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Chapter 5
Confiscating the Proceeds of Crime
Introduction
5.1
Although this inquiry initially focussed on the effectiveness of
association-type offences to prevent organised crime groups from committing
criminal offences, the committee heard repeatedly, from almost every law
enforcement agency with which it met, that one of the most effective ways of
preventing organised crime is by 'following the money trail'.
...organised crime is for the most part about profit. They are
not generally about a better quality of firearm or a better quality of drug.
Perhaps there is something of that in there but by and large it is about the
balance sheet for them. Our focus then is not necessarily about the predicate
activities or even some of the individuals involved in it, but recognising
that, wherever the criminal activity takes place and whatever crimes are
involved in it, if we can take away the profit benefit then we are having more
impact than we would through any number of—and I hesitate to use this term—
minor charges. If we drive at what is the profit motive here, I think we will
be more successful in unpicking and deterring—and perhaps even in the crime
prevention area.[1]
5.2
This chapter discusses various existing legislation which provides for
the confiscation of assets derived from criminal activity, and considers the
benefits and disadvantages of different legislative models. It also considers
the laws and process used to support proceeds of crime laws, such as ways that
law enforcement can collect financial information and monitor suspected
individuals, to gain the necessary information and evidence to confiscate
criminal assets.
Confiscation of criminal assets
5.3
It is a well-accepted common law principle that the Crown may confiscate
assets derived from criminal action, with forfeiture laws having existed in England since at least early Anglo-Saxon times.[2]
Modern proceeds of crime provisions generally take two forms: conviction based
laws and civil confiscation laws.[3]
The former requires a criminal conviction before assets may be confiscated, the
latter uses the courts' civil jurisdiction to confiscate criminal assets, and
does not require a criminal conviction.
5.4
The US was one of the first jurisdictions to introduce civil
confiscation laws as a means of preventing organised crime in its RICO
legislation. The reason for this extension of confiscation laws from
conviction-based to civil, is due to the effectiveness of the laws in
preventing organised crime from occurring. Confiscating illegally obtained
assets undermines the profit motive of crime and prevents the re-investment of
those assets into further criminal ventures.
5.5
The committee heard from a number of sources, including the ACC and the
Italian authorities, that the confiscation of criminal assets 'hits criminals
where it hurts most'. The ACC told the committee that:
The seizure of criminal proceeds is a key available means of
disrupting the activities of serious and organised criminal groups. Whereas
they continue to prove resilient and adaptable to legislative amendment and law
enforcement intelligence and investigative methodologies, the reduction or
removal of their proceeds of crime is likely to represent a significant
deterrent and disruption to their activities.[4]
5.6
Mr Raffaele Grassi, from the Italian National Police, highlighted the
importance of 'going after the money' and depriving criminal groups of their
assets. He noted that:
Mafia members are prepared to spend time in prison, but to
take their assets is to really harm these individuals.[5]
5.7
Civil forfeiture laws may still be based on a criminal standard of proof
– such as is the case in Canada, whereby if a person has not been convicted of
a criminal offence, but the Crown can prove beyond reasonable doubt (to the
'criminal standard') that assets are the proceeds of crime, then a court may
make an order that those assets be forfeited to the Crown.
5.8
However, more commonly, civil forfeiture laws are based on a lower,
civil standard of proof, as is the situation under the Commonwealth's Proceeds
of Crime Act 2002, section 18 of which provides that a court may make an
order restraining assets, if 'there are reasonable grounds to suspect that' the
assets are the proceeds of crime.
5.9
The Australian Law Reform Commission found in its 1999 report, Confiscation
that Counts: A Review of the Proceeds of Crime Act 1987, that
conviction-based forfeiture regimes are relatively ineffective,[6]
resulting in the Commonwealth adopting a civil regime. All jurisdictions in Australia, with the exception of Tasmania, now have civil forfeiture regimes in addition to
conviction-based forfeiture laws.[7]
The UK and Ireland also have civil forfeiture regimes, however conviction-based
forfeiture remains the norm in the rest of the world.[8]
5.10
The legislation in Western Australia and the Northern Territory goes one
step further, allowing the respective Directors of Public Prosecutions to apply
to the courts for a confiscation order if a person has 'unexplained wealth'. This
means that in those jurisdictions it is not necessary to demonstrate on the balance
of probabilities that the wealth has been obtained by criminal activity, but
instead places the onus on an individual to prove that their wealth was
acquired by legal means.
5.11
The table below summarises these positions:
|
Conviction-based forfeiture |
Civil forfeiture |
Unexplained Wealth |
Test |
Beyond reasonable doubt –
conviction for criminal offence |
On the balance of
probabilities/more likely than not |
On the balance of
probabilities/more likely than not |
Onus of Proof |
Crown |
Crown |
Respondent |
Jurisdictions |
Tasmania |
Cth, ACT, NSW, Qld, SA, Vic |
NT, WA |
5.12
This chapter is divided into three parts: the first outlines the
existing Commonwealth proceeds of crime laws and their effectiveness; the
second part outlines the development of unexplained wealth laws, and discusses
the benefits and concerns with unexplained wealth legislation; and the third
section looks at various laws which support criminal assets confiscation
legislation, particularly mechanisms for obtaining information about suspected
individuals' financial affairs.
Proceeds of Crime Act 2002 (Commonwealth)
5.13
The Proceeds of Crime Act provides that the Commonwealth Director of Public
Prosecutions (CDPP) may apply to a State or Territory court for:
-
restraining orders prohibiting a person from disposing or dealing
with the subject property;
-
forfeiture orders which require a person to forfeit property to
the Commonwealth;
-
pecuniary penalty orders which require a person to pay money to
the Commonwealth based on the proceeds they have received from crime; and
-
literary proceeds orders which require a person to pay money to
the Commonwealth based on literary proceeds of crime.
5.14
A court may make these orders if satisfied on the balance of
probabilities that the subject property is the proceeds of crime.
5.15
The Act also provides for the use of coercive investigative techniques
to assist law enforcement agencies in investigating proceeds of crime matters
including compelling examination, the production of documents or information,
warrants and monitoring. Further, the Act provides:
-
that law enforcement may give a notice to a financial institution
to provide specified information about the suspected proceeds of crime;[9]
-
that the court may make a monitoring order which requires a
financial institution to provide certain information about the transactions in
a particular account.[10]This
enables law enforcement to monitor the financial affairs of suspected persons;
-
directions as to how the Commonwealth must deal with confiscated
property including the purposes for which payment may be made from confiscated
funds (such as payment of legal aid); and
-
that arrangements may be made for the equitable sharing of
confiscated proceeds between international or state and territory agencies
involved in an investigation.
5.16
With respect to the final point, Dr Dianne Heriot, Assistant Secretary
of the Attorney-General's Department informed the committee that such
arrangements are made at the discretion of the ministers involved:
If a jurisdiction has had a significant contribution to an
investigation that has led to proceeds seizure, then it is put to the minister
to determine the equitable distribution.[11]
Effectiveness of Commonwealth's
proceeds of crime laws
5.17
The committee heard that there are a number of weaknesses in the Commonwealth's
existing proceeds of crime legislation, which could be strengthened by:
-
reversing the onus of proof in criminal assets confiscation proceedings;
and
-
greater interaction and cooperation between different agencies in
proceeds of crime investigations, and the appropriate responsibilities of
different agencies involved in proceeds of crime matters.
