House of Representatives

Explanatory Memorandum

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

General Outline

1. The Unexplained Wealth Legislation Amendment Bill 2018 (the Bill) amends the Proceeds of Crime Act 2002 (Cth) (the POC Act) to give effect to the National Cooperative Scheme on Unexplained Wealth (the national scheme) as recommended by the February 2014 Independent Report of the Panel on Unexplained Wealth (the Report) by former police commissioners, Mr Ken Moroney AO APM and Mr Mick Palmer AO APM, and negotiated by the Officials-Level Working Group on Unexplained Wealth (the Working Group) under the auspices of the former Law, Crime and Community Safety Council (LCCSC).

2. Depriving criminals of their wealth is a key element in combating serious and organised crime. Unexplained wealth laws provides a valuable tool to law enforcement to confiscate assets where a person linked to criminal activity cannot reasonably demonstrate that these assets have been lawfully obtained.

3. Currently, Commonwealth unexplained wealth orders can only be used in relation to a person or property that is linked to a Commonwealth offence, foreign offence or State offence with a federal aspect. With serious and organised crime groups constantly working across jurisdictions, national law enforcement efforts are being increasingly frustrated.

4. The national scheme will provide a national approach to target unexplained wealth, enabling all participating jurisdictions to work together to effectively deprive these criminals of their wealth, irrespective of the jurisdiction in which they operate.

5. The Bill, supplemented by an Intergovernmental Agreement on the National Cooperative Scheme on Unexplained Wealth (the 'NCSUW agreement' ) and State Bills, gives effect to the following aspects of the national scheme:

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extending the scope of Commonwealth unexplained wealth restraining orders (section 20A) and unexplained wealth orders (section 179E) under the POC Act to Territory offences (specifically ' self-governing Territories ' including the Australian Capital Territory and the Northern Territory) and 'relevant offences' defined in the legislation of 'participating States'

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allowing 'participating State' and Territory agencies to access Commonwealth information gathering powers under the POC Act for the investigation or litigation of unexplained wealth matters under State or Territory unexplained wealth legislation, through inserting new provisions based on current production orders and notices to financial institutions powers

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provisions to ensure the continued effective operation of State and Territory confiscation regimes

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new equitable sharing arrangements to ensure that the contributions of Commonwealth, State, Territory and foreign law enforcement entities to investigating and litigating proceeds of crime matters and associated criminal proceedings are appropriately recognised through the sharing of recovered proceeds, and

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amendments to the Telecommunications (Interception and Access) Act 1979 (Cth) (TIA Act) allowing Commonwealth, Territory and 'participating State' law enforcement agencies to use, communicate and record lawfully intercepted information in relation to unexplained wealth investigations and proceedings.

Schedule 1 - Constitutional basis for the measures

6. Schedule 1 to the Bill outlines the constitutional basis for the measures and defines the key terms underpinning the national scheme.

7. In general terms, the application of the measures in the Bill to the Australian Capital Territory and the Northern Territory will be based on the territories power under section 122 of the Commonwealth Constitution, among other powers (see subsection 14B(11) in Schedule 1 of the Bill).

8. To facilitate a national scheme allowing federal unexplained wealth orders, and the operation of other provisions of the POC Act as they relate to unexplained wealth, to extend to State matters (rather than only those matters already within Commonwealth constitutional power) States must agree to either refer power to the Commonwealth or adopt the text of Commonwealth laws under paragraph 51(xxxvii) of the Commonwealth Constitution, and refer the 'amendment reference' (at subsection 14C(4) of the Bill). Each State will retain the discretion under their legislation as to the particular State offences to be included within the scope of the referral or adoption.

