Criminal Finances Bill (Third sitting)
Thursday 17th November 2016
(8 years ago)
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The Chair
We now begin line-by-line consideration of the Bill. Before we begin, would everybody who has a mobile phone switch it off so we can get on with the business of the day? Although it is a bit cold at the moment, hon. Members may remove their jackets if they wish to.
The selection list for today’s sitting is available in the room, and shows how selected amendments have been grouped together for debate. Amendments grouped together are generally about the same or similar issues. A Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments in that group. A Member may speak more than once in a single debate, and I will work on the assumption that the Minister wishes the Committee to reach a decision on all Government amendments. Please note that decisions on amendments do not take place in the order in which they are debated, but in the order in which they appear on the amendment paper. In other words, debate occurs according to the selection and grouping list, and decisions are taken when we come to the clause that that amendment affects. I hope that explanation is helpful.
The Bill contains 51 clauses, which is a substantial number considering that we only have today and two days next week to discuss it. I would appreciate it if Members could be concise and full in their presentation as possible, so the examination can be as full as possible. After all, it is Members’ time and the House’s time. I will use my discretion on whether to allow separate stand part debates on individual clauses and schedules following the debate on relevant amendments.
Clause 1
Unexplained wealth orders: England and Wales and Northern Ireland
Dr Rupa Huq (Ealing Central and Acton) (Lab)
I beg to move amendment 1, in clause 1, page 1, line 17, after “sought” insert—
“(and the property specified may include property located outside the United Kingdom)”
This amendment would ensure that unexplained wealth ordered may be issued for property located outside the UK.
It is a pleasure to serve under your chairmanship, Sir Alan.
In summary, we welcome the Bill. The unexplained wealth orders are a good thing, but amendment 1 is an example of where we think the measures could go a little bit further and be further improved. The amendment would provide that property located outside the UK could be utilised in an unexplained wealth order brought before an individual. It is meant to be a technical rather than political amendment. We are happy to work with the Government, but I think we can all drink to this amendment regardless of political affiliation.
The amendment would facilitate information sharing across different jurisdictions and would provide the United Kingdom with vital information regarding illicit financial activity that has taken place elsewhere across the globe. Reports by both the Select Committee on Home Affairs and the Public Accounts Committee hinted at this, and there is even a line in the Government’s action plan for anti-money laundering and counter-terrorism finance from April that says we should increase
“the international reach of law enforcement agencies and international information sharing to tackle money laundering and terrorist financing threats.”
Therefore, if an individual provides false and/or misleading information in relation to an unexplained wealth order, they can be prosecuted, but we would widen the scope of the property that comes under such an order so that we can question those who might be resident in the UK regarding their suspected illicit activities regardless of where their wealth is. As we know, people travel and cross borders, so we might not be able to recover wealth from that person. That throws up issues around cross-jurisdictional co-operation, and it is one area where confiscation orders kept hitting a brick wall and coming to grief.
We can glean intelligence on behaviour abroad and share it with other states, which would act as a disincentive to come to the UK to corrupt politically exposed persons who may contaminate our economy with their illicit wealth. If criminals know that on entering the UK, there is a process and our enforcement agencies can compel them to talk about their suspect wealth or property regardless of where they have placed it, they will think twice about coming here. We want to restrict their ability to move. That would send out a powerful message that the UK is not a soft touch when it comes to dodgy financial dealings, which I think we can all agree would be a good thing.
The current threshold at which a UWO can be served under the Bill is £100,000, but what if a criminal or suspected criminal has property of £50,000 here in the UK and has moved £50,000 of property elsewhere? Our enforcement agencies have concluded that, on the balance of probability, both combined are beyond the means of the person in question. I would like to think that the Bill already covers that, but we have tabled this probing amendment to confirm it. We are talking about portable wealth, which extends to jewellery and paintings, which have ultimate portability, because someone could leg it to a foreign country with them. My conclusion is that we would be unable to issue an unexplained wealth order if property is split between two places. I suspect I am right but am happy to be proved wrong.
The scenario I mentioned raises another question. If an individual acquires property of a value that reaches the unexplained wealth order threshold of £100,000 and manages to transfer it out of the UK, it is only after they have done so that our enforcement agencies become aware of it. Does that mean that an unexplained wealth order cannot be issued to that person because the property is now outside the UK? I want some clarification from the Minister on those things. I imagine that the answer is “Yes, we cannot do that”, but if the answer is, “No, we can do it”, it would be even better, because Opposition Members want unexplained wealth orders to be a success.
Finally, the amendment would introduce an element of operational efficacy. If all our enforcement agencies were aware that they were able to factor in stuff that is located outside the UK properly from the beginning of their investigations, it could contribute to our agencies being quicker off the mark. They could sound a warning alarm bell. They would be oriented from the get-go to cast their net as widely as they can to hold criminals to account. That is largely what we seek to do through the amendment.
The Minister for Security (Mr Ben Wallace)
It is a pleasure to serve under your chairmanship, Sir Alan. As we begin the line-by-line scrutiny, it might be useful if I give the Committee a brief outline of how unexplained wealth orders will work.
In short, an unexplained wealth order is a civil investigatory tool. It is a court order that requires a person to provide information that shows they obtained identified property legitimately. If the person provides information and responds to an unexplained wealth order, the enforcement authority can then decide whether to investigate further, take recovery action under the Proceeds of Crime Act 2002 or take no further action. If the person does not comply with an unexplained wealth order, either by not responding or not responding fully to the terms of the order, the property identified in the order is presumed to be recoverable under any subsequent civil recovery proceedings. It is important to note that the unexplained wealth order does not in itself lead directly to recovery action. It is designed to be an investigatory power and a precursor to civil recovery action.
An unexplained wealth order is an order made against a person, requiring them to provide information to explain how they obtained the property. It is important for all of us to understand this crucial factor: the unexplained wealth order is made against a person, not against property, and does not itself result in the recovery of that property. That is the vital point in relation to amendment 1.
In the Proceeds of Crime Act, it is clear that, if an order is to be made against a person or a property overseas, it must be explicitly stated on the face of the legislation. For example, section 282A of POCA provides that a civil recovery order can be made against property overseas if there is a connection with the UK. Section 375A of POCA also provides that an evidential request can be made overseas in constructing a case for civil recovery.
The same is already the case with unexplained wealth orders. New section 262A(2)(b) in clause 1 of the Bill provides that the person on whom the order will be served must be named, and it expressly provides that
“the person specified may include a person outside the United Kingdom”.
The unexplained wealth order therefore has global effect. The definition of “property” in the POCA already encompasses all property, whether it is situated at home or abroad. An unexplained wealth order can therefore list any property, wherever it is in the world. The court has an associated power to make an interim freezing order in respect of that property.
Clause 3 inserts a provision into POCA that an enforcement authority can request assistance from an overseas state concerning the freezing of property overseas that is subject to an unexplained wealth order. I therefore assure the hon. Lady that unexplained wealth orders will be effective against property anywhere in the world. Accordingly, I invite her to withdraw her amendment.
Dr Huq
I beg to move amendment 2, in clause 1, page 2, line 31, at end insert—
“(8) Persons who are members of an enforcement authority must co-operate with other persons who are members of other enforcement authorities for the purposes of making application to the High Court for an unexplained wealth order.
(9) In particular, the duty imposed on a person by subsection (8) requires a person—
(a) to engage constructively, actively and on an ongoing basis in any process leading to an application being made for an unexplained wealth order, and
(b) to have regard to activities of a person within subsection (8) so far as they are relevant to the making of an application for an unexplained wealth order.”
This amendment would require enforcement authorities to co-operate when making applications for unexplained wealth orders.
The Chair
With this it will be convenient to discuss new clause 12—Unexplained wealth orders: duty to prevent corruption—
“In Chapter 1 of Part 8 of the Proceeds of Crime Act 2002 (investigations: introduction), after section 342, insert the following—
‘342A Unexplained wealth orders: duty to prevent corruption
(1) A relevant authority must exercise its functions in relation to unexplained wealth orders in the way which it considers is best calculated to contribute to the prevention of corruption.
(2) For the purposes of this section it is immaterial whether corruption is being prevented in the United Kingdom or elsewhere.
(3) In considering under subsection (1) the way which is best calculated to contribute to the prevention of corruption a relevant authority must have regard to any guidance given to it by—
(a) in the case of the National Crime Agency, the Secretary of State,
(b) in the case of the Director of Public Prosecutions or the Director of the Serious Fraud Office, the Attorney General,
(c) in the case of Her Majesty’s Revenue and Customs or the Financial Conduct Authority, the Chancellor of the Exchequer, and
(d) in the case of the Director of Public Prosecutions for Northern Ireland, the Advocate General for Northern Ireland.’”
Dr Huq
We heard in the evidence session on Tuesday from many different bodies, including Her Majesty’s Revenue and Customs, the Serious Fraud Office, and the National Crime Agency. One problem with the existing confiscation orders is that the buck seems to be passed between many of them, and there is confusion about who the lead investigator is. The amendment would introduce a duty on all those agencies to co-operate, even before it got as far as the Crown Prosecution Service and Her Majesty’s Courts and Tribunals Service. Those people feel stymied, and they cannot investigate—it does not get that far because of squabbling over where the buck stops. The amendment seeks to address the lack of co-operation among UK law enforcement agencies that devolve responsibility for investigating cases.
There is an example that people may know about. It is the quite famous case of Sergei Magnitsky, the Russian who was murdered, and who uncovered what had been going on at Hermitage Capital Management. Bill Browder, an American, has spoken to an all-party parliamentary group here and is quite vocal on these issues. The murdered chap blew the whistle on $230 million in Russian Government frauds. Hermitage Capital Management discovered that, and there is a timeline on which it sought every possible avenue to open a money laundering investigation in the UK. Every single UK enforcement agency refused to open an investigation, stating that it was not its responsibility to investigate.
In 2010, Hermitage filed a complaint with the Metropolitan Police Service, highlighting the UK nexus of criminal activity. The MPS replied that the responsibility for investigating the fraud did not lie with the MPS. Hermitage then attempted to take legal action through the Serious Organised Crime Agency, requesting that an investigation begin in connection with the $230 million in fraud. SOCA replied that it was not the appropriate body for the job. In 2012, Hermitage filed another complaint with the Serious Fraud Office, which gave evidence to us on Tuesday, to highlight those financial crimes, which occurred in a UK jurisdiction. The SFO refused to do anything. In its words,
“matters do not fall within the offences that the SFO is permitted to investigate.”
In 2013, Hermitage filed a complaint with HMRC seeking a review of the company formation agent that facilitated the money laundering in the UK. HMRC answered that confidentiality precluded an investigation. In 2015, Hermitage filed a complaint with the NCA, which also gave evidence to us on Tuesday, outlining the flow of money—the fraudulent $230 million—to the UK. The NCA replied that it was a domestic criminal investigation relating to money laundering in the UK and therefore that the NCA was not the most effective way forward.
The amendment would create a duty for UK authorities to co-operate and take constructive action. We used to talk about joined-up thinking. That is essentially what the amendment is with regard to unexplained wealth orders. It would strengthen the Bill and ensure that provisions are not rendered ineffective because everyone says, “It is not my responsibility.”
Tristram Hunt (Stoke-on-Trent Central) (Lab)
New clause 12 seeks to add to amendment 2 and put a duty to prevent corruption in the Bill, to strengthen the hand of the Minister and the agencies involved. As we have heard, the UK is still considered a global haven for money laundering.
According to a Home Affairs Committee report on the proceeds of crime, it is estimated that more than £100 billion is laundered through London’s financial systems every year. Despite more than 380,000 suspicious activity reports being filed each year, the National Crime Agency currently has only 27 investigations open, with approximately £170 million frozen. By contrast, in Switzerland, some £5 billion-worth of Swiss francs are currently frozen.
The new clause seeks to ramp up the responsibilities on the National Crime Agency, public prosecutions and HMRC to make it a duty to prevent corruption, to ensure that we protect London’s reputation and that our financial, legal and accountancy services remain among the best in the world.
Mr Wallace
We are all in agreement that law enforcement agencies should do more to co-operate and talk to each other before embarking on action against a person or property, and that they should ensure that they are acting to combat corruption in all its forms. In that sense, the implication of the amendments is entirely sensible.
As the hon. Lady set out, amendment 2 would impose a duty on operational agencies to co-operate prior to applying an unexplained wealth order. Such co-operation would have several benefits. Most obviously, it would avoid duplication of the same effort against an individual and their property. It would avoid one agency trampling over another that had embarked on a similar line of inquiry. Indeed, another agency may well have an explanation of the wealth. An obvious example is that HMRC can be aware of complex legal tax arrangements that an individual may have.
