Regulatory Regimes and Organised Crime: Consultation Paper

4. The use of regulatory regimes to prevent the infiltration of organised crime groups into lawful occupations and industries

4.1 This chapter examines issues relating to the establishment of a framework of principles for developing suitable regulatory responses to the risk of organised crime group infiltration of lawful occupations and industries.

4.2 In establishing these principles, the terms of reference ask the Commission to consider:

• the experience of Victoria and other jurisdictions in using occupational and industry regulation to help prevent organised crime infiltration of lawful occupations or industries

• whether, to what extent, and in what circumstances regulatory regimes may be effective in helping to prevent organised crime infiltration of lawful occupations or industries

• the implications for the overall efficiency and effectiveness of regulatory regimes of using such regimes to help prevent organised crime infiltration of lawful occupations or industries

• the costs and benefits of regulatory options to assist in preventing organised crime infiltration of lawful occupations or industries

• how best to structure any regulatory regime to ensure its effectiveness in helping to prevent the infiltration of organised crime without imposing unreasonable regulatory burdens, including consideration of regulatory options such as: licensing (including negative licensing), registration, notification, statutory exclusions, discretionary exclusions, fit and proper person tests, criminal offences, and the level of sanctions.

4.3 This chapter presents information about the key tools found in current Victorian regulatory regimes that may be used to prevent organised crime group infiltration of lawful occupations and industries. While some of the regulatory tools presented may not have the prevention of infiltration by organised crime groups as their primary purpose, they may nonetheless be useful for that purpose.

4.4 The regulatory tools examined in this chapter relate to some of the lawful occupations and industries that are said to have been infiltrated, or to be vulnerable to infiltration, by organised crime groups (as identified in Chapter 3). In conducting its review, the Commission has not sought to examine the regulatory regime of any particular occupation or industry in its entirety, nor has the Commission sought to examine every possibly relevant regulatory regime.

4.5 For the most part, regulatory tools in other jurisdictions have not been examined for the purpose of this paper.

4.6 This chapter contains information in relation to the following:

• choice of regulator

• regulatory purposes and objects

• tools for regulating entry into an occupation or industry

• tools for monitoring an occupation or industry

• tools for regulating exit from an occupation or industry

• information sharing for the purpose of regulation

• protections for people affected by decisions of the regulator.

Choice of regulator

4.7 The regulatory tools examined for this paper are administered by:

• traditional regulators that are independent of policing/law enforcement agencies, including the Business Licensing Authority division of Consumer Affairs Victoria (the Business Licensing Authority regulates occupations and industries such as the sex work industry, second-hand dealers and pawnbrokers, and real estate agents) and independent statutory authorities such as the Victorian Commission for Gambling and Liquor Regulation (VCGLR)

• Victoria Police—for example, Victoria Police regulates the private security industry by licensing and registering industry participants and monitoring behaviour in the industry. Victoria Police’s regulatory role is distinct from its role in enforcing the criminal law. Regulation by Victoria Police is less common than regulation by traditional regulators such as the Business Licensing Authority and the VCGLR.

4.8 There may be certain costs and benefits attached to each model in seeking to prevent organised crime group infiltration of lawful occupations and industries.

4.9 On the one hand, regulation by a traditional (non-police) regulator may allow a wide range of regulatory purposes and objects to be addressed, including, but not limited to, the prevention of criminal conduct and infiltration of the occupation or industry for criminal purposes. By addressing numerous regulatory objects, the regulator may be able to acquire a more comprehensive understanding of the nature of the occupation or industry, its regulatory requirements, and effective regulatory measures.

4.10 A traditional regulator may also be better placed to balance possibly competing policy priorities, such as preventing the infiltration of organised crime groups and reducing regulatory burdens on participants in the occupation or industry.

4.11 On the other hand, regulation by Victoria Police may concentrate the regulatory focus on the prevention of criminal conduct and infiltration of the occupation or industry for criminal purposes. Victoria Police may be particularly well placed to address this regulatory object. Further, to the extent that regulation of the occupation or industry relies on the provision of information that is held by Victoria Police, there will be no, or fewer, barriers to the sharing of this information between regulators and investigators. In order to realise these benefits, however, resources may need to be diverted from traditional policing functions.

4.12 Under some of the regimes examined for this paper, regulatory roles are shared between traditional regulators and Victoria Police (for example, the lawful sex work industry is regulated in this manner). A possible advantage of this approach may be the ability to allocate regulatory roles to the agency best suited to carry them out. For example, inspecting licensed premises for criminal conduct may be best done by police, whereas monitoring compliance with occupational health and safety requirements may be more appropriately done by a traditional regulator.

4.13 Even if Victoria Police has no regulatory role in relation to a particular occupation or industry, it retains its primary role as an investigator of suspected criminal conduct. When structuring regulatory regimes, it may therefore be important to define the roles of the regulator and Victoria Police clearly. This may be particularly so where the regulator also has investigative powers. Overlapping or poorly defined roles may lead to duplication or confusion with regards to agency responsibilities.

4.14 Finally, it is noted that local councils may play a role in some aspects of the regulation of occupations and industries. For example, a local council may need to approve the use of land for certain businesses, such as licensed brothels.^[1]

Question

5 For the purpose of preventing organised crime group infiltration of lawful occupations and industries, what are the advantages and disadvantages of regulation by:

(a) a traditional occupation or industry regulator such as the Business Licensing Authority

(b) Victoria Police

(c) both a traditional regulator and Victoria Police?

Regulatory purposes and objects

4.15 Regulatory purposes and objects will guide a regulator in determining how it should perform its duties and functions.

4.16 Any regulatory object aimed at preventing the infiltration of organised crime groups will likely coexist with other objects.

4.17 For example, the Sex Work Act 1994 (Vic), which regulates the sex work industry in Victoria, has multiple objects, including to seek to ensure that criminals are not involved in the sex work industry. Additional objects include:

• to seek to protect children from sexual exploitation

• to maximise the protection of sex workers from violence and exploitation

• to promote the welfare and occupational health and safety of sex workers.^[2]

4.18 To take another example, the objects of the Gambling Regulation Act 2003 (Vic) include to ensure that the management of gambling is free from criminal influence and exploitation and to promote tourism, employment and economic development generally in Victoria.^[3]

4.19 There may be a conflict between an object aimed at preventing the infiltration of organised crime groups, and other objects; for example, an object aimed at reducing barriers to entry (‘cutting red tape’).

4.20 Alternatively, an object aimed at preventing the infiltration of organised crime groups may complement other objects, such as consumer protection, the protection of employees, or the promotion of efficiency and competition (in that organised crime groups may exercise unlawful competitive advantages if they infiltrate an occupation or industry).

4.21 Consequently, the use of regulatory tools to prevent the infiltration of organised crime groups into lawful occupations and industries may affect the pursuit of other regulatory purposes and objects, and, therefore, the overall efficiency and effectiveness of a regulatory regime.

Question

6 If a regulator is required to prevent the infiltration of organised crime groups into an occupation or industry, how does this affect, or how might this affect, the pursuit of its other regulatory purposes and objects (whether positively or negatively)?

Regulating entry into an occupation or industry

4.22 This section examines six means of regulating entry into an occupation or industry:

• positive licensing regimes

• negative licensing regimes

• registration schemes

• rules relating to the effective control of a business

• rules relating to who may be employed in a business

• rules relating to re-entry.

4.23 More than one of these measures may be used to regulate an occupation or industry.

Positive licensing regimes

4.24 Entry into an occupation or industry is often regulated by a positive licensing regime (referred to below as a ‘licensing regime’). A licence is an authorisation to engage in particular conduct or offer a particular service.

4.25 By scrutinising prospective entrants, a licensing regime may prevent the corruption or destabilisation of an occupation or industry by organised crime groups. Further, an effective licensing regime may reduce regulatory burdens in the monitoring of occupations and industries if there is confidence in the probity of new entrants.

4.26 Conversely, licensing regimes are a barrier to entry. As stated in the final report of the 2014/2015 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.^[4]

4.27 Licensing regimes have broadly similar structures though their details may vary. Some of the key components of a licensing regime relate to: proof of identity, licence preconditions, scrutiny of associates, group-based licence exclusions, the investigation of licence applications, requirements to inform the public, and licence conditions.

Proof of identity

4.28 A key part of most licensing regimes is a requirement that applicants prove their identity. This requirement is relevant to members of organised crime groups, who may seek to use a fraudulent identity in order to gain entry into an occupation or industry.

4.29 Proof of identity requirements may include fingerprinting and referee verification of identity.^[5]

4.30 The nature and rigour of the method of proof varies among 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.

4.31 A regulatory regime may either prescribe the method by which an applicant’s identity is to be proved, or the method may be within the regulator’s discretion.^[6] A discretion may enable the regulator to determine how to best allocate its resources.

Licence preconditions

4.32 A key aspect of a licensing regime is the use of preconditions to ensure that unqualified or unsuitable people are not granted licences. For example, a precondition may be that licences are only granted to ‘fit and proper’ people or people with appropriate qualifications.

