Federal Government Will Increase Criminal and Civil Penalties For Corporate Misconduct

Tuesday 24 April 2018 @ 11.49 a.m. | Corporate & Regulatory | Legal Research

The Turnbull Government has committed to increasing the criminal and civil penalties for corporate misconduct, following recommendations made by the ASIC Enforcement Review Taskforce (“the Taskforce”).  The Government has also announced plans to “significantly increase” ASIC’s powers and allow ASIC to see additional remedies to strip wrongdoers of illegally obtained profits.  The announcement comes as testimony continues at the financial services royal commission.

The Taskforce was commissioned in October 2016 by Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, and tasked with reviewing the enforcement regime of ASIC.  The Taskforce included representatives from ASIC, the Attorney-General’s Department, and the office of the Commonwealth Director of Public Prosecutions.  For more information on the Taskforce and their earlier papers, see TimeBase’s earlier article.

In a media release issued on 20 April 2018, Treasurer Scott Morrison and Ms O’Dwyer said:

“These reforms represent the most significant increases to the maximum civil penalties, in some instances, in more than twenty years. They bring Australia's penalties into closer alignment with leading international jurisdictions, and ensure our penalties are a credible deterrent to unacceptable misconduct.”

The media release outlines the Government’s plan to increase and harmonise criminal penalties to a maximum of:

  • “For individuals: (i) 10 years' imprisonment; and/or (ii) the larger of $945,000 OR three times the benefits;
  • For corporations: (i) the larger of $9.45 million OR (ii) three times benefits OR 10% of annual turnover.”

For civil penalties:

  • “the greater of $1.05 million (for individuals, from $200,000) and $10.5 million (for corporations, from $1 million); or
  • three times the benefit gained or loss avoided; or
  • 10% of the annual turnover (for corporations).”

The expansion of ASIC’s powers will include:

  • expanding their ability to ban individuals from performing any role in a financial services company where they are found to be unfit, improper, or incompetent;
  • strengthening their power to refuse, revoke or cancel financial services and credit licences where the licensee is not fit or proper; and
  • boosting ASIC's tools to investigate and prosecute serious offences by harmonising their search warrant powers to provide them with greater flexibility to use seized materials, and granting ASIC access to telecommunications intercept material...
  • ... allowing ASIC to seek additional remedies to strip wrongdoers of illegally obtained profits, or losses avoided from contraventions resulting in civil penalty proceedings

The Government has also released a response to the Taskforce recommendations.  It has agreed or agreed in principle to all 50 of the Taskforce’s recommendations.  The Government has said 30 of these will be prioritised, while another 20 will be considered along with the final report of the royal commission.

Australian Banking Association chief executive Anna Blight told ABC News that the Association backed the increased penalties:

A stronger range of penalties for misconduct is vital to tackling criminal and unacceptable behaviour by individuals and corporations…

Many of the issues raised over the last few days are the subject of investigation with changes already underway in the sector to ensure cases such as these cannot reoccur.

The industry expects that further changes should and will be made following the final recommendations of the Commission.”

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

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