Stripping Australian citizenship – the illusory protection of judicial review

Human rights lawyer Kerry Murphy has a very useful explanation of the weakness of judicial review as a safeguard against new laws foreshadowed by the Abbott government which would permit arbitrary ministerial stripping of Australians’ citizenship from those accused/suspected of terrorist activity.  However, if anything the situation is even worse than Murphy says.  Citizenship is arguably the most fundamental right any Australian possesses, without which no other human rights protection is assured, even the most basic application of the rule of law. And yet our citizenship right itself is not protected by our Constitution.

We don’t actually know exactly what provisions the citizenship-stripping law proposed by Abbott and his Immigration Minister Peter Dutton will contain, but you can bet they will include the following:

  1. A subjective opinion clause;
  2. A clause requiring national security or criminal intelligence information to be withheld from a suspect and his lawyers but nevertheless to be used against him.

These provisions have become increasingly popular with governments at both federal and state levels since the “moral panic” induced by September 11.  As a result, the combination of enthusiasm for greater power and less accountability on the part of both politicians and intelligence agencies, and a relatively supine response on the part of the High Court, has had drastic adverse consequences for the freedom and human rights of all Australians.  It is hardly an exaggeration to observe that in today’s Australia the right to impartial judicial review of executive government action, which was intended by the drafters of our Constitution to be a fundamental aspect of our system of national governance, is now an optional extra that governments can effectively negate almost at will.  And yet hardly anyone knows about it.

That is probably because some of the concepts are quite difficult to explain clearly to non-lawyers.  Nevertheless, bear with me. It’s important and worth “unpacking” the argument.

Subjective opinion clauses

As Latham CJ explained in R v Connell; Ex parte The Hetton Bellbird Collieries Ltd:

[W]here the existence of a particular opinion is made a condition of the exercise of power, legislation conferring the power is treated as referring to an opinion which is such that it can be formed by a reasonable man who correctly understands the meaning of the law under which he acts. If it is shown that the opinion actually formed is not an opinion of this character, then the necessary opinion does not exist. …

It should be emphasized that the application of the principle now under discussion does not mean that the court substitutes its opinion for the opinion of the person or authority in question. What the court does do is to inquire whether the opinion required by the relevant legislative provision has really been formed. If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational, or not bona fide.

However, this approach to “subjective opinion” qualifications does not mean that they are ineffective to partially insulate decisions on jurisdictional fact from successful judicial review. As Gummow J explains in Minister for Immigration & Multicultural Affairs v Eshetu [1]:

[W]here the criterion of which the authority is required to be satisfied turns upon factual matters upon which reasonable minds could reasonably differ, it will be very difficult to show that no reasonable decision-maker could have arrived at the decision in question. It may be otherwise if the evidence which establishes or denies, or, with other matters, goes to establish or to deny, that the necessary criterion has been met was all one way.

It will be especially difficult where the legislation also contains a provision forbidding a suspect and his lawyer from knowing what is alleged against him but nevertheless allowing that material to be taken into account against him.  An increasing volume of legislation includes precisely such provisions. In that situation a court conducting judicial review will almost never have any way of effectively scrutinising adverse evidence that may seem superficially plausible. As Brennan J observed way back in 1979:

[I]f an applicant is not given a full opportunity to deal with confidential information adverse to his interests, the probative force of the information must be particularly cogent if that information is to be acted upon. There are notorious risks in failing to hear an opposing view – slender proofs may falsely seem irrefragable, and the scales of justice may falsely seem to be tipped by the weight of insubstantial factors.[2]

The following is an extract from a recent conference paper I wrote.

Legislative secret evidence clauses

Both the Criminal Organisation Act 2009 (Qld) and the Crimes (Criminal Organisation Control) Act 2012 (NSW) go significantly further than either the South Australian or Northern Territory Acts.  Neither contains the provision requiring the court to ‘take steps’ to maintain the confidentiality of criminal intelligence information, words which allowed the High Court in K-Generation to conclude that the Supreme Court retained enough control of its own procedures to ensure that the rules of natural justice were satisfied e.g. by allowing a respondent’s counsel, but not the respondent himself, to have access to secret criminal intelligence information on giving appropriate confidentiality undertakings.

