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Legal and Constitutional Affairs Legislation Committee
05/03/2018

GRAY, Mr Warren, State Manager, New South Wales Operations, Australian Criminal Intelligence Commission

ROSS, Mr David, Head of Determination, Financial Crime Intelligence Hub, Australian Criminal Intelligence Commission

[12:29]

CHAIR: Welcome. Thanks for giving your time and thanks for your submission. I'm just wondering why we've got the Criminal Intelligence Commission involved in a bankruptcy issue, but perhaps you can tell us that. I assume you're both aware of parliamentary privilege and protection of witnesses. I think we've given you some written material on that. You're also, perhaps, aware that we shouldn't ask you questions of opinion, particularly on government policy, for obvious reasons. In your opening statement, perhaps, you could let me know why criminal intelligence is needed in an insolvency matter. Then we will then ask you some questions.

Mr Ross : I would add that as Head of Determination I target criminal wealth determination and look at all our money-laundering, proceeds of crime and serious financial crime matters.

Mr Gray : Thank you to the committee for having us here. Chair, I think the point you made about our place here—we thought that our opening statement should probably just contain an update to the committee of the merger of the Australian Criminal Intelligence Commission, which we were with the CrimTrac agency. This is the first time we've appeared before the Legal and Constitutional Affairs Legislation Committee since that merger on 1 July 2016.

CHAIR: If I could interrupt you, and I should have mentioned this, I think you know that if there are things the committee might usefully know about but they're not for public dissemination, we can hear evidence in camera.

Mr Gray : We believe most of today would not need in camera, unless it's requested by the committee.

CHAIR: Okay, thanks.

Mr Gray : The Australian Criminal Intelligence Commission, ACIC, is Australia's national criminal intelligence agency, uniquely equipped with intelligence, investigative and information-delivery functions. The agency's role includes working with and for partners to discover, understand and respond to serious and organised crime threats of most harm to Australians and the national interest and providing national policing information systems and services. As stated in the ACIC submission to the committee, the agency is responsible for assessing the national financial crime threat picture and contribute, as a member agency, to both the Serious Financial Crime Task Force and the Phoenix Task Force, which provides a whole-of-government approach to combating illegal phoenix activity. Serious and organised criminals are always looking for vulnerabilities to exploit opportunities for making money. Exploiting financial systems gives organised crime groups the opportunity to launder illicit funds and facilitate a disguised criminal activity.

The ACIC board determines the work priorities for the ACIC. These priorities are called determinations. The ACIC has two determinations that undertake work to contribute to financial crime efforts: Targeting Criminal Wealth No. 2 Special Investigation, and Mr Ross is head of that determination; and National Security Impacts from Serious and Organised Crime No. 2 Special Operation. The ACIC also participates in a number of multiagency task forces that address financial crime, including the Commonwealth Serious Financial Crime Task Force, the Phoenix Task Force, the Criminal Assets Confiscation Task Force and the National Criminal Intelligence Fusion Capability and the investigative task force into money laundering.

That sets our position as our interest in bankruptcy. We make no further commentary on the bills, other than what's in our submission, but we're happy to take questions in relation to these.

CHAIR: Thanks very much for that. This is a hypothetical, which you're not supposed to ask at some Senate institutions, but I'm the chair so I'll allow it. Could you give me a hypothetical example about how someone, an individual as opposed to a corporation, going into bankruptcy or insolvency and the time being reduced from three years to one year. Can you give me an example that might raise your interest as a commission?

Mr Gray : We have a solid example, which is on the public record, that we can give the committee. I'll hand over to Mr Ross to give the details of that example. Through it, you will realise that with serious organised crime, in exploiting opportunities, the lessening to one year will give that cycle the opportunity to do it more often. I now might hand over to Mr Ross.

Mr Ross : One example, and bearing in mind that we see matters which, typically, involve serious organised crime involving an individual, it would be that they're becoming aware of law-enforcement interest, in relation to their activities. They may have some suspicion but there might be proceeds-of-crime action in the future. They may take steps to, essentially, transfer their assets to another entity for sham arrangements and let themselves go into bankruptcy, in order to avoid recovery by Commonwealth or state agencies. Having said that, there are mechanisms under the relevant Proceeds of Crime Act to pursue people when they are, in effect, of control of particular assets, but what it does is increase the time and resources that agencies such as ours have to allocate to investigate those matters.

