House of Representatives

Crimes Legislation Amendment (Economic Disruption) Bill 2020

Addendum to the Explanatory Memorandum

(Circulated by authority of the Minister for Home Affairs, the Honourable Peter Dutton MP)

The purpose of this addendum is to provide additional material to the Explanatory Memorandum to the Crimes Legislation Amendment (Economic Disruption) Bill 2020 (the Bill). This addendum responds to concerns by the Parliamentary Joint Committee on Human Rights' Report 13 of 2020 (13 November 2020) and the Senate Standing Committee for the Scrutiny of Bills' Scrutiny Digest 16 of 2020 (20 November 2020).

Schedule 1 - Money Laundering

After paragraph 34 on page 12, insert the following paragraphs:

Significant penalties
The maximum penalties imposed by each of the proposed money laundering offences in Schedule 1 are significant, ranging from imprisonment for four years to imprisonment for life. These penalties are justified below.
General justification
Part 3.1.1 of the Guide to Framing Commonwealth Offences provides that a high maximum penalty will be justified where there are strong incentives to commit the offence or where the consequences of the commission of the offence are particularly dangerous or damaging.
The high maximum penalties under the proposed offences are necessary to overcome the strong incentives that currently exist to commit money laundering.
Transnational serious and organised crime (TSOC) groups are primarily motivated by profit, and money laundering is an essential component of their criminal business model. These groups are no longer confined to a particular crime-type or association, but have instead evolved into sophisticated multinational businesses, constantly shifting their operations to create, maintain and disguise illicit financial flows. Money laundering enables these groups to disguise illicitly obtained funds behind a veil of legitimacy, allowing them to realise their profits from criminal activity, hide and accumulate wealth, avoid prosecution, evade taxes and fund further criminal activity.
In this profit-focused environment, demand for money laundering services has increased dramatically, creating financial incentives that have fuelled the proliferation of global laundering networks. Money laundering remains extremely profitable within the illicit economy, and networks are able to charge high commissions to move money around the world in a manner that is incredibly difficult to trace. Australian law enforcement experience indicates that these commissions are generally five to ten per cent of the value of the money laundered. This is a considerable sum when one considers the total value of money laundered globally, which the United Nations estimates to be 2-5% of global Gross Domestic Product, or approximately $800 billion - $2 trillion in current US dollars.
The high maximum penalties imposed under the proposed offences can also be justified as money laundering has a particularly dangerous and damaging impact on society.
Money laundering remains a fundamental enabler of almost all TSOC activity, allowing profits from crime to be realised, concealed and reinvested in further criminal activity, or used to fund corruption and lavish lifestyles. Money laundering systematically devastates the health, wealth and safety of Australia's citizens through the conduct it enables, such as illicit drug trafficking, terrorism, tax evasion, people smuggling, theft, fraud, corruption and child exploitation. The Australian Institute of Criminology estimates that overall TSOC activity costs Australia up to AUD47.4 billion per year.
Money laundering also directly impacts on Australia's economic wellbeing, distorting markets, generating price instability and damaging the credibility of Australia's institutions and economy. These consequences can deter foreign investors and impede economic growth. Money laundering also diminishes the tax revenue collected by the Australian Government, causing indirect harm to millions of Australians that would otherwise benefit from Government programs funded through this revenue.
Penalty benchmarks
Part 3.2.1 of the Guide to Framing Commonwealth Offences states that a penalty 'should be consistent with penalties for existing offences of a similar kind or of a similar seriousness'. The maximum penalties of the proposed offences in Schedule 1 are consistent with those imposed under the existing money laundering offences in Division 400 of the Criminal Code.
Offences of a similar kind
