Explanatory Memorandum(Circulated by authority of the Minister for Justice and Customs Senator the Honourable Chris Ellison)
SCHEDULE 1 - MONEY LAUNDERING
Criminal Code Act 1995
Item 1 - Schedule . The offences in the Criminal Code Act 1995 are contained in a schedule. This item amends that schedule by adding new Part 10.2 and Division 400, both of which are headed 'Money Laundering' and contain new money laundering offences. These replace the money laundering offences in sections 81 and 82 of the Proceeds of Crime Act 1987 . All very serious offences are placed in the Criminal Code for convenience. The Criminal Code contains the general principles by which offences are interpreted as well as other serious offences which in many cases will be relevant to the money laundering offences. The policy of placing the very serious offences together in this way is not only a feature of the Commonwealth Criminal Code but also the legislation of most jurisdictions throughout the world. It is also a feature of the Model Criminal Code which was developed by Commonwealth, State and Territory officers and by implication was favoured by the ALRC when it suggested it should be located in the old central criminal statute, the Crimes Act 1914 (recommendation 32). Most of the Criminal Code is based on the Model Criminal Code.
Proposed section 400.1 Definitions . The first definition that requires explanation is 'authorised deposit-taking institution' . It nominates financial institutions over which the Commonwealth has jurisdiction and ensures the offences apply to money laundering through such institutions. These are a body corporate involved in a banking type business, the Reserve Bank and State banks that have business extending beyond the limits of the particular State (paragraph 51(xiii) of the Constitution. The definition is identical to that in section 3 of the PoC Act 1987. 'Instrument of crime' introduces a new concept for the purposes of the money laundering offences which were previously only concerned with 'proceeds of crime.' Consistent with recommendation 22 of the ALRC report, the definition extends the coverage to money or property used in the commission of, or to facilitate the commission of, an indictable offence. However, it is not a new concept in the context of proceeds of crime legislation. A similar concept is used as part of the definition of 'tainted property' in section 4 of the PoC Act 1987 and in clause 338 of the PoC Bill. 'Proceeds of crime' is similar in effect to the definition in section 4 of the PoC Act 1987, so this aspect of the new money laundering offences remains much the same. It is restricted to the proceeds of indictable offences. 'Property' is defined in the same way as in section 4 of the PoC Act 1987 and clause 338 of the PoC Bill. It covers real and personal property whether in or outside Australia and interests in such property. In accordance with recommendation 27 of the ALRC report, proposed subsection 400.1(2) is included to make it clear it includes financial instruments, cards and other such items regardless of whether they have intrinsic value.
Proposed section 400.2 - Meaning of dealing with money or other property
Dealing with money or other property is a key element of the serious money laundering offences in proposed sections 400.3 to 400.8. This differs from the existing serious money laundering offence at section 81 of the PoC Act 1987 and extends the scope of the Commonwealth offences more closely to Constitutional limits. Section 81 was limited to transactions related to Commonwealth and certain Territory indictable offences, foreign offences or which involved bringing proceeds into Australia. Proposed subsection 400.2(1) covers exports as well as imports and other dealings, including banking transactions. This is in accord with recommendation 24 of the ALRC report. Under proposed subsection 400.2(2) the 'dealing' definition covers transactions related to State and Territory offences where it involves the import or export of goods, electronic communications, postal or telegraphic communications or a transaction in the course of banking (other than certain State banking). In accordance with recommendation 22 of the ALRC report it also extends the offences to cover 'instruments of crime'. Proposed subsection 400.2(3) makes it clear that ' banking transactions' include transactions involving a money order and that exports and imports of money or other property includes the transfer of money or property by an electronic communication. These definitions modernise the offences in line with contemporary methods of engaging in financial transactions. There are also definitions of ' Commonwealth indictable offence' and ' foreign indictable offence' which do not require further explanation.
Proposed section 400.3 - Dealings worth $1,000,000 or more
This is the most serious of 5 offences which prohibit the more significant types of money laundering. A criticism of the old offence in section 81 of the PoC Act 1987 was that for an offence carrying a maximum penalty of 20 years imprisonment it was far too broad. It could apply where the money or property was small in value and even where the defendant did not advert to the fact it was derived or realised from some form of illegal activity. It was only necessary for the prosecution to prove the defendant ought reasonably have known of these things.
Chapter 2 of the Criminal Code has a menu of general fault elements that provide a more appropriate basis for criminal liability which together with variations in penalty provide the opportunity to more severely penalise those who are more culpable and dealing in larger amounts. This also enables the legislature to be more precise in its signal to the courts about the level of penalty it considers to be appropriate for the particular conduct. While this means that there are more offences they provide a level of precision which is warranted given the consequences of being convicted of money laundering. The ALRC did not make recommendations in relation to the fault elements for the equivalent offence but at paragraph 7.18 of page 121 expressed strong support for the requirement that fault be proved by the prosecution for such a serious offence.
Proposed subsection 400.3(1) is the most serious offence. The maximum penalty is 25 years imprisonment (an increase of 5 years on the existing penalty) and/ or a fine of $165,000 for an individual or $825,000 for a body corporate. However, the offence applies to dealings in very large sums - proceeds of crime worth $1,000,000 or more and where the person believes the money or other property to be a proceed of crime or intends that it will become an instrument of crime.
