Crime Prevention Unit

Organised Crime

Office of the Minister of Justice 

Cabinet Business Committee

REDUCING THE LEVEL AND IMPACT OF ORGANISED CRIME IN NEW ZEALAND: RECOMMENDATIONS FOR LEGISLATIVE REFORM

4 I recommend that the following proposals be referred for further consideration as first 12-month deliverables of the Organised Crime Strategy:

• Restrictions on OCGs’ access to legal mechanisms, such as limited liability companies and incorporated societies;
• Extending identity protection under s108 of the Evidence Act to enable undercover officers to testify in a wider range of organised crime prosecutions;
• Implementation of tighter controls over the availability of precursor chemicals – including over-the-counter pseudoephedrine-based medications.

6 New provisions of the Evidence Act 2006 will make the presentation of certain forms of evidence easier and more manageable. These are likely to greatly enhance prosecutions for participation in an OCG such that amendments to existing legislation in this respect are not recommended at this time.

7 I do not recommend legislative amendment specifically authorising the destruction of fortified gang houses. The existing scope of s216 of the Local Government Act 2002, which provides for orders for the "removal" of any "fence, structure, or vegetation", appears sufficiently broad to extend to dwellings.

8 The introduction of a new offence that is directed at persons who do not themselves commit crime but who involve themselves in criminal activity (by, for example, orchestrating the activities of others who do commit crime) was considered by the Law Commission. Based on their advice, I do not recommend the introduction of such an offence.

"Street level" Responses

10 However, there have been concerns expressed about the scope and potential application of a proposal to provide the Police with a new power to address the problem of unintended intimidation. Further consideration therefore needs to be given to the development of this proposal and I recommend that this constitute another first 12-month deliverable of the Organised Crime Strategy.

11 Cabinet also directed officials to consider the implications of introducing "crime prevention directives" and the suitability of civil injunctions, such as anti-social behaviour orders and gang injunctions. I do not recommend either be introduced at this time. However, a Local Bill to set up a Rotorua model of anti-social behavioural orders is to be introduced by Hon Steve Chadwick on behalf of the Rotorua District Council and Rotorua Police.

Background

13 On 9 July 2007, Cabinet agreed to the following proposed amendments [CBC Min (07) 14/15]:

14 Cabinet also directed officials to consider:

15 Cabinet also invited me, as Minister Responsible for the Law Commission, to invite the Law Commission to:

16 This paper responds to these and further areas of potential legislative reform. These areas can be broadly divided into two categories: "business end" responses (responding to serious organised crime) and "street level" responses (that is, public manifestations of OCGs). This paper is accordingly divided into two parts.

Part One: "Business End" Responses

19 In 1999 a Police survey on the use of incorporated societies, trusts and limited liability companies by OCGs identified several types of businesses or activities potentially funded by or fronting criminal activity. These included taverns, massage parlours, contracting (for example, wood chopping), forestry, fishing, farming, and escort agencies.

20 Despite the findings of this Police survey, it remains unclear as to what extent OCGs use legal structures to manage their financial activities or to derive financial gain.

21 The types of business structures available to OCGs include partnerships, incorporated or unincorporated societies, limited liability companies, cooperative organisations and discretionary or trading trusts.

22 The extent of legal controls around the establishment and operation of such structures affects their attractiveness to OCGs. For example, a person cannot direct a company if they have been convicted of a crime involving dishonesty in the previous five years. Additionally, some business structures require a degree of transparency and accountability. An incorporated society, for example, must maintain a register of its members (a copy of which must be forwarded to the Registrar of Incorporated Societies on request) and provide the Registrar with a set of financial statements each year. In a similar vein, a limited liability company must maintain company records, file an Annual Return and keep a share register providing details of shareholders.

Options Available

24 Although regulatory control might prevent OCGs using certain legal mechanisms it is far from clear that such mechanisms, particularly intellectual property rights, support ongoing activities of OCGs. Imposing regulatory controls that prevent OCGs using certain legal mechanisms therefore presents challenges. Unincorporated societies, for example, exist simply by virtue of agreement within the group itself and are not required to be registered. Trusts are also problematic in this respect. Where there are regulatory controls, these should not be so onerous as to impose unjustifiable costs on legitimate businesses. Consideration should also be given impact such controls may have on the operations of regulatory agencies who administer the legislation.