4.33 A range of approaches is taken to the formulation of preconditions, including in relation to:

• whether the granting or refusal of a licence is mandatory or discretionary if the preconditions are found to exist

• whether the preconditions are subjective or objective, and the nature of those preconditions.

4.34 The exercise of a discretion as to whether to grant a licence, and the exercise of judgment as to subjective preconditions, may be constrained by judicial or legislative guidance.^[7]

Mandatory or discretionary granting of a licence

4.35 The granting or refusal of a licence will be mandatory where the legislation provides that the regulator must or must not grant a licence if certain preconditions exist.^[8]

4.36 Alternatively, the granting of a licence may be discretionary, even if the preconditions exist.

Subjective preconditions

4.37 Subjective preconditions require the regulator to exercise judgment about whether a particular precondition exists, and typically involve a consideration of whether an applicant is a suitable person to be licensed to operate in an occupation or industry. For example, legislation may require that a licence not be granted if the regulator:

• is satisfied that the granting of the licence is not in the public interest^[9]

• is satisfied that the applicant is not a suitable or ‘fit and proper’ person to hold a licence or to carry on a relevant business due to, for example, the applicant’s (or their associates’) offending history or character^[10]

• is not satisfied that the applicant can carry on the business without being a danger to public safety or peace.^[11]

4.38 Some of these preconditions encompass very broad and flexible concepts, particularly notions of the public interest and a fit and proper person.

4.39 In exercising judgment about whether a subjective precondition exists, the regulator may be obliged to make enquiries (for example, the regulator may be required to seek out information about whether the applicant is a fit and proper person).^[12] Alternatively, the regulator may not be obliged to make enquiries. It may be sufficient for the regulator to grant a licence if it has not been made aware of particular information (for example, information indicating that an applicant is not a fit and proper person).^[13]

Objective preconditions

4.40 Objective preconditions do not require the regulator to exercise judgment about whether a particular precondition exists. Instead, the regulator may only be required to determine whether something has or has not occurred. For example, the regulator may need to be satisfied that the licence applicant:

• has not been charged with, or convicted of, disqualifying offences^[14]

• has not been declared bankrupt and is not insolvent under administration^[15]

• has provided relevant references from a prescribed class of persons^[16]

• has met prescribed competency requirements, for example, the completion of a particular course of study.^[17]

Costs and benefits

4.41 The benefits of licence preconditions may include:

• the ability to tailor preconditions to prevent the infiltration of organised crime groups into lawful occupations or industries

• the creation of barriers to the use of industry insiders and professional facilitators by organised crime groups—for example, competency requirements may assist in preventing the corruption of specialist service providers if those service providers, having undergone lengthy training, have much to lose in the event of disqualification.

4.42 The costs of licence preconditions may include:

• financial costs and delays for applicants in having to provide information

• the risk that suitable applicants will be denied entry if preconditions are too restrictive

• burdens on the resources of regulators, particularly if the preconditions require subjective assessments to be made or additional enquiries by regulators.

Scrutiny of associates

4.43 Some of the licensing regimes examined for this paper require an assessment of whether an applicant’s associates (or ‘close associates’) are fit and proper, suitable or of good repute. The assessment may result in the refusal of a licence.

4.44 Associates may be natural persons or corporations. There are varying definitions of ‘associates’ and ‘close associates’. The broader the definition, the more likely it is that applicants will be refused a licence because of the reputation or previous conduct of people or entities with whom they associate.

4.45 The factors that may make a person an associate or close associate of a licence applicant include that the person:

• is a relative of the applicant (for example, a spouse, domestic partner, parent, sibling or child). A relative may be excluded from the definition of associate or close associate if they have not been and will not be involved in any relevant business of the applicant;^[18] alternatively, a relative may be captured by the definition of associate or close associate regardless of whether or not they have a relevant business connection with the applicant^[19]

• is a business partner of the applicant^[20]

• has entered into a business arrangement or relationship or a lease with the applicant in respect of a relevant business^[21]

• is or will be an executive officer of a relevant business of the applicant^[22]

• is able to exercise a significant influence over or with respect to the conduct of the business carried on under the licence.^[23]

4.46 For the most part, these categories only capture people with some connection to the business of the applicant. In some cases the net is cast more broadly, perhaps due to the level of risk in the occupation or industry. For example, the definition of ‘associate’ in the Gambling Regulation Act encompasses relatives who do not have a business connection with the applicant.^[24]

4.47 Once a licence is granted, the licence holder may be obliged to notify the regulator of new associate relationships, or seek the approval of the regulator for a person to become an associate of the licence holder (see [4.127]).

Costs and benefits

4.48 The scrutiny of associates may allow regulators to detect organised crime group members and other unsuitable occupation or industry participants who seek to remain at arm’s length from a licensed business through the use of intermediaries. Regulators may then prevent these intermediaries from obtaining a licence.

4.49 However, in some cases, the scrutiny of associates may unreasonably result in licence applicants being considered ‘guilty by association’.

Group-based licence exclusions

4.50 Among the Victorian licensing regimes examined for this paper, group-based licence exclusions are generally not used. While an applicant may be denied a licence because of the prior conduct, character or general unsuitability of the applicant or an associate of the applicant, merely being a member of a particular group is not generally used as a ground for the refusal of a licence.

Exclusions arising from anti-association laws

4.51 In recent years, a number of laws have been passed at the Commonwealth, state and territory levels that aim to combat organised crime by regulating people’s associations with certain groups and organisations.^[25] These anti-association laws are often referred to as ‘anti-bikie laws’ and have become linked in the media with efforts to combat possible or actual criminal behaviour by outlaw motorcycle gangs (OMGs). However, these laws may have broader application. Some of these laws prohibit members of criminal organisations from participation in a range of occupations and industries.

4.52 The Criminal Law (Criminal Organisations Disruption) and Other Legislation Amendment Act 2013 (Qld) amended the licensing requirements (or other authorisation requirements) applicable to a number of industries.^[26] The amendments mean that any person who is an ‘identified participant in a criminal organisation’ is prohibited from holding a range of authorisations that they need to work legally in those industries.^[27]

4.53 Similarly, 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 an interim control order or control order.^[28]

4.54 The definition of ‘prescribed activity’ encompasses a range of occupations such as carrying on a security activity within the meaning of the Security Industry Act 1997 (NSW), carrying on the business of a pawnbroker within the meaning of the Pawnbrokers and Second-hand Dealers Act 1996 (NSW), operating a tow truck within the meaning of the Tow Truck Industry Act 1998 (NSW), and carrying on business as a motor dealer, motor vehicle repairer or motor vehicle recycler within the meaning of the Motor Dealers and Repairers Act 2013 (NSW).^[29]

4.55 In Victoria, the Criminal Organisations Control Act 2012 (Vic) does not appear to directly prohibit declared organisations or declared individuals from participating in lawful occupations and industries.^[30] However, other legislation may contain such a prohibition. For example, under the Firearms Act 1996 (Vic), Victoria Police must not issue a firearm dealer’s licence to an applicant unless Victoria Police is satisfied that the applicant, all officers of a relevant body corporate named in the application, and all people the applicant is proposing to employ in the business are fit and proper people. If any of those people is a ‘declared organisation member’, she or he is presumed not to be a fit and proper person.^[31] That presumption may be rebutted.^[32]

4.56 Furthermore, Victoria Police must not issue a firearm dealer’s licence if the applicant, any close associate of the applicant, any responsible person in relation to the application or any person the applicant is proposing to employ in the business is a ‘declared individual’.^[33]

Costs and benefits

4.57 One possible benefit of group-based licence exclusions is some reduction in costs and burdens on regulators. A person will be automatically excluded from one or several occupations or industries without the need for the regulator to examine other, perhaps more resource-intensive, licensing criteria.

4.58 Against this benefit, group-based exclusions may create a considerable barrier to employment for people subject to anti-association laws.

Investigation of licence applications

4.59 A typical component of the licensing regimes examined for this paper is the power or obligation of the regulator, when considering a licence application, to conduct any investigation or make any inquiry that it thinks fit.^[34]

4.60 Victoria Police may also inquire into licence applications in some occupations and industries.^[35] In these circumstances, it is likely that a regulatory regime will further specify whether:

• the type of information to be provided to Victoria Police is determined by the regulator or Victoria Police^[36]

• the nature of the inquiry is determined by the regulator or Victoria Police^[37]

• any recommendations of Victoria Police will be binding on the regulator.^[38]

Costs and benefits

4.61 A rigorous investigation of licence applications—by the regulator itself and/or Victoria Police—may be beneficial where the applicant is adept at concealing information about its identity, prior conduct or associates; for example, an organised crime group may use a complex business structure that conceals the true owners/controllers of corporate licence applicants.

4.62 However, an investigation of licence applications may:

• cause delay for the licence applicant under investigation

• divert resources from other activities of the regulator or Victoria Police

• generate additional costs for regulators that may be passed on to all licence applicants through increased licence fees.

