Regulatory Regimes and Organised Crime: Report (html)

6. Restricting entry into an occupation or industry

6.1 In order to help prevent organised crime infiltration of an occupation or industry, policy makers should consider the use of a formal regulatory tool to restrict entry. In this regard, the Commission considered the merits of three tools:

• registration schemes

• negative licensing schemes

• positive licensing schemes.

6.2 Of those three, the Commission considers that only positive licensing should be considered as a tool for the restriction of entry to prevent organised crime infiltration. Registration schemes and negative licensing schemes are unlikely to be adequate for this purpose.

6.3 A registration scheme would usually require an individual or corporation to list their name and other information in an official register if they wish to participate in a particular occupation or industry. The information contained in a register may be open to the public or restricted to certain people. In his submission, Darryl Annett asserted that:

Registration is merely a list. As a regulatory tool it is low cost and very light touch and as a mechanism to defend an occupation against infiltration it is ineffective.[1]

6.4 Under a negative licensing scheme, no licence is required to enter an occupation or industry but certain classes of people may be prohibited from operating in the occupation or industry. In the Victorian debt collection industry (which adopted a negative licensing scheme in 2011), a prohibited person must seek the permission of the regulator to gain entry into the industry.[2]

6.5 Negative licensing has some general merit, including that, as no licence is required, legitimate entrants are able to avoid the costs of licensing processes.[3] However, occupations/industries with negative licensing schemes may be highly susceptible to organised crime infiltration as the regulator has no opportunity to scrutinise would-be entrants prior to their entry into the occupation/industry.

6.6 In his submission, Darryl Annett argued that ‘[n]egative licensing relies for effectiveness upon an active monitoring (and compliance) program, or particular and significant market forces.’[4] Those market forces may be, for example, consumers who insist on dealing with legitimate operators, and who are capable of undertaking their own enquiries into the legitimacy of operators in the absence of a positive licensing scheme.

6.7 In the Commission’s view, a negative licensing scheme relies on thorough monitoring of the occupation/industry by the regulator, customers, and/or legitimate operators in order to ensure that prohibited people have not infiltrated the occupation or industry. Accordingly, a negative licensing scheme is not really a tool for restricting entry per se and should instead be regarded as part of a post-entry monitoring regime.

6.8 A number of consultation participants expressed support for the use of positive licensing schemes as a barrier to organised crime infiltration.[5]

Is a licensing scheme appropriate?

6.9 Set out below are the key issues that policy makers and regulators should consider when deciding whether a positive licensing scheme (referred to below as a ‘licensing scheme’) is appropriate for an occupation or industry at risk of infiltration, and in operating such a scheme for the purpose of preventing organised crime infiltration.

The form of infiltration

6.10 When deciding whether to introduce a licensing scheme, policy makers should consider the goals that would motivate an organised crime group to infiltrate the occupation or industry in question.

6.11 Those goals may make it likely that an organised crime group will seek to enter the occupation/industry, whether by owning or operating a business, or having its members obtain employment in a business. In those cases, a licensing scheme may be a useful measure to counter the risk of infiltration.

6.12 Where, however, the goals of organised crime may be achieved by operating through a particular occupation/industry, without actually entering into that occupation/industry (for example, by using a service provider or engaging a professional facilitator), a licensing scheme may be an ineffective barrier to infiltration.

Infiltration by owning/operating a business

6.13 If the risk of infiltration exists at the business owner/operator level, it may be that not all owners/operators need to be licensed or, if licensed, need to be subjected to the same degree of scrutiny. As recommended by the Victorian Guide to Regulation:

Given the limited resources of government and/or the potential costs of regulation, action should be proportionate and targeted on those risks or hazards that are significant and/or have significant consequences.[6]

6.14 When considering which types of owners/operators should be licensed, policy makers should again have regard to the purpose of infiltration. The Australian Collectors & Debt Buyers Association (ACDBA) and the Institute of Mercantile Agents (IMA) both suggested to the Commission that the regulatory regime that governs the debt collection industry should differentiate between debt collectors who have face-to-face contact with debtors and those who do not (namely, call centre-based operators). The ACDBA and IMA suggested that in the first case, a positive licensing regime with a rigorous fit and proper person test would be appropriate because of the greater inherent risk involved in face-to-face contact, whereas a registration and/or negative licensing regime would suffice in the second case.[7] .

6.15 However, care should be taken in differentiating licensing requirements among business owners/operators. In the private security industry, for example, gaps in licensing requirements are allegedly creating vulnerabilities to infiltration.[8]

6.16 Policy makers should ensure that it is clear which activities require a licence. A lack of clarity can lead to inadvertent non-compliance or be used as an excuse for deliberate non-compliance.[9]

6.17 The licensing of business owners/operators also needs to be supported by disincentives for organised crime groups to operate on an unlicensed basis.

Infiltration by gaining employment

6.18 Infiltration at the level of business ownership/operation may bring the most scrutiny to an organised crime group. The relevant legislation may impose disclosure and record-keeping obligations and give regulators and/or police officers the right to inspect business premises.[10] As an alternative, an organised crime group may seek to infiltrate an occupation or industry by having its members gain employment in a business, or by corrupting existing employees of a business. That may still enable the group to achieve its goals; for example, employees of a private security company working at a port may be able to assist in the importation of illicit drugs.

6.19 A licensing scheme may help prevent infiltration via employees, by requiring:

• employees—including managers—to be licensed[11]

• that a licence to operate a business not be issued unless the regulator is satisfied that the people the applicant is proposing to employ in the relevant business are fit and proper.[12]

6.20 Scrutinising employees may help prevent members of organised crime groups from infiltrating an occupation/industry. It may also restrict the employment of people who are more likely to be susceptible to corruption (a licensing process can be used to detect indicators of potential corruption, such as a history of dishonesty offences).

6.21 Restrictions on employees may have positive and negative outcomes for employers. Where employers would like their prospective employees to be vetted, regulators may be able to do that more thoroughly and more cost-effectively than employers. However, licensing requirements may limit the pool of employment candidates where prospective employees cannot afford to wait to start work while the licensing process is completed.[13] Overly restrictive employee licensing requirements may also limit the pool of otherwise suitable employment candidates, such as where the relevance of a person’s criminal history is not properly assessed and that person is unduly excluded from an occupation or industry.[14]

Infiltration via vulnerabilities in the supply chain

6.22 The supply chain comprises the steps taken to get a good or service from the supplier to the customer, such as production, distribution and retailing. For example, there are often numerous steps involved in the transportation of waste, with different intermediaries at each step, including consignors who organise the management of waste by a third party, and subcontractors who dispose of the waste. Intermediaries such as consignors also operate in the trucking and heavy haulage industry.[15]

6.23 Where licensing requirements are absent at some points in the supply chain, this may create a vulnerability that can be exploited by organised crime groups as either business owners/operators or employees of businesses. Policy makers should therefore consider the entire supply chain related to the occupation/industry in developing a licensing scheme. The complexity of the supply chain may mean that it is practically impossible to impose licensing requirements on all relevant occupation/industry members, in which case licensing may need to be imposed only at the most vulnerable points in the supply chain for organised crime infiltration. Alternatively, the regulator may need to shift its focus to the post-entry regulation of supply chain members (see Chapter 7).

Capacity and ability to conduct a rigorous examination of licence applicants

6.24 In seeking to prevent organised crime infiltration, the main benefit of a licensing scheme is that it allows the regulator to screen prospective occupation/industry members for any connections to organised crime.[16] Organised crime groups may try to hide those connections, including through the use of ‘cleanskins’ or complex business structures. Uncovering those connections may require considerable resources and the assistance of law enforcement agencies. Policy makers should therefore consider whether the regulator will have the capacity and ability to conduct rigorous examinations of licence applicants, and whether law enforcement agencies have the capacity to assist with these examinations.

6.25 A regulator may be able to target its efforts by only conducting rigorous examinations of applicants who, on an initial review, appear suspicious. For example, an applicant for a business operator’s licence with no previous experience in the relevant industry may be worthy of closer examination.[17] Regulators should work with law enforcement agencies and other government agencies to determine relevant ‘red flags’ for their occupations/industries.

