisdictions. The Government notes that the current regime already allows for courts to take action in relation to property located overseas due to sections 314 and 335 of the POC Act as well as the extra-territoriality application of the Act provided for by section 13. The Government also notes that section 32 of the Mutual Assistance in Criminal Matters Act 1987 explicitly provides for processes to enforce restraining and confiscation orders over property located in foreign countries.[167]

Currently, section 53 of the POC Act relates to jurisdictional issues concerning forfeiture orders and provides that a court cannot make a forfeiture order where it does not have jurisdiction with respect to the recovery of that kind of property. According to the Government, these provisions have caused ‘unnecessary confusion’ regarding the ability to take action against overseas property.[168] Item 1 of Schedule 5 therefore repeals section 53. In addition, Item 5 inserts proposed subsection 314(4) which stipulates that a court’s jurisdiction under the POC Act is not limited only because the property concerned is located overseas.

The POC Act provides that property specified in a forfeiture order or forfeited on conviction of a serious offence vests absolutely in the Commonwealth at the time of the order or forfeiture.[169] This is subject to some exceptions.[170] Items 2 and 3 insert additional exceptions for property located outside Australia (proposed sections 68A and 98A). The exceptions provide that property outside Australia vests in equity in the Commonwealth (as opposed to absolutely) and only to the extent permitted under the law in that jurisdiction.[171] The responsible authority has power on behalf the Commonwealth to do anything necessary or convenient to give notice of, or otherwise to protect the Commonwealth’s equitable interest in that property or to give effect to the forfeiture order.[172]

The proposed amendments also stipulate that the relevant property in a foreign jurisdiction can vest in a person instead of the Commonwealth if that is the law in that country; this does not however affect the Commonwealth’s equitable interest.[173] The Government notes that these amendments:

… are intended to facilitate the interaction between the enforcement of Australian forfeiture orders over property located overseas and foreign laws that may also apply to that property. This reflects that different countries may have different approaches and laws around the recognition and enforcement of foreign orders over property located within their territory. These subsections are not intended to provide additional rights to a person affected by the making of a forfeiture order.[174]

The amendments in Schedule 5 extend to property acquired by a person before the commencement of the Schedule. The amendments also apply in relation to court proceedings that are pending at commencement. The Government notes that ‘retrospective operation is required to ensure that asset confiscation action is not frustrated by requiring law enforcement agencies to obtain evidence of, and prove, the precise point in time at which certain property was acquired.[175]

Schedule 6: proceeds of crime—non-compliance penalties

Increasing penalties for failure to comply with coercive information gathering powers

Currently, the POC Act provides for penalties in relation to failing to comply with certain coercive information gathering powers. The Government notes however that these penalties are relatively low.[176] In order to create an effective deterrent, items 1–3 and 5–6 of Schedule 6 make the following amendments:

changing the maximum penalty for failing to attend an examination from imprisonment for 2 years or 120 penalty units or both to imprisonment for 5 years or 300 penalty units or both[177]
changing the maximum penalty for offences relating to a person’s appearance at an examination from imprisonment for 2 years or 120 penalty units or both to imprisonment for 5 years or 300 penalty units or both[178]
changing the maximum penalty for offences relating to giving false or misleading answers or documents at an examination from imprisonment for 2 years or 120 penalty units or both to imprisonment for 5 years or 300 penalty units or both[179]
changing the maximum penalty for complying with a production order from imprisonment for 2 years or 100 penalty units or both to imprisonment for 2 years or 120 penalty units or both[180]
changing the maximum penalty for a failure to comply with a notice given to a financial institution to provide relevant information or documents from imprisonment for 2 years or 100 penalty units or both to imprisonment for 2 years or 120 penalty units or both.[181]

Expansion of definition of serious offence

The Government notes that compliance with information gathering powers under the POC Act framework can be problematic as:

Even where criminal penalties can be enforced, they may not sufficiently incentivise compliance with an information-gathering power under the POC Act where the subject of that power is willing to incur a criminal penalty through non-compliance to maximise their chances of retaining their illicitly derived property.[182]

Section 338 of the POC Act contains a list of serious offences. These offences trigger certain requirements under the POC Act:

The POC Act provides enhanced restraint and confiscation powers where property is linked to a 'serious offence' or a person commits a 'serious offence'.