As outlined in the table below, the maximum penalty of the existing offences (not in bold) and proposed offences (in bold) reflect: the level of awareness a defendant has as to the link between property (which includes money) and criminal activity; the seriousness of their conduct in relation to this property; and the value of the property.
$10 million or more $1 million or more $100,000 or more
Believes property is proceeds of indictable crime or intends that property will become an instrument of indictable crime Life imprisonment and/or 2,000 penalty units (pu) 25 years' imprisonment and/or 1500 pu 20 years' imprisonment and/or 1200 pu
Believes property is proceeds of general crime and concealed or disguised it Life imprisonment and/or 2,000 pu 25 years' imprisonment and/or 1500 pu 20 years' imprisonment and/or 1200 pu
Reckless as to whether property is proceeds of indictable crime or the risk that property will become an instrument of indictable crime 15 years' imprisonment and/or 900 pu 12 years' imprisonment and/or 720 pu 10 years' imprisonment and/or 600 pu
Reckless as to whether property is proceeds of general crime and concealed or disguised property 15 years' imprisonment and/or 900 pu 12 years' imprisonment and/or 720 pu 10 years' imprisonment and/or 600 pu
Negligent as to whether property is proceeds of indictable crime or the risk that property will become an instrument of indictable crime 6 years' imprisonment and/or 360 pu 5 years' imprisonment and/or 300 pu 4 years' imprisonment and/or 240 pu
Negligent as to whether property is proceeds of general crime and concealed or disguised property 6 years' imprisonment and/or 360 pu 5 years' imprisonment and/or 300 pu 4 years' imprisonment and/or 240 pu
Reasonable grounds to suspect that property is proceeds of indictable crime 5 years' imprisonment and/or 300 pu 4 years' imprisonment and/or 240 pu 3 years' imprisonment and/or 180 pu
By expanding on the existing penalty structure under Division 400, the proposed offences enable the legislature to be more precise in specifying the penalties it considers to be appropriate for particular conduct. This provides a greater level of certainty, increasing the deterrent effect of these offences, while ensuring that penalties under the proposed offences can be justified by reference to existing offences.
Offences of a similar seriousness
The most serious of the proposed offences under subsections 400.2B(1)-(3) involve laundering property valued at $10,000,000 or more and are punishable by a maximum sentence of life imprisonment. This maximum penalty is the most serious that can be imposed under Commonwealth law, and is currently only applied to abhorrent offences such as people smuggling, espionage, large-scale illicit drug trafficking and terrorism.
The proposed offences under subsections 400.2B(1)-(3) are of similar seriousness to existing offences punishable by life imprisonment as the consequences of committing these offences is often just as damaging.
For example, if an offender commits an offence of dealing with an instrument of indictable crime under subsection 400.2B(1) by providing $10,000,000 directly to a drug syndicate, this would enable the syndicate to purchase approximately 33 to 110 kilograms of cocaine. Even on the most conservative estimates, the commission of the money laundering offence will have allowed the syndicate to possess and sell sixteen times the 'commercial quantity' of cocaine required to attract a maximum sentence of life imprisonment.
If the drug syndicate provides $10,000,000 of proceeds from the sale of this cocaine to a person, who subsequently commits a proceeds offence under subsection 400.2B(2) or (3) in disguising the illicit origins of these proceeds, this may have concealed multiple offences punishable by life imprisonment from law enforcement. With the proceeds 'cleaned', the drug syndicate could use these proceeds to buy and resell further commercial quantities of cocaine, or to invest in a lavish lifestyle and thereby incentivise others to engage in drug offending, enabling the cycle of serious offending to continue.
The offences under subsections 400.2B(1)-(3) will only be triggered by the most serious forms of conduct. In order to commit an offence under subsections 400.2B(1)-(3), the property must be proceeds of indictable crime, proceeds of general crime, or the person must intend that the property will become an instrument of crime. A further requirement is that a person must have a high degree of awareness of the link between the property they are dealing with and criminal activity.
A person will only be liable in relation to property (including money) under the offences where they:

deal with property that is 'proceeds of indictable crime' while believing it to be 'proceeds of indictable crime' (subsection 400.2B(1)) - for example, dealing with $10,000,000 while believing that it was derived from selling illicit drugs; or
deal with property intending that it will become an instrument of crime (subsection 400.2B(1)) - for example, providing $10,000,000 to a drug syndicate while meaning to ensure that these funds are used to purchase drugs or aware that this will occur in the ordinary course of events; or
engage in conduct in relation to property that is 'proceeds of general crime' while believing it to be 'proceeds of general crime' and concealing or disguising its origins (subsections 400.2B(2)-(3)) - for example, concealing the origins of $10,000,000 while believing that these funds to be derived from crime generally.

Schedule 1, Part 1, Division 1, items 62-67

After paragraph 157 on page 32, insert the following paragraphs

Subsection 400.9(5) imposes a legal burden of proof on the defendant, requiring them to establish, on the balance of probabilities, that they had no reasonable grounds for suspecting that money or property was derived or realised, directly or indirectly, from some form of unlawful activity. A legal burden of proof is higher than an evidential burden, which requires a defendant to merely adduce or point to evidence that suggests a reasonable possibility that a particular matter exists or does not exist.
Part 4.3.2 of the Guide to Framing Commonwealth Offences provides that the defendant should generally bear an evidential burden of proof for an offence-specific defence, unless there are good reasons to depart from this position.
It is necessary to impose a legal rather than evidential burden on the defendant under subsection 400.9(5) to ensure that the offences can pierce the 'veil of legitimacy' that money laundering networks frequently use to disguise their activities.
These networks often exploit seemingly legitimate banking products; remittance services; front companies; complex financial, legal and administrative arrangements; real estate and other high-value assets; gambling activities; and a range of formal and informal nominee arrangements to conceal proceeds of crime and obscure beneficial ownership. This layering activity generates a paper trail that can be used to establish a 'reasonable possibility' of legitimacy that, in many cases, would be sufficient to meet an evidential burden under subsection 400.9(5) and thereby allow these networks to avoid criminal liability.
An evidential burden may be met by pointing to evidence, even slender evidence, adduced as part of the prosecution case. Hence a defendant could discharge an evidential burden by pointing to an answer provided in a police record of interview which suggested that the money or other property was derived from a legitimate business activity. By imposing a legal burden of proof on the defendant, subsection 400.9(5) ensures that courts look beyond this 'reasonable possibility' to properly examine the genesis and operation of structures used to legitimise transactions, reducing the effectiveness of layering activity.

Statement of Compatibility with Human Rights

After paragraph 39 on page 101, insert the following paragraphs:

Framing the offences with reference to an objective test that it was 'reasonable to suspect' that property was proceeds of indictable crime, rather than requiring proof of the defendant's subjective knowledge or suspicion, is necessary and appropriate to deal with the activities of money laundering networks.
These networks operate in a ways which seek to insulate operatives from information as to the true origins of the property to be laundered. Through engaging in this information compartmentalisation, networks can ensure that participants do not subjectively suspect that property was derived from a particular kind of offence, even if they suspect that it was derived from offending generally.
For example, a person may be asked to deliver $1 million in cash to a third party in an abandoned car park whilst using encrypted communications to contact his instructor and also using tokens to identify himself to the third party. In these circumstances, the defendant may have reasonable grounds to suspect that the property was derived from some form of unlawful activity but is not given enough information by his instructor to suspect that it came from a specific kind of indictable offence.
Unknown to the defendant, the money came from a drug cartel and was likely derived from drug trafficking offences. Criminal liability could be established under the proposed offence provisions as the trier of fact could find that it was objectively reasonable to suspect that the money came from drug trafficking. The defendant would be unable to rely on the defence under subsection 400.9(5) as, on the information known to him, he had reasonable grounds to suspect that the cash was derived from some form of unlawful activity.

After paragraph 41 on page 101, insert the following paragraphs:

It is also necessary to impose a legal rather than evidential burden on the defendant here to ensure that the offences can pierce the 'veil of legitimacy' that money laundering networks frequently use to disguise their activities.
These networks often exploit seemingly legitimate front companies; complex financial, legal and administrative arrangements; real estate and other high-value assets; gambling activities; and a range of formal and informal nominee arrangements to conceal proceeds of crime and obscure beneficial ownership. This layering activity generates a paper trail that can be used to establish a 'reasonable possibility' of legitimacy that, in many cases, would be sufficient to meet an evidential burden under subsection 400.9(5) and thereby allow these networks to avoid criminal liability.
An evidential burden may be met by pointing to evidence, even slender evidence, adduced as part of the prosecution case. Hence a defendant could discharge an evidential burden by pointing to an answer provided in a police record of interview which suggested that the money or other property was derived from a legitimate business activity. By imposing a legal burden of proof on the defendant, the offences will ensure that courts look beyond this 'reasonable possibility' to properly examine the genesis and operation of structures used to legitimise transactions, reducing the effectiveness of layering activity.