6.26 It is unlikely that a licensing scheme will prevent all instances of infiltration by organised crime groups. However, by conducting a rigorous examination of licence applicants, a regulator may better deter infiltration by exposing organised crime groups to a greater risk of detection. Further, a licensing scheme may have a broader disruptive effect on organised crime by requiring time and resources to be spent on attempts to evade detection through the licensing process that would otherwise be expended on illicit activities.

Capacity and ability to monitor the occupation/industry

6.27 The use of a licensing scheme that involves a rigorous examination of applicants may reduce the need to monitor an occupation/industry, as it should be strengthened against the risk of infiltration.[18]

6.28 However, a licensing scheme does not obviate the need for ongoing monitoring of occupation/industry members. A regulator should therefore have the capacity and ability to conduct such monitoring (see [ ]–[ ]).

6.29 First, even the most rigorous of examinations may be unable to discover a ‘cleanskin’ applicant’s links to an organised crime group.

6.30 In addition, initially law-abiding licensed operators may become corrupted by organised crime groups. Professor Michael Levi told the Commission that one of the paradoxes of licensing and other authorisation regimes is that a licensed operator could be blackmailed (by being threatened with exposure of drug use or sex worker use, or compelled to provide services due to outstanding debts) and plausibly threatened with the loss of licence and livelihood. In other words, licensing and strict entry requirements may make a licensee more vulnerable to blackmail by giving her/him more to lose.[19] Further, a licensee may become susceptible to involvement with organised crime because of associations that develop after the licence is obtained or because the licensed business is in financial difficulty.[20]

Capacity and ability to prevent unlicensed activity

6.31 A key message from the Commission’s consultations was that any licensing scheme needs

to be supported by stringent controls on unlicensed businesses.[21] A regulator should therefore have the capacity and ability to monitor for unlicensed activity and take enforcement action against unlicensed operators. As the Victorian Guide to Regulation recommends, only regulation ‘that can be realistically enforced should be put in place’.[22]

6.32 If an organised crime group can achieve its goals by engaging in the regulated conduct without a licence, then it will have an incentive to do so and bypass the regulatory regime altogether. Indeed, a licensing regime that involves a rigorous examination of applicants

may motivate people to operate without a licence,[23] at least where there is a viable market for unlicensed operators.

6.33 The Commission received feedback from a number of industry representatives who are concerned about the number of unlicensed operators in their occupations/industries and

a perceived lack of enforcement action in response to this activity.[24]

6.34 A particular concern of legitimate operators is that unlicensed operators can operate below cost and thereby undercut legitimate operators.[25] Unlicensed activity may therefore be particularly attractive to organised crime groups.[26]

6.35 Faced with these pressures, legitimate operators may exit the occupation/industry[27] or may be tempted to reduce their compliance with the regulatory regime.[28]

Measures to detect unlicensed activity

6.36 Policy makers should consider whether the regulator and/or Victoria Police have sufficient powers to enable them to discover and prosecute unlicensed operators. Under existing regulatory regimes, there may be insufficient power to enter unlicensed premises without

a warrant, and it may be inordinately difficult to gather enough evidence to obtain a warrant and to prosecute unlicensed trading.[29]

6.37 Whichever agency is responsible for the investigation of unlicensed activity, it may benefit from working with industry and supporting industry members in the reporting of infiltration. The Commission was told that legitimate business operators often have valuable intelligence about unlicensed operators.[30]

6.38 Unlicensed activity may also be detected and disrupted through collaboration and information sharing with other government agencies. Individuals/entities engaged in unlicensed activity in one industry may be doing so in several industries,[31] and may be contravening multiple laws in the process. In the auto-wrecking/recycling and scrap metal industry, unlicensed participants are suspected of contravening environmental and occupational health and safety laws.[32]

6.39 A regulatory regime may further deter unlicensed activity by prohibiting consumers from patronising unlicensed businesses.[33]

Impact on legitimate applicants

6.40 It is in the regulator’s interests that members of the occupation/industry are supportive of the regulatory regime, as they are likely to be a key source of information about organised crime infiltration. Accordingly, policy makers should be mindful of minimising the negative impacts of licensing, and maximising the positive impacts of licensing, for legitimate operators.[34]

6.41 If all applicants are subjected to rigorous examination, this is likely to impose significant costs and delays on applicants. If regulators seek full recovery of administrative costs from occupation/industry members, then licence fees are likely to be considerable. This may be mitigated by tailoring fees according to the time and cost of investigating each applicant. This may also help prevent infiltration by favouring applicants whose affairs are transparent; for example, there would likely be an increased licence fee for applicants who use complex and opaque corporate/trust structures.

6.42 However, licence fees need to be carefully set in this respect. Very high licence fees may provide a perverse incentive to organised crime groups to enter the occupation/industry on an unlicensed basis and operate below cost (in turn, organised crime groups may offer a lower cost product/service to customers).[35]

6.43 A licensing scheme designed to prevent organised crime infiltration may provide benefits to legitimate operators by raising standards of integrity and professional conduct in the occupation/industry.

6.44 Further, if the licensing scheme is effective in reducing organised crime infiltration, legitimate operators may benefit from fairer business conditions, since organised crime groups may exercise a competitive advantage as business owners/operators by:

• operating at a loss when using a business to launder money from criminal activities

• using a business as a vehicle for criminal activity and thereby supplementing legitimate income with revenue from illicit activities

• avoiding the standard costs of business through non-compliance with the regulatory regime and other laws, such as taxation and employment laws

• using violence and intimidation to gain market share.

6.45 While a licensing scheme that focuses on preventing infiltration may bring the benefits described above, legitimate occupation/industry members may be more supportive of a licensing scheme that serves additional purposes, including ensuring that all licensees have the necessary skills to perform the work involved and maintain appropriate business standards.[36] Further, if a licensing scheme does not address these matters, consumers may mistakenly assume that a licensee has been approved in terms of competency, safety and other professional standards and so not conduct their own due diligence before engaging the licensee’s services.[37] Accordingly, it may be preferable for a licensing scheme to fulfil those expectations on the part of consumers.

6.46 Policy makers should consult with industry when considering criteria for obtaining a licence. This will help ensure that appropriate criteria are used and that industry is supportive of the licensing scheme.

Potential for anti-competitive effects

6.47 Licensing schemes have the potential to restrict or encourage competition.

6.48 On the one hand, a licensing scheme may have anti-competitive effects by creating a barrier to entry of an occupation or industry.[38] As stated in the Final Report of the Competition Policy Review:

Licensing that restricts who can provide services in the marketplace can prevent new and innovative businesses from entering the market. It can also limit the scope of existing businesses to evolve and innovate. As a result, service providers can become less responsive to consumer demand.[39]

6.49 Given this potential for anti-competitive effects, the Victorian Guide to Regulation states that:

Governments should only intervene in the market when it is considered to be absolutely necessary. Any regulatory proposal needs to be scrutinised carefully to assess whether it is having an adverse impact on the ability of firms or individuals to enter and participate in the market.[40]

6.50 Using a licensing scheme to prevent organised crime infiltration may pose a particular barrier to entry, because of the costs and delays caused by a rigorous examination of licence applicants. In addition, the criteria for entry under a licensing scheme may create a greater barrier to entry. In particular, if an overly broad approach is taken to the exclusion of applicants on the basis of criminal offending histories, the barrier to entry may be great.

6.51 On the other hand, a licensing scheme that is effective in preventing infiltration may improve the standing of an occupation or industry and protect legitimate business operators from being unfairly undercut by organised crime groups. This may encourage more legitimate entrants, thus improving competition.

Resourcing of good administrative decision making

6.52 As discussed in Chapter 2, regulatory regimes should be designed and implemented in a way that promotes good administrative decision making. This is particularly necessary where a licensing scheme is used. A regulator should be willing and able to sufficiently resource good administrative decision making.

6.53 Resources will be required to mitigate any risk of regulatory staff being corrupted, and to educate and support staff in any discretionary decision making when assessing the probity and suitability of licence applicants.

6.54 In addition to the cost of examining licence applicants, if a regulator refuses a licence application its decision may be reviewed. The cost of defending such reviews may be a significant imposition on a regulator’s resources.[41] If regulators are not adequately resourced to defend reviews of their decisions, they may be more reluctant to refuse licence applications in the first instance.