I am entirely supportive of the spirit of the hon. Lady’s amendment. I would go further and say that liaison should not be limited to those bodies that can apply for unexplained wealth orders and take civil recovery action; it should happen between all law enforcement agencies and prosecution authorities. I am pleased to reassure her that that already happens. Law enforcement agencies, as a matter of course, check various law enforcement databases to see whether there is a flag against a particular person or property that is of interest to them. They can then liaise accordingly. In addition, unexplained wealth orders will be subject to the Proceeds of Crime Act investigation code of practice, which will be amended and subject to debate in both Houses before coming into force. I can assure the Committee that this issue will be addressed in that code.
The Proceeds of Crime Act is not the only legislation where a conflict between law enforcement agencies could occur relating to the same person or property. Several police forces may have an interest in the same criminal. Those conflicts can be resolved without the need for primary legislation. This is a matter for internal discussion on tasking and co-ordinating, which the code of practice will achieve.
New clause 12 would impose a duty on agencies to prevent corruption when considering the use of unexplained wealth orders. It is my hope that the mere existence of these orders in UK law will in itself create a deterrent to those who seek to place their corrupt wealth in the UK.
We continue our efforts to tackle corruption in all its forms. This year, we hosted the London anti-corruption summit, bringing together world leaders, business and civil society to agree a historic package of actions to expose, punish and drive out corruption in all walks of life. We will continue to implement UK commitments from the summit and encourage others to do likewise.
Indeed, the limb of unexplained wealth orders that allows their application to non-EEA foreign officials and politicians reflects the real concerns about those involved in corruption overseas who then launder the proceeds of their criminality in the UK. I hope the hon. Member for Stoke-on-Trent Central can see that the power will be used to tackle corruption, but unexplained wealth orders go further: they will also apply to cases in which there is a suspicion of involvement in serious crime, not necessarily corruption. The proposed duty could risk the deprioritisation of other crime types, which we agree that the NCA, the Crown Prosecution Service, HMRC and the Financial Conduct Authority could be tackling. They will of course pursue those guilty of corruption, but I hope we agree that our law enforcement agencies are best placed to prioritise their resources to pursue a whole range of criminals.
The Secretary of State and Attorney General already issue statutory guidance on the use of powers under POCA, including the use of civil recovery powers. That guidance will be extended to the new bodies granted civil recovery powers in the Bill. HMRC and the FCA intend to reissue the guidance next year, when we will be able to address both issues. I hope that the hon. Members for Ealing Central and Acton and for Stoke-on-Trent Central are reassured that the issues are already accounted for. I invite her to withdraw the amendment.
Tristram Hunt
I am happy for the amendment to be withdrawn, but it would be nice to hear something more on Report. I take the point about the precision of focusing on corruption when other serious criminal activities are involved, but some language on a duty to prevent corruption would be good. The important element is the duty; I hope that the wording on corruption and other serious criminal activity might be added to that.
Dr Huq
If I understood correctly, the Minister said that no primary legislation is required to do what the amendment would do, and that there are already flags and a joined-up process. Are we confident that something like the Magnitsky case, with all the stuff that happened—everyone closing the door to Bill Browder, year upon year—would not happen again with unexplained wealth orders?
Mr Wallace
On the Magnitsky case, it would be inappropriate to comment on a case that could be under continuing investigation. The main point is that our law enforcement agencies have operational independence. It is for them to decide the priorities for how they spend their resource and work together. We do an awful lot, without primary legislation, to ensure that they work together. They liaise through regional bodies such as the regional organised crime units, and through the national co-ordinators and everything else.
Our view is that primary legislation is unnecessary because, whether it is through the code of practice, which will be published alongside the Bill, or in the operational day-to-day running of the organisations, joint working is part of their remit and, effectively, their duty. We do not think it is necessary to put anything in the Bill because we fear that that could pervert their priorities and interfere with their operational independence.
Tristram Hunt
I beg to move amendment 59, in clause 1, page 3, leave out line 28.
This amendment would allow unexplained wealth orders to be issued to politically exposed persons in the United Kingdom and EEA States.
The Chair
With this it will be convenient to discuss amendment 60, in clause 4, page 15, leave out line 25.
This amendment has the same effect as amendment 59 but applies to unexplained wealth orders issued in Scotland.
Tristram Hunt
The amendment is explained by the explanatory statement. You will know, Sir Alan, that in 2014 Slovenia’s former Prime Minister, Janez Janša, was found guilty of taking bribes during the course of a €278 million arms deal with a Finnish state-owned contractor. Politically exposed persons were also among the 12 people referred to a criminal court in Cyprus earlier this year to stand trial for corruption and bribery charges in connection with a waste overcharging scam that is thought to have involved more than €30 million.
Although it may be reasonable to expect that European economic area countries would be able to undertake criminal investigations against politically exposed persons in their countries if there were sufficient evidence to suggest that they had been involved in corruption, that might not necessarily be the case. For example, there is still blanket immunity from criminal prosecution for parliamentarians in Hungary, despite it being an EEA country. The amendment would extend the Government’s welcome reform of unexplained wealth orders for those outside EEA states to include those within EEA states. We know that what we are dealing with does not simply stop at the continent of Europe or the EEA states. The amendment seeks to apply some degree of equality of this legislation to the EEA states.
Amendment 60 would have the same effect as amendment 59, but would apply to unexplained wealth orders issued in Scotland as well.
Mr Wallace
I thank the hon. Gentleman for his comments. We had a useful meeting yesterday about some of these issues. He will know that we welcome these amendments as they give us the opportunity to discuss why we have effectively a different regime between politically exposed persons outside the EEA and ourselves. The amendment would cover us sitting in this room—all PEPs in the EEA. That is important because, if any of us were to face an unexplained wealth order, we would want to know that it had been issued on the basis of evidence linking us to serious crime; we would not want to give our authorities the ability just to slap one on without any evidential threshold.
We have confidence that, within the EEA—the hon. Gentleman used the example of a country prosecuting its own former Prime Minister—there are the tools to find the evidence and the ability to work with fellow law enforcement agencies around Europe to meet the evidential threshold. We cannot discriminate within the EEA; we cannot say, “This applies to Slovenia but it doesn’t apply to France”. Once we go into that area, we cannot discriminate between the different states. He picked out Hungary, where there is immunity for parliamentarians. I think there are other countries—even Italy; I do not know. If I remember my Berlusconi history, I think there were lots of issues about immunity in that country. That is the real issue. We have confidence in our neighbours and friends in Europe that they have the capacity to build the evidence and therefore to build a case for an unexplained wealth order.
Charlie Elphicke (Dover) (Con)
My hon. Friend is making a powerful argument. Is he aware how many Members of Parliament have problems just opening a bank account because of over-eager regulators using the PEPs regulations? With this amendment, would there not be a risk that over-eager agencies would be interested in issuing these things to MPs, which is not an ideal situation? We ought to have the evidential threshold set out in clause 1(4)(b).
Mr Wallace
I am grateful to my hon. Friend for his intervention. He makes the clear point that we want to be confident that, when we are held to account, it is based on evidence gathered by our resourced law enforcement agencies. The decision on PEPs outside the EEA reflects real operational challenges that we and organisations such as the National Crime Agency have had in gathering evidence against people in some countries where there may be no properly functioning Government or, indeed, where the Government are entirely corrupt and it is very difficult to gather that evidence.
That is the reason we have had to plug that gap in that way. I hope that the hon. Member for Stoke-on-Trent Central understands that that is why we have a different approach. I urge him not to push his amendment to a vote.
Tristram Hunt
I thank the Minister for his comprehensive response, including on the evidential threshold, and the hon. Member for Dover for his point concerning the energy with which some financial institutions in the UK have approached PEPs, even—dare I say it?—on car insurance.
On the basis of the Minister’s argument, I am willing to withdraw the amendment, but I fear that this may be returned to in the aftermath of our exiting the European Union.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this, it will be convenient to discuss the following:
New Clause 11—Unexplained wealth orders: reporting requirements—
“In Chapter 2 of Part 8 of the Proceeds of Crime Act 2002, after section 362H insert—
‘362HA Unexplained wealth orders: reporting requirements
(1) The Secretary of State must make an annual report to Parliament setting out the number of unexplained wealth orders applied for by enforcement agencies under section 362A of this Act (and by Scottish Ministers under section 396A of this Act) during the previous 12 month period.
(2) The report must also provide information in respect of each unexplained wealth order about—
(a) the value of property subject to the order,
(b) whether the respondent was—
(i) a politically exposed person,
(ii) a person involved in serious crime (whether in a part of the United Kingdom or elsewhere)
(c) whether the order was granted,
(d) the value of the property reclaimed as a result of the order.
(3) For the purposes of this section “enforcement agencies” has the same meaning as in subsection 362A(7).’”
This new clause would require the Secretary of State to make an annual report to Parliament about the number of unexplained wealth orders made each year.
New Clause 13—Unexplained wealth orders: award of costs—
“In Chapter 2 of Part 8 of the Proceeds of Crime Act 2002, after section 362H insert—
‘362HB Unexplained wealth orders: award of cost
(1) Part 44 of the Civil Procedure Rules (General Rules about Costs) shall not apply to applications made by enforcement authorities for—
(a) unexplained wealth orders under section 362A of this Act,
(b) interim freezing orders under section 262I of this Act.
(2) The High Court shall not have power to make awards for costs against enforcement authorities who bring an unsuccessful application for—
(a) unexplained wealth orders under section 362A of this Act,
(b) interim freezing orders under section 262I of this Act.
(3) For the purposes of this section ‘enforcement agencies’ has the same meaning as in subsection 362A(7).’”
This new clause would prevent the courts from awarding costs against enforcement agencies where they have brought unsuccessful applications for unexplained wealth orders or interim freezing orders.
Mr Wallace
The previous debates have given us the opportunity to begin considering clause 1, which provides for the creation of unexplained wealth orders. Those are powerful new tools, and I welcome the cross-party support for them as well as the strong endorsement of those in civil society from whom we heard earlier this week.
The London anti-corruption summit in May galvanised the international response to corruption. Domestically, we must tackle grand corruption and protect the integrity of the UK’s financial sector. Unexplained wealth orders will help us to do that. As we have discussed, unexplained wealth orders are essentially an investigatory tool that will help to enable civil recovery of the proceeds of crime under existing powers in the Proceeds of Crime Act 2002. Civil recovery is a powerful tool, because it can be used where criminal prosecution followed by a confiscation order is impossible, perhaps because a person is abroad and cannot be extradited or there is not specific evidence linking an individual to a crime, but there is enough evidence to show that property is linked to the wealth generated from a crime.
Between April 2015 and March 2016, £6.5 million was recovered under those powers, but there is still a gap where law enforcement agencies cannot satisfy the necessary evidential burden. Unexplained wealth orders will flush out evidence to enable enforcement agencies to take forward recovery action under POCA. Such an order will require a person to provide information that shows that they obtained identified property legitimately. If they do so, agencies can then decide whether to investigate further, take civil recovery action or take no further action. If the person does not comply with the order, the property identified in the order is presumed to be recoverable under any subsequent civil recovery proceedings.
I stress that the unexplained wealth order is designed to be an investigative power and a precursor to civil action, not an end in itself. I accept that there is significant interest in the way that such orders will operate, because they involve the reversal of the burden of proof. That is why they are subject to stringent safeguards. The value of the property subject to an unexplained wealth order must be greater than £100,000, a much higher threshold than for normal civil recovery, where action cannot be taken against property worth less than £10,000.
Nic Dakin (Scunthorpe) (Lab)
I thank the Minister for being so complete in his arguments. Can he explain why £100,000 was chosen? I note from the evidence that we have received that no one had any objection to that figure, but I am interested in why it was chosen.
Mr Wallace
The hon. Gentleman poses an interesting question. Unexplained wealth orders are linked to serious and organised crime. Although, inevitably, some serious criminals make below £100,000, that was thought to be a useful threshold, and that is where we should look as a starting point. There will be concerns among Members that Aunt Bessie’s £25,000 appearing in someone’s bank account may trigger something like an unexplained wealth order, and we wanted the wealth threshold to be significant enough to ensure that there was a link between serious crime and the recovery of assets being triggered. I know that some people wanted that threshold to be higher than £100,000 and some people wanted it to be lower. As the Minister, my job is to try to get it in the right place, but I would welcome his suggestions on whether it should be, say, £59,000 or £105,000. It could be like “Bullseye”.
Carolyn Harris (Swansea East) (Lab)
It is a pleasure to serve under your chairmanship, Sir Alan. Is there a mechanism for recognising regular, ongoing transactions that are close to but always under £100,000? Will that trigger any red flashing warning lights that there may be illegal activity?