5.18
These two issues are discussed in detail in the following two sections.
5.19
The committee notes that a major review of the Proceeds of Crime Act was
undertaken in 2006 by Tom Sherman, to which the Government is yet to respond. Mr Sherman made a number of specific recommendations as to how the effectiveness of the Act may
be improved. In its last report,[12]
the committee urged the Government to implement the recommendations made by Mr
Sherman.
5.20
In this inquiry, the Committee heard from a large range of agencies
about the importance of assets confiscation laws in preventing organised crime.
Law enforcement agencies around Australia were unanimous about the need for
strong and effective laws to enable the confiscation of assets from those
involved in organised crime.
5.21
The ACC agrees with the need for the government to implement the
recommendations of the Sherman report:
The implementation of recommendations of the Sherman report
on the operation of the Proceeds of Crime Act 2002 would strengthen the
proceeds of crime regime.[13]
5.22
As in its previous report the committee urges the government to give
consideration to the findings of the Sherman report.
Unexplained wealth provisions
5.23
Numerous law enforcements agencies, both within Australia and
internationally, gave evidence to the committee about the benefits of
unexplained wealth legislation as a means of disrupting serious and organised
crime. Unexplained wealth legislation goes a step beyond civil forfeiture by
reversing the onus of proof in criminal assets confiscation proceedings.
5.24
A number of jurisdictions, including the UK, Italy, Western Australia
and the Northern Territory, have already adopted legislation which reverses the
onus of proof, enabling authorities to restrain assets that appear to be
additional to an individual's legitimate income and requiring that individual
to demonstrate that those assets were obtained legally.
The United Kingdom approach
5.25
Detective Inspector John Folan, head of the Dedicated Cheque and Plastic
Crime Unit in the UK, told the committee that the historical approach to
policing involving 'identifying suspects and getting prosecutions' had failed with
regard to organised crime. Detective Inspector Folan argued, like his
counterparts around the world, that UK law enforcement needs to focus on the
motivations of criminals, and target the profits of organised crime in order to
successfully dismantle criminal groups.[14]
5.26
The UK's Proceeds of Crime Act 2002 provides for the confiscation
and restraint of proceeds of crime. In order for a person's assets to be
confiscated under the Act, the person must have been convicted. However, in
order for assets to be restrained, it is only necessary that the person is
being investigated and that there is reasonable cause to believe that they have
committed an offence.
5.27
The UK also has a set of offences under the Proceeds of Crime Act which
enable the confiscation of assets obtained from a 'criminal lifestyle'. Under
section 75 of the Act, a person has a 'criminal lifestyle' if they:
-
have been convicted of one of the offences listed in Schedule 2
(drug trafficking offences)
-
have been convicted of any offence over a period of at least 6
months, from which they obtained at least £5000, or
-
have been convicted of a combination of offences which amount to 'a
course of criminal activity' which is either:
-
conviction in the current proceedings of at least four offences from
which they have benefited; or
-
conviction in the current proceedings of one offence from which they
have benefited in addition to at least two other convictions on at least two
separate occasions in the past 6 years.
5.28
Where a court has decided that a defendant has a criminal lifestyle,
section 10 of the Act contains provisions which enable an assessment to be made
as to the financial benefit they have derived from their criminal lifestyle.
The court may make certain assumptions in relation to property and expenditure,
which the defendant is then required to disprove, thus reversing the onus of
proof in relation to the assets held by those proven to have a criminal
lifestyle.
5.29
The amount recoverable by the Crown is an amount equal to the
defendant's total benefit from criminal conduct, unless the defendant is able
to prove that the available amount is less than the recoverable amount.
5.30
The committee was informed by Mr Ian Cruxton, from the Proceeds of Crime
Office within SOCA, that the 'criminal lifestyle' provisions have been an
effective tool for recovering criminal assets. However, it was also
acknowledged by SOCA officers and other UK police officers that the civil
recovery process in the UK is extremely lengthy, and can take up to three years
to go to trial.[15]
The Italian approach
5.31
The committee was told that Italy has also developed laws based on a
reverse onus of proof which allow law enforcement to prevent the mafia from
using illegally obtained assets to reinvest in further criminal enterprises.
5.32
Officers from the Italian Central Directorate for Antidrug Services
informed the Committee that Chief Police Officers and Public Prosecutors can
undertake investigations into suspected illegally obtained assets without
having prima facie evidence of a predicate offence. At the conclusion of such
an administrative investigation, the matter can be referred to a judge who can
investigate the matter further to establish the source of the assets. During
the trial process, the burden of proof falls on the defendant to explain the
source of their assets.[16]
5.33
The committee was told that this process had been very effective in
confiscating criminal assets and preventing organised crime in Italy.
5.34
The committee notes that Italy is a civil law jurisdiction with an
inquisitorial judicial system and in this context a judge can investigate the
source of the individual's assets, and require evidence from the individual.
The same system could not be applied in the same form in the Australia.
However, the committee was interested to learn about the successful use of
reverse onus of proof investigations in a civil law jurisdiction.
Western Australia and Northern
Territory approaches
5.35
Western Australia introduced unexplained wealth provisions in 2000 in
Division 1 of Part 3 of the Criminal Property Confiscation Act 2000 (WA),
and the Northern Territory followed in 2003 with the Criminal Property
Forfeiture Act 2002 (NT). Given the similarities between the two acts, both
are discussed together.
5.36
The laws both provide that the relevant DPP may apply to the court for
an unexplained wealth declaration against a person. The court must make an
order 'if it is more likely than not that the total value of the person's
wealth is greater than the value of the person's lawfully acquired wealth'.[17]
Both Acts also reverse the onus of proof.
5.37
The key aspects of the laws are:
-
The requirement that courts make an order if satisfied that
a person's total wealth is greater than their lawfully acquired wealth.[18] Courts therefore have minimal discretion regarding the making of such orders.