Informing the public

4.63 Another common component of a licensing regime is a requirement for an applicant to inform the public by placing a notice in a newspaper circulating generally in Victoria, setting out that the application has been made and that any person may object to the granting of a licence.^[39] This provides another method by which information about the suitability of an applicant may be brought to the attention of the regulator. When this tool is used, the regulator will be required, when determining the application, to consider any relevant objections.^[40]

Licence conditions

4.64 Under the licensing regimes examined for this paper, regulators often have a broad discretion to attach licence conditions with which the licence holder must comply.^[41] In addition, the legislation may stipulate certain licence conditions.^[42]

4.65 The licensing regime may also allow the regulator to vary or revoke a condition of a licence or impose a new condition at any time, either on its own initiative, on the application of the licence holder, or on the application of another relevant person such as an authorised police officer.^[43]

Negative licensing regimes

4.66 Negative licensing is an alternative to a positive licensing regime. Under a negative licensing regime, no licence is required to enter an occupation or industry but certain classes of people may be excluded from the occupation or industry unless they obtain the permission of the regulator. This exclusion may take place at the time of entry or post-entry.

4.67 Negative licensing regimes are relatively uncommon, in both the regulatory regimes examined for this paper and in other areas of regulation.^[44]

Negative licensing in the debt collection industry

4.68 Entry into the Victorian debt collection industry is regulated by a negative licensing regime. The former positive licensing regime was replaced in July 2011 by a requirement for prohibited persons to obtain permission from the Business Licensing Authority to engage in debt collection.^[45] People who are not prohibited persons do not require a licence or any other form of authorisation to engage in debt collection. A natural or corporate person may be prohibited from engaging in debt collection for a number of reasons, including that the person has in the previous five years:

• held a private security licence or a private security registration under the Private Security Act 2004 (Vic) that was cancelled or suspended

• been found guilty or convicted of an offence involving fraud, dishonesty, drug trafficking or violence punishable by imprisonment of three months or more (natural persons only)

• been found to have been involved in the use of physical force, undue harassment or coercion in contravention of the Australian Consumer Law and Fair Trading Act 2012 (Vic), among other laws^[46]

• been found guilty or convicted of the offence of engaging in prohibited debt collection practices.^[47]

4.69 The Business Licensing Authority may permit a prohibited person to engage in debt collection if it is satisfied that it is not contrary to the public interest to do so.^[48] It is an offence for a prohibited person to engage in debt collection without the permission of the Business Licensing Authority.^[49]

Costs and benefits

4.70 The benefits of a negative licensing regime may include:

• the exclusion of unsuitable participants from the occupation or industry with relatively little administrative burden, in that exclusion may be automatic once a particular event occurs^[50]

• a reduction in costs for regulators, due to the removal of costs associated with a positive licensing regime^[51]

• a lowering of barriers to entry for non-prohibited persons, which may benefit competition in the occupation or industry.^[52]

4.71 The costs of a negative licensing regime may include:

• greater opportunity for the entry of organised crime groups or other unsuitable people due to the lowering of barriers to entry

• the inadvertent sheltering of unsuitable occupation or industry participants under a reactive rather than proactive regulatory regime—that is, a negative event needs to be discovered before an unsuitable person is excluded^[53]

• a greater need for the monitoring of occupation or industry participants, since less is known about entrants than under a positive licensing regime^[54]

• a greater reliance on flushing out unsuitable people post-entry, which may be difficult to enforce in relation to organised crime groups because it relies on consumers and occupation/industry participants to report prohibited practices.

Registration schemes

4.72 Generally, a registration scheme is one of the least intensive ways of regulating entry into an occupation or industry. A registration scheme requires 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.

4.73 The information contained in a register may be open to all people, restricted to certain people, and/or only available for inspection for certain purposes.^[55]

4.74 Registration schemes may be an appropriate, cost-effective regulatory tool for occupations and industries that are at low risk of infiltration by organised crime groups.

4.75 A registration scheme may operate in lieu of a licensing regime.^[56] Alternatively, a more complex registration scheme may operate in a very similar way to a licensing regime. For example, under the Private Security Act, registration (rather than licensing) is required for certain types of private security businesses (security equipment installers and security advisers).^[57] The requirements for registration applications are similar to the requirements for licence applications under the Private Security Act.^[58]

Costs and benefits

4.76 The benefits of a registration scheme may include:

• low-cost barriers to the entry of organised crime groups into lawful occupations and industries—group members may not be prepared to have their details entered on a register

• the creation of a business environment that is less conducive to the entry of organised crime groups, by making information about business operators easily available to the public (for example, a prospective purchaser of private security services may wish to check the registered details of a private security business before proceeding with the purchase).

4.77 The costs of a registration scheme may include reduced probity in the occupation or industry if a registration scheme is used entirely in lieu of a licensing regime, which may be conducive to the entry of organised crime groups.

Rules relating to the effective control of a business

4.78 Some of the regulatory regimes examined for this paper require the licensee^[59] to be in effective control of the relevant business.

4.79 For example, under the Sex Work Act, the licensee of a brothel must be regularly and usually in charge at the brothel and must give regular and substantial attendance at the brothel.^[60]

4.80 Effective control requirements aim to ensure that the licensee is the person who actually conducts, controls and obtains the financial benefit from the business. In the absence of such requirements, organised crime groups may attempt to obtain a licence under the cover of an intermediary or proxy, and then exercise effective control over the business once the licence has been granted.

Rules relating to who may be employed in a business

4.81 Regulatory regimes may impose restrictions on who may be employed in a business. Employee restrictions may be useful in preventing organised crime group members from entering lawful occupations and industries as employees. An employee position may be perceived as less visible and scrutinised than the position of a business owner/operator. Further, where an organised crime group member does have some involvement in the ownership or operation of a business, employee restrictions may prevent that owner/operator from running a business comprised wholly or in part of other group members.

4.82 Employee restrictions may operate at the time a person applies for a licence. For example, the relevant legislation may require that a licence 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.^[61]

4.83 Employee restrictions may also (or alternatively) operate during the period of any licence.

The scope of employee restrictions

4.84 A licensing regime may prohibit a licensee from employing, in connection with her or his business, any person:

• who is disqualified from holding a licence

• whose application for a licence has been refused by the regulator

• who, because of her or his conduct or reputation, is not a fit and proper person to be employed in a business conducted under such a licence.^[62]

4.85 Further, the licensing regime may provide that any person prohibited from being employed in the business conducted under the licence must not participate or be in any way concerned in the business.^[63]

4.86 Some employee restrictions only apply to people who seek to perform certain roles, such as management positions or other roles requiring probity.

4.87 For example, under the Sex Work Act, a person cannot manage a brothel unless they have received approval to do so from the Business Licensing Authority.^[64] The grounds on which the Business Licensing Authority must not grant its approval are similar to the grounds on which it must not grant a licence to operate the business (for example, where the person is not of good repute or has been found guilty of a disqualifying offence).^[65]

4.88 Under the Gambling Regulation Act, a gaming industry employee’s licence is required if the prospective employee will be performing specified functions (such as functions that pose an inherent risk to the integrity of gaming).^[66] Employers are prohibited from employing or using the services of an unlicensed person to perform any of the specified functions.^[67] Further, prospective employees must satisfy the licensing criteria and are ineligible to apply for a licence if they belong to a prescribed class of persons.^[68]

Costs and benefits

4.89 The benefits of employee restrictions may include:

• increased scrutiny of a business’s employees, to the detriment of organised crime groups who may otherwise exploit a lack of such scrutiny

• a reduction in regulatory burdens where there is a flexible and targeted approach to the restriction of employees that still seeks to protect the integrity of the occupation or industry

• thorough and cost-effective probity checks for employers (that is, a background check carried out by a regulator may be less costly than a background check carried out by the employer or a private agency, and regulators may have access to more information about prospective employees).

4.90 The costs of employee restrictions may include:

• reductions in the pool of prospective employees

• increased regulatory costs if the employee restrictions are overly broad or restrictive and require the vetting of a substantial number of prospective employees.

Rules relating to re-entry

4.91 Rules around re-entry into an occupation or industry may be relevant to preventing infiltration by organised crime groups.

4.92 Legislation may provide that if a person has had a licence cancelled, or has had a previous licence application refused, she or he may not re-apply for a minimum period unless the regulator otherwise permits.^[69]

4.93 This type of requirement may be important in restricting the entry or re-entry of organised crime groups, and may also be reasonable in order to reduce the regulator’s workload. On the other hand, it may be unreasonable to deny an applicant entry to an occupation or industry once the reasons for refusal or cancellation have been addressed.

Questions

7 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries, is it useful to regulate entry into an occupation or industry (for example, by requiring would-be entrants to obtain a licence)?

