Regulatory Regimes and Organised Crime: Report (html)
10. Developing an implementation plan for the preferred strategies
10.12 As the Victorian Guide to Regulation notes, consideration of how to achieve the effective implementation of regulation will be crucial to its success. In developing an implementation plan for a regulatory response to organised crime infiltration, a regulator should consider:
• the most appropriate agency, or agencies, to implement the regulatory response
• the need to gather information from a broad range of sources, including third parties
• the investigative powers that will be required
• the most suitable enforcement measures.
Choice of regulatory agency
10.13 There is no single, optimal agency to implement regulatory responses to organised crime infiltration. There was a consensus among consultation participants that choice of regulator/s will vary by occupation or industry.
10.14 Ideally, the regulator/s should be chosen after identification of the particular problem or issue, and the appropriate strategies for responding to that problem or issue. If regulatory responsibilities are allocated prior to the completion of these steps, there is a danger that the regulatory response will be largely determined by the objectives, skills and resources of any existing regulator. Such an approach may lead to constrained policy making, a poorly targeted regulatory response that has little impact on infiltration, or a misallocation of resources to an inappropriate regulator.
10.15 Regulatory roles may be assigned to:
• an occupation or industry regulator (such as the Business Licensing Authority/Consumer Affairs Victoria, Fisheries Victoria, and the Victorian Commission for Gambling and Liquor Regulation)
• a law enforcement agency, namely Victoria Police (which currently regulates the firearm dealing and private security industries)
• an inter-agency group comprising occupation/industry regulators, law enforcement agencies, and other government agencies as appropriate.
10.16 The Commission frequently heard that inter-agency collaboration is the preferable model for responding to organised crime infiltration. An inter-agency approach is increasingly taken to organised crime activity more broadly. The Melbourne waterfront ‘Trident Taskforce’ involves an inter-agency partnership between Victoria Police, the Australian Federal Police (AFP), the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Australian Crime Commission (ACC), the Australian Taxation Office (ATO), and the Australian Border Force (similar taskforces operate on the New South Wales and Brisbane waterfronts). The Project Wickenby taskforce—which investigates and prosecutes organised tax fraud—is led by the ATO in collaboration with seven other Commonwealth agencies. Ayling notes that inter-agency approaches are also becoming a common feature of the response to transnational organised crime.
10.17 Following its consultations, the Commission considers that inter-agency approaches are more advanced at the Commonwealth level than at the Victorian level. The same view was articulated by Victoria Police. A relatively rare example of a Victorian inter-agency approach is the regulatory model for the Victorian sex work industry, under which the Business Licensing Authority/Consumer Affairs Victoria (CAV) has responsibility for the licensing of sex work service providers, and Victoria Police has primary responsibility for the enforcement of the Sex Work Act 1994 (Vic), with some enforcement functions carried out by CAV and local councils. CAV also works with the AFP and the Department of Immigration and Border Protection to investigate human trafficking.
10.18 Collaboration is discussed further in Chapter 2.
10.19 The following factors should be considered in choosing the most appropriate regulator/s to implement the regulatory response, including the choice of agencies for any inter-agency partnership.
The scope of infiltration
10.20 Organised crime groups may infiltrate several occupations and industries in order to commit a particular crime, conceal or launder the proceeds of crime, or engage in other unlawful activity. Further, organised crime groups may be displaced from one industry to another as a result of regulatory action, or change infiltration strategies in response to opportunities that emerge in other industries. This may require an inter-agency approach that can deter or disrupt infiltration across several occupations and industries, or respond to the dynamic, evolving nature of infiltration as regulatory action is applied, through the addition or withdrawal of particular government agencies to a regulatory partnership. For example, preventing the diversion of precursor chemicals may require collaboration between agencies that oversee key industries in the supply chain that may be vulnerable to infiltration, such as chemical manufacturing, trucking and heavy haulage, and the retail supply of chemicals and pharmaceuticals.
Risk of infiltration and degree of harm
10.21 Choice of regulator/s should also be guided by the risk of organised crime infiltration in an occupation or industry, and the degree of harm likely to arise from infiltration. The Environment Protection Authority Victoria (EPA) suggested that it may be disproportionate for it to invest significantly in criminally trained staff, and that the use of inter-agency partnerships may be preferable for addressing organised crime infiltration.
10.22 Where serious public harm is likely to arise from organised crime infiltration, it may be necessary for a law enforcement agency to have a key role in regulation. Each of the industries currently regulated by Victoria Police—the private security industry and the firearm dealing industry—would appear to be suitable for police regulation because of the potential for significant public harm as a result of criminal infiltration in either industry. Both industries provide access to weapons, while the private security industry additionally provides access to secure property and confidential information about security systems and routines, and permits some degree of force and control to be exercised over members of the public.
10.23 Each occupation or industry should be assessed individually to determine whether the involvement of law enforcement agencies in their regulation is desirable.
Skills and powers of agency
10.24 An occupation or industry regulator may have powers and expertise that are sufficient for investigating organised crime infiltration. In these circumstances, collaboration with other agencies (particularly law enforcement agencies) may not be necessary, or may play a relatively limited role. Fisheries Victoria has dual roles as a regulator that undertakes the licensing of commercial fishing operators and as a law enforcement agency that draws on police-like powers to investigate criminal activity in the commercial fishing industry.
10.25 Alternatively, an occupation or industry regulator may lack sufficient powers and expertise to investigate organised crime infiltration. That agency will need to determine whether the retention of new powers and skills is appropriate or whether collaboration with other, appropriately skilled agencies is the most preferable course, as suggested by Consumer Affairs Victoria (see [10.53]–[10.69]).
Ability to assess probity and suitability
10.26 The chosen regulator/s should be well placed to assess whether a candidate for entry, or an existing member of an occupation or industry, is competent to perform a particular role or function. An assessment of competency may help to deter or detect organised crime infiltration, as discussed at [ ]–[ ].
10.27 In addition, the regulation of an occupation or industry is likely to have objectives other than preventing organised crime infiltration, including maintaining certain standards of conduct or expertise, and promoting the general integrity of an occupation or industry. In this regard, the Victorian Automobile Chamber of Commerce (VACC) argued that specialists with in-depth industry knowledge should be responsible for regulation of the auto-wrecking/recycling and spare parts industry, and that the police are unlikely to be a suitable regulator for that reason.
