House of Representatives

Explanatory Memorandum

Circulated By Authority of the Attorney-General, the Honourable Robert Mcclelland MP

Schedule 1 - Unexplained Wealth

Schedule 1 amends the Proceeds of Crime Act 2002 to strengthen the Commonwealth criminal assets confiscation regime in Chapter 2 of the Act by introducing unexplained wealth orders to the suite of confiscation processes. Unexplained wealth orders target wealth that a person cannot demonstrate that he or she has lawfully acquired.

While the Act contains existing confiscation mechanisms, these are not always effective in relation to those who remain at arm's length from the commission of offences, as most of the other confiscation mechanisms require a link to the commission of an offence. Senior organised crime figures who fund and support organised crime, but seldom carry out the physical elements of crimes, are not always able to be directly linked to specific offences.

Under the unexplained wealth provisions introduced by Schedule 1, once a court is satisfied that an authorised officer has reasonable grounds to suspect that a person's total wealth exceeds the value of the person's wealth that was lawfully acquired, the court can compel the person to attend court and prove, on the balance of probabilities, that their wealth was not derived from offences with a connection to Commonwealth power. If a person cannot demonstrate this, the court must order them to pay to the Commonwealth the difference between their total wealth and their legitimate wealth (the unexplained wealth amount). Schedule 1 also provides for restraining orders in relation to unexplained wealth.

Unexplained wealth provisions have been successfully used in Italy in recent years in relation to the Mafia. The Northern Territory and Western Australia also have unexplained wealth schemes. It is estimated that more than $40 million in alleged criminal assets has been seized in the Northern Territory and Western Australia under unexplained wealth provisions since 2003. Article 20 of the United Nations Convention Against Corruption encourages parties to the Convention to consider creating an 'illicit enrichment' offence for public officials who have intentionally increased the value of their assets and cannot link the whole value of their assets to a lawful source of income.

The Commonwealth unexplained wealth regime draws on the Northern Territory and Western Australia experience. There main differences between the Commonwealth's unexplained wealth scheme and those of the Northern Territory and Western Australia is that the Commonwealth is limited to confiscating unexplained wealth derived from offences within Commonwealth Constitutional power.

Part 1 - Main amendments

Proceeds of Crime Act 2002

Items 1-4

Items 1 - 4 are consequential on the insertion of new Part 2-6 into the Act. Part 2-6 establishes a new confiscation scheme in the Act for unexplained wealth.

Item 1 - After paragraph 5(b)

Item 1 inserts a new object into the Act. It provides that one of the principal objects of the Act is to deprive persons of 'unexplained wealth amounts' that they cannot satisfy a court were not derived from certain offences.

An unexplained wealth amount is the difference between a person's total wealth (defined at 179G(2)) and the amount of a person's wealth that he or she can satisfy a court was not derived from certain offences (see subsection 179E(2)). The offences that a person must show were not the source of his or her wealth are an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect.

Item 2 - Paragraph 5(d)

Item 2 amends paragraph 5(d) of the Act by inserting 'unexplained wealth amounts.' This makes one of the principal objects of the Act the prevention of the reinvestment of 'unexplained wealth amounts' in further criminal activities.

Item 3 - Paragraph 5(e)

Item 3 amends paragraph 5(e) of the Act by inserting 'unexplained wealth amounts.' It will be a principal object of the Act to enable law enforcement authorities to effectively trace unexplained wealth amounts.

Item 4 - At the end of section 7

Item 4 amends the outline of how Chapter 2 (the confiscation scheme) operates. It inserts a new process relating to confiscation: unexplained wealth orders requiring payment of unexplained wealth amounts in Part 2-6 of the Act.

Item 5 - After section 20

20A Restraining orders - unexplained wealth

Item 5 inserts section 20A after section 20 of the Act. Section 20A requires a court with proceeds jurisdiction to make a restraining order in relation to unexplained wealth if certain conditions have been met. The restraining order for unexplained wealth is modelled on the existing restraining orders at sections 17-20 of the Act.

The restraint of property suspected of being an unexplained wealth amount is a crucial part of the confiscation scheme and a condition precedent to the court issuing an examination order. An examination order is an important tool that the DPP may employ to locate further property. These provisions ensure that property is preserved and cannot be dealt with to defeat an ultimate unexplained wealth order.

Paragraphs 20A(1)(a) and (b) will enable the court to prohibit a person from dealing with certain property, or specify that the property may only be dealt with in ways set out in the order. For example, a restraining order may prohibit a person from selling or mortgaging a business, but allow him or her to continue to run the business.

There are several conditions that must be met before a court with proceeds jurisdiction may make a restraining order. These are set out in subparagraphs 20A(1)(c)-(g). The DPP must first have applied for a restraining order for unexplained wealth and met the affidavit requirements of subsection 20A(3) (20A(1)(c) and (e).

Subparagraph 20A(1)(d) requires there to be reasonable grounds to suspect that a person's total wealth exceeds the value of the person's wealth that was lawfully acquired. The court must be satisfied that the authorised officer who made the affidavit holds the requisite suspicion(s) stated in the affidavit on reasonable grounds (subparagraph 20A(1)(f)).

Lastly, subparagraph 20A(1)(g) requires the court to be satisfied either that:

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the person has committed an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect, or

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the whole or any part of the person's wealth was derived from an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect.

Subsection 20A(2) sets out what property may be covered by a restraining order. The restraining order may cover all of the property of the person (the suspect) suspected of having unexplained wealth amounts, or specified parts of that person's property. In addition, the order can extend to property of another person if the property is suspected of being under the effective control of the suspect, as well as bankruptcy property. Bankruptcy property is property that used to belong, or be under the effective control of, the suspect but which is now vested in another person under either subsection 58(1) or 249(1) of the Bankruptcy Act 1966.

