Woltring, Herman --- "Crime does not pay?" [1998] ALRCRefJl 31; (1998) 73 Australian Law Reform Commission Reform Journal 58

• Reform Issue 73 Spring 1998

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Reform Issue 73 Spring 1998

This article appeared on pages 58 – 61 of the original journal.

Crime does not pay?

The Australian Law Reform Commission’s review of the Proceeds of Crime Act 1987 and related legislation is underway. Herman Woltring* gives a progress report.

In 1987, when heralding the introduction into federal parliament of the first Commonwealth legislation dealing with proceeds of crime, then Attorney-General Lionel Bowen proclaimed it provided “some of the most effective weaponry against major crime ever introduced into this parliament”.

“Its purpose,” Mr Bowen stated, “is to strike at the heart of major organised crime by depriving persons involved of the profits and instruments of their crimes. By so doing, it will suppress criminal activity by attacking the primary motive - profit - and prevent the reinvestment of that profit in further criminal activity.”

The legislation spoken of, the Proceeds of Crime Act 1987 (Cth), was designed to enable convicted criminals to be stripped of all assets or other benefits derived from, or used in the commission of their crimes. Similar legislation was passed in all Australian jurisdictions, commencing in the mid-1980s.

The impetus for proceeds of crime legislation had come from an initiative of the Australian Police Ministers Council, followed by both the special Premiers Conference of Drugs (1985) and the Standing Committee of Attorneys-General.

The basic scheme agreed upon, but enacted with variations in different jurisdictions, allowed the court, after conviction, to order the forfeiture of any profits or benefits derived by the offender, and the forfeiture of any other lawfully acquired property used in, or in connection with, the offence. Forfeiture could be direct, by forfeiture order, or indirect by way of a pecuniary penalty order. This latter order was a court assessed quantification of the benefits derived by the criminal and an order to pay that amount. The order could be enforced against any property. The court could make both orders, but then had to reduce the pecuniary penalty order by the amount representing the value of any property forfeited.

Property could also be ‘restrained’ by the court, so that it could not be dissipated before conviction. The scheme also included a number of investigative tools to enable police to trace property that might otherwise become liable to restraint or forfeiture due to the criminal conduct of another.

Why the ALRC review?

Despite the words of Mr Bowen, which appeared to have breathed new meaning into the time-honoured adage that ‘crime does not pay’, several jurisdictions have found those stated objectives have not, or have not adequately, been met.

New South Wales and Victoria have enacted legislation that questions the basic effectiveness in some cases of a ‘conviction based’ forfeiture regime. Western Australia is believed to be about to follow suit. Both Victoria and South Australia have also found it necessary to legislate the extent to which, if any, the making of forfeiture or pecuniary penalty orders is relevant to the determination of the appropriate penalty for the predicate offence.

There have also been developments in overseas jurisdictions, with the United Kingdom, for example, enacting the Drug Trafficking Act 1994 and amending the Criminal Justice Act 1998. Both addressed forfeiture.

While the Proceeds of Crime Act 1987 has been amended from time to time, the amendments have been mainly of a ‘tidying up’ nature which have left the original basic scheme unaltered. So seen, it is very much ‘first generation’ legislation. Clearly Attorney-General Daryl Williams, in giving the reference to the ALRC, felt it was time to revisit the Act in the context of post-1987 developments in Australia and abroad.

The issues

At the outset it should be noted that the terms of reference presuppose an effective regime to deprive criminals of their undeserved profit. So the basic question of whether there should be such a regime is not in issue. Anything related to the effectiveness of the relevant laws clearly is a matter of concern to the inquiry.

An initial consultative process conducted by the Commission with major stakeholders and an introductory pamphlet, entitled Commonwealth legislation relating to forfeiture of the proceeds of crime - an introduction to the inquiry, identified two types of issues, namely basic or threshold issues, and issues relating to specific terms of reference.

The principal threshold issues include uniformity or consistency between forfeiture regimes in the Commonwealth, States and Territories. While the ALRC’s terms of reference are restricted - as indeed they must be - to federal legislation, a degree of uniformity or consistency may render compliance easier and more cost effective. Many submissions strongly support a greater degree of consistency.