If a person is reasonably suspected of committing a 'serious offence', a court is able to make a restraining order against property under a person's 'effective control' and to forfeit this property unless the person can establish that, on the balance of probabilities, it was not derived from unlawful activity (see existing sections 18, 29, 47 and 73 of the POC Act). In addition, if a person is convicted of a 'serious offence', all property subject to a restraining order under existing section 17 or 18 will forfeit by operation of the POC Act six months after the date of conviction unless the person can prove it was not the proceeds of unlawful activity or an instrument of a serious offence (existing sections 29, 92 and 94 of the POC Act).

The court also has the ability to restrain and forfeit instruments of serious offences under the 'asset-directed' restraint and forfeiture powers in the POC Act, even where the offender cannot be identified (see existing subparagraphs 19(d)(ii) and 49(1)(c)(iv) of the POC Act).[183]

Item 19 addresses issues around the lack of compliance with information gathering powers by adding several offences to the definition of serious offence at section 338. These offences relate to failing to attend an examination (section 195), offences relating to appearing at an examination (section 196) and giving false or misleading answer or documents in an examination (section 197A).[184]

Failure to comply with information gathering powers will only be considered serious offences where they relate to a person who is also the subject of the examination order, is a suspect, has or claims an interest in the relevant property or a person who is or was party to the proceedings in relation to the examination order. The Government notes:

… these qualifiers ensure that enhanced restraint and forfeiture powers are only available against a person who either has a sufficient connection to the proceeds of crime proceedings, intends to generate a benefit or loss of at least $10,000 through non-compliance (see existing subparagraph 338(a)(iii) and (iv) of the POC Act) or is found to have committed other relevant offences.[185]

Clarifying use of documents obtained under the POC Act

The POC Act contains various ‘use’ and ‘derivative use’ immunities, including where:

an answer or document produced by a person in an examination is not admissible in evidence in civil or criminal proceedings against the person subject to certain exemptions[186]
the disclosure of an answer or document, or information contained within, is not admissible in evidence in civil or criminal proceedings against the person who provided that information in an examination subject to certain exemptions[187]
the disclosure of a document to certain authorities is not admissible in evidence in civil or criminal proceedings against the person who provided that document under a production order subject to certain exemptions[188]
the giving of information and documents by a natural person, or information and documents obtained as a direct or indirect consequence of giving such information or documents, due to powers exercised by the Official Trustee, is not admissible in evidence in criminal proceedings against that person subject to certain exemptions.[189]

Schedule 6 makes amendments to the POC Act so that documents and information obtained under the information gathering powers provided for under the Act, can be used as evidence in proceedings relating to non-compliance with the information gathering powers themselves.

To this end, the amendments in Schedule 6 provide for the following exemptions to the above limited use and derivative use immunities:

allowing an answer or document produced in an examination to be admissible in civil or criminal proceedings against the person who gave the answer or produced the document for an offence relating to information gathering powers in examinations[190]
allowing an answer or document, or information contained within, that has been disclosed to certain authorities, to be used in civil or criminal proceedings against the person who provided that information in an examination where the proceedings are for an offence relating to information gathering powers in examinations[191]
allowing an answer or document, or information contained within, that has been disclosed, to be used in civil or criminal proceedings against the person who provided that information under a production order in relation to proceedings for non-compliance in relation to production orders[192]
allowing any information, document or thing obtained as a direct or indirect consequence of giving the information or document produced in relation to the powers of the Official Trustee to be used in criminal proceedings against the relevant natural person[193]
allowing the giving of information and documents by a natural person due to powers exercised by the Official Trustee to be used in proceedings for offences relating to the obtaining of information about controlled property by the Official Trustee.[194]

The Government notes the broad rationale for these amendments:

This [the above discussed amendments] is necessary as, in cases of non-compliance with an information-gathering power, often the only evidence of non-compliance with this power will be given in response to the exercising of this information-gathering power. If under a production order in Part 3-2, for example, a person is required to produce three documents, and only produces two, then the original production order and the two documents provided will need to be provided in evidence to indicate that a person has committed an offence of failing to comply with a production order under existing section 211.[195]