The DPP is not required, at the time of applying for a restraining order for unexplained wealth, to prove that the property is effectively controlled by the person, or is an unexplained wealth amount. However, under subparagraph 20A(3)(b), if the application is to restrain property of a person other than the suspect, but not to restrain bankruptcy property of the suspect, the authorised officer must state in his or her affidavit that he or she suspects that the property is subject to the effective control of the suspect. For example, if a person places a property in his or her spouse's name but effectively controls the property.

The authorised officer must also state in his or her affidavit his or her suspicions that the total wealth of the person identified in the affidavit exceeds the value of the person's wealth that was lawfully acquired (subparagraph 20A(3)(a).)

The affidavit requirement of subparagraph 20A(3)(c) also requires an authorised officer to state that he or she suspects either that the person identified in the affidavit has committed an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect; or that the whole or any part of the property was derived from an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect.

Subsection 20A(4) will allow a court to refuse to make the restraining order if it is not in the public interest to do so.

A court may also refuse to make a restraining order if the Commonwealth refuses to give an undertaking with respect to the payment of damages or costs, or both, for the making and operation of the order under section 21 of the Act.

Subsection 20A(5) provides that a court must make a restraining order even if there is no risk that the property will be disposed of or dealt with. This is because a restraining order must be in force before a court may make an examination order and examinations are a particularly useful investigative tool for uncovering proceeds of crime.

Subsection 20A(6) enables a restraining order to operate in relation to property which is not yet in the possession of the suspect at the time the order is made. For example, the suspect's bank account may be restrained, and the court may order that any other amounts paid into that account after the making of the order are also restrained.

Item 6 - Subsection 29(1) (note)

Item 6 amends the note that follows subsection 29(1) by omitting '31A' and substituting '32.' This is to correct an incorrect existing cross reference.

This item also alters the heading to section 29 by omitting 'a restraining order' and substituting 'certain restraining orders.' This is necessary to differentiate between property that be excluded from a restraining order made under section 20A and other restraining order situations in which property may be excluded under section 29.

Item 7 - After section 29

29A Court may exclude property from a restraining order made under section 20A

Item 7 inserts section 29A into the Act and will enable a person whose property is the subject of a restraining order under section 20A to have specified property excluded from that order, if certain conditions have been met.

The first condition is that the person must apply under either section 30 or 31 of the Act for an order to exclude property from a restraining order (a person applies under section 30 after receiving notice of an application for a restraining order but before a restraining order is made, and under section 31 if the restraining order has already been made).

The second condition is that the court hearing the application to exclude property from a restraining order must be satisfied that the property is property of a person other than the suspect and the property is not subject to the effective control of the suspect.

Item 8 - Paragraph 35(1)(a)

Item 8 amends paragraph 35(1)(a) by inserting '29A' after '29.' This is consequential to the insertion of section 29A by Item 6

Section 35 states that, if the DPP has previously applied to a registration authority for the recording in a register of particulars of a restraining order covering particular property, the DPP must notify the registration authority if certain circumstances change.

One of the existing circumstances is if the property is no longer covered by the restraining order because it is excluded from the order under section 29 or because the property covered by the order is varied under section 39. Inserting the reference to section 29A means that the DPP will need to notify the registration authority if property is excluded from a restraining order under section 29A.

Item 9 - Section 39(1)(note)

Item 9 inserts '1' after 'Note' at the end of subsection 39(1) of the Act. This amendment is necessary because of item 8. Item 8 inserts a second note after subsection 39(1) of the Act. Therefore, the existing note after subsection 39(1) of the Act needs to be labelled 'Note 1.'

Item 10 - At the end of subsection 39(1)(after the note)

Item 10 inserts a second note at the end of subsection 39(1) of the Act. Subsection 39(1) of the Act relates to ancillary orders a court that has made a restraining order, or any other court that could have made the restraining order, may make.

Note 2 states that, if there is an unexplained wealth order that relates to a restraining order under section 20A, the court may also order the Official Trustee to pay an amount equal to the relevant unexplained wealth amount out of property covered by the restraining order. This means that, in certain circumstances a court may direct the Official Trustee to pay the Commonwealth an amount up to a person's unexplained wealth amount, out of property that is subject to a restraining order under section 20A.

Item 11 - At the end of subsection 45

Item 11 inserts a new subsection to section 45 of the Act. Section 45 of the Act deals with cessation of restraining orders. Subsection 45(7) clarifies that section 45 does not apply to a restraining order made under section 20A.

Cessation of section 20A restraining orders will be governed by section 45A at item 10.

A note after subsection 45(7) alters the heading to section 45 by inserting 'certain' before 'restraining.' This is necessary to differentiate between cessation of restraining orders relating to unexplained wealth orders under section 45A inserted by Item 10, and other restraining orders under section 45.

Item 12 - At the end of Division 6 of Part 2-1

45A essation of restraining orders relating to unexplained wealth

Item 12 inserts section 45A after section 45 of the Act. Section 45A establishes the three ways in which a section 20A restraining order will cease to operate. It is important that a person to whom a section 20A restraining order relates, knows when the order ceases to operate so that they can deal in their property.

The first way in which a section 20A restraining order will cease to operate is if, within 28 days after the order was made, the DPP has not applied for an unexplained wealth order in relation to the person to who the restraining order relates.

The second way in which a section 20A restraining order will cease to operate is if a court refuses to make an unexplained wealth order and all appeal avenues are closed. This could be because either the time for an appeal against the refusal has expired without an appeal being lodged, or an appeal against the refusal has lapsed or an appeal against the refusal has been dismissed and finally disposed of.

The third way in which a section 20A restraining order will cease to operate is if an unexplained wealth order is made and either the order is complied with or an appeal against the order has been upheld and finally disposed of.