Instead, both the Queensland and New South Wales Acts provide that a criminal intelligence application is to take place ex parte and without notice to the organisation or person to whom it relates,[3] and in a special closed hearing from which both the subject of the application and his/her lawyer are required to be excluded.[4] In other words, there is no capacity in the Supreme Court to ensure any meaningful compliance with the rules of procedural fairness. Although both Acts create an office of public interest/criminal intelligence monitor to provide some degree of independent oversight of police conduct, it is clear that the monitor’s role is not to represent the accused organisation/individual.

The Queensland Act was considered by the High Court in Assistant Commissioner Condon v Pompano Pty Ltd.[5] Despite the fact that the mandated procedure seemingly did not permit the Supreme Court to require any meaningful compliance with the rules of natural justice, and that those rules have repeatedly been held by the High Court previously to be core aspects of judicial power, the Court in Pompano unanimously held that the Queensland anti-bikie legislation was constitutionally valid.

Although the Kable doctrine had been previously deployed by the High Court to strike down other States’ anti-bikie laws in Totani and Wainohu, in Pompano the Court eschewed reliance on Kable and instead followed its earlier reasoning in Gypsy Jokers and K-Generation and developed its own judicial “jurisprudence of secrecy”.[6] The Court unanimously concluded that the Queensland Act’s mandating of complete secrecy of criminal intelligence information did not impair the essential and defining characteristics of the Supreme Court of Queensland so as to transgress the limitations on state legislative power derived from Chapter III of the Australian Constitution. Their Honours resolved the tension between reliance on criminal intelligence and fair trial procedures in favour of secrecy, so long as courts retain discretion to independently assess classified information.[7] It has also been said that as a result of these cases, in criminal intelligence and national security matters the High Court has abolished the doctrine of procedural fairness and replaced it by a newly-fashioned notion of “curial fairness”.[8] The common reasoning linking Gypsy Jokers, K-Generation and now Pompano is that:

evidence that formerly would not have been available to the affected party, pursuant to public interest immunity, on which basis it was not utilised by the court, may now still not be available to the affected party but can be used by the court.[9]

Big Brother is undeniably alive and well, residing happily in the State of Exception that Australia has become since September 11.  Be afraid. Be very afraid.  The real terrorists are the governments of both major parties that inflict these laws on ALL Australians under the spurious pretext of protecting us from international terrorism, criminal bikie gangs or anyone else they can scare us into fearing sufficiently to distract us from thinking about the fundamental freedoms we are surrendering bit by bit.


[1] (1999) 162 ALR 577, [137].

[2] Re Pochi and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 33.

[3] Qld Act s 66; NSW Act s 28I.

[4] Qld Act ss 70, 78; NSW Act s 28K.

[5] (2013) 252 CLR 38.

[6] Greg Martin, ‘Jurisprudence of Secrecy: Wainohu and Beyond’ (2012) 14(2) Flinders Law Journal 189, 189.

[7] Andrew Lynch, Tamara Tulich and Rebecca Welsh, ‘Secrecy and Control Orders: The Role and Vulnerability of Constitutional Values in the United Kingdom and Australia’ in David Cole, Federico Fabbrini and Arianna Vedaschi (eds), Secrecy, National Security and the Vindication of Constitutional Law (Edward Elgar Publishing, 2013) 156, 168.

[8] Greg Martin, ‘Pompano and the Short March to Curial Fairness’ (2013) 38(2) Alternative Law Journal 118, 119.

[9] Steven Churches, ‘Paradise Lost: But the Station is Always There’ (2010) 12(1) Flinders Law Journal 1, 20 (emphasis in original).

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
This entry was posted in Law, Politics - national. Bookmark the permalink.
Subscribe
Notify of
guest
37 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Patrick
Patrick
6 years ago

Personally, I think a lot of the intended targets of this legislation must be close to being considered to have declared allegiance to a foreign power at war with us; if we just went the extra step of declaring war against ISIS (which now meets a hell of a lot more of the criteria for being recognised as a country than your average terrorist group) then we could presumably simply amend section 35 of the Australian Citizenship Act 2007 to deem people taking up arms for ISIS to be nationals of ISIS, and short-circuit a lot of the controversy.

