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ASIC’s deterrence message – “no point just communicating this into the Fin Review”.

ASIC gave some useful insights before the recent Senate oversight hearing[1] on 13 September as to the reality of the effectiveness of its proposed and current enforcement measures, in particular by way of litigation as one means of promoting deterrence.

Whether the recent increases in corporate sanctions will help is perhaps another matter.

As was readily acknowledged by ASIC,

“the academic literature in this area is quite mixed’.

But rightly, ASIC said that for its enforcement actions to have a deterrent effect it needs to be

“seen to be incredibly active across the entire regulatory pyramid. There’s no use ASIC being active around that regulatory pyramid if we’re not getting it out of the public domain—and not just the business community but also the consumers”.

And as Senator Bragg responded,

‘there is no point just communicating this into the Fin Review’,

though many of ASIC’s potential defendants may well read that paper.

As to the academic literature on deterrence, Mr Shipton’s assessments were

“firstly, that to be deterred you’ve got to be under the impression that there will actually be enforcement action, and, secondly, that there has to be a reasonable to high probability of being caught. If you don’t have both of those, the deterrence impact is minimised”.

Mr Crennan then explained that the new office of enforcement “will have a communication strategy embedded” with those messages of deterrence being sent.

Comment

The academic literature on deterrence is indeed mixed, though ASIC’s focus on conveying perceptions, backed by a certain reality, is valid. White collar enforcement also requires more nuanced approaches to be effective, and to avoid counter-productive outcomes.

As to those outcomes, the literature is less mixed in relation to the effectiveness of the deterrence claimed from the government’s recent increases in corporate penalties and imprisonment terms[2]

“I’ll risk it for 10 years, but maybe not 15”, or “for $20,000 but not $100,000″

as to which see this earlier article:

by how much could we reduce white collar crime by imposing 30 year jail sentences? “Zero”.

[1] PJC on the Oversight of ASIC, the Takeovers Panel and the Corporations Legislation No.1 of the 46th Parliament, 13 September 2019

[2] Treasury Laws Amendments (Strengthening Corporate and Financial Sector Penalties) Act 2019

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