Item 13 - At the end of Chapter 2

Item 13 inserts new Part 2-6 into Chapter 2 of the Act. Chapter 2 of the Act is the confiscation scheme and currently includes restraint and forfeiture of property, pecuniary penalty and literary proceeds orders. Part 2-6 will add unexplained wealth orders to the suite of confiscation processes in the Act.

179A Simplified outline of this Part

Section 179A gives a basic outline of the unexplained wealth provisions. The DPP must apply for an unexplained wealth order. A court with proceeds jurisdiction must then decide whether to make a preliminary unexplained wealth order requiring a person to attend court for the purpose of enabling the court to decide whether to make an unexplained wealth order.

Division 1 - Making unexplained wealth orders

179B Making an order requiring a person to appear

The process for obtaining an unexplained wealth order is divided into three steps, but requires only one application (an application for an unexplained wealth order.) Section 179B is the first and prerequisite step in obtaining an unexplained wealth order.

This initial step has been inserted to act as a gate keeping provision. Before a court with proceeds jurisdiction embarks on the hearing of an unexplained wealth order, it has an opportunity to assess whether an authorised officer has demonstrated reasonable grounds to suspect that the total value of the person's wealth exceeds the value of the person's wealth that was lawfully acquired. If the court does not consider that the authorised officer has reasonable grounds to hold that suspicion, it can refuse to make the preliminary unexplained wealth order and the application for an unexplained wealth order does not proceed any further.

Subsection 179B(1) requires a court with proceeds jurisdiction to make a preliminary unexplained wealth order requiring a person to appear before the court in relation to an unexplained wealth order if three conditions have been met.

The first condition is that the DPP must have applied for an unexplained wealth order in relation to the person. The second condition is that the court is satisfied that an authorised officer has reasonable grounds to suspect that the person's total wealth exceeds the value of the person's wealth that was lawfully acquired. Section 179G explains how to determine a person's wealth, total wealth and the value of property. Wealth is all the property that the person has owned, effectively controlled or disposed of at any time. The third condition is the affidavit requirements of section 179B(2) must be met.

Subsection 179B(2) requires an authorised officer to state in his or her affidavit the identity of the person to whom the application for the unexplained wealth order relates. The authorised officer must state that he or she suspects that the total value of the person's wealth exceeds the value of the person's wealth that was lawfully acquired. An authorised officer is also required to state the property he or she knows or reasonably suspects was lawfully acquired by the person and the property he or she knows or reasonably suspects is owned by the person or is under the effective control of the person and the grounds for that knowledge or suspicion. The authorised officer must state in the affidavit the grounds on which he or she holds the suspicions referred to in paragraphs 179B(2)(b) and (c).

Subsection 179(3) requires a court to make a preliminary unexplained wealth order, without notice being given to any person, if the CDPP requests that the order be made ex parte. This provision is modelled on existing subsection 26(4), which requires a court to consider an application for a restraining order without notice if requested to do so by the CDPP.

179C Application to revoke a preliminary unexplained wealth order

Section 179C provides a person to whom a preliminary unexplained wealth order relates, an opportunity to have the order requiring them to appear before the court revoked. There may be instances where a person can quickly and easily demonstrate that his or her total wealth does not exceed the value of his or her wealth that was lawfully acquired because, for example, the authorising officer was not aware of wealth that was lawfully acquired by the person. In such cases, it is in the interests of justice that the matter be disposed of quickly without resorting to a full hearing for an unexplained wealth order under 179E.

To have a preliminary unexplained wealth order revoked, a person must apply to the court, within 28 days after he or she is notified of the preliminary unexplained wealth order or within such longer period as the court allows but not exceeding 3 months, to revoke the order (subsections 179C(1) and (2).) Under subsection 179C(4) a preliminary unexplained wealth order remains in force until the court revokes the order.

The court may revoke a preliminary unexplained wealth order if it is satisfied that there were no grounds on which to make the order at the time of the application under section 179C, not the time at which the preliminary order was made under section 179B. This will ensure that decisions about whether a preliminary unexplained wealth order should have been made will be made on all of the available evidence, and will not require the CDPP to unnecessarily reapply for a new preliminary unexplained wealth order.

Revocation could occur where the person demonstrates that his or her total wealth does not exceed the value of his or her wealth that was lawfully acquired. For example, an authorised officer's affidavit may state that a person's total wealth exceeds their lawfully acquired wealth by $100,000.00. The person, however, has proof that the $100,000.00 came from a lawful source and thus that there were no grounds for making the preliminary unexplained wealth order.

Subsection 179C(5) provides that a preliminary unexplained wealth order can only be revoked where a person has made an application for revocation. A court will not be able to revoke a preliminary unexplained wealth order on its motion. However, a court will have discretion to revoke a preliminary unexplained wealth order if it is in the public interest to do so. Providing the court with this discretion is consistent with other provisions in the Act. For example, existing subsection 19(4) gives the court discretion to refuse to make a restraining order if the court considers it is not the public interest to make the order.

179CA Notice and procedure on application to revoke preliminary unexplained wealth order

Section 179CA outlines the procedure and notice requirements to revoke a preliminary unexplained wealth order under section 179C. To avoid an applicant under section 179C being confronted with additional evidence at the hearing that she or he did not know about, the CDPP will be required to provide an applicant with the affidavits it proposes to rely on to contest the application (subsection 179CA(5)).

The CDPP will be required to provide copies of any affidavits it intends to rely on within a reasonable time before the section 179C hearing (subsection 179CA(6)). Similarly, the applicant will be required to provide the CDPP with written notice of their application and a copy of any affidavit supporting their application to revoke a preliminary unexplained wealth order (subsection 179CA(3)).

