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Thursday, 29 March 2001
Page: 23357


Senator ELLISON (Minister for Justice and Customs) (3:33 PM) —I present three government responses to committee reports as listed on today's Order of Business at item 13. In accordance with the usual practice, I seek leave to incorporate the documents in Hansard.

Leave granted.

The responses read as follows

GOVERNMENT RESPONSE TO THE JOINT STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE'S REPORT FUNDING AUSTRA-LIA'S DEFENCE

The Government welcomes the Committee's inquiry into and report on the level of Defence funding required to provide for the defence of Australia. The report provided a valuable contribution to raising public awareness of issues in national security and informed public debate on defence funding.

Following the tabling of the Committee's report and the last federal election, the Government began a thorough review of Australia's defence needs. This review included an extensive community consultation program and an unprecedented level of ministerial involvement in defence policy formulation through the National Security Committee of Cabinet.

Following this wide-ranging review, the Government tabled the Defence White Paper 2000 in Parliament on 6 December 2000. Defence 2000: Our Future Defence Force presents the Government's decisions and commitments concerning the future of Australia's defence force, including the level of funding that will be provided to enable the Australian Defence Force to achieve Government-directed strategic objectives.

The commitments and plans made by the Government in the Defence White Paper, particularly in the sections on Capability and Funding, comprehensively address the current pressures and future demands on funding for the Australian Defence Force. These new plans and commitments build on earlier Government initiatives, particularly the Defence Reform Program, which sought, among other initiatives, to maximise the resources available for the sustainment and enhancement of Defence capability. The Government remains strongly committed to continuing improvements and reforms in Defence to ensure that money spent on defence is managed wisely and that funding Australia's defence is both affordable and sustainable over the long term.

The Recommendations of the Committee

1. The Committee recommends that the Government undertake to provide Defence with a five-year budget commitment, to provide Defence with a more secure basis for long term planning of resource allocations.

The Government has decided to provide Defence funding commitments covering the whole of the coming decade matched to the capability enhancements detailed in the Defence Capability Plan. This funding commitment is the most specific long-term defence funding projections provided by any Australian government in more than 25 years. This commitment will provide Defence with a secure basis for managing and planning the development of capability.

2. The Committee recommends that the Department of Defence be required to report to the Parliament annually, and in a report separate from the Defence Annual Report, specifically detailing the progress made in implementing major efficiency initiatives.

Separate reporting by the Department is considered unnecessary. Defence already reports regularly to Parliament on progress in implementing major efficiency initiatives in Portfolio Budget Statements and Annual Reports. This reporting is being expanded to cover all improvements as Defence migrates to a culture of continuous improvement. This specific reporting together with the regular ministerial statements on efficiency initiatives to Parliament should obviate the need for separate reports. There will be a higher level of accountability attendant with the introduction of the classified Defence Financial and Management Plan, which will set annual targets for the delivery of savings and efficiency measures.

3. The Committee recommends that Defence funding should be increased in real terms, to enable the ADF to remain a well-equipped, highly-trained force relying on technologically advanced weapons and support systems

In the White Paper, the Government has committed itself to increasing Defence funding by an average of about three percent per annum in real terms over the next decade. The Government intends that funding for 2001-02 and 2002-03 will increase by $500 million and $1,000 million respectively, to provide substantial initial funding for a number of key capability initiatives that will ensure the ADF is equipped, trained and supported to the level necessary to enable it to perform the roles Government directs.

4. The Committee recommends that the mechanism of fixing a real rate of growth be adopted as a means of defining the increase in Defence spending.

The Government has determined the appropriate level of increase in Defence spending through a rational, structured approach. The Government has assessed Australia's strategic environment; confirmed Australia's strategic interests and objectives; and then developed and costed the capabilities required in the Australian Defence Force to ensure it is able to protect Australia's strategic interests and achieve our strategic objectives. This approach, coupled with a thorough evaluation of current Defence funding programs and pressures has enabled the Government to forecast an appropriate level of Defence funding over the next decade. The appropriate level of funding averages about three per cent per annum in real terms over the decade. It should be stressed that these Defence funding levels have been (and will in the future be) determined by reference to strategic objectives (ie outcomes and outputs) and budgetary and defence requirements in a given year.