PJCHR concerns

The PJCHR noted that the removal of derivative use immunity (meaning that information or documents compulsorily provided by a person can be used against them in a criminal proceeding) engages and limits the right to a fair trial.[196] Following advice from the Minister, the PJCHR concluded that ‘the removal of the derivative use immunity seeks to achieve the legitimate objective of being able to trace, restrain and confiscate illicitly obtained funds.’[197] The PJCHR noted however that this also means significant implications for a person’s right to not be forced to testify against themselves. The PJCHR draws these concerns to the Minister and to Parliament.[198]

Scrutiny Committee concerns

In its first report on the Bill, the Scrutiny Committee expressed some concerns around the removal of the derivative use immunity at paragraph 217(2)(c) of the POC Act (item 16), noting that this would mean ‘information or evidence obtained as a direct or indirect consequence of the production of self-incriminating information or documents to the Official Trustee may be used in criminal proceedings against the person who was compelled to produce the information or documents’.[199]

The Scrutiny Committee considers the privilege against self-incrimination to be an important common law right, requiring a full justification for any abrogation of that right.[200] In light of the detailed justification provided in the Explanatory Memorandum, the Scrutiny Committee has left to the Senate to consider the appropriateness of removing this immunity.[201]

Amendments relating to disclosure of information

Section 266A of the POC Act provides that a person who obtains information as a result of certain powers under that Act is able to pass this information onto various authorities for designated purposes. Information obtained from an examination for example can be provided to the Australian Taxation Office for the purpose of protecting public revenue.[202]

Disclosure of information obtained by the Official Trustee

Item 8 inserts proposed subparagraph 266A(1)(a)(iii) so that information obtained under the Official Trustee’s information gathering powers in relation to controlled property, can be passed on to designated agencies under section 266A.[203] The Government notes that currently there is no mechanism for the Official Trustee to pass on information to other agencies ‘to investigate or prosecute offending, or to protect public revenue, severely undermining the utility of the information.’[204] The Government notes that this amendment will allow the Official Trustee to work closer with Commonwealth agencies when managing assets on behalf of the Commonwealth and increases the usefulness of any information that the Official Trustee gathers.[205] The application of this amendment extends to information obtained before the commencement of Schedule 6.[206]

Additional purposes for disclosure

Items 9 and 10 amend the table at subsection 266A(2) to expand the agencies to whom and the purposes for which information gathered under the POC Act can be disclosed. These amendments are summarised in Table 1 below.

Proposed subsection 266A(2A) as inserted by item 12 clarifies that the specific purposes listed in the table in subsection 266A(2) (including those additional items proposed by the Bill), do not prevent a person from using or disclosing the relevant information for the purpose that it was originally obtained for (or for connected or incidental purposes). The Explanatory Memorandum states that the provision is ‘intended to legislatively enshrine existing common law principles around how information obtained using investigative powers can be used’ and provides the following example:

if the AFP obtained information for the purposes of proceedings under the POC Act, the AFP can then use that information or disclose/share it with any person for the purpose of the proceeds of crime investigation, supporting the proceedings under the POC Act as well as any purposes that are directly or indirectly connected with, or incidental to that purpose (such as an appeal, determining a claim for legal professional privilege or responding to an administrative law challenge). If the AFP were then to disclose the information to the ATO for the purposes of protecting public revenue under item 3 of the table at subsection 266A(2), the ATO could use this information to investigate a person’s non-compliance with tax laws, including using and disclosing that information to other persons or authorities where that is necessary to further their investigation into that person, obtain further information or levy a tax debt.[207]