8 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries, what are the costs and benefits of any of the following:

(a) positive licensing regimes

(b) negative licensing regimes

(c) registration schemes

(d) rules relating to the effective control of a business

(e) rules relating to who may be employed in a business

(f) rules relating to re-entry

(g) other entry-regulation tools that you would like to comment on?

Costs and benefits may apply to a range of stakeholders, including regulators, Victoria Police, business operators, business employees, and business customers.

9 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries, what are the costs and benefits of group-based licence exclusions?

Monitoring an occupation or industry

4.94 The regulatory regimes examined for this paper include a number of tools for the monitoring of an occupation or industry. An effective monitoring regime may discourage organised crime groups from entering lawful occupations and industries, or may discourage or detect organised crime activity within an occupation or industry, should the regulation of entry fail to exclude organised crime groups, or where entry is unregulated.

4.95 This section examines:

• the relevance of licence duration and renewal requirements to the monitoring process

• models of compliance monitoring

• investigative powers

• prohibited practices

• record-keeping obligations

• continuous disclosure obligations

• the detection of unauthorised participants

• enforcement measures.

The relevance of licence duration and renewal requirements

4.96 The duration of licences and requirements for the renewal of licences may affect the degree to which occupation or industry participants are monitored.

4.97 Once issued, a licence generally continues in force for a specified period, which may be up to a maximum period allowed under the relevant legislation unless the licence is suspended or cancelled.^[70]

4.98 The legislation may provide that before the expiration of a licence, the licensee may apply to the regulator for renewal of the licence.^[71] The requirements relating to an application for renewal, and the bases for granting or refusing that application, may be similar to those that applied to the original application for a licence.^[72]

4.99 Relatively long licence periods may create additional monitoring requirements, since there will be fewer opportunities to scrutinise incumbents through licence renewal or re-application processes.

4.100 By contrast, relatively short licence periods may reduce monitoring requirements, since incumbents will be scrutinised on a regular basis through licence renewal or re-application processes, provided those processes are sufficiently stringent. In these circumstances, however, the regulatory burden (and the attendant costs) may merely shift to the stage of entry/re-entry into an occupation or industry. Regular licence renewals may also increase costs for legitimate incumbents.

Models of compliance monitoring

4.101 In monitoring an occupation or industry for compliance with the law, regulators may rely on a complaints-based model, an inspection-based model, or both.

Complaints-based model

4.102 The Private Security Act provides an example of a complaints-based model. A person who is affected by the conduct of a holder of a private security business licence that is carried on under the licence may make a complaint to Victoria Police.^[73] Victoria Police must investigate any complaint.^[74] The investigation may result in a disciplinary inquiry, following which a range of options will be open to Victoria Police, from taking no action to cancelling the licence and ordering that the licensee not be entitled to apply for a licence for up to five years.^[75]

Inspection-based model

4.103 The regulatory regime for the gaming industry includes an inspection-based model. Victorian Commission for Gambling and Liquor Regulation (VCGLR) inspectors routinely inspect premises used in connection with any activity regulated by a gaming Act, examine machinery and equipment used and records kept in those premises, and monitor the operation and management of any such activity, for the purpose of determining compliance with any gaming Act and gaming regulations.^[76] Inspectors report to the VCGLR as required.^[77]

4.104 VCGLR inspectors must also investigate complaints related to activities regulated by a gaming Act.^[78]

Costs and benefits

4.105 On the one hand, a complaints-based model may place fewer demands on the resources of a regulator than an inspection-based model. A complaints-based model also limits disruption to compliant businesses.

4.106 On the other hand, a complaints-based model is reactive rather than proactive, and relies on other occupation or industry participants, consumers or other people making a complaint. There may be particular barriers to the making of complaints where an organised crime group is responsible, or appears to be responsible, for non-compliant behaviour (for example, complainants may fear reprisal from organised crime groups).

4.107 An inspection-based model may be difficult to implement where a body other than a policing/law enforcement agency seeks to investigate any infiltration by organised crime groups. These bodies may not necessarily feel equipped to investigate possible organised crime activity. For example, in a study of organised crime in the commercial fishing industry, the Australian Institute of Criminology found that 71 per cent of the fisheries officers interviewed for the study rated personal safety as the most important issue in seeking to deter organised crime activity in the industry.^[79]

Investigative powers

4.108 Where a regulator is able to conduct investigations of an occupation or industry, the regulatory regime may provide powers to obtain information that is relevant to the activities conducted under a licence. The investigative powers of a regulator are distinct from the investigative powers of Victoria Police in relation to suspected criminal conduct.

4.109 There are various investigative powers among the regulatory regimes examined for this paper, including powers to:

• require a licensee or any person who has possession, custody or control of documents relating to the licensed business to answer questions, supply information and provide documents related to the licensed business^[80]

• require an employee of a licensee to answer questions or provide information with respect to any activity regulated by the legislation^[81]

• require a public body and other specified people (such as a financial institution) to answer questions and supply information relating to a licensed business^[82]

• enter and search premises and seize items.^[83]

Costs and benefits

4.110 One advantage of a regulator having investigative powers is that it may be uniquely well placed to use those powers effectively—a regulator will be able to exercise investigative powers according to its regulatory priorities, and is likely to have a comprehensive understanding of the occupation or industry under regulation.

4.111 However, if a regulator has investigative powers, any overlap with the investigative powers of Victoria Police may lead to duplication or confusion with regard to their respective responsibilities. Further, regulators may lack the skills or confidence to use their investigative powers properly, particularly in relation to suspected organised crime activity. This may lead to delays in matters being investigated if, for example, the regulator expects Victoria Police to take the lead while Victoria Police may believe that the regulator should exercise its own investigative powers.

Prohibited practices

4.112 It may be advantageous to identify the anticipated behaviour of organised crime groups within a lawful occupation or industry and focus on preventing or detecting that behaviour. The prohibition of certain practices may assist in this respect. For example, under the regulatory regime for debt collectors, a debt collector must not engage in a prohibited debt collection practice, including:

• using physical force, undue harassment or coercion

• doing or threatening to do any act that may intimidate a person or a member of that person’s family.^[84]

4.113 The maximum penalty for engaging in a prohibited debt collection practice is a fine of 240 penalty units (or $35,426) for a natural person, or 1200 penalty units (or $177,132) for a corporation.^[85] If a person uses physical force, undue harassment or coercion in debt collection, that person may then be prohibited from engaging in debt collection.^[86]

4.114 In practice, the prohibition of certain conduct is likely to be of little use unless it is backed by robust enforcement. Enforcement may be difficult against organised crime group members—in particular, witnesses may be reluctant to report prohibited practices to regulators for fear of reprisal.

Record-keeping obligations

4.115 Record-keeping obligations—and the strict enforcement of these obligations—may be an important tool in preventing or hindering the supply of goods and services to or from organised crime groups.

4.116 Deficient or non-existent record keeping may facilitate and conceal criminal conduct. For example, an investigation of Victorian motor vehicle wreckers/recyclers and scrap metal dealers between 2013 and 2014 found that widespread non-compliance with record-keeping obligations had both wittingly and unwittingly facilitated the disposal of stolen vehicles, because the details of vehicle suppliers and other identifying information were frequently not recorded.^[87]

4.117 Record-keeping obligations may interact with the investigative powers described at [4.108]–[4.109], and may also include requirements for:

• a licensee or former licensee to keep documents relating to the licensed business for a specified period of time, available for inspection in a form that can be immediately and easily inspected^[88]

• specific transactions to be recorded in a register that must be available for inspection by a police officer at any reasonable time.^[89]

4.118 The precursor control legislation provides an apparently successful example of record-keeping obligations. The Drugs, Poisons and Controlled Substances Act 1981 (Vic) regulates, among other things, the supply of precursor chemicals (that is, chemicals that can be used to make other chemicals such as illicit drugs). The Act requires a supplier to not supply a category 1 precursor chemical to another person (‘the receiver’) unless the receiver:

• provides sufficient proof of her or his identity to the supplier (for example, a driver’s licence or a passport)

• has an account with the supplier

• gives the supplier an end-user declaration including the receiver’s name and address, the name and quantity of the chemical to be supplied, the proposed date of supply and the intended use of the chemical.^[90]

4.119 The supplier must keep:

• each end-user declaration for at least five years after the date of supply of the chemicals

• a record of the supply, including the date of supply and the name and quantity of the chemical supplied, for at least five years from the date of supply

• written authorisations for access to category 1 precursor chemicals for at least two years after expiry of the authorisation.^[91]

4.120 A police officer may, without warrant, enter a supplier’s premises during business hours and require the supplier to produce for inspection any of the records described above.^[92]

4.121 The record-keeping obligations under precursor control laws have apparently been successful in reducing organised crime groups’ use of legitimate pharmaceutical/chemical manufacturers and distributors for precursor supply. Recent seizure data suggest that producers of methamphetamine may be gradually relying less upon the precursors ephedrine and pseudoephedrine and more upon phenyl-2-propanone (a precursor chemical that may be self-manufactured by drug producers), which is said to be a response to the regulation of ephedrine and pseudoephedrine supply by legitimate industries.^[93]

Costs and benefits

4.122 Record keeping assists in revealing the chain of supply of goods and services, including supply to or from organised crime groups, which may in turn compromise the ability of organised crime groups to:

• use professional facilitators and industry insiders for the supply of goods and services (for example, precursor supply by complicit members of the pharmaceutical/chemical manufacturing and distribution industries)

• intermingle lawful and unlawful business activities (for example, the intermingling of stolen and lawfully acquired property and the freighting of lawful and unlawful goods).

4.123 Where a record-keeping obligation operates, deficient or non-existent record keeping may be a ‘red flag’ to regulators that wider defects may exist in the conduct of the business and in the ownership/operation of the business (including criminal activity).

4.124 Record-keeping obligations must be strictly enforced in order for these benefits to be realised. The keeping and inspection of records may be resource-intensive for businesses and regulators, and may require the employment of specialist regulatory staff to detect irregularities in record keeping.

Continuous disclosure obligations

4.125 The monitoring of occupations and industries may be assisted by continuous disclosure obligations that require licensees and other authorised persons to report new events to regulators.

4.126 Continuous disclosure obligations may assist in circumstances where organised crime groups seek to associate with an existing authorised person in a lawful occupation or industry and use this person as an intermediary in criminal or other conduct (for example, human traffickers may partner with licensed brothel operators to supply trafficked women to licensed brothels).

4.127 Some of the regulatory regimes examined for this paper require licence holders to disclose new associate relationships. For example, under the Private Security Act, a licence holder is required to immediately notify Victoria Police if a person becomes or ceases to be an associate of the licence holder.^[94]

4.128 The Gambling Regulation Act contains particularly extensive provisions relating to the monitoring of associates. Among other requirements, a gambling industry participant must ensure that a person does not become an associate of that participant (other than a relative) except with the prior approval of the VCGLR.^[95] The VCGLR must not grant its approval unless it is satisfied that the person is suitable to be concerned in or associated with the gambling business of the gambling industry participant.^[96]

Costs and benefits

4.129 Continuous disclosure obligations may reduce regulatory burdens by placing the onus on licence holders to report events to regulators that may impair the suitability of the person to operate in a particular occupation or industry. However, there may nonetheless be a burden on the regulator to ensure that continuous disclosure obligations are complied with.

4.130 Insofar as continuous disclosure requirements regulate associate relationships, similar costs and benefits may apply to these requirements as apply to the scrutiny of associates at the time of entry into an occupation or industry (see [4.48]–[4.49]).

Questions

10 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries, is it useful to monitor an occupation or industry?

11 When monitoring an occupation or industry in order to prevent or detect the infiltration of organised crime groups, what are the costs and benefits of any of the following:

(a) short licence periods/regular licence renewals

(b) a complaints-based model versus an inspection-based model

(c) investigative powers (or particular investigative powers)

(d) prohibited practices

(e) record-keeping obligations

(f) continuous disclosure obligations

(g) other monitoring tools that you would like to comment on?

Costs and benefits may apply to a range of stakeholders, including regulators, Victoria Police, business operators, business employees, and business customers.

Detection of unauthorised participants

4.131 Many of the regulatory tools described above relate to the monitoring of authorised occupation or industry participants. Monitoring regimes may also seek to prevent organised crime groups from operating without authorisation in a particular occupation or industry.

4.132 Regulators may be provided with extensive investigative powers for the purpose of detecting people who are operating without a necessary licence, including powers that relate to the inspection of premises and the obtaining of documents and information, similar to those described at [4.109].^[97]

4.133 Further regulatory tools that may discourage people from operating without the necessary licence or other form of authorisation include:

• empowering a police officer or an authorised person to require a licence holder to produce their licence document for inspection^[98]

• requiring a licence holder to produce their licence document for inspection by customers^[99]

• declaring that a person is not entitled to retain or recover monies obtained or earned through unlicensed activity^[100]

• empowering courts to freeze the bank accounts of unauthorised occupation or industry participants (for example, people who are prohibited from engaging in debt collection and operate as debt collectors without the permission of the Business Licensing Authority)^[101]

• empowering a court to declare premises to be ‘proscribed premises’ if it is satisfied that those premises are being or have been used for the conduct of unlicensed activities for which a licence is required^[102]

• making it an offence for a person to be found in unlicensed or proscribed premises without lawful excuse.^[103]

Question

12 What are the most useful ways of detecting people (particularly organised crime groups) who are operating in a lawful occupation or industry without the required authorisation (such as a licence)?

Enforcement measures

4.134 Any regulatory regime will include enforcement measures for non-compliant conduct. In approximate order of the least to the most severe measures, a regulatory regime may contain some or all of the following measures:

• warnings, cautions, and improvement and prohibition notices

• enforceable undertakings

• infringement notices

• administrative monetary penalties

• publicity and banning orders and injunctions

• licence suspension or cancellation

• civil sanctions

• criminal sanctions.^[104]

4.135 Under a model of ‘responsive regulation’ (which is one proposed model of enforcement), coercive enforcement measures ‘should only be used when less interventionist measures have failed to produce compliance’.^[105]

Licence suspension or cancellation

4.136 Licence suspension or cancellation is a common enforcement measure in the regulatory regimes examined for this paper.^[106] For example, licence suspension or cancellation may be used as an enforcement measure in relation to:

• any offending^[107] or particular types of offending^[108] by the licensee either during or prior to the licence period

• the regulator becoming aware that the licensee, or a close associate of the licensee, is a prohibited person under the regulatory regime, or does not meet the probity requirements under the regulatory regime^[109]

• the regulator or other body (such as a court or tribunal) becoming aware that a licensee is not of good character or otherwise a fit and proper person to hold a licence.^[110]

Civil sanctions

4.137 Civil penalties are sanctions imposed by a court for contravention of a legislative requirement or prohibition. Civil penalties include court-imposed monetary penalties, compensation orders, and disqualifications (such as a disqualification from being a director). A civil penalty regime may offer a less onerous route of enforcement than criminal prosecution.^[111]

Criminal sanctions

4.138 Criminal offences appear to be a common form of enforcement in the regulatory regimes examined for this paper. Fines and imprisonment are typical criminal sanctions, and may be imposed for conduct such as carrying on a business without the appropriate licence^[112] or engaging in a prohibited practice.^[113]

4.139 Ancillary orders may also be available. For example, an order for damages may be sought against a person who has engaged in a prohibited debt collection practice, where that act has caused humiliation or distress.^[114]

Discretion in the use of enforcement measures

4.140 The regulator may have a discretion as to the enforcement measure to be imposed.

4.141 For example, under the Private Security Act, if Victoria Police is satisfied that there are grounds for believing that the holder of a private security licence has engaged in unfair, dishonest or discreditable conduct in carrying on any activity authorised by the licence, Victoria Police may hold an inquiry into the matter.^[115] Following such an inquiry, Victoria Police may take any of several measures, including taking no further action, reprimanding the licence holder, imposing or varying a licence condition, and suspending or cancelling the licence.^[116]

Costs and benefits

4.142 An examination of costs and benefits in relation to enforcement measures may need to consider:

• the proportionality of the enforcement measure in relation to the non-compliant conduct, including any interference with a right to work (particularly if a rigorous licensing process was undertaken)

• the deterrent value of the enforcement measure for organised crime group members; for example, measures that disrupt a business or activity (such as licence cancellation or banning orders) versus monetary penalties

• the likely period of time between the non-compliant conduct and the imposition of an enforcement measure (for example, licence suspension or cancellation may be able to be imposed relatively quickly)

• the regulatory resources required in seeking particular types of enforcement measures (for example, the process involved in suspending or cancelling a licence is likely to be less onerous for the regulator than the pursuit of criminal proceedings against the licensee)

• whether discretion should be available to regulators in the use of enforcement measures, and to what degree

• the rights of review available to the occupation or industry participant who is the subject of an enforcement measure

• the capacity of the regulator to complete enforcement actions (for example, the capacity to enforce payment of monetary penalties).

Question

13 Which enforcement measures are useful, or might be useful, in preventing organised crime group infiltration of lawful occupations and industries?

Regulating exit from an occupation or industry

4.143 Regulating the exit of people from occupations and industries may serve particular functions in relation to organised crime groups.

4.144 First, an organised crime group may seek to infiltrate an occupation or industry by acquiring a licence from an existing licensee under transfer of the licence. Among the regulatory regimes examined, it is common for licences to be personal to the licence holder and non-transferable.^[117] There are some exceptions to this; for example, under the Firearms Act, Victoria Police may authorise transfer of a firearm dealer’s licence due to death, bankruptcy or mental impairment of the dealer.^[118]

4.145 Second, a regulatory regime may impose restrictions on the surrender of licences. A licensee may be permitted to surrender a licence at any time, except, for example, when a relevant authority has decided to conduct an inquiry into the licensee or its actions.^[119] A regulator may be empowered to investigate the activities of a former licensee.^[120]

4.146 These types of restrictions on the surrender of licences may render an occupation or industry less attractive to organised crime groups. Ease of surrender may be attractive to organised crime groups, which may wish to quickly exit an occupation or industry if there is a risk that unlawful conduct will be detected.

