Author: Nyman Gibson Miralis
Subject: White Collar Crime
Keywords: white collar crime Australia, what is white collar crime, civil and criminal penalties.
The handling of white collar crime in Australia has been criticised over the past few years – Australian Securities and Investments Commission (ASIC) Chairman Greg Medcraft has gone so far as to say that Australia needs to be careful not to be seen as a “haven” for white collar criminals. A new Senate report points out that penalties are inconsistent, and says that the “time should fit the crime.” So in a system where penalties for white collar crime can be lower than those for social security fraud, is reform needed?
What is white collar crime?
White collar crime in Australia has long been considered a confusing area for lawmakers and enforcers to deal with.
The definition of white collar crime is broad, but it is generally considered to include crimes committed by a person in a position of trust and authority within a business or organisation. These crimes can include tax evasion, embezzlement, conducting inappropriate financial dealings, bribery or other breaches of civil legislation.
These crimes are non-physical and are therefore non-violent, and are generally not committed “against” any one person, although they are usually financially motivated.
The current approach is contradictory
Given the wide variety of potential crimes covered under this definition, the question of how to deal with white collar crime can be a legal and political minefield – particularly noting that fraud costs Australian businesses over a billion dollars annually.
Legislatively, there are many contradictions in relation to the application of civil and criminal penalties, evidentiary standards and the conflict between rules of civil and criminal procedure in Australia.
The long-standing inefficiencies in Australia’s treatment of white collar crime have prompted the release of a report by the Senate Economics References Committee, entitled Lifting the fear and suppressing the greed: Penalties for white collar crime and corporate and financial misconduct in Australia.
The report, released in March 2017, considered the evidentiary standards presently applied across Australia in relation to white collar crimes, the nature and adequacy of penalties including custodial sentences, banning orders and financial penalties, and the ability for government agencies to seek the recovery of illegitimate gains. It also included a comparison of international treatments of white collar crime.
A long road to reform
Australia’s treatment of white collar crime has been on the radar of law reform for some years now.
- In March 2014, an Australian Securities and Investments Commission (ASIC) report concluded that civil penalties in Australia for white collar crimes are lower than in other countries. It also found that within Australia even similar crimes occasionally attract completely different penalties.
- The Senate Economics References Committee released a report in June 2014, which agreed with ASIC that legislative penalties needed to be reviewed and refocused.
- The Financial System Inquiry Final Report of December 2014 recommended substantial increases in maximum penalties, and the ability for ASIC to pursue the disgorgement of profits earned illegally by those convicted of white collar crimes.
The federal government also announced an ASIC Enforcement Review Taskforce in 2016, with the aim of determining whether current criminal and civil penalties for financially-motivated contraventions of the ASIC legislation and enforcement mechanisms are sufficient, or should be reviewed.
Although it is clear that there are many issues relating to the treatment of white collar crime in Australia, the common theme arising from recent reviews is that punishment and penalties are inadequate, incoherent and compare poorly with more rigorous regimes internationally.
What are the recommendations for change in the latest report?
The 2017 Senate report ultimately made six key recommendations on how treatment of white collar crime should be improved in Australia.
- Clarifying the evidentiary standards and rules of procedure that apply to civil penalty proceedings.
- Making improvements to ASIC’s banned and disqualified register, especially in relation to banning and disqualification orders.
- Giving ASIC power to issue infringement notices for breaches of financial services and managed investments elements of the Corporations Act 2001 (Cth).
- Increasing civil penalties for individuals and corporations.
- Changing the quantum of civil penalties so they are assessed as multiples of any financial benefits made or losses avoided by perpetrators.
- Introducing powers for ASIC to require disgorgement of monies illegitimately made by those accused of white collar crimes.
In making these recommendations, the report’s authors noted that penalties on white collar criminals often failed to act as deterrents. For example, more lenient penalties were often handed down for white collar crimes compared to those given to people found guilty of social security fraud, notwithstanding that white collar criminals were generally motivated by financial greed rather than need.
Interestingly, however, other areas such as competition law infringements or tax evasion were generally considered to attract sufficiently high penalties.
Of further concern was the fact that many maximum penalties had not been updated in over ten years, but that other, newly introduced offences attracted much higher penalties than similar offences set out in older legislation. For example, an individual charged under section 911A of the Corporations Act 2001 (Cth) for providing unlicensed financial services could be slapped with a maximum criminal fine of $36,000 – but the National Consumer Credit Protection Act 2009 (Cth) could see the same offence resulting in a civil penalty of up to $360,000.
It was pointed out that the offence of “general dishonesty” under the Criminal Code carried a maximum penalty of five years’ imprisonment, as against a ten-year penalty for similar offences such as engaging in dishonest conduct in relation to a financial product or financial service.
Australian custodial terms for various white collar crimes were found to be broadly comparable to international prison sentences, with the notable exception of the United States – which generally has higher maximum prison terms than many other jurisdictions.
The very nature of white collar crime, which can be difficult to detect and can appear to be victim-less, means that it is difficult to have a “one size fits all” approach to dealing with all crimes and civil breaches falling under this umbrella.
Nonetheless, it is clear from recent reviews that Australia is lagging behind our international counterparts in the treatment of white collar crime, particularly in failing to have a comprehensive, uniform and coherent approach towards the imposition of penalties and the requirement for those who have profited from their crimes to return the proceeds.
Hopefully the 2017 report and the work of the ASIC taskforce will enable Australia to move forward with a better, more consistent system for dealing with white collar crime.
Nyman Gibson Miralis specialise in all aspects of white collar crime and corporate crime law, including laws concerning money laundering, fraud, tax offences and bribery of foreign public officials. If you require assistance, contact one of our expert criminal defence lawyers