The latest mail on what regulators are doing to combat illegal phoenix activity was delivered yesterday at the Westin Hotel during a panel discussion for the Australian Restructuring Insolvency & Turnaround Association’s (ARITA) NSW/ACT divisional conference.
A multi-agency approach, utilising big data cross matched and shared, is where it’s at, delegates heard.
Michael Seddon from the Australian Taxation Office (ATO) talked about the anti-phoenix task force and how by collating each agency’s “top 50 problem children” from a phoenix perspective, a list of targets had been identified.
“In that initial tranche of work we found 23 that had cross-agency problems and the phoenix task force has decided to move forward on a significant number of those,” he said.
“Where we want to get to with intelligence and referrals is that we want to be dealing with them in real time, as they arise,” he said.
Adrian Brown from the Australian Securities and Investments Commission (ASIC) talked about relationships between registered liquidators and pre-insolvency advisors and how data matching was used to profile those practitioners the regulator believes are at risk.
“When we exchange information with the ATO and other agencies we’re starting to get a deeper picture about those relationships and when we consider our risk profiling of liquidators we’re concerned about certain of the firms obtaining that work.
“When we look at certain of those firms, the risk profile of certain of liquidators at certain of those firms does concern us,” he said.
As that sank in discussion mediator Michael Hughes from Minter Ellison sought clarity: “Just to be clear, these are on the one hand the pre-insolvency advisors and a relationship that you’re starting to match up with registered liquidators?
“Yes,” Brown said before adding: “Of itself is that a problem? If the liquidator is doing his or her job and can meet the requirements of independence not only in the ARITA code but in the law – noting the decision in the Walton Constructions matter – and they can tick that one off and do their job, then is that a problem?
“What concerns us is what we see as a problem with independence and a problem with what at first blush might look like a lack of competence but may also be interpreted as wilful blindness,” Brown said.
The lone liquidator on the panel, Anthony Elkerton from Dean-Willcocks Advisory, said registered liquidators were concerned that the publicity around phoenix task force raids targeting pre-insolvency advisors meant legitimate practitioners were being “tarred with the same brush”.
“The general public doesn’t know the difference between a pre-insolvency advisor and an insolvency advisor so it may erode some confidence in the industry itself,” he said. Further exacerbating the potential for doubt among the general public was the sector’s seemingly close association with the key industry bodies.
Elkerton said that in his preparations for the panel discussion he had run a google search on the phrase “pre-insolvency” and found that all the firms listed on the first three pages of his search carried the ARITA logo on their web pages.
What came through most strongly was that the ATO and ASIC are using their information gathering powers and big data to extend their influence into what is an unregulated space. Seddon said this will in turn drive out those operators who are not criminals. Then it will become a matter of better use of proceeds of crime legislation to “hit them where it hurts”. Gaoling them, Seddon said, would have little effect and was only a part of the solution.
Given the impregnability of family trusts and the ability of bankrupts to live comfortability from ill-gotten gains, better use of proceeds of crime legislation may well be where the ultimate challenge lies, but that’s a topic for another panel.