I do share your concerns about the encroaching surveillance state, if it is any comfort, it is a global phenomenom, France has legislative proposals in the works to a similar effect on citizenship. Financial surveillance is an even bigger problem, this post by Scott Sumner, describing how it is in fact a crime to withdraw money from your bank account without telling the government, is a reasonably accurate description of the law in all countries that are deemed fully compliant with the Financial Action Task Force rules on anti-money laundering (i.e. all countries you can think of) (needlesss to say that these recommendations have now been re-labelled with preventing terrorist financing) : http://www.themoneyillusion.com/?p=29547

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago
Reply to  Patrick

Anti-money laundering (AML) is also an important part of the tax on some of the poorest workers in the world who work in foreign countries and then send remittances home to their families. Remittance fees are often around 9% – incredible non?

But banks are getting out of the business because the “know your customer” requirements of AML are so onerous.

Steve at the Pub
6 years ago
Reply to  Nicholas Gruen

Know your customer requirements too tough for banks?
FMD – they can hack it.
Country pubs have to go through the same level of compliance, the same level know yer customa, the same onerous annual report – etc etc etc.

It is my view that should one of Bin Laden’s cronies going to come to Australia to launder money, well, going into a pub beyond the black stump and putting it on a horse will prove to be a most unreliable method of laundering terrorist funds.

I had plenty to say at the time it was brought in (at the height of the “Squeal – Kevin’s the new Prime Minister”) I think my suggestion that if he’s going to allow bullshit like that to be lumped onto bush pubs, then the sooner he got voted out again the better off Australia would be.

This may have been a new perspective for some of the Austrack staff who took my calls. They seemed quite shocked that I spake such heresy.

It hasn’t got any easier for us in the years since. (The only thing that has changed is that now my annual spray to Austrack has the word “Tony” insead of “Kevin” as the scapegoat that should be keelhauled, or something.

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago

it wasn’t a moralistic claim – as if the banks can’t ‘hack it’. It lowers competition in the market and prevents lower remittance charges. The effect seems to be substantial judging from Westpac exiting the market.

But I don’t know the contribution of AML versus other things.

Crocodile Chuck
Crocodile Chuck
6 years ago
Reply to  Nicholas Gruen

‘But banks are getting out of the business because the ‘know your customer’ reqm’ts of AML are so onerous’ [snip]

Data? Link?

Hard to believe. Why?

Because I’ve never read of any bank anywhere that’s been ‘pinged’ by its regulators for AML non-compliance.

You may recall HSBC running afoul of the US authorities 2 yrs ago-who then basically exonerated it, by saying that it was ‘Too Big to Prosecute’ – on the basis of systemic risk!

As a [dreary] aside, the next steps/phase for AML implementation in Australia after 2007 was to bring in real estate agents under its umbrella [ to prevent money laundering via real estate purchases]

This never happened: http://www.smh.com.au/business/comment-and-analysis/money-laundering-burden-yet-to-hit-property-market-20150510-ggy8c5.html

Patrick
Patrick
6 years ago

Chuck, I do recall the HSBC incident you refer to, as doesthe US DoJ who was enriched by US 1.256bn as a result: http://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations

Now you might have a point about there being no bankers in jail as a result, and that’s certainly a topic worth discussing, but it is a very different topic.

Working out how much banks and non-banks get fined for AML violations is hard for two reasons, first, they usually breach AML requirements along with (as in HSBC’s case) other rules such as sanctions rules, and two, there are so many AML prosecutions / settlements, of which the vast majority are necessarily small community banks or local newsagencies offering money transfer services to their ethnic kin.

But AML laws are definitely vigorously enforced in the West.

Moz of Yarramulla
Moz of Yarramulla
6 years ago

I have to admit I gave up on this at the point where it became a jailable offence to speculate that someone had been kidnapped by the secret police (if the speculation was correct). The whole “can be secretly taken and held” powers are ridiculous, and we already knew at that point that in other countries similar powers had been regularly abused (including in Northern Ireland, theoretically bound by the same legal history as Australia).

We also grant powers of judge, jury and executioner to various ministers on the flimsiest possible grounds, and as you point out, those powers are not effectively subject to review. What sanction does Morrison suffer for facilitating the sexual abuse of children in his care… nothing. But the people who revealed that could go to jail.

In that sense the latest round of secret evidence, unaccountable executioners and lawless police doesn’t seem too dramatic to me. It does make me wonder whether we do in fact have secret laws (per USA), though, because we don’t appear to need them – we have such terrifying public laws that why would they even bother with secret ones?

