Clare O'Neil (Hotham, Australian Labor Party, Shadow Minister for Justice) Share this | Hansard source

It is a real privilege today to be able to make a contribution, on behalf of my colleagues on this side of the House, to the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018. We are supportive of this bill. We are pleased to see the government finally making a move towards strengthening penalties for corporate crime, which has been a need for quite a long time in federal law. And I move a second reading amendment that will enable the House to continue a discussion about the government's failure to address some other areas of corporate crime that Labor believes are very critical. I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House notes the continued failure of the Government to address corporate misconduct".

First, I'll talk about the bill and what it does, for the benefit of people in the gallery and those listening at home. It's been widely recognised for a very long time in this country that the penalties that are attached to white-collar crime are insufficient. We see that when I do my roundtables. When I talk to people—even people in business—the refrain that always gets the most nods of heads is when I talk about the fact that people are sent to jail for long periods of time and get big fines when they're an individual committing a crime, but, for some reason, our law seems to suggest and seems to reflect a view that we don't take white-collar crime and corporate crime as seriously in this chamber. That is wrong, and that is something that we need to actively refute as a parliament to send a really clear message to the community and to the people for whom these laws are most relevant that white-collar crime is crime. It doesn't matter if you're wearing a suit when the crime is conducted and it doesn't matter if you're clever at hiding what you're doing in spreadsheets and in different sorts of files. If you commit a crime, you need to pay for that crime, and some of the measures that are in the bill before us are going to make sure that that's instituted by this federal parliament.

I mentioned that there's a general consensus that white-collar crime penalties have been insufficient and inadequate. A review into enforcement conducted a couple of years ago produced a final report in 2017 that outlined some changes that need to be made to federal law, and the bill before us will see some of those changes being enacted. The enforcement review, which is the discussion that I referred to, arose out of the financial systems inquiry. That inquiry identified very clearly that the maximum penalties in financial sector law are unlikely to deter misconduct by large firms and made a recommendation that we substantially increase civil and criminal penalties. The review also considered the enforcement options that are available to ASIC. So what we see in this bill is, in part, an increase to penalties across a range of different offences, but it also provides ASIC and the courts more flexibility in how they account for people's wrongdoing.

All in all, the ASIC review task force produced a set of recommendations that we are generally supportive of. We're generally supportive of strengthening penalties in the way that's being done in this bill, and I want to go through some of the specific changes. The bill deals with criminal and civil penalty provisions in the Corporations Act, the ASIC Act and the National Consumer Credit Protection Act. It makes several changes to offences that exist within those acts. It increases penalties for individuals and corporations for both criminal offences and breaches of civil penalty provisions. It makes some changes to the penalties that sit with strict and absolute liability offences. It creates several new ordinary criminal offences—that is, offences that require some type of mental element or criminal intent to be proven. It introduces a disgorgement remedy for ASIC to use in civil penalty proceedings. That, in plain English, means that this law will allow a court to force someone who has benefited from a crime to essentially return the funds that have come from that crime. It creates a new infringement notice provision, which will give ASIC more options in punishing misconduct.

I think the aspect of this bill that is going to have the most resonance in the community is the part of the bill that sees increases to penalties across a wide range of offences. There are increases to maximum financial penalties across both civil and criminal offences, and we are supportive of those increases.

I want to refer to other penalty increases. One of those is where the benefit the corporation gained from the contravention, or the loss avoided, can be calculated and the court can impose a monetary penalty of three times that amount. This is a very important reform. We might be speaking in sentencing gobbledygook a little bit in this discussion but, to put it simply, there probably have been instances which people at home will have read about in the newspaper where a very serious corporate crime is committed and the penalty that's attached to the crime is a tiny share of the benefit that was generated by the crime. These penalties are talked about as the cost of doing business. That's not we want penalties to be in federal criminal law. We need penalties to actively deter misconduct, and that means we need penalties that are of a significant size. The bill before us gives courts the power to award penalties that are three times the size of the wrongdoing.

Individuals will also be subject to this maximum penalty of three times the benefit for criminal offences or breaches of civil penalty provisions. The bill would give courts an additional option in determining a penalty, which is that courts can calculate monetary penalties using the turnover size of the corporation. The bill specifies that a monetary penalty of 10 per cent of the annual turnover of the corporation can be put in place. The government has proposed a restriction to that, which is that civil penalties that use the 10 per cent turnover calculation are restricted to a maximum of one million penalty units or $210 million.

Labor is generally supportive of using increased deterrence. As a parliament we need to send a stronger message to banks and financial service providers that the community expects better. The community expects that as parliamentarians we will use the democratic process to determine which actions are against the law. Importantly, the courts use the maximum penalties that we set to gauge how seriously the parliament regards conduct. That's why the maximum penalty for these types of crimes is crucial. It doesn't mean that people are always sentenced at the maximum; it means that a judge has in mind that the parliament is sending a signal about the seriousness of this type of wrongdoing.

The banks and financial institutions that have failed to obey the law on many occasions are in a sense turning up their noses up at the parliament. We in this room embody the views of the people we represent on what have been some flagrant examples of the breaking of the law. We simply can't allow a legal regime in our country that says that big corporations can get away with, for example, the sorts of wrongdoing that have come out of the banking royal commission.

