Business Law Report: Director's Duties, ASIC's Role, and Remedies

This report examines two key cases related to business law, focusing on director's duties and the role of the Australian Securities and Investment Commission (ASIC). The first case involves Crown Resorts Ltd and the alleged breaches of director's duties related to illegal activities in China. The report identifies the issues, ASIC's role in investigating the matter, and the available remedies. The second case analyzes the Commonwealth Bank's alleged violations of anti-money laundering and counter-terrorism laws, highlighting the roles of both ASIC and AUSTRAC. The report discusses the specific issues, potential penalties, and the interplay between the directors' responsibilities and the regulators' oversight, concluding with an analysis of the legal and regulatory frameworks applicable to both scenarios.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Question 1........................................................................................................................................2
(1) Issues indentified in relation to crown..............................................................................2
(2) Role played by ASIC in relation to the issue....................................................................3
(3) Remedies available in relation to the Issue.......................................................................4
Question 2........................................................................................................................................5
Bibliography....................................................................................................................................8

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Question 1
(1) Issues indentified in relation to crown
It is the duty of all directors and officers of a company to direct their operations towards the
benefits of the organization and towards its best interest. The Corporation Act 2001 (Cth) (The
Act) governs the operations of directors in relation to an organization along with a few other
common law provisions. There are several provisions which have been laid down the legislation
towards governing the activities of the directors. Section 180-184 of the Act entails the statutory
duties of directors set out by the CA. According to the provisions laid down by section 180(1) of
the Act the directors have to discharge their responsibilities towards the organization with due
skill and diligence. The actions of the directors in relation to the provisions of section 180 (1) of
the Act are analyzed on an objective basis rather than subjective. Thus an imaginary person with
an aptitude of a director is placed in situation of the director is question. Further the actions of
the director are evaluated based in the actions which the imaginary director would have taken in
same position1. It had been ruled by the court in the case of ASIC v Cassimatis2 that a legal
provision would not be violated by any reasonable director in any situation and further such an
act cannot be ratified even by the shareholders of the company.
It has been provided through the article that Crown Resorts Ltd have sent agents to china in
order to recruit gamblers. Gambling is prohibited in china and is treated as a penal offence.
These agents used to go mainland china and recruit gamblers to come and play in the resorts in
Australia. Employees of Crown resort have been arrested by Chinese officials and in addition the
1 The Corporation Act 2001 at section 180(1)
2 (No 8) [2016] FCA 1023

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share value of the organization has witnessed a steep drop of 14%. The shareholders and other
investors of the company are planning to take class action against the directors. It is apparent
from these facts that the directors of Crown have not complied with the provisions of section
180(1) of the Act. This can be said because a reasonable director would not undertake illegal
activities in relation to the company and these activities are not with the observation of due skill
and diligence.
(2) Role played by ASIC in relation to the issue
ASIC or the Australian Securities and Investment Commission is a corporate watchdog and
regulator of organizations operating within Australia and which are registered with the
Australian Securities Exchange (ASX). The ASIC regulates financial services, integrated
corporate activities and consumer and market credits within the Australian territory. The
regulator aims to make scope for the market in order to enhance economic growth and fund the
economy. The regulator operates to ensure financial wellbeing within the Australian community.
The trust and confidence of the investors and consumers is promoted by the regulator along with
the efficient functioning of market. The commission strives for orders like financial penalties and
suspension from management towards those who are found guilty of non compliance with
corporate legal framework. It has been provided through the article that few employees of crown
have been arrested by the Chinese officials for the illegal activities committed by them in China
and thus it is the duty and role of the regulator to conduct an investigation in relation to the
situation. The decision to conduct such activities is deemed to be taken by the directors of the
company. It is further identified that Crown is registered with ASX and thus ASIC has to
conduct investigation in relation to the allegations. The ASIC have to take action in order to