5. Given that the recommendations made in this report can have no impact on the decisions taken in the 1998-99 Federal Budget, the Committee recommends that real growth in Defence funding should commence in FY 1999-00.

The Government intends that the first increase in Defence funding of $500 million will be provided in the 2001-02 Federal Budget.

6. The Committee recommends that the current level of Defence funding be increased by a real growth rate of between 1.5 and 2.5 per cent annually for the next five years.

As discussed above, the Government has estimated that the appropriate level of funding increase for Defence is initial increases of $500 million and $1,000 million in financial years 2001-02 and 2002-03, respectively, with an average of about three per cent per annum growth in real terms over the decade.

7. The Committee is concerned about the substantial additional expenditure required to overcome block obsolescence in the 2010-15 period. The Parliament and Expenditure Review Committees of successive Governments must be involved in the advance financial planning to overcome this problem.

The Government has addressed comprehensively the issue of block obsolescence in its consideration and development of the White Paper. It has made explicit funding provision for the life extension, refurbishment, upgrade or replacement of all current Defence platforms and weapon systems that are reaching the end of their service life over the next two decades through the Defence Capability Plan, which will be implemented through the classified Defence Financial and Management Plan (this document informs Government of the impact and options available for managing block obsolescence). Ongoing review and development of the Defence Capability Plan will occur through the annual Budget process, and it is through this established mechanism that the Government will manage long term Defence funding pressures. The Parliament and Expenditure Review Committees will have visibility and involvement in this planning through normal Defence reporting and Government accountability mechanisms - particularly the classified Defence Financial and Management Plan as well as Annual Reports, Portfolio Budget Reports, Additional Estimates and appearances before Parliamentary Committees by representatives from the Department of Defence.

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GOVERNMENT RESPONSE TO THE JOINT STATUTORY COMMITTEE ON CORPORATIONS AND SECURITIES REPORT ON THE DRAFT FINANCIAL SERVICES REFORM BILL

Introduction

The Minister for Financial Services & Regulation, the Hon Joe Hockey MP, released the exposure draft Financial Services Reform Bill on 11 February 2000 for 3 months' public comment. On 8 March 2000, the Parliamentary Joint Statutory Committee on Corporations and Securities resolved to hold an inquiry into the draft Bill. The Committee tabled its report on 14 August 2000. In addition to 8 recommendations on the Bill made by the Committee, the report contains a minority report by Labor members.

The Government's response to the Committee's recommendations is as follows.

Committee recommendation: Final Bill should be passed.

Response: The Government welcomes this recommendation, and will seek to finalise the drafting of the legislation for early Parliamentary consideration as soon as practicable.

Committee recommendation: Amendment to address adverse effects of the draft Bill on the delivery of financial services in rural and regional Australia. In particular, the Committee recommended that the draft Bill be amended to remove deposit products offered by authorised deposit taking institutions from the definition of financial product.

Response: The Government recognises the need for the Bill's requirements to apply flexibly to basic deposit products and to ensure regulatory proportionality. Accordingly, the Government will amend the draft Bill so that deposit products offered by authorised deposit-taking institutions that are for a term of 2 years or less with no management or break fees will not be subject to the financial services guide requirements or requirements to provide statements of advice. This will ensure that the Bill's requirements apply flexibly to basic deposit products recognising that they are generally well understood by retail consumers and that consumers can get their money back on demand.

Amendments are also proposed to the draft Bill's definitions of financial product advice and dealing to ensure the requirements for licensing and authorisation are more tightly focussed. This will ensure that activities commonly engaged in by tellers such as the accepting of moneys for deposit or the giving out of moneys from deposit accounts will not be caught by the FSR regime.