Table 1: summary of proposed additional permitted disclosures under the POC Act

Party to whom disclosure can be made	Purpose of disclosure
Commonwealth/state and territory investigative and prosecutorial agencies (proposed table item 2D)	Assisting in the prevention, investigation or prosecution of: offences arising out of non-compliance with POC Act obligations various offences under the POC Act relating to making false statements in applications or giving false or misleading answers or documents offences of producing false or misleading documents under the Criminal Code offences that involve non-compliance with a court order made under the POC Act.
Attorney-General’s Department[208] (proposed table item 2E)	Facilitating the Department’s functions under the Extradition Act 1988, the International Criminal Court Act 2002, the International War Crimes Tribunals Act 1995 or the Mutual Assistance in Criminal Matters Act 1987 (including incidental purposes).
Foreign authority responsible for mutual assistance in criminal matters (proposed table item 2F)	Assisting in the prevention, investigation or prosecution of an offence against a law of the country that, if it had occurred in Australia, would constitute an offence against a law of the Commonwealth, or of a state or territory, punishable on conviction by imprisonment for at least 3 years or for life. Assisting in the identification, location, tracing, investigation or confiscation of proceeds or instruments of crime under the POC Act or corresponding state and territory laws.
International Criminal Court[209] (proposed table item 4)	Enabling or assisting the International Criminal Court to perform any of its functions.
An International War Crimes Tribunal[210] (proposed table item 5)	Enabling or assisting the International War Crimes Tribunal to perform any of its functions.
Professional disciplinary body (proposed table item 6)	Enabling the body to perform its functions.

Source: Parliamentary Library; items 9 and 10 of Schedule 6 of the Bill.

The application of these amendments extend to information obtained before the commencement of Schedule 6.[211]

Professional disciplinary bodies

The Bill does not define the term ‘professional disciplinary body’ in relation to one of the above categories of person that can receive information gathered under the POC Act. This was an issue of concern for some stakeholders, as noted in the ‘Position of major interest groups’ section of this Digest. The Government notes that since the term is not defined, ‘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’.[212] The Government says that the term ‘professional disciplinary body’ will therefore cover a wide range of institutions.[213]

PJCHR concerns

The PJCHR expressed concerns around amendments allowing information to be disclosed to foreign countries where a person could be at risk of the death penalty or of torture.[214] The Minister advised in response that there are existing safeguards within the Mutual Assistance in Criminal Matters Act 1987.[215] The PJCHR accepted the importance of these safeguards, but still expressed concerns that there remains some risk that information could be shared to foreign countries in circumstances which are not compatible with the right to life or the prohibition of torture. The PJCHR draws these concerns to the Minster and the Parliament.[216]

Schedule 7: expanding the Official Trustee’s role

Schedule 7 primarily makes amendments in relation to the role of the Official Trustee.

Role of the Official Trustee

The Official Trustee in Bankruptcy (Official Trustee) is a body corporate created under the Bankruptcy Act 1966 in order to administer bankruptcies and other personal insolvency arrangements when a private trustee or other administrator is not appointed.[217] The personnel and resources required for the Official Trustee to fulfil its responsibilities are provided by the Australian Financial Security Authority (AFSA).[218]

The Official Trustee has a role in controlling and dealing with property under the POC Act. A court can rule that the Official Trustee take custody and control of property covered by a restraining order.[219] Restrained property held in this way is not Commonwealth property, rather it is held on trust.[220] The Official Trustee has a range of powers and duties in relation to this controlled property including gathering information in relation to the property, dealing with the property (including preserving or destroying or disposing of it) and discharging pecuniary penalty orders and literary proceeds orders.[221]

If property is forfeited to the Commonwealth, the Official Trustee must generally dispose of the property.[222] As part of this process, AFSA procures a valuation of the property prior to engaging an agent to assist with the sale.[223] The Official Trustee (through AFSA) will liquidate the property and transfer the proceeds to the Confiscated Assets Account (CAA).[224] The CAA is established under the POC Act.[225]

Expansion of categories of property which Official Trustee can take control of

The Official Trustee can take custody and control of property or specified property that is covered by a restraining order, where the court is satisfied that this is required.[226] As noted above, the Official Trustee can then exercise certain powers over the property.[227]

Under the current provisions of the POC Act however, there is no ability for the Official Trustee to take custody and control of property covered by a forfeiture order which vests absolutely in the Commonwealth.[228] Similarly, there is no ability for the Official Trustee to take custody and control of property that is forfeited to the Commonwealth on conviction of a serious offence.[229]

Item 7 inserts proposed Division 4A into Part 2-2 of the POC Act consisting of proposed section 71A. Proposed subsection 71A(1) provides that the Official Trustee may take custody and control of any or all property covered by a forfeiture order. Proposed subsection 71A(2) allows the court that made the forfeiture order that covers the property to make either or both of the following orders:

an order determining any question relating to the exercise of powers conferred or duties imposed on the Official Trustee under Division 3 of Part 4-1 of the POC Act (dealings related to controlled property) to the extent those powers or duties relate to the property
an order directing any person to do anything necessary or convenient to enable the Official Trustee to take custody and control of the property.