Section 179CA ensures that the procedure for applying to revoke a preliminary unexplained wealth order is clear and that both sides are provided with all relevant information before the hearing.

179D Notice of revocation of a preliminary unexplained wealth order

Section 179D is a notice provision. If a court revokes a preliminary unexplained wealth order under subsection 179C(6), the DPP must give written notice of the revocation to the person who applied for the revocation. Requiring the DPP to provide written notice to an applicant will ensure that an applicant is made aware of the outcome of an application.

179E Making an unexplained wealth order

Subsection 179E(1) requires a court with proceeds jurisdiction to make an unexplained wealth order, requiring a person to pay an amount to the Commonwealth, if two requirements have been met. The first requirement is that the court has made a preliminary unexplained wealth order in relation to the person under section 179B. The second requirement is that the person has failed to satisfy the court that the whole or part of his or her wealth was not derived from an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect (a specified offence). The courts that have proceeds jurisdiction for a preliminary unexplained wealth order or an unexplained wealth order are those of any State or Territory with jurisdiction to deal with criminal matters on indictment.

The amount that the person must pay to the Commonwealth is his or her unexplained wealth amount. A person's unexplained wealth amount is the amount that, in the court's opinion, is the difference between the person's total wealth, and the sum of the values of the property that the court is not satisfied was not derived from a specified offence, reduced by any amount deducted under section 179J.

Section 179J allows for the reduction of an unexplained wealth amount to take into account forfeiture, pecuniary penalties and literary proceeds orders. This is appropriate to ensure that when a court makes an order requiring a person to repay an amount in unexplained wealth, that the amount is reduced by the amount of money or property already forfeited or paid.

Under subsection 179E(3) a person bears the legal burden of proving, on the balance of probabilities, that his or her wealth is not derived from one or more of the specified offences. Subsection 179E(4) clarifies that section 317 of the Act does not affect the burden in subsection 179E(3). Section 317 states that an applicant (which would be the DPP for an unexplained wealth order) in any proceedings under the Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for. In this case, however, it is the person against whom an order is sought that bears the burden of proving that his or her wealth is not derived from one or more of the specified offences.

Subsection 179E(4) clarifies that, when considering whether to make an unexplained wealth order, the court may have regard to information not included in the application. The effect of this subsection is that, if the DPP discovers further property owned or under the effective control of the person, after the application for an unexplained wealth order was lodged, the DPP can lead that evidence at a hearing for an unexplained wealth order.

The DPP may have been aware of information that it did not consider relevant at the time of the application and for this reason did not include it in the affidavit. In the intervening period since the application was made, that information might become relevant as further facts come to light. For example, because of submissions made by a person against whom the unexplained wealth order is sought. It is important that, when making an unexplained wealth order, the court has regard to all relevant information, whether or not it was reasonably ascertainable at the time the original application was made.

Subsection 179E(6) provides the court with a discretion to refuse to make an unexplained wealth order if the court considers it is not in the public interest to do so.

179F Ancillary orders

Subsections 179F(1) and (2) will allow a court that makes a preliminary unexplained wealth order or an unexplained wealth order, or any other court that could have made the preliminary unexplained wealth order or the unexplained wealth order, to make any ancillary orders to the preliminary unexplained wealth order or the unexplained wealth order that it considers appropriate. The court may make the ancillary orders either when the preliminary unexplained wealth order or the unexplained wealth order is made or at a later time.

Examples of ancillary orders that a court might make include an order varying the property covered by the restraining order or an order varying a condition to which a restraining order is subject.

Division 2 - Unexplained wealth amounts

179G Determining unexplained wealth amounts

Subsection 179G(1) explains what a person's 'wealth' is for the purpose of Part 2-6. A person's wealth is property owned, effectively controlled, consumed or disposed of by the person at any time. Importantly, this includes property owned, effectively controlled, consumed or disposed of before the commencement of Part 2-6.

It is necessary to include property owned, effectively controlled, consumed or disposed of by the person at any time so that the person accounts for the entirety of his or her wealth over time and not just property he or she currently owns or controls. If a person's wealth were limited to a particular period of time, a person could escape accounting for large amounts of unexplained wealth derived from a potential lifetime of crime. Similarly, if wealth did not include property disposed of, a person could funnel significant amounts of proceeds of crime through extravagant gifts or personal consumption.

Subsection 179G(2) explains what 'total wealth' is. A person's total wealth is the sum of all of the values of the person's property that constitute a person's wealth. This means that the value of every item of property owned, effectively controlled, consumed or disposed of by the person at any time is added together to give the person's total wealth.

Subsections 179G(3) and (4) state how the value of property is to be established. For property that has been disposed of, consumed or is no longer available (179G(3)), the value of the property is the greater of the value of the property at the time it was acquired or the value of the property immediately before it was disposed of, consumed or stopped being available.

Subsection 179G(4) relates to property that is available to be valued and is, again, the greater of the value of the property at the time it was acquired or the value of the property on the day that the application for the unexplained wealth order was made.

This is necessary to prevent a person from not fully accounting for their wealth. For example a house purchased for $100,000.00 and sold for $150,000.00 will be valued at $150,000.00 in any unexplained wealth order. Similarly, if a house is purchased for $100,000.00 and depreciates to $50,000.00, it will still be valued at $100,000.00 under the unexplained wealth order provisions.

179H Effect of property vesting in an insolvency trustee

Section 179H provides that, in limited but well recognised circumstances, property that would not normally be considered a person's property may still be treated as if it were the person's property for the purpose of assessing the value of a person's property.

These circumstances are if the property vests in the trustee of the estate of a bankrupt, the trustee of a composition or scheme arrangement, the trustee of a personal insolvency agreement or the trustee of a deceased person's estate. If such property were not included in the value of a person's property, a person could avoid accounting for their unexplained wealth by declaring themselves bankrupt.