10.28 Similarly, the Australian Tattooists Guild (ATG) stated that the regulatory needs of the tattoo industry require an inter-agency approach involving the Business Licensing Authority/Consumer Affairs Victoria, the Department of Health and Human Services, local councils and, if necessary, Victoria Police. The ATG perceived the police as having limited ability to administer the full suite of policy needs for the tattoo industry (in relation to technical skills, hygiene standards, and so on).
10.29 The chosen regulator/s should also have an ability to investigate corporate and trust structures and prior business histories, given the potential for organised crime groups to hide ultimate ownership through complex business structures and engage in phoenix activity. The Australian Collectors & Debt Buyers Association suggested that this type of role may be better suited to a non-law enforcement agency. However, the Commission notes that law enforcement agencies increasingly have strong forensic accounting and commercial fraud skill-sets, which have the potential to be utilised by occupation/industry regulators (for example, through staff secondments and training).
Capacity to collaborate with the private sector and other third parties
10.30 Consultation participants commonly emphasised the need for collaboration with the private sector, particularly occupation and industry members. This view was expressed by both regulatory and law enforcement agencies and industry representatives. Industry collaboration could involve information sharing for the purpose of industry-led risk education, overseeing customer and supplier due diligence programs, or developing industry codes of conduct. The choice of regulator/s should also take into account the need to harness other third parties—such as customers and workers—in detecting organised crime infiltration. The choice of regulator/s should foster, and not hinder, this engagement.
10.31 First, an agency with specialist industry knowledge may be better placed to collaborate with the private sector than an agency that lacks such knowledge. Any inter-agency partnership should include some degree of specialist industry knowledge.
10.32 Second, particular care should be taken in the choice of regulator/s where workers or industry/occupation members may be vulnerable to exploitative business practices, or distrustful of government agencies due to a history of negative experiences with authority, particularly law enforcement agencies. In the sex work industry, Vixen Collective stated that Victoria Police’s role as the primary enforcement agency is a barrier to the reporting of organised crime infiltration, due to ongoing mistrust of police among sex workers, and fear of regulatory action for engaging in unlicensed sex work or prosecution for street-based sex work (which remains criminalised in Victoria). The Australian Security Industry Association Limited (ASIAL) reported that some private security providers are reluctant to engage with Victoria Police for fear of exposing themselves to scrutiny, and instead channel information about suspicious operators through the industry association (that is, ASIAL).
10.33 The choice of regulator/s should also guard against the risk of corruption of decision makers.
10.34 Liberty Victoria cautioned that:
the current engagement of Victoria Police in the firearms and security sphere has come about in part through historical evolution but Liberty considers it desirable to provide a buffer from the further expansion of police power into regulation of other areas traditionally regarded as areas of vice and corruption.
The 1979 Beach Inquiry in Victoria, the Fitzgerald Inquiry in Queensland and evidence produced by more recent interstate and federal crime commissions give rise to the legitimate concern that there are significant risks attached to investing too much power and control in the hands of policing agencies and too little oversight in the hands of independent industry specific regulators or independent anti-corruption agencies.
10.35 Liberty Victoria further warned that ‘[t]he risk of bribery and corruption may be greater where the monitoring, compliance, licensing and regulatory agency also has power to investigate and prosecute alleged breaches’.
10.36 Corruption risks may be present in both law enforcement and non-law enforcement agencies. The Independent Broad-based Anti-corruption Commission (IBAC) has found that regulatory bodies may be at risk of corruption—or ‘cultivation’—by organised crime groups where they have access to law enforcement information and make decisions about licensing and other regulatory matters. The construction, planning, development, sex work, gaming and liquor industries may be at particular risk in this respect.
10.37 Further, a risk of corruption may arise where a government agency has a proven history of corruption in relation to a particular industry. In the Queensland sex work industry, the police have a ‘quarantined’ role in the regulation of the industry, with limits placed on the power of police to enter brothels (this follows the findings of the Fitzgerald Inquiry, which found links between sex work, organised crime and police corruption in Queensland).
10.38 Accordingly, both law enforcement and non-law enforcement agencies may be exposed to the risk of corruption in implementing a regulatory response to organised crime infiltration. IBAC’s September 2015 report—Organised Crime Group Cultivation of Public Sector Employees—explains the potential targets of organised crime groups in government agencies, cultivation/corruption strategies, and prevention and detection measures that an agency may put in place.
10.39 A regulator should seek information from a broad range of sources, including third parties (that is, parties other than government agencies). Regulators and other government agencies are increasingly harnessing the insights acquired by third parties in the course of routine activities. The conscription of third parties in an information-gathering role may help to relieve resourcing pressures on regulatory agencies and provide a greater breadth and depth of knowledge about infiltration.
10.40 Before proceeding with any initiative to gather information from a particular source, it is important for a regulator to consider whether it is sufficiently resourced (in terms of both funding and analytical capabilities) to interrogate the information it receives, and harness its value in tailoring investigative and enforcement action.
10.41 Government agencies in general have been criticised for insufficiently analysing their own data holdings. The National Commission of Audit, conducted by the Federal Government in 2013, stated that there is: a focus on collecting data for filing rather than for use; a lack of data-sharing both among government agencies and outside government (on an anonymised basis for the purpose of policy development); and a lack of data analysis skills within government agencies.
10.42 In this respect, Victoria Police noted that while the Project Stop initiative and the legislated precursor control regimes produce a significant amount of valuable information for both industry and law enforcement agencies, they also add to the workload of Victoria Police.
10.43 It is equally important that regulators explain to their information sources—particularly occupation and industry members, customers, and employees—how the information is used by the agency. In the Commission’s consultations, some industry representatives stated that there can be a lack of investigative and enforcement action following the provision of industry information, or communication about how the information is being used. Communication will therefore be required, at least in general terms, about how regulators identify issues of systemic concern and prioritise regulatory action in response to the provision of information. In appropriate industries, regulators may also need to engage in reciprocal information sharing with the private sector in order to incentivise the flow of information. For example, AUSTRAC shares information with the private sector about money laundering risks so that businesses can make more informed decisions about these risks. Failing such initiatives, information sources may be unwilling to engage with regulators.