Mr Wallace
The cumulative wealth would of course build up. I am happy to be persuaded by the Committee about the threshold. The reality is that, given the vast number of people involved with organised crime groups across the threat picture and the staggering wealth of some of them, we will be lucky to get to £100,000. We will be going for people worth £20 million, £30 million or £40 million and all the way down. It would chill people’s bones to realise how some of the people who live among us make their money out of crime and launder that money. The bottom line is the number of those individuals. That is why we chose £100,000, but hon. Members may want to make a persuasive argument otherwise. Cumulative wealth is certainly an issue. I was in the north-east of England the other day and met an individual who is unemployed but has well over £400,000 in their bank account. I am looking forward to knocking on that person’s door.
Tristram Hunt
I had a terrible fear about the rule of law for a minute there.
We tabled new clause 11 to help the Minister. It would require the Secretary of State to make an annual report to Parliament about the number of unexplained wealth orders made each year. It is really about helping to drive culture change through the Government, the Departments and the agencies involved in this excellent set of reforms, and ensuring that Parliament is kept up to date with how the agencies and Ministers are approaching it. There is nothing quite like a presentation to Parliament —a ministerial statement, written or oral—to concentrate attention in Departments on the importance and significance of a particular piece of legislation. The new clause would ensure that the Bill had the bureaucracy and political support behind it.
Similarly, new clause 13 would help to get the wheels in motion for unexplained wealth orders and investigatory powers under the Proceeds of Crime Act 2002. It seeks to prevent the courts from awarding costs against enforcement agencies if their applications for unexplained wealth orders or interim freezing orders are unsuccessful. It is about ensuring that a culture of risk-aversion does not develop in our agencies. They are often fearful, in these straitened budgetary circumstances and under the full glare of the press, about pursuing the kind of individuals the Minister spoke about, for fear of the financial implications if they are unsuccessful and taken to court. Colleagues will remember that the Serious Fraud Office’s botched case against the entrepreneur Vincent Tchenguiz will settle for £3 million plus costs, which is a fraction of what his lawyer originally demanded, so these can be quite costly enterprises.
We would not want to hand down these new powers in statute to those who direct our investigatory agencies, only for a culture of not pursuing those individuals to develop in those organisations. New clause 11 would ensure that Parliament had a voice and oversight over the process, and new clause 13 would ensure that a culture of risk-aversion does not develop in the agencies that are to be granted these new powers.
Mr Wallace
I will start with the good news: I support the spirit of new clause 11, which I discussed with the hon. Gentleman yesterday. It is important that we have a measure to ensure the transparency of the operation of unexplained wealth orders. In my recent responses to the reports of the Public Accounts Committee and the Home Affairs Committee on asset recovery—both reports were excellent, I have to say—I committed to publishing annual statistics on annual recovery performance. After our meeting, I instructed my officials to ensure that those statistics include unexplained wealth orders. I therefore hope there is no need for the hon. Gentleman’s new clause—which would create a statutory duty in primary legislation to report—as those figures will be contained in an annual bulletin.
New clause 13 relates to the risk that potential financial liability may make law enforcement agencies reluctant to apply for unexplained wealth orders. It seeks to ensure that the authorities are not liable following an unsuccessful unexplained wealth order application. I was pleased to be able to discuss that issue with the hon. Gentleman yesterday, and I am advised that the existing civil procedure rules, which would extend to cover unexplained wealth orders, mean that by default an application for such an order would take place in private. I am happy to share those civil procedure rules with the hon. Gentleman to see whether he thinks that is enough. That is also the case for any subsequent legal stages. On that basis, if an application is unsuccessful, or if the individual was latterly able to provide the court with an acceptable explanation of their wealth, it would not generally be public knowledge. There would therefore be no undue reputational damage to the individual concerned.
More generally, whatever the peculiarities relating to unexplained wealth orders, it remains our view that any awards of costs should follow the same rules that apply in other, similar matters. The general principle that the loser pays is a well established position. Changing it could lead to unfortunate unintended consequences in relation to other powers and procedures. In any case, the judge has a general discretion to award costs that are proportionate. It is not a matter of one side producing a figure and the judge awarding that without any consideration of the case; we should maintain a consistent approach.
On that basis, although I share the concern about impinging on our agencies’ ability to pursue crimes, it is not appropriate to indemnify them in this context. If they have made a mistake and applied for an unexplained wealth order against the wrong person, risking someone’s reputation, it is in my view appropriate for them to take responsibility. If we indemnify them, a mistake will be confused with normal investigative procedure. I do not think it is the best thing to indemnify them, given that hearings can be held in private, in court procedure. I hope that hon. Members will be satisfied with that.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Interim freezing orders
Question proposed, That the clause stand part of the Bill.
Mr Wallace
Clause 2 acts in tandem with clause 1 in appropriate cases. It provides that the court can also issue an interim freezing order in relation to property that is subject to an unexplained wealth order. The interim freezing order provides that the property cannot be dealt with in any way while subject to that order. There is no point in putting an unexplained wealth order on something if it can immediately be sold, as we might lose the asset. The freezing order can be used to keep it in place.
It is important to split the obtaining of an unexplained wealth order and the freezing of property into two different matters. Although they will be done at the same hearing, they are different decisions with separate considerations. Some colleagues have asked why we are not providing that property must be frozen in every case. Freezing someone’s property is a very invasive measure and may not be necessary in every case. For example, there may be no suspicion that the property will be dissipated—perhaps it is a house that has been owned and occupied by the same person for many years—or that a civil recovery order will be frustrated in some other way.
We would not want unexplained wealth order applications to be rejected solely on the grounds of a technicality related to the freezing decision. It is also important to note that if property is frozen, the court may quite reasonably expect the case to progress at a far quicker pace than if no freezing order was in place. On that last point, I should flag up the fact that, under clause 1, if property is subject to an interim freezing order, the enforcement authority is given a deadline of 60 days to decide the next steps. The freezing order would then be discharged after a further 48 hours.
The expectation is that if an enforcement authority is to go forward with civil recovery action, it will obtain a property freezing order, with many of same provisions and safeguards, to apply immediately to the same property once the interim freezing order is lifted. The property would remain frozen.
An application can be made for the variation or discharge of the freezing order. The court can also provide that property can be released to meet affected persons’ reasonable living expenses, their need to carry on their business and their legal expenses. I hope that what I have said reassures hon. Members that the freezing order provisions are properly circumscribed.
Dr Huq
The Minister has given a full and cogent account of why interim freezing orders are being introduced. As a London MP, I know how dirty money in the property market has skewed the entire London property market, meaning that genuine people cannot get a foot on the ladder. It sounds as if sufficient safeguards are being put in place, so we will not stand in the way of the clause.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
External assistance
Mr Wallace
Clause 3 supplements clause 1, on unexplained wealth orders, and clause 2. It provides for a request to be sent to another country to freeze property there that is subject to an unexplained wealth order, which addresses the point that the hon. Member for Ealing Central and Acton made in the debate on her amendment 1 about going after property abroad.
I will make two points for the benefit of the Committee. First, an unexplained wealth order can apply to property outside of the UK. That reflects the operation of existing civil recovery powers, which can include property overseas if a sufficient connection can be shown with the United Kingdom—for example, where the suspected criminal is British, the criminality is thought to have taken place in this country or there are victims in the UK.
Secondly, there is no international law that expressly provides for the freezing of property in relation to unexplained wealth order-type powers. We will need to liaise closely with other countries in relation what existing international law may underpin such a request, as well as working on obtaining wider recognition of unexplained wealth orders. The clause primarily creates legal certainty that such a request can be made. We also encourage recognition of such requests as part of the wider fight against international crime and corruption.
Dr Huq
Once again, we have no problems with any of that, particularly as it allays some of those concerns about overseas property that were anticipated by amendment 1.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Unexplained wealth orders: Scotland
Richard Arkless (Dumfries and Galloway) (SNP)
I beg to move amendment 57, in clause 4, page 14, line 35, leave out “£100,000” and insert “£50,000”.
This amendment reduces the threshold for the value of property that UWO may be issued for in Scotland to £50,000.
It is a pleasure to serve under your chairmanship again, Sir Alan. Essentially, we are asking for the threshold or limit for which an unexplained wealth order can be granted to be reduced, in Scotland only, from £100,000 to £50,000. I cite three main arguments for making that suggestion. We state in the explanatory notes that that would bring the threshold in line with international standards. The level in Ireland is €5,000, while the level in Australia is 100,000 Australian dollars, which equates to around £60,000.
I also refer the Minister to the drastic difference in asset valuations north and south of the border, particularly in property prices. Property prices in London average at £487,000. The unexplained wealth order threshold in England and Wales is set at £100,000, which is just less than a quarter of the average property price. Property prices in Scotland are significantly lower. In my constituency the average is £120,000, while in North Ayrshire they are less than £100,000. Applying the same rationale of a percentage of the overall property price, our threshold should be substantially lower. We suggest that a reasonable level would be £50,000.
I also draw the Minister’s attention to the point that reducing the threshold in Scotland, where there are lower asset valuations, is a no-lose situation for the Government. The threshold in itself is not the main benchmark to trigger these unexplained wealth orders; it is the test. The test for Scotland, which we agree with, is set out in proposed new subsection 396B(3) of the Proceeds of Crime Act 2002. That test must be met in every single circumstance, whether the threshold is £5, £10 or £100,000. Even if the limit was set at £500,000, that test must be met. Given the lower asset valuations in Scotland, it is a no-lose situation to bring the threshold down.
I envisage criminals perhaps acquiring properties in a lower-asset valuation jurisdiction and creeping below the £100,000 threshold. We do not want to end up with some criminals getting off the hook and us having to come back to Parliament to try to lower the threshold. We are not suggesting that the threshold is lowered in England and Wales—that is a matter for the Minister and Members for England and Wales. Clearly there are arguments, given the higher property prices, but I suggest, for the reasons I have set out, that it would be sensible to lower the threshold for Scotland. It would be a no-lose situation for the Government to agree to the amendment.
Mr Wallace
I thank the hon. Gentleman for his point. The point to note is that an unexplained wealth order is made against the person and therefore their collective assets, rather than an individual asset. Therefore, whether a successful gangster with a huge amount of money chooses to buy 10 houses where property prices are low—in any part of the United Kingdom—or one house, the order is against that person and catches all their wealth however it is stored.
I want to put the hon. Gentleman at his ease on his view that there is such a difference between Scotland and England. The threat of organised crime is exactly the same. Unfortunately for all of us, there are successful gangsters on both sides of the border who make considerable amounts of money. Therefore, the argument about the £100,000 threshold is that it will catch serious criminals on both sides of the border. We are going to go after their wealth. We must also remember that it is about the person rather than the property. I therefore urge him to withdraw his amendment. If he does so, I am happy to meet him to discuss this issue further—there are other opportunities for that, should he like to do so—and to explore the different options at the threshold.
Richard Arkless
Given that we are almost wholly persuaded by my arguments to reduce the threshold, I am tempted to press the amendment to a vote. However, taking the Minister at his word—I have no reason to disbelieve him—we will be happy to withdraw the amendment if we are assured that those further conversations could happen. We do not see any harm in that, and perhaps we can develop those conversations as we go through the stages of the Bill. Given his gracious assurance, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause brings us for the first time to devolution and separate court systems in the United Kingdom. Clauses 4 to 6 provide for unexplained wealth orders in Scotland on effectively the same terms as clauses 1 to 3 do for England, Wales and Northern Ireland. As such, much of what we have discussed relating to the substance of unexplained wealth orders applies equally here.
The reason for separate provisions for Scotland is the different court structure and the separate existing practice and procedure that relates to civil recovery. I assure the Committee that there will be a consistent approach to unexplained wealth orders across the United Kingdom. All the safeguards and other measures will apply in Scotland as they do elsewhere in the United Kingdom.
As we are adding to the criminal law, I will specifically mention the creation of a parallel offence of knowingly or recklessly making a statement that is false or misleading, but I do not think there is anything more to concern the Committee relating to unexplained wealth orders that we have not already discussed.
Richard Arkless
I rise to reiterate our support that the clause stands part of the Bill.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Interim freezing orders
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause supplements clause 4 in appropriate cases. It provides that the court can also issue an interim freezing order in relation to property subject to an unexplained wealth order in Scotland. It is important to note that it provides in Scotland what clause 2 provides in England, Wales and Northern Ireland. The safeguards and processes are similar. It is also closely modelled on freezing powers that already exist in civil recovery.
Richard Arkless
Although we accept the principal contents of the clause, I reiterate the concerns I made on the Floor of the House on Second Reading. The test to implement a freezing order in proposed new section 396I(2) is that the court
“considers it necessary…for the purposes of avoiding the risk of any recovery order that might subsequently be obtained being frustrated.”
Therefore, essentially the judge will have to decide whether there is reasonable suspicion that the alleged criminal will abscond with that property. We are clearly keen to avoid that situation.