Question

14 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries, is it useful to regulate the exit of people from an occupation or industry? Which tools are, or might be, useful for this purpose?

Information sharing for the purpose of regulation

4.147 Access to information is critical to the effective use of many of the regulatory tools described throughout this chapter. For example, regulators need to access information to determine whether a person is fit and proper to hold a licence. Lack of access to information could lead to unsuitable people gaining entry to an occupation or industry. Equally, difficulties in accessing information could cause unreasonable delays in processing applications even of suitable people, or result in applications of suitable people being refused.

4.148 Preliminary consultation conducted by the Commission for this reference has indicated that it may be necessary to improve information sharing between government agencies in order to prevent the infiltration of lawful occupations and industries by organised crime groups.

4.149 Some of the limitations of current information-sharing arrangements have been described as follows:

systems to access the information of multiple government agencies for the purpose of risk assessment are rare [in Australia]. Police intelligence is usually the sole source of additional information (other than information gathered by the regulatory agency itself) on which the agency can rely to base its decisions, and the extent to which there is any sharing of that information by the police with the agency depends on the governing legislation. In Australia, information exchange between criminal justice and other agencies is usually highly constrained by legislation. Special arrangements may be made for the purpose of whole-of-government initiatives such as task forces, but overall information sharing is not of the same order as the institutionalised form of information exchange that is part of the Dutch administrative approach.^[121]

4.150 The ‘Dutch administrative approach’ provides an alternative model of information sharing. Under the Dutch model, administrative authorities responsible for granting licences and similar authorisations may collect open-source information. If that information raises concerns, the administrative authorities have recourse to a centralised information/data-collection agency, the BIBOB Bureau. The BIBOB Bureau:

accesses and collates confidential information not generally available to administrative authorities, which may include, for example, police intelligence and judicial and financial information. … The Bureau then provides a written assessment to the requesting authority as to the integrity of the applicant and the risks involved in granting the application. The Bureau’s assessment is not binding on the authority, and the responsibility for the ultimate decision, and for defending that decision upon appeal, remains with the authority.^[122]

4.151 To some extent, the Dutch model is similar to the approach taken by some of the Victorian regulatory regimes examined for this paper. For example, often a Victorian regulator has the power, when considering a licence application, to conduct any inquiry it thinks fit.^[123] The regulator may also be entitled or required to give details about the application to Victoria Police so that Victoria Police can make its own inquiries and report back to the regulator (see [4.59]–[4.60]).

4.152 However, despite any apparent similarities between the Victorian and Dutch regimes, Australian agencies may have been less successful than their Dutch counterparts in overcoming problems related to information sharing.^[124] This may be partly due to the BIBOB Bureau having or seeming to have access to a broader range of information than Victoria Police. Another advantage in the Netherlands may be that it has only one police force^[125] while Australia’s agencies exist within a federal structure where the Commonwealth, states and territories generally have their own regulators and police forces.

4.153 Whatever the lessons that may be learned by studying overseas approaches, it seems likely that solutions to any information-sharing problems in Victoria will have to take into account the specific issues in this jurisdiction, including the fact that:

• Information about people is held and used by a range of government agencies. This may lead to a duplication of work where a person is being investigated by, or is making applications to, more than one agency. In the absence of near-perfect information sharing, it is also likely to lead to different information being available to different agencies.

• Information may be held by agencies in various Australian jurisdictions.

• Relevant information about a person or organisation may be confidential (for example, information held by a police force may be operationally sensitive).

• Even where information is shared, the time and cost of seeking information from agencies in different jurisdictions may be considerable.

4.154 Some of these issues may be dealt with through the creation of a single, centralised agency that collates and assesses probity-related information, at either a Victorian or Commonwealth level, similar to the BIBOB Bureau.

4.155 Another possibility may be the creation of a single, open-source database for regulators that holds information gathered in the course of regulatory activities, subject to necessary restrictions.

Question

15 Are there any problems with current information-sharing arrangements? If so, how might these problems be overcome? Information-sharing arrangements can refer to information sharing between regulators and Victoria Police, between different Victorian regulators, between Victorian and interstate regulators, and between any other agencies that hold relevant information.

Protections for people affected by decisions of the regulator

4.156 The discussion throughout this chapter shows that regulators often have considerable powers to restrict entry into an occupation or industry, or to remove an occupation or industry participant. The exercise of these powers may limit the employment and business opportunities of prospective participants or ex-participants. The rights of these people may be protected by administrative law measures such as rights to reasons for the decision and rights of review. However, under some of the regulatory regimes examined, these rights may be limited.

Reasons for the decision

4.157 The provision of reasons for a regulator’s decision may permit scrutiny of the regulator’s decision making, and may allow a person to address the matters that underlie the decision (for example, the reasons for why a licence was refused).

4.158 However, the provision of reasons may be discretionary. For example, the VCGLR is not required to give reasons for a decision to either grant or refuse an application for a gaming industry employee’s licence, but may give reasons if it thinks fit.^[126]

4.159 Reasons for a decision may be restricted where the decision is made on the basis of protected information. For example, under the Private Security Act, if Victoria Police decides not to grant a private security business licence because the granting of the licence is not in the public interest, and that decision is made wholly or partly on the basis of protected information, the applicant is not entitled to reasons, to the extent that the reasons relate to the protected information.^[127] However, if the applicant seeks review of the decision by the Victorian Civil and Administrative Tribunal (VCAT), Victoria Police must provide VCAT with the reasons for the decision.^[128]

Rights of review

4.160 Rights of review vary among the regulatory regimes examined for this paper.

4.161 For example, under the Gambling Regulation Act, if a single VCGLR commissioner refuses to grant a gaming industry employee’s licence, the applicant may appeal against the decision to the full VCGLR.^[129] An appeal must specify the grounds on which it is made (despite the fact that the applicant may not have received reasons for the decision).^[130]

The decision of the full VCGLR on an appeal may, but does not have to, include the reasons for the decision.^[131]

4.162 Under the Private Security Act, a person whose interests are affected by a decision to refuse an application for a private security business licence may apply to VCAT for a review of that decision.^[132] However, that right of appeal does not exist if Victoria Police refuses to grant the licence because the applicant or a close associate of the applicant is a prohibited person.^[133]

4.163 A regulatory regime may make certain protections available to licence applicants in the event of review. For example, under the Private Security Act, if Victoria Police informs VCAT that a decision not to grant a licence was based on protected information, VCAT must appoint a special counsel to represent the interests of the applicant.^[134] If VCAT determines that the information in question is in fact protected information, only Victoria Police and the special counsel are entitled to be present at the hearing of the appeal to the extent that it relates to that protected information.^[135]

Question

16 Please comment on the extent to which regulatory tools that may be used to prevent the infiltration of organised crime groups into lawful occupations and industries may:

(a) insufficiently protect the rights of people affected by decisions of the regulator

(b) insufficiently protect the rights of any other stakeholder

(c) impose additional burdens on regulators, courts and/or tribunals in relation to the provision of reasons for decisions and opportunities for review.

Other legal responses

4.164 The terms of reference ask whether, to what extent and in what circumstances regulatory regimes may be effective in helping to prevent organised crime group infiltration of lawful occupations or industries. To this end, there may be legal measures that are preferable or complementary to occupation/industry-based regulatory regimes in preventing infiltration.

Anti-association/crime control orders

4.165 Anti-association or crime control orders could possibly be used independently of occupation/industry-based regimes to prevent or disrupt organised crime group infiltration of lawful occupations or industries.

4.166 In Victoria, the Criminal Organisations Control Act 2012 (Vic) sets out a regime for the making of control orders in respect of organisations that are involved in serious criminal activity, and the individual members of such organisations. Broadly speaking, a control order may prohibit association between organised crime group members, the operation of a business, and/or the use of property by individuals or organisations subject to control orders.^[136] Victoria Police has indicated that the Criminal Organisations Control Act has not been widely used to date (the Act only came into operation in March 2013).^[137]

4.167 Crime control orders may also work in tandem with occupation/industry-based regimes; for example, such orders may be the basis for a group-based exclusion under a licensing regime (see [4.50]–[4.56]).

Anti-money laundering laws

4.168 As Chapter 3 indicated, the concealment or laundering of the proceeds of crime appears to be one of the key purposes of organised crime group infiltration of lawful occupations and industries. Anti-money laundering laws may therefore help make certain business types and professional facilitators less attractive to organised crime groups.

4.169 The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) sets out a reporting regime for entities that deliver certain ‘designated services’.