Recommendation

27 Although the notion of orders permitting the destruction of gang houses is fairly radical, they appear to be available. The definition of "structure" under the Resource Management Act 1991, for example, expressly includes houses and buildings.

Recommendation

30 Current efforts to reduce the availability of methamphetamine and prevent the diversion of pseudoephedrine into the manufacturing of methamphetamines do not appear to have had an impact on the price, purity or availability of methamphetamine. Additional approaches are being considered, such as initiatives to prevent the diversion of pseudoephedrine-bearing medicines at the retail and wholesale level into the illegal manufacture of methamphetamine.

31 I consider that consideration should be given to more comprehensive mandatory controls aimed at limiting organised criminal access to critical precursor chemicals given the limited statutory controls that currently exist.

32 Currently, the only comprehensive "control" over precursor chemicals is a voluntary code of compliance adopted by the New Zealand Chemical Industry Council. This code mirrors similar Australian codes. By way of contrast, New South Wales, Western Australia and Victoria have favoured legislation. Both New Zealand Police and the New Zealand Chemical Industry Council favour comparable legislation to prevent the unlawful diversion of precursor chemicals (due to declining levels of compliance with the voluntary code). This legislation would provide for greater scope to monitor and enforce measures, e.g. via customer "end user declarations" and mandatory reporting of suspicious transactions.

Recommendation

35 The prosecution and conviction rate for s98A is low. This stems from the need for the prosecution to prove the existence of an OCG as a preliminary matter in order to then prove an accused’s participation within the group.

36 I am of the view that the Evidence Act 2006 will be of assistance in raising prosecution and conviction rates. A number of provisions of the Act will enable a wider range of relevant evidence to be examined by the court and make the presentation of evidence more manageable. For instance, the Act:

37 These provisions will be of even greater significance once a proposed amendment increasing the maximum penalty under s98A from 5 to 10 years imprisonment is passed. This increase not only better reflects the seriousness of s98A offending, but also permits evidence obtained by interception warrant to be available in s98A prosecutions. As trials based upon interception evidence frequently involves the presentation of masses of discrete communications over protracted periods – often in foreign languages - this proposed amendment, taken together with the new Evidence Act provisions, will go a long way toward enabling s98A prosecutions.

Recommendation

41 This range of offences does not extend to other crimes that are integral to the day to day "business" of entrenched New Zealand OCGs. These include: illegal firearms use; crimes of dishonesty; including dealing in stolen goods; trafficking of counterfeited goods and pirated copyright works; trafficking of Class C drugs; and offences under the Fisheries Act 1996.

42 There is also a growing “p for pāua” trade in which ethnic New Zealand OCGs trade pāua for crystal methamphetamine from Asian OCGs. Police report that organised criminal involvement in the fisheries sector generally is of growing concern. The Ministry of Fisheries now has a "Special Operations Unit" that undertakes covert operations. The inability of Special Duties Fisheries Officers to maintain anonymity at trial is a real impediment to successful prosecution in this area.

Recommendation

45 Both circumstances are highly relevant to prosecutions alleging organised criminal activity, particularly for prosecutions involving s98A offending. They are also likely to be useful for a range of other offences, such as drugs or dishonesty offences. Crown prosecutors have identified enactment of these provisions as of use in organised crime related prosecutions.

Recommendation

48 The Commission has provided me with a response proposing that no further work be carried out in this area. The letter is attached as an appendix. I agree with the Commission’s recommendation.

Recommendation

53 Police have common law powers to keep the peace and to prevent crime. The scope of these powers is unclear. There is also a lack of consistency in their interpretation and application. Police have expressed a clear preference for these powers to be put in legislation.

Legislative Disruption Powers

55 These legislative powers first require an individual to engage in certain prohibited behaviour (such as obscene language or offensive behaviour). In the case of "incidental intimidation", however, no such behaviour has taken place. Finding a solution to this problem involves identifying circumstances in which it would be appropriate for Police to act and what powers they should be provided with.

