Criminal Finances Bill

Baroness Bowles of Berkhamsted Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

Moved by

[Baroness Bowles of Berkhamsted]

161: Clause 42, page 107, line 27, at end insert—“(9) The Secretary of State may by regulations made by statutory instrument create, amend or remove further facilitation offences in respect of economic crimes other than UK tax evasion.(10) Regulations under subsection (9) may create offences conferring liability on a relevant body where a person commits an economic crime when acting in the capacity of a person associated with the relevant body.(11) Regulations made under subsection (9) must contain the safeguards set out under subsections (2) to (8) and sections 44 to 47.(12) For the purposes of subsections (9) and (10), “economic crimes” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013 (offences in relation to which a deferred prosecution agreement may be entered into) with the exception of an offence under section 1 of the Theft Act 1968.(13) A statutory instrument containing regulations under subsection (9) may not provide for more than one facilitation offence, but, for the avoidance of doubt, more than one statutory instrument may be made under subsection (9).(14) A statutory instrument containing regulations under subsection (9) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the Bill creates a second failure to prevent or facilitation offence for tax evasion, the first such offence being in the Bribery Act. It therefore makes sense to have an extended family of failure to prevent offences for other serious crimes for which the UK has spectacularly failed to prosecute large companies. The purpose of this type of offence, along with a defence of due diligence, is to make companies have better prevention procedures as well as providing deterrent and punishment. These offences have a far-reaching effect on corporate governance and culture, encouraging own-up instead of cover-up, responsibility instead of denial. I do not know how many more times it is necessary to listen to the public outcry, but public trust in business is at an all-time low, as reported in the International Business Times in January. There is an urgent need to fix a problem we have known about for a long time.

Amendment 161 and Amendment 163—the alternative, narrower version—explore putting additional failure to prevent offences into the Bill and bringing them into effect later. I suggest creating an option in this way because it gives time to evaluate the recent call for evidence and because of the limited legislative opportunities due to Brexit. Amendment 161 is broader and more flexible and uses a statutory instrument to introduce further failure to prevent-type offences. I know that sounds a bit scary, so I encourage noble Lords to look at the whole of the amendment, because there are significant constraints on the SI’s content. First, as specified in proposed new subsection (11), the new offences “must” have the same safeguards and procedures that the Bill introduces for tax avoidance. Importantly, this will include due diligence defence and provision of guidance concerning procedures for preventing the offence.

Secondly, the new offences are not plucked from thin air. Proposed new subsection (12) states that they have to be from the serious crimes listed in the Crime and Courts Act for which deferred prosecution agreements are possible. That list can be added to under that Act, but it will always be for serious crimes. Thirdly, to compensate for the flexibility, proposed new subsection (13) provides that each SI should introduce only one offence. The idea here is that each receives individual consideration and scrutiny.

Amendment 163 is the narrowest way I can see to pursue the same objective. It creates four specific additional offences and provides for separate commencement from the general commencement provisions in the Bill. There is also a sunset clause so that, if the decision is not to commence, there is no hanging about. The four offences are those named in the Government’s call for evidence: common law fraud, statutory fraud, money laundering and Theft Act false accounting. These are the high-profile and costly areas where we have failed to prosecute large companies. As before, the defence guidelines and procedures follow the same pattern. That is important for businesses so that there is no additional complexity.

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[Baroness Williams of Trafford]

My Lords, I would say that the statement a company makes reflects the company, and if a statement of no effort is made, it will be for others to judge the efficacy of that company.

[Baroness Bowles of Berkhamsted]

My Lords, I thank the Minister and other noble Lords for this debate and of course I appreciate that it is a little awkward that the call for evidence and consultation process are lagging behind the progress of the Bill. That is why I had my novel idea that we could put in place a framework here which is only an option. The circumstances are such that it would not be an outcry if the decision was that you had to do it in a different way, so as in my Amendment 163, the provision would just fall away. Of course, that provision would not be introduced by statutory instrument, it is just a delayed commencement. I still feel that there is some mileage in taking a further look at this kind of provision.

As a result of this debate, I think we have the answer to one of the questions in the call for evidence because of what the Government have said that they are thinking of introducing for the four criminal offences I have picked up on and that it may be by statutory instrument for the others. We have heard some good reasons as to why statutory instruments are not such a good idea, and indeed I think the Minister has conceded that. That may be the outcome of the ticks in the call for evidence. I would like to know how many ticks were made in that box; perhaps she could count them and let me know.