The Committee's report highlights some concerns about the Bill's competency requirements for representatives, such as tellers or employees of third party agents. These concerns are unfounded and do not support arguments for the wholesale removal of deposits and means of payment from the draft Bill. The intention with these requirements is not to force every representative to be competent to provide full financial planning services. Rather, representatives will only have to be competent to provide the services they actually provide - no more and no less. The Government does not expect industry participants who are adequately trained and competent to provide the services they now provide to have to undertake significant extra training to meet the draft Bill's competency requirements.

The Government believes that the final form of the legislation will not hinder the operation of Rural Transaction Centres or distribution of deposit products through third-party agents such as newsagents or pharmacists in country Australia. The Government is committed to ensuring that all Australian consumers of financial products receive the same level of protection, irrespective of where they live or how they access those products. Hence, the draft Bill's requirements will ensure that consumers of financial services in the bush will get the same protections as consumers in cities. In particular, they will require deposit-taking institutions to ensure that their staff and agents are competent to provide the services they offer consumers, whether those consumers live in rural, regional or city Australia.

Committee recommendation: Amendment to address the information economy and e - commerce. In particular, the Committee recommended that the draft Bill be amended to exclude information provided in certain circumstances from the definition of financial product advice.

Response: The Government welcomes the support for the information economy and e-commerce. One of the underlying objectives of the draft Bill is to ensure that the regulatory regime is media-neutral and encourages innovation in the design, distribution and use of financial services and products.

The Government does not believe it needs to amend the definition of financial product advice in the way recommended by the Committee to address the concerns raised in evidence to the Committee on the information economy and e-commerce. Rather, the Government is amending the draft Bill to clarify the application of its requirements in a range of e-commerce situations. For example, the Bill will clarify that a person who merely provides a communication service through which a consumer makes a non-cash payment is not the provider of the non-cash payment facility.

Committee recommendation: Amendments to address issues concerning Australia as an international financial centre raised by Australian Stock Exchange Limited (the ASX).

Response: The Government is keen to enhance Australia's role as an international financial centre. The Government also agrees that the Australian market needs to be able to respond quickly to change, domestic and international, in order to continue to remain relevant. However, the Government is not convinced that the examples cited in evidence to the Committee by the ASX will have the effect of undermining the future of Australia's markets. In particular

· the object of provisions relating to the regulation of foreign-based markets operating in Australia is facilitative - to ensure that those markets which are subject to an appropriate regulatory regime overseas are not, in addition, subject to the full rigours of the Australian regulatory regime. The intention is that the regulation of such markets in Australia and overseas, when taken together, be equivalent to the regulation of a comparable market which is licensed only in Australia;

· the purpose of requiring that Australian incorporated bodies which operate a market or clearing and settlement overseas be licensed in Australia is to ensure that Australia does not lend its name to doubtful operators who may mislead overseas investors by implying that, since they are incorporated in Australia, they are regulated in Australia. Such a situation would adversely affect Australia's reputation as an international financial centre;

· the Government remains committed to providing regulation of financial markets through a combination of self-regulation, and regulation by the Minister and ASIC. A wide power of delegation to the regulator, ASIC, is necessary to ensure flexibility in the operation of the new legislation into the future, but it is expected that the Minister will continue to be the decision-maker in relation to the major markets.

The ASX also raised in evidence the issue of increasing the shareholder limitation in the Exchange from 5% to 15% in line with the banking sector, with the possibility of a larger proportion, subject to a fit and proper person test. The ASX also pointed to the need for an even-handed competitive environment.

On 10 October 2000, the Minister for Financial Services and Regulation, the Hon Joe Hockey MP, announced that the Government had decided that the shareholder limitation on the ASX would be changed to 15%, with the possibility of a larger shareholding being permitted if the acquisition is in the national interest. The same limitations would apply to other financial markets and clearing and settlement facilities which are of national economic significance. These changes are to be included in the draft Bill and will complement the 'fit and proper' person test which will apply to controllers and senior managers of Australian markets and clearing and settlement facilities.