56 I am of the view that Police should be able to respond in situations where individuals induce reasonable feelings of fear in others – whether or not those individuals intend to cause fear. Having said that, I do not believe that unintentional intimidation should be criminalised. To make this an offence would potentially capture a wide-range of situations in every day New Zealand contexts, including youth or other groups congregating in suburban shopping precincts. Instead, Police might be vested with a power to direct persons to undertake a specific act or to refrain from continuing to act in a way that has given rise to a reasonable apprehension of fear. Failure to comply with a lawful direction given by Police could be an offence punishable by a fine of up to $2,000 or imprisonment of up to 3 months.

57 The creation of a broad discretionary power to intervene is not without its problems. I am particularly concerned about the possibility of incidents involving the intervention of the criminal justice system, particularly where individuals ignore Police requests to "move-on". In this respect, the exercise of the power might be seen as adversely affecting Police relationships and perceptions of Police within the community.

58 I have come to this view because of the novelty of the power, the potentially far-reaching restrictions that might be placed on individuals under the power and the discretion the power accords to Police.

59 As individual Police officers will have differing perceptions of what circumstances might induce fear, the discretion provided to individual Police officers might result in the power being used inappropriately. These concerns are especially acute in situations where public expectations for Police to intervene are not well-founded. For example, members of the community have be known to feel intimidated by the presence of persons with facial tattoos or a moko, homeless people living on the street, people engaged in public demonstrations, union members on picket lines, or groups of youth wearing "hoodies" in public places.

60 It is likely that this power will increase the case-burden upon the Courts – both in terms of dealing with charges stemming from refusals by persons to comply with Police directions and through legal challenges under the Bill of Rights Act.

61 The Crown Law Office advises that Bill of Rights challenges are likely to see the Courts construing this power as available in only limited circumstances by requiring a very high trigger threshold of anxiety or fear. This occurred in a recent decision of the Supreme Court concerning disorderly behaviour.

Recommendation

64 Conceptually, crime prevention directives would enable Police to disrupt circumstances that might reasonably give rise to criminal activity. Such a power might be exercisable where Police officers repeatedly encounter particular situations that, experience has shown, regularly lead to crime. At a practical level, Police envisage that such powers would be employed to counter street level offending by, for example, enabling the dispersal of late night congregations of known individuals in certain areas even where there is no other indication that an offence might be committed.

65 Although conceptually sound – in that there must be some reasonable basis for the issuing of crime prevention directives – their availability would vest a high level of discretion in Police. Use of this discretion must be challengeable in the Courts. However, avenues of challenge are available only where an individual (i) is prosecuted for failure to comply with the directive and (ii) in their defence, questions whether the situation in question justified a directive. Whilst this is true also for other "move-on powers" (including the proposed intimidation power referred to above), the discretion here is so broad and "experience-based" that there is no objective or readily measurable standard by which the appropriateness of a crime prevention directive can be assessed.

66 Additional disruption powers are also likely to disproportionately impact certain sectors of the community, such as youth. They also have the potential to adversely affect the relationships Police have with the community and perceptions the community has of Police. Such outcomes would have longer-term implications for community policing initiatives.

67 In summary, I am not convinced of the merits of general crime prevention directives. They are an extraordinary departure from accepted criminal justice practices in that they do not address existing problems (such as intimidation or anti-social conduct) but instead target conduct on the basis that there might be a problem in the future. I am also unconvinced of the utility of such powers in addressing the problem of organised crime.

Recommendation

70 There are two forms of civil injunctions. The first targets gangs via gang membership. The second focuses on individuals, independent of any association to a gang.

"Gang injunctions"

72 Gang injunctions render individual gang members independently subject to a civil injunction that imposes restrictions upon specified conduct within a specified geographic location. Restricted activities might include: congregating in certain areas; harassing or intimidating members of the community; vandalising property; drinking alcohol and/or associating with particular individuals. Gang injunctions are employed as a deterrent and are backed up by criminal law penalties, including imprisonment. Gang injunctions raise the stakes for any injuncted person engaging in specific conduct by effectively elevating that conduct to the status of criminal activity.

73 Gang injunctions are a targeted response to a specific problem not uncommon in the streets of California – but less relevant in the New Zealand context. It evolved as a mechanism for communities to "recapture" geographical territory staked out by identifiable street gangs. Gang injunctions are designed to restore communities that have been altogether deprived of the social space necessary to foster essential networks and community institutions that offer alternatives to gang culture.

