21 November 2024

Recruitment

'Screened Out: The Impact of Digitized Hiring Assessments on Disabled Workers' (CDT, 2024) by Michal Luria, Matt Scherer, Dhanaraj Thakur, Ariana Aboulafia, Henry Claypool, Wilneida Negrón comments 

companies have incorporated hiring technologies, including AI-systems (AEDSs), into various stages of the hiring process across a wide range of industries. While proponents argue that these technologies can aid in identifying suitable candidates and reducing bias, researchers and advocates have identified multiple ethical and legal risks that these technologies present, including discriminatory impacts on members of marginalized groups. This study examines some of the impacts of modern computer-based assessments (“digitized assessments”) — the kinds of assessments commonly used by employers as part of their hiring processes — on disabled job applicants. The findings and insights in this report aim to inform employers, policymakers, advocates, and researchers about some of the validity and ethical considerations surrounding the use of digitized assessments, with a specific focus on impacts on people with disabilities. 
 
Methodology 
 
We utilized a human-centered qualitative approach to investigate and document the experiences and concerns of a diverse group of participants with disabilities. Participants were asked to complete a series of digitized assessments, including a personality test, cognitive tests, and an AI-scored video interview, and were interviewed about their experiences. Our study included participants who identified as low vision, people with brain injuries, autistic people, D/deaf and/or hard of hearing people, those with intellectual or developmental disabilities, and those with mobility differences. We also included participants with diverse demographic backgrounds in terms of age, race, and gender identity. 
 
The study focused on two distinct groups: (1) individuals who are currently working in, or intend to seek, hourly jobs, and (2) attorneys and law students who have sought or are likely to seek lawyer jobs. By studying these groups, we aimed to understand potential impacts of digitized assessments on workers with roles that require different levels of education and experience. 
 
Findings 
 
Disabled workers felt discriminated against and believed the assessments presented a variety of accessibility barriers. Contrary to the claims made by developers and vendors of hiring technologies that these kinds of assessments can reduce bias, participants commonly expressed that the design and use of assessments were discriminatory and perpetuated biases (“They’re consciously using these tests knowing that people with disabilities aren’t going to do well on them, and are going to get self-screened out”). Participants felt that the barriers they grappled with stemmed from assumptions made by the designers in how assessments were presented, designed, or even accessed. Some viewed these design choices as potentially reflective of an intent to discriminate against disabled workers. One participant stated that it “felt like it was a test of, ‘how disabled are you?’” Not only that, participants generally viewed the assessments as ineffective for measuring job-relevant skills and abilities. 
 
Participants were split on whether these digitized assessments could be modified in a way that would make them more fair and effective. Some participants believed the ability to engage in parts of the hiring process remotely and asynchronously could be useful during particular stages, if combined with human supervision and additional safeguards. Most, however, did not believe that it would be possible to overcome the inherent biases against individuals with disabilities in how assessments are used and designed. As one participant put it “We, as very flawed humans, are creating even more flawed tools and then trying to say that they are, in fact, reducing bias when they’re only confirming our own already held biases.” 
 
Given the findings of this study, employers and developers of digitized assessments need to re-evaluate the design and implementation of assessments in order to prevent the perpetuation of biases and discrimination against disabled workers. There is a clear need for an inclusive approach in the development of hiring technologies that accounts for the diverse needs of all potential candidates, including individuals with disabilities. 
 
Recommendations 
 
Below we highlight our main recommendations for developers and deployers of digitized assessments, based on participants’ observations and experiences. Given the harm these technologies may introduce, some of which may be intractable, the following recommendations set out to reduce harm rather than eliminate it altogether. 
 
Necessity of Assessments: Employers should first evaluate whether a digitized assessment is necessary, and whether there are alternative methods for measuring the desired skills with a lower risk of discrimination. If employers select to use digitized assessments, they should ensure that the assessments used are fair and effective; that they measure skills or abilities directly relevant to the specific job, and that they can do so accurately. 
 
Accessibility: Employers must ensure assessments adhere to existing accessibility guidelines, like the Web Content Accessibility Guidelines (WCAG)1 or initiatives of the Partnership on Employment and Accessible Technologies (PEAT), and that the selected assessments accommodate and correctly assess the skills of disabled workers with various disabilities. 
 
Implementation: For effective, fair, and accessible assessments, employers can take additional steps to potentially reduce biases by implementing significant human oversight in all assessment processes, using assessments to supplement, not replace, comprehensive candidate evaluations, and being transparent about when and how assessments are used.

The Impact of Digitized Hiring Assessments on Disabled Workers  

“It was soul crushing [...] AI is great and all, but these are people’s lives.” – Reaction of an interviewee after completing a series of hiring assessments 

The recent proliferation of artificial intelligence (AI) and other automated technologies and tools has permeated many companies’ business practices and workflows, including recruitment and hiring processes. Successfully hiring employees is a challenging and time-consuming task, and many employers have turned to technology to automate parts of the process. Proponents argue that such automation can help with collecting, screening, and recommending job candidates. However, some candidates may be marginalized by this automation, including people with disabilities. In this report we focus on the impacts of computer-based assessments – specifically AI-scored video interviews, gamified personality evaluations, and cognitive tests – on disabled people. 

The Integration of Technology in Hiring  

Technology has been incorporated into nearly every stage of the hiring process (Rieke & Bogen, 2018), from targeting advertisements for jobs, to collecting and screening applications and conducting interviews. While AI-powered assessments and other automated employment decision systems (AEDSs) have drawn attention from both the media and advocates, modern hiring technologies can take many forms and can be used in many different ways. They include gamified tests, assessments that rely on facial recognition and analysis, and computerized or algorithmic versions of assessments that have long been used by employers in hiring processes (like personality tests, cognitive tests, and more) (Mimbela & Akselrod, 2024). 

While the lack of transparency regarding companies’ use of technology in hiring and the lack of regulation of such technologies make it hard to precisely quantify the prevalence of these hiring technologies, various surveys and studies indicate that their use is widespread. For example, the chair of the Equal Employment Opportunity Commission suggested that “some 83% of employers, including 99% of Fortune 500 companies, now use some form of automated tool as part of their hiring process” (Hsu, 2023). Another survey noted that 76% of companies with more than 100 employees use personality tests, and that employers are turning to algorithms to administer and analyze the tests at a larger scale (Brown et al., 2020). The developers and vendors of AI-integrated hiring technologies claim that their tools can help employers identify the applicants that are the best fit for a given job, help sort and organize candidates (ACLU, 2024), and potentially even reduce bias in the hiring process (Savage & Bales, 2016; Raghavan et al., 2020). In contrast to the claims of vendors, research shows that the use of modern hiring technologies can introduce a range of ethical and legal risks (Rieke & Bogen, 2018), including privacy risks (Kim & Bodie, 2020) and a high risk of enabling employment discrimination based on race (Gershgorn, 2018), gender (Dastin, 2018), disability (Brown et al., 2020; Glazko et al., 2024), and other characteristics, including through perpetuating implicit bias (Persson, 2016). 

In addition to discrimination concerns, the use of these technologies also raises questions around effectiveness. Many modern computer-based employment assessments assess skills or traits that are not necessary for some jobs (Akselrod & Venzke, 2023). For example, personality assessments measured general traits like positivity, emotional awareness, and liveliness (ACLU, 2024). Such characteristics are not clearly linked to most job functions, and risk screening out workers with autism or mental health conditions, like depression and anxiety. 