Risk of infiltration and the degree of harm

6.55 When deciding whether to use a licensing scheme to help prevent organised crime infiltration of an occupation/industry, policy makers should consider whether a net social and economic benefit will be created for Victoria; that is, whether the costs of imposing the scheme will be outweighed by the benefits gained by the reduced risk of infiltration (and other benefits that may accrue).[42]

6.56 It is clear from the above discussion that using a licensing scheme to help prevent infiltration may require significant regulatory resources, place a burden on law-abiding applicants and potentially have anti-competitive effects. Nonetheless, when policy makers estimate the likely risk of infiltration and the degree of harm that may be caused to the industry and to the community in general by infiltration, an effective licensing scheme may yield a net benefit.

6.57 Victoria has a stringent regime for the licensing of brothels, which requires the Business Licensing Authority to investigate whether a licence applicant has any associations with organised crime. This requires significant resources and is the main reason it reportedly takes approximately one year to obtain a brothel licence.[43] However, this timeframe is not necessarily indicative of the time it would take for licence applications to be assessed in other occupations or industries where a regulator is screening for potential organised crime involvement.

6.58 Such a rigorous licensing process can be undertaken in relation to brothels in Victoria because there is a relatively small regulated group and there is government support for the licensing process to take as long as necessary because of a concern that brothels will be used as fronts for criminal activities.[44]

Assessing probity and suitability

6.59 Where a licensing scheme is adopted to address organised crime infiltration, a key measure—and a key challenge—is the effective assessment of licence applicants’ probity and suitability. This presents regulators with an opportunity to scrutinise applicants for any links to organised crime (and, perhaps, for characteristics that may make them susceptible to an approach from an organised crime group once established in an occupation or industry).

6.60 To demonstrate probity and suitability, licensing schemes typically require applicants to satisfy a number of preconditions in order to be eligible for a licence. Those preconditions may comprise:

• objective preconditions—these are criteria which either must or must not be present in order for a licence to be granted (for example, a licensing scheme may provide that a licence is not to be granted to an applicant who has been convicted of certain offences), and/or

• subjective preconditions—these require the regulator to exercise a discretion about whether the licence should be granted or not, on the basis of certain criteria, including assessing whether the licence applicant is a fit and proper person.

6.61 An assessment of whether an applicant is fit and proper will enable the regulator to closely scrutinise the applicant including, where appropriate, considering relevant criminal intelligence.

6.62 Policy makers should consider whether certain objective preconditions will help prevent infiltration of a particular occupation/industry, and whether the regulator has sufficient resources to properly exercise its discretion, including in relation to an applicant’s fit and proper person status.

6.63 When seeking to prevent the entry of organised crime, regulators should consider the factors set out below in assessing the probity and suitability of licence applicants. This list of factors arises from the Commission’s consultations and research and is non-exhaustive. Inevitably, there will be occupation/industry-specific factors that are relevant to the probity and suitability of licence applicants in this context.

Proof of identity

6.64 Most licensing schemes require applicants to prove their identity. This is particularly relevant to preventing infiltration by members of organised crime groups, who may use a fraudulent identity to gain entry into an occupation or industry.

6.65 Proof of identity measures may include fingerprinting and verification of identity by a referee.[45]

6.66 The nature and rigour of the method of proof varies among existing regulatory regimes. Where there is a high risk of infiltration by organised crime groups, a more rigorous method of verifying an applicant’s identity may be justified; however, greater rigour may cause additional costs and delays for regulators and applicants.

6.67 Legitimate applicants may have a number of objections to proof of identity requirements which may undermine their support for a regulatory regime.

6.68 Legitimate applicants may consider that being required to provide finger/palm prints has no relevance to whether or not they are fit to hold a licence. This requirement may negatively affect the morale of legitimate applicants by making them feel as though they are being treated with undue suspicion. Legitimate applicants may also have concerns about whether the collection of finger/palm prints will be used for collateral purposes such as law enforcement investigations.[46]

6.69 Applicants may also be frustrated by delays when they attend to provide finger/palm prints. One industry association reported that when trying to provide prints in accordance with licensing regimes in other states, its members were unable to book a time at their local police station and often had to wait for several hours.[47]

6.70 Legitimate applicants and occupation/industry stakeholders may also perceive the requirement to be a waste of police resources.[48]

6.71 A regulatory regime may either prescribe the method by which an applicant’s identity is to be proved,[49] or the method may be within the regulator’s discretion.[50] Having a discretion will allow a regulator to determine how to best allocate its resources and avoid imposing an undue burden on legitimate applicants by, for example, only requiring people whose applications arouse suspicion of a connection to organised crime to provide finger and palm prints.

Corporate licence applicants

6.72 Companies are often permitted to apply for a licence to operate in an occupation or industry. Corporate applicants present a challenge for regulators, because an enquiry will need to be made into the natural persons that sit behind the company—the shareholders, the directors, and potentially other officers[51]—in order to determine whether the company itself should be granted a licence.[52]

6.73 While an organised crime group may seek to conceal its involvement in a company through the use of third-party shareholders such as relatives, European research indicates that members of organised crime groups are themselves often shareholders in companies that are used to infiltrate legitimate businesses. In one study, 55.5 per cent of 299 companies that had been infiltrated by an organised crime group had at least one group member among its shareholders (the greatest proportion (74 per cent) was found in the United Kingdom). According to the authors of the study, this suggested ‘a certain propensity of OCGs [organised crime groups] to maintain direct control over infiltrated companies’.[53]

6.74 It appears that complex corporate structures are increasingly used by organised crime groups to conceal beneficial ownership for the purpose of illicit financial transactions and the operation of ostensibly legitimate businesses.[54] The natural persons who ultimately own or control the company (the beneficial owners)[55] may do so directly through personal shareholdings in the company or indirectly through other persons (such as nominees),[56] intermediary companies or trusts. Sometimes there are several intermediate structures between the company and the beneficial owner.

6.75 Under the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (Cth), beneficial ownership is defined as:

• direct or indirect ownership of 25 per cent or more of the shares in a company, or

• control of a company by means including trusts, agreements, arrangements, understandings and practices, in particular where there is capacity to control the company’s financial and operating decisions.[57]

6.76 Smaller shareholdings may be deliberately used to conceal ownership, and may therefore require investigation.[58]

6.77 In their submission, Professor Louis de Koker and Kayne Harwood contended that ‘[t]he effectiveness of licensing and registration regimes depends on the ability of the regulator to identify the individuals who actually control or benefit from the entity, whether directly or indirectly’.[59] In the context of a licensing scheme, a regulator should at least seek to identify the natural persons who ultimately own the shares in a company, as well as the directors, officers and any other people who appear to have day-to-day control of the company, and assess their probity and suitability.

6.78 A regulator should require a corporate applicant to provide information about beneficial ownership, such as a certificate of incorporation and the most recent annual statement lodged with the Australian Securities and Investments Commission (ASIC), which will contain information about office holders, shareholders and any ultimate holding company (a holding company owns the shares of other companies in a corporate group).

6.79 In some cases, it will be straightforward to determine beneficial ownership; a company search may reveal that the corporate applicant has only a limited number of shareholders and does not involve the use of holding companies. In other cases, the determination of beneficial ownership will be more difficult, requiring a detailed investigation of a complex corporate structure that includes the use of multiple holding companies, nominees and/or trusts. The use of trusts presents particular difficulties, because the identity of the beneficial owners of a trust may be impossible to ascertain without the provision of information by the applicant, such as the trust deed. Similarly, the use of offshore entities in the corporate structure is also problematic because some jurisdictions do not require the disclosure of beneficial ownership and directorships, or make it difficult to obtain such information.[60]

6.80 Three strategies have the potential to address the concealment of beneficial ownership by organised crime groups for the purpose of obtaining a licence.

Refusal of a licence where beneficial ownership not established

6.81 First, consideration should be given to permitting the refusal of a licence where the regulator is not positively satisfied that beneficial ownership of a corporate applicant has been established, either on the information provided by the applicant or as a result of the regulator’s own enquiries.

