Criminal Finances Bill

Ben Wallace Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 25th October 2016 Commons Chamber

[The Minister for Security (Mr Ben Wallace)]

I beg to move, That the Bill be now read a Second time.

First, may I, through you, Madam Deputy Speaker, apologise to the House on behalf of my right hon. Friend the Home Secretary, as she is unavoidably detained on departmental business pertaining to national security and has therefore asked me to open this debate?

Both terrorism and serious and organised crime pose a real and present threat to the UK. Those involved in terrorist activities endanger our domestic security and overseas interests. Terrorism may be the greatest threat we face, but serious criminality arguably causes the greatest harm, costing the UK at least £24 billion annually, causing loss of life, and depriving people of their security and prosperity. Right hon. and hon. Members must not doubt the scale of this problem, as it damages our economy and our communities. It also has impacts on real people, whether we are talking about a grandparent being scammed out of their life savings; the trade of weapons that enable the type of marauding firearms attacks we have seen in Paris; the smuggling of illegal drugs that blight our high streets and local neighbourhoods; or the organised trafficking of young women and children.

Those crimes have a corrosive impact on the most vulnerable in society—they ruin the lives of real people—but this is part of a truly global issue. As David Cameron has said, international corruption is

“one of the greatest enemies of progress in our time”

and the

“cancer at the heart of so many of the world’s problems”.

Financial profit is at the heart of almost all forms of serious and organised crime. The UK drugs trade alone is estimated to generate £4 billion of revenue, and Her Majesty’s Revenue and Customs estimates that more than £10 billion was lost to tax evasion and criminal attacks against the tax system in 2014-15 alone.

[Gavin Robinson (Belfast East) (DUP)]

I agree entirely with that comment from the former Prime Minister and with the thrust of the Bill. One great concern of Christian Aid is that the Bill does not extend to or legislate for the Crown dependencies or overseas territories. Will the Minister respond to that at this early stage?

[Mr Wallace]

I thank the hon. Gentleman for that point. The Bill does extend some of the offences and powers it contains to cover an extra-territorial extent, which will go a considerable way to getting to the bottom of money laundering, whether that be carried out here or elsewhere around the world. It also goes some way to dealing with people who evade tax overseas. Just because they are not evading our tax but are robbing another country, it does not mean that we would not still like to take action against those individuals. The Bill goes some way on that.

[Several hon. Members rose—]

[Mr Wallace]

I will make some progress and Members will doubtless be able to make their points throughout the debate.

Many of the criminals who profit from such activities live in plain sight, untouched by law enforcement agencies. They reap the benefits by money laundering—moving, hiding and using the proceeds of their crimes to fund their lifestyles and enable further criminality. It is estimated that the annual amount of money laundered globally amounts to $1.6 trillion, while the National Crime Agency assesses that many billions of pounds are laundered into or through the UK as a result of international corruption.

We should be rightly proud of the UK’s status as a global financial centre. This is one of the best places in the world in which to do business, but we must recognise that the size of our financial sector and open economy and the attractiveness of the London property market to overseas investors make this country unusually exposed to the risks of international money laundering. That is why this Government are taking action—to combat money laundering, terrorist finance and corruption—here and overseas. We are sending a clear message that we will not stand for money laundering or the funding of terrorism through the UK.

[Dame Margaret Hodge (Barking) (Lab)]

I am extremely grateful to the Minister for giving way. I agree with the content of his remarks, but I wish to pursue further the issue that has been raised by the hon. Member for Belfast East (Gavin Robinson). Does the Minister agree that transparency is absolutely key to trying to tackle some of the corruption and money laundering that take place? If he does agree, why is he not using this Bill to ensure that the overseas territories and Crown dependencies, which come under our jurisdiction, publish publicly available registers of beneficial ownership?

[Mr Wallace]

Yes, I absolutely agree that transparency is one of the steps along the path of tackling both corruption and money laundering. That is why, at the anti-corruption summit in May, the Prime Minister basically reaffirmed that commitment. Even before that, we had worked with the overseas territories and Crown dependencies to ensure that, hopefully by the end of this year or into next year, there will be transparency, registers, of which a considerable number will be public, and automatic information exchange between our tax authorities and those of our dependencies. In that way, we will be able to have access to information about people hiding tax from us, and our law enforcement agencies will then be able to set about tackling the matter.

This Bill is part of that process. A key element of that approach will be ensuring that we work with the private sector to make the UK a more hostile place for those seeking to move, hide or use the proceeds of crime.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

Prosecuting corporations for failing to prevent economic crimes was expected to be a core part of this legislation as it appeared during the consultation phase. It seems that, despite Government indications that they would include provisions to hold to account corporations that let their staff facilitate tax evasion and other economic crimes, those provisions are not part of the Bill. Will the Minister explain why he has chosen not to include such eminently sensible precautions?

[Mr Wallace]

Yes, but I will come to that part of the Bill later on. It is certainly our intention to prosecute those corporations, or the corporate body, that allow their companies to facilitate tax evasion. Under the current system, an individual can be prosecuted for evading tax, and someone within a company can be prosecuted if they facilitate that evasion. At the moment, it is very, very hard to prosecute the corporate body. We are intending to make that change in our Bill. If the hon. Lady reads the Bill, she will see how we will do that. We will go after not only the corporate body here in the UK, but overseas companies. Being an overseas company will not be an excuse, and we will go after them in the same extra-territorial way that we do with the Bribery Act 2010.

[Keith Vaz (Leicester East) (Lab)]

I congratulate the Minister on his appointment to the Home Office.

In evidence to Parliament earlier this year, the private sector made it very clear that it is trying to co-operate with the Government. There were 381,000 suspicious activity reports made under the ELMER system, only 20,000 of which could be looked into. What support is he giving the National Crime Agency to allow it to have a better system to deal with those reports?

[Mr Wallace]

I am grateful to the right hon. Gentleman for his intervention and for his kind comments about my appointment.

First, we will remove those barriers to information sharing. Often some of the regulators or the bodies that we deal with say that they would like to pass on more to us, but feel that they are not protected from sharing wider information. We will remove those barriers so that the National Crime Agency can see the full chain of a financial instruction. We will also empower the NCA with a stronger disclosure order so that it can force people—it can go and apply for an order—to release documentation or to comply with questions about a particular transaction. Such an order currently exists in the Proceeds of Crime Act 2002, but it only covers fraud. We will now do the same for money laundering. We will also extend the time limit for a suspicious activity report. At the moment, there is a one-off extension of up to 31 days, but we would like to see that extended to six months, which means that the NCA will have much longer for its investigations.

[Keith Vaz]

I thank the Minister for his very full answer, but the real problem is that the system is old. The ELMER system needs to be replaced and renewed. Will he give the National Crime Agency the additional resources to pay for the new system to do all the things that he is suggesting? Without a new system, 20,000 simply does not go into 381,000.

[Mr Wallace]

The right hon. Gentleman is absolutely right that 381,000 referrals is a hefty amount to get through. First, we need to ensure that there is time to get through them. Secondly, what we do not want is what has happened in the past, which is that the private sector makes a suspicious activity report by default. If we can remove those excuses about why it cannot get to the bottom of a transaction before it passes it on, that will ensure that it passes on proper suspicious activities, rather than the ones that it can satisfy itself are not such a problem. In that way, we can cut out some of the referrals that are unnecessarily done.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I thank the Minister for giving way. He is being exceptionally generous.

Does that example not actually illustrate exactly what prosecutors are up against here and the complexity of these cases? Compulsion for transparency will be necessary, as it will put prosecutors on the front foot. Will he look at this matter again—it has already been raised by a number of Members—as the Bill progresses?

[Mr Wallace]

Yes, I can assure the right hon. Gentleman that that will happen throughout the passage of the Bill and even after. This is part of a longer process. We will make sure that, where we cannot get hold of the information that we need, we will prosecute people who are deliberately trying to evade tax, and also prosecute people who are trying to launder money. That is part of the process. Many of these powers, including the unexplained wealth orders, give us the benefit of the doubt and put it on to us to say, “Actually, we think you’re linked to serious organised crime, or we can show you are. Explain to us where your money is from.” At the very least, that will get over some of those hurdles about not being able to get to the bottom of the information in that process. That is one of the steps that we will take and that I hope the right hon. Gentleman will support as the Bill goes through.