People get grumpy with me when I object to labelling what we have a “justice system” when it’s clearly not even designed as such, let alone capable of reliably producing its public goal – justice. The goal is power, untrammelled power, and there’s ever less attempt to conceal that.

John Barr
John Barr
6 years ago

Moz:

I don’t know where we get the idea that the Courts deal in “Justice.” The Courts deal in “The Law” only. Justice is “sometimes” a by-product. A quote from a Queens Council friend of mine, when we had Queens Councils.

Hasbeen
Hasbeen
6 years ago

Sorry Ken, to an old layman the above sounds more like a member of the club trying desperately to justify their hold on power, than any worry about justice for the peasants.

I am more inclined to trust the judgement & ethics of even a Labor minister, than that of a lawyer or more particularly a judge. Nothing I have ever seen has shown me any reason to believe members of the legal profession have any interest in justice.

You say, ” some of the concepts are quite difficult to explain clearly to non-lawyers”. If that is the case, don’t bother, as justice is very easily understood, but legal gooble-de-gook is designed not to be in my experience.

If I ever see legal efforts & outcomes profitable to the general public, rather than the legal practitioner, I may change my opinion. However, even at my age, I won’t be holding my breath while waiting.

derrida derider
derrida derider
6 years ago

OK, Hasbeen just think about it like this. A politician can now choose whether you should be an Australian citizen or not. And you can be jailed – even “disappeared” – on the basis of secret “evidence” provided by that same politician’s lackeys; evidence that you are not even allowed to see, let alone contest.

Ken’s post tries to explain how that happens, and you may indeed not care for the legal reasoning that lets it happen or the lawyers doing the reasoning. But it ought to terrify you that it HAS happened, and refuse to vote for politicians that let it happen.

Hasbeen
Hasbeen
6 years ago

I am more worried about getting justice in a court of law, than about any other place I can think of.

Tripitaka
Tripitaka
6 years ago
Reply to  Hasbeen

Why?

John Barr
John Barr
6 years ago
Reply to  Tripitaka

I agree with Has been. Read my reply to Moz above.

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago

hear hear DD.
A politician acting on Secret intelligence advice and that has always been correct hasn’t it!

Steve from brisbane
6 years ago

Hasbeen sounds suspiciously like an unhappy party to a Family law case, but I could be wrong….
Ken, on the matter of government secrecy, I continue to be amazed that the public, media, lawyers and other politicians are not conducting any effective campaign against the Abbott government doing anything it wants to boatloads of foreign civilians, including locking up them at sea for weeks at a time before forcing their return to countries to a fate unknown. This strikes me as the most scandalous government international conduct, unjustifiable on security or defence grounds, and completely beyond effective scrutiny simply by Ministers saying “we’re not going to tell you.”
I agree with your concerns re the citizenship under new legislation, but the government has been acting like legalised pirates for a year now.
Have you posted on that topic?
This is truly the most systematically unethical and stupid government I can recall in my lifetime.

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago

Hasbeen reads like a troll to me.

John Barr
John Barr
6 years ago
Reply to  Nicholas Gruen

Just because you maybe embarrassed by the unabashed truths of Hasbeens posts does not make him a Troll. I will vouch for Has been because of my prior dealings with him on OLO & Forum. I, too, have been a victim of “Law verses Justice.”

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago

Worse than that Steve, If David Kilkullen is correct then this just gains ISIL more recruits!

Alfred
Alfred
6 years ago

Extracts from the UK Telegraph 2014:  A British-born man and his three grown-up sons have been stripped of their citizenship by Theresa May, the UK Home Secretary over alleged terrorism links. The 51-year-old man, who was born in Newcastle-upon-Tyne, and his London-born sons, who are all in their twenties, had their British nationality rescinded two years ago while they were out of the country.  Siac has the power to hear evidence in secret, in a system which prohibits the accused and their lawyers from knowing the evidence against them. Instead, they are represented by “special advocates” who have been vetted by the security services. Rachel Robinson, of the human rights organisation Liberty, criticised legislation which has allowed the Home Secretary to strip British citizens of their nationality “without telling them why”. Interestingly David Hicks was stripped of his UK citizenship even though he was never convicted of a terrorism. In fact he was later cleared!

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago

Thanks Ken for a great post. Terrible that it’s come to this, but there you go.

The change in zeitgeist is truly something.