These orders can only be made by the Court on the application of:

the responsible authority
the person who immediately before the making of the forfeiture order, was the owner of the property covered by that order
the Official Trustee or
any other person who has the leave of the court.[230]

The effect of proposed section 71A is that the Official Trustee will be able to take custody and control of property subject to a forfeiture order. In combination with the amendments made by item 24 (discussed below), this property becomes ‘controlled property’ for the purposes of Division 2 and 3 of Part 4-1 of the POC Act—thereby allowing the Official Trustee to exercise powers in relation to the controlled property.

Item 17 inserts proposed Division 2A into Part 2-3 of the POC Act. The proposed division consists of proposed section 101A, which is drafted in similar terms to proposed section 71A. The effect of proposed section 101A is that the Official Trustee will be able to take custody and control of property forfeited to the Commonwealth on conviction of a serious offence (section 92 of the POC Act) and will allow the Official Trustee to exercise its powers in relation to the property.

Expansion of categories of property in relation to which Official Trustee can exercise its powers

Item 24 makes amendments that expand the categories of property which the Official Trustee can exercise its existing powers in relation to.

Information gathering powers

The Official Trustee has various information gathering powers under Division 2 of Part 4-1 of the POC Act in relation to obtaining information about controlled property. This includes powers in relation to:

accessing the books in relation to the property in order to ensure controlled property is within the custody and control of the Official Trustee or to ensure the effectiveness of the exercise of its powers in relation to the property[231]
requiring assistance from suspects[232]
obtaining information and evidence.[233]

Proposed section 267AA as inserted by item 24 allows the Official Trustee to exercise the powers conferred on it under Division 2 of Part 4-1 in relation to:

property that is the subject of a forfeiture order
property forfeited on conviction of a serious crime (that is, forfeited under section 92 of the POC Act) and
property subject to a direction made under section 282 or 282A of the POC Act.[234]

The above is considered controlled property for the purposes of Division 2 of Part 4-1.[235]

Power to deal with controlled property

The Official Trustee also has various powers to deal with controlled property under Division 3 of Part 4-1. This includes powers in relation to:

preserving the property[236]
exercising rights that are attached to shares in the property[237]
destroying or disposing of the property.[238]

Proposed section 267AB allows the Official Trustee to exercise the powers conferred on it under Division 3 of Part 4-1 in relation to:

property that is the subject of a forfeiture order
property forfeited on conviction of a serious crime (that is forfeited under section 92 of the POC Act) and
property subject to a direction made under section 282 or 282A of the POC Act.

Proposed subsection 267AB(2)–(4) set out the period during which the Official Trustee can exercise its powers in relation to each of these categories of property. The Government notes that the purpose of these provisions:

… is to ensure that the powers under Division 3 are only exercised during relevant appeal periods. Exercising these powers after the appeal period would not be appropriate as the Official Trustee will either be under an obligation to return the property to an applicant (if the applicant is successful on appeal) or to dispose of the property and credit the sale proceeds to the CAA if the Commonwealth is successful (see sections 70, 100 and 294 of the POC Act).[239]

Other amendments

Items 5, 14 and 41 make amendments to sections 69, 99 and 285 respectively to ensure that the ability of the Official Trustee to exercise its powers under Division 3 of Part 4-1 with respect to the above categories of controlled property, is not restricted despite some other limitations. Effectively these amendments allow the Official Trustee to continue to exercise its powers and deal with property during appeal periods.