[Charlie Elphicke (Dover) (Con)]

I welcome my hon. Friend to his place as Security Minister. His appointment is much deserved.

May I ask him about seizure and forfeiture powers? Previous legislation in this area has not been entirely successful in ensuring that the assets of criminals are seized. Can the Minister explain to the House why the provisions in this Bill will make a difference? We want to ensure that we grab the money off the criminals so that they cannot carry on with their illegal enterprises.

[Mr Wallace]

My hon. Friend is right that, in the past, it has been a challenge. Crafty hoods have been very good at taking their money out of cash and putting it into a range of moveable valuables, such as fast cars, paintings, jewels, or even betting slips, which I know the Scottish Government are quite keen for us to consider. We need to broaden it out and ensure that when they are crafty, we are crafty as well.

This Government have already done more than any other to tackle money laundering and terrorist financing. More assets have been recovered from criminals than ever before, with a record £255 million recovered in 2015-16, and hundreds of millions of pounds more frozen and put beyond the reach of criminals. We set up the Panama papers taskforce to ensure an effective, joined-up approach to those revelations. The London anti-corruption summit in May built capacity with overseas partners.

It is important to note that we are already doing this. In November 2015, the UK returned £28 million to Macau, which were the proceeds of corruption laundered in the UK. That is a concrete example of our giving back money to those countries that have been robbed by crooks who have used Britain to launder the money or to make the money in its jurisdiction. I want to see more of that and to see it go further.

There was a need for legislation and a need to build on the process of the anti-corruption summit and to find out where we were still vulnerable. In October 2015, the Government published the “National risk assessment for money laundering and terrorist financing”, identifying a number of areas where these regimes could be strengthened. Our response to that assessment was the action plan for anti-money laundering and counter-terrorist finance, which was published in April 2016. It represents one of the most significant changes to our anti-money laundering and terrorist finance regime in more than a decade.

The Bill will give effect to key elements of that action plan. It will significantly enhance the capability of UK law enforcement to tackle money laundering and to recover the proceeds of crime. It will strengthen the relationship between public and private sectors and combat the financing of terrorism.

Part 1 contains a number of measures that will amend the Proceeds of Crime Act 2002, including the creation of unexplained wealth orders. There are criminals who declare themselves almost penniless, yet control millions of pounds. Law enforcement agencies may suspect that assets are the proceeds of international corruption, but they are unable to freeze or recover them, often because they cannot rely on full co-operation with other jurisdictions to obtain evidence. A court will be able to make an unexplained wealth order to require an individual or organisation suspected of association with serious criminality to explain the origin of assets, where they appear to be disproportionate to their known income. If that person does not respond, this may enable the property to be recovered under existing civil recovery powers.

Part 1 chapter 1 will extend the use of disclosure orders, which allow a law enforcement officer to require someone who has relevant information to answer questions as part of an investigation. Those orders are already in use for civil recovery and confiscation investigations. They will now be available for money laundering cases.

Chapter 2 will enhance the process by which private sector companies report suspected money laundering—the suspicious activity reports, or SARs, regime. Where a company in the regulated sector, such as a bank, accountancy or legal firm, suspects that it may commit a money laundering offence, it is obliged to submit a SAR to the National Crime Agency, seeking consent to proceed. At present, there are occasions where these SARs are incomplete and where further information is needed to inform the NCA’s decision. The Bill will give law enforcement agencies more time to investigate those suspicious transactions that require consent and the NCA extra powers to request further information from companies to help to pursue those investigations and conduct wider analysis.

The Bill will provide a gateway for the sharing of information between regulated companies—subject to appropriate oversight—to help to build a broader intelligence picture of suspected money laundering. This has been piloted through a programme known as the joint money laundering intelligence taskforce. In the 12 months from February 2015, the taskforce led directly to 11 arrests, the restraint of more than £500,000 and the identification of 1,700 bank accounts linked to suspected criminal activity. We want to build on the success of that work, by providing the clearest possible legal certainty that companies can share information for the purposes of preventing and detecting serious crime.

Part 1 chapter 3 will improve the ability of law enforcement agencies to recover the proceeds of crime. Existing legislation contains civil powers to confiscate cash, but criminals hold proceeds in other forms, as I said earlier, and we must adapt. The types of asset covered by the power are listed in the Bill, so that Parliament can properly scrutinise its potential use. We continue to consult operational partners on their requirements, and I expect that we will introduce a Government amendment to extend the list to include gambling slips and tokens, which are often used by organised criminals to launder their ill-gotten cash. I hope that such an amendment will attract cross-party support.

The rest of part 1 will extend existing POCA powers to a number of other organisations, including the Serious Fraud Office, Her Majesty’s Revenue and Customs and the Financial Conduct Authority. It will make a range of minor and technical amendments to POCA.

The first duty of any Government is to keep their citizens safe. The terrorist threat is real and is growing. If we are to combat that threat, we must cut off the funding streams that enable terrorist-related activity. The 2015 national risk assessment identified two key weaknesses in this area: the raising and moving of terrorist funds through vulnerabilities in the financial sector, including money service businesses and cash couriering; and the abuse of the charitable sector for terrorist purposes. To combat these issues, part 2 will make complementary changes to powers for terrorist finance cases, by mirroring many of the provisions in the Bill, such as those on SARs, disclosure orders and seizure and confiscation powers, so that they are also available for investigations into offences under the Terrorism Act 2000.

Part 3 will deliver on the Conservative manifesto commitment to make

“it a crime if companies fail to put in place measures to stop economic crime, such as tax evasion”.

At present, if an individual evades tax and that is criminally facilitated by those working for a company, the individual taxpayer will have committed a crime and those individuals facilitating it could also be prosecuted, but it is very difficult and often impossible to hold the corporate entity to account. That needs to change. That is why we are creating two new offences of corporate failure to prevent the criminal facilitation of tax evasion—one in relation to UK taxes; another in relation to taxes owed to other countries.

Tax evasion is wrong. It is a crime. It cannot be right that a business operating in the UK can escape criminal liability simply because a tax loss is suffered by another country rather than the UK. The new offence in relation to foreign taxes will be of particular benefit in tackling corporate facilitation of corruption in developing countries. HMRC has conducted two public consultations on these offences, including engagement with the private sector—banks, accountants and legal practices—and everyone is clear of the need to take responsibility for ensuring the highest possible standards of compliance in this area.

As I have said, tax evasion and corruption in the developing world are key contributors to global poverty. Those crimes are frequently facilitated by companies in other jurisdictions. We cannot abdicate our responsibility and leave solving this problem to other countries. The UK’s financial sector should lead on the disruption of tax evasion, money laundering and corruption. This measure will help to do just that.

The Government are committed to reducing the regulatory burden on business, which can make it harder for companies to focus on real risks. The measures in the Bill were developed in close partnership with law enforcement agencies and the regulated sector, including major financial institutions, as well as other key representatives.

[Robert Jenrick (Newark) (Con)]

Although I support the Bill, does the Minister agree that there is no point in legislating if the agencies tasked with enforcing the legislation simply do not have the resources to do so? For example, since the creation of the Office of Financial Sanctions Implementation, as far as I am aware from talking to lawyers who work on white-collar crime practices, there has been no enforcement whatever. All of us who want to support the Bill would like to hear reassurance that there will be the resources to match the good intent.

[Mr Wallace]

I am grateful to my hon. Friend for his intervention. In the past few months, I have visited regional organised crime units up and down the country, including in his region, and the NCA, and they all say that their barrier to getting further with some of these problems is not the resource issue; they all say that their barrier has been the ability to find the cash, see the cash and seize it. Those three things are incredibly important. We can put all the resources in the world into our law enforcement agencies, but if they do not have the powers to take back some of the stolen assets, it will not make a difference.

