Federal Court imposes first custodial sentences on individuals in landmark cartel prosecution

What you need to know

• The Federal Court of Australia has fined money transfer business Vina Money Transfer $1 million and imposed custodial sentences on four individuals ranging from nine months to two years and six months in the first criminal cartel sentencing case involving individuals in Australia.
• While each individual was released on good behaviour (pursuant to recognizance release orders), the Court carefully considered the prosecutor's submissions that immediate sentences of imprisonment ought to have been imposed on some of the offenders given the importance of general deterrence.
• On 8 September 2022, charges were dropped against a fifth individual who had pleaded not guilty. If the jury trial against that individual had proceeded, it would have been only the second contested criminal cartel trial in Australia, following the acquittal of Country Care and two individuals in June 2021.

On 9 June 2022, Justice Abraham of the Federal Court of Australia delivered sentences in the criminal cartel case against Vina Money Transfer Pty Ltd (Vina Money) and four individuals.  The Commonwealth Department of Public Prosecutions (CDPP) prosecuted the case following an investigation by the Australian Competition and Consumer Commission (ACCC) and the Australian Federal Police (AFP).

Background and charged conduct 

The cartel related to conduct engaged in by three businesses that supplied money transfer services between Australia and Vietnam: Vina Money, Hong Vina and Hai Ha.  Each business had multiple branches in Victoria and NSW which, in some suburbs, were within 500 metres of one another. 

The four individual offenders included directors and/or employees of Vina Money and Hong Vina. Hai Ha and its director was granted immunity from prosecution by the ACCC and CDPP.

The three businesses entered into two contracts, arrangements or understandings (CAUs) containing cartel provisions:

1. Exchange rate CAU: The three businesses agreed to charge customers a common exchange rate of AUD to VND (Vietnamese Dong) from January 2012.  Prior to this CAU being made, there was intense competition between the businesses which was affecting their profits, and
2. Fee discount CAU: The three businesses agreed to cease applying fee discounts in February 2012, and then agreed to apply a common fee discount in March 2012, on money remittances to Vietnam.

Vina Money pleaded guilty to (and was convicted of) giving effect to the exchange rate CAU January 2012 and August 2016 and giving effect to the fee discount CAU in February and March 2012.  The four individual offenders each pleaded guilty to (and were convicted of) being knowingly concerned in some of all of the charged conduct.  The extent of each individual's involvement in the conduct varied but was, in each case, considered by the Court to be "serious". 

Investigation and referral 

The judgment records that the investigation arose as a result of telephone communications between two of the individuals which were intercepted by the Australian Criminal Intelligence Commission in relation to an unrelated investigation.  Those communications revealed conversations and text messages between the three money transfer businesses.  These communications were referred to the AFP and ACCC in June 2014 who subsequently executed search warrants at the business premises of each company, and the residential premises of each individual in 2016.

Sentencing Decision

The Court recognised there were no comparative sentencing cases to consider as this was the first occasion on which individuals were to be sentenced for cartel conduct.  The Court accepted that principles relevant to other white collar crime offences may be equally applicable to cartel offences given the similarities in both types of offending. 

The Court ultimately imposed a fine of A$1 million on Vina Money and sentenced each individual to terms of imprisonment ranging between nine months and two years and six months. Each individual offender was released immediately on good behaviour (known as a recognizance release order for Commonwealth offences).

The offenders did not recognise the seriousness of their offending 

While the Court accepted the objective seriousness of the offending was appropriately characterised in the low to moderate range of offending, the Court held that the conduct was 'serious' in each case. The Court was critical of various submissions that sought to minimise the seriousness of the offending and failed to recognise that the conduct was charged as criminal.  For example, some of the offenders had submitted that customers were better off with the three local businesses working together compared with dealing with the large banks or international remittance services and that the CAUs were not "designed to rip off customers".  

There were also submissions that the offending was not as serious as that subject to the only previous criminal cartel sentences in Australia, which involved three large international shipping companies – given the comparatively small sizes of the companies involved in this case.  The Court rejected these contentions on the basis  that the "nature of the evil" is the same in all cartel cases, given the effect of cartel conduct on consumers and the market, and that general deterrence is a paramount sentencing consideration. Notwithstanding the small size of the businesses involved, between the relevant period in which the cartel operated, the three businesses occupied approximately two-thirds of the market in terms of the number of transactions remitting money from Australia to Vietnam, values at approximately A$2.5 billion.

While there was a dearth of evidence regarding each offender's financial position, the Court readily inferred that the offending in this case was committed for financial gain.  Further, while the prosecution was unable to quantify the damage to the market or identify any individual victims in this case, the Court concluded this was not necessary as cartel conduct by its nature was destructive to competition and consumer welfare. 

Subjective personal factors and an early plea of guilty are influential but not indicative of future cases: a foreboding warning 

The most significant of the matters considered by the Court in determining the appropriate sentence was the fact that each offender entered pleas of guilty.  The Court applied a 25% discount to the sentences for Vina Money and three individuals, and a 20% discount to the fourth individual (noting that offender entered their plea at a later stage in the proceeding than the other offenders).

Other personal factors considered significant in mitigating the sentences, were: 

• the subjective circumstances of each offender (eg, their health, financial and family circumstances); 
• their respective prospects of rehabilitation; 
• the significant delay between charging and sentencing (of almost three years) caused by the Covid-19 pandemic and the complexity of the proceedings; and 
• the restrictions likely to be imposed in prison due to the Covid-19 pandemic, which may have made time spent in custody more onerous on the offenders than usual. 

The prosecution submitted that immediate imprisonment was the appropriate sentence for three of the offenders, but accepted it would not be an appellable error if recognizance release orders were granted. 

The Court observed that in ordinary circumstances a period of immediate imprisonment may otherwise have been imposed for the offender that was most heavily involved in the conduct had the above mitigating factors not been present – particularly given the importance of general deterrence and denunciation of cartel conduct.  Ultimately, the Court considered its decision to impose recognizance release orders to be "finely balanced". 

Looking to the future for sentencing 

General deterrence will remain at the forefront of any sentencing for criminal cartel conduct moving forward.  It is clear that the CDPP is willing to push for immediate custodial sentences for individual cartel offenders and the Court is open to considering this punishment in the future.

While an early guilty plea will always weigh heavily in mitigation, the influence of other subjective factors on sentence will be considered on a case by case basis.   Most obviously, as we move to a more 'normal' post Covid-19 world, delay or restrictions in custody imposed by Covid-19 may not be factors available in mitigation of sentence in the future.

Charges dropped against fifth individual

On 8 September 2022, the CDPP withdrew criminal charges against a fifth individual who had pleaded not guilty and was proceeding to a jury trial set to commence on 21 September 2022.

This follows the CDPP withdrawing all criminal cartel charges against Deutsche Bank, Citigroup, ANZ and six individuals between October 2021 and February 2022, and withdrawing all criminal cartel charges against the CFMMEU and one individual in August 2021.

While the CDPP is not required to provide reasons for withdrawing criminal charges, it is clear that the CDPP has faced serious challenges in successfully prosecuting cartel conduct referred to it by the ACCC.  The extent to which these challenges will influence the CDPP's appetite to prosecute future cartel cases remains to be seen.

Authors: Ross Zaurrini, Partner; Andrew McClenahan, Lawyer; and Isabella Hunt, Lawyer.