As the May 2022 Australian federal election approaches, the major parties’ campaigns have primarily centred on issues that affect households and individuals. By contrast, a number of major reforms impacting upon the financial and corporate sectors, which had been introduced into Parliament prior to its dissolution on 11 April 2022, have not featured in the major parties’ campaigns. These appear likely to remain on the legislative agenda post-election.
DPA scheme; corporate offence of failure to prevent foreign bribery
The Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (Cth) (Combatting Corporate Crime Bill) sought to bolster the Commonwealth’s anti-foreign bribery and corruption laws, and to introduce a Deferred Prosecution Agreement (DPA) scheme in relation to a number of serious corporate crimes, including offences under Part 7.10 of the Corporations Act 2001 (Cth) and other offences including foreign bribery, false accounting, money laundering, proceeds of crime and sanctions offences. These measures were designed to address challenges associated with detecting, investigating and addressing serious corporate crime. Such crime is said to be easy to conceal, and investigations may be frustrated by processing large quantities of complex data, lengthy negotiations over legal professional privilege claims, or engaging in mutual assistance processes for evidence held overseas.
The Bill proposed to amend the Commonwealth Criminal Code to:
- (in Schedule 1 to the Bill) expand the scope of the existing foreign bribery offence, including by capturing candidates for office in the definition of foreign public official, and applying the offence where a personal (as opposed to business) advantage is sought, and introduce a new corporate offence of failing to prevent foreign bribery;
- (in Schedule 2 to the Bill) introduce a Commonwealth DPA scheme to enable the Commonwealth Director of Public Prosecutions to invite a corporate offender to negotiate an agreement to comply with a range of specified conditions, in lieu of prosecution; and
- (in Schedule 3 to the Bill) repeal the existing definitions of ‘dishonest’ in the Commonwealth Criminal Code and insert a new, simplified definition, which defines ‘dishonest’ as meaning ‘dishonest according to the standards of ordinary people’ (and thus remove existing requirements that the defendant be aware that their knowledge, belief or intent was dishonest according to the standards of ordinary people, in line with the test endorsed by the High Court of Australia in Peters v The Queen (1998) 192 CLR 493).
A version of the Bill (which did not include the amendments in Schedule 3) was originally introduced in the Senate in the 45th Parliament in December 2017, which lapsed at the end of that Parliament in July 2019. The 2019 version of the Bill was introduced in the Senate in the 46th Parliament by the Australian Government in December that year, and was reviewed by the Senate Legal and Constitutional Affairs Legislation Committee (LCAL Committee).
The LCAL Committee, which comprised two Labor Party senators, three Liberal senators and a Greens Party senator, invited submissions from a number of organisations and individuals, and conducted a public hearing in February 2020, before delivering its report on the 2019 version of the Bill in March 2020. That report noted that a number of inquiry participants had expressed broad support for amendments in the Bill, although some had done so with certain qualifications or suggested amendments. Nevertheless, the Committee recommended that the Bill be passed.
However, the Labor Party senators on the LCAL Committee dissented, indicating that they supported the foreign bribery offence amendments in Schedule 1, but contending that, while there may be a place for DPAs in Australia, the Australian Government had not made a case for the particular DPA scheme proposed in Schedule 2, and that the scheme proposed was “too weak”. The Labor senators also opposed the amendments in Schedule 3 to the Bill.
The Greens senator on the LCAL Committee also delivered further comments, expressing broad support for Schedules 1 and 2 but recommending that the Senate suspend consideration of the Bill until after the Attorney-General had tabled the Australian Law Reform Commission’s report into Australian Corporate Criminal Responsibility (ALRC Report), which was pending at that time.
The ALRC Report was published in August 2020. It included a recommendation (consistent with the DPA scheme in the United Kingdom) that the Bill be amended to:
- vest the power to approve a DPA in a Judge of the Federal Court of Australia (rather than an “Approving Officer” appointed by the Attorney-General);
- permit the parties to present oral submissions on the DPA; and
- require the publication of the reasons for any approval in open court.
It therefore appears, despite having failed to pass in the last two Parliaments, that there is support on both sides of politics and from the Greens for the amendments proposed in Schedule 1 to the Bill and for a DPA scheme to be introduced (albeit that there is some disagreement in relation to the details of the DPA scheme proposed in the Bill itself). Given in particular the recommendation in the ALRC Report, it remains likely that the Australian Government will pursue foreign bribery offence amendments along the lines proposed in Schedule 1 of the Bill, as well as the introduction of a DPA scheme, in the new Parliament.
As we outlined in a previous article in February 2022, over a year has passed since the ASIC immunity policy for market misconduct was introduced in early 2021. That policy is designed to incentivise individuals to disclose their own potential wrongdoing under Part 7.10 of the Corporations Act 2001 (Cth) to ASIC, by applying for immunity from a penalty or criminal proceedings. The policy’s exclusion of corporate entities from its scope has prompted speculation regarding its effectiveness. The proposed introduction of a DPA scheme could remedy some of the immunity policy’s shortcomings, by encouraging companies to self-report potentially serious corporate misconduct by offering greater certainty of outcome when compared to litigation, and an opportunity to avoid some of the reputational and financial costs associated with lengthy criminal investigations and trial processes.