Before I turn to some other matters I mention the removal of custodial sentences from strict and absolute liability offences. The bill makes some changes to strict and absolute liability offences. Currently in the laws that I talked about there are several strict and absolute liability offences that carry potential custodial sentences. Again I want to put that in plain English: we're saying that a strict or absolute liability offence doesn't require the proof of a mental element and, despite not having that requirement, a person can go to jail when those offences have been committed. The way that those laws are framed is a little bit unusual. We try not to attach prison sentences to offences that don't have a mental element to them. The reason we don't is that going to prison is such a grave thing to happen and it's such a big thing to take away someone's liberty that we want to make sure we're doing it in only the most extreme of circumstances.

I just want to note that there has been quite substantial debate about the government's bill, which would seek to remove the custodial option from the absolute and strict liability offences. One of the most concerned parties about this aspect of the bill is ASIC, who is meant to be enforcing these remedies. ASIC raised concerns, through the ASIC Enforcement Review, about what is proposed by the government in this bill. It opposes the measures that are in the bill, and I want to just share, in a couple of quotes, what ASIC has said about its opposition. It said:

We consider that imprisonment should not be removed as a possible sanction for strict and absolute liability offences where it is currently in place, as this would send a confusing regulatory message.

It also said:

… Parliament clearly intended that various corporate strict liability offences were of such importance as to warrant a potential custodial sentence.

This same legislative intention is evident in numerous other Commonwealth statutes that also contain strict liability offences punishable by terms of imprisonment.

I just want it noted for the debate and discussion that will occur about this bill that we have here our corporate regulator actively opposing the solution that the government has put forward. I think that's going to warrant some further conversation in the Senate.

One of the important justifications that we do need to put into this discussion is that there are some specific aspects of white-collar crime that would mean that we wouldn't normally attach custodial sentences to strict and absolute liability offences. One of them is that white-collar crime is incredibly difficult to investigate. It's very difficult, therefore, to prosecute to the point of proving a criminal element in the mind of the wrongdoer. The reason for that is that, unlike a normal assault offence, for example, where there are witnesses who see one person punch another—and then the evidentiary process is quite straightforward—with white-collar crime we have a different type of criminal usually. People who are engaging in white-collar crime are often very good at hiding what they do. Indeed, the nature of white-collar crime makes it easier for them to hide what they're doing. It is quite difficult to take, for example, a big bank that might have 20,000 employees and find the person who is responsible for some type of wrongdoing and then find evidence of that wrongdoing when you're not actually inside the bank. So I think there is an argument to be made here about the strict and absolute liability offences, and ASIC has made that argument quite strongly in its discussion about this bill.

The bill creates several new infringement notice provisions. Infringement notices are lower level penalties that ASIC can impose without the need to go to court or prove wrongdoing. As we might get a parking ticket, this is ASIC's way of giving people a fine without having to go through an expensive and lengthy process using a court. However, if the infringement notice is not complied with, ASIC needs to be able to go to court and prove the offence. Infringement notices provide ASIC with more options, and we want to give our regulator all the tools that it needs to be able to bring these people to justice. But I think there does remain an open question here about whether, in some cases, creating infringement notice provisions sends the wrong signal about the seriousness of the conduct. For some of the offences in the bill before us, there's a criminal offence that exists within the law and, essentially, we're layering less serious ways of penalising that conduct beneath the criminal offence. It's easier to fine wrongdoing, but it's also less of a penalty, and I think that, as per ASIC's argument about the strict and absolute liability offences, there's a discussion to be had here about the kind of message we're sending as a parliament when, in an effort to strengthen the penalties attached to corporate wrongdoing, we actually end up providing a whole lot of easier-to-prove penalties which, I would assume, will be used more frequently than the criminal penalties are today. That is a discussion that I think will take place.

I want to note that, in the royal commission, Commissioner Hayne has identified some potential issues with the use of relatively small infringement notices to penalise serious misconduct where the benefits to the company and the damage to consumers are far in excess of the value of infringement notices. In discussing two cases where ASIC issued infringement notices for breaches of responsible lending obligations under the National Consumer Credit Protection Act, Commissioner Hayne observed that in both cases the ASIC media release about the infringement notice featured the disclaimer that 'the payment of an infringement notice is not an admission of guilt in respect of the alleged contravention.' It is difficult to identify any correspondence between the scale or severity of the conduct and the penalty imposed in either of these cases. If penalties are intended to have a deterrent effect, as suggested by the words of the ASIC media release, then it must be plainly said that the amounts imposed in these cases do not. We'll continue to consider that matter through the Senate process to make sure that we're taking into account these competing views about the benefits of providing additional options to ASIC in this regard.

The bill contains some new powers to ASIC. I mentioned before some new methodologies that a court can use to determine the size of penalties. There are other measures in the bill that create a new remedy that ASIC can seek from courts through civil penalty proceedings through requiring the disgorgement or forfeiture of benefits gained as result of misconduct. Labor supports the introduction of the new disgorgement remedy; that's a very positive development.