6.82 The ability to refuse a licence in such circumstances was endorsed by Racing Victoria, which observed that it can be difficult to establish the beneficial ownership of companies that seek licences and other forms of authorisation under the Racing Victoria regulatory regime.[61]

6.83 The refusal of a licence due to uncertain beneficial ownership would be consistent with anti-money laundering initiatives, which recognise that a failure or an inability to ascertain beneficial ownership risks enabling illicit transactions.[62] While commercial institutions may decide to refrain from starting a relationship, or may terminate a relationship, where the beneficial ownership of a customer cannot be identified and verified, it seems rare for regulators to take a similar approach in determining the probity and suitability of corporate licence applicants. This would appear to be an unjustified anomaly given the potential for both money laundering and other unlawful conduct in the operation of a business.

Beneficial ownership register

6.84 The identification of beneficial ownership would be assisted by the development of a centralised beneficial ownership register, which contains ownership details in respect of both companies and trusts. Such a register would enable more efficient and less resource-intensive investigations of corporate licence applicants and may ultimately deter the abuse of corporate structures by organised crime groups by bringing greater transparency to the ultimate ownership of companies and trusts.

6.85 Although a beneficial ownership register is primarily intended to be of use to authorities and institutions that are engaged in anti-money laundering initiatives (including customer due diligence measures), such a register could equally be used by government agencies for the purpose of investigating corporate licence applicants. Professor Louis de Koker and Kayne Harwood argued that:

The ability of regulators to keep organised crime out of lawful occupations and industries would be much strengthened by requiring the public registration of trusts and the establishment of public registers of beneficial ownership interests in businesses and entities.[63]

6.86 The Financial Action Task Force (FATF),[64] an international, intergovernmental body that provides guidance about anti-money laundering policies, has recommended that government agencies ensure that there is accurate, adequate and timely information available on the beneficial ownership of companies and trusts. In the view of the FATF, there are insufficient mechanisms in Australia allowing access to beneficial ownership information, particularly in respect of trust entities.[65]

6.87 The FATF’s recommendation has been endorsed, in broad terms, by the G20 network of countries (including Australia).[66] The World Economic Forum has advocated a similar beneficial ownership register, noting that, along with the use of professional advisors, the concealment of beneficial ownership is one of the key enablers of money laundering and a priority issue for government agencies internationally in addressing organised crime.[67]

6.88 In some countries, beneficial ownership registries will soon be in operation. From 2016, a centralised open register of beneficial ownership (capturing ultimate owners and controllers) will be available in the United Kingdom.[68] Further, the European Union (EU) has passed a directive requiring EU member states to create centralised beneficial ownership registries, with companies and other legal entities incorporated in EU member states obliged to obtain and hold beneficial ownership information.[69]

Identification of changes to beneficial ownership

6.89 Once the beneficial owners of a corporate licence applicant have been established and their probity assessed, it may be necessary to tie the grant of any corporate licence to the current beneficial owners of the corporate entity and/or require that any changes to beneficial ownership during the period of a licence be reported to the regulator. This may make it more difficult for organised crime groups to become the beneficial owners of existing corporate licence holders. This would also allow a regulator to pursue a corporate licence holder for non-compliant conduct where changes to beneficial ownership have not been reported under the terms of the regulatory regime.

Corporate history and financial capacity

6.90 In addition to the identification of beneficial ownership, a regulator should enquire into the corporate history of a company or natural person where the applicant seeks a licence to operate a business.

6.91 Where the applicant is a company, the history of the company and its directors and owners should be searched through the ASIC register of companies. Where the applicant is a natural person, a search should be conducted to determine any current or former directorships or shareholdings.

6.92 These searches may help to reveal prior phoenix activity. Phoenix activity involves closing down a company to avoid creditors and then resuming substantially the same business through a different company. A company/director search may show that one or more companies of which the applicant was a director or owner were deregistered, and new companies registered within a short space of time. Phoenix entities may share directors, owners, registered or business addresses, and company or business names with the entities they replace. Liaison with other government agencies, particularly ASIC, the Australian Taxation Office (ATO) and the Fair Work Ombudsman, may establish that the applicant (or its directors or owners) have been suspected of engaging in phoenix activity.

6.93 Phoenix activity is associated with organised crime, and may be one of the reasons for attempted infiltration of an occupation or industry.[70] Phoenix activity is attractive to organised crime groups because it allows the maximisation of profits; upon deregistration of a company, the company can avoid the payment of outstanding liabilities to government agencies (such as the ATO), employees, trade creditors, and other creditors.[71]

6.94 The Australian Crime Commission (ACC) reports that there is increasing evidence of organised crime involvement in industries susceptible to phoenix activity, such as the labour hire industry, the private security industry, and the building and construction industry (particularly property development).[72] During the Commission’s consultations, industry representatives concurred that phoenix activity was apparent in the private security and labour hire industries.[73]

6.95 It may be difficult to distinguish between phoenix activity and ordinary company failure. However, even if a regulator can only determine that there is a substantial and recent history of prior company failure, this fact may be relevant to an assessment of probity.

6.96 As the Australian Security Industry Association Limited (ASIAL) noted, phoenix activity may also allow a disreputable operator to start again in an industry under the guise of a new company and obtain a licence to operate.[74] This could be prevented if a search were conducted of the applicant company’s corporate history, in order to determine a) whether the directors/owners of that company are the current or former directors/owners of any other company and b) whether any such companies have been refused a relevant licence or had a licence suspended or cancelled.

6.97 In addition to a review of the applicant’s corporate history, it may be necessary to enquire into the applicant’s financial capacity to operate the business for which a licence is sought. An undercapitalised applicant may suggest a lack of bona fides and an intention to enter an industry for illegitimate purposes.

6.98 Further, an undercapitalised applicant may be prone to corruption or influence by organised crime.[75] For this reason, applicants for a Queensland brothel licence must establish the financial viability of the proposed brothel. The Queensland Prostitution Licensing Authority suggested that financially vulnerable licensees may be more susceptible to influence by organised crime groups, which can lead to participation in money laundering, illicit drug trafficking, or the trafficking of women.[76]

Criminal intelligence

6.99 Regulators often rely on criminal intelligence held by law enforcement agencies (primarily, Victoria Police) in determining whether a licence applicant has any connections to organised crime groups.[77] Criminal intelligence comprises information about suspected, rather than proven, criminal activity.

6.100 The use of criminal intelligence in licensing decisions raises a number of issues that may need to be addressed if reliance is to be placed on this source of information in assessing the probity and suitability of a licence applicant.

6.101 First, law enforcement agencies may be reluctant to share confidential information with the regulator responsible for a licensing decision. This may be addressed through the implementation of appropriate governance arrangements and information-sharing mechanisms, as discussed in Chapter 2.

6.102 Second, criminal intelligence may need to be kept confidential from the licence applicant. This will, however, undermine the applicant’s ability to comment on adverse information that is taken into account when the licence application is determined. A regulatory regime may need to make provision for regulators to seek the protection of criminal intelligence, while allowing the value of that intelligence to be assessed by a court or tribunal on any review of a licensing decision, as discussed in Chapter 2.

6.103 Third, some regulators may not have the necessary expertise to assess criminal intelligence. Where a regulator seeks to have regard to criminal intelligence in decision making, it should be equipped with staff that are appropriately trained to analyse the intelligence received and assess its proper weight. Alternatively, a lack of skills in criminal intelligence analysis may be mitigated by giving Victoria Police a role in assessing licence applicants, or a power of veto over licence applicants in high-risk occupations/industries.

6.104 Under some existing regulatory regimes, a regulator is able, or required, to seek the advice of Victoria Police about a licence applicant, but the regulator retains the authority to grant or refuse a licence.[78]

6.105 A different approach is used in respect of applications for poppy cultivation licences under the Drugs, Poisons and Controlled Substances Act 1981 (Vic), where Victoria Police has an ultimate power of veto. Upon receipt of a licence application, the regulator must carry out the investigations it considers necessary to determine the application and provide a copy of the application to Victoria Police.[79] Victoria Police must make the appropriate inquiries and report to the regulator.[80] The regulator must determine the application but must not issue a licence if Victoria Police opposes it.[81]

6.106 Fourth, a reliance on criminal intelligence in licensing decisions places pressure on the resources of Victoria Police. Given the number of licensing regimes in Victoria which allow or require a regulator to seek input from Victoria Police, there is the potential for Victoria Police to be unable to meet the demand for its assistance.[82]

6.107 That demand may be reduced if regulators only seek assistance from Victoria Police after conducting their own inquiries, including into other matters relevant to probity and suitability such as an applicant’s prior business experience, financial capacity to conduct the licensed business, and any history of non-compliance with other regulatory regimes. This may require regulators to liaise with non-law enforcement agencies. It may be appropriate for a regulator to only seek Victoria Police’s assistance if an applicant raises certain red flags (such as where a licence applicant seeks to operate a business in an occupation/industry in which she/he has no prior experience).