The Crimes Legislation Amendment (Ransomware Action Plan) Bill 2022 (Cth) (Ransomware Bill) was introduced in the House of Representatives in February 2022, in response to the growing threat of ransomware attacks. Recent ransomware attacks have targeted Australia’s critical infrastructure, businesses and members of the community, such as the ransomware campaigns targeting Australia’s aged care and healthcare sectors during the height of the COVID-19 pandemic in 2020. The purpose of the Ransomware Bill was to implement key aspects of the Ransomware Action Plan announced by the Minister for Home Affairs in October 2021, including:
- expanding and modernising criminal offences relating to cybercrime in the Commonwealth Criminal Code;
- ensuring that law enforcement can continue to monitor and freeze proceeds of crime, by extending current investigative and freezing powers to cover digital currency and certain digital currency exchanges; and
- creating new powers to seize digital assets (including cryptocurrencies) that are reasonably suspected to be evidential material or tainted property under the Crimes Act 1914 (Cth) and the Proceeds of Crimes Act 2002 (Cth).
Ransomware is generally understood to mean a malicious cyber-attack that aims to put the victim in a position where they can be extorted. It has become an increasingly prevalent global threat over the past decade, due in part to the proliferation of cryptocurrencies that allow for international payment of ransoms in a way that is difficult for law enforcement to track and disrupt. As ransomware attacks are expected only to increase in severity and ubiquity, and given that no significant opposition to the Ransomware Bill has been expressed from either major party, it is likely that amendments of the sort proposed in the Ransomware Bill will be pursued following the election.
Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) reform has been high on the parliamentary agenda in recent years, following reports issued in 2015 and 2018 by the Financial Action Task Force (FATF) on Australia’s technical compliance with FATF recommendations. Those recommendations have been approached by the Australian Government in tranches, with the first tranche having been implemented by the passing in December 2020 of the Anti Money-Laundering and Counter-Terrorism Financing and Other Legislation Amendment Act 2020 (Cth). That Act introduced a number of significant reforms in relation to customer due diligence, correspondent banking, tipping off and confidentiality. However, there have been further calls for reform, including the second tranche of the FATF’s recommendations, which would involve extending AML/CTF regulatory obligations to designated non-financial businesses and so-called “gatekeeper” professions, including lawyers, conveyancers, accountants, high-value dealers in precious stones and metals, real estate agents and trust and company service providers.
Most recently, in March 2022, the Senate Legal and Constitutional Affairs References Committee (LCAR Committee) reported on its inquiry into the adequacy and efficacy of Australia’s AML/CTF regime. The Committee recommended, among other things, that the Australian Government accelerates its consultation with stakeholders on the timely implementation of second tranche reforms, and that the Australian Government pursues the establishment of a public register containing information as to the ultimate beneficial ownership of legal entities and trusts.
In February 2022, Greens Senator Nick McKim introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment (Increased Financial Transparency) Bill 2022 (Cth) (the Greens’ Bill). The Greens’ Bill sought to require the Australian Government to introduce legislation into Parliament by 30 September 2022, to amend the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), to implement the second tranche reforms and to establish a beneficial ownership register.
The prospect of continued parliamentary and international pressure, including in the context of recent sanctions imposed by the Australian Government in response to the war in Ukraine, leaves little doubt that the AML/CTF reform will remain high on the agenda in the new Parliament.
Simplification of the financial services regulatory regime and introduction of a Financial Accountability Regime
The Financial Accountability Regime Bill 2021 (Cth) (FAR Bill) was introduced in the House of Representatives in October 2021, together with the Financial Sector Reform (Hayne Royal Commission Response No.3) Bill 2021 (Cth), the Financial Services Compensation Scheme of Last Resort Levy Bill 2021 (Cth) and the Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2021 (Cth). This suite of bills is the latest in a series of reforms to be proposed by the Australian Government in response to the recommendations of the Banking and Financial Services Royal Commission, in line with the Government’s commitment to taking action on all of the Royal Commission’s recommendations and additional commitments announced in February 2019 to address issues identified in the Royal Commission’s final report.
The suite of bills proposed to repeal the Banking Executive Accountability Regime introduced in 2018 and replace it with a new and strengthened Financial Accountability Regime, which would impose accountability, key personnel, deferred remuneration and notification obligations on the banking, insurance and superannuation sectors. It also proposed to introduce a scheme of last resort to compensate eligible consumers where the Australian Financial Complaints Authority has made a determination in their favour in relation to a financial product or service within the scope of the scheme, and that determination remains unpaid.
Although financial regulatory reform has not featured in the major parties’ election campaign messaging to date, it remains highly topical, and the Australian Law Reform Commission (ALRC) is continuing to conduct an inquiry into the potential simplification of the Australian financial services regulatory regime (as recommended by the Royal Commission). That inquiry commenced in late 2020 and the ALRC published its first interim report in November 2021, recommending a number of amendments to the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). The ALRC’s second interim report, focusing on regulatory design and the hierarchy of primary law provisions, regulations, class orders and standards is due by 30 September 2022, and its third interim report, focusing on potential reframing or restructuring of Chapter 7 of the Corporations Act 2001 (Cth), is due by 25 August 2023. Those interim reports will likely recommend wholesale changes to Chapter 7, including in line with the issues canvassed in the ALRC’s fifth background paper entitled Risk and Reform in Australian Financial Services Law, which was published in March 2022. Given this context and the outstanding recommendations of the Royal Commission, financial services regulatory reform, including in respect of the proposed Financial Accountability Regime, is likely to be high on the new Parliament’s legislative agenda.
Authors: Andrew Floro, Jason Oliver and Gabriela Freeman.