-
The reversal of the onus of proof in favour of the Crown,
providing that 'any property, service, advantage or benefit that is a
constituent of the respondent's wealth is presumed not to have been lawfully
acquired unless the respondent establishes the contrary'.[19]
-
Both Acts set out how law enforcement and prosecutors can obtain
information about criminal assets,[20]
which includes:
-
The DPP or police may require a financial institution to provide
information about the transactions and/or assets of a particular person[21] (this information may also be volunteered by financial institutions);
-
The DPP can apply to the courts for an order allowing the DPP to
conduct an examination of a suspect individual, which can require a person to
furnish the court with information and/or documents;[22]
-
The DPP can also obtain documents relating to assets or property
by applying for a production order;[23]
-
The DPP can apply to the court for monitoring and suspension orders
which require a financial institution to monitor or suspend a person's account,
and provide that information to the police or DPP;[24]
and
-
The police can detain a person if they have a reasonable
suspicion that the person has in their possession property liable to forfeiture
under the Act, or documents identifying or determining the value of a person's
unexplained wealth.[25]
-
Provisions to ensure that property remains available for
forfeiture, including:
-
Police have the power to seize property if they reasonably
believe it was derived from or used in a crime;[26] and
-
Police and the DPP may apply to the courts for a restraining or
freezing order, which prevents property or assets from being used for a period
of time.[27] It is a criminal offence to deal with property otherwise than is permitted by a
restraining or freezing order.[28]
-
People have a right to object to their property being restrained
within 28 days of being served with an order restraining the property.[29]
-
In addition to unexplained wealth declarations, the court can
make:
-
Criminal Benefit Declarations which declare that certain property
is, at least in part, more likely than not to have been derived from a specific
forfeiture offence committed by the suspect or that the property was more
likely than not unlawfully acquired;
-
Crime-used Property Substitution Declarations which are available
when the actual property used in the crime is not available for seizure, e.g.
when they are no longer in the suspect's possession. They enable the state to
declare equivalent property that is in the suspect's possession as a
substitute;
-
The Acts also allow the same orders to be made against 'declared
drug traffickers'.
Differences between WA and NT
unexplained wealth laws
5.38
While the WA and NT laws are very similar, there are a few substantive
differences between them. These are:
-
The WA legislation does not enable confiscation to be taken into
account in sentencing. The NT law allows courts to take into consideration an
offender's cooperation in forfeiture proceedings when sentencing the offender. The
NT laws also provide that the courts should have regard to a forfeiture order
that required the forfeiture of property that was not crime-derived when
sentencing a convicted offender.
-
The WA laws only require that a drug trafficker has been
convicted of one offence before they can be declared for the purposes of their
assets being confiscated. The NT laws require that a drug trafficker be
convicted of 3 offences before they can be declared a drug trafficker and have
their assets confiscated.
-
The WA Act is declaration-based. Once a court has declared
certain assets to be 'unexplained wealth', a 'criminal benefit' or 'crime-used
property substitution', those assets may be confiscated by the government.[30] However,
because the NT is a Territory, the Constitution requires that property can only
be confiscated by the government 'on just terms'. This means that a court order
is required for confiscation, even after a declaration has been made that the
relevant property is 'unexplained wealth' etc. Should the Commonwealth enact
unexplained wealth provisions, the same constitutional restraint would apply,
requiring a judicial order before assets could be confiscated.
Effectiveness of NT and WA
approaches
5.39
Although the NT Act is based on the WA legislation, the committee heard
that the NT Act expanded and improved on the WA Act. With regard to the
effectiveness of its unexplained wealth legislation, the Northern Territory
Police submitted:
Whilst traditional methods of illicit drug interventions are
still employed, legislation that targets the entire criminal enterprise is
extremely effective. In this respect, assets forfeiture legislation allows
Police to seize the wealth created by these criminal enterprises without the
need for a conviction.[31]
5.40
The Northern Territory Police gave evidence to the committee that the
laws have been very successful in addressing the issues of OMCGs in the
Northern Territory, as well as other criminal groups.[32]
To date the Northern Territory Police has seized over $13
million dollars in criminal property forfeiture cases with approximately $5
million forfeited to the Crown at this time.[33]
5.41
Commander Colleen Gwynne from the Northern Territory Police explained to
the committee how the unexplained wealth laws work in practice to dismantle the
control of key individuals over criminal groups:
I think it makes life much more difficult. They just cannot
return to where they were. The problem we have had over the years is once a
criminal, always a criminal, because you can just return to what you were
doing. You continue to make money out of illegal activity. But that is so much
more difficult if you do not have that financial support behind you to commence
those activities. With a lot of the networks, if you do not have that financial
support then it is very hard to gain the support of other criminal networks as
well.[34]
5.42
Assistant Commissioner McAdie further explained to the committee why the
unexplained wealth approach to assets confiscation is superior to the civil
confiscation regime contained in, for example, the United States' RICO laws:
Our understanding—and we are hardly what you would call
experts in the RICO laws in the United States—is that, in order to be enforced,
they involve very long, very complex and very sustained investigations. There
is a cost-benefit ratio in everything. Our understanding is that the success
ratio is not very high and the cost of each investigation is extremely high. I
guess we are looking for simpler-to-administer and easier means to achieve the
same ends.[35]
5.43
However, Commander Gwynne also highlighted that one of the impacts of
the new legislation has been the movement of some criminals out of the Northern
Territory:
We have had a couple of cases where people have chosen to
move. We had an unexplained wealth case in Alice Springs where we restrained
$2.2 million worth of assets and cash. That matter has now finalised. At the
end of the day, nearly $1 million was forfeited. In a lot of these cases,
people also have to pay their debts off. If they have $2.2 million worth of
assets, they may owe a bank or a financial institution half of that, so part of
the assets pays the debt off before the government sees the end amount. People
involved in that couple of cases, who are quite significant in trafficking
illegal drugs within Central Australia, have since moved interstate. There have
been other cases that I could talk about where people have chosen to move
elsewhere.[36]
5.44
This evidence concerns the committee because it indicates that while the
legislation may be effective in those jurisdictions that have it, due to the
federated nature of the Australian justice system, strong laws in one
jurisdiction can cause problems to relocate to another jurisdiction. For this
reason, the committee's view is that, whatever approach to assets confiscation
is taken, it is critical that Australian governments work together to ensure
that there are no 'weak points'. This issue is discussed in further detail in
chapter 6.
5.45
The Northern Territory Police agree with this assessment:
If there is a jurisdiction that does not have the type of
legislation the Northern Territory has, you are creating a vulnerable area, a
soft target. People will say, ‘We can go to New South Wales, South Australia or
elsewhere where we won’t be subjected to such legislation.’ It is important
that it is consistent.[37]
5.46
The committee notes that a number of jurisdictions are now considering
the adoption of unexplained wealth provisions.
[38]
This is discussed in more detail later in the chapter.
Arguments in favour of unexplained
wealth laws
5.47
A large number of agencies from various jurisdictions mentioned the
effectiveness of unexplained wealth legislation, and suggested that it may be
appropriate to adopt such laws at the Commonwealth level. The ACC, AFP, Victoria Police, Tasmania Police, Queensland Police, South Australia Police, the Northern
Territory Police, the Police Federation of Australia and the Australian Tax
Office all support the wider adoption of unexplained wealth laws.[39]
5.48
There is some support in international law for the adoption of such
provisions at a Commonwealth level with the Interpol General Assembly having
resolved in 1997 that:
...unexplained wealth is a legitimate subject of enquiry for
law enforcement institutions in their efforts to detect criminal activity and
that subject to the fundamental principles of each country's domestic law,
legislators should reverse the burden of proof (use the concept of reverse
onus) in respect on unexplained wealth.[40]
5.49
The primary reason given by most agencies in support of unexplained
wealth laws is the fact that, if applied successfully, they remove the
financial incentive to commit organised crime.