6.108 However, for occupations/industries at the highest risk of infiltration and/or where infiltration has the potential to cause the most harm, a greater level of assistance from Victoria Police may be justified.

6.109 The regulation of an occupation/industry should be considered in the context of the relative needs of other occupations/industries so that Victoria Police’s resources are used where they are most needed.

Prior criminal offending

6.110 An applicant’s criminal history may reveal several matters relevant to probity:

• prior involvement in organised crime, including the trafficking of illicit commodities or organised economic crime such as fraud

• prior criminal conduct that could indicate that a business owner or employee may be vulnerable to influence by organised crime groups once established in an occupation or industry—an enquiry into the circumstances of prior fraud or corruption offences may indicate that a person is susceptible to the influence of others for improper purposes

• prior infiltration of a lawful occupation or industry as part of an organised crime group—this may be revealed by the commission of offences under the regulatory regime of another occupation or industry, or the commission of money laundering, taxation, customs or other relevant offences.

6.111 A licensing scheme may require an applicant to disclose all prior criminal offences, which are then reviewed for their relevance to the licence application. Alternatively, an applicant may be required to disclose only certain types of offence; where this approach is followed, the specified offences should seek to capture the three forms of prior conduct identified above.

Mandatory or discretionary licence refusal

6.112 A licensing scheme may mandate the refusal of a licence where a person has previously committed certain types of offence. Alternatively, a regulator may have a discretion as to whether a licence is refused on this basis.

6.113 Careful consideration should be given to whether it is appropriate to mandate the refusal of a licence on the basis of an applicant’s criminal history. The Commission heard from several industry representatives that legitimate applicants can be unfairly excluded from an occupation or industry where the regulator does not enquire into the relevance of a prior offence. Representatives of the tattoo industry noted that many individuals within that industry have criminal records (including for historical offences) that may or may not be relevant to probity.[83] Vixen Collective stated that regulators should take into account whether any previous offences relate to conduct that was previously criminalised but where this is no longer the case, and may therefore be irrelevant to an applicant’s probity.[84] JobWatch more broadly contended that people with a criminal record should be given the opportunity to explain the circumstances of their offending.[85] These are important considerations.

6.114 The mandated refusal of a licence on the basis of criminal history can reduce competition by raising barriers to the entry of new business operators, disadvantage employers by restricting the pool of employment candidates, compromise broader public policy objectives in relation to offender rehabilitation, and compel people with criminal histories to seek illegitimate work[86] (including, potentially, with businesses linked to organised crime).

6.115 While Victorian law does not prohibit discrimination in employment on the basis of criminal record, the federal Australian Human Rights Commission Act 1986 (Cth) (the AHRC Act) does contain such a prohibition.[87] However, discrimination is not constituted where a person’s criminal record means that he or she is unable to perform the inherent requirements of a particular job.[88] The Australian Human Rights Commission (AHRC) has stated that a licensing agency may potentially contravene the AHRC Act by making a distinction that has the effect of impairing employment opportunities on the basis of criminal record.[89] The AHRC recommends that licensing agencies ensure there is an opportunity for an individual assessment of a person’s criminal record, in order to determine whether that record is relevant to the inherent requirements of the role of a licensee.[90]

6.116 The Australian Health Practitioner Regulation Agency (AHPRA) has developed a registration standard to determine whether an applicant’s criminal history is relevant to the practice of a health practitioner. While the particular factors reviewed will vary by occupation or industry, the AHPRA standard may provide guidance to other regulators about the factors to consider in determining the relevance of criminal history, such as:

• the nature and gravity of the offence and its relevance to the role for which the licence is being sought

• the period of time since the applicant committed the offence

• the sentence imposed for the offence, and the sentencing remarks made (including discussion of mitigating factors and prospects of rehabilitation)

• the age of the applicant at the time of the offence

• whether or not the conduct that constituted the offence has since been decriminalised

• the applicant’s behaviour since they committed the offence

• any information given by the applicant.[91]

6.117 The Commission considers that these criteria are generally appropriate, and constitute fair and proper practice.

6.118 An individualised assessment of an applicant’s criminal history will require more resources than the mandatory refusal of licences on the basis of specified offences, particularly in respect of staff training and the oversight of discretionary decision making. However, regulators should consider whether a net benefit may be realised through an individualised assessment of an applicant’s criminal history, from both a human rights perspective (by not unduly restricting access to employment) and a business perspective (by fostering competition where a person is applying to operate a business, and allowing access to a wider pool of employment candidates where an employee’s licence is sought).

Prior civil contraventions and adverse administrative decisions

6.119 An applicant may be required to disclose previous civil contraventions or adverse administrative decisions either under a provision that expressly requires the production of such information, or under a general power of a licensing agency to request prescribed information from an applicant.[92]

6.120 A review of prior non-criminal conduct is likely to be just as important as a review of prior criminal conduct, since it may reveal:

• adverse administrative decisions, including licence refusals or cancellations, in other occupations or industries (for example, an applicant for entry into the waste management industry may have previously been refused entry into the private security industry because of their association with an organised crime group)

• prior civil contraventions in another occupation or industry that may require further investigation (for example, an applicant for entry into the commercial fishing industry may have previously contravened regulatory obligations in other occupations/industries)

• prior civil contraventions in other areas of law, such as employment law, taxation law, and local planning law, where the contravention has occurred as part of organised crime activity (for example, non-compliance with employer obligations may have occurred as part of previous infiltration of the private security industry).

6.121 It will be particularly necessary to review previous civil contraventions as law enforcement agencies and regulators increasingly adopt a multi-disciplinary approach to enforcement which addresses organised crime activity by drawing on the enforcement options available across several areas of criminal and civil law (see [ ]–[ ]).

Professional competency

6.122 ‘Professional competency’ refers to the knowledge, technical skills and aptitude required to fulfil a particular function or role. Many licensing schemes will require an applicant to establish professional competency.

6.123 A close review of professional competency may deter the attempted entry of organised crime. The Victorian Automobile Chamber of Commerce (VACC) said that the unlicensed sector of the auto-wrecking/recycling industry attracts unqualified and unscrupulous operators who would not withstand a review of professional competency as part of the licensing process.[93]

6.124 An insistence on professional competency can render an occupation or industry less attractive to organised crime groups by marginalising low-standard/illegitimate operators. The Australian Tattooists Guild noted that the majority of professional tattooists do not want to work in organised crime-affiliated studios, and instead seek employment at studios ‘where owners/operators have a sincere and vested interest in the art form itself’.[94] Victoria Police stated that professionalisation plays an important role in reducing the risk of infiltration in the tattoo industry.[95]

6.125 Where entry is attempted, a lack of professional competency may suggest that an applicant seeks entry for illegitimate purposes. An organised crime group that infiltrates multiple industries, or shifts between industries as opportunities and vulnerabilities arise, is unlikely to have the requisite professional competencies for each of these industries.

6.126 A lack of professional competency may also signal the possible use of a ‘cleanskin’ applicant. Victoria Police explained that where an applicant for a private security licence lacks sufficient skills and prior industry experience, this can raise a ‘red flag’ that prompts the further investigation of the applicant, in order to determine whether the use of a ‘cleanskin’ front for an organised crime group has been attempted.[96]

6.127 It may be necessary to consult with industry in order to establish procedures for determining professional competency. The VACC suggested that industry representatives could play a role in the assessment of licence applications with regulatory officers. Industry members, the VACC noted, are attuned to whether an applicant is legitimate or not. Any such role would have to be carefully managed to avoid conflicts of interest, such as where licensing objectives conflict with industry demands for limits on new entrants.[97]

Associates of applicants

6.128 Regulators should examine a licence applicant’s ‘associates’ (also referred to as ‘close associates’ under some current regulatory regimes) when considering the applicant’s probity and suitability, at least in respect of high-risk occupations/industries.

