ASIC eyes 'extremely harsh' sanctions against banks

Australian Financial Review Feb 15, 2019 2.25pm

John Kehoe

The corporate regulator's chief prosecutor, Daniel Crennan, QC, has warned that the government has empowered him to pursue "extremely harsh civil penalties and criminal sanctions against banks, their executives and others" after the Senate passed tough new sanctions for white-collar offences.

Corporate executives would face maximum jail terms of 15 years for criminal offences and companies be liable for fines of up to $525 million per civil violation, after the Morrison government agreed to Labor's amendments to toughen the Coalition's bill on Thursday night.

Mr Crennan, an ASIC deputy chairman, said the passage of the penalties bill through the Senate was a very significant step for the Australian Securities and Investments Commission's enforcement capabilities when corporate laws had been breached.

Daniel Crennan, QC, deputy chairman at the Australian Securities and Investments Commission: "Without this bill very significant aspects of the law lacked sufficient penalties to properly punish corporate wrongdoing in Australia." AFR

"Without this bill, very significant aspects of the law lacked sufficient penalties to properly punish corporate wrongdoing in Australia," Mr Crennan said. "In part, the core obligations owed by banks and other financial services licensees to the citizens of Australia did not carry any penalties.

"The legislation is the culmination of ASIC's recommendations to government and will provide the legislative regime for it to far better enforce the law."

Separately, the government and Labor did a bipartisan deal on a bill to extend civil penalties to both directors and trustees of superannuation funds who fail to act in the best interests of members. It will also stop superannuation funds such as industry giant Hostplus from wining and dining corporate clients to win default fund mandates from employers.

Mr Crennan, appointed ASIC deputy chairman last June, is quickly developing a reputation as a tough corporate cop on the beat.

The Hayne royal commission chastised ASIC's propensity to cut deals and impose lenient penalties on financial services firms, and urged the new ASIC chairman James Shipton to shift to a "why not litigate" culture on corporate misdeeds.

The amended bill for white-collar offences passed by the Senate needs to be rubber-stamped by the House of Representatives, a virtual formality.

Treasurer Josh Frydenberg said: "The increased penalties include increases to penalties that haven't changed in more than 20 years. The range of contraventions subject to civil penalties will also now expand and the courts will be given the power to seek additional remedies to strip wrongdoers of profits illegally obtained or losses avoided."

He accused Labor of backing down on its push for uncapped monetary penalties, which business warned would drive up insurance costs even for firms that did nothing wrong.

Labor's financial services spokeswoman Clare O'Neil said it was a humiliating backflip for the Liberals.

"For months they've been resisting Labor's push for higher penalties. They simply didn't have the numbers to continue their protection racket for the big banks. We're delighted to see our tough penalties pass the Senate."

The government accepted Labor's amendment to triple the maximum jail sentence for the most serious corporate crimes to 15 years. The government originally had proposed a doubling to 10 years.

The penalty limit for civil offences for corporations will be increases to a maximum 10 per cent of annual turnover, up to a limit of $525 million per offence, from a government-proposed cap of $210 million.

Labor this week backed down on a push for virtually uncapped monetary fines that could have equated to billions of dollars.

Fines for individuals for civil contraventions were increased five-fold to $1.05 million, or three times the benefit gained, whichever is greatest.

The Coalition government toughened civil and criminal penalties for corporate misdeeds, as recommended by Treasury's ASIC 2016-17 enforcement review taskforce.