Makes the authors of light comedy program “Yes Prime Minister” and its subsequent stage-play prophets for our time. As I wrote in this review, their TV program of the 1980s and 90s was government as a relatively benign conspiracy of those in the system. The stage play is about the conspiracy of the governing against the weakest of the governed.

John Barr
John Barr
6 years ago

I feel the only reason the Law Fraternity wants to have a say in the Citizenship Debate is purely financial. They make lots of money hearing cases, then lots more hearing Appeal after Appeal. If a Government Minister made the decision based on Intelligence Agencies advice they would miss out on all that lovely Lucre.

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago

Thanks John,

Do you think that it doesn’t cross the mind of the people arguing for our freedoms here that our reliance on the legal cartel to deliver them is pretty problematic. But that’s a separate issue. If I were to judge the motives of lots of the legal fraternity in defending our freedoms both financial gain and grandstanding would be among the motives.

So the legal system should be reformed. Couldn’t agree more. It’s an indictment of our intellectual and policy class that it has shown so little interest.

And beyond that for the purposes of this post – so what? We have a legal system. We have cases. And Ken has shown us what a bad state we’re in.

And one final thing – Ken isn’t telling us this to grandstand or for his financial gain – don’t make me laugh.

Moz of Yarramulla
Moz of Yarramulla
6 years ago
Reply to  Nicholas Gruen

It’s problematic, but at least the legal system has interests that differ from the political system. The more they can be encouraged to work at cross purposes the more likely it is that we the people will find out what’s going on and have a chance to affect the process. If we don’t know we can’t do anything.

It’s not any great faith in lawyers that makes me say that, it’s simply “two people can keep a secret, if one of them is dead”. The more people that need to be involved in these secret, illegal processes the better.

Steve from Brisbane
6 years ago

Exactly. There is no justice system that is perfect, but you can bet your bottom dollar that if any of the lawyer/judge critics here had a close relatively unfairly or mistakenly or malevolently rendered stateless by a politician acting on secret information, they would want access to effective legal review to right the wrong.

John walker
John walker
6 years ago

Really cannot see how striping citizenship from terrorists , will do anything to , deter. Cannot see the point of the exercise. And I think Steve is right , if somebody has joined a , ‘ state’ that’s declared aim is the end of our society , then they have effectively become ‘enemy’, whose treatment is subject to the rules of engagement, but not to the rights and freedoms of a citizen of Australia.
Do you think that it might be a case of ‘look like we are in control’?

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
6 years ago
Reply to  John walker

Yes, I was going to say the same thing but forgot. The whole thing is such a farce in terms of what it could conceivably hope to achieve – but a nice juicy culture war that the media can report as a Big Deal.

John walker
John walker
6 years ago
Reply to  Nicholas Gruen

Sad

Tripitaka
Tripitaka
6 years ago
Reply to  John walker

Would you include 16 year old’s in this category?

The only case I am aware of in which one of these terrorists did leave the country and join this ‘state’ – how do you define state? state of mind perhaps – is that of a local lad who according to his football coach and various other members of the community, was a very nice boy and who would have thought.

If we say that’s easy, we will just call everyone over 18 an adult and so responsible for their actions. But that raises one of those wicked problems that has become even more wicked because of the evidence from neuroscience about how brain development of the sort that underpins the ‘taking responsibility for yourself’ behaviour continues well into the ’20’s.

But I’m sure ‘they’ are there; I just find it hard to believe that this overreaction is in any way acceptable.

Climate change is the enemy we need to see now, not the ‘other’ humans who want to take our stuff and our way of life.

I can’t see how this looks like they are in control. Seems more like a case of ideology and unearned privilege creating people who are way out of their depth when dealing with the hoi polloi – because they don’t understand us having never lived among us – trying desperately to hold on to their privilege.

Tripitaka
Tripitaka
6 years ago

Dear John Barr

I did read what you wrote to Moz and it is still the case that you and your good mate Hasbeen come across as bitter and twisted old men with an imaginary axe to grind.

Would you like to tell your story about how you came to be a victim of the system?

It might be good therapy for you and perhaps some kind left wing lawyer will take on your case pro-bono – they do that for good causes the silly bleeding hearts – you know.

