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Monday, 11 May 1987
Page: 2952

Mr SPENDER(9.43) —Profit is the driving force behind most serious crime. As Mr Costigan said, if profit is the main motive, the object of any law enforcement should be the destruction of the profit. There can be no possible justification for allowing criminals to keep the profits of crime. Mr George Best said in his work Forfeiture: An Effective Drug Tool:

What theory of law, reason or basic common sense justifies the retention by a drug dealer of his profits? Is the armed robber allowed to retain the money obtained at gunpoint from his helpless victim? Does the car thief keep the stolen car simply because he gets sentenced to probation? Of course not.

Nor is there any reason founded on logic, common sense or public interest to confine assets confiscation to only some serious offences. Gaol is not a substitute for depriving criminals of the profits of crime. Imprisonment can be viewed as just another cost of doing business, and it is usually the small men who are imprisoned, not the leaders. The better organised a criminal is, the more likely it is that the profits will be waiting for him on his release from gaol. It is not only that logic, common sense and justice demand that criminals be stripped of the proceeds of crime, but also if they keep the proceeds of crime, with the huge profits that organised crime can bring, those profits will be used not simply to finance further crime but for investment in legitimate business activities. This is happening in Australia. The Costigan Royal Commission on the Activities of the Federated Ship Painters and Dockers Union cited one principal as having beneficial interests in at least 38 legitimate companies, and this was thought to be one of the less significant of those identified.

Overseas experience, especially of the Mafia and Italy, shows that when major criminals turn their hands to business they have dangerous advantages over their legitimate competitors; in short, advantages of competition in the market-place. In his work Mafia Business, Mr Pino Arlacci, a member of the Italian Government's Anti-Mafia Commission, set out three advantages that the criminal has over the honest businessman. The first is in setting up within the market in which the business operates an umbrella of protection that discourages competition. I quote Mr Arlacci:

In making sure of goods and raw materials at favourable prices, and in obtaining orders, contracts and sales markets, the Mafia enterprise achieves its end without being exposed to the competitive pressures other firms must take account of. Mafia methods, with their power to intimidate, actually erect what amounts to a tariff barrier.

The second competitive advantage which he identified as enjoyed by the Mafia was:

. . . wages are held down within them, while their labour force is more fluid . . . After all, few labour officials are likely to visit Mafia firms to check on their observance of the law.

He gave an example of female agricultural workers in Italy. Can anyone suggest why that should not take place in Australia, if the laws do not exist? Thirdly, he pointed out that a criminal entrepreneur has access to financial resources denied to competitors, especially small or medium sized firms. The proceeds of illegal activity play the part that the banking system plays for the honest businessman. The cost of money for the criminal investor is very much less than it is for the honest investor. It is a question of washing it through the system. Not only does he not have to pay interest on borrowed money but also the money required to set up major criminal operations can be a fraction of the great return on those operations, which is then reinvested in what appears to be a legitimate and honest business.

The case for comprehensive assets confiscation legislation is overwhelming. It has been made by Royal Commissioners Williams, Stewart and Costigan, by Special Prosecutors Redlich and Gyles and by Mr Athol Moffitt, a former justice of the New South Wales Court of Appeal and the Royal Commissioner on Alleged Organised Crime in Registered Clubs in New South Wales. It was endorsed by the Australian Police Ministers Council as long ago as May 1984, the Premiers Conference in April 1985, and the Standing Committee of Attorneys-General. The fundamental point is that we are dealing with a phenomenon which is primarily economic. That is the whole rationale for organised crime. Legislation is already on the statute books in New South Wales, Victoria and South Australia. Whilst we have reservations about some aspects of this legislation, and in particular the speed with which it has been brought forward, overall we support the legislation which is now before the House. However, we make the point that other States have had legislation before this House has considered it, and it is for the Federal Government to be the leader at all times in the fight against organised crime.

I think that we would all agree that it is profoundly wrong that criminals and criminal syndicates should be able to keep the proceeds of crime. Yet, for the most part, Commonwealth law dealing with the forfeiture of assets used in or derived from criminal activity is archaic. Firearms and gaming equipment may be confiscated and equipment interfering with telephone lines may be forfeited. Stolen goods may be repossessed and returned. But these remedies are of peripheral utility. The only modern Commonwealth forfeiture provisions are to be found in the Commonwealth Customs Act. The Customs Act provides for the forfeiture of a broad range of property derived from drug trafficking. Pecuniary penalties assessed in accordance with the value of benefits derived from drug trafficking may be imposed. These provisions were inserted in the Customs Act by the Fraser Government. But since these amendments came about Mr Costigan and others have highlighted the need for far more extensive provisions. For those who might question the utility of assets confiscation legislation, let me cite an example again from Italy. In Italy, in the first two years of implementation of Italy's anti-mafia legislation, illegally accumulated fortunes to the tune of $US500m-a prodigious sum-were confiscated, half of that amount being seized in just two operations.