If the person was reckless about the money or other property being a proceed or about the risk that it is an instrument of crime there is a lower maximum penalty. Applying section 5.4 of the Criminal Code which provides for the meaning of recklessness, this offence would occur where the person is, aware of a substantial risk that the money or property was, or would become, a proceed or an instrument of crime and having regard to the circumstances known to him or her it was unjustifiable to take that risk. Where this is the case the offence at proposed subsection 400.3(2) provides a maximum penalty of 12 years imprisonment and or a fine of $79,200 for an individual or $325,000 for a body corporate.
Finally, where the person was negligent about the money or other property being a proceed or instrument of crime the penalty prescribed is lower again. Applying section 5.5 of the Criminal Code which provides for the meaning of negligence, this offence would occur where the dealing involved such a great falling short of the standard of care that a reasonable person would exercise in the circumstances, and such a high risk that the dealing merits criminal punishment. Where this is the case the offence at proposed subsection 400.3(3) provides a maximum penaltyof5 years imprisonment and or a fine of $33,000 or $165,000 for an individual.
Proposed subsection 400.3(4) accords with the usual practice where the Criminal Code applies to an offence. Due to the strict requirements of the Criminal Code in relation to proof of fault in relation to all elements of offences, it is necessary to state that it is not necessary for the prosecution to prove that the defendant knew, or was aware of, the value of the dealing for him or her to be convicted of these offences. This is achieved by providing that absolute liability applies to that element of the offence. This is consistent with other offences that have been enacted in recent years. It has been accepted that it is not necessary to prove an element that does not impact on culpability and in some circumstances would be difficult to establish. However, in this case it is considered appropriate that special rules should operate to reduce the penalty where the defendant has made a mistake of fact about the value. This is dealt with in more detail in the notes on proposed section 400.10.
These offences cover the conduct and culpability covered by the offence in section 81 of the PoC Act, but provides for much more appropriate penalties.
Proposed sections 400.4 to 400.8 - Lesser dealings
These provisions provide for offences follow the same pattern as proposed section 400.3.
Where the dealings involve money or property with a value of $100,000 or more the maximum penalty is 20 years imprisonment and or a fine ($132,000:individual; $660,000:body corporate) if the dealing was intentional, 10 years ($66,000:individual; $330,000:body corporate) if there was recklessness; and 4 years ($26,400:individual; $132,000:body corporate) if it was negligent (proposed section 400.4).
Where the dealings involve property or money with a value of $50,000 or more the maximum penalty is 15 years and or a fine ($99,000:individual;$495,000:body corporate) if they were intentional, 7 years ($46,200:individual; $231,000:body corporate) if there was recklessness; and 3 years ($19,800:individual; $99,000:body corporate) if it was negligent (proposed section 400.5).
Where the dealings involve property or money with a value of $10,000 or more the maximum penalty is 10 years and or a fine ($66,000:individual; $330,000:body corporate) if they were intentional, 5 years ($33,000:individual; $165,000:body corporate) if there was recklessness; and 2 years ($13,200:individual; $66,000:body corporate) if it was negligent (proposed section 400.6).
Where the dealings involve $1,000 or more the maximum penalty is 5 years and or a fine ($33,000:individual; $165,000:body corporate) if they were intentional, 2 years ($13,200:individual; $66,000:body corporate) if there was recklessness; and 12 months ($6,600:individual; $33,000:body corporate) if it was negligent (proposed section 400.7).
Finally there is a basic offence with a maximum penalty of 12 months and or a fine ($6,600:individual; $33,000:body corporate) if the dealing is intentional, 6 months ($3,300:individual; $16,500:body corporate) if there was recklessness; and a $1,100 fine if it was negligent (proposed section 400.8).
This approach provides the courts with very specific guidance about sentencing of money launderers. It is intended to result in offenders who are more culpable and have dealt in larger amounts receiving more severe sentences.
Proposed sections 400.9 - Possession, etc of property reasonably suspected of being proceeds of crime
This inserts a lesser money laundering offence based on existing section 82 of the PoC Act 1987. Like section 82 the proposed offence applies to those who receive, possess, conceal or dispose of, or bring into Australia any money or other property that may reasonably be suspected of being proceeds of Commonwealth or foreign crimes. However, the proposed offence also covers taking money outside Australia ('exports' as well as 'imports') and the proceeds of State and Territory offences where they involve the import or export of goods, postal or telegraphic communications or a transaction in the course of banking (other than certain State banking). These changes are in accord with recommendations 25 and 26 of the ALRC report and are at subsections 400.9(1)(a)(ii) and (3) which mirror those proposed in relation to the more serious money laundering offences (proposed sections 400.3 to 400.8). The maximum imprisonment penalty remains the same at 2 years imprisonment. The fines of $5,500 (individuals) and $27,500 (corporations) have been increased to reflect those which would apply to similar offences.