10.44 A range of parties have the potential to be fruitful sources of information, beginning with government agencies and occupation/industry members. While these sources may be adequately utilised in other policy areas, it appears from the Commission’s consultations that their full potential in relation to organised crime infiltration is yet to be realised.
10.45 As discussed throughout the report, a regulator will often need to liaise with numerous regulatory and law enforcement agencies in order to address organised crime infiltration, whether at the point of entry into an occupation or industry, or once an entity is established in an occupation or industry. The Commission’s consultations indicate that organised crime infiltration of an occupation or industry may result in multiple forms of unlawful behaviour or adverse administrative decisions (such as licence refusal or cancellation), such that liaison with the following agencies should be considered, as relevant:
• law enforcement agencies—Victoria Police, other state and territory police forces, the Australian Federal Police (AFP), and the Australian Crime Commission
• occupation/industry-specific regulators, such as the Business Licensing Authority/Consumer Affairs Victoria, Fisheries Victoria and the Victorian Commission for Gambling and Liquor Regulation
• AUSTRAC (money laundering)
• the Australian Taxation Office (taxation fraud, phoenix activity)
• the Australian Securities and Investments Commission (phoenix activity, insolvent trading, investment fraud)
• WorkSafe Victoria (occupational health and safety offences)
• the Fair Work Ombudsman (employment law contraventions)
• the EPA (environmental offences on commercial premises)
• local councils (breaches of local government laws, including planning and permit restrictions over commercial premises).
Occupation and industry members
10.46 As actors who will likely engage (at some point) with organised crime-linked competitors, suppliers or customers, occupation and industry members will be key sources of information. Information may be acquired through procedures such as customer due diligence, supplier due diligence, record keeping in relation to the provision of goods and services, and other routine commercial interactions.
10.47 This information may be particularly important in illuminating the supply chain in an occupation or industry. The EPA suggested that acquiring information about the various intermediaries in complex supply chains would significantly assist with regulation, and may be more important than granting additional investigative powers to regulators.
10.48 The Commission heard that industry-led communication can be fostered through the use of reciprocal information-sharing arrangements between government agencies and industry, or other measures that help to create a relationship of trust and cooperation. These measures could include skills exchange and staff secondments between government agencies and industry.
10.49 Further, a regulator may foster industry-led communication by enforcing high standards of conduct and promoting professionalisation within an occupation or industry. In these circumstances, occupation and industry members may be particularly motivated to defend the industry from infiltration and protect the investment they have made in professional standards and regulatory compliance. In this respect, Victoria Police remarked on the commercial motivations of legitimate private security providers and commercial fishing operators to keep their industry clean and report suspicious operators.
10.50 Industry associations are likely to be a key channel in the provision of information to government agencies. Among the regulators who attended the Commission’s roundtable of regulatory agencies, there were mixed views about the value of industry associations as a communication channel. Some regulators spoke highly of the benefits of reciprocal information exchange with industry associations; other regulators were sceptical, noting that, in their experience, industry associations were reluctant to report to regulators due to a fear of licence restrictions or additional regulation being imposed. While the value of industry associations will vary by occupation or industry, the Commission considers that regulators may need to reconsider any previous opposition to engagement with industry associations, given that occupation and industry members are uniquely placed—through frequent, routine commercial interactions—to acquire information about organised crime infiltration.
10.51 Similar to occupation and industry members, customers are frontline actors who have the potential to engage directly with a business owned or operated by organised crime, and therefore have a capacity to detect and report suspicious activity. These customers may be substantial government or private sector entities, or individual consumers.
10.52 Government agencies and the private sector may perform an information-gathering and reporting role by conducting due diligence on service providers in the course of procurement and reporting suspicions to regulators.
10.53 Individuals also play an important role, whether on an ad hoc basis or through consumer awareness campaigns that educate consumers about illegitimate operators. Scarlet Alliance and the AFP observed that clients of sex workers have previously been an important source of information about human trafficking.
10.54 Customers may be a particularly important conduit between workers and government agencies where the industry contains a significant proportion of vulnerable workers who may be fearful of reporting organised crime infiltration.
Employees and other workers
10.55 Employees and other workers (such as independent contractors) potentially have the most direct relationship with organised crime groups that own or operate a business. Unions and employee associations may act as important conduits for the supply of information to government agencies, particularly in an anonymised form that identifies systemic problems within an occupation or industry in relation to organised crime infiltration.
10.56 In some industries it may be difficult to acquire information from workers. An organised crime group may have entered an occupation or industry in order to exploit workers or engage in labour trafficking, whether this is through the private security industry, the labour hire industry, the lawful sex work industry, or another occupation or industry.
10.57 The particular circumstances of some workers are likely to hinder engagement with government agencies. For example, some sex workers may operate outside the relevant regulatory framework in order to avoid prohibitive regulatory fees or aspects of the regulation they find intrusive, and because of concerns around the disclosure of sex worker status to government agencies. Vixen Collective submitted that ‘[s]ex workers working in the non compliant sector of the sex industry are less likely/able to report any instances of infiltration to authorities’. Vulnerable migrant workers (regardless of industry) may fear job loss, deportation or other legal action if they report their concerns about infiltration.
10.58 JobWatch observed that these vulnerabilities may discourage the reporting of organised crime infiltration, and recommended that Victorian whistleblower laws need to be amended to provide for protected disclosures by labour hire workers and sex workers about private sector employers and entities. At present, the Protected Disclosure Act 2012 (Vic) only protects disclosures about the improper conduct of public bodies and public officers. While this proposed reform is beyond the scope of the report, the Commission notes that a lack of whistleblower protections may help to insulate organised crime groups from scrutiny in industries with vulnerable workers.
10.59 Regulators that oversee industries with vulnerable workers may need to consider other means of obtaining information held by workers, including liaising with community legal centres and other community-based or peer support services in order to receive general, possibly anonymised information about organised crime infiltration.
Property owners and landlords
10.60 Both commercial and residential landlords have recently begun to be used as a source of information about organised crime activity, including organised crime infiltration of legitimate businesses. Police Scotland is educating residential landlords about the indicators of human trafficking activity and cannabis cultivation. International law enforcement agencies are engaging with commercial landlords in order to prevent the use of legitimate commercial premises for organised trade in counterfeit goods.