How does the Minister see that paragraph being interpreted by the judiciary? Is there a danger that it is over-prohibitive or too onerous? How will it be evidenced? How on earth can a judge determine whether that person is likely to abscond with the property? The fact that they have been subject to an unexplained wealth order might reasonably suggest in itself that that would be enough to compel the profit to be frozen? We are trying to avoid an unexplained wealth order being granted, but then some pest from another jurisdiction wriggles with the freezing order and gets the property out of the country, and the unexplained wealth order will have no effect. We are keen to make sure that does not happen in Scotland or, indeed, in the rest of the UK.
Mr Wallace
The hon. Gentleman makes an interesting point and my response is “judicial discretion.” It is up to the sheriff or the judge to weigh up the evidence, and the individual or party, before him. The likelihood and ability that they may flee and so on may well come into that.
Richard Arkless
I completely understand and respect those points. The point of an unexplained wealth order is that the wealth is unexplained. We do not know the nature of the criminal. We know nothing about them. We have no idea whether they are likely to abscond. I suggest that it would be difficult for the judge to make that determination, and if he cannot do so under the Act, he will probably, as the judiciary is entitled to do, err on the side of caution and not implement the freezing order, but implement the unexplained wealth order.
Mr Wallace
The provision reflects the existing civil recovery arrangements in both Scotland and England. In other civil recovery procedures, that is how it is dealt with at the moment. That is why it is framed that way in the Bill.
I take the hon. Gentleman’s point concerning the worry about flight and so on, but if criminals are obviously residents of the UK or European economic area and there is a link to serious organised crime, those making the application cannot just turn up, but will have to present evidence, so there will be scrutiny and the judge or sheriff will be able to weigh up whether there should be a freezing order.
Richard Arkless
I accept that and am happy to support the clause. The Minister’s constructive response provides an opportunity to discuss this and to examine the legal points to ensure that criminals do not to fly with the cash before we can get our hands on it. No one wants that.
Mr Wallace
We can discuss that at length when we discuss the £50,000 threshold, which I am happy to do. As the hon. Gentleman knows, we are grateful to the Scottish Government with whom we have worked hand in hand on much of the Bill. Because we have accepted recommendations, advice and help from the Justice Minister in Scotland on some of the framing of the Bill, it is one we can agree on. We have accepted some of the guidance from the hon. Gentleman’s Government north of the border.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
External assistance Disclosure orders
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause supplements clauses 4 and 5 and provides that a request can be sent to another country to freeze property there that is subject to an unexplained wealth order. It is a Scotland-specific provision but closely mirrors what clause 3 provides in England, Wales and Northern Ireland.
Richard Arkless
I reiterate that we will not stand in the way of clause 6 standing part of the Bill.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7
Disclosure orders: England and Wales and Northern Ireland
Mr Wallace
The Proceeds of Crime Act 2002, which was introduced by the last Labour Government, provides a suite of powers to be used in connection with a range of investigations, including confiscation and civil recovery. A disclosure order is one of those powerful tools and requires any person having relevant information to answer questions, provide information or produce any document that is relevant to the investigation. Disclosure orders are flexible, practical and efficient. Their use avoids the need to seek multiple orders over the course of an investigation. The changes we are making extend the power to seek disclosure orders in money laundering investigations that were previously explicitly excluded. This exclusion was primarily because of concerns over self-incrimination. However, that protection is maintained in the new provisions, ensuring that individuals who are subject to a money laundering investigation cannot be compelled to provide information that might incriminate them.
Clause 7 also changes the definition of who can apply for a disclosure order, removing the need for a prosecuting body to be responsible for its application. Significantly, this change does not lead to a reduction in the level of seniority of the person who can apply. An appropriate officer can apply for a disclosure order only on the approval of the senior appropriate officer, ensuring that the application process is safeguarded. These changes will be reflected in the statutory code of practice on the investigation tools in the Proceeds of Crime Act 2002.
Clause 8 replicates in Scotland the provisions contained in clause 7 for England and Wales that enable an application for disclosure orders in money laundering investigations, providing an essential UK-wide response.
Dr Huq
I am convinced by the Minister’s persuasive words that red tape will be removed. We can apply for disclosure orders and yet maintain vital safeguards, so we will support clause 7 and clause 8, which extends the power to Scotland.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8 ordered to stand part of the Bill.
Clause 9
Power to extend moratorium period
Mr Wallace
I beg to move amendment 8, in clause 9, page 28, line 34, at end insert “(subject to the restriction mentioned in section 336A(6))”
This amendment clarifies that the 186 day maximum period for extending the moratorium period also applies to a decision of the appeal court in Scotland.
The Chair
With this it will be convenient to discuss Government amendments 15, 50, 51, 55, 56, 52, and 53.
Mr Wallace
Clause 9 inserts in part 7 of POCA a scheme for the extension of the suspicious activity report moratorium period beyond 31 days. As the action plan for anti-money laundering and counter-terrorist finance sets out, the Government see a more robust law enforcement response as central to tackling money laundering. It might help if I briefly explain how the suspicious activity report regime works.
Where a company in the regulated sector—a bank, an accountancy firm or a legal firm—suspects that they may commit a money laundering offence, they are obliged to submit a suspicious activity report to the National Crime Agency seeking consent to proceed. The National Crime Agency then has a seven-day period to determine whether it is necessary to refuse consent to the company to proceed with the transaction. If consent is refused, the 31-day moratorium period begins. During the moratorium period, law enforcement agencies need to gather the necessary evidence to instigate civil recovery proceedings or a criminal investigation in relation to the money laundering activity. However, money laundering investigations can be multi-layered and complex. Money launderers obfuscate the financial trail to distance proceeds from their criminal source; funds are often moved overseas.
New section 336A of the Proceeds of Crime Act 2002 states that the court may not grant a further extension of the moratorium period if the effect would be to extend the period of more than 186 days in total, beginning with the day after the end of the initial 31-day moratorium period. The amendment makes that clear. Amendment 15 replicates in Scotland what clause 28(2) already does for England and Wales. Amendments 52, 53, and 56 are consequential to that.
The criminal’s property, referred to in POCA as “free property”, which may be in the form of cash, is available for consideration in confiscation unless it is already subject to a forfeiture or deprivation order. When a court considers making a confiscation order under POCA, it must not take into account certain types of property when calculating the amount of the order. This is to ensure fairness to the defendant and prevent the double counting of assets.
Clause 28 amends POCA to clarify the situation in relation to cash that has been seized and is being detained pending the decision of a forfeiture application. Cash that is detained in anticipation of the forfeiture application being made is already excluded, so this is an extension of the existing principle in section 82 of POCA. The amendment extends that to Scotland. We hope to be making an equivalent amendment in respect of Northern Ireland in due course—we are awaiting their formal agreement.
Amendments 50 and 51 will correct an error in clauses 37 and 38, which incorrectly refer to England when they should refer to England and Wales. That is merely to ensure that the text of the Bill reflects the intent of the policy, which is for the measure to extend to England and Wales. Amendment 55 will correct another typographical error.
Dr Huq
It sounds as if the amendments are tidying up some sloppy mistakes. On the whole, however, I know that the SARs extension to the moratorium period was very much welcomed by the witnesses we heard from. I have seen that some law firms do not like the policy, but I think it is a good idea. The previous period of 31 days was not long enough. Does the Minister have an inkling of how many times the maximum would be used—I think it is 200 days?
Mr Wallace
The timescale is really just a reflection of what the investigatory agencies have said to us: that some of these cases are very complex. Some of the ways in which people hide their wealth—they sometimes freeze it themselves—and who they are mean that the process will take time. We want to ensure that our agencies have time to investigate, rather than being under the sort of pressure where effectively they run out of time. Those people exploit that. That is the reason for the longer period. Hopefully it will not be used, but the very fact that it is there will give power to the elbow of the agencies trying to do the job.
Dr Huq
I thank the Minister for his response. We support the proposal, but we have a concern, which will come up in a new clause at the end, about the architecture of crime fighting. There could be better resource for all the different agencies that will be looking at these issues and particularly for the ELMER IT system. It was envisaged that that system would deal with 20,000 SARs a year, but the figure is 380,000 at the moment and will probably rise even higher after the Bill is passed. That does not relate to the clause, but I wanted to sound a word of caution.
Richard Arkless
I have a very quick point to make on amendment 9. I apologise if I missed it—I had my head buried in some papers—but could the Minister clarify why Scottish Ministers are being removed from the list of people who can apply to the sheriff?
The Chair
Order. Amendment 9 is in the next group, which we have not quite moved on to yet.
Richard Arkless
My apologies, Sir Alan. I got ahead of myself.
Amendment 8 agreed to.
Mr Wallace
I beg to move amendment 9, in clause 9, page 29, leave out line 47.
This amendment removes a reference to the Scottish Ministers from the list of persons who may make an application to the sheriff for extending the moratorium period under new section 336A of the Proceeds of Crime Act 2002.
Mr Wallace
The amendments will remove references to Scottish Ministers from the list of persons who may make applications to the sheriff for extending the moratorium period and for making a further information order under the Proceeds of Crime Act 2002 or the Terrorism Act 2000. In our ongoing dialogue with the Scottish Government and with law enforcement partners, we have clarified that Scottish Ministers do not require those powers. In Scotland, they would be used by the Crown Office and Procurator Fiscal Service, the National Crime Agency, the police and HMRC in respect of the moratorium period and by the procurator fiscal, the police and the NCA in respect of further information orders. We are acting on the advice of the Scottish Government, with whom we have consulted extensively in the development of the Bill and will continue to do so. We are making these amendments to ensure that the new measure will work effectively in Scotland.
Richard Arkless
The Minister’s explanation was comprehensive and persuasive and accords with my understanding of the Government’s position. We will not stand in the way of the clause.
Mr Wallace
Clause 9 inserts in part 7 of POCA a scheme for extending the suspicious activity report moratorium period beyond 31 days. As the action plan for anti-money laundering set out, the Government see a more robust law enforcement response as central to tackling money laundering. I have already explained the SARs regime, so we do not need to hear about that again.
As the national risk assessment set out, the UK is vulnerable to abuse by professional enablers from the legal, accountancy and finance sectors. The level of expertise involved can make it difficult to progress a money laundering investigation substantially in only 31 days. That is particularly the case when the law enforcement agency needs to obtain evidence from overseas authorities, which is another reason for an extension for a further length of time—the hon. Member for Ealing Central and Acton asked why it needed to be so long—or to undertake complex asset-tracing inquiries. Accordingly, the moratorium period may be lifted and funds dissipated before the investigation has progressed sufficiently to determine whether civil or criminal proceedings should be undertaken.
We need to provide law enforcement agencies with an appropriate amount of time to undertake investigations. This clause provides for the extension of the moratorium period by a court for periods of up to 31 days. That can be repeated up to a total of 186 days from the end of the initial 31-day moratorium period. The hon. Lady is better at adding up than me, so she produced the right figure. Providing an extension of the moratorium period enables law enforcement officers to continue investigating particularly complex transactions, such as those involving overseas grand corruption or other serious crime. The clause ensures that proceeds of crime are not dissipated when there is a suspicion that money laundering activity has taken place and when the law enforcement agency has not had the opportunity to complete its inquiries.
The Government recognise that there may be concerns about the length of time for which an individual’s property could be withheld from them. The clause does not allow unlimited extension of the moratorium period. The court must approve the application to extend the moratorium period each time an extension is sought. Law enforcement agencies must demonstrate to the court that it is reasonable in all circumstances for the moratorium period to be extended. They must satisfy the court that the investigation is being carried out diligently and expeditiously and that further time is required to progress the investigation.
An application to extend the moratorium period will be made to the Crown court, which provides a senior level of judicial authorisation. The owner of the property will be able to make representations in person before the court and is provided with the opportunity to appeal the decision to extend the moratorium period. An application may be made only by a senior officer who has a remit to undertake financial investigation. A senior officer is at the police rank of inspector or equivalent.
Money laundering is an enabler of serious and organised crime. The clause will help to stop criminals profiting from their criminal behaviour. It gives our law enforcement agencies the time to progress critical investigations into money laundering where they have genuine reasons for being unable to progress their investigation substantially in 31 days.
Dr Huq
The Minister has put it very well. All the witnesses stated that 31 days was not enough. Here we have appropriate checks and balances. A legal procedure is gone through to extend the period; it cannot be open-ended; and appeals procedures are built in. The Minister also praised my maths, which never happens normally—I am a qualitative person usually—so for that reason as well as all the other reasons, we will not stand in the way of the clause.
Question put and agreed to.
Clause 9, as amended, accordingly ordered to stand part of the Bill.
