Anne Urquhart (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Chair of the Economics References Committee, Senator Ketter, I present the committee's report 'Lifting the fear and suppressing the greed': penalties for white-collar crime and corporate and financial misconduct in Australia, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

I move:

That the Senate take note of the report.

I seek leave to continue my remarks later.

Leave granted.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I would like to make some remarks. I initiated this inquiry following a very important Senate Economics References Committee inquiry, dating back nearly four years ago, where we had a look at ASIC, the Australian Securities and Investments Commission, and its performance, its powers and its resources. It was obvious to us, the economics committee at the time, that we in this country had an issue with penalties for white-collar crime. One of the recommendations from the report was that the government look at this issue: that it look at white-collar crime, that it look at the penalties in place compared with those in overseas jurisdictions and that it seek evidence from a number of expert witnesses on this issue.

Nothing happened for three years, so I initiated this inquiry. I am pleased to say that, following the initiation of this economics committee inquiry, the government has initiated its own inquiry into white-collar crime penalties in Australia. In fact, the terms of reference that the government's working group is adhering to on this issue are very similar to the terms of reference of the economics committee inquiry. I await the results of the government's inquiry with interest. I thank the committee members for their good work, the staff who worked on the inquiry and of course all the witnesses who gave evidence.

This is a really important area, because white-collar crime is little understood in this country compared to other forms of crime. White-collar crime tends to be highly premeditated. It tends to occur over long periods of time. It tends to occur from people in a position of trust who are able to misuse that position of trust to manipulate other people. It is often very sophisticated. And it involves, usually, a high degree of intelligence. It is very different to other kinds of crime, yet in this country we have seen evidence of hundreds of cases of white-collar criminals perpetuating crimes—be it in the financial services industry, be it across tax deduction; a whole range of issues that the committee looked at—but very few people have been penalised. I think Greg Medcraft, the chairman of ASIC, made the comment that Australia has become a haven for white-collar criminals. He later clarified his comments, but the point was an important one.

I have been on a number of other committees, as have other senators across the political spectrum in this chamber, that have looked at things like financial misconduct in the banks and in the financial services industry. One thing we can do to try and crackdown on white-collar criminals, to help stamp this out, is increase the range of penalties available to us. That is what the committee has looked at. We looked at detection and deterrence, because we know from evidence that fear is the key to trying to prevent white-collar criminals. We heard strong evidence that the thing most likely to stop people committing white-collar crime is of course the fear of getting caught. So we need to better resource our regulators, who actually do the monitoring of these kinds of things. But we know also that the fear of going to jail, of doing jail time, is the thing most likely to deter someone from committing a white-collar crime. In fact, we heard evidence that often in the financial services sector individuals and businesses are making so much money that they treat some of the penalties literally as a cost of doing business or as a slap on the wrist. So one thing we know is that jail sentences do matter in trying to deter white-collar crime.

The committee has made a number of recommendations in relation to this. They are strong recommendations. The report talks also about disgorgement, which gives ASIC the specific powers to seek financial redress from the criminals themselves. One of the problems we have is that when our regulators go after people they do not have the powers to take funds from them. They have to refer a case to the Director of Public Prosecutions or to the Federal Police or to other groups to seek the money back. These court cases are so expensive that they end up spending literally millions of dollars of taxpayers' money on these court cases, and if they are lucky enough to get a conviction then they do not have the ability to get the money to pay for these expenses, or be a sufficient deterrent in the first place. So giving ASIC disgorgement powers, as we see with regulators overseas, would allow it to levy these fines by going directly after people and seizing their assets, the kind of thing that we know also matters in deterrence.

We also believe that penalties in the current system of civil or criminal prosecutions are not high enough, certainly in the area of civil prosecutions. The Greens have put in additional comments to the report. We did not want to put in a dissenting report, because the actual report is very good. We would certainly like to see things go a step further. We would like to see the default maximum custodial sentence for criminal wrongdoing being 10 years imprisonment. We want to see the default maximum monetary penalty for criminal wrongdoing being the greater of $5 million or three times the benefit gained. We heard of one very high profile example of insider trading where someone sold $3 million worth of shares. They were convicted of insider trading and fined $50,000, after having made a $3 million gain on the sale of their shares. That was not good enough. It went back to Director of Public Prosecutions, who got a better result the next time round. Nevertheless, under a much tougher regime, which we base on what happens overseas, that individual potentially could have been up for a $9 million fine for insider trading versus the slap on the risk that was $50,000. These are the kinds of things that we would like to see happen, so they have been added in the additional comments of the Greens.

We want to see the default maximum monetary penalty for civil and administrative penalties to be the greater of $1 million or three times the benefit gained. We strongly endorse the recommendation in the chair's report that disgorgement powers be available. Without those we have a gaping hole in our current white-collar crime toolbox. That is something I would urge the government—Senator Fifield is in here today—to act on immediately. We will wait for the government's report, but I would be very disappointed if that issue was not dealt with in detail and we did not see a forthcoming recommendation.

Lastly, we would like to see public reporting improved. We do have name-and-shame registers for some offenders in this country. We would like to see penalties on those committing white-collar crimes and that information being made available to the public. Transparency is of itself a penalty for the person who committed a crime—being exposed publicly—and acts as a deterrent against further criminal activity.

ASIC has established an enforceable undertakings register and a banned and disqualified register that makes information available to the public about certain white-collar criminals, such as directors who may have been banned from a company. However, this only represents part of the enforcement action undertaken by the regulator. There is still a lot of secrecy around these proceedings, whether they are criminal or civil.

We would like to take the hardest-possible line on this issue. We feel that this inquiry was very important; it follows up an even-more important inquiry, in the ASIC inquiry that started nearly four years ago. In fact, I think that Senator Williams and I may be two of the few left in here who were actually on that inquiry. I look forward to the government's response to this issue and I hope that we actually get some action. I think that just about everyone we heard from agreed that we needed much better enforcement and much stronger laws around deterrents and providing penalties for white-collar crime. Thank you.

I seek leave to continue my remarks.

Leave granted.