Financial Sector Reform (Hayne Royal Commission Response No 3) Bill 2021 [2022] AUSStaCSBSD 37 (18 March 2022)

• Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021
• Reversal of evidential burden of proof29

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Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021

Purpose	Schedule 1 and 2 to this bill make consequential amendments to relevant Acts to support the new Financial Accountability Regime. Schedule 3 to this bill is part of a package that seeks to introduce the "compensation scheme of last resort". The scheme will provide compensation where a determination issued by Australian Financial Complaints Authority remains unpaid and the determination relates to a financial product or service within the scope of the scheme. The scheme is intended to support confidence in the financial system's external dispute resolution framework.
Portfolio	Treasury
Introduced	House of Representatives on 28 October 2021
Bill status	Before the House of Representatives

Reversal of evidential burden of proof^[29]

2.51 In Scrutiny Digest 17 of 2021 the committee requested the Treasurer's advice as to why it is proposed to use offence-specific defences (which reverse the evidential burden of proof) in this instance. The committee's consideration of the appropriateness of a provision which reverses the burden of proof is assisted if it explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences.^[30]

Treasurer's response^[31]

2.52 The Treasurer advised:

The bill amends the secrecy regime contained in the Australian Prudential Regulation Authority Act 1998 and the Australian Securities and Investments Commission Act 2001 to include information collected under the Financial Accountability Regime. Both Acts contain pre-existing secrecy regimes which make it a breach of the statute or a criminal offence for an individual who has been employed by ASIC or APRA to disclose information they received in the course of their duties, unless certain exemptions apply. Generally, the defendant, who is the individual who discloses the information, is under an evidential burden to raise a relevant exemption (see section 56 of the Australian Prudential Regulation Authority Act 1998).
The relevant exemptions inserted for the Financial Accountability Regime are exemptions where:
- the disclosure is of information on the register to an accountable entity under 56(7G);
- the disclosure is of personal information on the register to the person to whom the information relates under 56(7H);
- the disclosure relates to whether a regulator has disqualified an individual under the regime under 56(7J); and
- the disclosure is the sharing of information between APRA and ASIC under 56(7K) or 56(7L).
The exemptions are for the most part replications of pre-existing exemptions under the Banking Executive Accountability Regime under Part IIAA of the Banking Act 1959, with the addition of the information sharing exemption. This approach ensures continuity of the regimes.
Subsection 13.3(3) of the Criminal Code Act 1995 provides that a defendant who wishes to rely on any exception, exemption, excuse, qualification or justification bears an evidential burden in relation to that matter. Consistent with this, the defendant bears an evidential burden of proof to exercise the offence-specific defence in the proposed subsections 56(7G) to (7L) of the Australian Prudential Regulation Authority Act 1998. This approach is justified as the information subject to the provisions would be peculiarly within the knowledge and control of the defendant, and to preserve the integrity of the Financial Accountability Regime.
The Financial Accountability Regime requires accountable entities in the banking, insurance and superannuation industries to disclose highly sensitive and confidential information in relation to their businesses to APRA and ASIC (see clause 31 of the bill). This information could include information about the internal affairs and structures of the business, lines of accountability between the businesses most senior executives and directors, or information about the wrongdoing of the businesses senior executives and directors that has given rise to prudential risks which could affect the broader Australian economy. This means it is essential for the efficacy of the Financial Accountability Regime that individuals employed by APRA and ASIC who receive information under the regime are subject to strict controls in relation to their treatment of this information.
An individual employed by APRA and ASIC who discloses information obtained under the Financial Accountability Regime, in a situation which could potentially breach their secrecy obligations, is in the best position to assess what exemptions might apply to their conduct.
It is reasonable to place the evidential burden upon an individual in this circumstance to raise a relevant exemption from the secrecy regime. The situation surrounding the disclosure would be peculiarly within the person's own knowledge and control as they would be aware of the information they disclosed, and the recipient, and the manner and purpose for which it was disclosed. In contrast, requiring the prosecution to eliminate all possible exemptions beyond reasonable doubt could be difficult and costly in terms of time and resources, and could undermine the effectiveness of the secrecy regime which is essential to the functioning of the regime. As such, consistent with the Guide to framing Commonwealth offences, an evidential burden has been placed on the defendant in the proposed subsections 56(7G) to (7L) of the Australian Prudential Regulation Authority Act 1998.
Placing the evidential burden of proof on the defendant is also justified as it aligns with the approach taken in other similar frameworks. For example, it is consistent with the treatment of other protected information collected by APRA under the predecessor regime to the Financial Accountability Regime, the Banking Executive Accountability Regime under Part IIAA of the Banking Act 1959 (see section 56 of the Australian Prudential Regulation Authority Act 1998). Similarly, an evidential burden of proof exists in relation to the other prudential frameworks which interact with the regime including a matter raised under section 11CI of the Banking Act 1959, section 109A of the Insurance Act 1973, section 231A of the Life Insurance Act 1995. Consistency of approach across this complex legal framework is important to support understanding and application of the law.

Committee comment

2.53 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that provisions within the bill which reverse the evidential burden of proof in relation to offences within the Australian Prudential Regulation Authority Act 1998 and the Australian Securities and Investments Commission Act 2001 are justified because they align with the approach taken in other similar frameworks. The Treasurer advised that consistency of approach is important to support understanding and application of the law.

2.54 The Treasurer further advised that reversing the evidential burden of proof is justified in this instance as the relevant information would be peculiarly within the knowledge and control of the defendant. For example, the Treasurer advised that the situation surrounding disclosure of protected information would be peculiarly within the defendant's own knowledge as they would be aware of the information they disclosed, the recipient, and the manner and purpose for the disclosure. The Treasurer advised that requiring the prosecution to eliminate all possible exemptions beyond reasonable doubt could be difficult and costly and could undermine the effectiveness of the secrecy scheme underpinning the financial accountability regime.

2.55 While acknowledging this advice, it is not clear to the committee from the explanation provided how it can be said that the relevant matters could be peculiarly within the defendant's knowledge. For example, as previously noted by the committee, it would appear that whether information had been shared between APRA and ASIC in accordance with clause 39 of the Financial Accountability Regime Bill 2021 would be a matter that the prosecution could readily ascertain. In addition, the committee notes that consistency with existing legislation is not a sufficient justification for reversing the evidential burden of proof.

2.56 The committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of reversing the evidential burden of proof in relation to several defences to secrecy offences in circumstances where the relevant matters do not appear to be peculiarly within the knowledge of the defendant.

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[29] Schedule 1, item 10, proposed subsections 56(7G), (7H), (7J), (7K), (7L); item 17, proposed subsection 127(7A). The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(i).

[30] Senate Scrutiny of Bills Committee, Scrutiny Digest 17 of 2021, pp. 22-24.

[31] The Treasurer responded to the committee's comments in a letter dated 15 February 2022. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 2 of 2022 available at: www.aph.gov.au/senate_scrutiny_digest.