A long awaited Senate committee report on penalties for white collar crime was issued on 23 March 2017 under the rather dramatic title of ‘Lifting the fear and suppressing the greed’: Penalties for white-collar crime and corporate and financial misconduct in Australia.
For all that drama, the report offers a fairly uncontroversial and hardly novel list of recommendations, although the report itself is well written and substantiated by worthwhile submissions.
It is perhaps enough to report the report’s few recommendations, that the government:
- consider reforms to provide greater clarity regarding the evidentiary standards and rules of procedure that apply in civil penalty proceedings involving white-collar offences.
- consider making infringement notices available to ASIC to respond to breaches of the financial services and managed investments provisions of the Corporations Act.
- amend the Corporations Act to increase the current level of civil penalties, both for individuals and bodies corporate, and that in doing so it should have regard to non-criminal penalty settings for similar offences in other jurisdictions.
- provide for civil penalties in respect of white-collar offences to be set as a multiple of the benefit gained or loss avoided.
- introduce disgorgement powers for ASIC in relation to non-criminal matters.
ASIC has one recommended task, to consider ways in which the accessibility and usability of its “banned and disqualified register” might be enhanced, in order to create greater transparency regarding banning and disqualification orders.
In my view, management of white collar crime requires at least these three measures:
- Penalties for deterrence, and jail, if needed, but set on properly considered criminological bases, and certainly not according to the views of the yellow press, or, necessarily, the regulators. But community perceptions, and international parity, are important. (While nominal only, the Committee could have referred to the Crimes Amendment (Penalty Unit) Bill 2017, presently before parliament, that would amend the Crimes Act 1914 to increase the amount of the Commonwealth penalty unit from $180 to $210, with CPI indexation thereafter).
- Enforcement and monitoring, to increase the likelihood of detention, even if only so perceived. This calls for efficient and technology based means of surveillance. “Increasing ASIC’s resources” is a common refrain, which must be resisted, or at least tested.
- Importantly, transparent and accessible corporate information, with appropriate detectors and disruptors set in the business arena. This refers to the director identity number, open access to ASIC records, single touch payroll, and beneficial ownership registers and many other such measures now being commonly recommended.
The Senate report refers to the Australian Law Reform Commission report, Principled Regulation, ALRC 95, of 2002, which in its 1,000 pages examined all the issues in this inquiry and more, and made many valuable recommendations. Very few of these if any have since received law reform attention. Might this Senate Committee not have asked and reported why?
ALRC 95 considered the wide range of penalties available, from community service orders and infringement notices to the disgorgement of tainted moneys, and jail. It based its recommendations on stated criminal and regulatory theory, with many international comparisons.
It also considered the impact of a criminal’s insolvency both on recovery and deterrence, with recommendations made, but with no apparent consideration or action. A $10 million penalty will be for nought if the penalised company then goes into liquidation.
The Senate Committee Report’s limitations
The title to this Senate Committee inquiry indicates the limitations of its reference. Penalties are the least important in the equation, but they are the easiest to focus on. Their impact upon deterrence is problematic, which the report acknowledges. As with any crime, attending to the cause of the crime is important. With white collar crime, while the cause, or impetus, may in one sense invariably be greed, the cause upon which to focus attention is the corporate and business environment and how it allows or does not inhibit unlawful misconduct, such that the greed overcomes the fear of detection. Increasing the likelihood of detection, assisted by a transparent and criminally disruptive environment, should be the main focus.
To that extent, this report’s recommendations are just a side show.
ASIC Enforcement Review Taskforce
This taskforce, almost running in parallel with the Senate inquiry, has similar but broader terms of reference. Again, enforcement comes above penalties in order of priority for attention, but it needs to be assisted by implementing a more open and transparent and accountable business environment. This taskforce may also find much to assist it in ALRC 95.
The government’s response to the Senate Committee report, and to ALRC 95, is awaited.