Crime Prevention Unit

Organised Crime

Office of the Minister of Justice
Cabinet Policy Committee

LAW COMMISSION REPORT SEARCH AND SURVEILLANCE POWERS

Paper 5: Production and Monitoring powers

Proposal

1. The Law Commission report on Search and Surveillance Powers (NZLC R97) was tabled in Parliament on 7 August 2007. This paper is part of a suite of 8 papers in relation to that report and makes proposals about the use by law enforcement agencies of production powers (requiring persons to produce information) and monitoring powers (requiring organisations to provide information on transactions made through certain accounts held by a specified person over a specified period). Recommendations are made for extending the scope of these powers for law enforcement purposes.

Executive Summary

2. Currently production orders are only available under the Proceeds of Crime Act 1991 for a narrow range of offences. Production notices, not requiring prior judicial authorisation, may be issued by the director of the Serious Fraud Office for the investigation of serious or complex fraud. Monitoring orders are available against financial institutions under the Proceeds of Crime Act in relation to drug-dealing offences. It is proposed that a single judicial order be available to cover production and monitoring functions, in respect of offences for which a search warrant may be obtained, for general criminal investigative purposes.

Background

3. Production powers currently take two forms: production orders made by a judicial officer, and production notices issued by an authorised person within an agency. Both require the subject to produce specified information to the agency. Internationally, production powers are common in proceeds of crime and money-laundering and related legislation.

4. Unlike search warrants or production orders, monitoring orders require the recipient to provide an enforcement agency with account transaction information in relation to a specified person over a specified period. That power includes an obligation to provide information not in existence at the time the order is made. Monitoring orders are a relatively recent innovation and are common internationally in proceeds of crime legislation and are generally directed to financial transactions.

Production and monitoring powers: current approach

Production powers in NZ

5. Production orders are not available for general criminal investigative purposes in New Zealand. However, a specific power exists under the Proceeds of Crime Act 1991. Under that Act a High Court judge may issue an order requiring the production of specified documents in respect of the property of a person convicted of or reasonably believed to have committed a drug-dealing offence or a serious offence that is transnational in nature. The order may be made if the judge is satisfied that the person has committed or was convicted of the offence, that he or she derived a benefit from committing the offence and that the property specified in the application is subject to his or her effective control.

6. The only legislation providing for the use of production notices (without prior judicial authorisation) for criminal investigative purposes in New Zealand is the Serious Fraud Office Act 1990. The director may issue production notices under that Act for investigating serious or complex fraud. The production notice is the primary investigative tool under that legislation; the search warrant power is available only if the production notice procedure has not achieved or would not achieve its objective.

7. A number of other agencies have legislative authority to use production notices for a range of regulatory or administrative compliance purposes. Such powers exist under section 67 of the Securities Act 1978, section 98 of the Commerce Act 1986 and section 17 of the Tax Administration Act 1994. Apart from the tax powers (which are wider than those generally available to other agencies because of the difficulty in maintaining the integrity of the tax system), these powers are provided for the purposes of regulating activities in a specific and clearly circumscribed commercial context. They are not available for general criminal investigative purposes.

Monitoring powers in NZ

8. Under the Proceeds of Crime Act 1991 a High Court judge may issue an order directing a financial institution to supply the police with transaction information relating to a specified person for a period not exceeding 3 months. The power is only available in relation to drug dealing offending. A call data warrant is a similar procedure available in respect of offences punishable by imprisonment under the Telecommunications (Residual Provisions) Act 1987. It gives police and customs officers the authority to obtain from telecommunications network operators “call associated data” (the number from which the call originates and is sent to, the time it is sent and duration of call) in respect of a specified person for a period not exceeding 30 days.

Production powers overseas

9. The United Kingdom and Australia have a range of production orders or other judicial orders of a similar nature available in relation to proceeds of crime and money-laundering (and related) investigations. The range of circumstances and type of offences for which these powers are available are wider than in New Zealand. Under Australian Federal legislation and the Canadian Criminal Code, production orders may be issued by a judicial officer for general investigative purposes.

10. In the United Kingdom production notices may be issued in relation to the investigation of serious or complex fraud (as in NZ) and the Serious Organised Crime and Police Act 2005 introduced a “disclosure notice” regime (essentially amounting to a production notice) in respect of serious organised crime or terrorist investigations. Under the Australian Commonwealth Crimes Act, authorised officers of the Federal Police have limited production powers in respect of terrorism offences.