The thing that struck me coming into this job only a few months ago, although I thought I knew a bit about terrorism from my previous life, and what has absolutely shocked me is the weight and strength of organised crime across the United Kingdom. To see its depth, how it affects my community in the north-west and how close it comes to us all really takes my breath away. I am absolutely determined not only that the guys and girls at the top, the Mr Bigs, get sent to jail for as long as possible, but that those people who consider themselves a little removed from it—the facilitators, the white-collar smoothies who launder the money into property and so on—also face their time in court, because they are the people who contribute to the message that there is a permissive society and that it is okay to be associated with crime. They are the people who help the nasties to put a gloss on themselves.

That is what I am determined to do with the Bill. All Members should rest assured that I will use the Bill to try to build momentum in non-legislative areas—in the non-regulated sector. I want to ask the regulators of estate agents and accountants what they are doing to play their part. If we can change the powers here, if their members get into trouble, what are they going to do to hold their members to account? Legislation is only one part of this. I hope that everyone supports the Bill and that the message goes out that there is more to do and that we will make sure that those people who facilitate and think that they live on the edge of the crime know that we are coming after them.

[Charlie Elphicke]

I thank my hon. Friend for giving way again; he is being incredibly generous. As he says, this is a question not just of laws but of the culture of the organisations. The NCA’s predecessor organisations all seemed to be more culturally bureaucratic. The NCA seems to be more intelligence-led. It seems to have more officials at the top who were intelligence operators in past times. From everything that I have seen, the NCA is far more vigorous at chasing down the intelligence, which is what it really needs to do.

[Mr Wallace]

There are several parts to this. The NCA has absolutely got the bit between its teeth, and I see a professional organisation up and down the country determined to tackle the threat that we face. I compliment police forces throughout the country that have put away the old-fashioned territorial boundaries that organised crime often exploited and have been determined to work together. When we visit Police Scotland and regional organised crime units in the north-west and all the other regions, we see police forces all sitting around the same table, working together for their own ends, led by intelligence, deciding on their priorities, sharing capabilities and knuckling down and getting on with it, rather than just focusing on their small areas. The NCA and regional organised crime units have provided the impetus on this, and the results will speak for themselves. I can assure the House that each of the Bill’s provisions will be subject to a set of stringent safeguards and robust oversight, so that they can be used only where it is necessary and proportionate to do so.

We considered carefully the responses to the public consultation on options for legislative proposals to implement the action plan. We published the Government response alongside the Bill earlier this month. I am grateful to everyone who responded to that consultation. There will inevitably be some additional pieces of statutory guidance to underpin the measures in the Bill. We will seek, wherever possible, to make that available to Parliament during the passage of the Bill, to ensure the widest possible consultation on how it will work in practice.

The Bill is only one part of a wider package of measures, as I have said, aimed at strengthening the Government’s response to money laundering and increasing the amount of criminal assets confiscated by the state. Our wider programme includes improving the effectiveness of the supervisory regime for the regulated sector; reforming the SARs regime, including investment in systems and processes; and further increasing our international reach, working with other Governments, overseas territories, Crown dependencies and international organisations to crack down on money laundering, tax evasion and corruption. We must ensure that the Bill and those other projects have the greatest possible impact on money laundering and terrorist finance in this country and abroad.

I welcome the hon. Member for Hackney North and Stoke Newington (Ms Abbott) to her post as shadow Home Secretary, and I am pleased that she has been able to meet me since her appointment to discuss this Bill. I would be delighted to continue to meet her and her team during the passage of the Bill to make sure that we get it right. Hopefully, we can work to ensure that the whole House agrees to support the Bill to send a message to the crooks, criminals and facilitators that we will not tolerate this any more. I hope that the hon. Lady, her colleagues and Members from the Scottish National party agree that it is in the public interest that the Bill be enacted at the earliest opportunity, hopefully with clear cross-party support.

I also congratulate the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) on her recent election as Chair of the Select Committee on Home Affairs. I am afraid that she is not in the Chamber, but she has a wealth of experience in home affairs, and I look forward to discussing these issues with her and the Select Committee.

The Government are committed to protecting the security and prosperity of our citizens, and the integrity of our world-leading financial system. We must ensure that we can pursue vigorously those who abuse that for illicit means. That is what the Bill will do, and I commend it to the House.

--- Later in debate ---

[Richard Arkless]

I have a great deal of sympathy with both of the right hon. and learned Gentleman’s points. I suggest, however, that the first one is rather a half-house measure that does not go far enough. It will not pin criminal liability on the banks. On the second point about vicarious liability, it is interesting to note that the United States is often considered as the free market monster of the entire world, yet the US feels comfortable with criminalising banks for the actions of their rogue employees. I suggest that we should do the same in the UK.

[Mr Wallace]

It is a joy as a non-lawyer to be skewered between two barristers in this place, but may I point out to the hon. Gentleman that one reason why the Bill imposes an unlimited fine for a conviction of corporate facilitating of tax evasion is that we believe it will change behaviour. It is one thing to fine a company for a capped fee, but we need to change the attitude not only of the bosses but of the shareholders—and massive fines make a difference. If that is coupled with our provision to increase the powers of the Financial Conduct Authority, we hope that both will help to change behaviour.

[Richard Arkless]

I agree with the Minister, but my point is that under the Bill, corporate economic crime extends only to tax evasion and not beyond it. Within the four corners of the Bill, there is relatively little to disagree with, but it does not go beyond tax evasion, which I think is a huge omission.

SNP Members can support other parts of the Bill without much hesitation—for example, the expansion of the suspicious activity reports regime, information sharing disclosure orders and combating terrorism. We support all those measures in principle. Notwithstanding our in principle support, we do not think it goes far enough, as I have said.

I shall shortly go through some of the issues that we think are missing from the Bill. Before I do so, however, I wish to make a small point about the time we have had to consider this Bill and its contents. We do not agree that the Scottish Government were given adequate time to scrutinise them. The Bill has been instructed and drafted with high speed, admirable though that may be, but with limited consultation. Only in the last fortnight were we shown draft clauses that related to unexplained wealth orders and mobile items of value—and even then, they were tagged “in confidence”. That said, we welcome the move to extend to Scotland the powers for wealth orders and disclosure orders, as requested by the Scottish Government.

For these reasons, the Scottish Government have not had the chance—and neither have I—to consider the Bill in sufficient detail, to consult Scottish stakeholders properly or to provide the Minister and the Government with some detailed advice. The Scottish Government will do so in due course. In addition, we are already aware of concerns among some Scottish stakeholders, particularly the civil recovery unit, that their advice has not been fully listened to and acted upon by the Home Office, and that the current approach adopted in the draft seizure and forfeiture powers provisions may not be the most effective available. I would encourage the Minister to continue his dialogue with the Scottish Government. He demonstrated yesterday evening that that is ongoing, for which I thank him.

So what is missing? It remains the case for us that the most notable aspect of the Bill is what is not in it. The headline objective of the Tory manifesto in this context was to deal with tax evasion, but, as has already been pointed out, the Bill makes absolutely no mention of the United Kingdom overseas territories and Crown dependencies. Given the aforementioned statement of intent in the Tory manifesto and the problems highlighted by the Panama papers—and the public reaction to the Panama papers—that omission seems very odd and very peculiar indeed.

--- Later in debate ---

[Dame Margaret Hodge]

Indeed. I would also add that the Brexit provisions might also lead to increased activity through the overseas territories and tax havens, so there are several dangers.

A number of Members have mentioned the evidence that backs up the importance of the Bill, but I want to point out two or three facts that have not yet been raised. The World Bank reviewed 213 corruption cases from a 30-year period between 1980 and 2010. Shell entities were involved in 70% of them, and UK Crown dependencies and overseas territories were second after the US on the list of those who provided shell entities. That is clear evidence of the importance of the role played by the Crown dependencies and overseas territories. Do we always have to wait for another leak to understand that? We will keep on getting them—the Mossack Fonseca leaks and the Panama papers will be just one in a stream. If we look at the information we garnered from the leaks, over 200,000 corporate entities were exposed, more than half of which were registered in the British Virgin Islands. I ask the Minister to consider that.

