House of Representatives

Explanatory Memorandum

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

GENERAL OUTLINE

1. Profit is at the heart of transnational serious and organised crime. Criminal groups are constantly shifting their operations to create, maintain and disguise illicit financial flows. Driven by the possibility of commercial benefit, organised crime groups no longer adhere to particular associations or crime-types, and instead fluidly adjust their activities to maximise their illicit gains and avoid law enforcement detection. These amendments will increase the pressure on transnational, serious and organised crime groups by targeting the financial benefits they gain from their illicit activities.

2. The Bill contains a range of measures to improve and clarify Commonwealth arrangements targeting the criminal business model, ensuring that law enforcement has suitable tools to detect illicit financial flows through effective information-gathering, confiscate relevant assets and prosecute responsible individuals.

3. The Bill amends the Crimes Act 1914 (Crimes Act), Criminal Code Act 1995 (the Criminal Code), the COAG Reform Fund Act 2008 and the Proceeds of Crime Act 2002 (the POC Act) to:

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update Commonwealth money laundering offences to address the behaviour of modern money laundering networks and remove unnecessary obstacles to securing convictions and appropriate sentencing outcomes

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clarify that the obligations imposed on investigating officials under Part IC of the Crimes Act do not apply to undercover operatives

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ensure that buy-back orders under the POC Act cannot be used by criminal suspects and their associates to buy back property forfeited to the Commonwealth or delay POC Act proceedings

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clarify that the POC Act permits courts to make orders confiscating the value of a debt, loss or liability that has been avoided, deferred or reduced through criminal offending

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clarify the operation of the POC Act in relation to the restraint and confiscation of property located overseas

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strengthen information-gathering powers under the POC Act by increasing penalties for non-compliance and clarifying the circumstances in which information gathered under these powers can be disclosed and used, and

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expand the Official Trustee in Bankruptcy's (Official Trustee's) powers to deal with property, gather information and recover costs under the POC Act to allow the Official Trustee to discharge its functions in a more cost-effective manner.

4. The Bill contains 7 schedules.

Schedule 1 - Money Laundering

5. Money laundering networks are typically led by 'controllers' who issue directions to others to deal with particular money or other property. They intentionally keep these individuals ignorant of its criminal origins while themselves operating at an arm's-length to avoid criminal liability. The criminal origins of money or other property is also typically obscured through complex legal and administrative arrangements, strict information compartmentalisation, encrypted communication services, and other methodologies employed to severely frustrate law enforcement's efforts to identify predicate offending (and therefore show that money or property is the proceeds of crime).

6. The Bill amends Division 400 of the Criminal Code to ensure that Commonwealth money laundering offences can be more effectively used to target these modern money laundering networks. The amendments extend money laundering offences to persons who cause a dealing with money or other property to occur, or engage in conduct in relation to money or other property. This ensures that offences capture the 'controllers' of these networks who do not typically deal with money or other property directly and instead send instructions to another person to locate, move or otherwise engage in conduct that affects money or other property. These controllers are at the heart of money laundering operations and should not be beyond the reach of anti-money laundering laws.

7. The Bill also targets members of these networks who remain wilfully blind to the nature and origins of proceeds of crime that they deal with as a means of avoiding money laundering offences. The Bill does this by creating new offences of engaging in conduct in relation to 'proceeds of general crime', which remove the need to link money or other property to a kind of indictable offence (as outlined in Lin v The Queen [2015] NSWCCA 204) and instead take an 'all crimes' approach to predicate offending.

8. This will have the effect of ensuring that money or other property will be 'proceeds of general crime' where evidence of the circumstances in which the money or other property was handled are such as to give rise to the irresistible inference that it is wholly or partly derived or realised, directly or indirectly, from crime generally. Property may be 'proceeds of general crime' for example, if it cannot be linked to legitimate income or is grossly disproportionate to the defendant's legitimate income, there is a strong nexus between the defendant and known criminal entities, and the parties to a relevant transaction engage in practices to conceal their activities (for example, by communicating through encrypted networks).

9. Under these proposed 'proceeds of general crime' offences, the prosecution must prove that:

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the defendant intentionally engaged in one or more instances of conduct in relation to money or other property; and

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one instance of the defendant's conduct, or two or more instances taken together, relate to money or other property collectively valued at $100,000 or more; and

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the person believed, was reckless or was negligent as to whether the money or other property was 'proceeds of general crime' in each instance; and

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each instance of the defendant's conduct concealed or disguised one or more particular aspects of the money or other property (including, but not limited to, its value or location); and

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the defendant was reckless as to this result occurring in each instance.

10. This ensures that offences are not used to prosecute relatively trivial behaviour and can only be used where the conduct of the person conceals or disguises aspects of the property, which may make it more difficult for law enforcement to trace it or identify its criminal origins.

11. Amendments will also provide that, for the offence of attempting to commit an offence under Division 400 that requires a person to be reckless or negligent as to whether property is 'proceeds of general crime' or 'proceeds of indictable crime', recklessness will be the relevant fault element in relation to this circumstance (section 11.1 of the Criminal Code would otherwise apply knowledge as the relevant fault element). This will assist the prosecution in establishing criminal liability in cases where money laundering organisations have obscured the actual criminal origins of money and made tracing efforts impossible, as the prosecution does not need to establish that property was actually proceeds of crime for an offence of attempting a 'proceeds of general crime' or 'proceeds of indictable crime' offence.