10.61 The provision of information by landlords may be facilitated by:
• educating landlords about the risk of leasing property to organised crime groups, such as potential liability to prosecution, the loss of property value if premises are damaged, loss of rental income due to law enforcement disruption, and expenses arising from dealing with unreliable/unscrupulous tenants
• encouraging landlords to conduct due diligence on potential tenants, including requiring adequate forms of identification, verifying these identities, and checking for potential indicators of criminal intent such as a willingness to pay rent months in advance (particularly in cash)
• educating landlords about the indicators of relevant organised crime activity and encouraging regular inspections of tenanted premises in order to check for these indicators.
10.62 Some regulators particularly encouraged the use of hotlines that can be used with relative ease and capture all potential sources of information.
10.63 Fisheries Victoria commented that its public hotline is a vital source of high-quality information, providing 25 per cent of total intelligence. The Racing Integrity Commissioner was similarly enthusiastic about the value of hotlines in the racing industry.
10.64 Any regulatory regime will include a suite of investigative powers. When considering the investigative powers that will be required in order to address organised crime infiltration, regulators should have regard to the following factors.
Risk of infiltration and degree of harm
10.65 Investigative powers should be proportionate to the risk of infiltration, and the degree of harm likely to result from infiltration.
10.66 Extensive investigative powers may be justified where there is a substantial history and ongoing risk of infiltration (such as in the racing industry) and/or significant harm results from infiltration (such as the unlawful depletion of scarce fish stocks in the commercial fishing industry). The regulatory regimes for the racing industry and the commercial fishing industry are distinguished by the availability of police-like powers that may or may not be warranted in other occupations and industries.
10.67 In addition, investigative powers should be responsive to the particular opportunities exploited by organised crime in an occupation or industry. For example, where organised crime groups rarely infiltrate an industry through ownership or operation of a business, there is likely to be little need for powers that are directed to the investigation of ownership, management and effective control.
Scope and utility of existing powers
10.68 In the case of existing regulatory regimes, the scope and utility of existing powers should be audited before any new powers are considered. The EPA emphasised that a key challenge for regulators lies in better using existing powers. A regulator should consider the extent to which existing powers have been used and tested, and address any barriers to better use, including:
• inadequate training of staff in the use of existing powers or inadequate employment of staff with relevant skills
• the existence of a regulatory culture that discourages the use of certain investigative powers or enforcement actions
• confusion among government agencies as to their respective investigative and enforcement responsibilities within a particular occupation or industry
• ambiguity as to the lawful use of existing powers, which may need to be resolved through legal advice, determination by the courts or legislative amendment.
10.69 For the purpose of any audit, the Commission’s consultations suggested that certain investigative powers may be necessary in order to respond to organised crime infiltration, being powers to:
• conduct on-site inspections without unduly disrupting a business or further marginalising vulnerable workers
• investigate unlicensed businesses, given the potential for significant unlicensed sectors to attract organised crime groups to otherwise lawful occupations and industries
• compel the production of information and documents by business owners/operators.
Skills and capabilities of the regulator
10.70 It is counterproductive to grant investigative powers to a regulatory agency that is not sufficiently skilled, or willing, to exercise those powers. This may lead to a regulatory ‘grey zone’, whereby the powers remain unused but an investigatory role is not assumed by other agencies.
10.71 The investigation of organised crime infiltration will require training and skills in:
• the forensic analysis of business records and corporate structures
• detecting the indicators of organised crime activity, as relevant to the occupation or industry (such as labour trafficking, illicit drug trafficking, stolen goods distribution, fraud and so on)
• the proper conduct of investigations, particularly evidence gathering and the preparation of evidence for civil or criminal proceedings
• police-like personal protection measures, where a regulatory officer is required to attend on-site inspections, investigate unlicensed businesses, or otherwise make direct contact with occupation or industry members in potentially dangerous scenarios.
10.72 A regulator may determine that these investigative functions are best performed by other agencies and seek to partner with these agencies, as discussed below. Alternatively, a regulator may consider that it is well placed to perform these functions (or at least some of these functions) due to its detailed knowledge of an occupation or industry, well-established relationships with information sources, and other factors. In such circumstances, the ACC suggested that an agency ‘start small’ and slowly build a capacity to perform intelligence gathering roles; a response to organised crime infiltration does not necessarily require the resourcing of a large team and the acquisition of a broad range of new powers from the outset. As an example of this approach, the ACC pointed to the establishment of integrity units within sports governing bodies, which have gradually and successfully built a response to organised crime infiltration of professional sport.
Powers of other agencies
10.73 Under a model of collaborative regulation, it may be most appropriate to harness the investigative powers of other agencies in an inter-agency partnership.
10.74 First, the risk of infiltration, and the degree of harm likely to result from infiltration, may not warrant an occupation or industry regulator being vested with a suite of police-like investigative powers. While an occupation or industry regulator may play a key role in detecting organised crime infiltration, the further investigation of the matter may be more suited to law enforcement agencies, as some regulators suggested to the Commission. Liberty Victoria noted that Victoria Police are already invested with significant coercive powers to investigate organised crime under the Major Crime (Investigative Powers) Act 2004 (Vic), including the investigation of links between organised crime activity and lawful occupations and industries.
10.75 Second, there are likely to be instances where the most beneficial avenues for disrupting organised crime infiltration lie outside the regulatory regime of an occupation or industry, in which case the investigative powers of another government agency (such as the Australian Taxation Office or the Fair Work Ombudsman) will be used. For example, the Task Force Discover investigation used the powers of Victoria Police, the EPA, and the Victorian WorkCover Authority to conduct a thorough audit of the auto-wrecking/recycling and scrap metal industry. This audit produced a rich picture of the vulnerabilities exploited by organised crime in that industry and the various forms of unlawful behaviour in which they are allegedly engaged.
Potential for business disruption
10.76 Any regulatory regime should guard against undue disruption to business in the course of investigations.
10.77 Members of the tattoo industry were critical of the regulatory regimes in Queensland and New South Wales that permit police to enter licensed tattoo studios with sniffer dogs without notification to licensees. This reportedly results in the disruption of existing business, contamination of studios and subsequent closure for decontamination over several days, and the potential loss of clients due to reputational damage.
