He said Australia needed harsher jail terms and bigger penalties. "All you're doing is giving them a slap on the wrist [and] that is not deterring people." But Mr Medcraft backed away from the comments at a Senate estimates hearing on Wednesday after speaking with Senator Cormann. "I correct that. Basically the point is that we want to make sure we don't become a paradise," he said. "I want to make it clear that what we're talking about is making sure that we don't end up in that situation."

Senator Cormann told the hearing that he had contacted Mr Medcraft after seeing the comments in the media. "I rang the chair of ASIC to ask him myself the question, do you believe Australia is a paradise for white-collar criminals, because if that is what he believed I would be very concerned," he said. "The clear and crisp and unambiguous answer that the chair of ASIC put to me was a no, fullstop." Mr Medcraft's comments have sparked renewed calls for a royal commission into white collar crime from Nationals senator John Williams. "I've said for five and a half years that we should have a royal commission into white-collar crime because I believe Australia is, today, a paradise for white-collar crime," Mr Williams told the hearing.

The hearing was the first time ASIC had faced questioning since a scathing Senate inquiry report over its performance into the handling of the Commonwealth financial planning scandal. The report made 61 recommendations, including a beefing up of the watchdog's powers to immediately ban planners suspected of "egregious misconduct causing widespread harm to clients". When asked about the recommendations, ASIC deputy chairman Peter Kell said: "We're looking at implementing them". Mr Cormann said the government was finalising its own response to the recommendations. ASIC told the hearing on Wednesday that it had been granted approval from the government to dip into a special enforcement fund to cover the cost of monitoring the financial planning arms of the big four banks plus Macquarie and AMP.

The fund, worth about $50 million, is usually reserved for legal costs involved in taking a big company to court. ASIC said by targeting the "six largest financial advice institutions" it had qualified for access to the fund. "One of the ways we're funding this is through a decision that was made by the government to allow us to access our enforcement special account," Mr Kell said. "That will allow us some access to additional funding." ASIC has made a confidential new funding proposal to the government after its resources were slashed by $120 million over four years in the May federal budget.

The proposal is understood to include a user-pays model for financial planners. Senator Cormann would not comment on the proposal except to say it recommended a cost-recovery approach similar to the US. "The government is currently considering that proposal," he said. Also during the hearing, Mr Medcraft defended his role as chairman of the International Organisation of Securities Commissions, which took him on several overseas trips a year. He said the position meant Australia did not import "inappropriate regulation, that our institutions are not subject to hundreds of millions of dollars of additional costs".