I want to speak a little bit now about the second reading amendment, which I'm moving as part of my speech today, because it is important for us to remember the context of the conversation that has brought us to this point and that inexorably leads us to the banking royal commission, which I haven't referred to in too much detail in my speech so far but must be a part of the conversation that we have about the deep failure of our current penalties regime to deter criminal conduct. That's just the frank reality that has come out of the royal commission.

It's important to note that the ASIC Enforcement Review Taskforce reported in December 2017, before the first royal commission hearings had been held. In fact its deliberations occurred before the royal commission had even been announced. I'm sure all of us in this chamber have had the same experience. We knew that there was some level of wrongdoing occurring in corporate Australia and particularly within banking, but the scale, the size and the damage that has been done that has been revealed through the royal commission has shocked almost every Australian. In fact, even the bank CEOs that I talk to, knowing as they do their own organisations, are shocked at what they see when all of the wrongdoing and misconduct is put together. We need to note that the conclusions that the ASIC enforcement review made, and the conclusions that this bill is based on, don't take into account the widespread misconduct and systemic failures of compliance that were laid bare through the royal commission.

The failure of banks to live up to community standards is something that I feel extremely strongly about. One of the reasons for that is that I have spent a considerable amount of time over the last couple of months in particular meeting and speaking with people who are victims of bank misconduct. The unbelievable damage that has been done by these institutions is not possible to put into words. I firmly believe that the only way that anyone can really understand what has happened here is by sitting down with someone who has been affected by banking misconduct and speaking to them about the damage that has caused to them. I have met with people frequently who have had marriage breakdowns, who have had lifelong mental illness—illnesses they will battle with the rest of their life. Their lives have been ruined for financial reasons, but that has often led to a cascade of events that have taken them to a place that they could never have envisaged themselves in.

There have got to be people held to account for the type of conduct that's been seen. We do feel a genuine and huge sense of frustration on this side of the chamber that it has taken so long for us to get to this point. To speak with these bank victims and then to think back to the level to which the government was willing to go to try to prevent the royal commission from ever taking place tells me everything I need to know about the people who sit opposite me in this chamber. Instead of defending the people who have been affected by this misconduct—and I meet some of the worst, but there are millions of Australians who have in one way or another been victims of some type of conduct that has not met community standards—and trying to investigate the people who did this wrong to them, the government defended the big banks and did it for almost two years. We could have had the royal commission done and dusted. We could be implementing reforms right now, but instead we have this royal commission still underway and people still being hurt.

I'm enormously frustrated that I am still today looking at the royal commission. We've had the bank CEOs through the royal commission this week and last week, and I have to say that in many instances I haven't been overwhelmed by or impressed with their conduct. One of the things that is most frustrating about watching those bank CEOs on the stand is what I see as a lack of effort to properly compensate people who have been wronged by the banks. It's a great thing for the bank CEOs to come before the royal commission and say that they did the wrong thing, but it's cold comfort to the many millions of people who were hurt by that.

I see that the banks are going about huge compensation schemes for instances where they've had some type of systemic misconduct. They are going about trying to identify those people. But what about all of those other people who were victims of much more serious misconduct? We have examples where people have been victims of fraud by the banks, and instead of dealing with them properly in an upfront way the banks have sometimes sued them so that they can tie them up in years-long legal battles and prevent that person from ever accessing justice.

So I'm frustrated. I'm frustrated with the government, because we could have been so much further along in this debate. There are so many people who were hurt by the conduct of the big banks while the government ran protection for them and while the government tried to give them billions of dollars in tax cuts. And I'm frustrated because we're here talking about this bill instead of implementing some of those pretty significant reforms that I think will be the consequences of the royal commission.

I just want to put this on record one more time. We have a different person occupying the big chair in this room now—the member for Cook, the Prime Minister. This is the person who called the royal commission a 'populist whinge'. The Prime Minister called the royal commission a 'QC complaints desk' and he voted against it 26 times. He can go around Australia in his empty bus and he can use all the Australian vernacular he wants—he can call things 'dinky-di' and 'fair dinkum' until the cows come home—but the truth is that it doesn't mean anything if he doesn't come into this chamber and do the right thing. And he didn't do the right thing: 26 times he voted against a royal commission.

So I'm frustrated with the current Prime Minister, because I do see him as responsible for where we are today, and that is a community of people who have lost trust in our big financial institutions. That's actually a bad thing. It's a bad thing for the economy and it's a bad thing for Australians. Increasingly, when I talk to people about this they feel that the royal commission represents for them a view of society that they didn't really believe was Australia. That is to say that they thought Australia was a fair country, where if people broke the law they were held to account and if they went to work every day and did the right thing then bad things wouldn't happen to them. I have seen people and talked to them—literally, grown men—and every time I've had a banking round table a grown man will well up with tears or cry in front of me as he talks about the fact that he never thought this could happen in Australia, but it did. And part of that responsibility has to sit with the government of the day.

So we're pleased with aspects of this bill, but frustrated that this is where the debate is. I'll leave my comments there and allow those on the other side of the chamber to make their contributions.

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