How Many Loopholes?

{Published on 26 October 2014}

PR 26 Oct 14

The Chairman of ASIC, Mr Greg Medcraft, has claimed that Australia is a ‘Paradise’ for white-collar criminals – a statement he was forced to retract by the Assistant Treasurer, Senator the Hon Mathias Cormann.

A hallmark of a ‘Paradise’ for white-collar criminals is the presence of legal “loopholes” that the white-collar criminals and their legal advisors can exploit.

Superannuation funds are the perfect target for white-collar criminals since large amounts of “other people’s money” is placed in the hands of a small number of “trustees”.

Australia has a COMPULSORY superannuation system so the Government forces people to place their hard earned money into the hands of complete strangers, where the temptation to steal some of this money is high.

There are many “loopholes” in Australia’s compulsory superannuation system, but one of the major loopholes is avoided by Senators and Members of Parliament and that is why it persists.

Senators and Members of Parliament have ensured that they enjoy a safe superannuation system by basing the Parliamentary Superannuation System on legal documents that are available not only to themselves but to members of the public as well.

These legal documents cannot be concealed by white- collar criminals who might gain access to these superannuation funds.

However members of the Public are not so fortunate since their superannuation funds are based on private trusts and the Government has allowed a major “loophole” to persist.

There is no requirement for the Deeds of superannuation funds to be registered with a public authority where members are able to have access to these Deeds.

This “loophole” allows white-collar criminals who can gain control of superannuation trusts to conceal genuine Deeds of the superannuation trust and to represent fraudulent documents that provide much lower benefits as the “Trust Deed” of the fund to unsuspecting Members and Beneficiaries of the fund.

By concealing the genuine Deeds of a superannuation trust (fund), white collar-criminals who can gain control of the superannuation trust are able to use “Creative Accounting” to then remove tens of millions of dollars from the actuarial surplus created by substitution fraudulent Deeds. The white-collar criminals can then enjoy the “lifestyles of the rich and famous” whilst the members of the fund are left destitute after decades of making contributions to the fund.

If the Assistant Treasurer is concerned about Australia being a ‘Paradise’ for white collar-criminals his first priority should be to ensure that as many legal “loopholes” are closed as possible.

The first priority of the Assistant Treasurer should be to establish a COMPULSORY Deed registration scheme where every Deed of a large superannuation fund is registered with a public authority where members can have access to these Deeds if the “trustees” of their fund seek to deny access to the Deeds held by the trustees.

If the Government has made superannuation COMPULSORY then to protect the members’ legal entitlements there must be a COMPULSORY Deed Registration Scheme just like there is a public access system for title deeds and title certificates in the real property market.

The High Court of Australia has noted Finch v Telstra Super Pty Ltd [2010] HCA 36 at [33]:

 

For some people, superannuation is their greatest asset apart from their houses; for others it is even more valuable.”