Further, these kinds of assessments may not be able to meaningfully measure or predict the skills and qualities they purport to assess in the first place (Stark et al., 2021; Birhane, 2022). For example, recent research shows the validity of cognitive ability tests for predicting future job performance ratings has been substantially overestimated for several decades (Sackett et al., 2022). It has also long been established that cognitive ability tests often have adverse impacts based on race (Outtz & Newman, 2009; Cottrell et al., 2015). 

Job seeking has long been a process riddled with barriers for people with disabilities for a number of reasons, including ableist norms about desired qualities of a worker, choices disabled people have to make about whether to disclose their disabilities, and approaches to evaluating and communicating with applicants that don’t account for their disabilities (Fruchterman & Mellea, 2018; Bonaccio et al., 2020). Despite significant gains since the passage of the Americans with Disabilities Act in 1991, the participation rate of disabled individuals within the labor force is approximately half that of non-disabled individuals, and the unemployment rate for disabled workers is roughly double that of non-disabled workers (National Trends in Disability Employment, 2024; Bureau of Labor Statistics, 2024). 

The use of modern hiring technologies, including those that use AI as part of the assessment or scoring process, may create even more barriers. AI systems often fail to account for the needs, experiences, and perspectives of disabled people (Brown et al., 2020; Williams, 2024). For example, a recent study found that résumé sorters incorporating OpenAI’s GPT-4 exhibited prejudice in rankings if they contained activities or awards suggesting the candidate had a disability (Glazko et al., 2024). These and other issues can lead to a variety of negative consequences for disabled workers (Fruchterman & Mellea, 2018; Bonaccio et al., 2020). 

Some of these barriers stem from the fact that disabled workers’ needs are often overlooked in the design and evaluation of selection procedures, both those that leverage automation or AI and those that do not (Papinchock et al., 2023). This is especially likely to happen when hiring procedures and technologies are designed without input from disabled workers and disability experts, and thus do not consider the full range of people who may use a new technology or feature (Brown et al., 2020). Examples include systems that rely on facial recognition or automated analysis of interactions with a computer (Rieke & Bogen, 2018), or automated systems designed to recognize and analyze speech. These kinds of systems are commonly used to power video interviewing systems in hiring, and have been shown to perform worse for speakers with a variety of disabilities (Tu et al., 2016; Glasser et al., 2017; Hidalgo Lopez et al., 2023). 

While there is clear evidence of the harms certain hiring technologies can have, including for disabled workers, there is a need for more research examining the extent and nature of hiring technologies’ impacts on jobseekers with disabilities. In particular, we identified a gap in research regarding the multi-faceted experiences of disabled workers in engaging with modern hiring technology, as well as in understanding how hiring tools may have different impacts on job seekers with different kinds of disabilities. In this research report we contribute to addressing this gap by examining the experiences of people with disabilities with certain kinds of digitized assessments. In particular, the focus of this report is on the impact of computer-based hiring assessments — including personality testing, cognitive tests, and an AI-scored video interview (hereafter referred to collectively as “digitized assessments”) — on disabled workers.

17 November 2024

Weapons

Advancing the Legal Review of Autonomous Weapon Systems: Report of an Expert Meeting (Sydney, 16–18 April 2024) by Renato Wolf, Lauren Sanders, Rain Liivoja, Natalia Jevglevskaja and Netta Goussac states 

This Report provides a summary of an expert meeting on the legal review of autonomous weapons systems (‘AWS’), which was convened by the Directorate of Operations and International Law, Australian Defence Force, in Sydney in April 2024 (‘Expert Meeting’), and chaired by Colonel Damian Copeland. This Meeting was the second such meeting, building upon the inaugural Expert Meeting (‘First Meeting’) which took place in Sydney in March 2023. The Expert Meeting was attended by governmental and non-governmental experts from eight States (Australia, New Zealand, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States). Since the First Meeting, the discussion about the utility of the conduct of legal reviews has intensified in multilateral fora, most notably within the Group of Governmental Experts on Emerging Technologies in the Area of Lethal Autonomous Weapons Systems (‘GGE’), mandated by the High Contracting Parties (‘HCPs’) to the Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons Which May Be Deemed to Be Excessively Injurious or to Have Indiscriminate Effects (‘CCW’). This enhanced focus has been reflected in academic discourse, and is in part a result of operationalisation by those States that have adopted military technologies that incorporate autonomy. This Meeting provided an opportunity to review the progress of international discourse about the regulation of AWS generally, as well as how legal reviews have featured in that debate. A summary of this update is included in Part 2 of this report. 

This focus of the current international debate aligns with the general rationale for this Expert Meeting. Legal reviews of AWS are a method to assess a State’s ability to comply with and implement international law but they can also function as a confidence building measure when States share information about the conduct and process of legal reviews. Accordingly, a stated aim of this Meeting was to enhance State cooperation through the sharing of practices as they relate to the legal review of AWS. This was achieved on the first day of the Meeting, by governmental experts providing updates and further information about their national practices as they pertain to the conduct of legal reviews, and the review of AWS and, autonomous or AI-enabled capabilities more generally (referred to as ‘military AI, or ‘MAI’ hereafter). A summary of these practices is included in Part 3 of this report. 

Separate to enhancing State information sharing in undertaking legal reviews of AWS, this Meeting undertook to again reflect upon the specific practices related to the conduct of legal reviews that may require adjustment to account for the challenges presented by AWS, and the introduction of artificial intelligence (AI) and autonomy into military capabilities, more generally. A number of themes emerged from this discussion. They are:

• legal reviews in the context of other processes; • lexicon with definitions of key terms; • legal reviews of weapons / means and legal review of methods; • legal review as a process compared to legal reviews as an outcome; • multi-disciplinary approach to legal reviews; • security of AWS; • the role of industry in the legal review of AWS; and • information-sharing and transparency in the legal review of AWS. 

These themes are addressed in Part 4 of the Report. 

In spite of this invigorated focus on legal reviews, the practice of legal reviews by States, either in satisfaction of their legal obligation under article 36 of Additional Protocol I to the Geneva Conventions (‘AP I’), or as a matter of policy, remains far from universal. In addition to the confidence building function undertaken in relation to the sharing of State-specific practices, the second iteration of this meeting has worked to consolidate an international community of practice of like-minded States (and their representatives), and practitioners from industry and academia, who are building the corpus of knowledge about the methods by which the challenges presented by AWS in conducting a sufficiently robust legal reviews, can be overcome. This community of practice has also contributed to discussion and understanding of Elements of Good Practice in the review of AWS, which is addressed separately to this report (see Part 5, regarding next steps).

14 November 2024

AML/CTF, proof and the legal profession

The report by the Senate Legal and Constitutional Affairs Legislation Committee on the Anti-Money Laundering and Counter- Terrorism Financing Amendment Bill 2024 features the following recommendations 

1 The committee recommends that the bill be amended to move the commencement of the ‘tipping off’ offence to 31 March 2025. 

2   The committee recommends that the bill be amended to include a note that reflects the policy intent for the AML/CTF regime to not capture barristers acting on the instructions of a solicitor. 