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protect the shareholders and investors of Crown. They also have to make an investigation as the
organization has subjected the employees who have been arrested to significant risks3.
(3) Remedies available in relation to the Issue
The ASIC can take several actions against the organization and its directors where it has been
analyzed and indentified upon investigation that they have not complied with the provision of the
Act and have subjected the investors, stakeholders and creditors of the organization to significant
risks. When the duties of directors as entailed in Section 180-183 of the CA have been violated
results in a civil penalty provision. On the other hand where the provisions entailed in section
184 of the Act have been breached it results in criminal liability under the provisions of section
6.1 of the criminal code. The directors are held criminally liable for their actions of they have
recklessly violated the duties imposed on them in relation to the organization. Section 1317E of
the Act entails the civil penalty provisions4. According to the section the directors can be
subjected to financial penalties and they may also be barred from managing a company for a
certain period. The maximum penalty which can be imposed on the directors of an organization
as an individual is A$200,000. The maximum period for which the directors can be barred from
managing a corporation is five years under the provisions of section 206c of the Act5. The
directors can however rely on section 180(2) or 1317G as a defense in relation to the allegation.
Under section 1317G the court may forgive the directors for the breach of duty made by them.
The ASIC obtained a financial penalty of A$100,000 as well as a barring period of two years in
the case of Australian Securities & Investments Commission [ASIC] v Lindberg6
3 Our role | ASIC - Australian Securities and Investments Commission. (2018). Asic.gov.au. Retrieved 3 January
2018, from http://asic.gov.au/about-asic/what-we-do/our-role/
4 The Corporation Act 2001 at Section 1317E
5 The Corporation Act 2001 at Section 1206C
6 [2012] VSC 332

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Question 2
ASTRAC has launched multiple cases against the Commonwealth Bank in relation to the
violation of Anti money laundering and counter terrorism laws. It has been alleged by
AUSTRAC that the bank has facilitated illegal money transfers which has helped several
criminal gangs and terrorist groups. AUSTRAC has alleged that the bank has violated the above
mentioned legal provisions on more than 53,700 instances. the organization have therefore been
alleged of making wide violations in relation to the legal provisions. ASTRAC has brought
proceedings against the bank in relation to the civil penalty provisions set out by the CA in the
federal court of Australia with respect to “serious and systemic non-compliance”7.
The Australian community have been subjected to ongoing and serious financial crime
by the actions of the Bank as alleged by ASTRAC while filing the case. The specific issue which
has been brought by ASTRC before the court is that the bank failed to take or deliberately did
not take any action in relation to A$77 million worth of suspicious transactions. The court has
the right to impose a maximum penalty of A$18 million in relation to each of the 53000 breaches
made by the bank. According to allegations made by ASTRAC towards the bank in situation
where it was apparently that the use of the Intelligent deposit machines were in relation to
suspected money laundering activities necessary steps in order to address the risk were not taken
by the bank. In additions the use of the machines provided by the bank were done by for money
laundering syndicates three of which were associated with drug distribution and import network.
These syndicates in order to keep suspicion at bay carried out transactions in small amount and
were able to successfully deposit $21 Million across 11 commonwealth bank accounts. It was
further alleged by ASTRAC that the bank did not take any action towards addressing the
7 CBA will take months to answer money laundering allegations. (2018). ABC News. Retrieved 3 January 2018,
from http://www.abc.net.au/news/2017-09-04/commonwealth-bank-will-take-months-to-respond-to-austrac/
8869706