I also came across the African Progress Panel, which found that citizens of the Democratic Republic of the Congo were deprived of some £1.35 billion—twice their health and education budgets combined—due to the sale of mining contracts to five anonymous BVI companies. Those assets were sold at about one sixth of their commercial value, enabling the secretive offshore companies to sell them on and secure profits of more than 500% of the original moneys they paid. Again, desperately needed resources were lost to the poorest countries in the world.

If we are really to tackle the corruption, evasion and avoidance that occur in jurisdictions over which we have ultimate control, we must have the transparency that a number of Members have asked for this afternoon.

[Mr Wallace]

I have listened carefully to what the right hon. Lady said. Will she not concede that since the lead-up to the London anti-corruption summit in May, the Crown dependencies and overseas territories have agreed to establish a central register of beneficial ownership and a data-sharing system with the UK enforcement agencies that will give us access to those data almost in real time, and that that goes a long way to meeting some of her concerns? I recognise that the Scottish National party would like this to be public as well as shared with our law enforcement agencies, but it still goes some way on this issue. On the other side, the unexplained wealth orders for politically exposed persons will allow us to grab the money should they put it in this country and live in the nice houses that they sometimes seem to live in.

[Dame Margaret Hodge]

In my view, and indeed the British Government’s view, publicising those registers of ownership is crucial. We decided to do that for ourselves, so why are we not using our powers to enforce it on the Crown dependencies and overseas territories? There are multiple reasons why we have decided to do it for ourselves, and I shall mention two of them. First, for many of the poorer countries, getting their agencies up to speed so that they can pursue people and know what questions to ask is tough, and public registers make it much easier for those people to be interrogated. Civil society should interrogate them, and the registers make it much more likely that the type of activity that I mentioned in the DRC is revealed.

Secondly, we are talking about a very reactive response; if a register can be interrogated only by the international agencies that are allowed to have access, people will have to know that there is something they are after before being able to discover whether or not there is information about beneficial ownership that is relevant to a criminal activity or to aggressive tax avoidance and so on. Such an approach presupposes a degree of intensive resources and knowledge that will not necessarily be in place. Although one of course welcomes the creation of these registers, having them made public is central to making them work.

The Minister should listen not to my words on this, but to those of the former Prime Minister, who was absolutely clear, year on year, when talking about these issues, that the openness and transparency of these registers was what mattered. In 2013, he said to the Crown dependencies and overseas territories that they had to rip aside the “cloak of secrecy” by creating a public register of beneficial ownership. In April 2014, he wrote to the overseas territories, saying that

“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion.”

He also expressed his hope that overseas territories would follow suit to

“consult on a public registry and look closely at what we are doing in the UK.”

On a trip to the Caribbean in September 2015, he said:

“Some of the British Crown Dependencies and Overseas Territories are making progress in this direction. And others, frankly, are not moving anywhere near fast enough. I say to them all today, including those in this region”—

the Caribbean—

“if we want to break the business model of stealing money and hiding it in places where it can’t be seen: transparency is the answer.”

When we established our own public register here in the UK, David Cameron said that

“there are also many wider benefits to making this information available to everyone. It’s better for businesses here, who’ll be better able to identify who really owns the companies they’re trading with. It’s better for developing countries, who’ll have easy access to all this data without having to submit endless requests for each line of inquiry. And it’s better for us all to have an open system which everyone has access to, because the more eyes that look at this information the more accurate it will be.”

I simply say to the Minister that I really do agree, in this instance, with the former Prime Minister and I hope the current Government will listen carefully to his wise words.

[Dame Margaret Hodge]

I, too, have seen that survey. Any action that the Minister takes will be warmly welcomed by the public across the whole of the United Kingdom—by people of all ages and all genders. This is a really important bit of work, and I hope that the Minister will take it seriously.

I am concerned about the action taken so far. I am concerned that in December 2015 when we had the Overseas Territories Joint Ministerial Council, the Government failed to persuade those territories to implement public registers. I am concerned that, in March 2015, the Cayman Islands and the British Virgin Islands refused to meet Ministers from the Foreign Office and the Treasury. I am concerned that they failed to meet the Financial Secretary’s request that they adopt registers by November 2015. I am concerned that—as I understand it—they have ignored letters from UK Ministers. I am deeply concerned that tax is not even on the agenda for the forthcoming meeting of the Overseas Territories Joint Ministerial Council. I hope that the Minister can address that point. We do have the powers, and, as was mentioned in a previous intervention, we have used them before. The Government must act.

If the Minister could at least tell us that he will set a timeline, at the end of which, if matters cannot be resolved in a collective and collaborative way with the overseas territories and the Crown dependencies, the Government will use their power. That would go a long way to settling some of our concerns today. I hope that he can at least consider that as a possibility for taking the matter forward.

May I briefly comment on some of the other provisions in what is a warmly welcomed bit of legislation? On the unexplained wealth orders, it is particularly welcome that they will be applicable no matter where in the world the offence takes place. May I ask the Minister two questions? If the money comes from an overseas territory —a developing country, for example—will there be a notification to that country of the setting of an unexplained wealth order? Again, our enforcement agencies will be more capable than some others in pursuing laundered money.

[Mr Wallace]

I can get an exact answer to the right hon. Lady’s question. Just around that, though, we have started to sign memorandums of understanding with a number of countries—we signed one in August with Nigeria—to help them recover their assets, without barriers between here and there, and to assist them, both in their country and here, with tackling crime. Once they find their assets, we will get them back to them as soon as we can.

[Dame Margaret Hodge]

I am grateful to the Minister for providing that information. Will he explain why the orders do not apply to politically exposed people inside the European economic area? Will he look again at that issue, because there may occasionally be a relevant instance where that is important?

[Mr Wallace]

That is quite straightforward. We are unable under EU law to discriminate against different members of the EEA in relation to the UK citizen. What we do for the UK citizen we also have to do for other members of the EU.

[Dame Margaret Hodge]

I wish to raise two other issues. One arises from a debate held in the House on March 2012, initiated by the hon. Member for Esher and Walton (Mr Raab), on what is known as the Magnitsky-style amendment. The argument there arose from the horrific and brutal killing of Sergei Magnitsky—a Russian lawyer who was tortured and murdered because he uncovered a huge $230 million tax fraud in Russia. Allegedly, $30 million of that found its way laundered into the UK, according to evidence given to the Home Affairs Committee.

The hon. Gentleman proposed something similar to an amendment enacted in America—he and I would support such an amendment during the proceedings on the Bill—that would have ensured that foreign individuals involved in corruption and human rights abuses had their assets frozen, be denied right of entry to this country and be publicly named and shamed. Again, although that is slightly different to other provisions in the Bill, I think that there is strong cross-party support for introducing a Magnitsky-style amendment into UK legislation.

I hope that the Minister will look favourably on such an amendment. I have looked at the details, and a particularly disturbing aspect is how many UK banks were involved in laundering the alleged $30 million into the UK, according to evidence given to the Home Affairs Committee. They include Barclays, HSBC, NatWest, Bank of Scotland, RBS, Citibank, Bank of America, Lloyds TSB and the Bank of Tokyo. I hope that, from that horrific tragedy, we can introduce an important change in our legislation.

Finally, I want to talk about the corporate failure to prevent tax evasion, which other hon. Members have spoken about. I welcome the Bill as the first attempt to place responsibility for tax evasion not just on individuals but on corporations. However, this is a very small first step towards making those who are responsible for devising, advising and facilitating evasion and avoidance accountable for their actions.

Before we go over the top on saying what a great change the Bill represents, we should realise that it will apply only where a criminal offence has been successfully prosecuted against an individual or where an individual adviser has committed an offence when working for a corporation. It does not cover negligence by the corporation. It will not make the corporation responsible for the crimes of its staff. It does not cover aggressive tax avoidance. Unlike my Front-Bench colleague, I think that that is where the important bit of action must be taken if we are to ensure that we get the resources into coffers according to people’s wealth and their profits and incomes.

The Bill simply asks that reasonable procedures are in place, which is a risk-based and proportionate exercise, so it does not represent a fail-safe procedure. As I think through some of the instances we heard about during my time chairing the Public Accounts Committee, where we felt that corporations were misbehaving, I do not think that it would cover PricewaterhouseCoopers and all the stuff that it was doing in Luxembourg, where it was clearly selling schemes in an industrial way that had no other purpose than to avoid tax. We had a discussion earlier today about Heathrow. I do not think that it would cover Heathrow, which has managed to avoid paying a heck of a lot of tax on massive billion-pound profits that it has made. I do not think that it would cover Google. I do not think that it would cover—this is really important—the fact that when we interviewed advisers about the tax advice they give to corporations and individuals, they said that they would give advice so long as there was a 50% chance that it was not challenged by HMRC. The reverse of that is that there is a 50% chance that it will be challenged by HMRC, but given the size of the task and HMRC’s limited resources, it takes a long time to catch up with such schemes and does not have the resources that some of the big accountancy firms, advisers, banks and lawyers et al. have. That will be caught not by the first welcome but small measures that are being taken.

From all the work that we did in the PAC, the only thing that I can think would be caught is probably HSBC’s actions. The non-executive director, Rona Fairhead, gave evidence to us, sought to blame the whistleblower in that instance for being a thief—I thought that that was pretty awful—and blamed the front-line staff for doing what was obviously expected of them by the organisation for which they worked. She, as a non-executive director earning £500,000 a year at HSBC, felt that she did not have any responsibility to ensure corporate governance. The measure might catch that sort of instance, but it is very limited, and as we examine the Bill, I would welcome opportunities to extend that important first step in ensuring corporate liability as well as individual liability and accountability for actions that have been taken. I warmly welcome the Bill and I hope that the Minister can take the further steps that I have suggested.

--- Later in debate ---

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Many people in the Chamber consider much of the Bill to be praiseworthy. It struck me that all the critical speeches this afternoon—spanning all parties represented by the Members who have spoken—have been about what is not in the Bill, rather than what is in it. I wondered who would put the Bill in the context of the challenge that we face, and I think the Minister did that best in his opening remarks. He said of the extent of the criminality that he discovered on becoming a Minister that

“it…takes my breath away.”

The extent to which the Bill will deal with such criminality does not quite take the breath away.

I would like to comment on three areas that have been mentioned, the first of which is the permissive culture of banks. The best critique of that culture has come not from me or from anybody who is currently in the Chamber, but from the right hon. and learned Member for Rushcliffe (Mr Clarke) on 24 May this year. When talking about this forthcoming Bill, he commented:

“we in this country are very bad at dealing with white-collar crime, and there is growing awareness of that. If someone wishes to rob a bank, they go to the LIBOR market; they do not put on a balaclava and pick up a shotgun—that is much less profitable.”

He very succinctly drew out the problem of how the culture in banks has created a context in which it is easier to commit grand crimes in them than it is for the old-fashioned external robber to do so. He went on:

“London is still the money-laundering capital of the world. For an African despot or a serious international criminal, London is the best place to put their money, because they can trust the bankers to look after it and not to steal it from them.”

He concluded:

“I hope we will also impose a duty on those at the head of the institutions involved to ensure that they take positive steps to stop those working for them encouraging such activities.”—[Official Report, 24 May 2016; Vol. 611, c. 450.]

I doubt whether anybody in this debate would disagree with the right hon. and learned Gentleman’s words in May, but I do not think that his optimism about the Bill is reflected by the reality of what we now face.

On banking, I suggest that the Minister look at two things. The right hon. Member for Barking, who is no longer in her place, gave the example of what happened in HSBC, where someone was willing to speak up but was then pilloried by senior management. One thing I would suggest to the Minister that needs doing is to strengthen protection for whistleblowing in the banking and financial sector. If we could find a mechanism to encourage people to speak up about criminality or bad practice, that in itself would be a useful measure. Many people have commented that the crisis in the banking sector in 2008 was not predominantly because of the details of regulation, but predominantly because of the culture at the top level. It was caused by group-think on the boards of banks, and by the over-confidence of individual chief executives who were immune to considering anything other than a dash for cash. The other thing I would suggest to the Minister is that it would be useful for a requirement for proper cultural analysis to be built into the banking sector.

The second area on which I want to comment has already been hinted at by my hon. Friends the Members for Dumfries and Galloway and for Aberdeen North (Kirsty Blackman), but no one else has talked about it in this debate thus far. It is the topic of Scottish limited partnerships. This may be new to some hon. Members, so I hope they will allow me to give a few examples. Scottish limited partnerships are not a new phenomenon. They are not a devolved matter; they are a matter for this House. Although they were created by Asquith in the Budget of 1907—even I do not remember it—from 2008 they began to be used much more extensively for criminal behaviour. Since 2008, the use of SLPs has risen by approximately 40% year on year.

Scottish limited partnerships have been at the heart of some of the major corruption scandals in the world. For example, they have been named in major corruption scandals involving the former Soviet Union, particularly Ukraine, where they are still openly marketed as off-the-peg zero-tax offshore companies. Elsewhere, one Scottish limited partnership is at the moment at the heart of a $1 billion digital bootlegging case in the United States. The International Monetary Fund has warned that the risk posed by SLPs to the fight against money laundering and organised crime is something to which attention needs to be given. Other Scottish limited partnerships are involved in pornographic and even in paedophilia websites. Indeed, the span of criminal activity through these financial vehicles seems to know absolutely no bounds.

Closer to home, The Herald newspaper, which has done extraordinary work in this area, revealed barely six days ago that the tax haven bank owned by Lord Ashcroft is being used, without his permission, as a base to set up dozens of firms utilising SLP loopholes linked to a known fraudster. Indeed, two Belize companies have been falsely using the address of the HQ of Lord Ashcroft’s bank for at least six years. Those secret Belizean businesses, Sherbrook Assets and Whitmoore Solutions, have formed at least 70 other Scottish entities, most of them registered, I am sorry to say, to a convicted fraudster who lives in Fife in Scotland, Anzelika Young. The Bill should be ensuring that every SLP, along with any similar financial vehicle elsewhere in the UK, is exposed to rigorous due diligence at the very least.

During proceedings on the recent Finance Bill, I attempted to add a very simple new clause calling on the Government to investigate SLPs. They chose to vote that new clause down. When, subsequently, yet more criminal activity came to light, on 26 September I wrote to the Chancellor—I have a copy of the letter with me—seeking a meeting about this major international criminal activity. As of last week, when I was yet again chasing this up, the only response I have had—this is after a month, showing the Government’s lack of concern about international criminal activity—is that they are still considering how to respond to my request for a meeting. It is quite inappropriate for a Member of this House seeking a meeting about a major criminal activity to have to wait a month for any response.

[Mr Wallace]

I reassure the hon. Gentleman, given our meeting yesterday, that I have listened to what he said. I will meet my ministerial colleagues to discuss the problem he raised with me and see what we can do about it.

[Roger Mullin]

I am particularly grateful to the Minister for that clarity. Indeed, in coming to the Dispatch Box at that moment he confirmed what I was about to say in my closing line on the issue of SLPs. Given how he has discussed this matter with those of us on the Opposition Benches who are interested in it, and his understandable and quite appropriate concern about the matters raised, I was going to suggest that the Prime Minister could appoint him the formal tutor for all Treasury Ministers, in addition to his role as Minister for Security; I am sure they would learn a great deal from the appropriate way he deals with matters. I commend that new appointment to the House. I speak in jest, but surely there is an issue here, as some of the Treasury Ministers who have been turning a blind eye for months need to learn that these are matters of great concern and importance, and deserve to be treated as such.

The third area I will briefly mention—and it will be very brief, as many Members have already commented on it—is what has been happening post Panama papers on Crown dependencies and the like. The clear view expressed in this debate is that the Bill does not yet go far enough, particularly on the much needed transparency and openness on beneficial ownership. If the Minister would be willing to think about how we might, in a collegiate way across the House, begin to address that issue and some of the others raised today, he will win himself many friends indeed.