I reserve the right to have another go along the lines of Amendment 163, but at this stage I beg leave to withdraw the amendment.

Amendment 161 withdrawn.

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[Lord Kennedy of Southwark]

My Lords, Amendment 164, proposed by myself and my noble friend Lord Rosser, seeks to add a new clause to Part 3 of the Bill requiring the Secretary of State to publish a report on the number of companies that have been excluded from tendering for public sector contracts, or had an existing contract terminated as a result of being charged with the offence of failing to prevent the facilitation of UK or foreign tax evasion offences. The more light that is shone into the whole area of corporate failure in respect of tax evasion, the better, as this in itself would force companies that are sloppy or that do not follow procedures to take more notice of the provisions, take greater care and be clear that the Government and the tax authorities do not take such matters lightly.

Amendment 165, again in my name and that of my noble friend Lord Rosser, would be, in effect, a supervision order imposed by a court on a company convicted of a serious offence in these matters. The court could appoint a third party, such as an expert or body, to supervise the probation period of companies that co-operate with law enforcement bodies to the extent that they are offered a deferred prosecution agreement. Companies convicted under the Corporate Manslaughter and Corporate Homicide Act 2007 may have an order imposed on them to remedy the management system that allowed the manslaughter to occur. However, there are currently no powers available to a court to impose such an order on companies convicted of non-manslaughter offences which have not co-operated sufficiently with law enforcement agencies for a DPA. The perverse result is that companies that co-operate with law enforcement bodies have greater external scrutiny of their corporate governance programmes than companies that do not co-operate with enforcement agencies. This lack of scrutiny represents a missed opportunity to improve corporate governance among convicted companies, but also a powerful disincentive for companies to co-operate with enforcement authorities.

Corporate probation orders are used in other jurisdictions. The US Sentencing Commission, for instance, has given the courts the power to introduce any probationary condition relating to the nature and circumstances of the entire case when sentencing companies convicted of criminal offences. Introduction of such a power in the UK would add another significant tool to the armoury of courts and prosecutors in dealing with financial crime and ensure that the discrepancy of treatment for companies that co-operate with law enforcement authorities and those that do not is evened out, creating a more level playing field for business.

Amendment 170, in the names of the noble Baronesses, Lady Bowles of Berkhamsted and Lady Kramer, and the right reverend Prelate the Bishop of Oxford, addresses the very real issue that senior executives rarely face any consequences when companies they run engage in criminal activity—a point made numerous times from all sides in Committee. The lack of senior executives being held to account properly is a serious matter of public concern. I look forward to the contribution of the noble Baroness, Lady Bowles, who will shortly be speaking to her amendment, and I beg to move.

[Baroness Bowles of Berkhamsted]

My Lords, I shall indeed speak to Amendment 170 and I thank the noble Lord for his comments on it. This concerns the procedure for disqualification of directors where there has been a criminal conviction of a company, or a deferred prosecution agreement. The amendment seeks to make it possible, following a criminal conviction of a company, for the court to consider whether any directors should be disqualified. This is not seeking to make a criminal conviction against directors—disqualification is a civil procedure—but to put company criminality procedures on a par with that which exists when there is a breach of competition law.

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I hope that, with those words, noble Lords are satisfied with my responses and feel able not to press their amendments.

[Baroness Bowles of Berkhamsted]

The point is that a procedure exists when there is a breach of competition law. That does not have to be referred back to the Secretary of State. There is a subsequent hearing as to whether the director was culpable by not having established the right procedures. It does not automatically say that, if the company is guilty, the directors are guilty. If the circumstance is such that the judge says, “I think we should look further at this”, why should it not then be in the prosecutor’s toolbox to say, “We want to continue smoothly on to the next stage”, which the prosecutor has probably already investigated? It is a civil procedure to disqualify a director, I remind the Minister, so the human rights implications are slightly different. If it works for competition, why can it not work for criminality? It seems to be saying that there is a stricter rule, where directors sit up and take notice of the fact that it looks a little bit more automatic even though the same defence is there. Therefore, it has a huge impact on corporate governance in making sure that the procedures are there. It may even be on a piece of paper on the boardroom table. I have personally heard, “Oh, this is something we can get disqualified for if we don’t get it right”. That is exactly how more boards should be thinking. This kind of procedure induces that. Maybe the Minister can write to me and explain why it is good for competition and not for criminality.

[Baroness Williams of Trafford]

The noble Baroness foxed me when she asked that question the first time and she is still foxing me. I shall write to her before Report because I really do not know the answer.