Essay: Corporate Legal Issues And ASIC Role: Case Study On Crown Resorts Ltd And CBA.

This is a case study that is currently subject to investigation. It is important never to prejudge an issue that is ongoing. Without doing that, discuss the following:-

In your view, what are the corporate legal issues facing Crown Resorts Ltd?

What is the role of ASIC?

What are some of the possible remedies open in this situation for issues of this kind?

You will need to undertake legal research and analysis in order to provide support for all of your answers above and this includes references to the relevant law where applicable.

The Commonwealth Bank of Australia has been in the headlines regarding investigations by AUSTRAC in the last few months. Identify key news reports which capture the major issues and developments AND write a brief report of what  has happened and what are those issues? In your discussion you will need to have emphasis on ASIC’s role in the matter. Do NOT make any judgments (especially not about the people involved) but do show an understanding of what has occurred and why it is legally significant.

Corporate Legal Issues facing Crown Resorts Ltd

The directors of the organization have certain responsibilities that help them in acting in the best interest for the company. Section 180 (1) of the Corportaion Act (Cth) says that the directors along with the officers of a particular company has to organize diligence and care with respect to the operations that are being carried out within the organization. The diligence and care can be evaluated by nominating a person who is hypothetical and acts as a director in the present situation so that the analysis can be done with respect to the level of reasonability that is present within the decision. The decision that will be taken has to be for the best interest of the organization. In the case of Asic vs Cassimatis, it can be seen that one of the reasonable director will not breach the land law under any circumstances. The shareholders also do not have the right to instigate these acts. In the present situation, the directors of crown sports has somehow violated the provisions by appointing agents to be sent to China so that they can recruit the high roller gamblers, as gambling is illegal in China. With respect to this, the action of the employees within the organization has led to the arrest by the Chinese officials, which is inclusive of the Australian people. Additionally, it can be stated that there has been a 14 percent decline within the shares of the organization, which has led to huge losses for the company as well as its shareholders. The company also faced loss of reputation due to the actions that it took. In the given situation, the legal issues of the corporate that are being faced by the directors of the company are in direct relation with the directors that have violated these rules. The discussed directors have breached the section 180 (1) of the Corporation Act by not acting in a diligent and careful manner with relation to the affairs of the company.

The Australian Investment and Security Commission is a corporate body that is present in Australia and keeps a check on the duties and the affairs that are being carried out by the corporate organizations. The ASIC is a body that regulates the integration of the corporate bodies along with the financial services, and the credit regulators that are present among the consumers in Australia. The main vision of the commission is to help the markets in funding the economy and help in the growth of the economy. The main purpose of ASIC is that it helps in ensuring the wellbeing of Australia with respect to the financial terms. It also helps in boosting the trust and confidence of the investors and consumers that ensures efficiency in the market by allowing proper registration services. The ASIC provides actions against the organizations that fail in acting with respect to the legal and ethical manner, which leads to losses among the creditors and investors. It helps in providing better orders by allowing financial penalties and the suspension of directors if any violation can be identified. In the situation of crown resorts, it can be seen that the employees have been arrested due to illegal activities in China and ASIC will play an important role in investigating the matter. This has been done due to the fact that the decision of the directors will result in the loss of the creditors and investors within the company. Additionally, it can be stated that the companies that are registered within the Australian Stock Exchange (ASX) has been found guilty of violating the law and the primary duty of ASIC is to look into and investigate the matter. If ASIC finds that the directors of the company have breached its corporate duties, then it will take up legal actions against the company in Australia.

Role of ASIC

If the investigation conducted by ASIC revealed that the directors of the company have been involved in illegal activities, and then there are possible remedies that are present with respect to the Corporation Act. The duties of the directors that they have violated in the CA will give rise to provisions of civil penalties. Additionally, the directors might be prosecuted under the liability of criminal code under the section 6.1, if the directors are found to violate the provisions that are present in the section 184 of the Act that is to breach the duties in the section 180-183 in a reckless manner under the Corporation Act. The provision of civil penalties is present under the section of 1317E of the Act. The directors may also likely face a penalty that is financial up to an amount of A$200,000 if the breach is of serious nature. Additionally, the directors of the company may also get suspended with respect to managing a corporation for a period of 5 years that is present under the provision of 206C of the Act. The directors can seek an alibi that is present in the section of 1317G in which the breach that has been committed by them can be pardoned by the court with respect to the duties that they carry out within the organization. However, the ASIC has to prove the fact that the directors have committed a breach of the Act. In the case of Australian Securities & Investments Commission (ASIC) vs Lindberg, the ASIC gained support by obtaining a suspension of 2 years and a financial penalty of A$100,000, as the directors had violated under the section of 180 (1) of the Act. The directors have the provision to settle its penalties outside the court but ASIC has to prove the case within the court.