A wide range of services are prescribed as designated services in four principal areas of industry: banks and other lenders, non-bank financial service providers, gambling and bullion service providers, and money service providers.^[138] These individuals and businesses are known as ‘reporting entities’.^[139] Among other things, reporting entities are obliged to enrol with the Australian Transaction Reports and Analysis Centre (AUSTRAC), implement and maintain an anti-money laundering program to identify, assess and mitigate and manage the risk of money laundering, and lodge transaction reports and compliance reports with AUSTRAC.^[140]

4.170 In addition to the reporting regime under the AML/CTF Act, governments have sought to curtail money laundering through the creation of criminal offences under Commonwealth and Victorian law that prohibit certain dealings with the proceeds of crime.^[141]

Criminal asset forfeiture and confiscation

4.171 Criminal asset confiscation orders may assist in preventing infiltration, insofar as the benefits of any criminal conduct arising from infiltration may be neutralised through the forfeiture of tainted property or the making of a pecuniary penalty order.

4.172 In Victoria, the Confiscation Act 1997 (Vic) sets out a regime for forfeiture and confiscation of the proceeds of crime. Forfeiture orders may be available upon conviction for an offence (conviction-based orders)^[142] or on a civil basis without a finding of guilt or conviction (civil-based orders).^[143] A pecuniary penalty order may also be available upon conviction for an offence, which requires a person to pay a sum of money to the state that is equivalent to the value of the benefits a person derived from an offence.^[144]

4.173 At the Commonwealth level, the Proceeds of Crime Act 2002 (Cth) sets out a regime for confiscation of the proceeds of criminal conduct in contravention of Commonwealth laws. The regime includes conviction-based and civil-based forfeiture orders and pecuniary penalty orders.^[145]

Unexplained wealth orders

4.174 Unexplained wealth orders empower a court to order the forfeiture of property where the court is satisfied that a person is reasonably suspected of having engaged in serious criminal activity (regardless of whether that person has been charged with, tried or convicted of the offence/offences that are suspected of constituting the serious criminal activity), or where the court is satisfied that there are reasonable grounds to suspect that the property in question was not lawfully acquired.^[146]

4.175 Unexplained wealth orders could possibly be used against organised crime group members who seek to remain at arm’s length from criminal activity^[147] (for example, by using complex legal structures to conceal the true ownership of businesses used to facilitate crime or to conceal or launder the proceeds of crime). However, the utility of unexplained wealth orders is yet to be fully ascertained; in Victoria, the legislation for the making of such orders was only introduced in 2014, and as at 2012 no applications had been made for an unexplained wealth order under the Commonwealth Proceeds of Crime Act.^[148] (The unexplained wealth order provisions were inserted into the Commonwealth Proceeds of Crime Act and became operative in 2010.)^[149]

Question

17 In seeking to prevent the infiltration of organised crime groups into lawful occupations and industries:

(a) What issues are, or might be, better dealt with through legal responses other than occupation/industry-based regulatory regimes (including but not limited to the ‘other legal responses’ described at pages 66–68)?

(b) What issues are, or might be, better dealt with through occupation/industry-based regulatory regimes rather than other legal responses?

1. Sex Work Act 1994 (Vic) pt 4.

   ↑

2. Ibid s 4.

   ↑

3. Gambling Regulation Act 2003 (Vic) s 1.1(2).

   ↑

4. Ian Harper, Peter Anderson, Sue McCluskey and Michael O’Bryan, The Australian Government Competition Policy Review, Final Report (March 2015) 140.

   ↑

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

   ↑

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

   ↑

7. See, eg, Sex Work Act 1994 (Vic) s 38.

   ↑

8. See, eg, Estate Agents Act 1980 (Vic) ss 21(4), 21(4B).

   ↑

9. Private Security Act 2004 (Vic) s 26(1)(a).

   ↑

10. See, eg: Sex Work Act 1994 (Vic) s 37(1)(a); Gambling Regulation Act 2003 (Vic) s 3.4.11(1)(b); Estate Agents Act 1980 (Vic) s 21;
    
    Private Security Act 2004 (Vic) s 26.

    ↑

11. Firearms Act 1996 (Vic) s 61(1)(c)(i)(B).

    ↑

12. See, eg, Private Security Act 2004 (Vic) s 26.

    ↑

13. Estate Agents Act 1980 (Vic) s 21(4): under this Act, the regulator still has to be satisfied that the applicant is eligible to hold the licence and is of good character.

    ↑

14. See, eg, Private Security Act 2004 (Vic) s 26.

    ↑

15. Ibid.

    ↑

16. Private Security Act 2004 (Vic) s 17(2)(a); Private Security Regulations 2005 (Vic) reg 58.

    ↑

17. See, eg, Estate Agents Act 1980 (Vic) s 14(1)(a)(i).

    ↑

18. Sex Work Act 1994 (Vic) ss 3(1) (definitions of ‘relative’ and ‘uninvolved relative’), 37(2)(a).

    ↑

19. Gambling Regulation Act 2003 (Vic) s 1.4.

    ↑

20. Sex Work Act 1994 (Vic) s 37(2)(b).

    ↑

21. Ibid s 37(2)(c).

    ↑

22. Gambling Regulation Act 2003 (Vic) s 1.4(1)(b).

    ↑

23. Private Security Act 2004 (Vic) s 3 (definition of ‘close associate’).

    ↑

24. Gambling Regulation Act 2003 (Vic) s 1.4.

    ↑

25. See, eg: Criminal Organisation Act 2009 (Qld); Vicious Lawless Association Disestablishment Act 2013 (Qld); Crimes (Criminal Organisations Control) Act 2012 (NSW).

    ↑

26. See, eg: Electrical Safety Act 2002 (Qld); Liquor Act 1992 (Qld); Racing Act 2002 (Qld).

    ↑

27. An identified participant in a criminal organisation is a person who is identified by the Commissioner of the Police Service as a participant in the organisation within the meaning of s 60A(3) of the Criminal Code.

    ↑

28. 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 Crimes (Criminal Organisations Control) Act 2012 (NSW): Crimes (Criminal Organisations Control) Act 2012 (NSW) s 3(1).

    ↑

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

    ↑

30. A declared organisation member means a member, former member or prospective member of a declared organisation. The Supreme Court may make a declaration that an organisation is a declared organisation for a range of reasons, including that the organisation has engaged in or supported serious criminal activity or that any two or more members, former members or prospective members of the organisation have used the organisation for a criminal purpose. An individual may be declared by the Court to be a declared individual if, for example, the Court is satisfied that the individual is a member of an organisation, that the individual and another member of the organisation are using that organisation for a criminal purpose, and their activities pose a serious threat to public safety and order: Criminal Organisations Control Act 2012 (Vic) ss 3(1) (definitions of ‘declared individual’ and ‘declared organisation’), 19.

    ↑

31. Firearms Act 1996 (Vic) s 61.

    ↑

32. Ibid s 61(3).

    ↑

33. Ibid ss 3(1) (definition of ‘prohibited person’), 61(1)(a).

    ↑

34. See, eg, Sex Work Act 1994 (Vic) s 36A(2)(a).

    ↑

35. See, eg: ibid s 36; Estate Agents Act 1980 (Vic) s 20.

    ↑

36. See, eg: Estate Agents Act 1980 (Vic) s 20; Gambling Regulation Act 2003 (Vic) s 10.4.4(1)(c).

    ↑

37. See, eg: Gambling Regulation Act 2003 (Vic) s 10.4.4(2); Estate Agents Act 1980 (Vic) s 20(2); Drugs, Poisons and Controlled Substances Act 1981 (Vic) ss 69OA(3)(a), 69OA(3)(b).

    ↑

38. See, eg, Drugs, Poisons and Controlled Substances Act 1981 (Vic) ss 69OA(3), 69OA(4).

    ↑

39. See, eg, Private Security Act 2004 (Vic) s 18.

    ↑

40. See, eg, ibid s 18(3).

    ↑

41. See, eg: Gambling Regulation Act 2003 (Vic) s 3.4.12; Firearms Act 1996 (Vic) s 68.

    ↑

42. See, eg: Gambling Regulation Act 2003 (Vic) ss 3.4.12A, 3.4.12B.

    ↑

43. See, eg, Sex Work Act 1994 (Vic) s 52AA.

    ↑

44. Arie Freiberg, The Tools of Regulation (Federation Press, 2010) 149.

    ↑

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

    ↑

46. Those laws are s 12DJ of the Australian Securities and Investments Commission Act 2001 (Cth) or an equivalent provision in a Commonwealth or state or territory Act: Australian Consumer Law and Fair Trading Act 2012 (Vic) ss 47(1)(a)(vii), 47(1)(b)(vii).

    ↑

47. Australian Consumer Law and Fair Trading Act 2012 (Vic) s 47(1).

    ↑

48. Ibid s 49.

    ↑

49. Ibid s 47(2).

    ↑

50. Consumer Affairs Victoria, Private Agents Act Options Paper—Modernising Victoria’s Consumer Policy Framework (2008) 23.