Let me now turn to the Proceeds of Crime Bill and say something about its detail. The Attorney-General (Mr Lionel Bowen) in his second reading speech summarised its main provisions. I will refer to the explanatory memorandum of the Bill and then to some of its provisions which give the flavour of the legislation. As the explanatory memorandum points out, the purposes of the Proceeds of Crime Bill 1987 are five. The principal purpose is to permit a court to grant orders for the freezing and confiscation of property used in, or derived directly or indirectly from, the commission of an indictable offence against a law of the Commonwealth or of a Territory, other than the Northern Territory. Provision is made for the registration in Territory courts of orders for the freezing and confiscation of property made under corresponding State laws and which relate to property located in the Northern Territory. Provision is made for the enforcement of foreign freezing and confiscation orders which relate to property in Australia and in respect of which relevant procedures under the Mutual Assistance in Criminal Matters Act 1987, the Bill for which has just been passed by this House, have been complied with. Provision is made for the conferral on police of new powers to facilitate the following of the money trail and to require financial institutions to preserve their records to maintain the money trail. Lastly, new offences of money laundering and organised fraud are created.

The Bill is a complex and far-reaching piece of legislation, running to 87 pages and 104 clauses. It sets out a complex and sophisticated system for the confiscation of property derived from or used in crime for the monitoring of criminal activities and for the taking of remedies to safeguard the interest the Commonwealth has in the proceeds of crime. Let me quickly go through some of its main provisions. Under clause 14 application may be made for a confiscation order in respect of tainted property. `Tainted property' means property used in connection with crime or the proceeds of a crime.

Clause 15 provides for notice of an application to be given to those who may be affected. Clause 17 provides for the making of a confiscation order where a person has absconded. Clause 19 provides for the making of forfeiture orders. Under clauses 25 and 26 pecuniary penalties are provided for. In these clauses we see some ingenious attempts to lay down rules which are to guide courts in assessing pecuniary penalties. Clause 27 (2) provides that, for the purpose of an application for a pecuniary penalty order against a person, the value of the benefits derived by the defendant from the commission of an offence or offences shall be assessed by the court having regard to the evidence before it `concerning all or any of the following'. Certain rules or guides are then laid down. These include that `if the offence or any of the offences consisted of the doing of an act or thing in relation to a narcotic substance, the market value at the time of the offence of similar or substantially similar narcotic substances-in short, the street value-shall be taken into consideration. That is a very sensible approach. The amount that was, or the range of amounts that were, ordinarily paid for the doing of a similar or substantially similar act or thing may also be taken into account.

I said this was an ingenious attempt to lay down rules for the courts in the assessment of pecuniary penalties. I look forward with great interest to the first attempt to prove what the going rate is for hiring people for drug running. It is possible that it can be established in courts. It is a sensible sort of reference point which courts should have regard to. After all, if one is looking to what the proceeds of crime are, one needs to understand what the value of the proceeds are when sold on the street. One also needs to understand what the cost of the operation is.

Clause 30 provides for the forfeiture of restrained property if a person is convicted of serious offences. Provision is made under the Bill for restraining orders. Under clause 35 powers are given for the search for and seizure of tainted property; that is, property which has been used in connection with the commission of a crime or which is the proceeds of a crime. Under clauses 36 to 38 search warrants are provided for, including search warrants which may be obtained by telephone when there is an emergency. Clauses 43 to 65 contain a complex series of provisions dealing with the making of restraining orders to prevent dealings in property. Under clauses 66 to 69 production orders are provided for. These may be made on application to a judge; for example, for property tracking documents in relation to an indictable offence. Clauses 73 to 75 provide for monetary orders, which are orders by a judge against a financial institution which, once the order is made, shall not disclose to a client the existence of the order. This is a novel and useful provison. It will cause a great deal of concern to those who have guilty consciences about how the money they have has got into the bank accounts they hold.

Clauses 76 to 80 impose obligations on financial institutions. This is one of the questions we have about this Bill. Under clause 77 (2), unless an amount is otherwise prescribed by regulation, financial institutions must keep the original or copies of financial transaction documents relating to amounts in excess of $200. I have real doubt as to whether that figure is the right one in the sense that I believe it may be set too low and that the prescribed figure should, in fact, be a larger one. If we concentrate on organised crime and major criminal activities and we are not concerned with petty crime, the odds are that in following the money trail we would not be worrying about transactions involving $200 or so. We would be looking for transactions involving the thousands, the tens of thousands or the hundreds of thousands of dollars. The obligation on the bank to keep that kind of documentation-that is documentation relating to transactions that exceed that very low sum of $200-seems to be very onerous. One of my colleagues has received a letter from the Australian Association of Permanent Building Societies in which, amongst other things, this is said:

Unquestionably one of the biggest government induced costs confronting financial institutions will be presented to the House of Representatives in this session in the form of the Proceeds of Crime Bill and associated legislation concerning cash transactions. The requirement upon all financial institutions to generate mountains of paper and hold it for well beyond normal commercial practice, is estimated to cost our industry alone up to $20m each year. To that must be added the costs of all other financial institutions in particular banks.