Committee recommendation: Amendment to address the impact on small business. In particular, the Committee recommended that the draft Bill be amended to remove the requirement for disclosure in the Statement of Advice of quantum of commission on risk insurance products.

Response: The Government does not accept the Committee's recommendation. The draft Bill provides that, where personal advice is given to a client in relation to any financial product, the financial service provider must provide the client with a written copy of the advice including details of

· any benefit or advantage the financial service provider may receive in connection with the advice or the sale of a financial product, and

· any other pecuniary or other benefits (including soft dollar arrangements) which may reasonably be expected to influence the financial service provider in giving the advice.

The purpose of disclosure at this stage is to help the consumer identify any potential influences on the advice given or any potential conflicts of interest which the adviser may have in recommending a specific product. It is not to indicate the extent to which any return the consumer may receive on the product is reduced by such commissions. Nor is it to identify the distribution costs associated with the product.

In requiring the disclosure of benefit or advantage at this stage, the draft Bill will ensure that consumers are provided with information that will help them make an informed choice about whether to purchase a product or not. The disclosed information helps the consumer evaluate any possible influences on the adviser in recommending a particular product. For example, if an insurance agent received commission, bonuses or soft dollar remunerations, this would need to be disclosed in the same way as a salaried bank employee disclosed the receipt of a performance bonus based on the number of products sold .

For a consumer to assess possible conflicts an adviser may have in recommending a product they need to know the quantum. Conflicts of interest do not only occur where commission affects the return to the client. For example, an adviser may have a conflict of interest where they receive a 25% commission on a risk product even though the amount of commission does not affect the payment to the consumer if or when the event which is insured against occurs.

Committee recommendation: Amendment to address co-regulation and the position of professional bodies. In particular, the Committee recommended that the draft Bill be amended so that it does `not affect anyone whose involvement in financial services is incidental to their main activity'.

Response: The Government does not accept the Committee's recommendation. From the consumer's perspective, the loss they might suffer from poor financial advice given by, for example, an accountant who provided that advice incidentally to accounting services is no less serious than the loss they would suffer if the poor advice had been given by someone whose main activity is the provision of financial advice, for example a financial planner.

The draft Bill requires that anyone who provides defined financial services be competent to do so and provides the same minimum consumer protections. This requirement applies irrespective of whether the service provider calls themselves insurance agent, financial planner, accountant or lawyer.

Generally speaking, providers of financial advice will require an Australian Financial Services Licence. The draft Bill provides an alternative mechanism for those wishing to provide financial advice in the form of the declared professional body mechanism.

In light of submissions on the draft Bill, amendments have been made to the definitions of financial product advice and dealing to ensure that it is clear what activities will attract the operation of the Bill.

Committee recommendation: Provide proper recognition of corporate structures and the retail/wholesale client definition.

Response: As a result of the consultation process on the draft Bill, amendments have been made to the Bill to accommodate conglomerate structures where staff are employed by a single corporate entity within the group.

In relation to the potential capital gains tax consequences for existing industry participants in moving to the new licensing regime contained in the draft Bill, consultations have been occurring on this issue since February 2000. The Government will consider whether any legislation is necessary to deal with the tax consequences as a result of the FSR Bill.

In relation to the retail/wholesale client definition, as a result of the submissions received during the consultation process, the Government has amended this definition to align it more closely with the current definition in the Corporations Law and to clarify that Financial Services Licensees and prudentially regulated bodies are wholesale clients.

Committee recommendation: Amendment to start date of the Bill.

Response: The Government notes the Committee's recommendation that consideration be given to the timing of the FSR regime to allow industry sufficient time to comply with the new regime. The Government is keen to finalise, introduce and secure passage of the draft Bill as soon as possible. It will take account of the Committee's views, and those of the regulator and interested industry stakeholders, when determining when to commence the legislation. The Government also notes that it proposes to include transitional provisions in the draft Bill under which existing industry participants will be able to comply with some current requirements rather than the new law for a period of up to 2 years.