3 The committee recommends the bill be amended to ensure entities providing custodial, depository or safe deposit box services without associated transaction elements are not unintentionally captured by the AML/CTF regime. 

4   The committee recommends that the bill be amended to ensure uniform exemptions for item 54 entities from governing body requirements. 

5   The committee recommends that the bill be amended to move the criteria for ordering institutions and beneficiary institutions to the AML/CTF Rules to increase flexibility and allow for further consultation with industry. 

6 The committee recommends that the bill be amended to ensure that where a civil penalty is being considered, there is a clear connection to the customer that should have been subject to customer due diligence, by amending s28 and s30 to read ‘the customer’ instead of ‘a customer’. 

7 The committee recommends the bill be amended to ensure that where a reporting entity has previously provided delayed verification in a defective way, it can provide a designated service to a customer once any non- compliance has been remedied. 

8 The committee recommends the bill be passed, subject to the above amendments.

 The report states

The bill’s purpose is set out in the Explanatory Memorandum as follows: Australia’s AML/CTF regime establishes a regulatory framework for combatting money laundering, terrorism financing and other serious financial crimes. At its core, the AML/CTF regime is a partnership between the Australian Government and industry. Through the regulatory framework, businesses play a vital role in detecting and preventing the misuse of their sectors and products by criminals seeking to launder money and fund terrorism. The reforms in the Bill would ensure Australia’s AML/CTF regime continues to effectively deter, detect and disrupt illicit financing, and protect Australian businesses from criminal exploitation. The reforms would improve the ability of Australian national security and law enforcement agencies and the Australian Transaction Reports and Analysis Centre (AUSTRAC), as the AML/CTF regulator and Financial Intelligence Unit, to target illicit financing. This will impact the ability of transnational, serious and organised crime groups to invest their illicit funds into further criminal activities in Australia and our broader region. 

1.4 In addition, the Explanatory Memorandum states that the bill would bring Australia’s AML/CTF framework into line with international standards set by the Financial Action Task Force (FATF), the global financial crime body, of which Australia is a founding member: The FATF Standards...are a comprehensive framework of measures to combat money laundering, terrorist financing and proliferation financing. These standards set an international benchmark for countries to implement and adapt to their legal, administrative and operational frameworks and financial systems. The FATF Standards are regularly revised to strengthen requirements and adapt to emerging crime trends and threats. 

1.5 According to the Explanatory Memorandum, the three key objectives of the bill are:  to extend the AML/CTF regime to certain high-risk services provided by lawyers, accountants, trust and company service providers, real estate professionals, and dealers in precious metals and stones—also known as ‘tranche two’ entities  to improve the effectiveness of the AML/CTF regime by making it simpler and clearer for businesses to comply with their obligations, and  to modernise the regime to reflect changing business structures, technologies and illicit financing methodologies.5  

1.6 In his second reading speech, the Attorney-General, the Hon Mark Dreyfus MP, stated that the bill would make significant and timely reforms to the AML/CTF Act that was established in 2006. The Attorney-General commented that in introducing this AML/CTF framework, the then-Coalition government committed to undertaking a second tranche of reforms, which were not subsequently delivered, and that: [The bill] delivers on the Albanese government's commitment to protecting Australians from the serious harm caused by criminals. The bill will bolster Australia's anti-money laundering and counter-terrorism financing regime to prevent criminals from hiding their illicit profits and funding illegal activities. It will also stop funds from falling into the hands of terrorists and disrupt activities of authoritarian and corrupt regimes. The reforms in this bill are long overdue. The former government's inaction has led to significant regulatory gaps and vulnerabilities. We are acting now to make sure that Australia stops being an attractive destination for illicit financing. 

Inclusion of new high-risk services 

1.7 The bill would introduce new designated services into the AML/CTF Act, so that lawyers, accountants, real estate agents, precious stone dealers and other professionals that provide such services are required to comply with AML/CTF obligations. 

1.8 The Attorney-General’s Department (AGD) submitted that money laundering strategies are constantly evolving to take advantage of changes, both in Australia and internationally. It stated that current regulatory gaps left certain services and products unregulated, including ‘tranche two’ entities: ...such as lawyers, accountants, trust and company service providers, real estate professionals and dealers in precious metals and stones. Such services are globally recognised as being high-risk for money laundering. 

Improving the AML/CTF framework and meeting our international obligations 

1.9 As well as providing regulators and law enforcement with more information for their oversight and investigation work uncovering criminal activity, the AGD noted that the bill’s reforms would ‘better protect Australian businesses, communities and the economy from criminal exploitation’, and provide them ‘with the necessary tools to identify and report suspicious behaviour’. 

1.10 The AGD noted the bill would improve Australia’s compliance with FATF standards in other ways, including:  clarifying risk assessment requirements  aligning with the FATF principles for foreign branches and subsidiaries  clarifying the availability of simplified CDD where the money laundering or terrorism financing risk of the customer is low  better aligning the requirements for politically exposed persons in the AML/CTF Act and AML/CTF Rules with international standards  updating the CDD exemption for gambling services to align with FATF’s threshold, and  enhancing the transparency of value transfers involving virtual assets. 

1.11 The Explanatory Memorandum stated that the bill’s reforms would bring Australia’s AML/CTF frameworks into line with the international standards of the FATF, of which Australia is a founding member. 

1.12 The FATF is an intergovernmental group that sets and oversees the quality of implementation of AML/CTF and proliferation standards. Australia has been a member of the FATF since its inception in 1989, and currently takes on a leadership role, including as the chair of the Asia-Pacific Group on Money Laundering. 

1.13 FATF assesses the compliance of members with the mutually agreed standards. The Explanatory Memorandum states that these: ...are a comprehensive framework of measures to combat money laundering, terrorist financing and proliferation financing. These standards set an international benchmark for countries to implement and adapt to their legal, administrative and operational frameworks and financial systems. The FATF Standards are regularly revised to strengthen requirements and adapt to emerging crime trends and threats. 

1.14 The FATF assessment process includes ‘grey listing’ jurisdictions that have strategic deficiencies. The AGD submitted that the reforms in the bill would bring Australia into line with international best practice and improve compliance with FATF standards in certain areas where it is currently rated as ‘non-compliant’ (regulation of tranche two entities), or only ‘partially compliant’ (regulation of virtual asset services and value transfer transparency). 

1.15 The next FATF assessment of Australia’s compliance with these standards will be conducted over 2026-2027. 

Overview of the bill 

1.16 The bill contains 12 schedules, which this section will discuss briefly in turn. 

Schedule 1—AML/CTF programs and business groups 

1.17 The Explanatory Memorandum states that the current Act requires reporting entities to have programs that identify, mitigate and manage AML/CTF risks that they may face when providing a designated service. 

1.18 Schedule 1 of the bill would replace Part 7 of the current AML/CTF Act with: ...a set of outcomes-focused obligations that will ensure reporting entities undertake appropriate measures to mitigate and manage risk. This includes:  introducing new, flexible concepts for reporting entities that organise themselves into groups to manage risks more efficiently  clarifying the roles and responsibilities of a reporting entity’s governing body and its AML/CTF compliance officer, and  clarifying obligations for Australian companies operating overseas through a foreign branch of an Australian reporting entity, or a foreign subsidiary of an Australian parent company. 