I suspect that the permanent building societies may be more concerned with the cash transactions legislation which is to come into this House shortly, as the Attorney-General has told us. I should also add that the banks do not appear to be troubled by this legislation so far as the maintenance of financial records is concerned.

I will move on to the two remaining provisions of interest. An offence of money laundering is created by clause 81. This is an offence which is committed if:

(a) the person engages, directly or indirectly, in a transaction that involves money, or other property, that is proceeds of crime; or

(b) the person receives, possesses, conceals, disposes of or brings into Australia any money, or other property, that is proceeds of crime;

and the person knows, or ought reasonably to know, that the money or other property is derived or realised, directly or indirectly, from some form of unlawful activity.

The maximum penalty is imprisonment for 20 years for a natural person or a fine of $200,000 or, if the offender is a body corporate, a fine not exceeding $600,000. These are very heavy penalties. They are far heavier than penalties under the Crimes Act for offences against a person. If I recall correctly, they are heavier than the penalties that apply for offences such as extortion, but those kinds of penalties are merited given the enormity of the problem that we face. They will act as a very great deterrent because one of the things that we learn about those who are engaged in the peripheral but important transactions of money washing is that because they are on the peripheries and because they are frequently people with a respectable patina, even if they are not respectable at all, the prospect of spending some years breaking rocks down at the Iron Hotel has no appeal at all. So that heavy penalty is justified.

The other provision to which I wish to refer is that of organised fraud. That offence is created by clause 83 which provides that a person who engages in organised fraud is guilty of an offence punishable by a fine not exceeding $250,000 or imprisonment for a period not exceeding 25 years, or both or, if the offender is a body corporate, a fine not exceeding $750,000. Organised fraud is defined in a particular way as acts or omissions that constitute three or more public fraud offences and from which the person derives substantial benefit. That is a loose expression, but I do not think it is easy to find a tight expression when one is dealing with this sort of matter. These are extraordinarily heavy penalties but, once again, they are penalties which, in the context of the fight against organised crime, are fully justified.

I should like to raise some questions which the Attorney-General may be able to answer for me and, in doing so, move an amendment in my name which has been circulated around the House. I move:

That all words after `That' be omitted with a view to substituting the following words:

`whilst not declining to give the Bill a second reading, the House notes that-

(1) it comprises a major and novel legislative package of 104 clauses;

(2) it was introduced on Thursday, 30 April 1987, and has been called on for debate on the second reading on 11 May 1987, a period which allows less than adequate time for examination and consultation by the Opposition, and

(3) it imposes on financial institutions heavy obligations for the retention of records concerning financial transactions, yet no statement from the Business Regulation Review Unit of the cost of such measures has been provided to the House'.

I think that what I have said makes the reasons for that amendment to the motion for the second reading self-evident. It is a major legislative package. It has been available to us for only a very short time. I commend those involved in the draftsmanship of this Bill. Given the inherent complexity of the subject it is extremely well expressed and extremely clear. Nevertheless, it is a Bill of very real complexity and the time that we have had it, given the other pressures of time that are always on members here, has been quite inadequate for the kind of detailed assessment it deserves.

As to the burdens that are imposed on financial institutions, I wish to make it perfectly plain that we are not saying that the burdens should not be imposed. What we do say is that we need to know what the costs of those burdens are. If, for example, by removing the figure of $200, to which I referred earlier, and substituting $1,000 the cost burden would be cut in half or cut by 75 per cent, that would provide a very compelling argument for changing that figure. That figure is the trigger which determines whether a record has to be kept.

There is one other matter that I would like to refer to the Attorney-General; that is the position of innocent third parties. The overall effect of the operation of the Act will be that orders can be made against property in which others may have interests. The effect of such orders can be extremely damaging to the interests of the other persons. Let us deal with innocent third parties-for example, a co-partner in a business in which one member of the business is a criminal and the other member of the business is a man who has led a blameless life. The innocent person has worked hard and he has, in fact, been the partner who has run the business. Suddenly he is confronted with an application for a restraining order for forfeiture and he sees his life work going up in smoke. We must be extraordinarily careful to safeguard the position of that kind of a person. I am not convinced that that has been done, although I think that a very honest attempt has been made to balance competing interests. I would be glad if the Attorney-General would look again at those provisions. If by the time this Bill gets to the Senate amendments can be put up; I would be equally glad if the Government would accept them. I am sure that the honourable member would not want the Act to operate in a way that was unfair to innocent third parties. By all means let us get the proceeds of organised crime, but at the same time let us ensure that justice is done to those who are not guilty and who are dragged in simply because in some way or another they are involved in the affairs of a person who turns out to be a criminal or their property is bound up in the property of that person.