ASIC backtracks on corporate crime paradise comments

Trouble in paradise. The corporate regulator is backpedalling at a rate of knots after saying Australia is a haven for white collar criminals.

Grilled at a Senate committee hearing yesterday, the Australian Securities and Investments Commission chairman, Greg Medcraft, received this greeting from Senator John Williams.

"Mr Medcraft, welcome to paradise."

To which he replied, "Thank you Senator, it's wonderful to be in paradise. Isn't there a…"

"A paradise of white collar crime," interjected Senator Williams.

The controversy started when Greg Medcraft told a room full of business journalists at a Walkley Foundation function on Tuesday that "Australia is a paradise for white collar crime".

Yesterday, Mr Medcraft sought to refine, and perhaps redefine, his message.

"The point I was making was not that we are a paradise, but we need to be careful that we don't become, we're not seen as a haven and, therefore, the issue that we've raised previously about corporate penalties in which the Senate inquiry has actually recommended, we need to make sure that our penalties are consistent with the rest of the world," he told committee members.

The finance minister Mathias Cormann told the hearing that he was so surprised by yesterday's comments that he called Greg Medcraft for an explanation.

"Because, I mean, if that's what you believe I'd be very concerned about that, and the clear and crisp and unambiguous answer that the chair of ASIC put to me was a 'no'," Mr Cormann said.

"Then he elaborated to say that his concern was that we need to remain vigilant to ensure that we don't become a paradise for white collar crime. Which, of course, I fully and 100 per cent endorse."

Calls for royal commission into corporate crime

However, that was not enough for some on the Senate Economics Committee.

"I've said for five and a half years we should have a royal commission into white collar crime, because I believe Australia is, today, a paradise for white collar crime," said Nationals Senator John Williams, a long-time campaigner against financial misdeeds such as the Storm collapse.

Greg Medcraft did not entirely disagree, again telling the committee that penalties for white collar crime in Australia need to be tougher.

Here, the maximum civil penalty for much financial wrongdoing, including insider trading and inappropriate advice, is $200,000.

Overseas, fines in the UK are unlimited, in Canada and Hong Kong they can top $1 million, and in the US the penalty is three times the benefit gained.

The criminal penalties for insider trading were lifted several years ago in Australia, and now offer up to 10 years jail and fines of three times the benefit gained or loss prevented, however the standard of proof to get a conviction is much higher than for a civil penalty.

Greg Medcraft said penalties under the ASIC legislation and Corporations Act can be just a tenth of those under other laws, such as the anti-money laundering and counter-terrorism financing regimes.

Defence lawyer argues penalties appropriate

However, criminal defence lawyer Rob Stary said ASIC is doing a bit of exaggeration to garner attention and argue for more funding.

"There's often embellishment and overstatement of a position to attract attention, particularly political attention, and so that if the agenda is to get more resourcing into the organisation, then people sometimes are inclined to make those grand statements," he said.

Mr Stary argued that any perception that the courts are soft on white collar crime is not backed up by the statistics.

"The only white collar criminals that get off lightly are politicians who rort their travel allowances," he said.

"White collar criminals, just often by the nature of the work they're engaged in, you're dealing with first-time offenders and they are always dealt with, as a matter of course, more leniently."

Aside from the chairman's slip of the tongue, ASIC also came under sustained questioning over the way it has handled corporate collapses, insider training and a range of financial planning scandals.

"A lot of people who don't have the skill and time go to a financial planner and believe what they're told, and there's too many grubs in the industry," said Liberal backbencher Bill Heffernan.

Despite those concerns, Mathias Cormann argued there is no more money in the kitty now to give the corporate cop.

"In the context of the resources available to government from taxpayers, we obviously have taken the view that ASIC is appropriately resourced," he said.

However, the Government is considering ASIC's proposal to adopt a new cost recovery regime which would see market participants billed for ASIC performing its role.