[I]f there is an evident downturn in criminal profits then it
acts as a discourager, a potential preventer, of organised crime activity. It
may perhaps deter those who want to get into it and it may make it more
difficult for those already engaged in it, forcing them to take greater risks
than they currently do and therefore exposing themselves to greater risk of
detection and prosecution.[41]
5.50
Unexplained wealth laws do this to a greater extent than proceeds of
crime laws because they do not rely on prosecutors being able to link the
wealth to a criminal offence, even at the lower civil standard. As such there
is a greater likelihood that the assets of crime will be confiscated.
5.51
Unexplained wealth provisions are in many ways better adapted to dealing
with the specific law enforcement problem, such as OMCGs. Detective
Superintendent Hollowood gave evidence that, in the experience of Victoria
Police, it is generally individuals within the clubs who are involved in
organised crime as opposed to the whole club, or groups within the club,
conspiring to commit organised criminal offences. Detective Superintendent Hollowood
explained that while individuals may use their position within the club as
leverage to support their organised crime activity, it is those individuals who
are directly benefiting from organised crime, and not a motorcycle club as a
whole. Therefore he suggested that unexplained wealth laws may be better
adapted to preventing the criminal behaviour taking place within motorcycle
clubs as they target the benefits accumulated by the individuals of greatest
concern to law enforcement.[42]
5.52
Similarly, the Police Federation of Australia explained:
Do Australian police know who is involved in organised and
serious crime in Australia? Do we know who they are? The answer is yes. Can we
prove beyond reasonable doubt that these criminals are involved directly in those
crimes? The answer is no. Are we aware that these criminals possess or have
effective control of unexplained wealth? The answer is yes. Can these criminals
or those holding the assets and wealth for these criminals explain on the
balance of probability that they legally obtained that wealth or assets? The
answer is no. We do not have to link anything to a crime. It is about them on
the balance of probability explaining that they have got legally obtained
wealth...We have not got any legislation in Australia to deal with that at the
Commonwealth level...Unexplained wealth is the easiest way as a crime prevention
method to stop further crime, because, if the individuals who are holding onto
these assets cannot explain them...the tendency is to just hand it over because
they do not want to get into a debate about whether they are involved in
criminality or not.[43]
5.53
Queensland Police illustrated the same point by using an example:
You may have someone who, intelligence suggests, sits at the
top of the tree in a hierarchical structure that amasses vast amounts of
assets, millions of dollars, and yet, while the intelligence lends itself to
that, the on-the-ground investigation would be such that the evidence convicts
the underlings. Wealth creation provides an onus on them to account for that
asset wealth.[44]
5.54
It was also suggested that the laws may assist law enforcement agencies
in investigating criminal offences:
As I understand it, on many occasions
when people are brought in for questioning about unexplained wealth, rather
than implicate themselves in more crime, sometimes these things are not even
contested. There is no criminality attached to it, if you understand that. I
think there are some great opportunities in this to use some specific pieces of
legislation that can go a long way towards fighting serious and organised crime
in this country.[45]
5.55
Mr Barlow from the Australian Tax Office gave evidence to the committee
about the assistance that unexplained wealth laws would give them in enforcing
tax legislation:
From a practical perspective, we obviously do deal with
unexplained wealth. That is a basis of some of our assessments. We would raise
assessments on particular taxpayers on the basis that they cannot explain where
their wealth has come from. That is a process which involves doing the
investigation, raising an assessment and then collection after that litigation.
It all takes a lot of time. As I understand it, if you had an
unexplained-wealth regime within a proceeds structure then you would have the
ability to have restraining orders at the start, which would secure assets, so
I can see that in that sense there would be a way of securing those assets
upfront, which is quite difficult to do from a tax context because we have to
go through the process.[46]
5.56
Agencies also noted the benefits of nationally consistent confiscation
legislation. Detective Superintendent Hollowood from Victoria Police gave
evidence about the difficulties that Australian law enforcement agencies have
in identifying and confiscating assets which may be located in, or moved
between, various jurisdictions.[47]
Some of these problems, he said, would be overcome if there was
nationally consistent unexplained wealth legislation.
5.57
The ACC reiterated this view, agreeing that nationally consistent
unexplained wealth laws would improve the ability of law enforcement to combat
serious and organised crime.
I think following the money is obviously very important from
the point of view of identifying the areas of risk and the individuals who
represent the greatest risk, but then it is a question of how you actually do
anything about that, given the size of the criminal economy and the amount of
money that is restrained and forfeited. There is a big disparity, so the
performance would appear to warrant some improvement, I guess, in terms of the
way we recover money.[48]
Arguments against unexplained
wealth laws
5.58
The committee also heard evidence against the adoption of unexplained
wealth laws by the Commonwealth from a small number of organisations.
5.59
The main concern with unexplained wealth laws is the reversal of the
onus of proof. A member of the motorcycling community, Mr Withnell, expressed
concerns that such laws risk confiscating assets from innocent people because
of their breadth:
[T]he only problem I have with [unexplained wealth
laws is] I do not believe most people could actually explain everything they
own.[49]
5.60
The Law Council of Australia noted concern with unexplained wealth laws,
submitting that they 'offend common law and human rights principles'.[50]
Specifically, the Law Council is concerned that:
-
The
reverse onus of proof undermines the presumption of innocence. The Law
Council's concerns regarding the presumption of innocence also apply to the
Commonwealth's existing proceeds of crime legislation, but are heightened in
respect of unexplained wealth laws.[51]
-
The
provisions infringe on the right to silence and exclude legal professional
privilege. The unexplained wealth laws in WA and the NT enable the respective
DPPs to use information found in the process of examining unexplained wealth to
be used for criminal prosecution. The suspicion of a person having obtained
wealth illegally is sufficient for the DPP to obtain an order compelling a
person to answer questions on oath.[52]
The WA laws also exclude legal professional privilege by requiring lawyers and
other professionals to provide information that would otherwise be privileged.[53]
-
There is a
lack of appeal rights in respect of unexplained wealth declarations.[54]
The committee notes that individuals have a right to appeal decisions of a
court to make an unexplained wealth declaration and freezing order to a higher
court on a matter of law, as is the case with proceeds of crime confiscation
orders.
-
The
potential for arbitrary application of the laws. The Law Council expressed
concern that those who fail to keep receipts or records may be subjected to the
legislation,[55] and that use of the laws may be politically motivated.[56]
5.61
Similarly, Mr O'Gorman, the President of the Australian Council for
Civil Liberties said:
To those who wanted confiscation laws, from where I sit, we
say that a conviction based regime was working quite well. I think the current
scheme, under which people can simply have their assets frozen and taken away,
even without being charged with any criminal offence, from a philosophical
point of view as to where the reach of the criminal law should end, is utterly
obnoxious.[57]
5.62
Additionally, the unexplained wealth provisions in WA have had limited
use, with only 13 declarations made between its commencement in 2000, and June
2008.[58]
This supports the evidence that the committee heard from the Queensland Crime
and Misconduct Commission that 'the jury is still out...on unexplained wealth.'[59]
5.63
The WA Police gave evidence to the Western Australian Joint
Parliamentary Standing Committee on the Corruption and Crime Commission that
the DPP was reluctant to use the provisions.[60]
The DPP told that Committee that it was not reluctant to use the laws, but as
unexplained wealth applications are often made on the basis of information
obtained in the course of another investigation in which confiscation
proceedings had already commenced, the initial investigation must be completed
prior to any action for unexplained wealth being commenced.[61]
The Law Council of Australia argued that this evidence indicates that the WA
unexplained wealth laws are unnecessary.[62]
5.64
The Northern Territory appears to have resolved this problem to a large
extent by using an investigative and prosecutorial model that has a much
greater level of interaction between prosecutors, police and the Department of
Justice.[63]
This issue is discussed further at paragraph 5.118.