Conviction or non-conviction based scheme

Also under consideration is whether proceeds of crime legislation should provide for conviction or non-conviction based forfeiture. In relation to narcotics dealing, the Customs Act 1901 contains a non-conviction based civil forfeiture regime. As mentioned earlier, Victoria has introduced a similar regime in relation to drug offences, whereas NSW has introduced such a regime for a wider range of offences carrying a penalty of five years or more imprisonment. The Proceeds of Crime Act, dealing with the bulk of Commonwealth offences, is still solely conviction based.

If a non-conviction based scheme is to be introduced, several questions must be answered. For example, should such a scheme apply only to stipulated offences or to a range of offences by reference to a minimum penalty? Who should have the right to begin proceedings? If such power rests with the Commonwealth Director of Public Prosecutions, could this produce a real or perceived conflict of interest between the exercise of prosecutorial discretion in the public interest and the negotiating of settlements in court proceedings?

Some submissions received by the Commission have commented on perceived weaknesses of present conviction-based regimes. The Australian Bureau of Criminal Statistics has noted that its annual Australian Illicit Drug Report, which draws upon information from a range of sources, regularly reports on the problems associated with proceeds legislation. According to the Bureau:

“The primary issue identified by most jurisdictions was the inadequacy of conviction based forfeiture legislation to fully deprive criminals of assets gained through criminal activities.
“On numerous occasions, property/assets are identified as being derived through criminal activity, however, when insufficient evidence exists to sustain the predicate conviction ... the investigating agency is powerless to take any proceeds action ...”

Case studies supplied by the Australian Federal Police (AFP) and the National Crime Authority strongly urge the adoption of a non-conviction based regime. The AFP recommends that the pecuniary penalty powers in the Customs Act, relating to narcotics dealing, be incorporated into the Proceeds of Crime Act, so that those powers may extend to other serious criminal activity.

Money laundering

Confiscation of criminal assets and the prevention of money laundering are interdependent. Any property successfully laundered is obviously unavailable for confiscation. Therefore, an adequate law enforcement response to money laundering is essential to an efficient proceeds of crime law. Issues to be addressed will include the adequacy of the current provisions, including evidentiary requirements.

From cases submitted to the Commission, it is obvious that millions of dollars are being sent overseas, for which there is no apparent lawful explanation. Yet under the current law, nothing can be done to prevent these highly suspicious transfers.

Jurisdiction

Applications for restraining orders, which prevent the dissipation of assets pending the outcome of the prosecution for the offence, can be made only to Supreme Courts of the States and Territories. The same is true of search warrants and other investigative orders. The Commission is investigating whether this is still appropriate, or whether it needlessly clutters the jurisdiction of the most superior courts?

Specific terms of reference

Several issues for consideration arise out of specific terms of reference. These include the adequacy or otherwise of the protection of the rights of innocent third parties whose property or rights to property might be affected if the relevant property becomes liable to forfeiture. Such third parties could include joint tenants or owners, creditors, financial institutions and hire purchase type bodies.

As well, an appropriate balance must to be drawn between forfeiture and the possibility of compensation or restitution to the victims of the relevant criminal activity.

The terms of reference require consideration of the sufficiency of police powers to locate proceeds and other ‘tainted’ property; and whether any change is necessary in the Crimes (Superannuation) Benefits Act 1989 and, Part VA of the Australian Federal Police Act 1979. These Acts permit federal officers, if convicted of a corruption offence and sentenced to more than 12 months imprisonment, to be deprived of all government funded superannuation benefits, regardless of the proportionality of that loss to the offence.

The Commission is also seeking comment on the control of restrained assets and the prevention of their unreasonable dissipation on legal costs and living expenses. Should such funds be released for those purposes, or only if they are not proceeds or profits derived from the crime? Who should release such funds? Who should decide what is a reasonable amount to release?

One issue, which has attracted media attention, is whether there should be legislation to cover ‘literary proceeds’, whereby criminals are paid for telling the story of their crime or life of crime to the press, publishing books or selling film or video rights to that story. Some argue that such a law would be an unreasonable restriction on free speech, others that it is not free speech that is being restricted, but rather the payments received from the exercise of that right.

* Herman Woltring is the lead consultant on the Commission’s proceeds of crime reference.