Criminal Finances Bill (First sitting)

Ben Wallace Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Dr Huq]

Q What do you think of the £100,000 figure?

Detective Superintendent Harman: It sounds a reasonable figure to me when we are dealing with a higher end, it certainly does, but we operate less in that realm. We are more about the slightly smaller amounts causing a great deal of harm.

[The Minister for Security (Mr Ben Wallace)]

I want to clarify the point: the seizure threshold is £1,000 and the unexplained wealth order threshold is £100,000. I did not want members of the Committee to get confused about the two. If we are talking about taking money out of a bank account, it is at the £1,000 level; if we are talking about confiscating assets on an unexplained wealth order, it is £100,000.

[The Chair]

Order. Can I just say to the witnesses that we have only a very short period of time and there are at least five other members who want to ask questions? The Minister may also do so at the end. Your replies are very informative and welcome, but could you make them more succinct? Similarly, could Members confine themselves to instant questions that people want immediate replies to and that can be given?

--- Later in debate ---

[Dr Huq]

Q This is modelled on section 7 of the Bribery Act 2010. Am I right in thinking that so far under that Act there have been zero prosecutions—[Interruption]—or a very low level of prosecutions, shall we say?

[Mr Wallace]

We are getting there.

[Dr Huq]

That is only from 2010, so it is not an old Act, and again, nobody here is Mystic Meg, but do you have the tools in this legislation to bring about successful prosecutions or are there too many obstacles, such as that the SFO is involved and that behavioural change would be needed, as you said? Do you foresee there being a low or high level of prosecutions when the Bill is enacted?

Simon York: A good result would be that corporates change their behaviour and that there is less facilitation of tax evasion, and consequently, less tax evasion. We certainly have the tools, through a combination of this proposed legislation and our existing capability—HMRC is a very competent and successful law enforcement agency and criminally investigates many people and convicts them successfully every year, so I think we have that capability. Do I think we will have a lot of prosecutions in this area? I hope not, but I think we will be looking for a number to act as part of this deterrent to show that the legislation has teeth and to show that we mean business.

Nick Price: I would just make a quick general observation: all prosecutions are difficult and we operate an adversarial system, which of course we are well used to. This is a really useful piece of potential legislation, with some really useful elements to it. Are we going to see a phalanx of extra prosecutions coming over the horizon? Perhaps not, but there are some really useful aspects of the Bill that we will no doubt deal with shortly.

Mark Thompson: In my experience, it is not inherently a numbers game, in terms of numbers of prosecutions. We have found that the section 7 offence of the Bribery Act is a useful tool for us as prosecutors. It focuses the corporate mind and there has been a large response from the private sector in complying with that. I would be surprised if the tax evasion offence did not have the same implications.

--- Later in debate ---

[The Chair]

You have only two or three minutes to answer, so please be very brief. If you want to give fuller answers to Members, you can write to the Committee Clerk and we will make sure that all Members get a copy.

Professor Murphy: One brief answer—yes, it is effective. I think there are more effective mechanisms available but I am not disputing it has a behavioural consequence. I am afraid I am not expert enough to comment on the other areas. I simply am not an expert on mortgage fraud or LIBOR in that area. I am a tax specialist not a criminal finance specialist.

Does HMRC have enough resource? No, clearly, it does not. It needs to have a lot more resource and to be seen in local communities so that people realise that the threat is personal in that sense, but it is going in the wrong direction of travel at present. It is the risk of being caught that changes behaviour at the criminal end of activity, and transparency would expose that. That is why I think creating the smoking gun of information is the critical measure that needs to be taken to give HMRC a chance to identify those who are creating most risk.

Alex Cobham: We have a report out with the Public and Commercial Services Union, being launched across the road this afternoon, that says exactly that HMRC neither has enough resources and nor are they appropriately allocated to deal with the relative prioritisation that we think it should have.

[Mr Wallace]

Q The ARIS scheme allows HMRC, the investigators and the prosecutors to keep 50% of the proceeds of any confiscation. If the Bill leads to further confiscation, would you say that therein lies some of the solution that you are going to highlight across the road? If they will be able to keep what they recover, will unexplained wealth orders, for example, or seizures improve their budgets?

Alex Cobham: That seems potentially helpful, but I think you would be wise to look at the bigger question of whether HMRC is appropriately resourced given the bang per buck that it actually gets in different areas, rather than having just that one measure in mind.

Professor Murphy: I would rather have no crime and no proceeds than fund collection through increased recovery.

[Mr Wallace]

Q Unlike Corbyn economics, we live in the real world.

Professor Murphy: But it is the wrong direction of travel.

[The Chair]

I thank the witnesses for coming to answer Members’ questions. If you wish to give fuller answers, please submit them to us in correspondence.

Criminal Finances Bill (Second sitting)

Ben Wallace Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Peter Dowd]

Q Do you think that the amount of training within the system fits the Bill, so to speak? Is there enough there?

Anthony Browne: There are certainly a lot of training providers. I should declare an interest here in that the BBA provides training, although we are a tiny part of the whole. Larger banks tend to do in-house training. There are a lot of third companies, external to banks, that provide training. There could be an almost unlimited supply of training, so I do not think that that is a constraint.

Nausicaa Delfas: We have talked about training in firms but there also is training for investigators exercising the powers in the Bill and other legislation. There is accreditation and monitoring of them, so the system is robust.

[The Minister for Security (Mr Ben Wallace)]

Q Thank you very much for your input into the formation of the Bill. It helps the Government, and hopefully the Bill reflects some of that. I am keen to find out from the regulated sectors and the professions what you envisage could or would happen to any one of your members should they be convicted of the offence of corporate tax evasion or money laundering. What penalties are available to you to deal with either law firms or the individuals who could be convicted?

Amy Bell: In relation to law firms, while the Law Society is the named supervisor, we delegate enforcement responsibilities to the Solicitors Regulation Authority. Its powers are incredibly wide and include restricting or stopping a firm from practising, intervening in a firm, closing the firm down, stopping the individual solicitors involved from being able to practise and ultimately referring them to the solicitors disciplinary tribunal, where they can lose their right to practise and be removed from the role. Quite serious options are open to the SRA.

[Mr Wallace]

Q And for the banking and financial sector?

Nausicaa Delfas: From our perspective, obviously, individuals could be prohibited from the industry. In terms of firms, there are significant fines and reputational damage.

[Mr Wallace]

Q And they could potentially lose their banker’s licence, if they are a bank.

Nausicaa Delfas: Removal of permissions, yes.

[Mr Wallace]

Q Ultimately, if an international bank loses its British banker’s licence, what does it mean for that bank in the global world? Is it usually the case that if they lose their banker’s licence in a developed market, it is pretty much curtains for them in the rest of the world?

Nausicaa Delfas: It would have a significant impact, yes.

Anthony Browne: If you lost your licence to operate in London, it would clearly have a dramatic effect on an international bank.

[Mr Wallace]

Q Do you think some of the overseas offences here will have a change of behaviour effect on foreign-owned banks that operate here as well? Ones that may previously have been able to exploit their jurisdiction elsewhere will find that the stakes are higher for them.

Nausicaa Delfas: Undoubtedly so. Obviously, where controls are exercised from the UK, those powers already exist, but this certainly goes further.

Anthony Browne: One aspect of the criminal offence of failing to prevent tax evasion about which we do have concerns is its extraterritorial impact and the degree of extraterritoriality. For example, if a US citizen who is a customer of a US bank operating in the US evades tax in the US and that US bank has a branch in the UK, the entire US bank could become criminally liable for an action that has no nexus in the UK whatsoever—it is a US citizen, US tax and a bank operating in the US under US law. The same goes for Japan, and so on. Effectively, that would place us as regulators for jurisdictions overseas. The US Department of Justice, for example, does not have such authority over UK banks operating in the US. It could have a dramatic impact on the UK’s competitiveness as an international financial centre.

[Mr Wallace]

Q But the US regulator does have a say in things like foreign and corrupt practices over examples such as the one you used. You do not have to have an entity with their extraterritorial reach in their other legislation.