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GOVERNMENT RESPONSE TO THE PARLIAMENTARY JOINT COMMITTEE ON THE NATIONAL CRIME AUTHORITY REPORT “STREET LEGAL: THE INVOLVEMENT OF THE NATIONAL CRIME AUTHORITY IN CONTROLLED OPERATIONS”

The Government welcomes the report of the Parliamentary Joint Committee on the National Crime Authority on the involvement of the National Crime Authority in controlled operations.

Controlled operations are an essential tool for investigating and combating serious criminal activity. It is important that the provisions which provide for the conduct of controlled operations are framed both to enhance the effectiveness of controlled operations as an investigatory tool and ensure that private rights are protected and powers are exercised properly.

In recognition of the need for improved controlled operations provisions, the Government has formulated proposals to amend the controlled operations provisions in Part 1AB of the Crimes Act 1914. The recommendations of the committee have been considered in this context.

Government Response to each of the Recommendations of the Parliamentary Joint Committee on the National Crime Authority

Recommendation 1: That the Government recommend to the Standing Committee of Attorneys-General that uniform controlled operations legislation be enacted by the Commonwealth, States and Territories in terms similar to the Law Enforcement (Controlled Operations) Act 1997 (NSW) subject to the foreshadowed amendments in the Finlay Review Report and the further recommendations in this report. (Paragraph 3.43)

Government Response to Recommendation 1: Agree

The Government has decided to adopt an approach to enhancing drug law enforcement strategies that seeks national consistency and draws together existing disparate State and Territory practices. While it is proposed to pursue uniform Commonwealth, State and Territory controlled operations legislation in the medium term, the Government sees merit in pursuing the enhancement of Commonwealth provisions in the first instance.

Recommendation 2: That, if uniform controlled operations legislation cannot be secured then:

(a) the Government call for those States and Territories that do not have controlled operations legislation, to enact such legislation as is necessary for the NCA to authorise and conduct controlled operations in each jurisdiction;

(b) the Government call for those States and Territories that allow officers of a State or Territory agency (eg police service) to authorise controlled operations to amend their legislation to allow NCA members to authorise their own controlled operations. (Paragraph 3.43)

Government Response to Recommendation 2: Agree

As discussed in relation to recommendation 1, the Government proposes to pursue uniformity. The precise manner in which uniformity or consistency will be sought has not yet been determined. The question of conferring powers on the NCA under State laws will be explored in that context.

Recommendation 3: That a two tiered approval process be established for the authorisation of controlled operations under Part 1AB of the Crimes Act 1914:

(i) Applications for minor controlled operations should be subject to an in-house approval regime. That is, a law enforcement officer in charge of a controlled operation may apply to the Commissioner, a Deputy Commissioner or an Assistant Commissioner of the AFP or to a member of the NCA for a certificate authorising a controlled operation. Minor controlled operations are to be defined as short-term investigations (not exceeding one month's duration) involving minimal contact between a covert operative and a suspect or suspects, where law enforcement officers are required to engage in activities involving unlawfulness of a technical nature. If a minor controlled operation exceeds one month's duration, it should be re-classified as a longer-term operation and subject to the external approval process set out in paragraph (ii).

(ii) Applications for longer-term controlled operations should be subject to an external approval process. The function of determining applications for longer-term controlled operations should be transferred to the office of the Inspector-General of the NCA as described in recommendation 19 of the Committee's 1998 report Third Evaluation of the National Crime Authority. Should the Government not accede to the establishment of an Inspector-General for the NCA, then the power to approve longer-term controlled operations should be conferred on such other independent authority as the Government sees fit, such as the AAT.

