Inspector-General Practice Statement 14

IGPS 14 - Referring offences against the Bankruptcy Act 1966 to the Inspector-General
Date of release: 
February 2010
Last updated: 
September 2020

Inspector-General Practice Statement 14

IGPS 14 - Referring alleged offences to the Inspector-General

1. Introduction

The Australian Financial Security Authority (AFSA) investigates and refers alleged offences to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution. The decision to prosecute is made solely by the CDPP. 

This document provides guidance on when and how to refer alleged offences to AFSA.

AFSA staff act as delegates of the Inspector-General in Bankruptcy, and exercise the Inspector-General’s powers under the Bankruptcy Act 1966 (the Act) and Bankruptcy Regulations 1996. References in this document to AFSA are generally references to delegates of the Inspector-General, unless the context indicates otherwise.

Sections 19 and 185LA of the Act outline the duties of registered trustees and debt agreement administrators. Also, the Insolvency Practice Rules (Bankruptcy) 2016 (IPR) outline general standards for trustees.

Under the Act, trustees and debt agreement administrators[1] have a duty to:

  • look into the behaviour of someone who is bankrupt or a debtor to make sure they comply with their obligations under the Act;

  • consider whether someone who is bankrupt or a debtor has committed an offence against the Act; and

  • refer evidence of any alleged offences to the Inspector-General or relevant law enforcement authority.

Practitioners must report any offence committed by any person under the Act. This includes offences committed by someone who is bankrupt, a debtor, creditor (e.g. lodging a false proof of debt), or any other person (e.g. for hiding property of someone who is bankrupt to prevent creditors getting paid).

If a trustee files an objection to discharge under section 149B and the reason for the objection is related to a possible bankruptcy offence, the trustee must also consider referring the matter to AFSA.

Practitioners play an important role in supporting the integrity of Australia’s personal insolvency system. Practitioners must act in a way that serves the operation of the Act, and provides equality between creditors and fairness to someone who is bankrupt or a debtor.

A practitioner may be found in breach of their duties if they fail to refer a matter to AFSA when they have sufficient evidence that an offence may have occurred. If AFSA thinks a breach of duty has occurred, it will be recorded on the practitioner’s registration profile.

2.  Offences

The document below provides a list of offences[2] in the Act, IPR and Bankruptcy Regulations 1996.

Some offences can be dealt with in the first instance by sending a letter seeking voluntary compliance.

Example: Someone who is bankrupt has failed to respond to a letter from their trustee requesting documents or information. In this case, if it has been confirmed that the bankrupt received the request, then AFSA could send a letter giving them another opportunity to respond.

Offences that cannot be dealt with by issuing a letter seeking voluntary compliance usually involve fraud and/or financial loss.

Example: Subsections 263(1), 265(4), 265(5), 265(8), 267(2), 269(1) and sections 266 and 271.

3.  Knowledge of obligations

To prove that someone has intentionally or recklessly failed to comply with their obligations, there must be sufficient evidence to prove that the person knew about their obligations at the relevant time beyond a reasonable doubt.

Evidence can include:

  • acknowledgement by the person who is bankrupt or a debtor that they have read the prescribed information (depending on the offence)

  • acknowledgment of a letter advising the person who is bankrupt of their obligations and responsibilities while bankrupt

  • proof of receipt of a request for information.

Proof of notification in these instances can include:

  • an Australia Post delivery confirmation receipt signed by the intended recipient
  • an affidavit of personal service of documents[3]
  • a case note by the practitioner detailing a conversation or meeting with the person who is bankrupt or a debtor where:
    • their obligations are explained
    • directions are given
    • documents are served and/or
    • they confirm correspondence has been received.

If proof of notification is not available, the practitioner may decide not to refer the matter to AFSA. In this case, the practitioner should make a written record (e.g. file note) outlining the potential offence and the reason/s why it was not referred.

4.  Statement of affairs

For sequestration order bankruptcies, the person who is bankrupt must file a statement of their affairs under section 54 of the Act. If they fail to do so, the trustee should refer the offence to AFSA if:

  • there is evidence the person who is bankrupt has been advised of their bankruptcy and their obligation to file a statement of affairs (see section 3 for proof of notification requirements)

  • the referral is within 12 months of the bankruptcy notification and the requirement to file a statement of affairs. Matters over 12 months will be considered if there are justifiable delays or there have been difficulties contacting the person who is bankrupt.

If the person who is bankrupt is prosecuted and continues not to file their statement of affairs, AFSA may re-prosecute the matter if a request in writing is received.