Schedule 2—Customer due diligence 

1.19 Customer due diligence (CDD) is a foundational aspect of the AML/CTF regime, which requires reporting entities to identify and verify customer identity and associated persons, and understand and mitigate any risks associated with providing services to the customer. 

1.20 Schedule 2 would ‘reframe and clarify core requirements’ for initial and ongoing CDD–including enhanced CDD processes, and streamline where a simplified CDD may be used. 

Schedule 3—Regulating additional high-risk services 

1.21 This schedule expands the AML/CTF regime to certain services that are ‘recognised globally as high risk for money laundering exploitation’, including certain services: ...provided by gatekeeper professions: real estate professionals, dealers in precious metals and precious stones, and professional service providers, including lawyers, conveyancers, accountants and trust and company service providers (also known as ‘tranche two’ entities). 

Schedule 4—Legal professional privilege 

1.22 The Explanatory Memorandum states that: Schedule 4 would clarify the treatment of information subject to legal professional privilege for the purposes of the reporting and information disclosure obligations in the AML/CTF Act. Existing section 242 already provides that the AML/CTF Act does not affect the law relating to legal professional privilege. The Bill provides stronger protections for the disclosure of information or documents subject to legal professional privilege once legal practitioners are brought into the AML/CTF regime, in response to stakeholder feedback. These amendments preserve the core intention of the doctrine of legal professional privilege in both common law and statute, and ensure that regulated entities who handle client information that is subject to legal professional privilege can comply with their reporting and information disclosure obligations under the AML/CTF Act. 

Schedule 5—Tipping off offence and disclosure of AUSTRAC information to foreign countries or agencies 

1.23 Schedule 5 would make reforms to: ...the current prohibition against reporting entities ‘tipping off’ their customer about the formation of a suspicion. The new offence will focus on preventing the disclosure of suspicious matter report (SMR) information or information related to a notice issued under section 49 or 49B of the AML/CTF Act where it would or could reasonably prejudice an investigation. The new offence framework would be more flexible for reporting entities seeking to share information for legitimate purposes, including within reporting groups to manage risk and prevent further crime. 

Schedule 6—Services relating to virtual assets 

1.24 Schedule 6 would extend the AML/CTF regime to digital and virtual assets, which are ‘an increasingly popular conduit to represent, store and move value’, and have been identified as a money laundering framework vulnerability by AUSTRAC. 

1.25 This provision would also amend the current terminology of ‘digital currency’ to ‘virtual asset’, in line with FATF recommendations, to ‘ensure that the rapidly growing virtual asset sector is hardened against exploitation by criminals’. 

Schedule 7—Definition of bearer negotiable instrument 

1.26 Schedule 7 would clarify which monetary instruments are captured by the definition of a ‘bearer negotiable instrument’ and its subsequent reporting requirements. The Explanatory Memorandum states this is in response to industry concerns the current definition is too unclear and broad, and to maintain compliance with FATF standards. 

Schedule 8—Transfer of value and international value transfer services 

1.27 The Explanatory Memorandum states that: Schedule 8 would simplify and modernise the framework for electronic funds transfer instruction obligations, designated remittance arrangements and international funds transfer instruction (IFTI) reporting purposes. The amendments in Schedule 8 replace the previous funds transfer chain concept with an updated and simplified value transfer chain. Streamlining value transfer chains would reduce undue regulatory burden on industry. The value transfer chain concept will provide a framework for key AML/CTF reporting obligations for certain entities that transfer value on behalf of customers, like the travel rule and IFTI/international value transfer service reporting obligations. 

Schedule 9—Powers and definitions 

1.28 According to the Explanatory Memorandum, Schedule 9 introduces a number of new information gathering powers for AUSTRAC to monitor, investigate and enforce compliance with the AML/CTF regime. This includes: ...an examination power, an important investigatory tool to enable AUSTRAC to obtain relevant information needed to make enforcement decisions and obtain evidence to be used in proceedings, and additional notice to produce powers allowing AUSTRAC to gather information to assist with its financial intelligence functions. [and] updates to a number of definitions to respond to issues identified by the 2016 Statutory Review of the AML/CTF Act, AML/CTF Rules and the Associated Regulations, or where updates are otherwise required to modernise and simplify the AML/CTF regime. 

Schedule 10—Exemptions 

1.29 Schedule 10 would move exemptions from certain AML/CTF obligations (which can currently be made by the AUSTRAC CEO) from the AML/CTF Rules into the Act. This will allow for greater parliamentary scrutiny of appropriate exemptions from designated services.26 Schedule 11—Repeal of the Financial Transaction Reports Act 1988 1.30 This schedule repeals the FTR Act in its entirety, and makes consequential minor amendments to other Acts. According to the Explanatory Memorandum, this would streamline the AML/CTF regime by establishing a single source of obligations for industry. 

Schedule 12—Transitional rules 

1.31 According to the Explanatory Memorandum: Schedule 12 would provide a power for the Minister to make rules concerning any amendments introduced by this Bill. This modification power is limited to 4 years to address any unforeseen issues that may arise after the reforms commence and to accommodate the extensive time needed for industry to effectively implement each measure. 

Financial and human rights implications 

1.32 The Explanatory Memorandum states that the bill would have no financial impact. 

1.33 The Explanatory Memorandum comments that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments Australia is a party to, listed in Section 3 of the Human Rights (Parliamentary Scrutiny) Act 

Consideration by other committees 

1.34 The bill was considered by the Senate Committee for the Scrutiny of Bills (Scrutiny Committee), and the Parliamentary Joint Committee on Human Rights (PJCHR). 

Concerns raised by the Senate Committee for the Scrutiny of Bills 

1.35 The Scrutiny Committee raised a number of concerns with the bill, namely:  Significant matters in delegated legislation;  Abrogation of privilege against self-incrimination;  Reversal of the evidential burden of proof; and  Strict liability offences. 

Significant measures in delegated legislation 

1.36 The Scrutiny Committee noted the current AML/CTF framework empowers some heads of Commonwealth agencies and bodies to share AUSTRAC information with foreign governments and agencies.31 

1.37 Noting, that the bill would amend this existing limited list with a power prescribed by rules, the Scrutiny Committee expressed a preference that ‘significant matters should be included in primary legislation unless a sound justification for the use of delegated legislation is provided’, so as to assure more robust Parliamentary scrutiny. Moreover: Allowing the rules to designate the Commonwealth, State and Territory entities which can disclose AUSTRAC information to foreign governments is a significant delegation of legislative power over matters that are more appropriate for Parliament to consider. While noting this explanation, the committee has generally not accepted a desire for administrative flexibility to be a sufficient justification, of itself, for leaving significant matters to dele gated legislation. Noting that these matters are being removed from their existing status in primary law, the committee expects that a stronger justification should have been provided. Further, it is unclear to the committee why flexibility may be needed in this instance given the list of Commonwealth, State and Territory agencies who can disclose such information is necessarily limited and not liable to frequent change. This issue has not been sufficiently explored in the explanatory materials. 

Abrogation of privilege against self-incrimination 

1.38 The Scrutiny Committee noted that provisions of the bill would override, or expand ‘the common law privilege against self-incrimination which provides that a person cannot be required to answer questions or produce material which may tend to incriminate them’. 

