Proceeds of Crime Act 2002 (Cash Searches: Code of Practice) Order 2021

Debate between Baroness Bowles of Berkhamsted and Lord Haskel

Monday 17th May 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank the Minister for introducing these instruments, which stem from the Criminal Finances Act. The Minister will no doubt recall that I spent a fair bit of time trying to encourage more and faster steps during the passage of that Act. However, today’s instruments relate to the codes of practice for enforcement, and I wish to speak around that more generally rather than on the particular extension to Northern Ireland.

The codes are important because they give guidance on how officers exercise their functions, and are of interest to persons who may be the subject of the powers. While I have little sympathy for wrongdoers, functions must be exercised lawfully and proportionately. There may also be parties inadvertently dragged into scope. I therefore have no quarrel with the content of these instruments as such, but there are surrounding matters of interest and I am taking the opportunity of the time available for this debate to see whether the Minister can provide some more information.

My first point is that the code of practice will be of use only if it is backed up with a proper and robust training package by the NCA’s Proceeds of Crime Centre. The Home Office’s Asset Recovery Action Plan of July 2019 stated that the Government would conduct an independent review of the Proceeds of Crime Centre by March 2020. Earlier this month, the Government released a statement of progress on the economic crime plan, which states that this review has been completed and its recommendations are being implemented. The fact of that follow-up is good, one supposes, but the review has not actually been published and requests for its release under the Freedom of Information Act have been rejected. Therefore, it is not possible to know what the recommendations from the review that are being implemented are, what the background to those recommendations is or how effective they will be, because the information is not published. Given the centrality of the Proceeds of Crime Centre to ensuring effective training on the code of practice, will the Government make public that review and put a copy in the House of Lords Library? If that is not being done, can the Minister explain why not and what other information is available to Parliament?

My second point relates to the first: these powers will also be effective only if the UK has properly resourced financial investigators and law enforcement to investigate and prosecute for proceeds of crime. Again, there is an unpublished review, in Sir Craig Mackey’s independent review into law enforcement capabilities for tackling serious and organised crime and the cost of implementing the 2018 serious and organised crime strategy. The Government published the executive summary of Sir Craig’s review in March 2021, but that summary does not cover one of the key areas of the review’s terms of reference: the funding for law enforcement to tackle serious and organised crime. That is despite the fact that the review was specifically commissioned in 2019 in the context of the comprehensive spending review. Again, requests for the report or a summary of its recommendations on those matters to be released under the Freedom of Information Act have been rejected.

The Government have committed in their economic crime plan to develop a sustainable long-term resourcing model for economic crime reform. As part of that they have announced that they will introduce an economic crime levy, which they expect to bring in £100 million per year. The consultation closed in October last year and we are still waiting for its results. They have also made a one-year £63 million settlement with the Home Office to tackle economic crime, but the director-general of the NCA said in 2019 that the UK needed a £2.7 billion investment over three years in tackling serious and organised crime, which was estimated to cost the UK at least £37 billion a year. Without serious funding, these codes of practice will surely be used a lot less than they might be.

Will the full review be published? If not, why not? What further information will be given to Parliament? Without publication of the reviews, one is left to postulate that the content is embarrassing, but right now the embarrassment is in the extent of organised crime, and that ultimately it falls as a cost on society and the individual, yet the numbers indicate it should be possible to recover far more.

Finally, the code of practice lays out how law enforcement can use unexplained wealth orders, among other investigative tools. However, recent case law, the Baker judgment, has exposed significant gaps in the legislation for implementing unexplained wealth orders and exposed how, without greater protection against costs, law enforcers are unlikely to use these tools against wealthy, litigious kleptocrats, if at all. It has been suggested that there might be additional reforms, such as allowing production orders to be used before an account freezing order needs to be made. Is that reform something that the Government intend to pursue?

[The Deputy Chairman of Committees (Lord Haskel) (Lab)]

The noble Baroness, Lady Eaton, has withdrawn, so I call the noble Lord, Lord Dodds.

Companies (Miscellaneous Reporting) Regulations 2018

Debate between Baroness Bowles of Berkhamsted and Lord Haskel

Monday 9th July 2018 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I welcome any attempt to raise the reputation of business and to increase the trust and confidence in business in the eyes of the public, so I very much welcome these regulations, but I wonder how effective they will be.

These regulations require public companies and large private companies to publish pay ratios and other data to show that the directors are taking into account the broader interest of customers, employees and communities, as the Minister has explained. These data are useful to provide more information to enable shareholders to question the directors and, if necessary, to vote at shareholder meetings. But who are the shareholders? Many shares are held by institutions, which are reluctant to act as long as the financial returns are as expected. Frequently they have a limited and sometimes short-term interest in the company. Also, much share trading is carried out by algorithms—and who knows on what formula they base their decisions? There are still many day traders active, and their trading, again, is based purely on numbers. As I understand it, this is the way the majority of shares now change hands.

I ask the Minister: even if the published data leads to naming and shaming, how effective will these regulations be in changing behaviour? I know there is a lot of concern about misleading comparisons between companies, but perhaps we should ask for other data to be published, such as benchmarking data on productivity so that shareholders can compare how well their company is doing in comparison with competitors.

Surely, there must also be concern about the reliability of the numbers. The big four accountancy firms almost exclusively audit for the large companies that are the subject of these regulations; they are also their financial advisers. In their role as financial advisers to these companies, I am sure that they will have lots of schemes to make the ratios look a lot more attractive. This joint relationship has come in for a lot of criticism recently. Is there any sign of any change so that these regulations will become more effective?

I welcome the rules applying to large privately held businesses. Most respondents in the consultation wanted to see more data about these companies and I hope that these regulations will produce it. Generally, I welcome these regulations, but would like to see them widened and made more effective.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I first apologise to the Minister for being caught out—