Anthony Browne: It has to be a nexus in the US, I think. That is my understanding of that, but we can get back to you on the detail of it. Our understanding is that there no legislation which has this impact, in the sense that it is entirely extraterritorial without any nexus. It does not involve UK taxes, UK citizens, UK banks or UK laws.

[Mr Wallace]

Q But we do not really want tax evaders anywhere, do we? We do not want to allow tax evaders to rob other countries of their wealth either. We do not want to be a permissive society.

Anthony Browne: No, but obviously, the US, Japan and other countries have very sophisticated tax evasion laws already. Getting them to comply with two different laws simultaneously on a global basis, for both the UK and other jurisdictions, would have quite big implications. I do not know whether you have spoken to other Governments about the impact of this.

[Mr Wallace]

We have not had any representations from the United States objecting to this.

[Roger Mullin]

Q I would like the panel’s views on whether there is a case for strengthening protection for whistleblowers in the financial sector.

Anthony Browne: The protection for whistleblowers has just been strengthened in the financial sector. Ms Delfas might know more about it. We have been working with the regulators to ensure that each bank has a proper independent whistleblowing regime that does exactly that: protect whistleblowers. There is a senior manager or a board director who is a champion of the whole whistleblowing regime within the bank. That is a process that we have been going through over the past 18 months or so, to strengthen it.

--- Later in debate ---

[Dr Huq]

Q Can you think of anything that is not in the Bill that you would have liked to have seen in it? I was kind of thinking sideways—maybe enhanced supervision of the property market or something. I know that is not one for you three directly, but if there is anything you would like to see in the Bill, we are told that the Minister is in listening mode.

[Mr Wallace]

Always.

Anthony Browne: We broadly support this Bill and almost all the provisions in it. The one thing we would like to see changed in the Bill is the threshold for intelligence sharing, which is a point that Ms Delfas made earlier. It would be beneficial and make the regime more effective if you lowered the threshold for intelligence sharing. If there was activity that was just below the formal level of suspicion, so that banks do not deal with it as a suspicious activity report, if they could at that stage share intelligence with other banks like two pieces of a jigsaw, they could find out that something happening in bank A is also happening in bank B.

That could raise it to a suspicious activity and so enhance the intelligence sharing and make it far more useful and effective. We are worried that the way it is prescribed at the moment would actually be a lot less effective than either the Government or the banks want.

[Dr Huq]

Q Do you think that the £100,000 for an unexplained wealth order is about right as the threshold where that kicks in? Would you like to see it higher or lower?

Anthony Browne: I do not have a view on that, but I can get back to you.

Nausicaa Delfas: I do not particularly have a view but, certainly from our experience, the cases of money laundering tend to be of higher value. I do not have a view on the figure as such.

--- Later in debate ---

[Mrs Drummond]

Yes, but I think Mr Leask was talking about other countries and corrupt Governments. We cannot cover that in the Bill. We can cover the overseas territories. Were you not talking about other countries outside the overseas territories when responding to Mr Mullin?

David Leask: We were talking about the use of both English limited liability partnerships and Scottish limited partnerships as shell companies. Those shell companies often provide cover and a way for people in Russia, for example, to buy a company in the British Virgin Islands. Often the shell on the outside will be British, but, when you crack it open, on the inside you get the British Virgin Islands or another Commonwealth or British overseas territory. Sometimes it is a country such as Belize or Panama.

One of the things said to me by a colleague—a lot of work is being done on these stories by colleagues in countries like Ukraine and Latvia—was, “We keep coming up with that British Commonwealth problem.” That really struck me, once you start unwrapping these shells. One final point I will make is that, in many countries, there are blacklists of offshore fiscal paradises and tax havens, and the British and Scottish companies enable you to bypass those blacklists.

Toby Quantrill: In the recent Panama papers data that were revealed, just under half of companies in the documents in Mossack Fonseca in Panama were registered in the British Virgin Islands. It was by far and away the most utilised location. It is at the heart of the system. With the ability to deal with that comes a responsibility to do so.

[Mr Wallace]

Q I thank The Herald for what you have done. I have read some of your stuff and it has been quite an eye-opener. The SNP obviously raised it in the debate and that prompted me to have a meeting with one of my business Minister counterparts to see where we can go forward with it. Some of the stuff that you have identified—well done for it—is the truest form of good investigative journalism that can be produced. It was the Glasgow Herald when my grandmother wrote for it way back 40 or 50 years ago. It is clearly a structure that has been abused, and I think we want to ensure that that does not happen.

I want to ask Mr Quantrill about a bigger issue: the Crown dependencies and overseas territories. If we stack it up, going back to the anti-corruption summit chaired by David Cameron back in May, we have got to a position now where all of them will have a central register of beneficial ownership, except the Caymans, which will have a linked register of ownership. Our law enforcement agencies will have access to them. We are the only country in the G20 to have a public one. Never mind the dependencies or anywhere else; our neighbours in Europe do not have them yet, so the trajectory is in the right direction. It seems to boil down to a call to make the Crown dependencies make them public—that we, the UK Government, impose our will on the Crown dependencies and territories, in primary legislation.

Do you recognise what that actually means? I have many constituents who, for example, have very strong feelings on abortion. Does that give this sovereign Parliament the right—technically, we are sovereign over Scotland and the Crown dependencies—to impose that very strong will on those Crown dependencies? That is the next step. The step you are suggesting is for us to ignore their own Parliaments and impose our will on them, because it is a subject that you and many other people feel passionately about. I respect that, but it is what you are proposing. Is that something that you are happy to do?

Toby Quantrill: Not happy—

[Mr Wallace]

By working with them, we have got to a position rather quickly of having central registers and getting our law enforcement automatic access to those data without long, drawn-out court cases. We have done that in the space of a year. Is Christian Aid proposing that we override the democratic expression of those countries, whether they like it or not, because it is a subject that you have decided is more important than other issues?

Toby Quantrill: I certainly recognise the difficulties. I would also very much prefer that we did not have to go down the path of legislation. I do not necessarily think that we would need to, but it ought to be available, and it ought to be made clear that it is available. There have been precedents in the past.

That is one thing, but what we are looking for is a timeline and to be really clear by when this will happen, so that we know what is happening and can see the UK using all its powers to persuade and support these places to go in that direction, primarily. However, we do not think it is acceptable for this not to happen within a timeline. The reason for that is that the impact globally is so great. The Panama papers are a game-changer in this respect. It puts these places right at the heart of the system. The damage being done globally, to our mind, overrides the very real discomfort of taking this action, but it is not an action without any precedent. The UK has gone down that route in the past, as I am sure you are aware, on a number of different issues.

Also, interestingly, I had sight of a paper recently, the Foreign Office annual report on the Cayman Islands Government from 2003; it goes back some time. In it, there was a single paragraph relating to the EU savings directive. At that time, the Caymans Government clearly did not want to implement it; it was a similar issue of making certain information available. The paragraph stated that voluntary action by the Caymans Government meant, effectively, that we did not have to legislate. It was clear that the threat of legislation had been used, and had been effective in that case. It has been done in the past, in a similar incident.

Yes, I recognise the difficulty—I honestly do—but there are potential implications of maintaining secrecy in these places. It is not just one particular place; it was, as I said, one of the most important centres of financial secrecy in the world. I think the potential impact of that staying in place is too great to ignore, but what we are looking for is a timeline, persuasion and all means possible first.

[Mr Wallace]

Q You quote the Panama papers, which was a significant leak, and there have been previous ones—Liechtenstein and others. The access that our law enforcement agencies will now get will be greater than the Panama papers. The Panama papers are not complete, and they are effectively within the control of the journalists in the sense that they were selectively leaked to them and then published. No one is able to get the full picture because we do not have open access to Panama, which is not a Crown dependency or an overseas territory; it is a place that Scotland had a bad relationship with a few hundred years ago.