1.39 The Scrutiny Committee noted there may be certain circumstances in which this privilege can be overridden, but that abrogating the privilege ‘represents a serious loss of personal liberty’. Moreover, it noted the bill does not provide for any use or derivative use immunity in this context, which may mitigate the abrogation of privilege against self-incrimination. 

Reversal of the evidential burden of proof–significant measures in delegated legislation 

1.40 The Scrutiny Committee made comment on the bill’s addition of the new ‘tipping off’ offence into the AML/CTF Act, which is discussed earlier in this chapter, and noted that two exceptions for this offence reversed the evidential burden of proof ‘due to the operation of the Criminal Code’. 

1.41 The Scrutiny Committee found this was not justified and explained in the Explanatory Memorandum: At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove, or raise evidence to disprove, one or more elements of an offence, interferes with this common law right. The committee expects any such reversal of the evidential burden of proof to be justified and for the explanatory memorandum to address whether the approach taken is consistent with the Attorney-General’s Department’s Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers which states that a matter should only be included in an offence-specific defence (as opposed to being specified as an element of the offence) where:  it is peculiarly within the knowledge of the defendant; and  it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. 

Strict liability offences 

1.42 The Scrutiny Committee observed that: The bill provides that persons required to appear for examination in accordance with a notice given under the bill may be required by the examiner to take an oath or give an affirmation that the statements made will be true. The bill proposed that this be an offence of strict liability to fail to comply with these requirements, which would carry a sentence of up to three months imprisonment. 

1.43 The Scrutiny Committee noted that there may be some discrepancy between penalties included in the bill (including three months imprisonment), and the Commonwealth Guide to Framing Offences, and that there was no justification made for this in the Explanatory Memorandum: As the imposition of strict liability undermines fundamental common law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences. The committee notes in particular that the Guide to Framing Commonwealth Offences states that the application of strict liability is only considered appropriate where the offence is not punishable by imprisonment and only punishable by a fine of up to 60 penalty units for an individual. 

1.44 The committee requested an explanation from the Attorney-General for the bill’s inclusion of strict liability offence, and why it was necessary to impose a period of imprisonment in relation to a strict liability offence. 

Attorney-General’s response to Scrutiny Committee 

1.45 The Attorney-General responded in detail to the concerns raised by the Scrutiny Committee. A summary of the response is as follows. 

Significant matters in delegated legislation 

1.46 Following 2022 machinery of government changes, responsibility for administering the AML/CTF Act moved from the Minister for Home Affairs to the Attorney-General. This led to an error in subsection 127(3) listing the AGD twice and omitting the Department of Home Affairs from coverage. 

1.47 The proposed amendments aim to increase flexibility and efficiency in response to government changes and agency name updates, enhancing timely information-sharing to combat financial crime. Safeguards in subsection 127(2) ensure information protection and purpose-driven use. 

1.48 Moving the agency list to AML/CTF Rules would reduce legislative updates and enhance Parliamentary efficiency. 

1.49 AML/CTF Rules are legislative instruments, subject to Parliamentary oversight and disallowance, with proposed amendments restricting AUSTRAC information sharing to Commonwealth, State, or Territory agencies. 

1.50 Amendments would grant the AUSTRAC CEO the authority to update agency names under the AML/CTF Rules, enhancing regulatory agility and addressing outdated legislative listings. 

Abrogation of Privilege Against Self-Incrimination 

1.51 The privilege may be overridden for public benefit if justified. Expanding section 169 ensures information provided to authorised officers under section 167 can be used in criminal proceedings related to money laundering, terrorism financing, and proliferation financing offences. 

1.52 This expansion supports AUSTRAC’s role in investigating and prosecuting serious crimes, enhancing compliance and effectiveness under the AML/CTF regime. 

1.53 Removal of self-incrimination privileges typically includes ‘use’ immunity but not necessarily ‘derivative use’ immunity for serious offences, aligning with regulatory norms for agencies like ASIC and ACCC. 1.54 The provisions would ensure evidence can be used to prosecute serious offences uncovered during compliance activities without undermining AUSTRAC’s regulatory duties. 

1.55 Section 172K’s ‘use’ immunity prevents self-incriminating evidence use but allows necessary prosecution of serious offences. 

Reversal of the Evidential Burden of Proof 

1.56 Subsection 123(4) and (5) would create exceptions to the tipping-off offence for disclosures made in good faith for deterring criminal activity or detecting serious crimes, placing the evidential burden on the accused. 

1.57 The reversal of the burden of proof is appropriate, as evidence regarding the accused’s intention of disclosing the information in good faith and for the purposes of dissuading the prohibited conduct, or for the purposes of detecting, deterring, or disrupting money laundering, the financing of terrorism, proliferation financing, or other serious crimes is particularly within the defendant’s knowledge, and would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. It follows then that evidence to this effect could be readily and more easily provided by the accused. 

1.58 The Attorney-General indicated that an addendum to the Explanatory Memorandum containing this justification will be tabled in the Parliament as soon as practicable. 

Strict Liability Offences 

1.59 Strict liability should apply only where necessary, with appropriate constraints. Subsection 172C(3) would impose strict liability for failure to comply with examination requirements under subsection 172A(2). 

1.60 The penalty is limited to three months imprisonment, aligning with criteria for strict liability offences. This supports AUSTRAC’s enforcement capabilities without imposing unnecessary regulatory burdens. 

1.61 Similar strict liability provisions exist for other regulators, like ASIC, reflecting consistency and necessity for effective regulatory enforcement. Consideration by the Parliamentary Joint Committee on Human Rights 

1.62 The PJCHR identified several issues of concern, regarding:  the abrogation of privilege against self-incrimination, and the right to a fair trial;  significant civil penalties; and  sharing AUSTRAC information internationally. 

The abrogation of privilege against self-incrimination and the right to a fair trial 

1.63 The PJCHR noted that the bill would expand the existing section 169 of the Act, which abrogates the privilege against self-incrimination for the purposes of giving information or producing a document under existing information gathering powers. 

1.64 The committee expressed concern that these measures may engage and limit the right to a fair trial and related criminal process rights, and recommended: ...that consideration be given to the inclusion of a derivative use immunity in proposed section 172K. [and] ...that the statement of compatibility be updated to provide information in relation to a derivative use immunity. 

Significant civil penalties 

1.65 The PJCHR noted that the bill’s amendments would introduce numerous civil penalty provisions, and amend existing penalties. It noted that the maximum civil penalty under the Act is 20 000 penalty units (or $6.26 million). It considered that there may be a risk these penalties could be regarded as criminal, under international human rights law and, that if this were the case, ...they must be shown to be consistent with the criminal process guarantees, including the right to be presumed innocent until proven guilty according to law. The committee notes that as they are characterised as civil penalties under Australian law, those requirements would not be met. 

1.66 The PJCHR concluded: The committee recommends that the statement of compatibility be updated to provide a more fulsome assessment of the compatibility of each civil penalty created (or otherwise amended) by the bill, in particular whether any of those penalties may operate in relation to persons who are not direct participants in the scheme this Act seeks to regulate (for example, proposed section 49B). 