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situation even where they had been warned by the Federal police. However the role of ASTRC
is different from the role of ASIC8.
ASIC or the Australian Securities and Investment Commission is a corporate watchdog
and regulator of organizations operating within Australia and which are registered with the
Australian Securities Exchange (ASX) and on the other had AUSTRAC is the financial
organization regulator within Australia. As discussed above the ASIC regulates financial
services, integrated corporate activities and consumer and market credits within the Australian
territory. The regulator aims to make scope for the market in order to enhance economic growth
and fund the economy. The regulator operates to ensure financial wellbeing within the Australian
community. The trust and confidence of the investors and consumers is promoted by the
regulator along with the efficient functioning of market. The commission strives for orders like
financial penalties and suspension from management towards those who are found guilty of non
compliance with corporate legal framework. In the given situation ASIC has to analyze the
functioning of the organization as well as the way in which the directors of the bank have
discharged their duties9.
It has been stated by the chairman of ASIC Greg Medcraft that the commission is going
to investigate into the situation whether the board of the bank acted in accordance with the
continuous disclosure laws when it too the decision of not notifying investors in relation the
suspicious behavior. The role of ASIC in the given situation would been to analyze the
8 CBA faces 'very large' shareholder action on money laundering. (2018). ABC News. Retrieved 3 January 2018,
from http://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-shareholder-class-action/8833860
9 Knaus, C. (2018). Commonwealth Bank accused of money laundering and terrorism-financing breaches. the
Guardian. Retrieved 3 January 2018, from
https://www.theguardian.com/australia-news/2017/aug/03/commonwealth-bank-accused-of-money-laundering-and-
terrorism-financing-breaches

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compliance of the bank with licensing obligations which is to act honestly, efficiently and fairly
along with the requirement of reporting potential liabilities. It has however been noted by the
chairman that organizations like the CAB are not mandated to inform the ASIC in relation to the
breach of anti-money laundering laws along with terror financing laws. It is the duty of the
directors to bring in professional skepticism whole discharging their functions along with
ensuring an effective system of risk management10.
Thus in the given situation the role of the ASIC would be to primarily investigate and
analyze the actions of the directors in relation to the commonwealth bank. If upon investigation it
is found by the ASIC that the directors have not complied with their duties of making proper
disclosure about the risks involved in the matter to the investors they can be held liable for the
breach of section 180(1) of the Act. This is because where they have failed to comply with a
legal duty of disclosure they have also not acted with care and diligence in relation to their
operations which any reasonable director would have done in the given situation. The ASIC can
bring separate proceedings against the commonwealth bank for the breach of corporate laws. In
case the ASIC would be able to establish the breach of section 180(1) of the CA by the directors
of the bank they would be able to obtain an order in relation to the civil penalty provisions.
10 ABC News. (2018). ASIC to investigate CBA over money-laundering scandal. [online] Available at:
http://www.abc.net.au/news/2017-08-11/asic-to-investigate-cba/8796542 [Accessed 4 Jan. 2018].

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Bibliography
ABC News. (2018). ASIC to investigate CBA over money-laundering scandal. [online]
Available at: http://www.abc.net.au/news/2017-08-11/asic-to-investigate-cba/8796542 [Accessed
4 Jan. 2018].
ASIC v Cassimatis (No 8) [2016] FCA 1023
Australian Securities & Investments Commission [ASIC] v Lindberg [2012] VSC 332
CBA faces 'very large' shareholder action on money laundering. (2018). ABC News. Retrieved 3
January 2018, from http://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-
shareholder-class-action/8833860
CBA will take months to answer money laundering allegations. (2018). ABC News. Retrieved 3
January 2018, from http://www.abc.net.au/news/2017-09-04/commonwealth-bank-will-take-
months-to-respond-to-austrac/8869706
Corporation Act 2001 (Cth)
Knaus, C. (2018). Commonwealth Bank accused of money laundering and terrorism-financing
breaches. the Guardian. Retrieved 3 January 2018, from https://www.theguardian.com/australia-
news/2017/aug/03/commonwealth-bank-accused-of-money-laundering-and-terrorism-financing-
breaches
Our role | ASIC - Australian Securities and Investments Commission. (2018). Asic.gov.au.
Retrieved 3 January 2018, from http://asic.gov.au/about-asic/what-we-do/our-role/

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