Overview of the current penalty framework
This chapter provides an overview of the current penalty framework as it
applies to white collar crime and misconduct in Australia.
First, this chapter provides a brief summary of the three categories of
penalty that apply in relation to white collar crime and misconduct, as
captured in the inquiry terms of reference—that is, criminal, civil and
administrative penalties. In turn, this chapter offers an overview of the
regulatory and enforcement activities of various agencies.
Finally, this chapter considers evidence received in relation to the
overall adequacy and consistency of the penalty framework.
Categories of penalties for white-collar crime and financial misconduct
This part of the chapter provides an overview of criminal, civil and
administrative penalties for white collar crime and misconduct.
The main criminal penalties used in Australian legislation are fines and
However, criminal penalties can also take a number of other forms. For example,
instead of imprisonment, a court may impose a community service order (a common
outcome in white-collar crime cases). In many cases, a recorded criminal
conviction cannot be expunged from a person's record and can prevent the
convicted person from performing certain roles, such as becoming a company
Civil penalties are imposed by courts applying civil rather than
criminal court processes. Civil penalties typically take the form of a monetary
fine, although they may also take the form of injunctions, banning orders,
licence revocations and orders for reparation and compensation; they do not
include penalties of imprisonment. Perhaps the most important
distinction between criminal and civil penalty proceedings is the variable
standard of proof at or above the 'balance of probabilities'—as opposed to the
higher 'beyond reasonable doubt' burden of proof for criminal prosecutions—along
with the loss of procedural protections for the accused, such as the privilege
As Michael Gillooly and Nii Lante Wallace-Bruce have put it:
[C]ivil penalties may be broadly defined as punitive
sanctions that are imposed otherwise than through the normal criminal process. These
sanctions are often financial in nature, and closely resemble fines and other
punishments imposed on criminal offenders. However, the process by which these
penalties are imposed is decidedly non-criminal, lacking many of the procedural
safeguards built into the criminal process to protect the citizen from
arbitrary use of State power.
As the ALRC has explained, 'administrative penalties' in Australian
federal law 'are broadly understood as being sanctions imposed by the
regulator, or by the regulator's enforcement of legislation, without
intervention by a court or tribunal'. As set out in the next
section of this report, regulators with the ability to impose administrative
penalties in relation to financial or corporate misconduct include ASIC and the
ATO. Typical administrative penalties include monetary fines and banning
According to the ALRC, there are three broad categories of regulatory
activity that are described as 'administrative penalties' in Australian federal
regulation: infringement (or penalty) notices; 'quasi-penalties' or
'pseudo-penalties', such as the revocation or variation of a licence to which
the regulated party would otherwise be entitled; and automatic,
non-discretionary monetary administrative penalties.
Responsibilities for enforcement and the application of penalties
1.52 A number of agencies have regulatory or other
responsibilities in relation to preventing, investigating and punishing
white-collar crime and misconduct, including recommending or applying various
penalties. The next part of this chapter provides an overview of the
responsibilities of key agencies in this regard, and how these responsibilities
relate to the current regime of criminal, civil and administrative penalties.
Australian Securities and
Investments Commission (ASIC)
The Australian Securities and Investments Commission (ASIC) has
responsibility for the regulation of corporations, managed investment schemes,
participants in the financial services industry and people engaged in credit
activities under a range of Commonwealth laws.
Suffice to note here, many of the activities that can be characterised as
'white-collar crime' or 'corporate and financial misconduct' occur in
organisations and sectors for which ASIC has regulatory responsibility.
ASIC relies on a range of regulatory approaches to deter financial and
corporate misconduct, including alternatives to enforcement action such as
engagement with industry and stakeholders, surveillance, guidance, education
and policy advice.
However, enforcement action remains a critical regulatory tool for ASIC, and
ASIC's submission emphasised the importance of effective enforcement to its
strategic priorities of 'promoting investor and financial consumer trust and
confidence and ensuring fair, orderly and transparent financial markets'.
Sanctions and remedies available to ASIC in undertaking enforcement
action include 'punitive, protective, preservative, corrective or compensatory
actions, or otherwise resolving matters through negotiation or issuing
Table 1 provides a summary of the types of action available to ASIC, as set out
in its Report 387 in March 2014.
Table 1: Types of action
available to ASIC, from Report 387: Penalties for corporate wrongdoing
| Type of action
We can pursue action in the
courts to punish a person or entity in response to the misconduct. Actions
criminal penalties (e.g. terms
of imprisonment; fines; community service orders)—matters giving rise to
criminal penalties are prosecuted by the Commonwealth Director of Public
Prosecutions, with the exception of a number of minor regulatory offences,
which are prosecuted by ASIC; and
civil monetary penalties.
All monetary penalties in
these types of actions are payable to the Commonwealth.
We can take administrative
action decided by an ASIC delegate designed to protect consumers and
financial investors. Actions include:
disqualification from managing a
a ban on providing financial
services or engaging in credit activities;
revocation, suspension or
variation of conditions of a licence; and
public warning notices.
We can also apply to the
court for a disqualification order.
We can take court action to
protect assets or compel someone to comply with the law (e.g. through an
injunction or freezing order).
We can seek a court order for
We can begin a representative
action in the courts to recover damages or property for those who have
suffered loss (e.g. ASIC Act, s50; Corporations Act, s1317J).
Negotiated or agreed outcome
We can use negotiated
alternatives to remedies where these can achieve an effective regulatory
outcome. These include:
enforceable undertakings; and
payment of infringement notices.
Source: ASIC, Report 387:
Penalties for corporate wrongdoing (March 2014), pp. 9–10.
Legislation administered by ASIC
There is a range of legislation administered by ASIC which provides the
regulator with the capacity to impose or seek penalties for white-collar crime.
the Corporations Act 2001;
the Australian Securities and Investments Commission Act 2001
the National Consumer Credit Protection Act 2009 (NCCP
the Superannuation Industry (Supervision) Act 1993 (SIS
ASIC is also able to charge wrongdoers with fraud offences under state
and territory criminal legislation, as well as under ASIC-administered
ASIC can also brief the AFP and the CDPP to bring an action to
confiscate the proceeds of crime in criminal matters under the Proceeds of
Crime Act 2002 (POC Act). However, ASIC does not have any equivalent
disgorgement provisions in ASIC-administered legislation for civil penalty
The possibility of introducing disgorgement powers for non-criminal matters is
considered in chapter 6.
Australian Taxation Office (ATO)
The ATO has the responsibility of imposing and collecting financial
penalties relating to offences within the taxation and superannuation systems.
In its submission, the ATO noted that it administers over 80 different types of
penalties across the tax and superannuation systems. These penalties fall into
four different categories: administrative penalties, civil penalties, penalties
relating to taxation offences (summary offences), and criminal penalties for
serious tax crime prosecution.
Australian Federal Police (AFP)
The AFP investigates a range of Commonwealth criminal offences that can
be categorised as white-collar crime (which, as previously noted, the AFP
considers a subset of serious financial crime). These offences include fraud,
money laundering, and corruption, including the bribery of Commonwealth and
foreign public officials.
In addition to investigating criminal matters, the AFP noted that it
works closely with partner agencies to ensure other measures, such as civil and
administrative penalties, are considered and deployed to address the harm
caused by white-collar crime and misconduct:
Such measures are crucial in circumstances where criminal
liability cannot be proven, but the conduct has resulted, or will result, in
harm being caused to the community, or a profit or gain being wrongfully
The AFP further advised that in addition to appropriate penalties, law
enforcement and partner agencies also draw on a range of other powers to
detect, investigate, prevent and deter serious financial crime. These powers
include the non-conviction based confiscation regime provided for under the Proceeds
of Crime Act, recently strengthened through reforms introduced by the Crimes
Legislation Amendment (Proceeds of Crime and Other Measures) Act 2016.
The AFP works alongside government agencies such as ASIC, AUSTRAC and the
ATO to investigate and prosecute white-collar criminals.
Commonwealth Director of Public
The Commonwealth Director of Public Prosecutions (CDPP) plays an
important role in the Commonwealth's efforts to combat white-collar crime. A range
of Commonwealth investigative agencies refer matters relating to white-collar
crime to the CDPP, including the AFP, Australian Competition and Consumer
Commission (ACCC), Australian Criminal Intelligence Commission (established by
the merger in 2016 of the Australian Crime Commission and CrimTrac), ASIC, the ATO
and the Department of Human Services.
The CDPP further informed the committee that through 'the provision of expert
pre-legal advice and prosecution services, the CDPP actively contributes to whole-of-government
efforts to combat white-collar crime'.
Australian Competition and Consumer
The ACCC is Australia's national competition and consumer protection
As the ACCC explained in its submission, it does not have the power to
decide whether there has been a breach of the Competition and Consumer Act
2010 or to impose penalties. However, it plays an important role in
investigating potential breaches of the law, and making applications to the
Court for the imposition of remedies and penalties.
The ACCC can also refer a brief of evidence to the CDPP if it considers the
conduct may warrant a criminal penalty. The Competition and Consumer Act also
provides the ACCC with a range of non-Court based enforcement remedies, which
the ACCC suggested provides it with 'the flexibility to respond to conduct
proportionate to the potential harm'. These non-Court remedies include
administrative resolution, court enforceable undertakings, and the issuance of
Australian Financial Security
The Australian Financial Security Authority (AFSA) is an executive
agency in the Attorney-General's portfolio, responsible for the application of
bankruptcy and personal property security laws, and the regulation of personal
insolvency practitioners and trustee services. ASFA does not impose penalties itself,
but has an investigatory function, and refers prosecution briefs to the CDPP.
The Attorney-General's Department administers offences within the Criminal
Code Act 1995 (the Criminal Code), including fraud affecting the
Commonwealth government, domestic bribery, foreign bribery, money laundering,
forgery and false accounting offences.
The Attorney-General's Department summarised the penalties available for these
offences in its submission to the inquiry.
It also noted that the AFP is responsible for investigating Commonwealth
offences and the CDPP has primary responsibility for the prosecution of these
crimes, while ASIC, the ATO, the ACC and the ACCC also have enforcement and
prosecutorial functions in relation to white-collar crime.
The Attorney-General's Department summarised its policy role in relation
to combating white-collar crime in its submission as follows:
The department is responsible for a number of policy areas
related to white collar crime, including national anti-money laundering and
counter-terrorism financing (AML/CTF), Commonwealth fraud, proceeds of crime,
anti-corruption and foreign bribery. The department administers a range of Acts
used to combat white collar crime, including the Proceeds of Crime Act 2002
and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006
(AML/CTF Act). The department also fulfils a legislative scrutiny role,
assessing Commonwealth legislation against the principles outlined in the Guide
to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.
The department works closely with law enforcement agencies
such as the Australian Federal Police (AFP), the Australian Crime Commission
(ACC), CrimTrac, AUSTRAC, and the Commonwealth Director of Public Prosecutions
(CDPP) and provides legal and policy advice to government on criminal justice
issues, including issues surrounding white collar crime.
Interagency and international
There are various forums and bodies through which different agencies and
jurisdictions work together to combat white-collar crime and cooperate and
For example, in 2015 the government established a multi-agency Serious
Financial Crime Taskforce (SFCT), designed to deter and disrupt serious and
complex financial crime. The SFCT builds upon and broadens the partnerships
established by Project Wickenby, a cross-agency taskforce established in 2006
to better combat tax fraud. As the Attorney-General's Department explained:
The SFCT brings together the knowledge, resources and
experience of law enforcement and regulatory agencies, including the AFP,
Australian Tax Office (ATO), ACC, the Attorney General’s Department (AGD),
AUSTRAC, Australian Securities and Investments Commission (ASIC), CDPP and Australian
Border Force (ABF).
The SFCT targets activities in Australia and abroad, including phoenix
fraud, trust fraud and international tax evasion. In doing so, it works with
international partner agencies, governments and organisations around the world,
including those countries subject to Australia's bilateral tax treaties and Tax
Information Exchange Agreements.
The SFCT is part of the AFP-led, multi-agency Fraud and Anti-Corruption
(FAC) Centre, which was created in 2014 to improve existing fraud and
The AFP advised the committee that 11 agencies were working side by side in the
FAC Centre to prevent and combat serious financial crime.
Views on the adequacy and consistency of the current penalty framework
A number of submitters highlighted the importance of having a penalty
framework that was consistent and fit for purpose. For example, ASIC noted that
appropriate penalty settings, and the availability of a range of penalties for
particular breaches of the law, are central to its enforcement role. An
appropriately set penalty framework, it submitted, helps deter contraventions
of the law, promote greater compliance and encourage cooperation with the
regulator, thus 'resulting in a more resilient financial system'.
Conversely, ASIC explained that where there are gaps in its enforcement
...this presents a barrier to us taking an optimal enforcement
response, because the appropriate remedy is not available to us. This can risk
undermining confidence in the financial regulatory system.