It’s good to see that the brotherhood is still going strong at that bastion of freedom and intelligent discussion OLO; I was thinking that most of you old farts would have died out by now. Graham can’t seem to come with any more of his hilarious posts about how climate change is not happening.

But back to Hasbeen; I’ve checked out some of Hasbeens latest comments and he is a troll. he doesn’t seem to do two posts in a row.

Is he on a disability pension?

but just in case anyone is in any doubt that this man is a troll and a nasty vicious one at that, I’ll just let him speak for himself.

“Definitely not while the aboriginal victim industry is so profitable for so many. The aboriginals will have to make many changes before they can be reconciled with me. While we can still have a bunch of lefty ratbags select a vicious thug like Adam Goodes as Australian of the year, we will know their main interest is in keeping the dollars flowing, & not a damn thing more.”

and this:

“Do you have the $40,000 or more each, to support people for the rest of their lives? Don’t forget health care & education, for basically illiterate subsistence farmers, who can never find a place here.

“If you don’t have, I sure don’t have, so forget it. I don’t give a damn where any of these people go, just as long as it is not here. I am totally compassioned out. It is foolish unsustainable compassion that is going to destroy western civilisation.”

Hasbeen is an expert on lots of things and of course, gubmint is always inefficient and the unions are always corrupt.

“The only thing more costly & inefficient than shareholder owned companies Aussieboy, are government owned corporations, or contractor. Nothing like giving the unions control of something to make it a catastrophe, just think our sub building efforts.”

He knows about everything so one wonders why he is a Hasbeen; he is all over railways.

“I’m afraid fast rail would make even greater losses than ordinary rail. In Oz, apart for commuter services they are catastrophically expensive to run, & are a dead loss to the community. We can largely thank the unions for that too.”

And he’s an expert on trains.

“In Queensland we built at huge expense, the tilt train system. Even then we only did half a job, with too many slow corners to slow them down, & add heaps to the fuel bill. The Brisbane Cairns trains are book out months in advance, & it is almost impossible to get an intermediate ticket for a part of the route.

“They could fill twice as many trains & carriages, particularly with cheap pensioner passengers, but will never do it. The more passengers carried, the greater the losses, & that is with a half baked system. To allow the thing to travel anywhere near the speeds it could achieve would cost so much more in track development it just won’t happen. The resumptions required to reduce those tight bends alone would be ruinously expensive.

“Returning to using shipping is the answer, if only the unions could be controlled, to allow foreign ships to carry our bulk freight.”

Phil Clark
Phil Clark
6 years ago

On the 800th birthday of the Great Charter (Magna Carter) perhaps it’s appropriate to reflect on the evolution of social justice and the nature of progress. I always enjoy Ken’s post’s, if only for the passion, but I would lend some consolation to his concerns in that we are a robust democracy with all that is needed to put wrong too right. Personally I miss the old days of being a punk rocker with flowers in my hair, injustice was all around and utopia was just a revolution away but sadly I suspect that Julia will sort out the mess once the numbers add up ;)

Crocodile Chuck
Crocodile Chuck
6 years ago

Patrick, re: ‘enforced in the West’

1) I was referring to AUS. I have never read of money laundering court cases, let alone convictions.
2) the HSBC 1.25B fine is a cost of doing business, which, btw, is not borne by the perpetrators [executives, who keep their jobs], but, rather, hapless shareholders. It should have been delicensed, and executives arraigned, tried & convicted.
3) If you think 2) above is crazy, that’s exactly what the UK gov’t did in the early nineties with BCCI [look up Sandstone Rpt]

Patrick
Patrick
6 years ago

Hmm. First, on Aus, AUSTRAC issues “infringement notices” once a week or so: http://www.austrac.gov.au/enforcement-action/infringement-notices-issued-austrac

Again, these raise the question as to whether someone should be going to jail, but if you read what most of these are actually about, I suspect you will agree that in the vast majority of cases they shouldn’t. Again, that is however a worthy, albeit separate, discussion.

Second, I’m not sure I would pick BCCI as a case study. No-one is suggesting that HSBC or any other major bank is guily of widespread fraud in the manner of BCCI.

The collapse of BCCI triggered 25 years of litigation spanning dozens of cases in at least four jurisdictions, the biggest of which was the bank’s creditors suing the Bank of England for inadequately regulating the bank.

Not what I would pick for the model of how to enforce bank rules,

Crocodile Chuck
Crocodile Chuck
6 years ago
Patrick
Patrick
6 years ago

Happy to spare you the technicalities, even if I’m not sure what technicalities you are referring to!

And yes, I take your point. You do agree that AML is pretty solidly enforced, but you take issue with the fact that white-collar crime, and especially banking regulation crimes, tend not to be enforced by individual prosecutions and jail time, which reinforces a culture of impunity.

I agree that this is a problem, and I think that more senior bank executives, as well as trading-floor level employees (in the LIBOR and other market-rigging contexts, for example) should be personally prosecuted.

I still don’t see what HSBC is accused of as being the same what BCCI was accused of. At the risk of embarrasing myself by getting something wrong, BCCI’s “faults” were less about AML etc, and much more about the bank’s actual controls and ability to know where whose money actually was at any given point in time, or ever. That is, BCCI was fundamentally failing to function as a bank.

To my understanding, HSBC’s, and BNP’s, and most of the large banks’ faults that those articles are referring to are more about AML etc and much less about their ability to account for the money. That is, no-one is alleging that they are unable to function as a bank, but only that they are unable to limit their functioning as a bank according to a particular concept of allowable customers. This also includes stuff like the mortgage cases in the US, and the tax secrecy stuff.

So they are qualitatively different, which suggests that the BCCI solution, which as you are aware was incredibly costly and complex, may not be the right solution for these problems.

Crocodile Chuck
Crocodile Chuck
6 years ago

“So they are qualitatively different, which suggests that the BCCI solution, which as you are aware was incredibly costly and complex, may not be the right solution for these problems” [snip]

Well, insufficiently costly & complex, in terms of incenting the UK regulators & parliament, to not only allow such a corrupt pustule to regrow in the banking sector, but to achieve a balance sheet size an order of magnitude greater than the original! [BCCI]

Well played, gentlemen! [being, Messrs. Blair, Brown, Cameron]

Pat, where I’m from the outline solution is clear: Hang ’em high

What about you?

Patrick
Patrick
6 years ago

Well, to be clear I am not a supporter of capital punishment for white collar crimes, or indeed for any crimes other than aggravated rape, murder, abduction and child sexual offences.

But I am very uneasy with several aspects of the current approach, and in particular, the prevalence of fines and deferred- and non-prosecution agreements and settlements as a “short cut” to enforcement “wins”. Judge Rakoff of the Southern District Court of New York (one of America’s two major first-instance commercial courts, the other being Delaware’s Chancery Court) has perhaps been the most vocal judicial critic of these, but there are more: http://www.huffingtonpost.com/2011/12/22/sec-settlement-judge-koss_n_1165792.html

The most salient point that gets made in these criticisms is that, not only do the actual people who committed offences get off unpunished, the people who wear the cost of the punishment are the current shareholders. Whilst this might be justified in that it should incentivise shareholders to require stricter controls, that seems to me far too weak a mechanism to rely on.

I would like to see individuals who actually do the wrong thing, as well as those with oversight responsibility for them, prosecuted and face serious penalties including, at the least, remuneration clawbacks or penalties calculated with reference at least in part to their remuneration.

I would also like to see the hardship rules redefined so that these people could well be forced to sell their house and downsize to a mere 100sqm apartment, and their estranged wives likewise. They never deserved the money in the first place and we should have no shame in stripping it back off them, they can always rely on welfare if they really have to.

Patrick
Patrick
6 years ago
Reply to  Patrick

And here is a recent speech by a US financial law enforcement official which towards the end touches on the politically correct reasons why they prefer NPAs and DPAs (needless to say he doesn’t rely too much on the fact that they are just easier):

DPAs and NPAs are useful enforcement tools in criminal cases. Through those agreements, we can often accomplish as much as, and sometimes even more than, we could from a criminal conviction. We can require improved compliance programs, remedial steps or the imposition of a monitor. We can require that the banks cooperate with our ongoing investigations, particularly in our investigations of individuals. We can require that such compliance programs and cooperation be implemented worldwide, rather than just in the United States. We can require periodic reporting to a court that oversees the agreement for its term. These agreements can enable banks to get back on the right track, under the watchful eye of the Criminal Division and sometimes a court.

http://www.justice.gov/opa/speech/assistant-attorney-general-caldwell-delivers-remarks-acams-anti-money-laundering

He even has examples of actual imprisonment!