Monitoring powers overseas

11. In the United Kingdom similar powers to those existing in NZ under the Proceeds of Crime Act (but for a wider range of offending) and in respect of call data are provided for. Under the Australian Commonwealth Proceeds of Crime Act and equivalent state legislation, monitoring orders are available but for a far wider range of offences than in NZ. In Canada the general warrant procedure under the Criminal Code can be used to collect financial transaction information over a period of time.

Benefits

12. Production powers are seen as a valuable law enforcement tool because:

• it is easier for the person against whom the order is made to locate the information than it is for a law enforcement officer to do so;

• it makes the investigative process more efficient;

• it obviates the need for a physical search of premises and is less disruptive to a person’s privacy or business activities;

• the power is directed to the person rather than a specified location, a law enforcement agency is able to apply for a production order without specifying where the particular information is situated.

13. Monitoring powers were introduced to meet a need for an effective process to capture transactional information over a period of time. They allow the transfer of funds to be traced. This is important where increasingly sophisticated activities, such as money-laundering, are undertaken by organised criminal enterprises. The analysis of financial records is a valuable source of evidential material. A monitoring power is more effective than a search warrant in this context as it:

• requires the recipient of the order to maintain a record and to supply details of a suspect’s transactions for a specified period;

• allows on-going monitoring on the basis of a single authorisation rather than multiple warrants.

Order or notice

14. Having regard to those benefits, a case can be made for greater use of production and monitoring powers. However, a fundamental issue is whether a production/monitoring regime should require prior judicial authorisation by way of production order or whether officials from the agency seeking to exercise the power should be authorised to issue notices without judicial approval.

15. Production notices issued by the agency exercising the power have been developed for reasons of expediency, because it is quicker and more efficient for the agency to issue the notice than to seek prior judicial approval. It has also been argued that the privacy implications are less when the recipient is collating material than when a physical entry occurs under search warrant and thus independent scrutiny should not be required. Those justifications do not stand up to close scrutiny.

16. There are a number of fundamental objections to using notices:

• There is no compelling case for departure from the principle of prior authorisation by an independent person acting judicially before coercive state action, such as the use of production powers, can be undertaken;

• The lack of independent approval means that the privacy interests of the subject are not sufficiently addressed, particularly if the notice requires production of information that could be subject to privilege or an obligation of confidence;

• Given the nature of production/monitoring powers, which require the subject to collate and present documentation, dispensation from the requirement for prior judicial approval cannot be justified on the grounds of urgency.

17. In view of the identified benefits of production and monitoring powers and noting the objections to the use of notices issued by the agency exercising the power, a judicially authorised production/monitoring regime strikes the appropriate balance for effective law enforcement while recognising the desirability of independent authorisation for coercive state action that impinges on privacy interests.

Proposed approach

Single order rather than separate orders

18. The Commission report recommended that both production orders and monitoring orders be available to law enforcement agencies. In doing so it contemplated separate orders for each would be obtained. However, the Criminal Proceeds (Recovery) Bill, presently before the Law and Order Committee, refined this approach by including a single order that serves both functions. Subsequent to publication of its report, the Commission has agreed that the single judicial order in the Criminal Proceeds (Recovery) Bill provides a satisfactory model and could be adapted for general criminal investigatory purposes. I therefore recommend that a single order be available on the same basis as a search warrant for both production and monitoring purposes.

19. However, it is not proposed that the generic criminal investigative regime proposed in this paper apply to the Criminal Proceeds (Recovery) Bill. In its report the Commission noted that, in addition to the scheme proposed in this paper, a discrete proceeds of crime regime was appropriate, given the nature of those investigations and the international obligations required to be met in implementing legislation tailored to address anti-money-laundering and related measures.

Specificity in the order

20. The order should specify the type of documents or information required and whether the requirement is for the production of existing information in the recipient’s possession or for the collection of transactional or other information for the duration of the order (or a lesser specified period). The issuing judicial officer must specify in the order if the production of documents or information is required on a single occasion or whether the recipient is required to collect the specified information on an on-going basis for a specified period. A high degree of specificity in the order should be required to ensure that the recipient is left in no doubt as to his or her legal obligations in complying with the order.