    ↑

51. Arie Freiberg, above n 44, 150.

    ↑

52. Consumer Affairs Victoria, above n 50, 22–3.

    ↑

53. Arie Freiberg, above n 44, 150.

    ↑

54. Ibid.

    ↑

55. See, eg, Sex Work Act 1994 (Vic) s 24.

    ↑

56. See, eg, ibid ss 23, 24.

    ↑

57. Private Security Act 2004 (Vic) ss 9, 71.

    ↑

58. Ibid ss 17, 18, 26, 74, 75, 83.

    ↑

59. From this point on, this chapter will generally refer to licences (and licensees etc) as they appear to be the most common form of authorisation for entry into an occupation or industry. However, many of the comments could apply equally to occupations and industries regulated in another way, such as by a negative licensing regime or a registration scheme.

    ↑

60. Sex Work Act 1994 (Vic) s 42.

    ↑

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

    ↑

62. Estate Agents Act 1980 (Vic) s 44(1).

    ↑

63. Ibid s 44(2).

    ↑

64. Sex Work Act 1994 (Vic) ss 49, 50.

    ↑

65. Ibid s 51.

    ↑

66. Gambling Regulation Act 2003 (Vic) ss 9A.1.2, 9A.1.3(1).

    ↑

67. Ibid s 9A.1.3(2).

    ↑

68. Ibid s 9A.1.4(2). To date, the class of persons has not been prescribed.

    ↑

69. Estate Agents Act 1980 (Vic) s 24C.

    ↑

70. See, eg, Private Security Act 2004 (Vic) s 34.

    ↑

71. See, eg, Firearms Act 1996 (Vic) s 72(1).

    ↑

72. See, eg, ibid ss 61, 63, 64, 65, 72, 73.

    ↑

73. Private Security Act 2004 (Vic) s 48(1).

    ↑

74. Ibid s 49.

    ↑

75. Ibid s 56.

    ↑

76. Gambling Regulation Act 2003 (Vic) s 10.5.7(1).

    ↑

77. Ibid.

    ↑

78. Ibid s 10.5.11(1).

    ↑

79. Judy Putt and Diana Nelson, ‘Crime in the Australian Fishing Industry’ Trends & Issues in Crime and Criminal Justice no. 366 (Australian Institute of Criminology, 2008).

    ↑

80. Sex Work Act 1994 (Vic) ss 61D(1), 61E.

    ↑

81. Gambling Regulation Act 2003 (Vic) s 10.5.9(1)(d).

    ↑

82. Sex Work Act 1994 (Vic) ss 61F, 61G.

    ↑

83. Ibid ss 61J, 61K, 61L.

    ↑

84. Australian Consumer Law and Fair Trading Act 2012 (Vic) s 45.

    ↑

85. Ibid s 45(1). The maximum fine amounts are based on the penalty unit value for 2014–15.

    ↑

86. Ibid s 47(1)(a).

    ↑

87. Victoria Police, Task Force Discover—Addressing Profit-Motivated Vehicle Theft in Victoria’s Separated Parts and Scrap Metal Industries (2014) 3–5.

    ↑

88. Sex Work Act 1994 (Vic) s 61C.

    ↑

89. Firearms Act 1996 (Vic) s 87.

    ↑

90. Drugs, Poisons and Controlled Substances Act 1981 (Vic) ss 4(1) (definitions of ‘end-user declaration’ and ‘sufficient proof of identity of receiver’), 80J(1); Drugs, Poisons and Controlled Substances (Precursor Supply) Regulations 2010 (Vic) reg 8(1).

    ↑

91. Drugs, Poisons and Controlled Substances Act 1981 (Vic) ss 80K, 80N(1), 80O.

    ↑

92. Ibid s 80R.

    ↑

93. Australian Crime Commission, Illicit Drug Data Report 2012–13 (2014) 35; Law Reform, Drugs and Crime Prevention Committee, Parliament of Victoria, Inquiry into the Supply and Use of Methamphetamines, Particularly Ice, in Victoria, Final Report (2014) 445.

    ↑

94. Private Security Act 2004 (Vic) s 174.

    ↑

95. Gambling Regulation Act 2003 (Vic) s 10.4A.7(1).

    ↑

96. Ibid s 10.4A.7(2).

    ↑

97. Sex Work Act 1994 (Vic) ss 61DA, 61E, 61F, 61G, 64.

    ↑

98. Private Security Act 2004 (Vic) s 128.

    ↑

99. Ibid s 128(4).

    ↑

100. Ibid s 127.

     ↑

101. Australian Consumer Law and Fair Trading Act 2012 (Vic) s 212.

     ↑

102. Sex Work Act 1994 (Vic) s 80.

     ↑

103. Ibid ss 15, 82.

     ↑

104. Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992) 35.

     ↑

105. Arie Freiberg, above n 44, 97.

     ↑

106. See, eg: Sex Work Act 1994 (Vic) ss 47, 48A(g); Estate Agents Act 1980 (Vic) s 28A.

     ↑

107. See, eg, Private Security Act 2004 (Vic) s 61.

     ↑

108. See, eg, Estate Agents Act 1980 (Vic) s 22(2): cancellation of the licence is required under this section.

     ↑

109. See, eg, Private Security Act 2004 (Vic) s 47: cancellation of the licence is required under this section.

     ↑

110. See, eg, Estate Agents Act 1980 (Vic) ss 25(1), 28A.

     ↑

111. See Eamonn Moran, ‘Enforcement Mechanisms (including Alternatives to Criminal Penalties)’ (2009) 2 LOOPHOLE—Journal of the Commonwealth Association of Legislative Counsel 12, 13.

     ↑

112. See, eg: Private Security Act 2004 (Vic) s 5 (fines only); Estate Agents Act 1980 (Vic) s 12(1).

     ↑

113. Australian Consumer Law and Fair Trading Act 2012 (Vic) s 45(1).

     ↑

114. Ibid s 46(1).

     ↑

115. Private Security Act 2004 (Vic) s 50.

     ↑

116. Ibid s 56.

     ↑

117. See, eg: 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.

     ↑

118. Firearms Act 1996 (Vic) ss 84, 85.

     ↑

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

     ↑

120. Ibid ss 61A (definition of ‘licensee’), 61D(1), 61E.

     ↑

121. Julie Ayling, ‘”Going Dutch”? Comparing Approaches to Preventing Organised Crime in Australia and the Netherlands’ (2014) 1(1) European Review of Organised Crime 78, 98.

     ↑

122. Ibid 93.

     ↑

123. See, eg, Sex Work Act 1994 (Vic) s 36A(2)(a).

     ↑

124. Julie Ayling, above n 121, 97.

     ↑

125. Ibid 82.

     ↑

126. Gambling Regulation Act 2003 (Vic) s 9A.1.5(4).

     ↑

127. Private Security Act 2004 (Vic) s 29A(1).

     ↑

128. Ibid s 29A(2)(d).

     ↑

129. Gambling Regulation Act 2003 (Vic) s 9A.1.7(1).

     ↑

130. Ibid ss 9A.1.5(4), 9A.1.7(2).

     ↑

131. Ibid s 9A.1.7(4).

     ↑

132. Private Security Act 2004 (Vic) s 150(1).

     ↑

133. Ibid s 150(2).

     ↑

134. Ibid s 150B(1).

     ↑

135. Ibid ss 150C, 150D.

     ↑

136. Criminal Organisations Control Act 2012 (Vic) ss 14, 19, 43, 45–47, 53.

     ↑

137. Law Reform, Drugs and Crime Prevention Committee, Parliament of Victoria, above n 93, 421.

     ↑

138. Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 6; Australian Transaction Reports and Analysis Centre and Attorney-General’s Department, Review of the AML/CTF Regime, Issues Paper (2013) 18.

     ↑

139. Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 5.

     ↑

140. Australian Transaction Reports and Analysis Centre and Attorney-General’s Department, above n 138, 11.

     ↑

141. Crimes Act 1958 (Vic) ss 194, 195; Criminal Code Act 1995 (Cth) ch 10 pt 10.2.

     ↑

142. Confiscation Act 1997 (Vic) pt 3 div 1, div 2, div 4.

     ↑

143. Ibid pt 4.

     ↑

144. Ibid pt 8.

     ↑

145. Proceeds of Crime Act 2002 (Cth) ss 47–49, 116.

     ↑

146. Confiscation Act 1997 (Vic) pt 4A. See also Proceeds of Crime Act 2002 (Cth) pt 2-6 (different criteria apply under this Act).

     ↑

147. See Lorana Bartels, ‘Unexplained Wealth Laws in Australia’ Trends & Issues in Crime and Criminal Justice no. 395 (Australian Institute of Criminology, 2010) 4–5.

     ↑

148. Law Reform, Drugs and Crime Prevention Committee, Parliament of Victoria, above n 93, 405.

     ↑

149. Part 2-6 of the Proceeds of Crime Act 2002 (Cth) (unexplained wealth orders) was inserted by the Crimes Legislation Amendment (Serious and Organised Crime) Act 2010 (Cth). Part 2-6 commenced operation on 19 February 2010.

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