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Inspector-General Practice Statement 14
IGPS 14 - Referring alleged offences to the Inspector-General
The Australian Financial Security Authority (AFSA) investigates and where appropriate refers alleged offenders 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.
As delegates of the Inspector-General in Bankruptcy, AFSA staff exercise the Inspector-General’s powers under the Bankruptcy Act 1966 (the Act) and Bankruptcy Regulations 2021 (the Regulations). 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 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).
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.
The document below provides a list of offences in the Act, IPR and the Regulations.
Where non-compliance is identified, and relates to any of the grounds subject to section 149D(1), it may be more efficient, effective and timely to file an objection to discharge under section 149B in the first instance (see IGPD7 and OTPS5). This action may influence the bankrupt to comply in the knowledge that the objection to discharge will be withdrawn when compliance is achieved.
Where an objection to discharge is lodged for non-compliance, there is no requirement to simultaneously make an offence referral to AFSA. After an objection to discharge has been accepted, the bankrupt should be informed that the objection will be withdrawn once compliance has been achieved. Where, after 6 months has past, the bankrupt remains non-compliant, then an offence referral should be made. See section 10 regarding extensions of timeframes.
An objection to discharge must be withdrawn when compliance has been achieved directly related to that matter.
There is no requirement to submit an offence referral for an alleged offence of section 272 if an objection has been lodged on grounds subject to section 149D(1)(a). However, an offence referral should be made when the bankrupt returns to Australia.
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
- 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, including any legislative timeframe requirements
- directions are given
- documents are served and/or
- they confirm correspondence has been received.
Enforcement action is unlikely to occur where there is no proof that a bankrupt or debtor is aware of their obligations. 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 and what actions are being taken to ensure the bankrupt or debtor is aware of their obligations.
For sequestration order bankruptcies, the person who is bankrupt must file a statement of their affairs (also known as the Bankruptcy Form) 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 4 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.
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), the omission of information needs to be material to the administration of the estate and not simply minor or inconsequential.
Offences punishable by a term of imprisonment of six months or less have a 12-month statutory period of limitations. This means any prosecution action must start within 12 months of the offence being committed.
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.
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.
Where the matter can be best dealt with through an objection to discharge, the matter should not be referred immediately. (see section 3 above)
If there is insufficient or no evidence to support the allegation/s or the offending is minor or inconsequential the matter should not be referred. Offending is considered minor or inconsequential if it has minimal or no impact on the administration of the estate.
Practitioners should make a written record (e.g. file note) to document the decision not to refer a matter. 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, refer the matter to AFSA.
A person who is subject to a debt agreement omits a debt from their statement of affairs. When questioned by the RDAA, they advised they had not had contact with the debt buyer for 11 years and thought the debt was no longer outstanding. Checks conducted by the RDAA confirm the debt is no longer actionable as the limitation period to take recovery action had expired.
The omission of the debt 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 debt agreement 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 subject to the debt agreement and the circumstances, it would be hard to prove they purposely omitted the debt.
The RDAA 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 practitioner should refer the matter to AFSA.
A referral can be submitted online or by downloading and completing the Referral Form and emailing it to enforcement [at] afsa.gov.au.
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.
There are common errors that occur which lead to offence referrals being rejected. Specifically, these include:
- Not being aware of obligations
As noted above in section 4, for most offending conduct, the bankrupt or debtor must be aware of their obligations. This means there must be some proof of service or acknowledgement receipt of the ‘Initial Letter’ or file noted discussions of the specific obligations of the bankrupt or debtor.
- No proof of service for requests or directions
There must be evidence of when the recipient to any requests or directions received that request or direction. This could be through an affidavit of personal service, registered post acknowledgement signed by the respondent, email receipt acknowledgement from the respondent, or a detailed file note confirming a discussion with the respondent on the date of receipt and acknowledgement of the request and/or direction. No proof of service means non-compliance cannot be enforced.
- Compliance time frame expired or unreasonable
Notices cannot be enforced where confirmed receipt of the request or direction is later than the compliance due date. It is advisable to make any compliance time frame commence from the date of receipt of the request or direction. Time frames must also be reasonable. Where a large volume of information is required, it is only reasonable that a greater compliance time frame is provided. Unreasonable timeframes cannot be enforced.
- Extensions given to a compliance timeframe
Any extension of time, given either overtly or unwittily, on any request or direction will invalidate the notice and makes them unenforceable. A compliance outcome can still be achieved past any compliance due date. Where a request for extension is made because of a need to obtain material or there is a large volume of material to provide consideration should be given to issuing a fresh notice with a reasonable compliance timeframe requirement.
- Non-compliance with legislation
Requests or directions that are not compliant with the legislation cannot be enforced. Requests for books under section 77A cannot include payments for money or general information outside of what may be relevant to the books or records.
Example 1: You may request a lease agreement as a book in a notice under section 77A, but you cannot request information relating to that lease agreement until you are in possession of that document. You can however request a book and require the respondent to identify who may have the book and where it likely to be located if it is not in the respondent’s possession.
Example 2: You cannot make a request under 139U with a compliance date that is not in accordance with the legislation. All 139U requests have a legislative compliance date of 21 days past the end of any CAP period.
 This applies to debt agreements that started on or after 27 June 2019, where the proposal was given on or after that date.
 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.
 The other options for serving documents mentioned in section 102 of the Regulations are, by themselves, insufficient to satisfy criminal prosecution standards.
 Paragraph 265(1)(f) is not applicable to statement of affairs accompanying a Debtor’s Petition.
 See section 15B Crimes Act 1914 (Cth)