ASIC noted that the penalties in legislation that it administers have
not been subject to review since they were introduced
(although, as noted in the previous chapter, these penalties are now being
considered by the ASIC Enforcement Review Taskforce). ASIC submitted that this
had led to:
... shortcomings in the consistency or size of penalties, which
creates gaps between community expectations of the appropriate regulatory
response to a particular instance of misconduct and what we can do in practice.
Other inquiry participants highlighted a broad range of apparent
inconsistencies and inadequacies in the current penalty framework. The next
part of this chapter provides an overview of some of the perceived inadequacies
and inconsistencies in the penalty framework, noting that these concerns are
addressed in greater detail in subsequent chapters.
Views on the general adequacy of
the penalty framework
Several submitters argued that the penalty framework for white-collar
crime and misconduct was, on the whole, failing to properly deter or adequately
punish offenders. For example, the Australian Shareholders' Association (ASA)
submitted that penalties imposed for white-collar offences in Australia in
recent years 'have generally been inadequate'. It submitted:
The civil and administrative penalties which are currently
available and actually imposed are not strong enough to deter offenders and
criminal convictions, where available, are pursued only in limited cases. ASA
believes that there is a need for more criminal prosecutions and increased
civil and administrative penalties for white-collar crime.
The Uniting Church (JIMU) argued that the penalties imposed on white-collar
criminals were often too lenient, particularly relative to the penalties handed
down to people convicted of social security fraud. This was despite the fact,
the United Church (JIMU) submitted, that the sums involved in white-collar
crime were typically higher, and white-collar criminals were more likely to be
acting out of greed than financial hardship.
The Uniting Church (JIMU) submitted that:
...due to the inconsistencies in legislation the outcome for white-collar
criminals who are convicted can be much less detrimental than for those who are
convicted of other types of fraud such as welfare or identity fraud. Penalties
for social security fraud in Australia can include steep fines and up to ten
years in prison, even though the amounts defrauded are generally much smaller,
and the people committing the fraud are often people who are already suffering
extreme financial hardship.
Other submitters suggested that penalty settings in Australia, at least
in relation to those penalties within their area of concern, are generally
adequate. For example, the ATO submitted that existing penalty settings in
relation to tax crime are broadly consistent with comparable countries.
Moreover, the ATO submitted that overall the current penalty framework as it
applied to tax crime:
...is considered to be 'fit for purpose' in terms of its
structure, the variety of penalty options it affords to treat white-collar
crime, and the maximum levels of penalties and criminal sanctions. In addition,
the ATO has a range of powers which support our ability to collect the
financial penalties that we impose. The laws include the ability to garnishee
bank accounts and prevent taxpayers with a taxation liability from leaving the
country. Generally we believe that these laws are effective in supporting the
collection of penalties levied.
Similarly, the ACCC submitted that the penalties for breaches of
Australian competition law are 'broadly appropriate and in line with
However, while indicating that the maximum penalty settings for breaches of
competition law in Australia were generally appropriate, the ACCC also
suggested that 'there remains a challenge for the regulator and the Courts to
bring down penalties in proportion to the wrongdoing occurring'.
In contrast to its characterisation of the penalties available for
breaches of competition law, the ACCC submitted that the penalties for breaches
of the Australian Consumer Law (ACL) in Australia are currently inadequate, and
'ought to be more comparable to competition law penalties that also operate
across the economy'.
The ACCC advised that it:
...considers that the current maximum penalties available under
the ACL are too low to provide a powerful deterrent effect. This is
particularly the case for breaches by large corporate players that are unlikely
to be deterred by a maximum penalty of [$1.1 million] per contravention.
There appears to be no strong policy reason for the maximum penalties under the
ACL being considerably lower than those available for breaches of competition
laws. We do not consider that consumer harm resulting from ACL breaches is
necessarily less significant than that arising in competition cases.
At the same time, the ACCC noted that the ACL Review currently underway
(and due to report in March 2017) will consider whether the penalties provided
for in the ACL remain appropriate.
One apparent deficiency in the current penalty framework highlighted by
a range of inquiry participations was the level of civil penalties available in
the Corporations Act. These inquiry participants noted, for instance, that the
current maximum civil penalties of $200,000 for individuals and $1 million
for corporations have not been changed since they were introduced more than 10
years ago, and are too low given the severity of the offences involved. ASIC
also submitted that a 'broader range' of non-criminal monetary penalties are
available in other jurisdictions, including:
greater flexibility to impose higher non-criminal penalties (e.g.
penalties that are a multiple of the financial benefit obtained by the
wrongdoer) and scope to use non-criminal penalties when punishing a wider range
of wrongdoing; and
the ability to require disgorgement (i.e. to require the profits gained
or losses avoided to be removed from the wrongdoer).