12. The Bill also creates another tier of offences relating to money or other property valued at $10,000,000 or more, which is intended to address the most serious cases of money laundering. It also introduces a new offence of dealing with money or other property valued at $1,000,000 or more where it is reasonable to suspect that the money or other property was 'proceeds of indictable crime', filling a gap in existing offence provisions at existing section 400.9.

13. The Bill also addresses a vulnerability in the existing mistake of fact exemption at section 400.10 of the Criminal Code as outlined by the Victorian Court of Appeal in Singh v The Queen [2016] VSCA 163. It does so by providing that a person who believes that money or other property is of a certain value must maintain this belief for the duration of their dealing with the property to rely on the exemption under existing section 400.10.

Schedule 2 - Investigation of Commonwealth offences

14. The Bill amends the Crimes Act to clarify that the obligations imposed on investigating officials under Part IC, including the requirement under section 23F, to caution a person who is under arrest or who is a protected suspect before starting to question the person, do not apply to undercover operatives. This also includes those obligations listed in Division 2, in their capacity as undercover operatives. The requirements imposed upon investigating officials in Division 2 relate to the arrest and detention of persons and would only be exercised by officers acting overtly. The purpose of these amendments is to ensure that any evidence gained by undercover operatives is admissible (subject to the court's ultimate discretion regarding admissibility of any evidence). The Bill also brings the definition of the term 'investigating official' under the Crimes Act into line with the Evidence Act 1995.

Schedule 3 - Buy-backs

15. The Bill amends the POC Act to ensure that criminal suspects and their associates are not afforded an opportunity to buy back forfeited property, and to ensure that a court hearing a buy back application is required to consider whether the applicant's financial circumstances are such that the forfeited property will not be repurchased with illicit funds or unexplained wealth. Law enforcement are granted appropriate information-gathering powers to achieve these objectives and procedural changes ensure that a person cannot use buy-back applications to frustrate or unnecessarily delay proceeds of crime proceedings.

Schedule 4 - Benefit

16. The Bill clarifies the definition of 'benefit' under the POC Act, explicitly providing that this definition includes the avoidance, deferral or reduction of a debt, loss or liability. This could include, for example, the criminal evasion of import duties, excises or taxation. This amendment reflects the existing operation of the POC Act, which allows pecuniary penalty orders, and literary proceeds orders to be made in relation to both a benefit gained and loss avoided through criminal conduct.

Schedule 5 - Jurisdiction of courts

17. The Bill clarifies that orders made by a court with proceeds jurisdiction under the POC Act can be made in respect of property located overseas. These amendments are designed to reinforce how the existing application of the POC Act, in conjunction with international asset recovery mechanisms and other domestic legislation such as the Mutual Assistance in Criminal Matters Act 1987, apply in relation to property located overseas.

Schedule 6 - Information

18. The Bill strengthens the enforcement of information-gathering powers under the POC Act by increasing penalties for serious non-compliance offences, and allowing enhanced restraint and confiscation action to be taken where a person commits a non-compliance offence under existing section 195, 196 or 197A of the POC Act in relation to an examination notice. These amendments are aimed at enhancing compliance with investigation powers under the POC Act and ensuring that suspects are unable to frustrate POC Act proceedings by seeking to obstruct the information-gathering process.

19. The Bill also clarifies and expands the circumstances in which documents or information obtained using information-gathering powers under the POC Act can be subsequently disclosed to, and used by, particular bodies for particular purposes, including: the enforcement of non-compliance offences under the POC Act, mutual assistance and extradition, and professional disciplinary functions.

Schedule 7 - Official Trustee

20. The Bill enhances the powers of the Official Trustee, who has responsibility for managing the Confiscated Assets Account and property seized and confiscated under the POC Act.

21. In particular, the Bill ensures that the Official Trustee can use its powers to gather information and deal with property in relation to property forfeited under the POC Act or subject to a direction under existing sections 282 and 282A, allowing this property to be located and preserved during appeal periods. Amendments have also been made to allow the Official Trustee to tailor its written notices to obtain information in a more precise fashion and to clarify notice requirements when disposing of property by consent.

22. To assist the Official Trustee in meeting its cost-recovery obligations, the Bill also makes amendments to allow the Official Trustee to recover its remuneration, expenses and costs directly from the Confiscated Assets Account, including expenses and costs incurred under relevant provisions of the Mutual Assistance in Criminal Matters Act 1987, the Crimes Act and the Customs Act 1901. Minor amendments are also made to assist the Official Trustee in meeting its obligations under the A New Tax System (Goods and Services Tax) Act 1999.

23. The Bill also transfers purely administrative tasks that are currently the responsibility of the Minister under the POC Act, including transferring property to a person under court order, to the Official Trustee. The Minister will be able to decide whether to transfer forfeited interests to a person where this is contested by a person who had this interest before forfeiture, and will be able to authorise a senior Departmental officer to exercise this power.

24. The Bill also allows the Minister to make payments from the Confiscated Assets Account to the States and Territories through the COAG Reform Fund, while maintaining the existing ability to provide direct grants to the States and Territories or other organisations such as local councils and community organisations.

25. The amendments also provide that money (other than a penalty) paid to the Commonwealth by a person under a Commonwealth or foreign deferred prosecution agreement that represents benefits or property derived from, or used or intended to be used in the commission of, unlawful criminal activity in Australia or in a foreign country must be credited to the Confiscated Assets Account. This recognises that such money or property may otherwise be subject to confiscation action under the POC Act.

FINANCIAL IMPACT STATEMENT

26. The measures in this Bill will have no financial impact.

ABBREVIATIONS