Sharing AUSTRAC information internationally 

1.67 The PJCHR noted that the bill’s provisions relating to the sharing of AUSTRAC information internationally may, in some cases, provide information to a foreign government or entity that could ‘expose a person to a risk of the death penalty or to torture or other cruel treatment’. 

1.68 The PJCHR concluded that: The committee recommends that the statement of compatibility be updated to assess whether and how this measure is compatible with the right to life and freedom from torture and other cruel, inhuman and degrading treatment or punishment, including information as to whether there are guidelines to assist decision-makers in identifying and considering any risks that a person may be exposed to the death penalty or to torture as a result of the sharing of particular information, and if so, how those risks are managed. The committee recommends that, in the event compatibility cannot be assured, that amendments to the bill be considered to address this.

08 November 2024

Whistleblowing

The Parliamentary Joint Committee on Corporations and Financial Services report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry noted in the preceding post features a chapter on whistleblowing, replete with conventional pieties 

7.1 Whistleblower protection laws provide legal rights and protections to individuals who provide a company, organisation, or regulator information about alleged misconduct and/or breaches of the law inside a company or organisation.   

7.2 The threat of whistleblowing acts as a deterrent to wrongdoing by increasing the likelihood that misconduct will be reported.[1] Indeed, the importance of whistleblowers and whistleblowing was emphasised to the committee throughout the inquiry. For example, Ms Catherine Maxwell, General Manager, Governance Institute of Australia (GIA), pointed to the critical role whistleblowing plays ‘in identifying and stopping misconduct’.[2] 

7.3 However, the committee also received evidence that the multiplicity of whistleblower protection laws is creating confusion and leading to poor outcomes for whistleblowers and employers. Further, the patchwork legislative approach excludes important sectors of the economy including the large professional services firms. 

7.4 Therefore, this chapter explores the adequacy of the current whistleblower protection laws in Australia. It begins by providing a background on public and private sector whistleblower legislation, including the failure to include the audit, assurance and consultancy sector under the provisions of the Corporations Act 2001 (Corporations Act). The chapter then considers the evidence regarding the multiplicity of whistleblower protection laws, and examines proposed reform options. Itconcludes with the committee’s views and recommendations. 

Background on public and private sector whistleblower legislation 

7.5 Whistleblower protection laws in Australia are legislated through various acts at the Commonwealth, state and territory level, depending on the sector and whether that sector is public or private. 

7.6 Evidence to the inquiry identified 17 different federal, state, and territory statutes applying to whistleblowers in Australia: Public Interest Disclosures Act 2013 (Cth); Corporations Act 2001 (Cth); Fair Work (Registered Organisations) Act 2009 (Cth); Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth); Aged Care Act 1997 (Cth); National Disability Insurance Scheme Act 2013 (Cth); Taxation Administration Act 1953 (Cth); Public Interest Disclosures Act 2022 (NSW); Public Interest Disclosures Act 2012 (Vic) (previously titled Protected Disclosure Act 2012 (Vic)); Public Interest Disclosure Act 2010 (Qld); Public Interest Disclosure Act 2018 (SA); Public Interest Disclosure Act 2003 (WA); Public Interest Disclosure Act 2012 (ACT); Public Interest Disclosure Act 2002 (Tas); National Anti-Corruption Commission Act 2022 (Cth); Public Service Act 1999 (Cth); and Independent Commissioner Against Corruption Act 2017 (NT).[3] Public sector whistleblower protections and their relation to officers and employees of consulting firms 

7.7 The Public Interest Disclosures Act 2013 (Cth) (PID Act) promotes accountability and integrity within the public service by encouraging the disclosure of information about alleged misconduct and wrongdoing. The objective of the PID Act is to provide support and protection from adverse consequences to individuals who disclose information and provide an avenue for public interest disclosures to be properly investigated and reported.[4] 

7.8 Amendments to the PID Act commenced on 1 July 2023, and focused on immediate improvements for public sector whistleblowers and support for corruption disclosures to the National Anti-Corruption Commission.[5] 

7.9 On 22 November 2023, further reforms to the PID Act through a staged approach were announced.[6] 

7.10T he PID Act can apply to officers and employees of consulting firms when contracted as service providers to the Commonwealth Government. The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia noted that section 69 of the PID Act clarifies that a ‘public official’ whose disclosures may trigger the PID Act includes any individuals who are: a contracted service provider for a Commonwealth contract; or an officer or employee of a contracted service provider for a Commonwealth contract who provides services for the purposes (whether direct or indirect) of the Commonwealth contract.

7.11 Therefore, officers and employee of consulting firms may be covered by the PID Act, irrespective of whether the consulting firm is a body corporate, partnership or individual. However, the joint submission emphasises that misconduct can only be reported to an ‘authorised internal recipient’, which means they can only make a disclosure to the Commonwealth agency who is the party to, or responsible for, the consultancy contract (or to an independent agency like the Ombudsman) and not internally at their consulting firm. 

Private sector whistleblower protections and their relation to officers and employees of consulting firms 

7.12 Commonwealth whistleblowing laws that apply to the private sector include protections under the Corporations Act and the Taxation Administration Act 1953 (TAA Act). 

7.13 Entities subject to regulations under the Corporations Act and TAA Act include companies, superannuation entities or trustees, incorporated associations and bodies corporate that are trading or financial corporations. 

7.14 The Corporations Act requires these entities to have a whistleblower policy and to make it available to all officers and employees of the entity.[ 

7.15 To be eligible for whistleblower protection under the Corporations Act, an individual must be, or have been, in a relationship with the ‘regulated entity’ that the individual is reporting about as set out in section 1317AAA of the Corporation Act. 

7.16 In contrast to employees of corporate bodies or other financial licensees or trustees covered by the private sector whistleblower protection legislation under Part 9.4AAA of the Corporations Act, there are substantial inconsistencies and gaps for those employed by consulting firms or other contractors.

7.17 The main accounting firms in Australia, KPMG, Deloitte, EY and PwC, are partnerships in their legal form, even though most employees of the Big Four firms are engaged by service companies owned or controlled by the partnership. 

7.18 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia pointed out that partnership-based firms have lesser whistleblower protections because for the purposes of Part 9.4AAA of the Corporations Act: a partnership is not a ‘regulated entity’ (as required by section 1317AAA); a partner is not an ‘eligible recipient’ for protected disclosures of wrongdoing (section 1317AAC), despite being an owner and typically an important leader (unless they happen to also be a director or officer of a service company that employs or instructs the employee blowing the whistle); and a partner may also not themselves be an ‘eligible whistleblower’ (section 1317AA) and capable of benefiting from the protections if they disclose wrongdoing, other than in possibly in a very indirect sense. 

7.19 The Treasury expanded on this, stating: As partnerships are not companies, most aspects of the Corporations Act do not apply to partnerships. For example, partnerships are not regulated entities for the purposes of the corporate whistleblower regime. Partnerships are only subject to any state and territory laws that may protect private sector whistleblowers. 

2017 committee report on whistleblower protections and subsequent legislative reform 

7.20 This committee tabled a report titled Whistleblower protections in 2017 with 35 recommendations aimed at improving whistleblower protection legislation in Australia. 