Clause 10
Sharing of information within the regulated sector
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause introduces a new provision into the Proceeds of Crime Act 2002. As the action plan for anti-money laundering also set out—it seems to make a regular appearance—the Government see public-private partnership as central to tackling money laundering and terrorist financing. A major part of that approach is to provide support for the effective exchange of information, both within the private sector and between the public and the private sectors, to increase our collective knowledge of threats and vulnerabilities, to help the regulated sector to protect itself and to improve the quality of the UK’s financial intelligence.
Both the private sector and law enforcement agencies hold significant amounts of information that can be of great use to each other. The private sector holds data on financial transactions and related personal data; law enforcement agencies hold intelligence on money laundering and terrorist financing. When those data have been shared, there have been benefits to both sectors.
Dr Huq
I described joined-up thinking in my remarks on amendment 2. The Minister has reassured us. I have seen that some people have civil liberties concerns, but he has told us that the sharing of information will be a last resort in extreme cases, and that it will happen largely on a voluntary basis anyway.
The Government action plan on money laundering said that what is needed is a
“collaborative approach to preventing individuals becoming involved in money laundering.”
It discussed different agencies, supervisors and the public and private sectors working together. The clause does all those things, and we support it.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Further information notices and orders
Amendment made: 10, in clause 11, page 38, leave out line 2.—(Mr Wallace.)
This amendment removes a reference to the Scottish Ministers from the list of persons who may make an application to the sheriff for a further information order under new section 339ZJ of the Proceeds of Crime Act 2002.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Wallace
Clause 11 creates a new power to issue further information orders. In the anti-money laundering action plan the Government set out our commitment to improving the financial intelligence that would be available to both the law enforcement agencies and the private sector. Improving our financial intelligence is essential to allow the identification of the major risks from money laundering, and to identify where resources from both the public and private sectors should be focused.
The action plan also contained a commitment to do more to tackle money laundering internationally, through sharing information and intelligence, and working through international bodies such as the Financial Action Task Force. The suspicious activity reports regime, run by the UK Financial Intelligence Unit at the National Crime Agency, is central to the UK anti-money laundering regime, and to the development of financial intelligence. The regime took more than 380,000 reports in 2014-15 from the regulated sector, including banks, lawyers and accountants.
Clause 11 will allow the UK Financial Intelligence Unit, following the receipt of a suspicious activity report, to request further information from any member of the regulated sector, irrespective of whether that entity raised the SAR.
There are a number of reasons why the UKFIU needs such a power. First, there are occasions where the SAR does not contain all the information necessary to allow the UKFIU to determine whether action, including an investigation, should be undertaken. That is particularly important when determining how scarce resources should be allocated. The intention is to drive up the quality of SARs and to enable improved intelligence analysis for the better identification of risk and threat.
Secondly, the UKFIU can use the power when it needs information in order to develop effective intelligence to identify the major threats from money launderers. That intelligence will be used to inform the work of law enforcement agencies and can be shared with the private sector to help them put in place effective counter-measures to the threats they face from money laundering.
Thirdly, it will allow the UKFIU to seek further information on behalf of a foreign financial intelligence unit to support investigations or intelligence development in that country. That will be subject to the appropriate safeguards, and the UK will benefit from the ability to request equivalent information from foreign financial intelligence units. The provision will also ensure that the UK is compliant with the relevant Financial Action Task Force recommendations ahead of the its evaluation of the UK anti-money laundering regime in 2018.
The clause will allow the National Crime Agency to direct that further information is provided and, if it is not provided, to apply to a court for a further information order to require the person to provide the information requested. We are keen to support appropriate information sharing between financial intelligence units, and we know that FATF and its members want to do more in that area. Incidents such as the attacks in Paris, where financial intelligence was needed to support the investigation, illustrate the need to be able to share such information. However, I would like to be clear that there should be safeguards in place for international information sharing. As with a request driven by the NCA itself, a court order will be required where a regulated entity does not provide information if requested to do so by the NCA. That in itself is an important safeguard. I am, as ever, open to discussing this issue with hon. Members if it is felt that additional safeguards may be appropriate.
On a separate point, I know that the issue of privileged information is of concern to Members, and I want to be clear that the UK Financial Intelligence Unit will not be able to request the provision of privileged information as part of this measure. This is an important safeguard for those who hold such information, and we do not believe that it should be requested under this power.
Dr Huq
It appears that the clause enacts some of the recommendations of the action plan for anti-money laundering and counter-terrorist finance that the Government issued in April 2016. We will support the clause.
Question put and agreed to.
Clause 11, as amended, accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Andrew Griffiths.)
Criminal Finances Bill (Fourth sitting)
Thursday 17th November 2016
(8 years ago)
Public Bill CommitteesRead Full debate Criminal Finances Act 2017 View all Criminal Finances Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 17 November 2016 - (17 Nov 2016)
Richard Arkless (Dumfries and Galloway) (SNP)
I beg to move amendment 58, in clause 12, page 40, line 1, and end insert—
“(g) betting slips;
(h) casino chips.”
This amendment includes betting materials that can be used to store the proceeds of criminal activity.
Richard Arkless
Amendment 58 would extend the definition of “listed asset” in proposed new section 303B of the Proceeds of Crime Act 2002 to include betting slips and casino chips. The Minister helpfully acknowledged on Second Reading that he would consider tabling an amendment to deal with those two means of retaining value, and I understand that new clause 10 has been tabled in that regard.
Although I fully commend the spirit of new clause 10, it will achieve that change not by adding to the definition of listed asset but by expanding the definition of cash to include gaming vouchers and fixed-value casino tokens. On the latter, we are in agreement: in effect, the new clause does what it says on the tin. It will extend the meaning of cash and therefore make fixed-value casino tokens catchable. Our concern is that “gaming voucher” is specifically defined in new clause 10 as
“a voucher in physical form issued by a gaming machine”.
We do not believe that that covers betting slips. Therefore, although we welcome the tone and construct of new clause 10, we feel that there is one means of retaining value that it does not cover, and that is covered in amendment 58.
The Minister for Security (Mr Ben Wallace)
I am grateful to the hon. Member for Dumfries and Galloway for his amendment, which was set out in his party’s manifesto for this year’s Scottish Parliament elections. The Government take this issue seriously, as do the Scottish Nationalist party and the Scottish Government.
As we have heard, to avoid detection, criminals use a range of means to transfer value among themselves. Law enforcement agencies and prosecutors—particularly those operating in Scotland—have made us aware of criminals’ use of gaming vouchers and casino chips to do that. There has been media coverage of drug dealers using fixed odds betting terminals to convert cash obtained from street drug dealing into vouchers issued by those machines. Those vouchers can either be converted into cash at the bookmaker, thus laundering the funds, or transferred to another person to pay the drug dealer’s debts.
The Proceeds of Crime Act contains provisions that enable law enforcement agencies to seize cash, but those provisions do not extend to the type of criminal tactic that I have just described, so clauses 12 and 13 seek to allow those agencies to freeze, seize and seek forfeiture of illicit funds held in bank accounts and other forms of criminal property used to transfer value. It has always been the Government’s intention to include gambling vouchers and casino chips in those provisions, as I made clear on Second Reading. When the Bill was introduced, we were still looking at the best way of achieving that in legislation, but I tabled new clause 10 on Monday—I apologise for doing so at the beginning of the Committee stage and not giving hon. Members more time to look at it—which will add gambling vouchers and casino chips to the definition of cash in the Proceeds of Crime Act and allow law enforcement agencies to seize those items on the same basis as they can seize cash, where their individual or aggregate value is more than £1,000.
Officers will have to demonstrate to a court that they have reasonable grounds for suspecting that vouchers or casino chips are either proceeds of crime or intended for use in unlawful conduct. That is an important safeguard that we apply to all forms of seizure. Law enforcement agencies will need to show why they seek the detention of the property, and will be able to seek administrative forfeiture of vouchers or tokens, or the agreement of a court. In all cases, an individual who believes that such vouchers or tokens are theirs legitimately will be able to challenge their detention or forfeiture.
I turn to the hon. Gentleman’s point and why we have used the term “gaming vouchers” rather than “betting slips”. In discussions with law enforcement agencies, we have identified that there is a major concern about the laundering of proceeds of crime through machines that provide a guaranteed return if they are played in a certain way. Those machines produce pay-out vouchers with a value that can then be cashed in. Betting slips, such as those used for horse racing, are used for betting with no guaranteed return and, therefore, are much more risky for use in money laundering.
However, once the points had been raised by the hon. Gentleman, I asked officials to examine whether there is potential to extend the Bill to ensure that we cover betting slips as well. As someone who likes the horses and knows his way round a losing—rather than a winning —bet, I understand that the ability to exploit that type of bet could potentially lead to such money laundering.
Carolyn Harris (Swansea East) (Lab)
The Minister may be aware that I am the Chair of the all-party group on FOBTs. I have grave concerns about bookmakers not reporting unusual and excessive activity on B2 machines by people who would not normally have that kind of disposable income. Is the Minister satisfied that leaving it up to the betting industry to self-report is adequate?
Mr Wallace
If memory serves me right, the Gambling Commission has the power to carry out a range of investigations and to impose conditions on bookmakers. I hear the hon. Lady’s point loud and clear. I have the same concern in my part of the world in the north-west about whether bookmakers are properly regulated and carrying out their obligation to report suspicious bets, as they currently do under the law. That is more a question of whether we are doing enough to enforce the law. Existing laws are quite strong, though some bookies’ shops—I suspect, as she does—have a way to go. If criminals know that we can seize their FOBT print-outs, they might be less likely to stick their money in the FOBT in the first place. We have put provisions in the Bill because they are pretty canny. When POCA came in in 2002, they realised that we could seize cash, so off they went. They are pretty good at moving the cash. No doubt, one day we will be back again, maybe saying that they have used telephone cards or whatever, and we will have to adapt the legislation in time.
The Government’s amendment chooses to put the provision into POCA, as opposed to the route chosen by the Scottish Nationalist party, because we believe that these items are better placed in cash provisions, because they have no real use other than to be turned into cash. The listed items of moveable property have an intrinsic use as well as being a store of value, and they need to be dealt with under the provisions that we have introduced into the Bill.
The listed items of moveable property clause also contains detailed provision about dealing with non-severable property and competing joint-owner claims that are not relevant to gambling vouchers. As I said, we are considering this as part of the Treasury’s review of regulation under the change to the fourth anti-money laundering directive when it comes to self-reporting of suspicious activity and fixed odds betting. That is under review by the Treasury as well, so I hope everyone will get their collar felt if they do not comply with one directive or another.
I hope hon. Members will agree that that would achieve the results they were after and, accordingly, I invite them to withdraw their amendment.
Richard Arkless
I thank the Minister for his comments and it is clear that extending the definition of cash, as the Government intend in the Bill, achieves the same outcome as we desired in extending the list of assets. I accept the Minister’s point that those assets have an intrinsic value, and perhaps the other ones are best suited to the extension of the definition of cash.
On the basis of the Minister’s commitment to examine the specific issue of betting slips and if we can agree that the evidence suggests that they are a moveable item that can store value that could be easily used by criminals, I am sure—given his tone—that we could discuss that further down the line. Given that assurance and the long list of things that we will consider as the Bill passes through its stages, I will take the Minister at his word. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr Wallace
As a former Member of the Scottish Parliament, I might be accused of favouring one part of the United Kingdom over another with all the concessions.
Richard Arkless
Given the Minister’s time in Scotland, he might want to refer to my party as the Scottish National party, not the Scottish Nationalist party.
Mr Wallace
Well, I will not say what we used to call it when I was in the Scottish Parliament. We will call it the SNP. I never say “separatists”, obviously.
Clause 12 will create new powers to seize and forfeit moveable items of property where they are suspected to be the proceeds of crime. Criminals launder the proceeds of their crimes to benefit from their criminal activity and carry it on. They are resourceful in using any mechanism to hold and move illicit funds, and we need to ensure that we are able to respond to that threat. Criminals hold the proceeds of crime in a variety of forms, which act as a store of value and a means through which such value can be transferred. Some, such as cash, gold and diamonds, can be easily moved or concealed. In some cases, these items can be readily sold for cash or dissipated through other means.
We want to take action to prevent criminals from transferring their illicit funds however they choose to do it, and the clause should be seen as part of a framework for seizing such assets, alongside the existing cash seizure provisions in the Proceeds of Crime Act and the new provisions in clause 13 for the freezing and forfeiture of funds held in bank accounts.
The cash seizure and administrative forfeiture procedures in POCA were designed to prevent cash from being moved or dissipated in the time that it would take to seek a restraint order. Cash seizure is widely used, both inland and at the UK border. The existing legislation does not allow law enforcement agencies to take the same action in the case of other highly mobile stores of value. Evidence suggests that those items are being used to move value both domestically and across international borders.
