House of Representatives

Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017

Revised Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, the Hon. Stuart Robert MP)
This memorandum takes account of amendments made by the Senate to the bill as introduced.

Chapter 1 Outline of whistleblower reforms

Outline of chapter

1.1 This Chapter describes the broad context for the amendments made by this Bill.

Context of amendments

1.2 Combating crime and misconduct is a longstanding aim of corporate, financial and tax law enforcement. Criminal conduct can be difficult to detect or prove satisfactorily in a court. It can be concealed by a complex web of transactions and falsified or misleading corporate records, and a proliferation of entities in corporate structures can make responsibility opaque.

1.3 Often such wrongdoing only comes to light because of individuals who are prepared to disclose it, sometimes at great personal and financial risk.

1.4 To reduce these risks and encourage disclosure of wrongdoing, Australia and many other countries have statutory whistleblower regimes with legally enforceable protections for people who make disclosures. These regimes recognise the critical role whistleblowing can play in the early detection and prosecution of misconduct in businesses and the avoidance or evasion of tax liabilities. The existence of strong statutory protections to encourage whistleblowing can improve compliance with the law and promote a more ethical culture because individuals know there is a higher likelihood that misconduct will be reported.

1.5 In Australia's tax laws, no whistleblower protection regime exists.

1.6 The Australian corporate whistleblowing regime was first introduced in 2004 and expanded in a piecemeal way. It does not cover the field and has not adjusted to reflect the regulatory remits of ASIC and APRA. As a result, significant gaps in protection exist. For example, no statutory protection exists for whistleblowers who report conduct in breach of consumer credit laws, and the coverage in respect of disclosures concerning corporate corruption, bribery, fraud, money laundering, terrorism financing or other serious forms of misconduct is scattered between the Corporations Act and financial sector laws or is not available.

1.7 The existing whistleblower regimes present a confusing web for whistleblowers to navigate, with differences and gaps in the protections available.

1.8 The private sector whistleblower laws have rarely been utilised by whistleblowers to seek protection or compensation, or by regulators to prosecute offences under them.

1.9 While existing protections remain inadequate or unclear, it is likely that whistleblowers will continue to be discouraged from disclosing information about wrongdoing. By contrast, protections for whistleblowers in the public sector are more comprehensive as they were developed in a unified way after the development of the private sector protections. The public sector protections have been more widely used.

Proposals for change

1.10 In 2014, the Senate Economics References Committee inquiry into the performance of ASIC recommended a review of Australia's corporate whistleblower framework to bring it closer to Australia's public sector whistleblower framework under the PID Act, and to introduce a number of amendments to the Corporations Act focusing on:

·
extending the definition of whistleblowers by replicating the PID Act;
·
strengthening protections by expanding the scope of disclosures and victimisation provisions to match the level of protections provided by the PID Act; and
·
including provisions in the Corporations Act that would ensure ASIC and APRA cannot be required to reveal a whistleblower's identity without a court or tribunal order.

1.11 Similarly, an independent evaluation of G20 countries' whistleblowing laws concluded that many G20 countries' whistleblower protections in the private sector fall short of best practice. According to the evaluation report only one country with a legal framework comparable to Australia's had an effective whistleblower oversight body for the private sector: the United States. For Australia the following areas were identified for potential reform:

·
broadening the definition of whistleblowers and the scope of wrongdoing covered;
·
introducing protections for anonymous complaints;
·
introducing external reporting channels and requirements for internal company procedures;
·
improving compensation arrangements and protections against retaliation;
·
establishing an oversight agency responsible for whistleblower protections; and
·
improving the transparency of the law.

1.12 In late 2016, the Government released its first OGNAP. The OGNAP committed the Government to strengthening whistleblower protections in the corporate sector and harmonising them with those in the public sector by December 2017.

1.13 The Government's focus of the commitment in the OGNAP was a specific response to perceived shortcomings of the existing Corporations Act whistleblowers regime and related financial sector laws. It committed to immediate public consultation on a range of options and swift reform to these laws.

1.14 Around the same time, the Government also agreed to the establishment of an inquiry by a Parliamentary Committee into whistleblower protections in the corporate, public and not-for-profit sectors.

1.15 The Parliamentary Committee process was an opportunity to examine the amendments made to the Registered Organisations Act in 2016 to enhance whistleblower protections and, in the light of this, to undertake a comprehensive review of statutory whistleblowing frameworks across the private and public sectors. The objective of this process was to achieve an equal or better whistleblower protection and compensation regime in the corporate and public sectors as provided for in the Registered Organisations Act.

1.16 The public response to the Government's consultation process, which concluded in February 2017, overwhelmingly favoured amendment of the corporate whistleblower regime. In response, and having regard to its OGNAP commitment to introduce corporate sector amendments by 2017, the Government has developed this Bill.

1.17 In September 2017, the Parliamentary Committee finalised its report. The Committee concluded that whistleblower protections remained largely theoretical with little practical effect in both the public and private sectors. The Parliamentary Committee report made 35 recommendations to strengthen these regimes. The Government is considering the report and recommendations, and has recently appointed an Expert Advisory Panel to assist its deliberations.

1.18 With regard to the private sector protections, the Parliamentary Committee recommended:

·
introducing a standalone consolidated Whistleblower Protection Act covering the private sector;
·
establishing an independent a Whistleblower Protection Agency;
·
expanding the categories of qualifying whistleblowers;
·
broadening the definition of disclosable conduct to include a contravention of any law of the Commonwealth;
·
removing the 'good faith' requirement for whistleblower protection;
·
extending protections for recipients of disclosures;
·
allowing anonymous disclosures;
·
extending the range of internal and regulatory disclosees, and allowing for protected disclosures to a registered organisation or a federal Member of Parliament or their office in certain circumstances;
·
increasing protection, remedies and sanctions for reprisals;
·
improving access to compensation;
·
expanding the obligations of law enforcement agencies in their handling whistleblower matters;
·
applying the provision of the PID Act that clarifies the options for courts and tribunals in apportioning liability for compensation between individuals and organisations to the private sector;
·
introducing a rewards system for whistleblowers;
·
consistency between laws covering the public and private sector on public interest disclosures; and
·
implementing a statutory requirement for a post-implementation review of new whistleblower laws.

Changes made by this Bill

1.19 This Bill meets the Government's OGNAP commitment. It also meets many of the recommendations made by the Parliamentary Committee including a requirement for a post-implementation review.

1.20 This Bill addresses gaps and uncertainties in the protections and remedies available to corporate and financial sector whistleblowers by bringing the whistleblower laws in other financial sector statutes into the Corporations Act, and creates a new regime for the protection of individuals who disclose wrongdoing in the tax sphere.

Summary of new law

1.21 This Bill amends:

·
the Corporations Act to strengthen and consolidate whistleblower protections for the corporate and financial sector; and
·
the TAA 1953 to create a whistleblower protection regime for disclosures of information by individuals regarding breaches of the tax laws or misconduct in relation to an entity's tax affairs;
·
repeals the financial sector whistleblower regimes and clarifies transitional arrangements.

1.22 Details of the amendments to the Corporations Act are set out in Chapter 2.

1.23 Details of the new tax whistleblower regime are set out in Chapter 3.

1.24 Details of the amendments to the existing financial sector whistleblower regimes are set out in Chapter 4.

1.25 Chapter 5 contains a statement of compatibility with human rights.


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