Nothing in this recommendation should affect the ability of law enforcement agencies to make urgent applications for a certificate authorising a controlled operation in accordance with section 15L of Part 1AB of the Crimes Act 1914. Urgent applications should be able to be made in-house either in person, by telephone or by any other means of communication in respect of both minor and longer-term controlled operations. In particular, the requirements in sections 15L(5) and (6) for the follow-up provision of a written application and certificate in relation to urgent applications should be retained. These written records will be subject to the stringent accountability processes outlined in Recommendation 10. (Paragraph 4.74)

Government Response to Recommendation 3: Disagree

The Government does not favour a two-tiered approach. Such an approach would unduly fetter law enforcement agencies, and add unnecessary complexity to the legislative scheme. Maintaining the same approval process for all operations will ensure consistency and accountability and promote efficiency whilst providing operational flexibility. Both Commonwealth and NSW provisions currently employ a single approval process. The review of the NSW provisions found no reason to alter the existing regime in this respect.

The Government agrees that urgent application procedures should be retained.

Recommendation 4: That law enforcement agencies devise appropriate training and education courses in relation to the operations of the controlled operations legislative regime. (Paragraph 4.74)

Government Response to Recommendation 4: Agree in principle

The Australian Federal Police has established national guidelines in relation to the conduct of controlled operations. The guidelines are enforceable through disciplinary procedures available under an employment management regime and the Australian Federal Police (Discipline) Regulations 1979. Appropriate training and education will continue to be a focus for all agencies.

Recommendation 5: That those States and Territories that have enacted specific controlled operations legislation should make appropriate amendments to allow the NCA Chairperson and Members to authorise controlled operations certificates. (Paragraph 4.77)

Government Response to Recommendation 5: No comment

As previously noted, the Government has decided to adopt an approach to enhancing drug law enforcement strategies that seeks national consistency and draws together existing disparate State and Territory practices. The recommendation will be addressed in that context, and will ultimately be a matter for the States and Territories.

Recommendation 6: That the standard of satisfaction required by the authorising officer in relation to the preconditions in section 15M of Part 1AB of the Crimes Act 1914 should be expressed in such terms as `reasonably satisfied' or `satisfied on reasonable grounds'. (Paragraph 4.83)

Government Response to Recommendation 6: Agree

The Government is developing a proposal along these lines.

Recommendation 7: That the `no entrapment' test in section 15M(b) of Part 1AB of the Crimes Act 1914 be enunciated with greater clarity. (Paragraph 4.86)

Government Response to Recommendation 7: Agree

The Government is developing a proposal to require an authorising officer to be reasonably satisfied that a criminal offence will be committed by the person or group targeted by the operation, whether or not the operation takes place (the `no entrapment test'). The precise formulation of the test will be reviewed in the drafting process, taking into account the Committee's comments.

Recommendation 8: That in relation to the precondition in section 15M(d) of Part 1AB of the Crimes Act 1914 the paragraph be reworded to better reflect the need for operational flexibility by relevant law enforcement agencies. (Paragraph 4.88)

Government Response to Recommendation 8: Agree

The Government is developing a proposal to modify the existing requirement in paragraph 15M(d) that the authorising officer be satisfied that any narcotic goods that are the subject of the operation will be under the control of an Australian law enforcement officer at the end of the operation. It is instead proposed that the authorising officer be required to be reasonably satisfied that the operation will be conducted so as to minimise the risk that any illicit goods involved in the operation will be outside law enforcement control at the end of the operation. The proposed formulation will promote improved operational planning but does not require certainty as to operational outcomes.

Recommendation 9: That section 15M of Part 1AB of the Crimes Act 1914 be amended to adopt similar conditions to those contained in paragraphs 6(3)(b) and (c) of the Law Enforcement (Controlled Operations) Act 1997 (NSW) that the nature and extent of the suspected criminal activity or corrupt conduct are such as to justify the conduct of a controlled operation and the proposed controlled activities. (Paragraph 4.91)

Government Response to Recommendation 9: Agree

The Government is developing a proposal to amend to section 15M to require an authorising officer to be reasonably satisfied that the nature and extent of the suspected criminal activity is such as to justify the conduct of a controlled operation within the parameters that the authorising officer proposes to authorise. This proposal is consistent with paragraph 6(3)(b) of the of the Law Enforcement (Controlled Operations) Act 1997 (NSW).