5.65
Deputy Commissioner Kaldas of the NSW Police told the committee that the
existing legislation in NSW, which like the Commonwealth legislation allows
assets to be restrained or confiscated if a person is suspected of having
obtained those assets through serious crime related activity, is 'working
pretty well' and that there are no 'proposals or any need at the moment to
revamp the legislation'.[64]
Conclusions on unexplained wealth
laws
5.66
The committee notes the concerns of the Law Council and others with
unexplained wealth legislation. However, in the view of the committee
unexplained wealth laws appear to offer significant benefits over other
legislative means of combating serious and organised crime including:
-
preventing crime from occurring by ensuring profits cannot be
reinvested in criminal activity, as opposed to simply reacting to serious and
organised crime;
-
disrupting criminal enterprises;
-
targeting the profit motive of organised criminal groups; and
-
ensuring that those benefiting most from organised crime – i.e.
those gaining profits – are the ones captured by the law, which they are often
not under ordinary criminal laws, and proceeds of crime laws which require a
link to a predicate offence.
5.67
The committee's view is that it may be possible to deal with the
concerns of the Law Society through well-constructed legislation which
incorporates safeguards such as administrative or judicial review mechanisms
and evidentiary safeguards.
Crimes
Legislation Amendment (Serious and Organised Crime) Bill 2009 (Commonwealth)
5.68
The Commonwealth Attorney-General, the Hon Robert McClelland MP,
introduced legislation into Parliament on 24 June 2009, which proposes to
introduce unexplained wealth provisions into the Proceeds of Crime Act 2002.
5.69
The Attorney-General explained the purpose of the unexplained wealth
amendments:
In many cases, senior organised crime figures who organise
and derive profit from crime are not linked directly to the commission of the
offence. They may seek to distance themselves from the offence to avoid
prosecution or confiscation action.
Unlike existing confiscation orders, unexplained wealth
orders will not require proof of a link to the commission of a specific offence
and in that sense they represent a quantum leap in terms of law enforcement
strategy.[65]
5.70
This reasoning is consistent with the evidence that the committee heard
from law enforcement agencies around the world.
5.71
The Bill adds 'unexplained wealth' to the existing categories of assets that
may be subject to restraining or forfeiture orders under the Act. A person has
'unexplained wealth' if 'there are reasonable grounds to suspect that a
person's total wealth exceeds the value of the person's wealth that was
lawfully acquired.'[66]
5.72
In proposed Part 2-6 to the Proceeds of Crime Act, the Bill provides for
the making of 'Unexplained Wealth Orders'. In order for the Court to make an
order:
-
a preliminary order must have been made (with an 'authorised officer'
having made an affidavit under proposed section 179B(2)), and
-
the court must not be satisfied that the total wealth of the person was
not derived from one or more of the following:
-
an offence against a law of the Commonwealth;
-
a foreign indictable offence;
-
a state offence that has a federal aspect.
5.73
The additional requirement of the court not being satisfied of the
unexplained wealth not being derived from an offence with a Commonwealth aspect
is a result of the constitutional constraints on the Commonwealth's capacity to
enact criminal laws. '[T]he Commonwealth is limited to confiscating unexplained
wealth derived from offences within Commonwealth Constitutional power.'[67]
Other than this additional aspect, the confiscation provision appears to
operate in much the same way as the equivalent provisions under Northern
Territory and Western Australian law.
Concerns with the operation of restraining orders in the Commonwealth Bill
5.74
In considering the Bill, the committee identified a potential drafting
weakness. The proposed restraining orders in item 5 of the Bill appear to place
a greater burden on the Crown, as the orders are not based on a reverse onus of
proof. In order to make a restraining order, the Crown must satisfy the court
that:
-
there are reasonable grounds to believe that a person has unexplained
wealth; and
-
there are reasonable grounds to suspect either or both of the following:
-
that the person has committed an offence against a law of the
Commonwealth, a foreign indictable offence or a State offence that has a
federal aspect;
-
that the whole or any part of the person's wealth was derived from an
offence against a law of the Commonwealth, a foreign indictable offence or a
State office that has a federal aspect.
5.75
Item 5 is based on the restraining order provisions for the existing
proceeds of crime orders under the act, which do not carry a reverse onus of
proof.
5.76
As with unexplained wealth orders, the additional requirement is based
on the Commonwealth's constitutional restrictions. However, because the restraining
order provisions are not based on a reverse onus of proof (like the unexplained
wealth orders are), the restraining order provisions in the Commonwealth Bill
appear to be narrower than those in the Northern Territory or Western
Australia, as a link to a Commonwealth offence, and some level of proof thereof,
will still be required. It is unclear how strong the evidence linking the
unexplained wealth to an offence will need to be in order for the court to
grant a restraining order.
5.77
The committee notes that it is not necessary for the CDPP to seek a
restraining order prior to seeking an unexplained wealth order, as is the case
with forfeiture orders in relation to those suspected of having committed a
serious offence[68]
or conduct constituting an indictable offence.[69]
5.78
The explanatory memorandum to the Bill states that the purpose of
restraining order is to 'ensure that property is preserved and cannot be dealt
with to defeat an ultimate unexplained wealth order.'[70]
A restraining order also enables the CDPP to apply for an order to conduct an
examination so that further property can be located.
5.79
In short, it appears that restraining orders may be more difficult to
obtain than confiscation orders in respect to unexplained wealth in the
Commonwealth Bill. Both orders require some link to a Commonwealth offence, but
restraining orders require the link to be a positive burden on the Crown,
whereas with unexplained wealth orders it is a negative burden.
5.80
The committee is uncertain as to how the requirement of a link to Commonwealth
offence will be interpreted by the courts as it relates to both restraining
orders and confiscation orders. Although the committee understands that
constitutionally, such a requirement is necessary, the committee is concerned
that the Commonwealth's unexplained wealth orders should not be interpreted to
require substantial evidence linking the accused to a Commonwealth offence.
Such an interpretation would, in the committee's view, defeat the purpose of
unexplained wealth orders.
5.81
The committee is also concerned with the complexity of both restraining
order and confiscation order provisions, and notes that both sets of provisions
contain double negatives, making them difficult to understand and interpret.