Schedule 7 contains various amendments to existing requirements which are consequential to this expansion of controlled property which the Official Trustee can deal with. These include for example:

requiring that the Official Trustee fulfil certain notice requirements for the proposed destruction or disposal of controlled property subject to a forfeiture order or forfeited under section 92[240]
stipulating that amounts realised from the sale of controlled property by the Official Trustee continues to be proceeds of the relevant offence or an instrument of the relevant offence[241]
requiring the Official Trustee to arrange certain amounts to be paid to the owner where controlled property ceases to be subject to forfeiture under the POC Act.[242]
clarifying that the Official Trustee is not personally liable for any loss or damage, sustained by a person claiming an interest in all or part of the controlled property, arising from the Official Trustee taking custody and control of the property.[243]

Shifting certain roles from Minister to Official Trustee

The amendments in Schedule 7 move certain administrative roles of arranging for the return of property (following the discharge of a forfeiture order, following an order made by the Court in relation to buying back forfeited property, or when the forfeiture ceases to have effect) from the Minister to the Official Trustee.[244]

In addition, item 13 of Schedule 7 repeals and inserts a new section 90 so that the Official Trustee, alongside the Minister, has a role in receiving objections from a person who has an interest in forfeited property with others and one of those persons intends to purchase their share. The Minister, or a senior Departmental officer, will still have the power to ultimately decide if the property should be transferred where there is an objection.[245]

Updating information gathering notices

Currently, section 270 of the POC Act gives the Official Trustee power to obtain information and evidence through the provision of a notice. Subsection 270(2) however requires persons to physically attend before the Official Trustee in order to give evidence or produce books in their possession. The Government notes that ‘this has created inefficiencies as travel needs to be organised to ensure that persons can attend the Official Trustee’s offices, which are often interstate, to provide relevant information directly to the Official Trustee’.[246]

Item 26 of the Bill repeals paragraphs 270(1)(a) and (b) and replaces them with proposed paragraphs 270(1)(a)–(e). The proposed paragraphs will allow the Official Trustee to require a person to do the following if it relates to the exercise of the Official Trustee’s powers or performance of its duties:

give the Official Trustee such information as it requires for the exercise of its powers or performance of its duties under Part 4-1 of the POC Act[247]
attend before the Official Trustee to give evidence (retaining the existing requirements)[248]
give evidence via video link[249]
give evidence by telephone[250] and
produce all books in their possession.[251]

Item 27 inserts proposed subsections 270(2)–(4), allowing the Official Trustee to require that persons giving evidence in person, by video link or by phone be administered an oath or affirmation either orally or writing. Item 31 creates offences of imprisonment for 6 months or 30 penalty units or both in relation to giving evidence by video link or by phone. The offence provisions are triggered where the person refuses to be sworn or make an affirmation or refuses to answer a required question from the Official Trustee.[252]

Expanding cost recovery

Under the POC Act, certain provisions assist the Official Trustee in recovering its own costs. Section 288 currently provides that regulations can be made in relation to the Official Trustee’s remuneration. This remuneration is in respect of the costs, charges, expenses incurred in connection with the Official Trustee’s exercise of powers and performance of functions or duties under the POC Act or under Part VI of the Mutual Assistance in Criminal Matters Act.[253]

Items 43 amends this subsection so that the exercise of the powers of the Official Trustee or performance of its functions or duties under Division 3 of Part XIII of the Customs Act 1901 can also be made cost-recoverable through Regulations. This part of the Customs Act relates to the recovery of pecuniary penalties for dealing in narcotic goods.

As noted above, when property is disposed of by the Official Trustee, the funds are deposited into the CAA on behalf of the Commonwealth.[254] Section 297 of the POC Act provides the purposes for which payments can be made out of the CAA. Items 51–53 amend this section to expand the cost recovery purposes for which payments can be made from the CAA. Specifically:

item 51 amends paragraph 297(e) to allow payment out of the CAA to recover the Official Trustee’s remuneration as per the Regulations made under section 288
item 52 amends paragraph 297(f) to allow the transfer of amounts from the CAA to recover the Official Trustee’s costs, charges, expenses and remuneration under regulations made under section 9B of the Crimes Act. Section 9B of the Crimes Act provides that regulations can be made that allow the Official Trustee to cost recover in relation to its functions, duties and powers in relation to dealing with forfeited articles.[255]