Proposed subsection 400.9(2) takes a different approach to that in section 82. It specifies a range of activity which is taken to satisfy the reasonable suspicion element of the offence: structuring transactions to avoid reporting requirements, the use of false names for accounts, using grossly out of proportion valuations, contraventions of the Financial Transaction Reports Act 1988 , and engaging in transactions on behalf of others but not being prepared to identify such persons or their location. This provides a more specific basis for liability than section 82 and follows the approach of recommendation 28 of the ALRC report. Note that subsection 400.9(4) contains a device where absolute liability is used to with respect to paragraph (1)(b) to facilitate reliance on the matters listed in proposed subsection 400.9(2). This reflects the transparency about fault required by Chapter 2 of the Criminal Code in relation to all offences.
At the same time proposed subsection 400.9(5) retains the defence contained in subsection 82(2) which applies where the defendant proves that he or she had no reasonable grounds for suspecting that the money or property was derived or realised from some form of unlawful activity. As with section 82, the defendant bears the legal burden of proof in relation to these matters. This is appropriate given the knowledge and information the defendant will have concerning the transaction, the difficulty law enforcement agencies are likely to have in obtaining such information and the relatively low penalty.
Proposed section 400.10 - Mistake of fact as the value of money or property
Proposed subsection 400.10(1) provides that where at the time of, or before, the dealing which constitutes one of the serious money laundering offences, the person considered the value of the money or property and was under a mistaken but reasonable belief about that value and, had that belief been correct, a lesser offence would have applied. The effect of the offences and this provision is that if a person had not bothered to consider the value and the actual value made the offence one in a higher offence category, then subsections 400.3(4), 400.4(4), 400.5(4), 400.6(4) and 400.7(4) which apply absolute liability to the value, will operate to make belief about the value something that the prosecution does not have to prove. The approach of applying mistake of fact as in proposed section 400.10 is consistent with the way the same principle operates in relation to strict liability (under section 9.2 of the Criminal Code ) but is tailored to provide that the person is not to be completely absolved from liability. The aim is to ensure that where the person is less culpable about the element of the offence concerning the value of the dealing, then he or she should be subject to a lower maximum penalty. Proposed subsection 400.10(2) takes into account assessments of the value based on previous experience.
Proposed section 400.11 - Absolute liability - whether indictable offences
This simply ensures that the prosecution does not have to prove knowledge about whether the offences relevant to the money laundering are indictable. Knowledge about this element has nothing to do with the essence of the offence and would be very difficult to establish.
Proposed section 400.12 - Combining several contraventions in a single charge
In accordance with recommendation 31, for procedural convenience, this allows for the combination of charges in relation to the proposed offences. It also prevents the structuring of dealings with a view to manipulating the value based penalty scheme. The provision achieves this by allowing the total value to be taken into account when there are multiple dealings.
Proposed section 400.13 - Proof of other offences is not required
Money laundering is often linked to other offences, usually referred to as the 'predicate offence'. This provision makes it clear that it is not necessary to prove those other offences with particularity about the exact offence or the particular offender.
Proposed section 400.14 - Alternative verdicts
This is a standard provision used elsewhere in the Criminal Code to ensure that where the trier of fact concludes that the defendant is not guilty of say a more serious offence, but is guilty of a lesser offence, the trier may make that finding. This type of provision is used where there are groups of offences that have similar elements such as those in relation to money laundering. This means that if the trier considered the prosecution overestimated the value of the relevant property, and the actual value makes the charge no longer appropriate, it is open for the trier to convict the defendant of an appropriate offence with a lower penalty. This is an alternative verdict mechanism.
Proposed section 400.15 - Geographical jurisdiction
Category B extended geographical jurisdiction is appropriate for these offences because they often involve international dealings. Section 15.2 of the Criminal Code provides that offences categorised in this way can be committed not only wholly or partly in Australia, but also wholly outside Australia if the person who committed the offence is an Australian national or resident. This recognises that there is scope for money launderers based in Australia to try to avoid authorities in Australia by dealing in the money or other property off-shore.
Proposed section 400.16 - Saving of other laws
As with quite a number of other offences in the Criminal Code (for example, theft), there is some overlap of the proposed money laundering offences with State and Territory offences (particularly now that it is proposed that the scope of the money laundering offences be extended to cover dealings other than those involving Commonwealth and foreign offences). It is not intended that State and Territory authorities should be precluded by the Commonwealth offences from prosecuting similar offences under their law. However the normal rules of double jeopardy apply.
Proceeds of Crime Act 1987
Item 2 This item repeals the definition of 'proceeds of crime' from the PoC Act 1987.
Item 3 This item repeals the old money laundering offences (sections 81 and 82 of the PoC Act 1987). Differences between them and the new offences are explained in the notes on the new offences.
Telecommunications (Interception) Act 1979
Item 4 This item updates cross-references to ensure interception may be authorised to occur in relation to the more serious money laundering offences (proposed sections 400.3 to 400.8). As was the case previously in relation to the offence at section 82 of the PoC Act, interception is not available in relation to the lesser offence (proposed section 400.9). This is consistent with general policy that such powers should only be available for use in relation to serious offences.