10.78 Any costs associated with business disruption are unlikely to be able to be recovered and may expose a business to higher insurance premiums or difficulties in obtaining insurance.
10.79 Undue disruption to business may also cause occupation or industry members to become distrustful of regulators and law enforcement agencies and disengage from regulation. Vixen Collective stated that investigative powers over and above police powers (such as powers of business entry without warrant) exacerbate barriers between sex workers and government agencies. Legitimate members of the tattoo industry in Queensland and New South Wales have reportedly been intimidated by police powers of entry into studios; this, and other aspects of the regulatory regime in those states, have caused industry members to feel victimised and unduly scrutinised. The alienation of legitimate industry members will compromise the ability of regulators to enlist and engage industry members as key information sources about organised crime infiltration.
10.80 The potential for business disruption may be limited by appropriate training and the exercise of discretion in the use of intrusive investigative powers. The Victorian Independent Pawnbrokers Association observed that police have the power to enter and search second-hand goods businesses without warrant but do not take unreasonable advantage of this power.
10.81 Any occupation or industry regulatory regime will include enforcement measures for non-compliant conduct. A wide range of potential enforcement measures also exist outside these regulatory regimes. A clear lesson from the Commission’s consultations is that the full suite of enforcement measures—both outside and within occupation/industry regulatory regimes—should be considered in the implementation of a regulatory response to organised crime infiltration.
Enforcement measures outside the regulatory regime
10.82 Victoria Police, the ACC, the AFP, AUSTRAC, and the Commonwealth Attorney-General’s Department each referred to the value of a multi-disciplinary enforcement approach that considers the use of enforcement measures from a range of legal and policy areas.
10.83 At the federal level, this approach is reflected in the Commonwealth Organised Crime Compendium, which guides government agencies on the enforcement options available across a number of areas of the law in order to address organised crime. A similar compendium was developed by the former Serious Organised Crime Agency (SOCA) in the United Kingdom, which sets out a range of enforcement options from criminal justice and non-criminal justice contexts that may be used to disrupt organised crime, including the enforcement measures available to taxation, customs, and immigration agencies. Victorian regulators and law enforcement agencies should give consideration to the establishment of a similar compendium at the state level.
10.84 In responding to a particular regulatory problem, there are a number of benefits to considering a broad suite of enforcement options under state and federal laws.
10.85 An enforcement measure outside the regulatory regime may be the most effective way of addressing organised crime infiltration, due to the available evidence (for example, there may be evidence to warrant taxation-related action but insufficient evidence to cancel a licence), the speed with which the measure can be imposed, and the cost effectiveness of the measure relative to its disruptive effect (for example, a relatively low-cost action by local government in response to planning or permit violations may have a more disruptive effect on a business than a relatively high-cost civil penalty or criminal proceeding).
10.86 By taking enforcement action outside their regulatory regimes, agencies may be able to better address the systematic infiltration of several industries by a single organised crime group, and the particular purpose of that infiltration. Where, for example, an organised crime group has infiltrated several industries for the purpose of concealing or laundering the proceeds of crime, the most appropriate enforcement option may involve the prosecution of money laundering offences under state or federal law, and/or the recovery of criminal assets under forfeiture and confiscation laws (including unexplained wealth laws). To take another example, where an organised crime group has infiltrated several industries for the purpose of labour exploitation or trafficking, it may be most effective to enforce occupational health and safety, employment and/or anti-trafficking laws in relation to conduct across these industries, rather than seeking to deal with the problems in each industry separately.
10.87 The Commission’s consultations indicated that organised crime infiltration may require enforcement action in response to non-compliance with:
• ‘traditional’ criminal laws (that is, criminal laws relating to offences such as illicit drug trafficking, firearm trafficking and crimes against the person, separately to any criminal offences under an occupation or industry regulatory regime)
• anti-money laundering laws
• criminal asset forfeiture/confiscation laws
• taxation laws (for example, in relation to taxation fraud and undeclared business income)
• employment and occupational health and safety laws (for example, in the sex work, labour hire, and auto-wrecking/recycling and scrap metal dealing industries)
• corporations laws (for example, in relation to phoenix activity and investment fraud)
• customs and quarantine laws (for example, in infiltrating industries such as private security and trucking and heavy haulage in order to import illicit goods)
• migration laws (for example, in the labour hire industry)
• environmental protection laws (for example, in the auto-wrecking/recycling and scrap metal industry, the waste management industry, and the commercial fishing industry)
• local government and planning and permit laws.
10.88 Several recent operations have used a multi-disciplinary enforcement approach. ‘Project Tricord’ involved the investigation of a high-threat organised crime syndicate for involvement in illegal labour hire activity and other unlawful conduct. This resulted in the seizure of property and the charging of syndicate members with money laundering offences and offences under the Migration Act 1958 (Cth). As part of another operation (‘Operation Morpheus’), businesses and individuals with links to outlaw motorcycle gangs are being investigated for non-compliance with taxation laws. Operation Morpheus is a collaboration between the ACC, the Australian Taxation Office, state and federal police, and other agencies.
Enforcement measures inside the regulatory regime
10.89 Alongside a multi-disciplinary enforcement approach, a regulator will have regard to enforcement measures within an occupation/industry regulatory regime. In addressing organised crime infiltration, particular consideration should be given to:
• the value of a responsive regulation approach
• enforcement measures that neutralise commercial benefits obtained through infiltration
• enforcement measures that disrupt infiltrated businesses.
A responsive regulation approach
10.90 Consultation participants remarked on the utility of a ‘responsive regulation’ approach to enforcement, which begins with a consideration of low-end enforcement measures and escalates to more severe measures in response to ongoing non-compliance or unlawful activities. The concept of responsive regulation was developed by Ayres and Braithwaite in the early 1990s, and is now widely adopted by regulators in Australia and the United Kingdom.