6.129 Associates are people connected to the applicant, including in social, familial and business contexts. An investigation of an applicant’s associates may raise several concerns. If the applicant has associates who are members of an organised crime group, that may raise a concern that the group will be able to influence the applicant in the conduct of the business. An examination of associates may also reveal that the applicant is a ‘cleanskin’—that is, the applicant has applied for a licence on behalf of an organised crime group that will remain in the shadows while using the applicant to infiltrate the occupation/industry.

6.130 Investigating associates typically involves examining people connected to the applicant (the relevant legislation may describe specific categories of people to be examined) in order to determine:

• whether any associate would be able to influence the operation of the applicant’s business to be conducted under the licence

• if so, whether that associate meets probity and suitability requirements under the licensing scheme.[98]

6.131 The examination may result in a refusal of the licence.[99]

6.132 The investigation of an applicant’s associates is likely to require significant regulatory resources. A heavy burden is likely to fall on law enforcement agencies as the investigation of associates could well rely on the use of criminal intelligence.[100]

6.133 The investigation of associates also creates a burden for legitimate applicants, particularly because it will probably mean that applications take longer to process.

6.134 Given this burden, policy makers may be tempted to use a ‘bright line’ test for the examination of associates. That is, the test could simply be that if an applicant has any associates who are members of or are connected to organised crime groups, then that alone may justify licence refusal.

6.135 The Commission considers that it would be unjust to refuse a licence because of this relationship alone. An associate should have an ability to influence the business of the applicant in order to be relevant to the licensing decision, as is the case under most of the associate tests that the Commission has examined.[101] If a ‘business influence’ requirement is not applied, a legitimate applicant could be excluded due to a mere relationship with an organised crime group member that has no relevance to the conduct of the licensed business.

6.136 It is noted that the examination of the probity and suitability of associates is separate to the examination of any direct connections a licence applicant may have with an organised crime group. For example, it may be appropriate to refuse a licence if a person is a member of or closely associated with an organised crime group and this renders the person unsuitable to hold a licence within the context of a particular occupation or industry.

6.137 The definition of ‘close associate’ in the Private Security Act 2004 (Vic) provides an example of how influence over the conduct of a business may be assessed. Under that regime, Victoria Police (which is the regulator of the private security industry) must not grant a private security business licence if it is not satisfied that each close associate of the applicant is fit and proper.[102] Close associates are people who are able to exercise a significant influence over the conduct of the business proposed to be operated under the licence, because they:

• hold an interest in the capital or assets of that business or are entitled to receive any income derived from that business

• hold any power to participate in any managerial decision in that business or appoint any person to a position of management in that business

• participate in the management of the licensed business.[103]

6.138 It will require significant resources to identify potential associates, determine whether each associate is able to exercise influence over the business of the applicant, and assess any such associate’s probity. Policy makers should consider whether the risk of infiltration is sufficiently high to justify the resources required for such an investigation, or whether associate testing can be confined to applicants that raise particular suspicions.

Mandatory group-based exclusions

6.139 Under some regulatory regimes, members of certain groups—particularly those groups declared at law as ‘criminal organisations’—are excluded, on a mandatory basis, from seeking licences and other forms of authorisation to work in certain occupations and industries. A feature of group-based exclusion schemes is that people are excluded from entering an occupation or industry based on their membership of a particular group and not because of their individual characteristics, including whether or not they have a relevant criminal record.

6.140 In New South Wales, a ‘controlled member of a declared organisation’ is prohibited from applying for any authorisation (such as a licence) to carry on a prescribed activity so long as she or he is subject to a control order.[104] The prescribed activities include private security services, pawnbroking, the operation of tow-trucks, and motor-dealing, repairing or recycling.[105]

6.141 Under the Firearms Act 1996 (Vic), if a person is a ‘declared organisation member’ under the terms of the Criminal Organisations Control Act 2012 (Vic), that person is presumed not to be a fit and proper person for the purpose of a firearm dealers licence, but that presumption may be rebutted.[106]

6.142 The Commission received limited feedback from consultation participants about mandatory group-based licence exclusions.

6.143 The National Heavy Vehicle Regulator (NHVR) expressed some support for exclusions linked to criminal organisation control laws, but cautioned that any group-based exclusion may restrict the employee pool for the trucking and heavy haulage industry.[107]

6.144 Julie Ayling argued that an individualised assessment of licence applicants would be ‘both fairer and more effective at excluding seriously dangerous individuals than any group-based exclusion’. In respect of exclusions linked to criminal organisation control laws, Ms Ayling noted that members of declared criminal organisations are likely to have varying levels of criminality, which suggests that all members of a declared organisation should not be treated in the same manner for the purpose of a licence application. Ms Ayling also observed that criminal organisation control laws may only capture a limited class of organised crime groups, namely those that self-identify, such as outlaw motorcycle gangs. Criminal organisation control laws are less able to be applied to secretive, fluid networks that are engaged in organised crime, because the identity and boundaries of those networks are unclear and shift regularly.[108]

6.145 The Commission considers that the use of mandatory group-based exclusions requires further review if their use is contemplated by government in respect of a particular occupation or industry. The Commission notes that in the absence of such mandatory exclusions, an applicant’s group memberships may still be taken into account in an individualised assessment of probity and suitability, by examining whether:

• by virtue of the group membership, the person is not suitable to hold the licence (for example, where an applicant is applying for a private security licence, a regulator may consider it appropriate to refuse the licence if there is a risk that the applicant would use the licence to facilitate unlawful conduct by a criminal organisation of which he or she is a member, such as the trafficking of illicit commodities)

• certain members of the group would be able to exercise influence over the business of the licence applicant, and whether those people have the requisite probity and suitability.

Investigating licence applicants

6.146 In assessing a licence applicant’s probity and suitability, a regulator may need to draw on certain investigative powers, particularly where any links with organised crime may be difficult to detect.

6.147 While a regulator’s investigative powers should be proportionate to the risk of infiltration and the harm likely to be caused by infiltration, a regulator should be provided with a range of tools for the investigation of licence applicants, such as powers to:

• compel the production of documents or information by the applicant or the applicant’s associates[109]

• require other government agencies and private entities (such as banks and other lenders) to provide information about the applicant or the applicant’s associates

• interview applicants on a routine or optional basis (see, for example, the practices with regard to applicants for commercial fishing licences and applicants for sex work service providers’ licences).[110]

6.148 Investigating applicants may require significant resources and impact on licence applicants by prolonging the processing of applications and increasing licence fees, if the costs of investigations are recovered through fees. Regulators therefore need the discretion to determine which tools to use in each case. Ideally, applicants should be investigated with varying degrees of intensity depending on the level of risk they present. In a particular industry, the greatest risk of infiltration may lie with applicants who use complex business structures, or with applicants who appear to have little industry experience.

6.149 Regulators may need to develop new skills in order to investigate applicants (including skills in analysing complex business structures to determine the beneficial owners of corporate licence applicants) and address any other barriers that prevent them from exercising investigative powers (see [ ]–[ ]).

6.150 In its submission, Vixen Collective noted that the investigation of sex work licence applicants ‘may be affected by entrenched discriminatory attitudes … towards sex workers’.[111] Regulators (or any other agency involved in investigating licence applicants) should be sensitive to such concerns. More broadly, regulators should ensure that licence investigations are not tainted by any unjustified beliefs about the likelihood of occupation/industry members being connected to organised crime.

Renewal of licences

6.151 For a range of reasons, regulators will need to conduct ongoing monitoring of an occupation or industry as an adjunct to any licensing scheme (see [ ]–[ ]).