7.21 Following the committee’s report, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 expanded whistleblower protections in Part 9.4AAA of the Corporations Act and Part IVD of the TAA Act, to provide broader protections for the corporate and financial sectors. The amending Act implemented approximately half of the recommendations from the committee’s 2017 report.[19] These amendments are due for statutory review in 2024. 

7.22 Although the amendments to the Corporations Act and TAA Act were introduced at the same time, the TAA Actapplies to partnerships and partners while the Corporations Act does not. Under the TAA Act, partners of an entity, company or partnership are eligible whistleblowers and are eligible recipients to receive disclosures 

7.23 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia argued that a failure to fully reform the private sector whistleblowing regime has led to substantial issues in the audit, assurance and consultancy sector. 

7.24 The Treasury Laws Amendment (Tax Accountability and Fairness) Act 2024 commenced on 1 July 2024 and expanded tax whistleblower protections. The new Act protects individuals blowing the whistle about related entities to the Tax Practitioners Board that may assist the board in performing its duties under the Tax Agent Services Act 2009. 

7.25 The joint submission by the Inspector-General of Taxation and the Taxation Ombudsman noted the recently commenced National Anti-Corruption Commission Act 2022 could provide an alternative pathway for disclosures in relation to the audit, assurance and consultancy sector.[24] 

7.26 The Accounting Professional and Ethical Standards Board (APESB) noted that the Code of Ethics for Professional Accountants(including Independence Standards) (APES 110) contains provisions for professional accountants, including auditors, to respond to Non-Compliance with Laws and Regulations (NOCLAR). However, APES 110, including the NOCLAR provisions, does not establish whistleblower protections. 

Issues with the multiple current whistleblower schemes 

7.27 Several inquiry participants drew the committee’s attention to complexities and inconsistencies within Australia’s current whistleblower legislation, the confusion this creates, and the potential constraints it imposes on disclosure. 

7.28 Professor AJ Brown, Professor of Public Policy and Law at the Centre for Governance and Public Policy, Griffith University, noted that each state and territory has whistleblower protection legislation covering the public sector and to varying degrees the private sector (see Appendix 4) and that ‘contractors and service providers to government may not be aware of state and territory whistleblowing protection laws’. 

7.29 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia stated many of the statutes are ‘out of date and inconsistent with the latest iteration of protections found in the Corporations Act’. 

7.30 Ms Maxwell from the GIA argued that the complexities of whistleblower protection in the private sector disincentivise employees from making disclosures: …Australian whistleblower protection laws are a complex patchwork. The area is complex to understand, complex to administer and confusing for anyone contemplating speaking up about unlawful, unethical, or irresponsible behaviour … A whistleblower should not need a nuanced knowledge of the applicable legal and regulatory frameworks to know which regulator or which law enforcement agency they should make their disclosures to, to qualify for protection. It is a strong disincentive to making disclosures if employees or other relevant parties feel that they require legal advice before making any disclosure 

7.31 Charted Accountants Australia and New Zealand (CAANZ) shared a similar view: The existence of numerous existing laws relating to whistleblowing regimes and protection in different industries such as banking and finance, taxation, aged care and child protection makes it difficult for an individual to know what protections are available to them and in what circumstances. 

7.32 Mr Kieran Pender, Senior Lawyer, Human Rights Law Centre, emphasised the uncertainty experienced by employees of partnership-based firms regarding whistleblower protections: Unfortunately, right now we have a huge gap between law and reality. The law says you can speak up safely, lawfully; it says it’s a crime to take reprisal against a whistleblower. But there are so many loopholes, there are so many complexities…if you’re a whistleblower at one of the Big Four accounting and consulting firms, you need a law degree—you need more than a law degree!—to know whether you’re protected and who to speak up to. 

7.33 CAANZ drew attention to the fact that, as a result of partnership-based firms being excluded from the whistleblower protection legislation under the Corporations Act, some firms have created their own whistleblowing policies leading to further inconsistencies: Whilst a number of organisations have voluntarily developed whistleblowing policies and procedures, these are not supported by legislation to ensure consistency in the programs and to adequately protect whistleblowers. 

7.34 The GIA highlighted a recent report by Your Call that illustrated the complexities of the current whistleblower legislation in Australia and the impacts of overlapping federal and state and territory legislation: …more than half of the participants at a Workshop said their organisations must comply with four or more separate sets of whistleblowing laws. Attendees also noted…inconsistencies between regimes…‘…when you get a disclosure, it could fall within all three whistleblowing regimes. In reality, we could end up having to do three separate investigations if we were to follow everything to the letter of the law, which just seems kind of ludicrous and…surely that can’t be the intended outcome.’ Another attendee observed: ‘Trying to meet the requirements of both [two laws] can be a challenge while trying to maintain the anonymity of the whistleblower and… if we don't maintain it, that's when we’ll put people off and in the future people won't come forward as whistleblowers if it’s obvious who that person is’. 

Options for reform 

7.35 This section examines the proposed reform options suggested by witnesses and submitters during the inquiry, including: expansion of current legislation to include partnerships; harmonisation of whistleblower legislation; a whistleblower protection authority; bounty or reward systems; and the whistleblower protection federal roadmap. 

Expansion of current legislation to include partnerships 

7.36 The committee heard from numerous inquiry participants about the need to improve and strengthen whistleblower protection for partners and partnership-based firms. 

7.37 KPMG Australia emphasised its commitment to whistleblower protections and noted that as a partnership, its commitment to whistleblowers is voluntary because ‘adherence is not currently a regulatory requirement under the Corporations Act’. Therefore, KPMG Australia proposed that the professional services sector should be required to commit to these protections under the Commonwealth Procurement Rules. 

7.38 EY Australia went a step further and recommended extending the whistleblower protection framework in the Corporations Act to large, registered partnerships.[35] This proposal was endorsed by the Institute of Public Accountants.

7.39 CAANZ supported extending Part 9.4AAA of the Corporations Act to partnerships across all sectors but noted the need for appropriate exemptions for small partnerships. 

7.40 Ms Vanessa Chapman, Group Executive, CAANZ, argued that Parliament should consider amending the definition of regulated entity for the purposes of Part 9.4AAA of the Corporations Act: …to bring partnerships or other structures within it…because there are many organisations that are not companies per se, that are not bodies corporate, but that are subject to Part 9.4AAA by virtue of being caught by the definition of regulated entity. 

7.41 CAANZ also proposed that the following be considered: whether section 1317AAB of the Corporations Act allows ASIC to prescribe partnerships (whether general, limited liability or other partnerships) as regulated entities for the purposes of Part 9.4AAA; and whether sections 115(1) and (2) of the Corporations Act, which effectively cap the size of partnerships, may provide a basis for bringing partnerships within the ambit of Part 9.4AAA. 

7.42 CAANZ pointed out that the Corporations Act treats a member of an audit team as an individual, not an entity, which differs from the treatment of other eligible recipients of whistleblower reports under the Corporations Act. CAANZ expressed concern that: …a junior member of the audit team who receives a protected disclosure may be limited in what they can share with superiors, including their manager or an audit partner. This puts the junior audit team member in a difficult situation as they are unlikely to be best placed to receive the disclosure.[40] 

7.43 To address this concern, CAANZ proposed amending section 1317AAC(1)(b) and section 1317AAB to better support members of audit teams who receive qualifying disclosures. However, CAANZ noted that a longer-term solution would be to enact a single law covering all non-government whistleblowers. 