CHAIR: This legislation has a long gestation period for various reasons: elections and all of that, and perhaps more important things on the legislative program, which is always difficult to achieve, particularly through the Senate. Were you consulted originally by the Attorney-General's Department when this legislation was being put forward? Do you recall?

Mr Gray : At a number of steps we have participated in advice. Striking a balance between the threat from serious organised crime and vulnerabilities with the needs of the entrepreneurs et cetera is a matter for the committee, but we have certainly had longstanding advice given to both the Attorney-General's Department and other departments about the threat from phoenixing activity related to bankruptcy.

CHAIR: Speaking narrowly from your own point of view, which is of course why you're here, is there anything that could reasonably be done to this bill to address some of your concerns or is it really all or nothing—it's either one year or three years and that is what it's all about?

Mr Gray : I guess I'd be expressing an opinion, but the vulnerability is there, but the vast majority of Australians, like for all serious organised crime, are trying to do the right thing.

Mr Ross : I can add to that. Certainly in our experience with different sectors not related to this, if you have a willingness to collaborate between law enforcement, other government departments, supervisory agencies and the private sector, you can essentially achieve a collective understanding of the risks and move towards taking steps collaboratively, depending on the legislative regime in place to avoid people exploiting those risks. Essentially professionalising industry might be an example of that. People have touched on individuals involved in preinsolvency practices, for example. There might be steps that, as a collective, you could take to understand that sector better.

CHAIR: Did you have an opportunity to look at the submission from ASIC? You might have heard the witnesses' evidence. I'm not sure that you had an opportunity to read their submission in full. They made some suggestions as to possible amendments. Are you able, without much notice, to give an indication of whether, if those were introduced, it would assist you in the very important work that you're tasked to do?

Mr Gray : Any halving of any environment obviously assists us in the part of the population that we're interested in. Without going too in-depth about each part of it, I think that's as far as I could probably go.

CHAIR: Sure. Thanks very much for that.

Senator PRATT: We tried to talk about the extent to which this legislation creates a problem in relation to organised crime. You've also acknowledged the need for relief from the current arrangements for people who have good intentions and are, unfortunately, caught up in debt and bankruptcy. They're doing the best that they can to avoid it, whereas you're really pointing at those who use it illegitimately to hide assets et cetera. Is there anything we could do to separate those two cohorts? Essentially, the extent to which these people need relief is really quite significant. I'm weighing up the extent to which you're just going to have to live with an increased burden in trying to catch these crooks, because we really have to give some people some respite from the difficulty they find themselves in. But is there a way of unpicking the two so we can separate it out a little better? One example was precluding someone from being a sole director, so that even though their bankruptcy term might have expired they would have a range of other preclusions. How would you go about fixing this?

Mr Ross : I think I touched on it earlier. We are an intelligence agency. From our experience, possibly the best approach is essentially taking a detailed risk analysis of the population base. We might do that in conjunction with other agencies—for example, the Australian Taxation Office, the Australian Securities and Investments Commission or AUSTRAC. Once you have an understanding of the population that you're dealing with, if you like, you can perhaps better allocate your disruption and prevention activities. In terms of task forces we're involved in, that's certainly the business-as-usual approach we go down the path of.

Senator PRATT: So that's what you do currently?

Mr Gray : Yes.

Senator PRATT: Will that be harder? This shouldn't change too much.

Mr Gray : It shouldn't change too much. In part, registration regimes those sorts of things allow us access to data and information that assists us in those things. So the debt agreement bill, et cetera, would be positive move around the registrations and things there. I think access to information is the part, and nothing at the moment changes that access to information for us.

Senator PRATT: We could fix this for a great many people who need it to be fixed—people who don't have an intention of being a director or even a sole trader again, although some may. We could fix it just for them, but the government seems to have an idea that they want to be able to unlock some of that entrepreneurship. If someone's opened a cafe and they've gone bankrupt, as many do, you don't then want to stop them from opening a small business at home and trying to get on with life. By allowing someone to get on and do that, does that inevitably leave the window open for phoenix companies as well?

Mr Gray : I think we find that wherever there are opportunities to be exploited and money to be made, you will find serious and organised crime. Whether this loophole, if it were to be exploited by those people that are disposed to it, increases it greatly, only time would tell.

Senator PRATT: In terms of what you say is a role of liquidators, professional facilitators and financial advisers supporting organised crime, is that something they're doing knowingly? Is there anything we can do, in a legislative sense, to crack down on their involvement in those activities?

Mr Gray : Facilitators of organised crime in the context we're interested in are usually doing it willingly.

Senator PRATT: Knowingly?

Mr Gray : Knowingly. They set themselves up as businesses, in fact, to actually exploit that from time to time. But the fact is that that happens right across the serious and organised crime spectrum. We have a number of submissions right throughout government which would assist in that regard.

Senator PRATT: Do you have any evidence to show what proportion of liquidators and financial advisers are involved in bankruptcy such that it's part and parcel with their business model?

Mr Ross : It may help the committee—certainly, proportionally is a difficult question. We do have an unclassified intelligence assessment of financial crime in Australia which does touch on that issue, and we do have a classified version as well. If the committee would like a copy of that we can certainly provide that.

Senator PRATT: Yes, that would be good. So ACIC have a report that enables us to, to some extent, have a look at the extent to which liquidators, financial advisers and other professional facilitators have links to organised crime.

Mr Gray : If it would assist, we have copies of the unclassified version. We can provide that.

Senator PRATT: Yes, okay. We might start by accepting that.

CHAIR: There are two issues. First, I would accept that we take the unclassified version, and if, after reading that, we think that something more might be useful then we can get in touch with you. I'm not sure that either of them, though, relates specifically to this piece of legislation.

Senator PRATT: From what I can gather, they do to the extent that shortening the bankruptcy period can create an incentive for phoenix companies to use that loophole and, in turn, the liquidators and professional advisers that are advising those phoenix companies—and, in effect, advising organised crime and laundering those assets—might be able to support phoenix companies and organised crime in doing that. I guess the extent to which we can rely on that industry to conduct itself properly if that period is shortened is part of the evidence that I would hope for us to be able to glean.

CHAIR: Okay. We'll start by having a look at the unclassified version. I understood from your answers to my questions that, as far as amendments to this legislation are concerned, there's nothing that appears obvious except that, the more regularly people can get out of insolvency, the more chance they have to reoffend.

Mr Gray : That's pretty much the point.

CHAIR: That really comes to a case of yes or no, but it's something that perhaps we could look at in some other context. But let's start with that.

Senator PRATT: I have one more question. How far could we go in preventing this being a problem by allowing the bankruptcy period to end, which helps vulnerable people that need that respite for credit card debt et cetera, but prevent that from preventing people by being sole traders, board directors et cetera?

Mr Gray : I think I would go back to my previous answer: that any accountabilities in the regime will assist us in doing that. It's a matter for the committee.

Senator PRATT: Okay, and we need to balance that up against the government's desire to encourage entrepreneurship et cetera. But we could foreseeably separate out people who need relief for debts, are at risk of losing their homes and aren't involved in regenerating businesses, if you like.

Mr Gray : I'd say that's exactly the balance.

CHAIR: That's really what ASIC are getting at.

Senator MOLAN: I have a really quick question. It really goes to what Senator Pratt and the chair just said. My understanding was she made a judgement that this was likely to have very little impact on you, or words to that effect. Was that based on the fact that ACIC would get the five points they wanted that the senator and the chair were just talking about, or is that regardless of anything that we do?

Mr Gray : As stated, anything would assist. We probably are unable at this point to make an assessment of the risk that new provisions would provide to serious organised crime, usually without a time period of having a look at it in action.

Senator MOLAN: That's good. If the bill we have at the moment were improved by certain things that have been said this morning, you would be satisfied with that situation.

Mr Gray : I think anything assists.

CHAIR: Thank you very much for that. We'll take this unclassified version. The committee agrees to table that. If need be, we'll be back in touch with you, but we very much appreciate your contribution to date.

Proceedings suspended from 12:51 to 13:38