9. If a State wishes to join the national scheme before the Bill is enacted , it must follow a two-step referral process. This involves enacting State legislation that refers the following matters to the Commonwealth Parliament:

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the text references that give the Parliament power to enact Schedules 1, 2 and 4 of the Bill insofar as this power does not already lie with the Commonwealth - thereby granting the Commonwealth the power to validly enact that text as a Commonwealth law extending to that State, and

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the 'amendment reference' at subsection 14C(4) - which ensures that the POC Act, as amended by the Bill, can be amended from time to time by Commonwealth Parliament and continue to apply in relation to State offences covered by the referral.

10. If, on the other hand, a State wishes to join the Scheme after the Bill is enacted , it must do so by enacting State legislation that adopts the most recently amended version of the POC Act so far as it is a law with respect to the matters that have been referred by another State (that is, the matters in Schedules 1, 2 and 4 of Bill as amended pursuant to another State's 'amendment reference' ). The State must also refer the 'amendment reference' at subsection 14C(4) of Schedule 1 to the Bill.

Schedule 1 - Protections for participating States and Territories

11. To ensure that the confiscation regimes of the Territories and 'participating States' continue to operate effectively, Schedule 1 of the Bill includes provisions: preserving the concurrent operation of State and Territory laws (sections 14A and 14L); permitting States to remain 'participating States' even if they terminate their involvement in the national scheme in particular circumstances or they limit the scope of the Commonwealth's 'amendment reference' (subsection 14C(7) and (10)); and allowing States and Territories to rollback any future amendments to relevant provisions of the POC Act, ensuring that these amendments will not apply in their jurisdiction (sections 14G to 14K).

12. In addition, the Bill contains transitional, application and savings provisions at proposed Schedule 2 of the POC Act (as inserted by Schedule 1 of the Bill) which will allow the national scheme to continue to apply to proceedings that were initiated before a 'participating State' terminated its involvement in the scheme or provided that a particular State offence ceased to be a 'relevant offence' for the purposes of the national scheme.

13. These provisions complement mechanisms in the 'NCSUW agreement' to facilitate greater cross-jurisdictional coordination, which are intended to ensure that operational and legislative overlap between jurisdictions can be resolved quickly and efficiently. The mechanisms include de-confliction and consultation requirements should jurisdictions amend laws related to the national scheme.

14. These protections are intended to incentivise participation in the national scheme and ensure the continued operation of a suite of nationally cohesive, effective and cooperative laws to target unexplained wealth.

Schedules 2 and 3 - Extending Commonwealth unexplained wealth orders to State and Territory offences

15. Schedules 2 and 3 of the Bill expressly allow unexplained wealth restraining orders (section 20A) and unexplained wealth orders (section 179E) under the POC Act to be made in respect of all Territory offences, and 'relevant offences' of 'participating States' (to be specified in State legislation).

16. Current Commonwealth unexplained wealth restraining orders and unexplained wealth orders can only be made if the court is satisfied that a person, or the person's wealth, can be linked to a Commonwealth offence, a foreign indictable offence or a State offence that has a federal aspect.

17. Extending unexplained wealth restraining orders and unexplained wealth orders to Territory offences and specified 'participating State' offences will allow law enforcement to more effectively target unexplained wealth. In cases where a criminal syndicate has derived funds from a mix of 'participating State' , Territory, foreign and Commonwealth offences, this Bill allows a single federal unexplained wealth regime to be used to restrain and confiscate the illicit funds of syndicate members (regardless of whether the funds were derived from Commonwealth, foreign, State or Territory based offending) rather than relying on a complex patchwork of orders brought by Commonwealth, State and Territory authorities.

Schedule 4 - Allowing State and Territory law enforcement to apply for production orders and issue notices to financial institutions

18. Schedule 4 of the Bill inserts new information gathering powers to allow access by agencies of 'participating States' and Territories to provisions equivalent to those relating to production orders (Part 3-2) and notices to financial institutions (Part 3-3) under the POC Act for unexplained wealth investigations and litigation under State and Territory 'unexplained wealth legislation' .