10.91 In approximate order of the least to the most severe enforcement measures, a responsive regulation model may involve some or all of the following types of measures:
• warnings, cautions and show cause notices
• enforceable undertakings
• infringement notices and financial penalties imposed by government agencies (otherwise known as administrative penalties)
• court-imposed fines
• licence suspension and cancellation
• banning and prohibition orders
10.92 A responsive regulation approach is available under the Private Security Act 2004 (Vic). Where a licence holder has engaged in unfair, dishonest or discreditable conduct, a range of low- to high-end measures may be used by Victoria Police, including taking no further action, reprimanding the licence holder, imposing or varying a licence condition, or suspending or cancelling the licence.
10.93 In the context of organised crime infiltration, a responsive regulation model may have particular utility.
10.94 First, this approach may improve the effectiveness of the regulatory regime by allowing a regulator to tailor the enforcement response to the purpose of a particular regulatory obligation. For example, where an obligation is designed to assist the regulator in detecting infiltration (such as record-keeping and due diligence obligations), the most appropriate response in some cases may be to assist the industry member in that very process by using persuasive or educative strategies. A misdirected or disproportionate response risks alienating legitimate industry members and closing off an important source of information. Where necessary, the enforcement response can be escalated if non-compliance continues.
10.95 Second, a responsive regulation model allows a regulator to respond relatively quickly and regularly to non-compliance through the use of less costly and more immediate enforcement measures such as infringement notices, administrative penalties and enforceable undertakings. Timely and regular enforcement responses may help to build a narrative about the capacity of the regulator to detect non-compliance and take enforcement action. This is important from a deterrence perspective; empirical studies have consistently shown that the certainty of apprehension and punishment has a more significant deterrent effect than the severity of the punishment.
10.96 Third, a responsive regulation model permits the use of high-end measures in the first instance, but encourages regulators to first consider less severe responses and properly justify immediate escalation. Immediate escalation may be justified by the degree of risk or harm associated with the particular act of non-compliance, a lack of time, resources or opportunities for a step-by-step escalation of the enforcement response, or a lack of industry support for a less severe enforcement response (among industry members, disillusionment with the enforcement response may encourage non-compliance or disengagement from regulators).
10.97 The proportionate and otherwise appropriate use of high-end measures is likely to strengthen the credibility of the regulatory regime in the view of occupation and industry members, and therefore encourage engagement with the regime through processes such as disclosure and reporting, customer and supplier due diligence, record keeping and information sharing.
10.98 The Commission’s consultations revealed that two particular types of enforcement measures require consideration in developing a regulatory regime that aims to prevent organised crime infiltration: measures that neutralise the commercial benefits of infiltration, and measures that disrupt infiltrated businesses.
Measures that neutralise commercial benefits
10.99 A regulator should consider the use of measures that neutralise the commercial benefits obtained through infiltration of an occupation or industry.
10.100 Financial penalties are one measure that may be used for this purpose, whether these penalties are in the form of administrative penalties (that is, penalties imposed by government agencies), or court-imposed penalties for civil contraventions or criminal offences.
10.101 Some consultation participants said that maximum financial penalties in their respective industries are not commensurate with the commercial benefits of infiltration and therefore have a limited deterrent effect. Philip Morris Limited contended that the penalties for illicit tobacco trading should reflect the value of the products traded and that the current maximum penalties are insufficient in this regard. Philip Morris Limited stated that insufficient penalties encourage organised crime groups to shift from the trafficking of other illicit goods to the trading of illicit tobacco and the infiltration of the legitimate tobacco industry for that purpose.
10.102 In other areas of the law, it is increasingly typical for financial penalty provisions to allow for the quantum of the penalty to be calculated by reference to the value of the contravening or offending conduct. This may neutralise—or at least diminish—the commercial benefits arising from that conduct.
10.103 Under federal competition law, where a corporation has breached a restrictive trade practices provision (such as a cartel conduct provision), the court may impose a maximum penalty that is the greatest of: $10 million; or three times the value of the benefits obtained from the conduct; or, if the court cannot determine the value of the benefits, 10 per cent of annual corporate turnover during the 12 months ending at the end of the month in which the relevant conduct occurred.
10.104 The National Motor Vehicle Theft Reduction Council drew attention to the use of commercial benefits penalty orders under the Transport (Compliance and Miscellaneous) Act 1983 (Vic), which, among other things, regulates the taxi industry. A commercial benefits penalty order requires a person to pay a fine not exceeding three times the amount of gross commercial benefit obtained, or obtainable, from the commission of the offence.
10.105 Penalty provisions of this nature appear to be less common among the regulatory regimes of occupations and industries that may be vulnerable to organised crime infiltration. The adoption of such provisions should be considered in order to allow the imposition of proportionate penalties that reflect the commercial benefits obtained from non-compliant conduct and thereby reduce the rewards of infiltration. A less proportionate penalty may be easily absorbed as a ‘cost of doing business’ and incentivise non-compliance.
Preventing the recovery or retention of commercial rewards
10.106 Consideration should also be given to enforcement measures that prevent a person from recovering or retaining rewards that have been obtained through non-compliant conduct, including unlicensed activity. For example, the Private Security Act prevents a person from suing for, recovering or retaining any commission, fee, gain or reward for carrying on unlicensed security services.
10.107 Such measures provide a further means of neutralising the commercial benefits obtained through infiltration of a legitimate business.
Measures that disrupt business
10.108 In occupations and industries where entry is restricted, a regulatory regime will commonly include a power to remove an occupation or industry participant by suspending or cancelling a licence or other form of authorisation. Several consultation participants considered that powers of licence suspension and cancellation were one of the most beneficial measures for dealing with organised crime infiltration; industry representatives remarked that the prospect of the loss of livelihood, and the loss of significant business investments, has a strong deterrent effect.
10.109 Powers of removal may be particularly necessary in occupations and industries where entry is unrestricted. In these circumstances, a regulatory regime may need to permit the making of banning or disqualification orders that prevent a person from participating in the occupation or industry either on a permanent basis or for a specified period.
10.110 Despite the value of powers of removal, the Commission was told that there are barriers to the use of such powers.
10.111 One barrier is a lack of information sharing between government agencies, which prevents relevant criminal intelligence and other information from coming to the attention of regulators. Where information sharing is inadequate, there may be insufficient information on which to base administrative decisions to suspend or cancel licences or bring legal proceedings for similar relief. In Chapter 2, the Commission suggested ways in which information sharing may be improved.