The clause will give law enforcement agencies new powers to seize and forfeit certain listed items, such as precious metals and stones, where they have reasonable grounds to suspect that those items are the proceeds of crime or are intended for use in unlawful conduct. The clause will strengthen law enforcement agencies’ ability to disrupt criminal funding by preventing value from being transferred and enable the recovery of criminal property.
The Bill sets out the list of items that can be seized by agencies. The list has been drawn from discussions with law enforcement agencies and from reviewing the approach taken by other states. We have set the minimum value level for the seizure of listed items at £1,000, which is the same as for cash. There will be no upper limit, again mirroring the existing cash provisions. We have set no higher limit, as we believe there are potential circumstances where the value of the item is likely to be significant, and law enforcement agencies need the power to seize the item if there is reasonable suspicion that it is the proceeds of crime. There is evidence of that, particularly in relation to works of art being used to store illicit value and then transferred internationally. Some Members might have heard last week that a French impressionist painting was discovered in a mafia house. Should we discover one of those in the United Kingdom, I do not think we would like to cap what we could seize. I want to be clear that we do not intend that this power should be used indiscriminately. That is why the power can be used only in respect of certain listed items and is subject to oversight by a court.
We have also introduced two additional safeguards. First, within six hours of the seizure, a senior officer must review the seizure and authorise the continued detention. Secondly, we are not, in these cases, permitting administrative forfeiture. That procedure is available in the existing cash forfeiture system and allows a law enforcement agency to forfeit cash without obtaining a court order, in circumstances where the owner does not object. Owing to the possibility of greater complexity of the cases, such as property being jointly owned and difficult to sever, administrative forfeiture is not appropriate. We want to ensure that law enforcement agencies have the powers they need to seize such items. At present, there is a short list, but we intend that it will be amended over time to reflect changes in criminal behaviour.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
Amendment 58 looks quite attractive. The hon. Member for Dumfries and Galloway and I served together on the Select Committee on Justice and went to America. I was quite tempted by his amendment, but I am now reassured by the Minister that Government new clause 10 addresses those concerns. It is added to the list for the ever longer meeting they will have.
Mr Wallace
I am not an art historian or expert. We would probably get Philip Mould from the television to come along. In reality, like with everything else, there is probably a proper valuation process held and items are disposed of that way. If they wanted my services, I would be useless.
The Chair
Order. To help the hon. Lady, I think she will find that, in the evidence produced on Tuesday, one of the witnesses from Her Majesty’s Revenue and Customs said that they recovered assets and then called in experts who valued them.
Dr Huq
Thank you, Sir Alan. I guess there is a serious point behind this: sometimes it is unclear who is the prime enforcer. We want some reassurance, which I am sure will come, that structures are in place, but we are big fans of the clause on the whole.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13
Forfeiture of money held in bank and building society accounts
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause introduces a new provision into the Proceeds of Crime Act 2002. Criminals need to launder the proceeds of their crimes to carry on their criminal activity. As I outlined on clause 12, we need to ensure that we are able to respond to that threat.
POCA already contains provisions for the seizure of cash, but we do not have an equivalent power to take quick and effective action against funds held in bank accounts, and criminals know that. Given the use made by criminals of the banking system, we need to plug that gap. At present, it is difficult for law enforcement agencies to take action against many such accounts because their values are below the limits for civil recovery. The clause will allow the police or the National Crime Agency to seek the freezing and forfeiture of those funds.
The clause will give law enforcement agencies new powers to freeze and forfeit funds held in bank and building society accounts. The measure will have two significant effects. First, it will be easier and quicker for law enforcement agencies to seize the illicit funds held by criminals who abuse the banking system to store and transfer the proceeds of their crime. Secondly, it will also make it clear to criminals that we can take immediate and effective action against their abuse of the financial system.
The provisions we are putting in place will support the forfeiture of funds in bank accounts that have been suspended by the banks when they have serious concerns regarding the use of the accounts. The banks welcome the certainty that will bring. The provision will of course be accompanied by appropriate safeguards. An account cannot be frozen unless there are reasonable grounds to suspect that the funds in it are the proceeds of crime or will be used to fund criminal activity. The freezing of an account will be overseen by a court, which will be able to make an exclusion to allow the account to be used to support a person’s reasonable living expenses or to continue to run a legitimate business.
Forfeiture can be undertaken administratively by the law enforcement agency exercising the provision in uncontested cases. When the forfeiture application is contested, the matter will be decided by the court. The funds in the account will not be transferred to the law enforcement agency account until the forfeiture order is made. I hope that sufficiently reassures the Committee about the need for the power and how it will be used.
Dr Huq
It sounds like there will be sufficient judicial oversight in this space. We know that a lack of bank regulation previously led to some nasty incidents in our history, so we support the clause.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14
Serious Fraud Office
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 1 be the First schedule to the Bill.
Clauses 15 and 16 stand part.
Government amendment 11.
Government new clause 9—Immigration officers.
Mr Wallace
We come to chapter 4 of the Bill. This group concerns clauses 14 to 16, schedule 1, amendment 11 and new clause 9, which relate to provisions that grant officers of a number of agencies access to new powers under the Proceeds of Crime Act.
Clause 14 and schedule 1 amend POCA to grant officers of the Serious Fraud Office direct access to the wide range of powers under POCA without the unnecessary existing step of their having first to be accredited and monitored as accredited financial investigators by the National Crime Agency. We are also granting officers access to the new powers proposed elsewhere in the Bill, including the power to extend the moratorium period under clause 9 and the new seizure and forfeiture powers in clauses 12 and 13.
It is, of course, only right that those using the intrusive powers provided by POCA are trained and monitored to ensure that the powers are not misused. However, officers of the SFO are experienced and well trained in the use of POCA powers and have appropriate oversight arrangements.
Clauses 15 and 16 amend part 5 of POCA to grant the powers for the civil recovery of assets to both HMRC and the Financial Conduct Authority. Expanding the civil recovery powers to HMRC and the FCA will improve both the capability and capacity for civil recovery. It will ensure they have access to the full suite of investigatory powers to support them in their civil recovery investigations. The use of those powers is governed by an existing code of practice, which will be amended. The Bill will also enable the SFO, HMRC and the FCA to apply for unexplained wealth orders. As we have discussed, the civil recovery provisions in POCA are robust and powerful, and giving additional bodies access to those powers will strengthen the UK’s overall response to serious and organised crime.
Clauses 12 and 13 provide for new freezing, seizure and forfeiture powers. At present, the Bill allows the police, the National Crime Agency, the SFO and accredited financial investigators to use those powers. Amendment 11 and new clause 9 will extend the use of those important new powers to immigration officers to support their investigations into immigration offences and to take action against criminal property that is the proceeds of immigration crime, or that is being used to fund further immigration offences. Those officers will also be able to seize suspected criminal property obtained through offences unrelated to immigration if they encounter them during immigration investigations. The amendment will strengthen the UK’s ability to tackle money laundering and will allow for the seizure of more criminal assets.
Dr Huq
We will support the clause. However, the amendment will lead to an increased workload for agencies such as the SFO and others. Our new clause will be debated later, but we would like an assurance that the blockbuster funding model that they currently operate, which seems to momentarily splash cash, will be replaced with some sort of consistent funding model, because their workload is going to increase and the investigation time in the courts is increasing. That is my only caveat.
Mr Wallace
In response to the hon. Lady, some of the measures in the Bill actually make their jobs easier. Although it might give them more people to catch, the fact that they are going to have disclosure orders and that they will be able to use things such as unexplained wealth orders as an investigatory measure, and the fact that we are going to improve the subject access request data sharing regime, so that the private sector produces more quality referrals rather than just a blurb of quality, will hopefully make their jobs easier when it comes to an investigation. In one sense, all of those barriers that they have to get through at the moment will be removed, which, hopefully, will make them more productive.
I recognise the hon. Lady’s point about the funding of the SFO and other agencies. Under the comprehensive spending review and the SDSR, we found quite a lot. SFO officers are already doing this work. It is here to be—[Interruption.] My writing is appalling. One of the reasons we want to remove their need be accredited financial investigators is that that is another hurdle that will get in their way and make them less productive, so we have removed some of those issues.
Dr Huq
It is the NCA as well. Both of those big reports from the Home Affairs Committee and the Public Accounts Committee said that there should be more consistent funding, but I am not going to let that niggle get in the way right now because we have a whole clause on that coming at the end.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clauses 15 and 16 ordered to stand part of the Bill.
Clause 17
Search and seizure warrants: assault and obstruction offences
Question proposed, That the clause stand part of the Bill.
Mr Wallace
This clause, and those that follow, fill a gap in the general law relating to those who conduct investigations of being placed in danger of being assaulted or obstructed. It is a general offence to assault another person, but in addition to that, police officers and HMRC officers are protected by specific offences that relate to the obstruction or assault of those officers in the course of their duties.
There are two very good reasons for specific offences. Those officers, by the very nature of their actions and work, face a much higher danger and likelihood of being assaulted. For example, they often enter the residences of serious criminals. I am sure the Committee sees that that is a wholly different scenario from what is envisaged in the general offence of assault. We, as law-abiding citizens, are not actively placing ourselves in situations that put us in danger.
Although we are unaware of any prosecutions relating to the assault or obstruction of police officers or others while exercising powers under the Proceeds of Crime Act, there is wide recognition that it is an important safeguard. It is a gap in the law that under POCA, investigators of certain agencies are put in situations where they could be assaulted or obstructed, and yet there are no connected offences. Section 453A of POCA has already created assault and obstruction offences for civilian accredited financial investigators operating under the Act. The clause provides that those who can execute search and seizure warrants in civil recovery investigations have a similar protection.
Dr Huq
We have had two good debates on the Floor of the House recently about the assault of police officers. These are very good provisions, and we are happy to support them.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Assault and obstruction offence in relation to SFO officers
Question proposed, That the clause stand part of the Bill.
Mr Wallace
The clause addresses a gap in the law relating to those who conduct investigations being placed in danger of being assaulted or obstructed. Much of what I said in relation to clause 17 also applies here. We are extending powers to SFO officers elsewhere in the Bill—in clause 14 and schedule 1, as well as clauses 12 and 13. In doing so, we place them in the position of being vulnerable to being assaulted or at least obstructed.
Unlike the police, HMRC officers and others, there is no specific offence that relates to SFO officers who are assaulted or obstructed in the course of their duties in general. The Bill therefore creates one to support the more general provisions of extending powers to the SFO. SFO officers currently access the powers in POCA as accredited financial investigators, and there are offences of assault and obstruction that relate to them. As accredited financial investigators, they are therefore protected by the offences in section 453A. The clause will simply copy the same approach, to reflect the fact that they will be able to operate the powers in their own right.
Dr Huq
This appears to us an entirely logical extension of the anti-assault powers. I know that taxmen are not always the most popular people, but I think MPs and used car salesmen are the most unpopular in the rankings of professions. We thoroughly support the clause.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Obstruction offence in relation to immigration officers
Amendment made: 11, in clause 19, page 72, line 36, at end insert—
“( ) section 303C as so applied (powers to search for a listed asset);
( ) section 303J as so applied (powers to seize property);
() section 303K as so applied (powers to detain seized property);”—(Mr Wallace.)
This amendment is consequential on NC9.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Wallace
This clause is similar to clauses 17 and 18. It addresses the need for an offence of obstruction, in this case to apply to immigration officers. Much of what I have already said in relation to such an offence also applies here. Under section 21(1)(g) of the Immigration Act 1971, a person commits an offence if they obstruct an immigration officer who is lawfully acting in accordance with their powers under that Act. That obstruction offence does not apply to the exercise of powers under the Proceeds of Crime Act.
As immigration officers now regularly use their powers under POCA—in particular since the extension of those powers in the Crime and Courts Act 2013—it is consistent for them to have a related obstruction offence. The clause amends POCA to create such an offence. Immigration officers are already covered by a general assault offence under section 22 of the UK Borders Act 2007, so no further provision is required in relation to assault. We are also amending immigration officers’ power of arrest without warrant to include this new offence.
Dr Huq
Again, Her Majesty’s Opposition entirely support this clause in relation to obstruction of immigration officers in the line of duty.
Question put and agreed to.
Clause 19, as amended, accordingly ordered to stand part of the Bill.
Clause 20
External requests, orders and investigations
Question proposed, That the clause stand part of the Bill.
Mr Wallace
Clause 20 makes a technical change, consequential to clause 18. Under section 444 of POCA, an Order in Council can be made to set out the procedure for providing assistance to other countries in freezing and confiscating property in the UK that is related to their cases. The Order in Council can create provisions that correspond to those available in our own domestic cases. The clause ensures that any offence created relating to the assault or obstruction of an SFO officer mirrors the one that we are creating domestically under clause 18. I hope the clause stands part of the Bill.