When dealing with property subject to a forfeiture order or forfeited on conviction of a serious offence, the Official Trustee can currently apply any amounts received from the disposal of the property and any property that is money toward payment of its own remuneration and other costs, charges and expenses before crediting the remaining amount to the CAA.[256]

Items 6 and 16 amend the relevant legislative provisions to allow the Official Trustee to also apply money from the disposal of the property and any forfeited property that is money to make payments of GST (goods and services tax) liabilities under the A New Tax System (Goods and Services Tax) Act 1999.[257] Item 47 allows the crediting to the CAA of amounts equal to input tax credits owed to the Official Trustee following disposal of property and item 53 allows transfers out of the CAA to pay GST liabilities associated with the disposal of property.[258]

Grants to the states and territories

Item 55 inserts new Division 4 into Part 4-3 of the POC Act to allow the Minister to make financial assistance grant payments out of the CAA to states and territories for the purpose of crime prevention and related areas. These grants can be for the following purposes:

crime prevention measures
law enforcement measures
measures relating to treatment of drug addiction and
diversionary measures relating to illegal use of drugs.[259]

The terms and conditions of the financial assistance must be set out in a written agreement between the Commonwealth and the grant recipient which must include the circumstances in which the grant recipient must repay amounts to the Commonwealth.[260]

The mechanism of payment of the grants is through the COAG (Council of Australian Governments) Reform Fund.[261] The Federal Financial Relations Act 2009 allows the Treasurer to make payments to the COAG Reform Fund for the purpose of general revenue assistance to the states and National Partnership Agreement payments to the states.[262] Proposed section 298E of the POC Act provides that where the Minister decides to make a grant of financial assistance, they must issue a direction that an amount be debited from the CAA and credited to the COAG Reform Fund. This direction is not a legislative instrument, and so these grants are not subject to disallowance.[263]

Item 50 amends section 297 to provide the legislative authority for amounts to be transferred from the CAA to the COAG Reform Fund for the purposes of these grants.[264]

A copy of the Ministerial direction must be given to the Treasurer.[265] If an amount is credited to the COAG Reform Fund for the purpose of these crime prevention grants, then the Treasurer must debit the COAG Reform Fund to make the grant as soon as practicable.[266] Items 1–3 make consequential amendments to the COAG Reform Fund Act 2008, the key amendment being a clarification that the process for making these grants is not covered in that Act, but the POC Act.[267]

Scrutiny Committee concerns

The Scrutiny Committee sought advice from the Minister as to whether the Bill could be amended to:

include at least high level guidance on the terms and conditions for the grant of financial assistance to the states and
include a requirement that written agreements with the states and territories about grants of financial assistance be tabled in Parliament within 15 sitting days after being made and published on the internet within 30 days after being made.[268]

The Minister advised that such amendments would be a duplication of existing limitations and oversight mechanisms.[269] The Scrutiny Committee reiterated its concerns and draws the Senate’s attention to the appropriateness of leaving the terms and conditions on which financial assistance can be granted entirely to the executive branch of government, and not including a requirement for tabling or publishing agreements relating to the grants.[270]

Foreign deferred prosecution agreements

A foreign deferred prosecution agreement is an agreement between a person and a competent authority of a foreign country which provides for the indefinite deferral of the prosecution of the person for an offence against a law of that country, so long as the conditions set out in the agreement are met.[271]

Item 54 amends the POC Act to provide that money that is paid to the Commonwealth under or in connection with a foreign deferred prosecution agreement is credited to the CAA if the money represents:

the whole or a part of benefits the person derived from alleged unlawful activity
the whole or a part of property that is wholly or partly derived or realised by the person, directly or indirectly, from alleged unlawful activity
the whole or a part of property that is used in, or in connection with, the commission of alleged unlawful activity and
the whole or a part of property that is intended to be used in, or in connection with, the commission of alleged unlawful activity.[272]

The Government notes that these categories represent what foreign deferred prosecution agreements normally require, and that these amendments allow money to be credited to the CAA that might otherwise have been subject to confiscation under the POC Act had the person been prosecuted.[273]

The Government also notes that the amendment will not affect penalties paid to the Commonwealth as these will be credited to the Consolidated Revenue Fund.[274]