5.82
The committee suggests that these aspects of the Bill be given further
scrutiny in order to ensure that the Commonwealth's unexplained wealth laws do
not require the CDPP to demonstrate a link to a predicate commonwealth offence.
5.83
The committee notes that the Bill will be examined by the Senate Legal
and Constitutional Affairs Legislation Committee, and looks forward to
considering its report. The committee will continue to monitor the progress of
the Bill and of the more widespread adoption of unexplained wealth laws with
interest.
Conclusions on the Commonwealth's
Bill
5.84
The committee commends the Commonwealth Government on proactively
dealing with the problem of organised crime and in considering the evidence of
this inquiry to introduce unexplained wealth provisions. In the committee's view,
the unexplained wealth provisions in the Commonwealth's Bill are a reasoned and
measured approach to the problem of organised crime
5.85
In particular, with regard to the concerns of the Law Council and others
about unexplained wealth laws, set out above, the committee notes that the
unexplained wealth provisions proposed by the Commonwealth government are civil
provisions, and that no presumptions of criminal guilt or innocence are
involved. Furthermore, the committee notes that existing section 198 of the
Proceeds of Crime Act provides that information obtained in an examination
relating to a restraining order, cannot be used as evidence in criminal
proceedings against the person.
5.86
The committee notes that the unexplained wealth provisions of the Crimes
Legislation Amendment (Serious and Organised Crime) Bill 2009 are supported by
the findings of the committee's inquiry. Therefore, the committee recommends
that these provisions, in particular, be enacted.
Recommendation 3
5.87
The committee recommends that the unexplained wealth provisions of the
Crimes Legislation Amendment (Serious and Organised Crime) Bill 2009 be passed.
5.88
Noting the above comments of Victoria Police, the Northern Territory
Police and the ACC regarding the importance of having uniform unexplained
wealth provisions, the committee also urges the Commonwealth to continue to
consult with the States and Territories about the adoption of uniform
unexplained wealth laws.
5.89
The committee notes that the Commonwealth government is already involved
in a number of consultation and negotiation processes with the States and
Territories, which aim to achieve uniformity in legislation targeting serious
and organised crime. These include chairing a Senior Officers Group of the
Standing Committee of Attorneys-General (SCAG), and leadership of the
Ministerial Council for Police and Emergency Management – Police (MCPEMP). These
developments are discussed in chapter 6.
Measures supporting criminal assets confiscation
5.90
During the course of this inquiry, the committee became acutely aware of
the importance not only of having strong legislative measures to prevent
serious and organised crime, but also of having a suite of legislation and
administrative and policy arrangements to support those measures. In particular,
the need for law enforcement to have access to financial intelligence and for
the development of effective investigative and prosecutorial models for
criminal assets confiscation proceedings.
Financial intelligence
5.91
With the increasing law enforcement focus on 'the money trail',
financial intelligence has become a crucial law enforcement tool. Mr Neil
Jenson, CEO of AUSTRAC, highlighted the importance of financial intelligence:
...financial intelligence is critical to the fight against
organised and serious crime. It is valuable for both operational and strategic
purposes...[financial intelligence] information assists law enforcement to
uncover previously undetected criminal activity and connections among crime
groups as well as to identify emerging patterns and threats.[71]
5.92
There are a range of ways in which different jurisdictions collect
financial intelligence and monitor suspicious transactions.
Australian approach
5.93
AUSTRAC's submission to the inquiry notes:
AUSTRAC plays a vital role in supporting the ACC and other
law enforcement and security agencies through supplying the financial
intelligence expertise needed for this approach. AUSTRAC’s ability to link
financial data and cross-match information assists in detecting suspicious
activity as it is evolving. AUSTRAC’s expertise in data mining and real time
tracking allows analysts to detect criminal activity and track resources moved
in preparation for planned activities.[72]
5.94
AUSTRAC was established under the Financial Transaction Reports Act
1988 and is continued in existence by section 209 of the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC's
purpose is to detect and counter money laundering and the financing of
terrorism.[73]
5.95
The AML/CTF Act imposes a number of obligations on organisations
involved in certain industries (including financial service providers, the
gambling industry and 'cash dealers'), when they provide designated services,
including:
5.96
For example, reporting entities must report international funds
transfers, 'suspicious transactions' and transactions of $10 000 or more.
5.97
One of AUSTRAC's roles is to oversee compliance with these reporting
requirements and collate the information. AUSTRAC then provides transaction
reports and intelligence to law enforcement agencies and revenue agencies both
within Australia and internationally (depending on whether an international
agency has an agreement with AUSTRAC).[74]
5.98
The CEO of AUSTRAC, Mr Neil Jensen, told the committee that:
Our information contributed to a record 2,698 operational
matters in 2007-08, making a total of more than 15,000 such operational matters
over the past 10 years. In addition, taxation revenue directly resulting from
AUSTRAC’s financial transaction reports amount to $76 million in the 2007-08
financial year and approximately $685 million over the past 10 years.[75]
International approaches
5.99
A number of European countries have similar arrangements. The
committee's delegation to North America, Europe and the UK was told that the
European Union has developed a model approach to financial transactions and
reporting, to enable law enforcement to better target the proceeds of crime.
The approach involves:
-
banning the use of cash payments
-
the identification and control of all financial operators
-
the creation of common databases with the obligation for
financial operators to report all suspicious transactions, and
-
strong cooperation between all involved authorities.[76]
5.100
Italian legislation prohibits the use of cash for transactions over €12
500 (AU$21 800). Transactions over this amount are required to be processed
through a financial institution. All transactions over €15 000 (AU$26 000)
require the collection and verification of personal details, with these records
kept for ten years.
5.101
Italian banks and financial institutions are responsible for ensuring
that they are not involved in money laundering. Strong punitive legislation
targeted at the financial sector ensures the cooperation of banks in this area.
The committee was told of a case in which €160 million (AU$280 million) of
illicit funds was deposited into a bank account in China. The bank failed to
comply with the relevant reporting requirements relating to this transaction.
Accordingly, the bank was required to pay a penalty of 40% of the money
transferred, and bank officials involved in money laundering or in the non-compliance
with financial record keeping and reporting were able to be charged under mafia
association legislation.[77]
5.102
The Dutch Police (KLPD) have a similar system and store information
regarding unusual financial transactions on a secure database so that law enforcement
are able to target 'hot spots'. The KPLD told the committee that they have
identified that 85% of suspicious transactions involve international money
transfers.[78]
Effectiveness of existing
arrangements
5.103
The ACC told the committee that the work done by AUSTRAC is critical to
the confiscation of proceeds of crime, and ultimately organised crime
prevention.
As you would all know, the key motivator for undertaking
criminal activities is predominantly the profit which these activities bring.