10.112 Another barrier is a reluctance by regulatory and law enforcement agencies to risk the disclosure of criminal intelligence or other sensitive information to third parties in the course of administrative decision making or legal proceedings. As discussed in Chapter 2, policy makers should consider how sensitive information can best be protected under a regulatory regime in order to facilitate enforcement action such as licence suspension/cancellation, while balancing the need for oversight of such decision making.
10.113 Even where criminal intelligence is available to regulators and appropriately protected, there will be limits on the extent to which criminal intelligence can be used as a basis for licence suspension/cancellation or other form of removal. In some cases, this information will not provide an adequate basis for enforcement action. A regulator will therefore need to consider the full suite of enforcement measures available, both inside and outside the regulatory regime that applies to a particular occupation or industry. This should include a consideration of measures that enable greater reliance to be placed on documentary evidence rather than criminal intelligence, such as proceedings for non-compliance with record-keeping obligations.
10.114 Another potential barrier to the use of powers of removal is a reluctance, or a perceived inability, on the part of a regulator to devote resources to legal proceedings, including any appeal proceedings or reviews of administrative decisions; in particular, a regulatory or law enforcement agency may lack confidence that licence cancellation, or another substantial penalty, will be imposed by a court or tribunal for non-compliant conduct.
10.115 It is a strategic matter for regulators to assess whether the non-compliant conduct justifies enforcement action and the expenditure of resources on legal proceedings. In making this assessment, regulators should consider:
• The nature of the non-compliant conduct—egregious conduct may compel enforcement action in order to deter similar behaviour by other occupation/industry members
• The systemic effect of the non-compliant conduct on the occupation or industry—the conduct of an organised crime group may encourage wider non-compliance among occupation/industry members (such as where an organised crime group substantially undercuts market prices through non-compliance with regulatory obligations)
• Whether a lack of enforcement action will harm the integrity and standing of the occupation or industry, which may result in additional costs or burdens for legitimate members (such as insurance costs), the exit of legitimate members, and/or the creation of an environment that is more conducive to organised crime infiltration because fewer ‘guardians’ exist in the occupation or industry
• Whether contentious investigative powers or enforcement measures need to be tested in the courts, in order to better enable future enforcement action and minimise the costs of such action (where judicial clarification has been provided, appeals may be less likely on certain points).
10.116 Accordingly, the taking of enforcement action may produce a net benefit for regulators where such action has a deterrent effect, reduces future regulatory costs, and/or strengthens the integrity of an occupation or industry.
Department of Treasury and Finance, Victorian Guide to Regulation (December 2014) 33.
Consultations 4 (Roundtable 3), 7 (Australian Federal Police); Submissions 8 (Philip Morris Limited), 20 (Australian Collectors & Debt Buyers Association), 24 (Victorian Automobile Chamber of Commerce).
Those agencies are the Australian Crime Commission, the Australian Federal Police, the Australian Securities and Investments Commission, the Attorney-General’s Department, the Australian Transaction Reports and Analysis Centre, the Australian Government Solicitor, and the Commonwealth Director of Public Prosecutions.
Julie Ayling, ‘Harnessing Third Parties for Transnational Environmental Crime Prevention’ (2013) 2(2) Transnational Environmental Law 339, 344.
Consultation 9 (Victoria Police).
But see [10.21].
Consultation 4 (Roundtable 3).
Consultation 3 (Roundtable 2).
Consultation 2 (Roundtable 1); Submission 10 (Australian Tattooists Guild).
Submission 20 (Australian Collectors & Debt Buyers Association).
Consultations 6 (Australian Crime Commission), 7 (Australian Federal Police), 8 (Australian Transaction Reports and Analysis Centre and Commonwealth Attorney-General’s Department).
Consultations 2 (Roundtable 1), 3 (Roundtable 2); Submissions 10 (Australian Tattooists Guild), 11 (Australian Security Industry Association Limited).
Submission 19 (Vixen Collective). A similar point was made in Submission 12 (Scarlet Alliance, Australian Sex Workers Association). Vixen Collective also stated that because Victoria Police is the primary agency for the enforcement of the Sex Work Act 1994 (Vic), sex workers who work outside the licensing system or are otherwise non-compliant with the regulatory regime face difficulties in reporting crimes against sex workers, such as sexual offences.
Consultation 2 (Roundtable 1).
Submission 9 (Liberty Victoria).
Independent Broad-based Anti-corruption Commission, Organised Crime Group Cultivation of Public Sector Employees, Intelligence Report No 1 (2015) 1.
Submission 26 (Prostitution Licensing Authority (Queensland)); Prostitution Act 1999 (Qld) ss 59, 101. See also Crime and Misconduct Commission, Regulating Prostitution: An Evaluation of the Prostitution Act 1999 (Qld) (2004) ch 1.
Independent Broad-based Anti-corruption Commission, Organised Crime Group Cultivation of Public Sector Employees, Intelligence Report No 1 (2015).
Julie Ayling, ‘Harnessing Third Parties for Transnational Environmental Crime Prevention’ (2013) 2(2) Transnational Environmental Law 339; Adrian Cherney, Juani O’Reilly and Peter Grabosky, ‘Networks and Meta-regulation: Strategies Aimed at Governing Illicit Synthetic Drugs’ (2006) 16(4) Policing and Society 370.
Australian Government, Towards Responsible Government: The Report of the National Commission of Audit—Phase One (February 2014) 233–6.
Consultation 9 (Victoria Police).
Consultation 2 (Roundtable 1); Submissions 8 (Philip Morris Limited), 24 (Victorian Automobile Chamber of Commerce).
Consultation 8 (Australian Transaction Reports and Analysis Centre and Commonwealth Attorney-General’s Department).
Consultation 4 (Roundtable 3).
Submission 11 (Australian Security Industry Association Limited).
Consultation 9 (Victoria Police).
Consultation 4 (Roundtable 3).
Submission 11 (Australian Security Industry Association Limited).
Submission 12 (Scarlet Alliance, Australian Sex Workers Association); Consultation 7 (Australian Federal Police).