6.152 Licences typically run for a finite period, with licensees able to seek renewal of their licences towards the end of that period. The renewal process provides an opportunity to re-examine licensees and determine whether they remain suitable occupation/industry members. Several industry representatives expressed support for the use of licence renewal processes as an opportunity to examine the ongoing suitability of licensees.[112]

6.153 However, if all licensees in an occupation/industry were to be re-examined upon renewal, the burdens on the regulator, law enforcement agencies and legitimate licensees would be significant.[113]

6.154 In order to reduce these burdens, one option is to extend licence periods to allow for fewer, but thorough, re-examinations of licensees at the time of licence renewal. A number of industry associations commented on the burden created by short licence periods.[114] Other forms of ongoing monitoring would still be required during a longer licence period, as an organised crime group would likely have more opportunity to infiltrate and exit within that period.

6.155 Another option is to rely on monitoring tools (which may include thorough examination upon renewal of licences) that are more targeted—that is, that focus on particular high-risk licensees or categories of licensees. However, a regulator should retain the right to thoroughly re-examine any licensee at any time and cancel its licence if there are grounds to believe that the licensee is involved with organised crime or is, for any other reason, no longer suitable to hold a licence.

Restrictions on licence transfer and surrender

6.156 In order to help prevent organised crime infiltration, regulatory regimes should restrict the transfer and surrender of licences.

6.157 An organised crime group may seek to infiltrate an occupation or industry by acquiring a licence from an existing licensee. One solution is for licences to be personal to the licence holder and non-transferable.[115] If licence transfers are permitted, the transferee should be subjected to an examination in the same manner as any new applicant for a licence, as the Victorian Automobile Chamber of Commerce (VACC) submitted.[116]

6.158 Policy makers should also consider whether a regulatory regime should impose restrictions on the surrender of licences. Such restrictions may make an occupation or industry less attractive to organised crime groups. Ease of surrender may be appealing to organised crime groups, should they wish to quickly exit an occupation or industry if there is a risk that unlawful conduct will be detected. The VACC suggested that the surrender of a licence should:

trigger the regulator’s interest as to why the [licence] is being given back, and that surrender should not be automatically accepted without consideration as to whether conditions of surrender should be placed on the [licence].[117]

6.159 Accordingly, it may be necessary to permit restrictions on licence surrender where a regulatory or law enforcement agency has decided to conduct an inquiry into the licensee or its actions,[118] and permit a regulator to investigate the activities of a former licensee.[119]

  1. Submission 17 (Darryl Annett).

  2. See, eg, Australian Consumer Law and Fair Trading Act 2012 (Vic) ss 47(1), 48.

  3. Submission 22 (Victorian Competition and Efficiency Commission).

  4. Submission 17 (Darryl Annett).

  5. Submissions 6 (JobWatch Inc), 11 (Australian Security Industry Association Limited), 17 (Darryl Annett), 2 (Professor Rick Sarre); Consultation 7 (Australian Federal Police).

  6. Department of Treasury and Finance, Victorian Guide to Regulation (December 2014) 14.

  7. Submissions 20 (Australian Collectors & Debt Buyers Association), 21 (Institute of Mercantile Agents); Consultation 2 (Roundtable 1).

  8. Submission 11 (Australian Security Industry Association Limited).

  9. See ibid.

  10. See, eg, Sex Work Act 1994 (Vic) s 61C; Firearms Act 1996 (Vic) s 87.

  11. See, eg, Sex Work Act 1994 (Vic) ss 49, 50 (a person cannot manage a brothel unless they have received approval to do so from the Business Licensing Authority); Gambling Regulation Act 2003 (Vic) ss 9A.1.2, 9A.1.3(1) (a gaming industry employee’s licence is required if the prospective employee will be performing specified functions, such as those that pose an inherent risk to the integrity of gaming).

  12. See, eg, Firearms Act 1996 (Vic) s 61(1)(c)(i)(A).

  13. Consultation 2 (Roundtable 1); Submission 20 (Australian Collectors & Debt Buyers Association).

  14. Consultation 4 (Roundtable 3); see also Submission 13 (National Heavy Vehicle Regulator).

  15. Submission 13 (National Heavy Vehicle Regulator).

  16. Submission 20 (Australian Collectors & Debt Buyers Association).

  17. Consultation 9 (Victoria Police).

  18. Submission 17 (Darryl Annett).

  19. Consultation 1 (Professor Michael Levi).

  20. Consultation 3 (Roundtable 2).

  21. Consultations 3 (Roundtable 2), 11 (Victorian Automobile Chamber of Commerce); Submissions 11 (Australian Security Industry Association Limited), 24 (Victorian Automobile Chamber of Commerce). See also Submission 29 (Australian Metal Recycling Industry Association).

  22. Department of Treasury and Finance, Victorian Guide to Regulation (December 2014) 45.

  23. Consultation 10 (Victorian Automobile Chamber of Commerce).

  24. Consultations 3 (Roundtable 2), 11 (Victorian Automobile Chamber of Commerce); Submissions 24 (Victorian Automobile Chamber of Commerce), 29 (Australian Metal Recycling Industry Association).

  25. Submissions 24 (Victorian Automobile Chamber of Commerce), 29 (Australian Metal Recycling Industry Association); Consultations 2 (Roundtable 1), 11 (Victorian Automobile Chamber of Commerce).

  26. Consultation 5 (Professional Tattooing Association of Australia); Submission 24 (Victorian Automobile Chamber of Commerce).

  27. Consultation 5 (Professional Tattooing Association of Australia).

  28. Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014)

    35; Consultation 11 (Victorian Automobile Chamber of Commerce).

  29. Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014) 33.

  30. Consultations 2 (Roundtable 1), 11 (Victorian Automobile Chamber of Commerce).

  31. Consultation 4 (Roundtable 3).

  32. Victoria Police, Task Force Discover: Addressing Profit-motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014) 5.

  33. See, eg, Sex Work Act 1994 (Vic) s 15.

  34. See generally Submission 12 (Scarlet Alliance, Australian Sex Workers Association).

  35. Consumer Affairs Victoria, ‘Stopping Rogue Traders’ (Research Paper No 11, November 2006) 8.

  36. Submission 10 (Australian Tattooists Guild).

  37. Consultation 2 (Roundtable 1).

  38. Allen Consulting Group, ‘A Framework for Considering the Use of Occupational Licensing’ (Report to Consumer Affairs Victoria,

    April 2007) 2.

  39. Professor Ian Harper et al, Competition Policy Review: Final Report (March 2015) 140.

  40. Department of Treasury and Finance, Victorian Guide to Regulation (December 2014) 28.

  41. Consultations 9 (Victoria Police), 4 (Roundtable 3).

  42. Submission 22 (Victorian Competition and Efficiency Commission); see also Department of Treasury and Finance, Victorian Guide to Regulation (December 2014) 21–2, 28.

  43. Information provided to the Commission by Consumer Affairs Victoria (31 August 2015).

  44. Ibid.

  45. See, eg, Private Security Act 2004 (Vic) s 17(2)(a)(i).

  46. Submission 10 (Australian Tattooists Guild).

  47. Ibid.

  48. Ibid.

  49. Private Security Act 2004 (Vic) s 17(2)(a)(i)(A).

  50. Gambling Regulation Act 2003 (Vic) ss 10.4.3(1), 10.4.3(2); Estate Agents Act 1980 (Vic) s 92B.

  51. An officer of a corporation includes a director, company secretary, people who make decisions that affect the whole or a substantial part of the company’s business, people who have the capacity to significantly affect the company’s financial standing, receivers, administrators, and liquidators: Corporations Act 2001 (Cth) s 9 (definition of ‘officer of a corporation’).

  52. See, eg, Private Security Act 2004 (Vic) ss 20, 21, 26.

  53. Ernesto U Savona and Giulia Berlusconi (eds), Organized Crime Infiltration of Legitimate Businesses in Europe: A Pilot Project in Five European Countries, Final Report of Project Ariel (Transcrime, 2015) 94.

  54. Consultation 6 (Australian Crime Commission); Australian Crime Commission, Organised Crime in Australia 2015 (2015) 23–7; Financial Action Task Force and Asia/Pacific Group on Money Laundering, Anti-money Laundering and Counter-terrorist Financing Measures—Australia, Fourth Round Mutual Evaluation Report (April 2015) 108, 112; ibid 99–101.

  55. There is a distinction to be drawn between ‘ownership’ (legal title to the shares in a company) and ‘control’ (the capacity to determine the outcome of the company’s decisions or actions); however, the two often coincide and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (Cth) para 1.2.1 defines ‘beneficial owner’ as someone who either owns or controls an entity.