The underlying strategy of the ACC is to identify serious criminal targets
through identification of criminal business structures and money flows. For
example, the identification of suspect money transfers and repositories is a
key methodology for target generation and development. This is a proactive
risk-based approach to identifying high-risk money flows and it does not rely
on the identification of an original offence to start an investigation.[79]
5.104
AUSTRAC told the committee that there are a number of amendments that
could be made to the AML/CTF laws to make them stronger, and that it is working
with the Attorney-General's Department to achieve this:
As we are moving forward with the AML/CTF legislation we are
finding areas that the legislation may not cover adequately, or the legislation
may require further amendment. Remittance dealing is an area in which we
continue to work. They have an obligation to register with AUSTRAC. We are
aware that quite a number, potentially 500 or more, may not have registered
with us, and we are looking at the range of activities available to move
forward. We will propose to the Attorney-General’s Department, which has
responsibility for this legislation in the sense of amending it, issues that
are arising as a result of that. We have a number of concerns at the moment
about which we are talking to the Attorney-General’s Department. We would be
looking for some future possible amendment to assist our program in enforcing
the legislation.[80]
5.105
Mr Jenson went on to argue:
The major concern is how to enforce non-registration, or
where entities have not registered, to be able to ensure that they register so
that we can provide information. It would be some strengthening of the ability
to take an action, whether it is through the courts or in some other form, to
show them that they have a responsibility and they have to meet those
responsibilities.[81]
Recommendation 4
5.106
The committee recommends that the Commonwealth Government give urgent
consideration to strengthening the enforcement of registration obligations under
the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
5.107
The ACC also suggested a number of models that have been successful in
other jurisdictions that might be effective in strengthening Australia's
legislative, administrative and policy arrangements for collecting financial
intelligence. Specifically, the ACC commended the United Kingdom's system of
Financial Reporting Orders as a model that might enhance Australia's existing
laws. Mr Kitson from the ACC told the committee:
...financial reporting orders, FROs...[are] a useful way to
monitor the activities of key persons of concern. FROs, in combination with the
easily applicable proceeds of crime legislation, may enhance our capacity to
attack the criminal economy.[82]
Financial Reporting Orders in the
United Kingdom
5.108
Chapter 3 of the Serious Organised Crime and Police Act 2005 gives
SOCA the power to apply for Financial Reporting Orders (FROs), which are a
civil mechanism of restraining the use of assets by convicted organised
criminals. FROs may be made against persons convicted of certain specified
criminal offences including money laundering, fraud and terrorism.[83]
5.109
The orders may be for a period of up to 15 years and ordinarily require
a person to provide financial statements and details to the authorities
periodically.[84]
Failure to do so is an offence.[85]
5.110
The orders are intended to prevent known organised criminals from using
their assets to fund further crime. They essentially make it much more difficult
for those people to establish new criminal enterprises and to evade detection.
To verify the accuracy of information provided in a financial
report, UK agencies can request information from any source without use of a
production order and disclose information in the financial report to any party.
Where a person’s lifestyle is inconsistent with the financial position
reported, there are avenues to pursue the seizure of assets.[86]
5.111
The ACC told the committee that:
Financial reporting orders could simplify the ACC’s push to
understand high-volume money flows associated with those involved in the more
serious ends of organised crime.[87]
5.112
However, FROs only came into effect in the UK in 2005 and to date there
is little evidence of their effectiveness. The ACC acknowledged this, but noted
that they will continue to monitor the orders and discuss their effectiveness
with SOCA to determine whether they may be useful in the Australian context.
I think you would be aware that the UK’s laws have not been
enacted long enough to give us a decent body of information on which to judge
its success or otherwise. Indeed, in our dialogue with them, they also observed
that it is too early to make a judgement...I suspect that that we are a year or
so away from having an understanding of how that operates in their context and,
when we try to apply that across the Australian context with some of the
difficulties we might have with a non-unitary law system and the different
state and territory policing agencies we have here, I think there will be a
fair bit of study and work to be done in that area.[88]
5.113
Mr Kitson also noted the role that FROs might play if unexplained wealth
laws are adopted at the federal level in Australia.
...the reason that we identified particularly financial reporting
orders as something that was of interest to us is because it deals with the
capacity of some of the most enduring and resilient organised crime figures to
maintain their wealth regardless of the individual or concerted efforts of law
enforcement across the country. If we shift
the burden of proof so that people have to explain unexplained wealth then
there may be some benefit to us in trying to understand how they are operating,
who they are operating with and what they are doing with those assets.[89]
Recommendation 5
5.114
The committee recommends that the ACC continue to monitor the
effectiveness of the United Kingdom's Financial Reporting Orders, and report to
both the Minister for Home Affairs and the Parliamentary Joint Committee on the
Australian Crime Commission whether similar reporting orders may be of benefit
in the Australian law enforcement context.
Investigative and prosecutorial arrangements
for confiscating criminal assets
5.115
The ACC's submission argues that the Commonwealth's existing proceeds of
crime laws are not as effective as the models used in other jurisdictions. The
ACC points to the NSW and UK models as examples of laws that have been more
successful than the Commonwealth's existing legislative arrangements.[90]
5.116
The committee notes that the NSW laws are similar to the Commonwealth's
in terms of when assets can be seized or restrained by the Crown. The UK's Proceeds
of Crime Act 2002 is not as strong as the Commonwealth and NSW legislation
in that it requires that a person has been convicted before assets can be
confiscated.[91]
However, the ACC suggests that one of the reasons for the greater success of
the NSW and UK laws is the fact that the NSW Crime Commission and SOCA
respectively are responsible for investigating and prosecuting criminal assets
recovery matters. Accordingly, the ACC suggests that there is a:
...need for a clearer separation of responsibility for
prosecution and seizure action at Commonwealth level.[92]
5.117
The ACC elaborated on this statement:
Although a variety of models are available, there are
compelling arguments for the location of responsibility with an agency at the
national level with responsibility for targeting the most resilient and
enduring serious and organised crime groups and equipped with the
cost-effective capability offered by coercive powers. In addition, agencies
being able to draw on a range of tools, including the appropriate use of
coercive powers from another service agency, provides another model for
consideration. While the primary purpose would be improved rates of criminal
asset recovery, there would also be opportunities to improve a broader range of
outcomes in terms of disrupting and dismantling criminal enterprise structures
through corporations or taxation law action.[93]
5.118
This suggestion was echoed by police forces both within Australia and
internationally. The Northern Territory Police suggested that one of the key
reasons for the initial success of their unexplained wealth laws is the fact
that they have altered the way in which investigations and prosecutions work,
to a more integrated approach with greater interaction between police, the
Department of Justice and the DPP.
One of the other things that are unique to the Northern
Territory legislation is the way we manage the process. We have an area in the
Department of Justice that deals just with criminal property forfeiture. We
have a sergeant who is an experienced prosecutor working within that area, so
we have a conduit between the police and the Department of Justice, who are
taking the matters before the local courts and the Supreme Court. We work very
closely with the lawyers in preparing the cases and prosecuting them through
the system.[94]
5.119
The committee heard that this change in approach to the traditional
model of prosecution has contributed substantially to the success of the
Northern Territory's unexplained wealth regime.