74 The Californian experience indicates that gang injunctions are highly resource intensive. They require the gang to be designated as a proscribed entity. This, in turn, requires proof that: the named gang exists; that it is involved in nuisance activity; and the individuals named in the injunction are members of it. In order to issue such an injunction, a Court would therefore require statements from members of the local community or intelligence about an individual (e.g. gathered from arrest records and surveillance). Furthermore, although temporary injunctions can be obtained without giving the gang members an opportunity to be heard by the Court, permanent injunctions require notification to the affected parties and full opportunity to respond.

75 Gang members not named in an injunction are able to continue to engage in restricted activities within the designated zone. Criteria for "gangs" and "membership" are therefore open to subversion by "rebadging". Overly broad criteria, on the other hand, run the risk of capturing individuals not connected to a gang or not involved in nuisance behaviour. These are problems inherent in any designation process. It is partly because of these sorts of difficulties that Cabinet has already decided not to use designation options to "ban" gangs or gang paraphernalia outright.

76 The overall effectiveness of gang injunctions is not clear. Although the Courts in Southern California have issued approximately 50 such injunctions, current research has failed to establish that these injunctions have limited the ability of gangs to operate. I understand that there are ongoing attempts to modify the scope and application of the injunctions in order to improve their effectiveness.

"ASBOs"

78 "Anti-social behaviour" is defined as behaviour causing or likely to cause alarm, harassment, or distress to another individual or groups who do not live at the same household as the perpetrator. ASBOs are intended to prevent the individual subject to it from doing anything described in the order. This often extends beyond specified acts of anti-social behaviour to other restrictions. For example, entering specified areas or associating with specified persons.

79 In the UK an ASBO is in force for a minimum of two years. A breach of the order without reasonable excuse is a criminal offence punishable by a fine or imprisonment for a maximum of five years.

80 The ASBO regime provides for a range of responses from written warnings to civil injunctions (which have the same affect as described above).

81 Local government authorities, or the local chief of Police, may apply for an ASBO. Police and local government must consult and agree before making an application. The consultation process should involve the local Youth Offending Team and is, thereby, a multi-agency response.

82 ASBOs enable early intervention without reference to the criminal justice process. ASBOs have been shown to have had a positive effect in reducing anti-social behaviour in the UK where the person has not previously come into contact with the criminal justice system. However, research also shows that a high proportion of those who have had some prior contact with the criminal justice system are likely to breach the terms of an order or ignore warnings.

83 ASBOs have been shown to have had a disproportionate impact on youth. Four thousand ASBOs were issued between 1999 and 2005 (with use rising dramatically between 2004 and 2005). Around 50 percent of ASBOs were served on children and young people. In most years, around 40% of all ASBOs were breached. Nearly 50% of all young people in custody in the UK were in custody because they breached their ASBOs.

84 There is a high financial cost associated with implementing a full civil injunction regime. The cost of simply responding to reports of anti-social behaviour in Wales and England is estimated by the UK Audit Office at NZ$11bn per annum. While any costs associated with the model may be off-set by decreases in the criminal justice system, there is no current evidence to show that this has occurred.

85 Research does show inconsistencies in the issuing of ASBOs, which might result in a heightened sense of injustice for those affected. There is the additional possibility of ASBOs opening up the possibility of effectively criminalising behaviour (under the guise of an ASBO breach) that is not otherwise criminal. Such an outcome has the potential to inflate prison numbers and runs directly counter to Government policy in the area of Effective Interventions and youth justice.

Recommendations

87 I also consider that no further consideration be given to ASBOs as vehicles for countering the threat of organised crime in New Zealand. These orders were designed to redress particular social problems peculiar to the UK. The research shows that ASBOs have an economic and social cost with unclear benefits to the criminal justice system in terms of early intervention. I note that s186 of the Summary Proceedings Act 1957 provides for a civil injunction process that enables any person to apply to the Court for an order requiring any other person to keep the peace. The order is enforced by the way of a bond. Such a regime would appear to have some application in responding to street level disorder.

88 A Local Bill to set up a Rotorua model of anti-social behavioural orders is to be introduced by Hon Steve Chadwick on behalf of the Rotorua District Council and Rotorua Police. This Bill will provide Parliament with an opportunity to consider the relative merits of ASBOs in more detail.