Dr Huq
Again, we have heard that these criminals often do not respect borders and maps, so we support the move to extend the provisions to external requests.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Seized money: England and Wales
Mr Wallace
I beg to move amendment 12, in clause 21, page 73, line 17, at end insert—
“( ) In subsection (2), for paragraphs (a) and (b) substitute—
“(a) has been seized under a relevant seizure power by a constable or another person lawfully exercising the power, and
(b) is being detained in connection with a criminal investigation or prosecution or with an investigation of a kind mentioned in section 341,”.
( ) After subsection (2) insert—
“(2A) But this section applies to money only so far as the money is free property.”
( ) Omit subsection (3).
( ) In subsection (5), for “bank or building society” substitute “appropriate person”.
( ) In subsection (5A), at the beginning insert “Where this section applies to money which is held in an account maintained with a bank or building society,”.
( ) In subsection (7A), after “applies” insert “by virtue of subsection (1)”.”
This amendment broadens the circumstances under section 67 of the Proceeds of Crime Act 2002 in which a court may order detained money to be paid in satisfaction of a confiscation order, by providing that the section applies to money that has lawfully been seized by any person (rather than only by constables) under a relevant seizure power, and by removing the requirement that the money is held in an account maintained with a bank or building society.
Mr Wallace
Amendments 12, 13 and 14 are a logical extension of powers that are already within POCA. Section 67 of POCA provides the magistrates court with a power in relation to money seized by the police or HMRC under the Police and Criminal Evidence Act 1984 that has to be paid into a bank or building society account. The court can order that money be paid to the court in satisfaction of a confiscation order. The money still belongs to the criminal. Therefore, section 67 avoids the ridiculous scenario of money being paid back into the criminal bank account when there is an outstanding confiscation order to pay. The amendments do not break new ground, but extend the established logic of section 67. When the police have possession of a criminal’s money, they should be able to transfer that across in the payment of a confiscation order, rather than return it to the criminal.
The amendments do three things. First, section 67 currently applies only to police and HMRC officers. The amendments effectively extend the powers to law enforcement officers who have the power to seize money, including immigration officers and SFO investigators. Secondly, the provision will now apply to money that has been seized under any power relating to a criminal investigation or proceeding, or under the investigatory powers in POCA. Instead of being limited to money seized under the Police and Criminal Evidence Act, this removes an unnecessary restriction. Many other powers of seizure should come from this provision’s scope, such as those in the Immigration Act 2016.
Thirdly, section 67 currently applies only to money that has been paid into a bank or building society account. That is another false limitation. For example, if money has evidential value it will not be paid into an account. It may be required at a trial as evidence that it is contaminated with a trace of drugs or explosives. It would be odd that a convicted drug trafficker with an outstanding confiscation order has his money returned by the police purely because that money was used as evidence in his trial, and not paid into his bank account.
There was no provision equivalent to section 67 in Scotland. Section 67 applied in England and Wales, and was similar to section 215 for Northern Ireland. I draw the Committee’s attention to clause 23, which introduces a similar power in Scotland. In constructing clause 23, we have been made to rethink the scope of section 67. We have come to the conclusion that it should be extended in the ways I have just described. We are also looking into whether to make similar amendments to the powers being introduced in Scotland and to the existing powers in Northern Ireland, and I will update colleagues in due course. I am sure the Committee will agree that this is an entirely sensible extension of the existing power to support the enforcement of confiscation orders.
Dr Huq
We do not oppose the amendment.
Amendment 12 agreed to.
Amendments made: 13, in clause 21, page 73, line 18, leave out subsection (2) and insert—
“( ) For subsection (8) substitute—
(8) In this section—
“appropriate person” means—
(a) in a case where the money is held in an account maintained with a bank or building society, the bank or building society;
(b) in any other case, the person on whose authority the money is detained;
“bank” means an authorised deposit taker, other than a building society, that has its head office or a branch in the United Kingdom;
“building society” has the same meaning as in the Building Societies Act 1986;
“relevant seizure power” means, subject to subsection (9), a power to seize money conferred by or by virtue of—
(a) a warrant granted under any enactment or rule of law, or
(b) any enactment, or rule of law, under which the authority of a warrant is not required.
(9) A power to seize money conferred by Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 is not a “relevant seizure power” for the purposes of this section.”
This amendment defines terms used in amendment 12 and makes a consequential change to the Bill.
Amendment 14, in clause 21, page 73, line 23, leave out “subsection (8)(a)” and insert—
“the definition of “bank” in subsection (8)”.—(Mr Wallace.)
This amendment is consequential on amendment 13.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Wallace
The clause is a technical amendment to POCA, specifically to update references to the definition of “bank” in three sections. The current reference in POCA is to the Banking Act 1987, which was repealed in December 2001, before POCA was commenced. The reason for its repeal was to remove bank regulation from the Bank of England, and to make it independent. Although no universal definition of a bank was given in the Banking Act, and nor is there any such definition in the subsequent legislative changes, a bank is defined by its activity as a deposit taking institution.
The only references in POCA affected by the change are those in three sections: section 67, section 215, and paragraph 6 of schedule 3. In addition, the definition will apply for the purpose of the new powers in the Bill to freeze and forfeit funds in a bank account.
Section 67 provides that where a confiscation order is made against a person, and moneys belonging to that person are held in a bank or building society account maintained by the police or HMRC, those institutions can be ordered to pay those moneys to the court. Section 215 makes equivalent provisions for Northern Ireland, and paragraph 6 of schedule 3 to POCA refers specifically to a Scottish provision relating to the deposit of certain moneys by an administrator into an “appropriate bank or institution”.
These changes replicate, as much as possible, the previous provisions, while recognising that the legislation in the area has now changed. I hope the clause will stand part of the Bill.
Dr Huq
Once again, I am proud that the Proceeds of Crime Act was a Labour Act that we pushed through when we were in government. It is now being updated to reflect contemporary circumstances.
Question put and agreed to.
Clause 21, as amended, accordingly ordered to stand part of the Bill.
Clause 22
Seized money: Northern Ireland
Question proposed, That the clause stand part of the Bill.
Mr Wallace
Clauses 22 to 28 contain a number of minor and technical amendments that will strengthen the operational impact of POCA powers. The clauses clarify and simplify the use of powers intended to recover criminal assets, and I will very briefly expand on those particular provisions.
Clause 26 makes technical amendments to the process that accredited financial investigators follow when seeking approval to use certain POCA search and seizure powers. Accredited financial investigators are not warranted officers, but may be employed by a police force or another public body. They have access to a wide range of powers under POCA, including certain search and seizure powers. They have access to search and seizure powers to seize property that may be subject to a future confiscation order. In order to use those powers, an accredited financial investigator has to seek the prior approval of either a justice of the peace or a senior officer. Currently, POCA only allows a civilian AFI to seek the approval from a senior AFI, as opposed to a senior police officer. This is not always practical from an operational point of view and creates an additional layer of bureaucracy. This measure allows civilian accredited financial investigators to seek authorisation from a police colleague who is at least the rank of inspector and therefore of equivalent seniority, thereby creating additional flexibility.
Clause 27 provides that an investigator has full access to investigation powers in section 22 revisits. Section 22 of the Proceeds of Crime Act allows an investigation to revisit any confiscation order so that any money acquired by a defendant in the future may be confiscated and satisfy a previous order. Currently, it is open to question whether an investigator’s ability to identify money made by the defendant using the investigatory powers in POCA—for example, by monitoring bank accounts, searching property or requiring the production of evidence —is available for investigations linked to revisits. Clause 27 strengthens investigative powers, making confiscation revisits more effective and helping to make best use of the resources being put into revisiting confiscation orders.
The remaining clauses clarify process and definitions to allow for the more effective recovery of criminal assets. Although minor and technical, these amendments are important measures that allow for the proper functioning of POCA. I hope that the clauses will stand part of the Bill.
Charlie Elphicke (Dover) (Con)
It is a pleasure to serve under your chairmanship, Sir Alan, and to make my first speech before this illustrious and most distinguished Committee. I have a few queries for the Minister on these important clauses. Part of the concern about POCA in the past has been that it has not always worked quite as well as it should have; it has a slightly chequered history when it comes to making sure that the proceeds of crime are, in fact, captured for the state.
First, looking at the miscellaneous provisions relating to Scotland, we are told that clause 23 is intended to replicate in Scotland the effects of section 67 for England and Wales, and section 215 for Northern Ireland, with certain modifications. It provides for the High Court of Justiciary or the sheriff, as the case may be, to order that any realisable property in the form of money held in a bank or building society account is paid to the appropriate clerk of court in satisfaction of all or part of the confiscation order. It would be helpful if the Minister could say why exactly those provisions are needed and how they will ensure that POCA works more efficiently. I am sure that will be a matter of concern to the spokesman for the Scottish nationalist party [Hon. Members: “Scottish National party.”] Oh, Scottish National party—or is it the Scottish neverendum party? I get confused, but I have a one in three chance of being right on one of them. That deals with the concern that I had on Scotland.
We are discussing clauses 23 to 28, are we not? Clause 24 deals with recovery orders related to heritable property. The proposed measure is to remove existing jurisdictional and procedural barriers that can delay the recovery of the possession of heritable property. For those who are not fully up to speed on what heritable property is, and for the benefit of colleagues and Members of the Committee, it is a house, flat, commercial premises and like real estate. I would ask why there were jurisdictional and procedural barriers in the first place and how they would be dealt with by this provision. The clause also says that, where a recovery order is granted, the property automatically vests in the trustee for civil recovery and the previous owner-occupier loses his or her title, since the owner-occupier of the property is subject to the recovery order and has no right or title to occupy the property. The appropriate way to recover possession in those circumstances is by warrant for ejection.
I want to check that there will not be any delay in getting such a warrant and that the procedural aspects are considered likely to work efficiently and swiftly. I also want to ask what the situation would be if there are any sitting tenants in the heritable property to which a recovery order applies. Would such sitting tenants be ejected or would they be able to see out the length of their tenancy?
A house might be owned by a crook who might have let that house to some innocent people, members of the hard-working classes of modern Britain, who suddenly find that their home is seized because that crook is brought to book. They do not want to be ejected and thrown out on to the street, where it is cold and dark as the seasons change against us. I hope we can understand what will happen to sitting tenants in such a case because that is extremely important. I see that the hon. Member for Scunthorpe is following with interest and is concerned about the matter. It would no doubt be heritable property 95% made with English steel from the great steelworks in his illustrious constituency.
Clause 25 deals with money received by administrators. We are told that this is a technical amendment to paragraph 6 of schedule 3 to POCA, which deals with money received by an administrator in Scotland. That is obviously a matter of great concern to my hon. Friend from the Scottish nationalist party. It is to provide a definition of “bank” following the repeal of the provisions of the Banking Act 1987, which previously provided the definition. I want to understand why it is so important to provide a definition of bank in such circumstances and why that is not already covered by legislation. That is a minor technical point. Is it truly necessary or does it make a substantive difference?
Victoria Atkins (Louth and Horncastle) (Con)
Does my hon. Friend welcome, as I do, the fact that the Government are enabling civilians to help warranted officers in such important investigations? Civilians can bring skills from the private sector of which a warranted officer might not yet have experience. It is a useful tool in the armoury of law enforcement agencies to be able to draw on the wealth of experience in the private sector, as well as relying on the significant experience of warranted officers.
Charlie Elphicke
I thank my hon. Friend for more than fully answering my question. She has saved the Minister the trouble of having to respond to my query. She makes a powerful point. It is important that we have such expertise, understanding and skills and that the forces of law and order are able to draw on civilian skills that may not exist directly under the employ of officers of the Crown. That is extremely helpful, and I thank her very much.
The Chair
Minister, having caught such a rare fish, I presume you want to deal with it now rather than later.
Mr Wallace
I am touched by the love of Scotland expressed by my hon. Friend the Member for Dover—although his constituency is closer to France than Scotland. I might be able to help him on some of his technical questions.
My hon. Friend’s first question was about why the miscellaneous provisions relate to Scotland, how they are processed and why they are different. Sections 67 and 215 of the 2002 Act provide that a magistrates court can require a bank or building society to pay a sum of up to £5,000 if it fails to comply with an order. However, there is no precedent for such a provision in Scottish law. Also, the equivalent orders in Scotland will apply to law enforcement authorities, as well as to banks and building societies. It was therefore considered more appropriate for any, hopefully rare, wilful non-compliance with an order in Scotland to be dealt with as contempt of court.
Clause 24 addresses recovery orders relating to heritable property. Although it is Scottish Ministers, as the enforcement authority, who apply for a recovery order, once granted it is for the trustee for civil recovery to recover possession of any heritable property to which the recovery order applies. That is because the effect of a recovery order is to vest the property in the trustee for civil recovery. Under existing law, however, a trustee for civil recovery is unable to seek recovery of possessions directly in the Court of Session so must raise a separate action in a lower court, namely the appropriate sheriff court. That can lead to defenders rehashing arguments that were unsuccessful before the Court of Session and incurring costs for those days, which ultimately compromises the amount recovered. Such delays also permit those involved in criminality to continue occupying a property despite the Court of Session having determined that the property was obtained through unlawful conduct and should therefore be recovered.