Harmonisation of whistleblower protection legislation 

7.44 Most inquiry participants supported harmonising whistleblower protection legislation in Australia. Where they differed was over whether it was better to have a comprehensive Whistleblower Protection Act covering all government and non-government entities, or a harmonised set of laws that protect government and non-government entities separately. 

7.45 CAANZ preferred harmonising whistleblower protection legislation for all non-government whistleblowers,[42] but considered a single national whistleblower regime unnecessary. 

7.46 Deloitte concurred with CAANZ that harmonising whistleblower legislation for the audit, insolvency, tax and legal practitioner sectors would be appropriate. 

7.47The GIA concluded that Australia needs a general whistleblower regime in its own act applicable to the private sector. 

7.48 By contrast, the joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia recommended the establishment of a single Whistleblower Protection Act covering all private and not-for-profit entities and employers and entities under Commonwealth legislation or subject to Commonwealth regulation. 

Whistleblower protection authority 

7.49 Inquiry participants broadly supported the establishment of a whistleblower protection authority with many acknowledging the benefits of having a standalone authority to assist with understanding whistleblower protection legislation. 

7.50 The joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia stated that its ‘top priority remains the establishment of a whistleblower protection authority to oversee and enforce whistleblower protection laws and support Australian whistleblowers’. 

7.51 The joint submission noted that the Australian Government issued a discussion paper exploring whether there is a need for a whistleblower protection authority for the public sector but the joint submission emphasises that the need for this authority is not confined to the public sector only. 

7.52 The GIA highlighted the need for an independent stand-alone whistleblower protection authority to enforce whistleblower protection legislation, provide support to whistleblowers, and provide guidance to organisations regarding their obligations. 

7.53Ms Chapman from CAANZ supported: …a whistleblowing protection agency that can help not only whistleblowers but also organisations, employers, to understand what their obligations are in relation to the protection of whistleblowers within their organisation or to their organisation.[50] 

7.54 The Australia Institute observed that a whistleblower protection authority would make it easier for the National Anti-Corruption Commission to receive complaints and referrals.[ 

7.55 Professor Allan Fels supported ‘a fully independent, impartial whistleblower organisation that people have confidence in and go to’. 

7.56 Professor Dale Pinto, President and Chair of Certified Practicing Accountants Australia (CPA Australia), observed that a whistleblower protection authority could provide an alternative disclosure pathway for employees who do not feel comfortable blowing the whistle internally: Sometimes, whether it’s within firms or within organisations, junior staff would be reluctant within the hierarchy to raise an issue that they see. So, part of the information is having a mechanism—and I think Senator Scarr floated the idea previously of an independent whistleblower agency where people could, outside of their own particular entity, make a disclosure of information. 

7.57 The Community and Public Sector Union recommended the establishment of a whistleblower protection authority, and a commissioner to oversee the authority. 

7.58 Mr Pender from the Human Rights Law Centre noted that a similar system to the Office of the Whistleblower Ombuds in the United States (US)[55] could be an alternative to a whistleblower protection authority: …the US Congress has a dedicated independent body within it that helps members of parliament in the United States engage with whistleblowers, deal with whistleblowers. It helps them with best practice on intaking whistleblowers. It’s called the Office of the Whistleblower Ombuds in the US House. Even something like that, which would only require a small independent team in parliament working with committees, senators and MPs, could be a real game changer for whistleblower protection. 

Bounty, rewards or compensation for whistleblowers 

7.59 The Institute of Public Accountants argued that the committee should consider the provision of rewards or bounties to whistleblowers whose disclosures lead to the imposition of a penalty on an entity. 

7.60 The GIA noted that while it has not previously supported a bounty or rewards system, it will reconsider the system during the next stage of proposed whistleblower reforms. 

7.61 Professor Brown argued that it was important to address compensation for the detriment that whistleblowers suffer, as it is rare that they do not suffer detriment.[59] Professor Brown suggested that thresholds for compensating whistleblowers should be reformed to make them more practical and accessible because they are presently onerous, restrictive and inconsistent across Commonwealth whistleblower legislation. Professor Brown argued that the changes are needed ‘so that it actually becomes effective and feasible for people who have suffered detriment to apply to the courts or a tribunal…for compensation and relief’. 

7.62 The Human Rights Law Centre noted that under the current legislation, it is very rare for whistleblowers to be able to access compensation: Recently, the Human Rights Law Centre reviewed every whistleblowing case to go to judgement ever in Australia under both the Corporations Act protections and the Public Interest Disclosure Act. There hasn’t been a single successful case. The only case of compensation to a whistleblower for detriment across all of Australia since the first whistleblowing laws came in was a $5,000 compensation award under the Corporations (Aboriginal and Torres Strait Islander) Act. So the laws aren’t working in having that enforcement mechanism.

Federal roadmap 

7.63 In November 2022, Griffith University, the Human Rights Law Centre and Transparency International Australia published Protecting Australia’s whistleblowers: The federal roadmap, which provided an overview of the shortfalls of Australia’s whistleblower legislation (Figure 7.1). The roadmap sets out twelve key areas for reform, drawing from previous reviews and inquiry reports. 

7.64 Many of the key issues in the roadmap are a response to the committee’s inquiry into whistleblower protections in 2017, including: the establishment of whistleblower protection authority; ensuring a no wrong doors approach for disclosures; the enactment of a single law covering all non-government whistleblowers; the simplification and upgraded proof requirements for remedies and compensation; ensuring easier and consistent access to remedies; the enhancements of information sharing and ability to access support; the expansion of the definition of detriment attracting remedies; the protection of public and third-party whistleblowing; and the exclusion of solely individual employment grievances from PID protections 

7.65 The roadmap is supported by numerous inquiry participants, including the GIA, the Australia Institute and CAANZ. 

7.66 CAANZ expressed the view that: …Protecting Australia’s Whistleblowers: The Federal Roadmap presents a well thought out and internationally benchmarked set of measures that deserve consideration by Government as the process of reforming relevant law in Australia continues. ... 

Committee view 

7.67 Whistleblowing matters. It has a crucial role to play in identifying, stopping and deterring misconduct. 

7.68 Whistleblower protection laws should provide legal rights and protections to individuals who provide a company, organisation or regulator with information about alleged misconduct and/or breaches of the law. The need for consistent and harmonised whistleblower protection legislation 

7.69 The evidence provided to this inquiry revealed the substantial concerns of a range of stakeholders about the complexities, inconsistencies and gaps in current whistleblower protection legislation in Australia. 

7.70 This complex patchwork of legislation requires a high level of knowledge on the part of a whistleblower to understand which legislation and regulator covers the misconduct they wish to disclose. Unfortunately, this causes confusion and disincentivises whistleblowers from making a disclosure when they witness misconduct. 

7.71 Further, the multiplicity of inconsistent laws burdens employers with additional and unnecessary red tape because multiple pieces of different legislation may apply in any given situation. 

7.72 Given the complexities, attendant confusion, and frequent doubling up of resources, there was broad support for harmonising and aligning Australia’s whistleblower protection laws, although most inquiry participants favoured separate Acts for the public and private sectors. The committee recognises the vital importance of greater alignment across the public and private sectors.