179J Reducing unexplained wealth amounts to take account of forfeiture, pecuniary penalties etc.

When a court determines a person's total wealth under 179E(2), it could include amounts that a person has previously forfeited under a forfeiture order, an interstate forfeiture order or a foreign forfeiture order. A person's total wealth could also include amounts payable under a pecuniary penalty order, literary proceeds order, an order under section 243B of the Customs Act 1901, an interstate pecuniary penalty order or a foreign pecuniary penalty order.

To counteract this effect, section 179J requires a court, in determining a person's unexplained wealth amount, to deduct an amount equal to the value of any property forfeited by the person (at the time the order was made) or an amount equal to the sum of any amounts payable by the person listed in subparagraphs 179J(b)(i)-(v).

This provision is an important safeguard to ensure that a person will not be required to forfeit the same unlawfully acquired property twice.

179K Varying unexplained wealth orders to increase penalty amounts

Section 179K allows a court, in either of two situations, to increase the unexplained wealth amount determined under subsection 179E(2). The DPP must make an application to the court to vary an unexplained wealth order and increase the penalty amount. The DPP's application may deal with more than one increase to the same unexplained wealth amount.

The first situation in which an unexplained wealth amount may be increased is if the value of property the person forfeited under 179J(a) was deducted from the unexplained wealth amount and an appeal against the forfeiture or the order is allowed. In such a case, the amount of the increase able to be sought by the DPP is equal to the value of the property.

The second situation in which an unexplained wealth amount may be increased is if an amount the person forfeited under 179J(b) was deducted from the unexplained wealth amount and an appeal against the amount payable or the order is allowed. In such a case, the amount of the increase able to be sought by the DPP is equal to the amount that was payable.

Section 179K is necessary because, if a court deducts an amount from a person's unexplained wealth amount to take account of property forfeited or an amount paid, and the person successfully appeals against a forfeiture or pecuniary penalty type order, they will not pay to the Commonwealth the full extent of their unexplained wealth.

179L Relieving certain dependants from hardship

Section 179L enables a dependant of a person whose property is the subject of an unexplained wealth order to seek payment from the Commonwealth to compensate that person for the hardship that would be caused by the unexplained wealth order.

Such an order must specify the amount to be paid to the dependent of the person, and the court must be satisfied that the amount would relieve the hardship. The specified amount cannot exceed the unexplained wealth amount of the person to whom the unexplained wealth order relates.

Where the dependant is aged 18 or over, the court must also be satisfied that the dependant did not have any knowledge of the conduct of the person the subject of the unexplained wealth order. The court may make an order in respect of more than one dependant.

However, the Commonwealth will only be required to pay an amount to a dependant after the person to whom the unexplained wealth order relates has satisfied his or her debt to the Commonwealth in relation to the unexplained wealth amount. This is necessary because, unlike forfeiture orders, unexplained wealth orders do not involve a person forfeiting property to the Commonwealth. Rather, the person pays his or her unexplained wealth amount to the Commonwealth.

Division 3 - How unexplained wealth orders are obtained

179M DPP may apply for an unexplained wealth order

Section 179M states that the Director of Public Prosecutions (DPP) may apply for an unexplained wealth order. This is consistent with other application processes in the Act which empower the DPP to apply for restraining, forfeiture, pecuniary penalty and literary proceeds orders. Although a number of Commonwealth agencies will investigate and be involved in unexplained wealth order actions, only the DPP may apply for an unexplained wealth order.

179N Notice of application

Section 179N sets out the notice provisions for obtaining an unexplained wealth order. The DPP may apply for an unexplained wealth order without initially providing notice to the person to whom the unexplained wealth order would relate, if it were made.

However, once a court is satisfied that a preliminary unexplained wealth order should be made under 179B, subsection 179N(2) requires the DPP, within 7 days of the order being made, to give written notice of the preliminary unexplained wealth order to the person, as well as provide a copy of the application for the unexplained wealth order and the affidavit referred to in subsection 179B(2) which is required to support an unexplained wealth order application..

Subsections 179N(3) and (4) require the DPP to provide a copy of any other affidavit supporting the application for an unexplained wealth order. Copies must be provided to any person who would be affected by the order if it were made and must be provided within a reasonable time before the hearing.

179P Additional application for an unexplained wealth order

Section 179P prohibits the DPP from applying for an unexplained wealth order in particular circumstances without the leave of the court. The prohibition prevents the DPP from seeking to make an application for an unexplained wealth order under this Division if an application has already been made and finally determined. Similarly, if an application for an unexplained wealth order has been made and finally determined under another law of the Commonwealth or a law of a non-governing Territory, the DPP cannot apply for an unexplained wealth order in relation to the person without the leave of the court.

Subsection 179P(2) only allows the court to give leave in particular circumstances - namely if the court finds that the wealth to which the new application relates was identified only after the first application was determined, necessary evidence became available only after the first application was determined, or it is in the interests of justice to grant the leave.

It is not fair to subject a person to multiple unexplained wealth order applications that relate to the same 'wealth,' unless there are exceptional circumstances for doing so. If further unexplained wealth orders are made in relation to property that was already the subject of such an application, the court must be satisfied that the further application should be allowed.

179Q Procedure on application

Section 179Q provides for matters of procedure in the hearing of an application for an unexplained wealth order. The person who would be subject to an unexplained wealth order, were it made, may appear and adduce evidence at the hearing of an application under section 179C (application to revoke a preliminary unexplained wealth order) and 179E (making an unexplained wealth order).

The purpose of this section is to clarify, in case there is any doubt, that the person who would be subject to an unexplained wealth order, were it made, may appear and adduce evidence at the hearings under sections 179C and 179E.