Recommendation 10: That there be an appropriate system of accountability provided within the legislative regime of controlled operations involving oversight by the Commonwealth Ombudsman. The oversight should be in identical terms to that required of the NSW Ombudsman under the Law Enforcement (Controlled Operations) Act 1997 (NSW). (Paragraph 5.53)

Government Response to Recommendation 10: Disagree

In the course of developing proposals for reforming controlled operations provisions, significant consideration was given to providing appropriate systems of accountability. Creating an oversight role for the Commonwealth Ombudsman was one option considered. However, oversight by the Commonwealth Ombudsman was considered to be unlikely to yield further accountability beyond that which is already achieved by the requirement to report to the Minister. It was also considered that the oversight function in respect of controlled operations would not coexist well with the Ombudsman's current role in respect of Australian Federal Police complaints, as there would be a possibility the Ombudsman's office may be called upon to investigate and report on controlled operations procedures it had previously reviewed and approved.

Recommendation 11: In order that the Parliament be appropriately involved in discharging its responsibility for scrutiny under the legislation there should be a requirement placed on the Ombudsman to annually brief the Parliamentary Joint Committee on the National Crime Authority on a confidential basis in relation to the Authority's involvement in controlled operations. (Paragraph 5.53)

Government Response to Recommendation 11: Disagree

The existing controlled operations provisions require the NCA Chairperson and AFP Commissioner to report to the Minister and the Minister to table an annual report in Parliament. It is proposed to amend the National Crime Authority Act 1984 to require the National Crime Authority to comply with a request by the Committee for information relating to an investigation or concerning the general conduct of the operations of the authority, unless disclosure would be prejudicial to the safety of persons or the operations of law enforcement agencies. It is considered that these existing and proposed reporting requirements are sufficient and that an annual briefing by the Ombudsman is not necessary. Furthermore, as discussed in relation to recommendation 10, it is not considered appropriate for the Ombudsman to perform an oversight role in respect of controlled operations.

Recommendation 12: That the scope of the definition of `controlled operations' in Part 1AB of the Crimes Act 1914 should be widened to refer to operations carried out for the purpose of obtaining evidence that may lead to the prosecution of a person for theft, fraud, tax evasion, currency violations, illegal drug dealings, illegal gambling, obtaining a financial benefit by vice engaged in by others, extortion, violence, bribery or corruption of, or by, an officer of the Commonwealth, an officer of a State or an officer of a Territory, bankruptcy and company violations, dealings or illegal importation or exportation of fauna into or out of Australia, money laundering and people trafficking. (Paragraph 6.50)

Government Response to Recommendation 12: Agree in part

The Government agrees that controlled operations are an essential tool for infiltrating and investigating a wide range of criminal activity. However, rather than specifying each type of criminal activity, it is proposed to amend the controlled operations provisions to provide that a controlled operation may be conducted in respect of any criminal offence, the investigation of which falls within the functions of the agency in relation to Commonwealth law. Such an approach is consistent with the NSW Act, which does not limit the range of criminal activity for which approval to conduct a controlled operation may be sought.

Recommendation 13(i): That the immunity conferred on covert operatives should be widened commensurately with the scope of controlled operations to confer immunity from criminal liability on any person authorised to participate in a controlled operation in terms of sections 16 of the Law Enforcement (Controlled Operations) Act 1997 (NSW). As prescribed in section 16 of that Act, immunity should only be available where the unlawful activity engaged in has been authorised by and is engaged in in accordance with the Authority for the operation. (Paragraph 6.50)

Government Response to Recommendation 13(i): Agree

The Government is developing a proposal under which a law enforcement officer will not be liable for any offence in relation to conduct that is undertaken for the purposes of an authorised controlled operation and is within the terms of the authorisation. The proposal imposes an additional limitation that the conduct must not involve the commission of a sexual offence, or involve causing death or serious injury to a person.

Recommendation 13(ii): The Commonwealth Act should be amended to include a provision in terms of section 19 of the NSW Act to immune covert operatives from civil liability. As prescribed in section 19 of that Act, immunity from civil liability should only be available where the conduct engaged in was in good faith and for the purpose of executing the provisions of the Act regulating controlled operations. (Paragraph 6.50)

Government Response to Recommendation 13(ii): Agree

The Government is developing a proposal with respect to immunity from civil liability that would protect the rights of innocent third parties.

Recommendation 13(iii): The Commonwealth Act should also be amended to include a provision expressly acknowledging that where an individual suffers loss or injury as a result of a controlled operation an action can be maintained against the State for compensation in respect of that loss or injury. (Paragraph 6.50)

Government Response to Recommendation 13(iii): Disagree

It is not considered necessary to make statutory provision for a right of recovery where an individual suffers loss or damage as a result of a controlled operation. The Government is considering a proposal that would preserve applicable civil remedies.

Recommendation 14: That the timeframe for which an authority to conduct a controlled operation may remain in force be extended to three months. If an investigation exceeds that timeframe, law enforcement agencies must apply for a new certificate in respect of the same investigation. (Paragraph 6.63)

Government Response to Recommendation 14: Agree in part

The Government agrees that the current 30 day timeframe provides insufficient time for law enforcement agencies to properly infiltrate and investigate organised and serious crime. However, it is considered that 3 months is also inadequate. The Government proposes that the period within which an authorisation may remain in force be extended from 30 days to 6 months, with provision for review of the authorisation after 3 months. In reviewing an authorisation the authorising officer would have to be satisfied that it is appropriate for the operation to continue having regard to the same considerations relevant to the initial authorisation. Where the authorisation is not reviewed to assess the continuing need for the operation, the authorisation lapses and a new authorisation must be sought.

The 6 month authorisation period recognises that effective infiltration of criminal organisation may take many months or even years. The proposed extension takes into account the exigencies of deep infiltration of multi-faceted crime syndicates, while the provision for 3 monthly review ensures that the conduct of the operation receives frequent, high level attention.

Recommendation 15: That Part 1AB of the Crimes Act 1914 be amended to include a provision to allow for the retrospective authorisation of controlled operations only where the life or safety of a covert operative is at risk, in terms of section 14 of the Law Enforcement (Controlled Operations) Act 1997. In particular, the amendment should include the conditions that the relevant unlawful conduct was engaged in only for the purpose of protecting an operative or other person from death or serious injury and that the application must be made within 24 hours of the unlawful conduct having been engaged in. (Paragraph 6.85)

Government Response to Recommendation 15: Disagree

The Government considers that retrospective authorisation is not consistent with the integral role of planning in Commonwealth controlled operations. Common law defences and prosecution discretion will apply in emergency circumstances.

Recommendation 16: That Part 1AB of the Crimes Act 1914 be amended to include a provision to authorise the participation of civilians in controlled operations. The term `civilians' should be defined so as to exclude those persons who are police informants or who become involved in a controlled operation by reason of their having knowledge, position or influence as a consequence of their own involvement in criminal activities. The position of that class of civilians should remain subject to the current system of retrospective indemnities and assistance at the time of sentencing that operates according to the discretion of the Director of Public Prosecutions. (Paragraph 6.140)

Government Response to Recommendation 16: Agree in part

The Government proposes to provide for the participation of persons who are not law enforcement officers in controlled operations. It is not proposed to exclude persons from this possibility by reason that they are an informant or that they become involved by reason of their own criminal activities. The participation of an informant may be vital to the success of a controlled operation, and it may be difficult to secure their cooperation where prospective immunity cannot be offered. In this respect it is important to note that all non-law enforcement participants in a controlled operation, whether informant or otherwise, are subject to the requirement that the conduct for which immunity may be given must be in accordance with the operation, and in accordance with any and all directions given by a supervising officer.