Sonia Hickey

Royal Commission findings enable tougher corporate crime laws

As the fallout from the banking Royal Commission continues, the government is introducing new laws to ensure the same doesn’t happen again. But not everyone is convinced.

 

 

With revelations of systemic corporate misconduct surfacing during the current Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Federal Government is proposing to increase penalties for criminal offences under the Corporations Act.

 

Increased fines and prison time

The government has foreshadowed doubling the maximum prison sentence for various misconduct offences for individuals to 10 years in prison, and a $945,000 fine or three times the benefits gained, whichever is greater.

Under the proposals, companies would face maximum fines of $210 million, with their annual turnover stripped by 10 per cent under new penalty laws.

The federal government is playing down the timing of the announcement, claiming the proposals stem from a long-running review into the capability of the Australian Securities Investment Commission (ASIC). However, commentators have expressed the view that the Royal Commission has added a great deal of impetus to calls for increased penalties.

As recently reported, financial services provider AMP may face criminal misconduct charges for deliberately misleading ASIC. The Royal Commission heard evidence that senior AMP executives systematically charged for services that were never provided, then heavily amended a supposedly independent report to cover up their illegal and unethical conduct.

 

More powers for ASIC

Business experts have long criticised ASIC’s track record in bringing offenders to account, calling it a toothless tiger which is more concerned with negotiating outcomes than actually prosecuting those engaged in serious crime.

The organisation came under fire in 2014 for its ineffective handling of information regarding allegations of fraud and deception in the Commonwealth Bank’s financial planning division – which ironically, was the headline-making incident which triggered widespread calls for a Royal Commission.

ASIC admits that it prefers to negotiate outside the criminal courts. Over the year to June 2017, a total of only 10 criminal prosecutions instigated by ASIC were completed and only five other criminal prosecutions were commenced. Only six cases resulted in a custodial sentence and these included suspended sentences.

Figures such as these raise concerns that the regulator is ‘soft’ – enabling corporate criminals to get away with fraud and misleading the organisation.

The government says it intends to give ASIC more power to tackle corporate misconduct.

Reforms

The government plans to expand the range of breaches subject to civil penalties and, as stated, increase the penalties for many serious crimes under the Corporations Act.

The offences subject to increased penalties including knowingly providing defective disclosure documents to consumers, offering securities without appropriate disclosure and corporate fraud offences, which all currently carry a maximum penalty of five years in prison.

The government says there will be increases in penalties to a further 43, less-serious offences, including managing corporations after being disqualified, which is expected to increase from one year in prison to five, and providing false or misleading information to ASIC, which is expected to increase from two years to five.

These proposed penalties are part of recommendations made by the Murray Financial Systems Inquiry which began in 2013, and while the government has agreed to adopt most of them, it says the current Royal Commission will also look at some of the same issues as part of its remit and could make further recommendations.

The government claims its intention is to bring Australia more closely in line with other countries in terms of penalties for corporate crime, but many have questioned its sincerity given that Malcolm Turnbull and his cohorts vehemently opposed the Banking Royal Commission for so long.

 

 

Sonia Hickey

Sonia Hickey is a freelance writer, magazine journalist and owner of “Woman with Words”. She has a strong interest in social justice and is a member of the Sydney Criminal Lawyers content team.

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