19. Production orders currently can only be sought by 'authorised officers' which, under section 338 of the POC Act, does not include State or Territory law enforcement and prosecutorial entities. Similarly, notices to financial institutions can only be issued by a limited class of senior Commonwealth officers (see subsection 213(3) of the POC Act). These notices compel the production of information or documents to 'authorised officers' which, as mentioned above, does not include State or Territory law enforcement or prosecutorial entities. Further, these provisions have been designed to facilitate the investigation and litigation of Commonwealth proceeds of crime matters, rather than State and Territory unexplained wealth matters.

20. Allowing 'participating State' and Territory agencies to apply for production orders and issue notices to financial institutions will greatly assist these agencies in obtaining information to support the investigation and litigation of unexplained wealth matters. 'Participating States' and Territories will be required to report annually on the use of these provisions.

Schedule 5 - Equitable sharing arrangements

21. Schedule 5 of the Bill contains provisions which give effect to new equitable sharing arrangements, which will operate through the Cooperating Jurisdiction Committee (CJC). The CJC is made up of representatives from the Commonwealth, 'cooperating States' , 'participating States' and Territory parties to the 'NCSUW agreement' , and ensures that jurisdictions are appropriately recognised for assisting in the investigation and litigation of proceeds of crime matters and associated criminal proceedings through the sharing of recovered proceeds.

22. The new equitable sharing arrangements are based on a presumption that proceeds from an action under the POC Act will be allocated in equal shares to each participating jurisdiction which contributed to that action. A general outline of these new arrangements is provided in the 'NCSUW agreement' , which also includes definitions of key terms used in Schedule 5 including 'shareable' , 'corresponding proceeds' , 'decision-making period' , 'contribution' and 'payment period' .

23. These arrangements will be supported by increased transparency in equitable sharing payments between jurisdictions participating in the national scheme. The 'NCSUW agreement' imposes record keeping requirements to enable the effectiveness of these new arrangements to be assessed.

Schedule 6 - Improvements to information sharing arrangements

24. Schedule 6 of the Bill improves information sharing between jurisdictions by amending the TIA Act to allow Commonwealth, 'participating States' , Northern Territory and Australian Capital Territory law enforcement to use, communicate and record lawfully intercepted information in relation to unexplained wealth investigations and proceedings.

25. The TIA Act already allows lawfully intercepted information to be used for proceedings for the confiscation or forfeiture of property or for the imposition of a pecuniary penalty in connection with the commission of a prescribed offence, which includes some unexplained wealth proceedings. However, the new provisions will ensure that it is available for use in relation to all Commonwealth, and 'participating State' and Territory unexplained wealth matters, including those that do not require a connection with the commission of an offence.

26. Schedule 6 also contains amendments that will allow the New South Wales Crime Commission to use, communicate and record lawfully intercepted information in relation to proceedings for the confiscation or forfeiture of property or the imposition of a pecuniary penalty, in connection with a prescribed offence. These amendments will ensure that the Commission can disclose lawfully intercepted information to defendants in proceeds matters without first filing this information as evidence in court, which will greatly assist the Commission in settling proceeds matters out of court.

Schedule 7 - Review of national scheme

27. Under Schedule 7, a review of the 'national unexplained wealth provisions' (the key operative provisions in the scheme) must be undertaken as soon as practicable after the fourth anniversary of the commencement of the Unexplained Wealth Legislation Amendment Act 2018 . This review is intended to inform the States of the efficacy of the national scheme before deciding whether to continue participating in this scheme.

Schedule 8 - Amendments to the Proceeds of Crime Regulations 2002

28. Schedule 8 of the Bill makes amendments to the Proceeds of Crime Regulations 2002 to clarify that the definition of 'unexplained wealth legislation' in section 338 of the Act extends to particular provisions of the Criminal Assets Recovery Act 1990 (NSW) and the Criminal Property Forfeiture Act (NT).

Financial Impact

29. The Bill will have no financial input.

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