  56. A nominee is a natural person or company that holds shares on behalf of another person.

  57. Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (Cth) para 1.2.1 (definition of ‘beneficial owner’).

  58. Ernesto U Savona and Giulia Berlusconi (eds), Organized Crime Infiltration of Legitimate Businesses in Europe: A Pilot Project in Five European Countries, Final Report of Project Ariel (Transcrime, 2015) 90–3.

  59. Submission 5 (Professor Louis de Koker and Kayne Harwood).

  60. Financial Action Task Force, FATF Guidance: Transparency and Beneficial Ownership (October 2014) 6–7; Financial Action Task Force and Asia/Pacific Group on Money Laundering, Anti-money Laundering and Counter-terrorist Financing Measures—Australia, Fourth Round Mutual Evaluation Report (April 2015) 108; Ernesto U Savona and Giulia Berlusconi (eds), Organized Crime Infiltration of Legitimate Businesses in Europe: A Pilot Project in Five European Countries, Final Report of Project Ariel (Transcrime, 2015) 100–101.

  61. Consultation 2 (Roundtable 1).

  62. Financial Action Task Force, FATF Guidance: Transparency and Beneficial Ownership (October 2014) 3–7.

  63. Submission 5 (Professor Louis de Koker and Kayne Harwood).

  64. Australia is a member of the FATF.

  65. Financial Action Task Force, FATF Guidance: Transparency and Beneficial Ownership (October 2014) 10–18; Financial Action Task Force and Asia/Pacific Group on Money Laundering, Anti-money Laundering and Counter-terrorist Financing Measures—Australia, Fourth Round Mutual Evaluation Report (April 2015) ch 7.

  66. See G20, High-level Principles on Beneficial Ownership Transparency (2014) <>.

  67. World Economic Forum, Global Agenda Council on Organized Crime, Organized Crime Enablers (July 2012) ch 2.

  68. United Kingdom Department for Business, Innovation & Skills, The Rt Hon Dr Vince Cable and Companies House, ‘Tough Action Promised on Hidden Company Owners’ (Press Release, 21 April 2014) <>.

  69. Council Directive 2015/849 of 20 May 2015 on The Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing [2015] OJ L 141/73, art 14 to 18.

  70. Australian Crime Commission, Organised Crime in Australia 2015 (2015) 25–6, 66.

  71. Ibid 66.

  72. Ibid 25.

  73. Consultation 2 (Roundtable 1).

  74. Ibid.

  75. Ernesto U Savona and Giulia Berlusconi (eds), Organized Crime Infiltration of Legitimate Businesses in Europe: A Pilot Project in Five European Countries, Final Report of Project Ariel (Transcrime, 2015) 86–7.

  76. Submission 26 (Prostitution Licensing Authority (Queensland)).

  77. Consultations 4 (Roundtable 3), 7 (Australian Federal Police), 9 (Victoria Police).

  78. Estate Agents Act 1980 (Vic) s 20.

  79. Drugs, Poisons and Controlled Substances Act 1981 (Vic) ss 69OA(1)(a), 69OA(2).

  80. Ibid s 69OA(3).

  81. Ibid ss 69OA(4), 69OB.

  82. Consultation 9 (Victoria Police).

  83. Submission 10 (Australian Tattooists Guild); Consultation 5 (Professional Tattooing Association of Australia).

  84. Consultation 2 (Roundtable 1).

  85. Submission 6 (JobWatch Inc).

  86. Bronwyn Naylor, Moira Paterson and Marilyn Pittard, ‘In the Shadow of a Criminal Record: Proposing a Just Model of Criminal Record Employment Checks’ (2008) 32(1) Melbourne University Law Review 171, 188–91; Bronwyn Naylor, ‘Living Down the Past: Why a Criminal Record Should Not be a Barrier to Successful Employment’ (2012) 18(8) Employment Law Bulletin 115.

  87. Australian Human Rights Commission Act 1986 (Cth) s 3(1) (definition of ‘discrimination’, sub-para (b)(ii)); Australian Human Rights Commission Regulations 1989 (Cth) reg 4(a)(iii).

  88. Australian Human Rights Commission Act 1986 (Cth) s 3(1) (definition of ‘discrimination’, sub-para (c)).

  89. Australian Human Rights Commission, On the Record: Guidelines for the Prevention of Discrimination in Employment on the Basis of Criminal Record (2012) 32. Discrimination is defined to include any distinction, exclusion or preference that has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation, and has been declared by the Regulations to constitute discrimination for the purposes of the Act (discrimination on the basis of criminal record has been so declared): Australian Human Rights Commission Act 1986 (Cth) s 3(1) (definition of ‘discrimination’, sub-para (b)); Australian Human Rights Commission Regulations 1989 (Cth) reg 4(a)(iii).

  90. Australian Human Rights Commission, On the Record: Guidelines for the Prevention of Discrimination in Employment on the Basis of Criminal Record (2012) 32.

  91. Australian Health Practitioner Regulation Agency, Registration Standard: Criminal History—For Registered Health Practitioners (1 July 2015) <>.

  92. See, eg, Private Security Act 2004 (Vic) s 16.

  93. Consultation 11 (Victorian Automobile Chamber of Commerce).

  94. Consultation 2 (Roundtable 1); Submission 10 (Australian Tattooists Guild).

  95. Consultation 9 (Victoria Police).

  96. Ibid.

  97. Consultation 11 (Victorian Automobile Chamber of Commerce).

  98. See, eg, Private Security Act 2004 (Vic) s 26; Sex Work Act 1994 (Vic) s 37; Firearms Act 1996 (Vic) s 61; but see Gambling Regulation Act 2003 (Vic) ss 1.4, 3.4.11 regarding a broader meaning of associates that includes relatives without requiring them to have any influence over the business of the applicant.

  99. See, eg, Gambling Regulation Act 2003 (Vic) s 3.4.11.

  100. Consultation 4 (Roundtable 3).

  101. See, eg, Private Security Act 2004 (Vic) s 3 (definition of ‘close associate’); Sex Work Act 1994 (Vic) sub-ss 37(2)–(3); Firearms Act 1996 (Vic) s 3(1) (definition of ‘close associate’); Liquor Control Reform Act 1998 (Vic) s 3AC.

  102. Private Security Act 2004 (Vic) s 26.

  103. Ibid s 3 (definition of ‘close associate’).

  104. Crimes (Criminal Organisations Control) Act 2012 (NSW) s 27(4). A declared organisation is an organisation subject to a current declaration by the Supreme Court of New South Wales that the organisation is a criminal organisation for the purposes of the Act: Crimes (Criminal Organisations Control) Act 2012 (NSW) s 3(1).

  105. Crimes (Criminal Organisations Control) Act 2012 (NSW) s 27(6).

  106. Firearms Act 1996 (Vic) ss 3(1) (definition of ‘prohibited person’), 61(1)(a), 61(3).

  107. Submission 13 (National Heavy Vehicle Regulator).

  108. Submission 4 (Julie Ayling).

  109. See, eg, Gambling Regulation Act 2003 (Vic) s 10.4.5(1).

  110. Department of Economic Development, Jobs, Transport and Resources, Forms—Licences, Permits, Boats (17 November 2015) <>; Consumer Affairs Victoria, Apply for a Sex Work Service Provider’s Licence (2015) <>.

  111. Submission 19 (Vixen Collective).

  112. Consultations 2 (Roundtable 1), 3 (Roundtable 2).

  113. Consultation 4 (Roundtable 3).

  114. Submissions 10 (Australian Tattooists Guild), 19 (Vixen Collective). See also Submission 11 (Australian Security Industry Association Limited).

  115. Gambling Regulation Act 2003 (Vic) s 3.4.15; Sex Work Act 1994 (Vic) s 39(4); Drugs, Poisons and Controlled Substances Act 1981 (Vic)

    s 69OD.

  116. Submission 24 (Victorian Automobile Chamber of Commerce).

  117. Ibid.

  118. Sex Work Act 1994 (Vic) s 40A.

  119. See, eg, ibid ss 61A (definition of ‘licensee’), 61D(1), 61E.

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