A trustee can also request AFSA (as the Official Receiver) to issue a 77CA notice if:

  • a statement of affairs has not been filed; and
  • the trustee has evidence that the person who is bankrupt is aware of their bankruptcy and the obligation to file a statement of affairs.

If AFSA issues a 77CA notice, the trustee does not need to refer the offence to AFSA.

5. False declarations

Someone who is bankrupt or a debtor might provide incorrect information or omit information in their:

  • bankruptcy statement of affairs
  • debt agreement statement of affairs
  • debt agreement proposal and explanatory statement
  • personal insolvency agreement statement of affairs
  • statement of income.

In these circumstances, AFSA requires evidence to prove the person making the declaration or statement knew it was false.

For offences under paragraph 265(1)(f)[4], the omission of information needs to be material. This means the omitted information must be significant (not minor or inconsequential).

6. Referrals

A referral must be submitted to AFSA when there is evidence available to support the criminal conduct being alleged or if there is uncertainty regarding the evidence available and if it is sufficient.

If there is insufficient or no evidence to support the allegation/s or the offending is considered to be minor or inconsequential the matter should not be referred.

In these instances practitioners should make a written record (e.g. file note) to document the decision. The written record should include a description of the potential offence or circumstances and the reason/s why it was not referred. The offending is considered minor or inconsequential if it has minimal or no impact on the administration of the estate. If there is any doubt, refer the matter to AFSA.

Scenario 1

A person who is bankrupt omits several bank accounts from their statement of affairs. When questioned by the trustee, they advise they have not used the accounts in a long time and did not think they needed to be declared. Checks conducted by the trustee confirm the accounts hold no value and have not been used in several years.

The omission of the bank account would potentially be an offence against section 267(2) of the Act – knowingly making a false declaration. However, given there is no impact on the administration of the estate and no detriment to creditors, the offending can be considered minor in nature and there is no requirement to refer the matter to AFSA. In addition, considering the response of the person who is bankrupt and the circumstances, it would be hard to prove they purposely omitted the accounts.

The trustee should make a written record (e.g. file note) to document the decision. The written record should include a description of the potential offence or circumstances and the reason/s why it was not referred.

If there is any doubt, the trustee should refer the matter to AFSA.

7. Referral process

A referral can be submitted online or by downloading and completing the Referral Form and emailing it to fraud.enquiries [at] afsa.gov.au.

Please note all referrals completed online have a 20mb limit for attachments. If attached documents exceed this limit the downloadable version of the form must be used.

If there are multiple alleged offenders, a separate form must be completed for each alleged offender.

Referrals must also include these documents as attachments (if available):

  • a copy of all letter(s) sent to the alleged offender relevant to the allegation/s

  • copies of all relevant file notes

  • copies of relevant Bankruptcy Act notices (e.g. ss77C, 77A, 139V, 6A(3), 139ZL) (if applicable)

  • proof of service/notification (if applicable)

  • copies of any other information or documents that relate to the allegation (e.g. bank statements, title searches, account applications, loan documentation).

AFSA cannot assess a referral properly unless sufficient information is provided about the alleged offender and their behaviour, and all relevant documents are included.

If there is insufficient information provided, AFSA may reject the referral or request further information. If a referrer is unsure if a piece of information is relevant, it is best to attach it. The image below shows the referral process.

Referral process

8. Time for commencement of prosecution action

Offences punishable by a term of imprisonment of six months or less have a 12 month statutory period of limitations and prosecution action must start within 12 months of the offence being committed[5].

These offences include sections 80(1), 139U(1), 139ZIE(6), 139ZIEA(6), 139ZO(1), 185EC(6), 185MC(6) and 185PC(6).

Due to this time constraint, AFSA will not accept these matters for investigation if the referral is received less than four months before the expiry of the statutory period of limitations.

If the offence date is unknown or is within four months of the statute of limitation period expiring, the practitioner should make a written record (e.g. file note) which describes the potential offence and the reason/s why it was not referred to AFSA.

 

[1] This applies to debt agreements that started on or after 27 June 2019, where the proposal was given on or after that date.

[2] Offences subject to the Infringement Notice Regime are dealt with separately to the guidance in this document. See Inspector General Practice Statement 18 – Issuing of infringement notices by the Inspector-General in Bankruptcy.

[3] The other options for serving documents mentioned in Bankruptcy Regulation 16.01 are, by themselves, insufficient to satisfy criminal prosecution standards.

[4] Paragraph 265(1)(f) is not applicable to statement of affairs accompanying a Debtor’s Petition.

[5] See section 15B Crimes Act 1914 (Cth)