Australian Crime Commission, Organised Crime in Australia 2015 (2015) 77–8; Rochelle Ball, Laura Beacroft and Jade Lindley, ‘Australia’s Pacific Seasonal Worker Pilot Scheme: Managing Vulnerabilities to Exploitation’ Trends & Issues in Crime and Criminal Justice no. 432 (Australian Institute of Criminology, 2011) 6; Tim Prenzler and Rick Sarre, ‘Developing a Risk Profile and Model Regulatory System for the Security Industry’ (2008) 21(4) Security Journal 264.
Submission 19 (Vixen Collective).
Submission 6 (JobWatch Inc).
Submission 4 (Julie Ayling).
Police Scotland, Cannabis Cultivation: What Should I Know as a Landlord? <http://www.scotland.police.uk/keep-safe/home-and-personal-property/advice-for-landlords-and-tenant/>.
International Chamber of Commerce and Business Action to Stop Counterfeiting and Piracy, Roles and Responsibilities of Intermediaries: Fighting Counterfeiting and Piracy in the Supply Chain (March 2015) 45–6.
Ibid; Police Scotland, Cannabis Cultivation: What Should I Know as a Landlord? <http://www.scotland.police.uk/keep-safe/home-and-personal-property/advice-for-landlords-and-tenant/>.
Consultation 4 (Roundtable 3).
For example, under the Racing Victoria Rules of Racing, stewards have broad powers to inquire into officials and licensed persons and other people connected with racing, compel production and take possession of documents and property, and enter and search the premises of licensed persons (Rules of Racing of Racing Victoria, 1 December 2015, AR8, AR8B). Under the Fisheries Act 1995 (Vic), authorised officers have powers of arrest, powers to search people, powers to enter and inspect premises, and powers of seizure and forfeiture (Fisheries Act 1995 (Vic) ss 101B, 101G, 102, 105, 106).
Consultation 4 (Roundtable 3).
Consultations 3 (Roundtable 2), 4 (Roundtable 3); Submissions 8 (Philip Morris Limited), 11 (Australian Security Industry Association Limited), 24 (Victorian Automobile Chamber of Commerce).
Submissions 11 (Australian Security Industry Association Limited), 24 (Victorian Automobile Chamber of Commerce); Consultation 11 (Victorian Automobile Chamber of Commerce).
Consultation 6 (Australian Crime Commission).
Consultation 4 (Roundtable 3).
Submission 9 (Liberty Victoria).
Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014).
Tattoo Parlours Act 2012 (NSW) s 31; Police Powers and Responsibilities Act 2000 (Qld) pt 3.
Submission 10 (Australian Tattooists Guild); Consultation 5 (Professional Tattooing Association of Australia).
Submission 19 (Vixen Collective). See also Submission 12 (Scarlet Alliance, Australian Sex Workers Association).
Consultation 5 (Professional Tattooing Association of Australia).
Consultation 3 (Roundtable 2).
Consultations 6 (Australian Crime Commission), 7 (Australian Federal Police), 8 (Australian Transaction Reports and Analysis Centre and Commonwealth Attorney-General’s Department), 9 (Victoria Police).
The Organised Crime Compendium is not available to the public.
The United Kingdom Serious Organised Crime Agency has been replaced by the National Crime Agency.
Council of the European Union, Note from Eurojust to the Standing Committee on Operational Co-operation on Internal Security, ‘A Multidisciplinary Approach to Organised Crime: Administrative Measures, Judicial Follow-up, and the Role of Eurojust’, Outcome Report (14 June 2012) 6 <http://www.eurojust.europa.eu/Practitioners/operational/strategic-seminars-meetings/Pages/topical-events-reports.aspx>.
Submission 3 (National Motor Vehicle Theft Reduction Council).
Submissions 6 (JobWatch Inc), 12 (Scarlet Alliance, Australian Sex Workers Association); Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014) 3–5, 27–9, 35.
Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014) 3–5, 27–9, 35.
Australian Crime Commission, Annual Report 2013–14 (2014) 51.
Australian Federal Police, ‘Outlaw Motorcycle Gang Members Targeted to Pay their Fair Share of Tax’ (Media Release, 2 November 2015) <http://www.afp.gov.au/media-centre/news/afp/2015/november/media-release-outlaw-motorcycle-gang-members-targeted-to-pay-their-fair-share-of-tax>.
Consultations 8 (Australian Transaction Reports and Analysis Centre and Commonwealth Attorney-General’s Department), 3 (Roundtable 2), 4 (Roundtable 3).
See generally Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992); John Braithwaite, Regulatory Capitalism: How it Works, Ideas for Making it Work Better (Edward Elgar, 2008) 88–94; Robert Baldwin and Julia Black, ‘Really Responsive Regulation’ (2008) 71(1) Modern Law Review 59, 62, 65.
Private Security Act 2004 (Vic) s 56.
Robert Baldwin and Julia Black, ‘Really Responsive Regulation’ (2008) 71(1) Modern Law Review 59, 76.
Donald Ritchie, Does Imprisonment Deter? A Review of the Evidence (Sentencing Advisory Council, 2011).
John Braithwaite, Regulatory Capitalism: How it Works, Ideas for Making it Work Better (Edward Elgar, 2008) 90. The responsive regulation model appears sufficiently flexible to address the problems raised by Robert Baldwin and Julia Black, ‘Really Responsive Regulation’ (2008) 71(1) Modern Law Review 59, 62–4.
Submissions 3 (National Motor Vehicle Theft Reduction Council), 8 (Philip Morris Limited); Information provided to the Commission by the Environment Protection Authority Victoria (3 August 2015).
Submission 8 (Philip Morris Limited).
Competition and Consumer Act 2010 (Cth) s 76.
Transport (Compliance and Miscellaneous) Act 1983 (Vic) s 230B.
Private Security Act 2004 (Vic) s 127.
Submission 10 (Australian Tattooists Guild); Consultation 3 (Roundtable 2).
Equivalent orders exist in other areas of the law where certain professionals or occupation/industry participants are not subject to licensing or other authorisation regimes: see, eg, Corporations Act 2001 (Cth) s 206F (disqualification from managing a corporation).
Consultation 4 (Roundtable 3).
Consultations 4 (Roundtable 3), 9 (Victoria Police).
Consultations 4 (Roundtable 3), 9 (Victoria Police).