The VLRC was asked to assess the risks of organised crime infiltration of lawful industries.

Organised crime is a recurring topic for the legal profession, law enforcement agencies and policy makers. It is now recognised that organised crime groups have made the infiltration of lawful occupations and industries an important strategy. Infiltration may facilitate illicit activities or provide new opportunities for profit-making or money laundering.

The use of regulatory regimes, such as licensing schemes, is one method of tackling infiltration. In October 2014, the then Attorney-General Robert Clark asked the Victorian Law Reform Commission (VLRC) to review the use of regulatory regimes to help prevent criminal organisations entering into or operating through lawful occupations and industries. The VLRC report was delivered in February 2016.

The VLRC was asked to establish a framework of principles for assessing the risks of organised crime infiltration of lawful occupations and industries, and for developing suitable regulatory responses. The report contains pragmatic, general guidance that policy makers can apply to any particular industry or occupation that may be vulnerable. The report addresses systemic issues, not individual criminality.

Under the terms of reference, the concept of infiltration involves both the entry of organised crime groups into a lawful occupation or industry and the operation of organised crime groups through a lawful occupation or industry. Operating through an occupation or industry includes the use of professionals and specialist service providers by organised crime groups.

Overarching principles

The report sets out six overarching principles that should guide a regulatory response to organised crime infiltration, including:

• government agencies should seek to maximise information sharing, including through a centralised information-sharing mechanism.
• a regulatory regime should promote good administrative decision making. Regulatory agencies should guard against the corruption of staff by organised crime groups, and the regulatory regime should strike an appropriate balance between the protection of sensitive criminal intelligence and the oversight of decisions which rely on that intelligence.

Risk factors

The report provides a list of high-level risk factors for infiltration, divided into five broad groups:

• factors that facilitate the commission of crime – such as where an occupation or industry provides access to materials that can be used to commit crime or opportunities to distribute illicit goods or services
• factors that enable criminals to maximise profits or exploit competitive advantages, such as low barriers to entry, access to government subsidies and opportunities to unfairly undercut market prices
• factors that enable criminals to conceal or launder the proceeds of crime
• factors indicating that the occupation or industry has insufficient external or internal “guardians” who can help detect wrongdoing and maintain high industry standards – such as where complex supply chains and outsourcing arrangements complicate regulatory oversight
• where the occupation or industry has a history of organised crime infiltration.

This section of the report also reviews the potential for professional facilitators, including lawyers, to be used by organised crime groups for illicit purposes.

Strategies for reducing the risk of infiltration

The report identifies four main strategies for reducing the risk of infiltration:

• Assessing the existing regulatory regime and identifying any barriers to its use.
• Restricting entry into an occupation or industry through a licensing scheme. The report emphasises that a licensing scheme should not be a default response to infiltration, and sets out the factors that should be considered in deciding whether a licensing scheme is appropriate. This section also contains practical guidance about the key factors that should be assessed in determining probity and suitability under a licensing scheme, including the need to identify the beneficial owners of corporate licence applicants.
• Regulating post-entry behaviour in an occupation or industry. This is as important as any restrictions on entry, and may include ongoing monitoring of probity and suitability, customer and supplier due diligence measures, record-keeping requirements, restrictions on cash-based transactions and controls on coercive conduct.
• Addressing the use of professional facilitators through the use of professional ethics education and support measures, customer due diligence measures and accessorial liability measures.

The report provides guidance about the implementation of any regulatory response, including the factors to consider in choosing which agencies should administer the response, and useful enforcement measures.

The VLRC anticipates that policy makers will apply this guidance to specific vulnerable industries and occupations.

Read the full report Use of Regulatory Regimes in Preventing the Infiltration of Organised Crime into Lawful Occupations and Industries at www.lawreform.vic.gov.au.

This column is contributed by the VLRC. For further information ph 8608 7800 or see www.lawreform.vic.gov.au.