Consultation

91 While some issues have been raised regarding this particular proposal, the existence of similar policing options in other jurisdictions (notably in the United Kingdom and Australia) gives confidence in the ability to address these issues successfully through new legislative provisions. Police also sees the opportunity to refine the proposal into a potentially more effective intervention, if a broader crime prevention and public safety perspective is taken (rather than a more targeted focus on organised crime).

Regulatory Impact Statement

95 The Crown Law Office also notes that the exercise of this power is likely to be subject to additional litigation as groups and individuals challenge the exercise of the power. The implications of this litigation for the power are discussed in the body of the paper. Further consideration will be given to the Bill of Rights implications of the power during the drafting of the provision.

96 I also note that the provisions relating to Judge-alone trials infringe the right to trial by jury under section 24(e) of the Bill of Rights. These provisions were considered for compliance at the time the Criminal Procedure Bill was introduced in 2004 and were found to be consistent with the Bill of Rights Act.

97 The human rights dimensions of those proposals being considered as part of the Organised Crime Strategy will be considered during the development of those initiatives.

Legislative Implications

99 The proposal to establish a precursor control regime is likely to result in a stand alone bill.

Publicity

Hon Annette King
Minister of Justice

Date signed:

Regulatory Impact Statement

Executive Summary

2 The paper proposes one new legislative measure that will be of assistance in addressing certain gang behaviours that are manifested in street level disorder (including violence). This measure is a new power to enable police officers to take reasonable steps to disrupt circumstances giving rise to a reasonable apprehension of fear or intimidation.

3 In order to better facilitate proof in section 98A cases, the paper also proposes a minor amendment to the Evidence Act 2006 to provide for greater discretion in the range of cases in which the identities of undercover officers might be protected. The paper also proposes that provision be made for judge-alone trials where there are grounds to believe that potential jurors may be or have been intimidated, and that the effect of that intimidation could only be rectified by a Judge-alone trial.

4 It is further proposed that consideration be given to establishing controls around:

• the importation, and domestic purchase, of large quantities of chemicals that might be used in the process of manufacturing methamphetamines, and
• (the use of) legal mechanisms governing the manner in which a business may be structured, or governing the protection of intellectual property.

12 Although the prosecution and conviction rate for this offence remains low, Cabinet has previously agreed that amendment of section 98A runs the risk of complicating rather than simplifying the drafting.

Testimony of undercover officers

17 Crime prevention directives would enable the disruption of circumstances that might reasonably give rise to criminal activity. Such a power might be exercisable where police officers repeatedly encounter particular situations which, experience has shown, regularly leads to crime. At a practical level, Police envisage that such powers would be employed to counter street level offending by, for example, enabling the dispersal of late night congregations of certain individuals in certain areas.

18 Such directives were seen as problematic as they vest enormous discretion in police officers. Avenues for review of the exercise of this discretion would be available only where a person (i) is prosecuted for failure to comply and (ii) raises the lawfulness of the directive in defence. Whilst this is true also of other "move on powers" (including the new intimidation power suggested above), the absence of any determinative, objective criteria – such as behaviour or intimidatory circumstances – would make even limited judicial scrutiny highly problematic.

Civil injunctions

20 Both vehicles were designed to redress particular social problems of overseas jurisdictions. Both are likely to prove costly to implement yet have unclear benefits – even in the contexts for which they were designed.

Judge-alone trials

23 The exercise of this power is likely to be subject to additional litigation as groups and individuals challenge the exercise of the power on, amongst other things, Bill of Rights grounds. Increase litigation has financial implications for the criminal justice system, but it seems likely that any additional costs in terms of prosecutions, court hearings and sentence administration will be modest and able to be met within current baselines. It is therefore proposed to consider the power as another of the first 12-month deliverables of the Organised Crime Strategy.

Legal mechanisms

Footnote

1 Paper 1: Programme of Action for Organised Crime and the Organised Crime Strategy

Paper 2: Establishment of the Organised Crime Agency and Disestablishment of the Serious Fraud Office

Paper 3: Reducing the Level and Impact of Organised Crime in New Zealand: Recommendations for Legislative Reform