Calls for increasing the range and level of civil penalties in the
Corporations Act, the possibility of imposing penalties as multiples of the
benefit gained, and the introduction of a disgorgement regime are discussed in
Similarly, there was a robust debate between inquiry participants
regarding the adequacy of criminal penalties for white-collar crime, and in
particular maximum prison terms available and the extent to which white-collar
criminals are currently receiving custodial sentences. These views are
discussed in chapter 4.
Views on the general consistency of
the penalty framework
A number of submitters pointed to what they regarded as inconsistencies
in the penalty regime. For example, referring specifically to criminal
penalties for white-collar offences, Mr Greg Golding, representing the Law
Council of Australia, told the committee that:
... there is a need to review Australia's penalty regime to
ensure that there is conformity and appropriate similarity across criminal
penalties. We believe that there is a disparity that has crept into the law
over the years that needs to be reviewed for consistency purposes.
The CDPP pointed to one such inconsistency in the treatment of the offence
of general dishonesty in chapter 7 of the Criminal Code. For historical reasons
set out by the CDPP, the offence carries a maximum penalty of five years, as
opposed to 10 years for various other fraud offences. At the same time,
similar offences, such as conspiracy to dishonestly obtain a gain or cause a
loss to the Commonwealth and, under the Corporations Act, engaging in dishonest
conduct in relation to a financial product or financial service, carry a
maximum 10 year sentence.
ASIC pointed out in its submission that some penalties have increased in
recent times. However, ASIC described penalty changes in recent years as
'piecemeal', with some introducing inconsistencies into the penalty regime.
For example, referring to its own legislation, ASIC highlighted inconsistencies
in the penalties available for similar types of offence, depending on where
they are located in the relevant legislation:
For example, in 2010, the maximum penalties available for
offences including market manipulation, insider trading and dishonest conduct
in the course of carrying on a financial services business were increased, with
the maximum imprisonment term doubling to ten years and pecuniary penalties
being significantly raised. However, the maximum penalties for offences
including the dishonest use of position by a director and the intentional
failure of an officer of a managed investment scheme to act honestly remained
at five years imprisonment.
The introduction of new legislative instruments has, in some cases, introduced
an additional level of inconsistency into the penalty framework, with penalties
in more recent legislation being considerably higher than the penalties
available for similar types of conduct in older legislation. ASIC explained
that some of the newer legislation it administers (for instance, the National
Consumer Protection Act 2009) actually applies higher civil penalties than the
criminal pecuniary penalties available for the same type of conduct under the
An individual prosecuted for the criminal offence of
providing unlicensed financial services under the Corporations Act faces a
maximum fine of $36,000. In contrast, an individual subject to civil
proceedings for engaging in unlicensed credit activity under the National
Credit Act faces a civil penalty of up to $360,000.
ASIC also noted that some offences in the Corporations Act attract
criminal penalties but not civil penalties, whereas similar offences under the
National Credit Act and the ASIC Act do attract civil penalties:
For example, providing unlicensed financial services attracts
a significantly lower maximum penalty than does providing unlicensed credit
services. Providing unlicensed financial services is a criminal offence with a
maximum penalty of $180,000 for a corporation and/or two years imprisonment. As
it is a criminal offence only, the unlicensed provision of financial services
by a corporation will require proof, beyond reasonable doubt, of the fault
elements imposed under the Criminal Code Act 1995. In the event that a company
is convicted, the maximum penalty available is $180,000. In contrast, the
comparable provision in the National Credit Act relating to unlicensed credit
services is both a criminal offence and a civil penalty offence attracting a
penalty of $1.8 million for a corporation.
Providing an overall assessment of the adequacy and consistency of
current penalties for white-collar crime and misconduct is not straightforward.
Just as the types of wrongdoing that might be considered white-collar crime and
misconduct are extremely varied, so too are the penalties available in relation
to that wrongdoing. However, the committee agrees that, broadly speaking, there
appear to be serious inadequacies and inconsistencies in the current penalty
framework. These inadequacies and inconsistencies are drawn out in subsequent
chapters, as are steps that might be taken to address them.
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