5.120
It is not uncommon in some international jurisdictions for the 'prosecutorial'
function for civil, proceeds of crime related matters to be handled by a law
enforcement or assets recovery agency rather than by the public prosecution
service. For example the Director of the UK's Serious and Organised Crime
Agency (SOCA) has the ability to apply directly to the courts for assets
confiscation orders.[95]
5.121
Mr Kitson informed the committee that the NSW Crime Commission also has
responsibility for bringing proceeds of crime actions under the NSW Criminal
Assets Recovery Act 1990, and not the NSW DPP. Similarly, Assistant
Commissioner Mandy Newton told the committee of the value of the NSW
arrangements.[96]
5.122
The committee also heard that other jurisdictions have found advantages
in combining all assets recovery functions into one agency – including both
taxation and criminal assets recovery. The UK has adopted this approach, and
the committee was informed that SOCA have launched hybrid cases – which involve
both tax recovery and criminal asset confiscation. Mr Andy Lewis, Head of Civil
Tax Recovery, SOCA, informed the committee that the ability to target both
aspects of criminal assets has been successful, and the use of tax
investigation enables SOCA to examine records from the previous 20 years.[97]
Irish model
5.123
The ACC recommended that the committee examine the Irish proceeds of
crime model, as in its view, the Criminal Assets Bureau (CAB) in Dublin is 'the
most successful recovery agency in Europe.'[98]
5.124
The CAB is a division of the Garda Síochána that was established by
Statute in 1996. It reports directly to the Minister for Justice, Equality and
Law Reform. The CAB has both investigative and enforcement powers, and operates
independently of other criminal prosecution agencies.[99]
5.125
The CAB is comprised of officers from the Garda Síochána, Revenue
Commissioners Taxes, Revenue Commissioners Customs and the Department of
Social, Community and Family Affairs. Thus it takes a multi-agency approach to
confiscating the assets of organised criminals. The CAB is able to apply tax
legislation, proceeds of crime legislation as well as any relevant criminal
laws to their investigations and prosecutions. This allows the most effective
and appropriate legislation to be used in each situation in order to deny
organised criminals of their assets. According to the ACC in around 60 or 70
per cent of cases the CAB uses tax legislation to confiscate assets suspected
of being the profits of crime.[100]
5.126
Within the Australian context, the committee heard that the ability of
the Australian Tax Office and law enforcement agencies to work together was a
key element of the success of the Piranha Taskforce:
One of the key aspects of our success with Piranha is having
an embedded person from the Australian Taxation Office within the operation.
The cooperation we have had with the ATO in tracking assets has worked
extremely well for us. If we attack the wealth we attack the incentive for
people to be engaged in organised crime.[101]
5.127
However, Mr Cranston from the ATO informed the committee that in some
instances tax laws will not be the best adapted means of removing assets:
The tax law is looking at a particular tax liability. On
balance of probabilities, looking at the facts, we can make an assessment of
whether there is a tax liability. We have done well in that particular area in
the past in dealing with some of these organised groups. There is a problem in
relation to collection, however. Sometimes it is very difficult to collect on
those particular assessments. In relation to whether it is better than the
proceeds of crime legislation, I think that would depend on the particular
matter and the particular circumstances. When we raise tax assessments, they
have to adhere to the various taxation acts. However, the proceeds of crime is
because you have to have a criminal offence and that becomes sometimes a bit
difficult.[102]
5.128
The Irish model allows law enforcement to take a pragmatic approach to
the removal of assets by establishing permanent working relationships between
officers from different areas of law enforcement, tax, customs and community
affairs.
5.129
In the ACC's opinion this model of combining assets confiscation
agencies into one investigative and enforcement agency also enables law
enforcement to overcome some of the difficulties that result from complicated
and sophisticated organised crime business structures.[103]
The difficulty is that because of the complexity and
sophistication of some of these business structures and the intermingling of
legitimate and illegitimate sources of income, it is very, difficult for an
investigator to disentangle all that to the satisfaction of a court, where you
prove reasonably that that particular amount of money over there is from an
illegal source that money over there is legitimate. That is the difficulty we
face. And, of course, acquiring people with the skills to understand money,
money flows, business structures and the way businesses and markets work will
be a big trick for law enforcement down the track.[104]
5.130
The committee considers the effectiveness of multi-agency taskforce in
further detail in chapter 6.
Conclusions on investigative and
prosecutorial arrangements
5.131
The best model for investigating and prosecuting criminal assets
confiscation matters and other assets confiscation matters was not the primary
focus of this inquiry. However, the committee did hear substantial evidence and
received numerous recommendations as to how the Commonwealth's approach to
these issues could be strengthened, thereby improving the success of criminal
assets confiscation laws in Australia.
5.132
In the committee's view, Australia may benefit from an assets recovery
agency like CAB, for example by vesting the capacity to bring proceeds of crime
and unexplained wealth matters in the ACC, or by the establishment of permanent
multi-agency taskforces with a lead role in investigating and prosecuting
criminal assets recovery matters, or from a combination of these approaches.
5.133
The committee recommends that this issue be given further consideration
by the Commonwealth government.
Recommendation 6
5.134
The committee recommends that the Commonwealth government examine a more
integrated model of asset recovery in which investigation and prosecution are
undertaken within one agency, such as the ACC.
Conclusions
5.135
During this inquiry the committee examined a range of preventative law
enforcement approaches to serious and organised crime. On the evidence it has received,
the committee is persuaded that the most effective way of targeting and
disrupting serious and organised crime is to pursue the motivation behind it –
which is the financial gain.
5.136
While there are differences of opinion, both within law enforcement and
the community generally, about the effectiveness and appropriateness of
anti-association laws, law enforcement agencies both within Australia and
internationally, are unanimous that criminal assets recovery laws are an
effective way of combating organised crime at the highest level.
5.137
The committee believes that strong criminal assets recovery laws, specifically
unexplained wealth laws, are a significant way forward, as they:
-
prevent crime from occurring by ensuring criminal profits cannot
be reinvested in further criminal activity;
-
disrupt criminal enterprises;
-
target the profit motive of organised criminal groups to deprive
them of this incentive; and
-
ensure that those benefiting most from organised crime – i.e.
those receiving financial gain – are the ones captured by the law, which they
are often not under ordinary criminal laws, and proceeds of crime laws which
require a link to a predicate offence.
5.138
The committee acknowledges that unexplained wealth laws are a departure
from the traditional approach to proceeds of crime, which requires a person to
be convicted of a predicate offence before the proceeds of that crime may be
confiscated. However, the committee has heard throughout this inquiry about the
increasing sophistication and transnational nature of serious and organised
crime groups. The directors of modern organised crime have sophisticated and
dynamic methods of avoiding the law. They are well-informed and well-resourced.
The committee is therefore convinced that such a departure from traditional
approaches to confiscating the proceeds of crime is necessary and defensible.
5.139
Accordingly, the committee commends the Commonwealth Government for the
introduction of the Crimes Legislation Amendment (Serious and Organised Crime)
Bill 2009, which includes unexplained wealth laws. However, the committee also
notes that in order for any law which targets a national problem to have
maximum effect, it is critical that all levels of government adopt harmonised
approaches to unexplained wealth confiscation. The committee encourages the states
and territories to give this matter due consideration.
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