An increase in activity
2022 saw an increase in enforcement activity by regulators and law enforcement agencies. This included regulators with established enforcement track-records, as well as those using enforcement powers for the first time. Of all sectors, financial services was the most affected by enforcement action. Many of the enforcement trends that became apparent in 2022 will continue into 2023, with some becoming more pronouced, and other new areas emerging.
Also an election year, 2022 saw a number of important changes – enacted and proposed – to regulatory frameworks that will shape the landscape in 2023.
Quick snapshot video – enforcement trends
Here's a flavour of what regulators are focusing on.
Key themes
- A trend for several years now, pervasive across almost all regulatory and law enforcement activity against corporations, is a focus on governance and senior management accountability, with weaknesses in both an aggravating factor in favour of regulators taking enforcement action. Some regulators and agencies, for example ASIC, are showing an increased appetite to take enforcement action against directors and senior officers where serious risk management failures occur and the relevant regime provides for individual liability. We expect that 2023 will see a continuation of this trend, particularly in the financial services sector with the anticipated passing of the Financial Accountability Regime Bill 2022 (FAR Bill).
- In 2022, ESG, cyber risk and data practices firmly embedded themselves as areas of priority for a number of regulators and law enforcement agencies, consistent with a broader international trend. We expect these areas will continue to receive increased regulatory focus in 2023.
- Enforcement under the anti-money laundering and counter-terrorism financing regime in Australia continues to increase, again consistent with a broader international trend. Scrutiny has moved from the banking sector to gaming and pubs and clubs, and is likely to extend to the crypto and remittance sectors. After years of pressure and criticism, we may see the Australian regime finally extended to the legal, real estate and accounting sectors, bringing Australia into line with its international peers.
- While corporate criminal enforcement has increased, we have not seen the wave of activity expected after the Financial Services Royal Commission, in part because of delayed or abandoned reforms such as the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 (which would have, among other things, given the Commonwealth Director of Public Prosecutions the ability to enter into deferred prosecution agreements for certain offences). There were also significant defeats for prosecutorial agencies in bringing cases against larger corporations, such as the ACCC's bank cartel case. Nevertheless, with further reform occurring in 2023, we expect corporate criminal enforcement activity to increase.
- State and Commonwealth governments continue to place significant reliance on Royal Commissions and commissions of inquiry, often with public hearings, to investigate misconduct, particularly where the relevant regulators and/or regulatory regime is perceived to have failed in preventing, identifying or addressing that misconduct. These inquiries often have significant reputational impacts for the organisations and individuals who fall within their scope. We expect to see this trend continue in 2023.
- We have seen an increase in incidents leading to concurrent investigations (and in many cases enforcement) by multiple regulators; a factor which, alongside the proliferation of the usage of commissions of inquiry to investigate misconduct, and the focus on ESG by regulators, is driving the increasing involvement of in-house and external legal in crisis management response to incidents.
- While most sectors are impacted by these trends, the financial services, gaming, resources, energy, technology and media sectors are of particular focus for regulatory investigations and enforcement action.