AUSTRAC Turns Up The Heat On Small Business

Austrac kicked off the week with a press release noting that its remedial actions were up 104%. The regulator issued 1,140 requirements for remedial action and 491 recommendations to address non-compliance last financial year.   New CEO John Schmidt followed up with a warning to all reporting entities that Austrac is about to get tough on those that failure to comply with the AML/CTF Act.   To enforce his point, on Thursday, Austrac issued a press release advising that it had issued its first remedial direction for non-compliance against a small remittance service provider.  Mr Schmidt warned “other small businesses should also note that AUSTRAC’s enforcement activity will extend beyond large, well-known financial institutions”.

ASIC Pursues Former Firepower Boss Tim Johnston

Remember the Austrade backed “fuel pill” that was going to change the world.   Firepower must be one of the most audacious frauds in Australia’s corporate history with celebrity investors fleeced of over $100,000,000 as ASIC sat back and did absolutely nothing, despite whistleblowers screaming from the hill tops.  Remarkably its mastermind Tim Johnston simply upped and left Australia and has been living in Europe for the past few years apparently untouchable by Australian authorities.

In a move that caused Firepower liquidator Bryan Hughes to remark ”maybe .. he is cocky.. maybe his is incredibly stupid. I really don’t know” Johnston flew back into Australia last week only to have his passport confiscated.   This will be a great side show to watch in coming months / years.

Class Action Action

Last week we noted that the Multiplex decision was a nice technical point that wouldn’t affect the long term viability of class actions.   These words bore fruit this week when ASIC stepped in and exempted lawyers and litigation funders from having to register as managed investment schemes. It seems however that you just can’t hold a good lawyer down, when it comes to arguing technical points, because as soon as ASIC made its move AWB’s lawyers pick up on the fact the Legal Profession Act (NSW) prevents lawyers from running managed investment schemes and are again challenging the validity of the action not withstanding the ASIC exemption.  All good stuff from AWB’s lawyers however, just maybe, if AWB had focused on getting its corporate governance house in order they wouldn’t be in this mess in the first place.

In other class action news:

  • Litigation funder IMF announced this week that it expected to achieve a 15% increase in profits and that it is now targeting an “investment portfolio” (that’s class action claim value) of $2 billion by June 30 2011.  That’s more than double the annual value of annual Director & Office insurance premiums just on IMF’s books.   You don’t have to be Einstein to work out where this is all heading.
  • Centro have set up a “special matters committee” just to deal with the ASIC and class action claims the company, its directors and executives are facing.    Apparently these claims have been distracting the board from attending to day to day business.  Funny that.
  • Finally, late last week, the Commonwealth and State Attorney’s General agreed to a federal government review to consider whether or not ASIC should regulate litigation funders.

Commonwealth and States to Review of Director’s Liability Provisions

Federal and State governments have agreed on a set of principles by which all states and territories will audit their legislative provisions that deal with the personal liability of company directors, as the next step towards achieving consistency of laws across Australia.  Upon completion of the audit, the next step for all jurisdictions will be to move to amend any laws that do not adhere to the agreed principles.

8 November 2009