Section 179Q outlines the procedure on application and other notice requirements for unexplained wealth orders. Subsection 179Q(1) provide that a person who would be subject to an unexplained wealth order if it were made, may appear and adduce evidence at the hearing. A person who intends to adduce evidence at an unexplained wealth order hearing (under section 179E) must give the DPP written notice of the grounds on which he or she proposes to contest the order (subsection 179Q(2)). The DPP is also permitted by subsection 179Q(3) to appear and adduce evidence at the hearing.

Division 4 - Enforcement of unexplained wealth orders

179R Enforcement of an unexplained wealth order

Where an unexplained wealth order is made against a person for the payment to the Commonwealth of a specified amount of money, subsection 179R(1) provides that that amount is a debt due by that person to the Commonwealth.

Subsection 179R(2) provides that the unexplained wealth order may be enforced by the Commonwealth as if it were an order made by a court to recover a debt due by that person to the Commonwealth. By operation of subsection 170R(3), that debt is taken to be a judgment debt. Subsection 179R(4) has the effect that, if an unexplained wealth order is made against a person after they die, the order is treated as having been made the day before the person died.

179S Property subject to a person's effective control

Where the court has made an unexplained wealth order in relation to a person, the DPP may apply to the court for an order under subsection 179S, declaring that all or part of property within the effective control of that person be made available to satisfy the unexplained wealth order. The court may make such an order where it is satisfied that the property is subject to the effective control of the person.

Subsection 179S(2) provides that where the court makes such an order, the order may be enforced as if the property under the effective control of the person were the property of that person.

In addition, the court may make a restraining order over that property, as if the requirements to obtain a section 20A restraining order had been met (subsection 179S(3)).

Subsection 179S(4) requires the DPP to provide notice of an application to the person in respect of whom the unexplained wealth order was made, and any other person who the DPP believes has an interest in the property. Those people may appear at the hearing of the application, and adduce evidence (subsection 179S(5)).

This provision is necessary to ensure a person does not avoid paying their unexplained wealth amount to the Commonwealth by claiming that they do not control property that would assist in satisfying the debt to the Commonwealth. If a court is satisfied that particular property is subject to the effective control (defined in section 337 of the Act) of the person to whom an unexplained wealth order relates, subsection 179S(1) will empower a court to declare that property as being available to satisfy the unexplained wealth amount.

179T Penalty amounts exceeding the court's jurisdiction

Subsections 179T(1)-(3) clarify jurisdictional issues that may arise and ensure that courts have the ability to enforce orders made under Part 2-6.

The DPP may apply for an unexplained wealth order in a State or Territory County or District Court, on the basis that the authorised officer suspected that a person's unexplained wealth was $200,000.00, for example. However, after conducting further investigations and/or examination hearings, it may become apparent that a person's unexplained wealth is considerably more - $2,000,000.00, for example. In such a situation, most State and Territory County or District Courts would not have jurisdiction with respect to recovery of debts for the larger amount.

In such a situation, subsection 179T(1) will allow the registrar of the court to issue a certificate containing certain particulars specified in the regulations. The certificate may then by registered in a court that has jurisdiction with respect to the recovery of debts of an amount equal to the amount in the relevant order (subsection 179T(2).) In practice, this will most likely be the Supreme Court. Subsection 179T(3) provides that, once the certificate is registered, it is enforceable as a final judgment of the court in favour of the Commonwealth and the Commonwealth can recover the unexplained wealth amount.

Item 14 - After paragraph 202(5)(e)

Item 14 amends the definition of 'property tracking document' in subsection 202(5) of the Act to ensure this definition encompasses documents relevant to unexplained wealth orders.

The definition of property tracking document will be amended to include a document relevant to identifying, locating or quantifying property if it is reasonable to suspect the total value of a person's wealth exceeds the value of wealth that was lawfully acquired. The definition will also be amended to include a document relevant to identifying or locating any document necessary for the transfer of property to such a person.

If the definition of 'property tracking document' were not amended as described above, production orders used to gather information about a person's unexplained wealth might be frustrated.

Item 15 - Paragraph 202(5)(f)

Item 15 will omit the words 'or (e)' from paragraph 202(5)(f) and substitute the words '(e), (ea) or (eb)'. This will ensure the definition of property tracking document includes documents that would assist in the interpretation of a document referred to in the new paragraphs (ea) and (eb), in addition to documents referred to in existing paragraphs.

Law enforcement agencies will be assisted in their investigation of unexplained wealth by being able to access and inspect documents that may assist in the interpretation of other documents relevant to identifying, locating or quantifying the property of a person.

A note is inserted after subsection 202(5) amending the heading to section 282 by adding at the end of the heading the words, 'in relation to certain restraining orders.' This is necessary to differentiate directions by a court to the Official Trustee of those orders, and section 282A, inserted by Item 14, that permits a court to direct the Official Trustee in relation to unexplained wealth orders.

Item 16 - After section 282

282A Direction by court to Official Trustee

Item 16 will insert section 282A.

Section 282A will permit a court, in certain circumstances, to direct the Official Trustee to pay the Commonwealth an amount up to a person's unexplained wealth amount, out of property that is subject to a restraining order under section 20A.

This will ensure that courts have the discretion to enforce unexplained wealth orders directly from the property of a person named in the order or by requiring the person to pay an amount to the Commonwealth.

There are three circumstances in which a court may make such a direction. The first circumstance is that the court that makes the unexplained wealth order may include such a direction if the restraining order has already been made against the person and relates to property that constitutes part of the person's total wealth. The second circumstance is that the court that makes the restraining order may include such a direction in the order if the unexplained wealth order has been made against the person and the restraining order is made against the person's property under section 20A or property the person effectively controls under section 179S. The third circumstance is that the court that made the unexplained wealth order or the restraining order, may, on application by the DPP, make the direction if the unexplained wealth order has been made and the restraining order is made against the person under section 20A or another person under section 179S.

Item 17 - Subsections 283(1) and 284(1)

Item 17 will amend subsections 283(1) and 284(1) by adding references to new section 282A, in addition to section 282.

The powers in section 282A are substantially similar to the powers in section 282, although they are applicable to unexplained wealth orders instead of pecuniary penalty orders. Sections 283-285 provide guidance on the application of the directions that may be made under section 282. It is appropriate to ensure this guidance also applies to section 282A, which is intended to operate in a similar way to existing section 282.

Item 18 and 19 - Subsection 284(2) and Paragraph 284(2)(a)

Items 18 and 19 amend subsection 284(2) and paragraph 284(2)(a) by adding the words 'or unexplained wealth amount' after literary proceeds amount. This amendment is consequential to the insertion of the unexplained wealth provisions. It will allow the Official Trustee, where it is to credit an amount to the Confiscated Assets Account and the available amount of restrained property exceeds the unexplained wealth amount, to pay to the Confiscated Assets Account an amount equal to the unexplained wealth amount and to pay the balance to the person whose property was subject to the restraining order.

Items 20-22 - Subsection 285(1), Paragraphs 285(2)(a) and 285(2)(b)

Items 20, 21 and 22 amend subsection 285(1) and paragraphs 285(2)(a) and 285(2)(b) by inserting the words 'or 282A' after '282.' This is necessary to prevent the Official Trustee from carrying out the directions of a court that are subject to appeal. Because Item 14 inserted section 282A that allows a court to give directions to the Official Trustee in relation to unexplained wealth orders, it is necessary that section 285 also refers to section 282A.

Item 23 - At the end of section 286

Item 23 inserts subsection (3) to section 286. Section 286 is concerned with the discharge of a person's pecuniary, literary proceeds or unexplained wealth order to the extent that the Official Trustee credits money to the Confiscated Assets Account.

Subsection 286(3) has the effect that, if a court makes an unexplained wealth order requiring a person to pay an unexplained wealth amount of $50,000.00 and the Official Trustee credits money to the Confiscated Assets Account out of that person's restrained property to the value of $40,000.00, the person's liability under the unexplained wealth order is discharged to the extent of the $40,000.00. The person will still have to pay the remaining $10,000.00 debt to the Commonwealth.

Item 24 - After paragraph 296(3)(f)

Item 24 will insert paragraph (fa) into subsection 296(3). This will ensure that unexplained wealth amounts paid to the Commonwealth in accordance with an unexplained wealth order must be deposited into the Confiscated Assets Account.

Money in the Confiscated Assets Account is used for a number of purposes, including funding programs approved by the Minister for the purposes of crime prevention, law enforcement, treatment of drug addiction and diversionary measures relating to illegal use of drugs. Thus, wealth that a person has derived from illegal activities can be channelled into programs aimed at preventing crime.

Item 25 - Paragraph 322(1)(c)

Item 25 will amend paragraph 322(1)(c) to ensure that a person who has an interest in property that has been declared available to satisfy an unexplained wealth order may appeal the making of the order. The person may be the person against who the unexplained wealth order was made (the first person), or could be a person who has an interest in property that is subject to the first person's effective control (section 179S).

Item 26 - Subsection 322(1)

Item 26 will amend the words at the end of subsection 322(1) to ensure these words encompass the right to appeal against an unexplained wealth order or an order that property is available to satisfy an unexplained wealth order.

Item 27 - After subsection 322(4)

Item 27 inserts subsection (4A) after subsection 322(4). Subsection 322(4A) allows a person to appeal against an unexplained wealth order or an order made under section 179S (that property subject to a person's effective control is available to satisfy an unexplained wealth order).

The way in which a person may appeal either of those orders is as if the person had been convicted of one of the specified offences in subparagraph 20A(g)(i) (an offence against a law of the Commonwealth, a foreign indictable offence or a State offence that has a federal aspect) and the targeted order were, or were part of, the sentence imposed on the person in respect of the offence.

This ensures the manner of appeal is kept consistent with other appeal mechanisms under section 322.

Item 28 - Subsection 335(1)

Item 28 will amend subsection 335(1) to provide that 'proceeds jurisdiction' for an unexplained wealth order or a preliminary unexplained wealth order does not depend on the circumstances of the offence or offences to which the order would relate as it does for the other types of orders under the Act.

A court's jurisdiction to hear and determine unexplained wealth orders and preliminary unexplained wealth orders falls within the definition of 'proceeds jurisdiction' but such orders do not relate directly to an offence or offences as do other orders in the Act. It is therefore not appropriate for the references to the circumstances of an offence or offences in subsection 335(1) to apply to unexplained wealth orders and preliminary unexplained wealth orders.

Item 29 - At the end of subsection 335

Item 29 will amend section 335 by inserting subsection 335(7). Subsection 335(7) provides that a court of a State or Territory with jurisdiction to deal with criminal matters on indictment will have jurisdiction to make unexplained wealth orders and preliminary unexplained wealth orders.

A court's ability to hear and determine unexplained wealth orders and preliminary unexplained wealth orders has been incorporated into the definition of 'proceeds jurisdiction' for two reasons. The first is consistency and readability throughout the Act because all of the other provisions in the Act that refer to a court's jurisdiction refer to a court with proceeds jurisdiction. Secondly, unexplained wealth orders and preliminary unexplained wealth orders are not intended to have a separate jurisdiction. Rather, they are one of several types of confiscation orders available under Chapter 2 of the Act.

Items 30-31 - Section 336

Items 30 and 31 amend the meaning of 'derived' by inserting 'wealth' after 'literary proceeds.' These amendments are consequential to the inclusion of unexplained wealth provisions and are necessary to ensure their effective operation.

Item 32 - After section 336

336A Meaning of property being lawfully acquired

Item 32 will insert section 336A.

Section 336A will provide a definition of 'lawfully acquired' property and wealth. Property and wealth will only be lawfully acquired if the property or wealth was lawfully acquired and the consideration given for the property or wealth was lawfully acquired. Where property is purchased with partly illegitimate funds, it cannot be treated as being wholly lawfully acquired.

This definition will ensure that a court may include in the assessment of a person's lawfully acquired wealth any lawfully acquired consideration given in exchange for property or wealth. It will ensure a court cannot include in the assessment of a person's lawfully acquired wealth, the value of any consideration that was not lawfully acquired or the value of property purchased wholly or partially with consideration that was not acquired lawfully. This will ensure a person retains their lawfully acquired consideration but does not retain unlawfully acquired consideration or capital gains made on property that was not lawfully acquired.

For example, a person who purchases a house for $100,000.00 with $50,000.00 of lawfully acquired wealth and $50,000.00 of unlawfully acquired wealth, and whose house appreciates so that it is worth $200,000.00, will only be entitled to the initial lawfully acquired $50,000.00. They will not be entitled to any of the appreciation amount that might be argued to be attributable to the initial lawfully acquired $50,000.00. This is because the person would not have been able to purchase the house without the initial unlawfully acquired portion of $50,000.00 and should not gain the benefit of appreciation made possible through partially unlawfully acquired wealth.

Item 33 - Section 338 (definition of confiscation order)

Item 33 will amend the definition of 'confiscation order' in section 338 of the Act to include an unexplained wealth order.

The definition of confiscation order will be amended to include unexplained wealth orders to ensure proper interaction between this form of confiscation order and existing provisions providing guidance on the operation of confiscation orders.

Item 34 - Section 338

Item 34 will insert a definition of 'lawfully acquired' into section 338 that cross references the definition in section 338 to the definition of this term provided in section 336A.

Item 35 - Section 338

Item 35 will insert a definition of 'preliminary unexplained wealth order' into section 338, meaning an order under section 179B requiring the person to appear before a court.

Item 36 - Section 338 (definition of restraining order)

Item 36 will amend the definition of 'restraining order' in section 338 to include the unexplained wealth restraining orders under section 20A.

The definition of restraining order is being amended to include unexplained wealth restraining orders to ensure proper interaction between this restraining order and existing provisions providing guidance on the operation of restraining orders. Provisions that depend on the existence of a restraining order for application, such as examination orders under section 180, will apply to orders under section 20A in the same manner they apply to other restraining orders.

Item 37 - Section 338

Item 37 will insert a definition into section 338 of 'State offence that has a federal aspect', which will have the same meaning as section 3AA of the Crimes Act 1914. A State offence that has a federal aspect is an offence that is not an ancillary offence and, had it been enacted by the Parliament of the Commonwealth instead of by the Parliament of a State, it would have been a valid law of the Commonwealth.

This definition is relevant to unexplained wealth orders because a person against whom the DPP seeks an unexplained wealth order has to satisfy the court that his or her total wealth was not derived from certain offences, including State offences that have a federal aspect.

After the definition of 'State offence that has a federal aspect' a Note is inserted to alert the reader that section 3AA of the Crimes Act 1914 sets out when a State offence has a federal aspect.

Item 38 - Section 338 (definition of suspect)

Item 38 will amend the definition of 'suspect' in section 338 to include a person, in relation to an unexplained wealth order, whose total wealth is suspected of exceeding the value of wealth that was lawfully acquired.

This will ensure that existing provisions that apply to a 'suspect' will also apply to a person suspected of possessing unexplained wealth. By retaining and amending the term 'suspect' the Act will remain consistent. It also reflects the fact that unexplained wealth orders are similar to other types of confiscation orders.

Item 39 - Section 338

Item 39 will insert a definition of 'total wealth' into section 338, cross referencing the definition provided in subsection 179G(2), inserted by Item 13.

Item 40 - Section 338

Item 40 will insert a definition of 'unexplained wealth amount' into section 338, cross referencing the definition in subsection 179E(2), inserted by Item 13.

Item 41 - Section 338

Item 41 will insert a definition of 'unexplained wealth order' into section 338. An unexplained wealth order will mean an order under subsection 179E(1) that is in force.

Item 42 - Section 338

Item 42 will insert a definition of 'wealth' into section 338, cross referencing the definition in subsection 179G(1), inserted by Item 13.

Part 2 - Related Amendments

Bankruptcy Act 1966

Item 34 - Subsection 5(1) (at the end of the definition of pecuniary penalty order)

Item 34 will insert paragraph (c) at the end of 5(1) of the Bankruptcy Act 1966 to include explained wealth orders in the definition of 'pecuniary penalty order'. This will ensure that any reference to 'pecuniary penalty order' in the Bankruptcy Act 1966 will pick up unexplained wealth orders.

Crimes Act 1914

Item 35 - Subparagraph 3(2)(a)(ii)

Item 35 will amend subparagraph 3(2)(a)(ii) of the Crimes Act 1914 to include a reference to unexplained wealth orders.

Subparagraph 3(2)(a)(ii) states that a reference to a 'fine' in the Crimes Act is a reference to a pecuniary penalty, other than a pecuniary penalty imposed under several pieces of legislation, including the Proceeds of Crime Act 2002. Item 35 will replace the words 'or a literary proceeds order' with ', a literary proceeds order or an unexplained wealth order'. This will clarify that a 'fine' in the Crimes Act is a pecuniary penalty, other than a pecuniary penalty imposed by a pecuniary penalty order, literary proceeds order or unexplained wealth order made under the Proceeds of Crime Act.