The Commonwealth bank has faced numerous problems with respect to the drop in ts share prices after AUSTRAC registered a case with respect to the laundering of money against the company. This also subjected the organization to take up potential action in relation to its shareholders. AUSTRAC has accused the organization in laundering of money on a consistent manner by funding terrorist operations and criminal gangs. The CBA have been accused of other breaches with respect to counter-terrorism financing and laundering of money rules. The proceedings of civil penalties have been started by AUSTRAC against the company in the federal court under “serious and systemic non-compliance”.    

Possible remedies for legal issues

The CBA had subjected the community to ongoing crimes and serious financial issues, which has been filed in the court. However, the bank provided its statement that they would never take up any actions that would instigate any crime. This issue had been bought in the court by AUSTRAC, which states that the company had failed and the bank had been reported to indulge in suspicious matters and made a transaction of over A$77 million. The agency alleged that 53,700 contraventions of laws related to counter-terrorism and anti-money laundering laws had been made by the bank with respect to the intelligent deposit machines. A maximum penalty of A$18 million can be imposed related to the laundering of money and counter terrorism.

AUSTRAC stated that in situation where it is obvious for the machines in being used for the money laundering activities, the bank did not take up necessary steps in mitigating and managing the risks. AUSTRAC alleged that the machines were being used by four money laundering syndicates that were related to the import and distribution network of drugs. These machines have been used by the syndicates in transferring and depositing the cash that were of lower amount so that the suspicion can be kept at a minimum. One such incidence of money laundering had involved a transfer of 21 million, which was deposited in 11 CBAs and came mostly through the intelligent machines. The bank failed in taking action even after they were warned by the Australian Federal Police. ASIC keeps an eye on the duties and affairs of the corporate organizations. The main work of ASIC is to integrate the corporate regulations, provide financial services and keep control of the credit and market regulators in Australia. The primary vision of the institution is that it helps in allowing funds, which will trigger the growth of the economy. It also promotes the level of confidence and trust among the investors so that it can ensure efficiency by providing proper registration services. It helps in providing orders like financial penalties and the suspension of directors if any violation has been registered in their name. The directors of CBA were not able to take proper care with respect to the affairs within the company.

Section 180 (1) of the Corporation Act 2001 (Cth) instructs the officers and the directors to provide proper care and diligence with respect to the work that is being carried out in the organization. In this case, it can be seen that the company has indulged in violating the legal provisions, as the directors have violated the provisions laid under 180 (1) of CA. This is due to the fact that the reasonable directors will not indulge in any kind of violation against the anti-money laundering and counter-terrorism laws. Under the provisions laid down in civil penalties, they can be made liable in a personal manner by allowing them to pay the financial liabilities and being suspended from managing the affairs of the company under section 1317E and 206C of the CA.

Reference List

ASIC v Cassimatis (No 8) [2016] FCA 1023

Australian Securities & Investments Commission [ASIC] v Lindberg [2012] VSC 332

CBA faces 'very large' shareholder action on money laundering. (2018). ABC News. Retrieved 3 January 2018, from https://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-shareholder-class-action/8833860

CBA will take months to answer money laundering allegations. (2018). ABC News. Retrieved 3 January 2018, from https://www.abc.net.au/news/2017-09-04/commonwealth-bank-will-take-months-to-respond-to-austrac/8869706

Corporation Act 2001 (Cth)

Knaus, C. (2018). Commonwealth Bank accused of money laundering and terrorism-financing breaches. the Guardian. Retrieved 3 January 2018, from https://www.theguardian.com/australia-news/2017/aug/03/commonwealth-bank-accused-of-money-laundering-and-terrorism-financing-breaches

Our role | ASIC - Australian Securities and Investments Commission. (2018). Asic.gov.au. Retrieved 3 January 2018, from https://asic.gov.au/about-asic/what-we-do/our-role/