My hon. Friend is rightly concerned about sitting tenants whose house is owned by a crook and who suddenly find that it is forfeited or frozen. The primary policy obligation is the effective recovery of the proceeds of crime, which is generally best served by recovering the heritable property concerned and selling it so that proceeds from the sale can be added to the public purse. A primary function of the trustee for civil recovery is to realise the value of the property for the benefit of the enforcement authority, which, in Scotland, is the Scottish Ministers. It was never intended that the trustee should take on the functions of a landlord in relation to any sitting tenants.
However, we are considering introducing amendments to other legislation in consequence of the clause, as was well pointed out by my hon. Friend the Member for Dover, with a view to ensuring that any legitimate tenant receives fair notice that a recovery order is being sought in respect of the property concerned and that, if granted, they will have to vacate the property within a certain period of time, and that adequate support is put in place to safeguard against homelessness.
Let me move on to the fourth point, relating to the definition of “bank”—I remember this being a particularly gripping part of the Bill when I was reviewing the legislation. The Banking Act 1987 provided a definition of a bank; these amendments simply update the definition to ensure that it is current, as the Banking Act has been repealed.
Dr Huq
I am reassured to hear that tenants’ rights, which are often under-regulated in this country, will be dealt with in the legislation.
I have a question about clause 26, which is on accredited financial investigators. We have had those in this country since 2009. Even though I do not have the exact figures—my iPad is not getting wi-fi—there is evidence that we have not hung on to all of them. People have been trained as specialist investigators out of the public purse. We live in an age where we should justify every pound of public money, and we seem to have lost those people to the private sector. A lot of them have been poached.
Charlie Elphicke
This was exactly my concern as I studied the Bill in great detail. However, I feel that my hon. Friend the Member for Louth and Horncastle, who is extraordinarily able and learned in these matters, answered that question by saying that one should be able to draw on skills across the whole nation by contracting them in. I thought that was quite a powerful point.
Dr Huq
It was a powerful point. As I was going to say if the hon. Gentleman had allowed me to finish the sentence I had embarked on, this issue will be addressed at the end in one of our new clauses. Perhaps we could build in some way of, if not exactly giving them golden handcuffs, then retaining them or even getting the cost of the training repaid, whatever that is. We see the same happening across other sectors. We hear of junior doctors being lost to Australia. It would be a tragedy if we trained these people up and then off they went, poached by the private sector. We have heard of examples where they have gone to the gambling industry, which my hon. Friend the Member for Swansea East has experience of in her role on the all-party group on fixed odds betting terminals. I flag that issue up now, but we will come back to it later in a new clause.
Mr Wallace
I have heard the hon. Lady’s sentiment. We will discuss the new clause later. I understand the point that we invest in people and we as the taxpayer should extract that investment back. We will no doubt discuss that further.
On the final concern raised by my hon. Friend the Member for Dover about the governance of accredited financial investigators, the use of the power in the clause is covered by a code of practice that will be amended. That mirrors the application processes elsewhere in POCA whereby civilians authorise applications. I am happy to provide those codes of practice for my hon. Friend to look at.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clauses 23 to 27 ordered to stand part of the Bill.
Clause 28
Confiscation orders and civil recovery: minor amendments
Amendment made: 15, in clause 28, page 78, line 33, at end insert—
‘(2A) In section 148 (free property: Scotland), in subsection (3)(b) for “or 297D” substitute “, 297D or 298(4)”.” —(Mr Wallace.)
Clause 28(2) amends section 82 of the Proceeds of Crime Act 2002, which determines what constitutes “free property” in relation to confiscation proceedings in England and Wales, by providing that property detained under section 298(4) of the 2002 Act is not free property. This amendment provides for a corresponding change to be made to section 148, which applies in the case of confiscation proceedings in Scotland.
Clause 28, as amended, ordered to stand part of the Bill.
Clause 29
Disclosure orders
Question proposed, That the clause stand part of the Bill.
Mr Wallace
We now move on to part 2 of the Bill, relating to terrorist property. In our discussions so far we have focused on clauses that are about ensuring we take the profit out of serious and organised criminality. Terrorism finance is different. Individuals who raise and move funds for the purpose of terrorism are not concerned with profit, but with causing the loss of life. It is essential that the tools available for terrorist finance investigations and the powers available to seize terrorist cash and property are as comprehensive as those available for dealing with other financial crime or, in some cases, more robust. Part 2 of the Bill is included for that purpose.
The relevant clauses therefore largely reflect the existing provisions relating to financial crime, but have been adapted as needed to respond to what is a different type of threat. As I explained earlier, disclosure orders are available for confiscations, civil recovery and exploitation proceeds investigations. Clause 29 and schedule 2, which it introduces, are very similar to clauses 7 and 8, and extend disclosure orders to money laundering investigations, but do so for terrorist finance investigations. The clause will make disclosure orders available for terrorist finance investigations, which will give law enforcement agencies the means to obtain information that is significant for investigating suspected terrorist finance offences or for identifying terrorist property.
The clause makes it possible for the police to apply to the court for an order to compel an individual to answer questions, to provide information or to produce documentation that is assessed to be relevant to progressing a terrorist finance investigation. It will be an offence to fail to comply with such an order without reasonable excuse, and to make a false or misleading statement in response to such an order. Either offence is punishable by a possible term of imprisonment of up to two years.
This is a robust measure, which is appropriate when we consider the type of threat with which we are concerned. However, it will operate with a number of safeguards: the application for an order must be made by a senior police officer, at least a superintendent, or authorised by such an officer; and the court must be satisfied that the information sought will be of substantial value, and that it is in the public interest for it to be provided, before making an order.
The action plan for money laundering and counter-terrorism finance, to which I have referred on numerous occasions, identified the need for a more robust law enforcement response to tackle money laundering and terrorist finance in all its forms. The measure is part of that response.
Dr Huq
The Minister is absolutely correct that the Government’s action plan of April 2016 identified this as a crucial area in need of examination. Terrorism is the threat of our modern age, along with climate change, so we go along with the clause.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Schedule 2
Disclosure orders
Mr Wallace
I beg to move amendment 16 in schedule 2, page 109, line 9, leave out “designated” and insert “counter-terrorism”.
This amendment, and amendments 18, 20, 21 to 25, 27 to 49 and 54, are consequential on amendment 26.
The Chair
With this it will be convenient to discuss Government amendments 18, 20 to 49 and 54.
Mr Wallace
We come to a large number of Government amendments, but I am pleased to inform the Committee that they are all connected to the same issue. Legislation must keep pace with changes to the police workforce. Civilian financial investigators accredited to the National Crime Agency under the Proceeds of Crime Act 2002 can already exercise many of the equivalent investigatory powers available under the legislation for a variety of investigations into money laundering and other serious crime.
Clause 34, which we will reach consideration of in due course, will allow civilian members of police staff, who will be referred to as counter-terrorism financial investigators, likewise to exercise certain investigatory powers in connection with terrorist investigations. The powers include applying to a court for a production order in relation to terrorist property, a financial information order or an account monitoring order. Clause 34 will also amend schedule 1 to the Anti-terrorism, Crime and Security Act 2001 to allow financial investigators to seize terrorist cash. Clause 32 will enable them to seize certain personal movable items.
At a time when counter-terrorism policing has been given additional investment in recognition of the threat levels facing the UK and the vital function it provides, I hope the Committee will agree that it is entirely sensible to provide greater flexibility in legislation for how the police may use their workforce. That does not mean that the exercise of those powers by a wider pool of people should be without safeguards. After further discussion with the police and the National Crime Agency, we have identified that a discrete accreditation process is appropriate for counter-terrorism financial investigators, rather than the training system for financial investigators set out in the Proceeds of Crime Act 2002.
Nic Dakin (Scunthorpe) (Lab)
The Minister is explaining the need for the amendments. Will he explain exactly what difference the proposed changes will make to the accreditation? How will it compare with what it would otherwise have been?
Mr Wallace
As I said earlier, terrorist financing often happens much more in real time. It is not about someone banking their asset to enrich themselves; it is about funding an operation. There will therefore be different requirements for these financial investigators. They will almost be chasing the money as they go, often to stop an operation that is about to happen—someone may be about to book a plane ticket and we may need that stopped—so they will need a different skill set from a normal accredited financial investigator. That is one fundamental difference; another relates to the different approaches that the Bill takes to terrorist financing and to criminal financing. There is a difference between enriching oneself and funding an act of terror.
Amendment 16 agreed to.
Mr Wallace
I beg to move amendment 17, page 114, line 30, leave out “6” and insert “12”.
This amendment increases the maximum period of imprisonment from 6 to 12 months (in line with other provisions in the Bill) in the case of an offence in Scotland of making false etc. statements in response to a disclosure order under the new provisions inserted into Schedule 5A to the Terrorism Act 2000.
The amendment will increase the maximum sentence for making false or misleading statements in response to a disclosure order to 12 months’ imprisonment, following a summary conviction in Scotland. The maximum penalty for the offence following a conviction on indictment will remain two years’ imprisonment. In our ongoing discussions with the Scottish Government, I have been advised that the summary courts in Scotland have general powers to impose sentences of up to 12 months and that this is therefore the correct approach for offences that can be tried summarily or on indictment. It will help to ensure the best use of the sheriff courts in Scotland.
Richard Arkless
That is a fair assessment of the position in Scots law. A sentence of 12 months is more consistent with the rest of the Bill and with the summary powers of sheriff courts in Scotland. Also, we have a presumption against lower sentences in Scotland and I would not like a lower sentence of less than six months to be caught by that presumption unintentionally. We support the amendment.
Mr Wallace
Collaboration between law enforcement and the private sector is incredibly important for countering terrorism, as it is for combating serious and organised crime. The importance of such close collaboration will be a key theme that features prominently in the forthcoming revised Contest counter-terrorism strategy.
Clauses 30 and 31 mirror the provisions in clauses 10 and 11, but for terrorist finance investigations.
As I have outlined to the Committee in relation to part 1 of the Bill, the Government are committed to improving public-private partnerships. We must support the regulated sector to come together to share expertise and information to help it protect legitimate businesses from being exploited for criminal or terrorist intent. In some cases, the detailed picture held by the regulated sector might be key to understanding particular threats. Closer working with the regulated sector can only enhance our understanding of terrorism and provide opportunities to protect against it or disrupt it. Clearly, the financial sector in particular can play a vital part in terrorist finance investigations and tracking terrorist property.
Clause 30, like clause 10 on money laundering, will enable firm-to-firm information sharing through a legal gateway, which will provide immunity from civil liability, encouraging the reporting sector to share information to detect and prevent money laundering and terrorist financing. The joint money laundering intelligence taskforce has demonstrated that there is potential for information sharing in relation to terrorist financing to support effective law enforcement action and disrupt threats to our national security. The clause is an important measure that enables us to take forward that agenda. Although obligations to protect customers’ personal data remain important and must be respected, where it is possible to overcome barriers to the effective sharing of information to progress an investigation, the Government will do what we can to allow it.
Clause 31 will allow the National Crime Agency or the police, following receipt of a report under section 21(2)(a) of the Terrorism Act 2000, to request further information from any member of the regulated sector, irrespective of whether that entity raised the original suspicious activity report. It will also allow the National Crime Agency to seek further information on behalf of a foreign authority. Just as in clause 11, in the event that a member of the regulated sector does not comply with a request for more information, the provision will also allow the NCA or the police to obtain a court order to ensure that it is provided.
The two clauses will allow better information flows within the regulated sector and between the regulated sector and law enforcement agencies, generating better intelligence for law enforcement agencies and helping firms better protect themselves. I commend the clauses to the Committee.
Dr Huq
Clauses 30 and 31 revisit the information sharing themes that we have been discussing all day. We thoroughly commend them. They build on another good piece of Labour legislation, the Terrorism Act 2000. Unfortunately, terrorists have become ever more ingenious in the evil schemes that they dream up in the 16 years since, which is why the clauses are necessary.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Clause 31
Further information notices and orders
Amendments made: 18, in clause 31, page 86, line 1, leave out “designated” and insert “counter-terrorism”.
See the explanatory statement to amendment 16.
Amendment 19, in clause 31, page 86, leave out line 3. —(Mr Wallace.)
This amendment removes a reference to the Scottish Ministers from the list of persons who may give a further information notice under new section 22B of the Terrorism Act 2000.
Question put and agreed to.
Clause 31, as amended, ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Andrew Griffiths.)