Senate

Addendum to the Explanatory Memorandum

(Circulated by authority of the Minister for Home Affairs, the Hon Peter Dutton MP)

Unexplained Wealth Legislation Amendment Bill 2018

The purpose of this addendum is to provide additional material to the Explanatory Memorandum to the Unexplained Wealth Legislation Amendment Bill 2018 (the Bill). This addendum responds to a request by the Senate Standing Committee for the Scrutiny of Bills in its Scrutiny Digest 8 of 2018 (15 August 2018).

Schedule 1, item 2, Section 14F

After paragraph 61 on page 23, insert the following paragraphs:

Subsection 14F(5) Exemption from disallowance

The exemption from disallowance at subsection 14F(5) is justifiable as an instrument made under subsection 14F(4) is intended to facilitate the operation of the National Cooperative Scheme on Unexplained Wealth (the Scheme), which would involve the Commonwealth and one or more States. It is vital that the Commonwealth Parliament should not, as part of a legislative instruments regime, be permitted to unilaterally disallow instruments that are part of a multilateral scheme. This principle is enshrined in subsection 44(1) of the Legislation Act 2003.

A State's ongoing participation in the Scheme as a 'cooperating State' is intended to facilitate continued good faith negotiations with the Commonwealth and encourage the State to fully commit to the Scheme at a later date. The Minister's ability to remove this status by legislative instrument is vital in ensuring that a State cannot continue to indefinitely benefit from the equitable sharing arrangements where it has demonstrated it has no intention of re-engaging with the Scheme.

If there is a risk that such an instrument would be disallowed, this would jeopardise the ongoing effectiveness of the Scheme.

Schedule 4, item 6, Clause 5

After paragraph 208 on page 42, insert the following paragraphs:

Subclause 5(1) Overriding privileges

Paragraph 5(1)(a) Overriding the privilege against self-incrimination

It is appropriate to override the privilege against self-incrimination at paragraph 5(1)(a) as its use could seriously undermine the effectiveness of State and Territory regulatory schemes and prevent the collection of evidence (see Part 9.5.3 of the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (the Guide)).

In some unexplained wealth matters, relevant information on property may only be obtainable from persons who have had some connection to criminal conduct. This may be the individual who committed the original crime, a financial institution that dealt with property suspected of being proceeds of an offence or professional intermediaries responsible for laundering the property through legal structures.

Allowing these individuals to rely on the privilege against self-incrimination would frustrate the operation of production orders and, in many cases, would prevent law enforcement from gathering the information required to support the unexplained wealth action.

Combatting unexplained wealth and, as a result, serious and organised crime groups, provides a benefit that outweighs the loss to personal liberty produced through the abrogation of the privilege against self-incrimination.

Paragraph 5(1)(c) Overriding legal professional privilege

The exceptional nature of the conduct which the Bill is seeking to address justifies the abrogation of this privilege. Legal professional privilege can obstruct the investigation of serious and organised criminal activity and can undermine the central purpose of the proposed production orders, namely the identification, location and quantification of property relevant to State and Territory unexplained wealth matters.

Serious and organised crime groups frequently set up elaborate financial and legal structures to conceal or disguise their wealth. Lawyers can become unwittingly caught up in this process if they provide advice to a client on matters such as setting up a trust structure, incorporating a business or selling property.

However, in other circumstances, lawyers may become professional facilitators. The use of legal practitioners to launder illicit funds is an internationally established money laundering method, and law enforcement have reported that it can be difficult in many cases to distinguish legitimate legal advice from advice given to intentionally frustrate the operation of future investigations.

As production orders can be issued prior to restraint action or during a covert investigation, if legal professional privilege was not removed tension could also arise between a lawyer's professional obligations to their client and the fact that they could not take instructions to clarify or waive legal professional privilege from their client due to the non-disclosure requirements under proposed clause 16 of proposed Schedule 1. The abrogation of legal professional privilege prevents this tension from arising.

Paragraph 5(1)(a) and (c) Additional protections

Production orders also contain safeguards to minimise the impact on a person's legal professional privilege and privilege against self-incrimination.

Production orders must be made by the courts, and a magistrate retains the discretion not to make a production order under subclause 1(1) of proposed Schedule 1 of the Act.

A production order under paragraph 1(3)(a) can also only require the production of documents which are in the possession, or under the control, of a corporation or are used, or intended to be used, in the carrying on of a business. The narrow scope of these orders minimises the possibility that relevant privileges will be abrogated, as corporations do not benefit from the privilege against self-incrimination and documents which do not relate to the carrying on of a business cannot be produced.

Further, it should be noted that similar provisions overriding the privilege against self-incrimination exist at section 206 of the POC Act. These aspects of Commonwealth law have not been changed, but have merely been extended to States and Territories that participate in the Scheme.

The abrogation of these privileges can therefore be justified on the basis that it is necessary to ensure the effectiveness of unexplained wealth laws, and provides a public benefit that outweighs the loss of these privileges.

Subclause 5(2) 'use immunity' and the absence of 'derivative use' immunity

Subclause 5(2) provides a use immunity, that is, any document produced or made available is not admissible in evidence in criminal proceedings against a natural person except for the offences of giving false or misleading information or documents under the Criminal Code.

This use immunity will continue to apply to subsequent disclosures of the information contained in the documents under proposed subclause 18(3).

Derivative use immunity has not been included to prevent information indirectly obtained from production orders from being used in proceedings against the person.

Applying a derivative use immunity to civil investigations would defeat the central purpose of production orders under subparagraph 1(6)(a)(i) of proposed Schedule 1 to the POC Act, which is to gain information required to determine whether to take further civil action, including investigative action, under State and Territory 'unexplained wealth legislation'.

If a derivative use immunity was applied to criminal investigations, this would also have the potential to severely undermine the existing ability of authorities to investigate and prosecute serious criminal conduct.

For example, if a derivative use immunity was included, where an investigator in a criminal matter could potentially have access to privileged material, the prosecution may be required to prove the provenance of all subsequent evidentiary material before it can be admitted. This creates an unworkable position wherein pre-trial arguments could be used to inappropriately undermine and delay the resolution of charges against the accused.

This would be contrary to the aims of the existing production order regime, the proposed production order regime and the associated information sharing provisions under existing section 266A of the POC Act and proposed clause 18 of Schedule 1 to the POC Act.

These provisions only allow for the derivative use and sharing of produced documents where the documents are shared with a specific authority for a legitimate purpose. For example, a document obtained under a production order may be given to an investigative authority of a State under item 3 of subclause 28(2) only if the person giving this document believes on reasonable grounds that the document will assist in the prevention, investigation or prosecution of an offence punishable by at least 3 years or life imprisonment.

It is also pertinent to note that production orders do not affect the inherent power of the court to manage criminal prosecutions and civil proceedings that are brought before it where it finds that those proceedings have been unfairly prejudiced or that there is a real risk of prejudice to the defence of an accused.

The abrogation of the privilege against self-incrimination and legal professional privilege therefore remains appropriate in the absence of a derivative use immunity, as including this immunity would not be appropriate and the derivative use of documents obtained through a production order is suitably restricted.

Schedule 4, item 6, Clause 12

After paragraph 230 on page 45, insert the following paragraphs:

For a 'self-governing Territory', a person who may give a notice is a person of a kind prescribed by the regulations in relation to the Territory (see paragraph 12(3)(d)). This regulation-making power was created to ensure that the national scheme was sufficiently flexible to allow appropriate officials in the Territories to issue notices to financial institutions in unexplained wealth cases.

Defining a specific class of officials for the Australian Capital Territory (ACT) under paragraph 12(3)(d), however, was not possible as the ACT does not currently have an unexplained wealth scheme, and it is therefore not possible to define the characteristics of the appropriate official with sufficient certainty.

The operation of this regulation-making power will also be subject to the disallowance mechanism under section 42 of the Legislation Act 2003 and the oversight of the Parliamentary Joint Committee on Law Enforcement under proposed clause 19 of Schedule 1 to the POC Act.

These oversight mechanisms will be informed by the Territories' obligation to provide annual reports to the Commonwealth on the operation of proposed Schedule 1 to the POC Act under clause 20 of this Schedule. These reports are required to be tabled in Parliament under subclause 20(2) of the Schedule.

Schedule 4, item 6, Clause 12

After paragraph 241 on page 46, insert the following paragraphs:

Subclause 14(1) replicates existing subsection 215(1) of the POC Act, which was introduced at the recommendation of the Australian Law Reform Commission. The Commission found that financial institutions and their employees could expose themselves to civil and criminal liability for the mere act of providing financial information or documents to an authorised officer, even where they were compelled to do so.^[1]

On this basis, the Commission recommended that financial institutions and their employees should be protected from any action, suit or proceedings in relation to its or their response to a notice.

The breadth of the immunity, however, only extends to actions carried out under the notice or under the mistaken belief that the action was required under the notice.

Under subclauses 12 and 13 of proposed Schedule 1 to the POC Act, a notice must state the documents or information to be provided, the form and manner in which these are to be provided and may only permit documents or information to be provided to a specific authorised State/Territory officer.

A person receiving this written notice will be clearly informed of their specific obligations. Given the narrow nature of these obligations, the immunity will not protect an employee from civil or criminal liability if they deliberately engage in conduct that clearly falls outside of the parameters of the notice.

Therefore it is appropriate that financial institutions and their employees should retain immunity from civil and criminal liability under subclause 14(1) as the immunity is appropriately restricted to actions taken under a particular notice and the immunity is necessary to ensure that these notices function as intended.