Choice of order or search warrant

21. In cases where a search warrant could be used to obtain the same information, the circumstances will often dictate the preferable approach. Where business or commercial information is sought from a party that the enforcement agency anticipates will be cooperative, the proposed order may be appropriate. Where it is anticipated that the party may be uncooperative or the documents are sought from a potential suspect, a search warrant may be required. The choice as to whether a production order or search warrant should be sought will vest with the enforcement agency, subject to the overriding requirement of reasonableness in section 21 of the Bill of Rights Act.

Type of information available under the order

22. There is no good reason to limit the type of information that can be obtained using the proposed order, as is currently the case under the separate orders in the Proceeds of Crime Act. A range of records, including utility (power or telephone) use data, may be highly relevant to an investigation. The only requirement should be that the sought information be evidential material in relation to the offence being investigated.

23. The order may be issued in respect of the contents of mobile telephone text messages and e-mail communications and will compel a telecommunications or internet service provider to collect the content of such communications for the duration of the order and produce it to the enforcement agency.

Duration of the order

24. The order should be available for a period of up to 30 days. Though this period is shorter than the maximum for proceeds of crime monitoring orders, in many cases an investigation will be concluded inside that period. For longer running investigations it is appropriate that the issuing officer be satisfied as to the on-going need for the order. A new order will be able to be obtained at the expiry of the initial order, if the issuing officer is satisfied that the grounds exist, as for search warrants.

Offence for failure to comply with order

25. As is common in production order regimes, an offence should be provided for failing to comply without reasonable excuse within a reasonable time. If producing the material would be likely to incriminate the person, his or her compliance would be subject to the privilege against self-incrimination. The way in which that privilege should apply to material obtained or sought through the exercise of a production power should be codified in line with the provisions of the Evidence Act 2006 (see Paper 6: Clarification and Codification). Thus the privilege would not be available in respect of documents in existence at the time the production order is issued.

Repeal of call data provisions

26. The proposed surveillance device warrant (see Paper 2: Interception and Surveillance) and powers proposed in this paper will provide a range of powers comparable or superior to those currently available for call-data warrants under the Telecommunications (Residual Provisions) Act 1987. A separate warrant to obtain that information will no longer be required. The relevant provisions of that Act should be repealed.

Summary

27. In summary, the features of the proposed order will be that:

• it will only be exercised following the making of an order by an independent issuing officer acting judicially;

• it will be available in respect of any offence for which a search warrant could be obtained;

• it will require the recipient to produce specified information or documents that are evidential material relating to the specified offence either on a single occasion or on an on-going basis for a specified period;

• the documents or information sought are in the possession or control of the person to whom the order is directed;

• it will be available for a period of up to 30 days;

• the general framework proposed for application, issue and execution of warrants should apply where relevant and with necessary modification.

28. The procedural provisions and the immunities and protections governing searches as set out in Papers 1: Overview, 6: Clarification and Codification and 7: Remedies and Immunities should generally apply to production orders. However, there will be some necessary modifications. For example, the post-seizure notification requirements (see Paper 6, recommendations 38 and 39) will be redundant, since the evidential material will have been provided by the person against whom the order is made.

Recommendations

I recommend that Cabinet Business Committee:

1. Agree that a single order, issued by an independent officer acting judicially, that may be used for production or monitoring purposes, be available to enforcement agencies for general criminal investigative purposes;

2. Agree that the choice as to whether a production order or a search warrant is sought vest in the enforcement agency seeking the evidential material;

3. Agree that the features of the order are that:

• it will be available in respect of any offence for which a search warrant could be obtained;

• it will require the recipient to produce specified information or documents that are evidential material relating to the specified offence either on a single occasion or on an on-going basis for a specified period;

• the documents or information sought are in the possession or control of the person to whom the order is directed;

• it will be available for a period of up to 30 days;

• the general framework proposed for application, issue and execution of warrants should apply where relevant and with necessary modification.

4. Agree that the procedural provisions and immunities and protections proposed with respect to search warrants apply to these orders, subject to necessary modification;

5. Agree that it be an offence to fail without reasonable excuse to comply with a production order, punishable by a maximum term of imprisonment of 3 months for an individual or a maximum fine of $20,000 for a body corporate;

6. Agree that non-compliance with an order be justified if the document or documents sought are subject to the privilege against self incrimination under the Evidence Act 2006;

7. Agree that a separate call data warrant regime is no longer required and the relevant provisions of the Telecommunications (Residual Provisions) Act 1987 should be repealed.

Hon Annette King
Minister of Justice

Date signed: