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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

Strengthen and Simplify: ALRC Advocates for a Corporate Criminal Responsibility Regime with Sharper Teeth

The Australian Law Reform Commission report, Corporate Criminal Responsibility, was tabled in Parliament on 31 August 2020, making 20 recommendations for reform. Access the final report here and the summary report here.

The ALRC's Corporate Criminal Responsibility report assesses Australia's current national corporate criminal responsibility regime.

The report was commissioned following the Hayne Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry, which sparked renewed public scrutiny of the protection of Australian consumers from corporate misconduct. The report is the first comprehensive assessment of the regime in 25 years.

The ALRC made 20 recommendations geared toward combating the view of corporate civil penalties as a mere 'cost of doing business' and ensuring effective and meaningful criminal prosecution. The recommendations include:

  • improved data collection, with the goal of developing robust corporate criminal policy;
  • reductions to new corporate criminal offence provisions, to combat their overabundance and underuse;
  • principled criminalisation, promoting the selective criminalisation of corporate offences based on principles of deterrence and necessity;
  • streamlined corporate attribution, to resolve inconsistencies in attributing responsibility and fault to corporations;
  • sentencing revisions, giving courts additional powers to impose non-monetary penalties up to and including dissolving corporations and disqualifying a person from managing a corporation; and
  • transnational business accountability, to address inadequate prosecution of overseas crimes by Australian companies.

Many of these recommendations, if adopted, will require significant adjustments to Australia's current corporate regulatory landscape. A selection of these recommendations are discussed below.

A National Approach to Corporate Crime

Recommendation 1 promotes the creation of a national approach to the collection, maintenance and dissemination of data relating to corporate crime. Access to complete, timely and accessible data relating to corporate defendants would facilitate the development of evidence-based criminal justice policy. Collaboration between the Commonwealth and state and territory governments would increase the likelihood of state-based investigations having federal corporate criminal responsibility implications.

Determining Corporate Responsibility and Fault

Recommendations 5 and 6 address the need for one clear method of determining when a corporation is criminally responsible, by expanding the range of liable actors.

Recommendation 7 argues a similar need in relation to determining whether a corporation had the requisite state of mind for an offence.

If implemented, these reforms have implications for the levels of training given to corporate officers, as well as the robustness requirements of corporate risk management frameworks.

Criminalising Patterns of Behaviour

Recommendation 8 encourages the Australian government to criminalise systems of conduct or patterns of behaviour that result in multiple contraventions of civil penalty provisions.

This reform is intended to challenge the perception that civil penalties are merely a 'cost of doing business'.

'Failure to Prevent' Provisions

Recommendation 19 suggests the government should consider applying the new model of 'failure to prevent' offences to misconduct and crimes committed overseas on a company's behalf.

This would increase the criminal justiciability of offences that occur in transnational business contexts such as tax evasion, human trafficking, and financing of terrorism. Implementation of this recommendation has implications for all Australian companies operating in multiple jurisdictions.

Deferred Prosecution Agreements

Recommendation 20 promotes judicial oversight of Australia’s proposed Deferred Prosecution Agreements scheme (DPAs).

The report recommends that the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 should be amended to:

  • empower Federal Court judges to approve DPAs;
  • allow oral submissions by the parties; and
  • require the reasons for approvals to be published in open court.

These changes are raised as a solution to the proposed scheme's poor transparency, and accords with Clifford Chance's own submissions during the public consultation process.

What does this mean?

These recommendations reflect the growing public appetite for strong corporate governance in Australia.

Streamlined corporate criminal responsibility laws would reduce the regulatory compliance burden on corporations.

It would also remove barriers to the prosecution of large corporations, who have to date been subject to significantly fewer prosecutions than small corporations.1

1. ALRC Corporate Criminal Responsibility Final Full Report p 96.