What we are proposing, and what the Crown dependencies are giving our law enforcement access to, is the complete picture. In one sense, we will have a greater advantage than the Panama papers because our law enforcement agencies will be able to have full access to the full range automatically. Therefore, in one sense we are 90% there. As you said, we do not have the transparency bit, but the Government’s intention is to do that. We are doing it, first, by leadership. We are the first in the G20 to say it is our aspiration. The step that seems to be mooted is to impose the sovereign will of Parliament on them, but in 12 months we have gone 90% of the way.

Toby Quantrill: We are looking for a timeline. We must give time and support to moving in that direction and be clear about when we are going to reach it. The Panama papers demonstrated the power of making this information public, because the impact has been global. In countries all around the world, citizens have gained information about people often within their Government and judiciary, and they have been able to investigate, follow those leads and hold their Governments to account. That is the power of transparency. It should be full transparency, not just the bits and bobs. We should not have to rely on leaks to hold our Governments to account. That is the point we are making.

[Carolyn Harris (Swansea East) (Lab)]

Q Have you ever heard of the Magnitsky clause?

Toby Quantrill: No.

Criminal Finances Bill (Third sitting)

Ben Wallace Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 17th November 2016 Public Bill Committees

[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 thank the Minister for his reassurance. It was a probing technical amendment to clear up that point, and he has sufficiently clarified it, to my mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[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.

[Dr Huq]

I thank the Minister for that explanation. We will leave it where it is. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[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.

--- Later in debate ---

[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

Question proposed, That the clause stand part of the Bill.

[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.

[Dr Huq]

We entirely support the Government on the clause.

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clause 8 stand part.

[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]

It is 186 days.

[Dr Huq]

It is something like 186 days plus the 30 days, so if we add it all together it is more than 210. It gets stretched out a lot. Is that likely to be used very sparingly? There are people on the other side who think it is too long.

[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.

--- Later in debate ---

[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.

[The Chair]

With this it will be convenient to discuss Government amendments 10 and 19.

[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.

[Dr Huq]

Ditto. We agree and will not stand in the way of the clause.

Amendment 9 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

[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.

--- Later in debate ---

[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)

Ben Wallace Excerpts

Committee Debate: 4th sitting: House of Commons
Thursday 17th November 2016 Public Bill Committees

[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]

You can come along.

[Dr Huq]

Can I come too? Okay. One point occurs to me—to dispel any suspicions of HMRC regulating the art market, how will those paintings be valued? I imagine it is the best of three, with experts, but I wonder how that will be enforced.

[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.

--- Later in debate ---

[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.

[The Chair]

With this it will be convenient to discuss Government amendments 13 and 14.

[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.

[The Chair]

With this it will be convenient to consider clauses 23 to 28 stand part.

[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?

--- Later in debate ---

[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.

[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.

--- Later in debate ---

[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.

[The Chair]

With this it will be convenient to discuss clause 31 stand part.

[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.)

Criminal Finances Bill (Fifth sitting)

Ben Wallace Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 61 to 72.

That schedule 3 be the Third schedule to the Bill.

Clause 33 stand part.

That schedule 4 be the Fourth schedule to the Bill.

Government new clause 18—Forfeiture of terrorist cash.

Government amendments 73 to 75.

[The Minister for Security (Mr Ben Wallace)]

Good morning, Mrs Main. I am delighted to serve under your chairmanship. This group deals with the provisions in the Bill that allow for the seizure and forfeiture of terrorist property. I suggest that we covered some of this ground in our debates last week on clauses 12 and 13, which will do likewise for proceeds of crime, and I will seek to avoid repeating all the same points.

Clause 32 and schedule 3 cover the seizure and forfeiture of moveable personal items such as precious metals and gemstones where they are earmarked for terrorism, are the resources of a proscribed organisation or are intended for use in terrorism. Clause 33 and schedule 4 give law enforcement agencies new powers to freeze funds held in bank or building society accounts that are suspected to be terrorist money, and provide for such funds to be forfeited if law enforcement agencies or the courts are satisfied that that is the case. Hon. Members will know that the threat from terrorism is constantly evolving. In the same way that we should have a mechanism to deal with criminals who launder money to evade disruption, we should have the ability to seize items that represent terrorist property.

Although this is a powerful new measure, several safeguards are built into the Bill to ensure that the interference with individuals’ rights to enjoy private property is managed in a way that is proportionate and guards against innocent parties being disadvantaged. Seized property may initially be detained for only 48 hours before an application must be made to a magistrates court in England, Wales or Northern Ireland, or to the sheriff in Scotland, for further detention for up to two years. There is therefore judicial oversight of this provision. Individuals who are joint owners of property will be able to claim back the value of their share.

Denying access to funding is already a key part of our counter-terrorism strategy, but the current powers in the Terrorist Asset-Freezing etc. Act 2010 may not always be the most appropriate operational route for combating the financing of terrorism, as they are designed to freeze the entirety of someone’s economic assets, carry a relatively high threshold for use and do not include forfeiture powers. That is why we have tabled several amendments to this part of the Bill.

New clause 18 will ensure that UK law enforcement agencies have the ability to seek forfeiture of terrorist cash without requiring a court order. An administrative forfeiture power is already provided for in the Proceeds of Crime Act 2002, as amended by the Policing and Crime Act 2009. However, the terrorist cash provisions in the Anti-terrorism, Crime and Security Act 2001 were not amended at that time, and we seek to address that anomaly. The new clause will ensure that the best use is made of both the courts’ and the police’s time and resources by providing that there is no need for law enforcement bodies to involve the courts where forfeiture is uncontested.

However, these provisions are not without oversight. Where terrorist cash is seized, extended detention beyond an initial 48-hour period is already subject to oversight by a magistrates court, or the sheriff in Scotland. There is therefore early judicial involvement in the detention and forfeiture process. In addition, the administrative forfeiture of cash will be exercisable only by a senior officer who is a police officer of at least the rank of superintendent.

The other amendments in this group make several technical and consequential changes to complement those provisions. In particular, they address inconsistencies in the definition of “senior officer” in the Anti-terrorism, Crime and Security Act 2001 and the Terrorism Act 2000 to ensure that such a person is at least the rank of superintendent. The amendments will also ensure that a court can order that property be detained under the powers in ACSA for up to six months per application, with an overall cap of two years, which is consistent with the Proceeds of Crime Act, and that these administrative forfeiture powers can be applied for and implemented in Scotland. Taken together, these measures will strengthen law enforcement agencies’ ability to disrupt terrorist financing in a proportionate and effective way.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I apologise for being slightly late, Mrs Main. Her Majesty’s Opposition support the amendments.

Question put and agreed to.

Clause 32 accordingly ordered to stand part of the Bill.

Schedule 3

Forfeiture of certain personal (or moveable) property

Amendments made: 61, in schedule 3, page 117, line 36, leave out “3” and insert “6”.

This amendment has the effect that an order for the detention of seized property under new Part 4A of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 may be made for a period of up to 6 months, rather than 3 months. This is in line with the provision made by Part 5 of the Proceeds of Crime Act 2002.

Amendment 20, in schedule 3, page 122, line 28, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 62, in schedule 3, page 122, line 38, leave out “inspector” and insert “superintendent”.

This amendment has the effect that a police officer must be of at least the rank of superintendent, rather than inspector, in order to be a senior police officer for the purposes of new Part 4A of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Amendment 63, in schedule 3, page 126, line 33, at end insert—

“(5) If sub-paragraph (6) applies, the court or sheriff may order the property to which the application relates to be released to the applicant or to the person from whom it was seized.

(6) This sub-paragraph applies where—

(a) the applicant is not the person from whom the property to which the application relates was seized,

(b) it appears to the court or sheriff that the property belongs to the applicant,

(c) the court or sheriff is satisfied that the release condition is met in relation to the property, and

(d) no objection to the making of an order under sub-paragraph (5) has been made by the person from whom the property was seized.

(7) The release condition is met—

(a) in relation to property detained under paragraph 10C or 10D, if the conditions in paragraph 10C or (as the case may be) 10D for the detention of the property are no longer met, and

(b) in relation to property detained under paragraph 10G, if the court or sheriff decides not to make an order under that paragraph in relation to the property.”

This amendment adds to new paragraph 10O of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001, which concerns the release of property seized under new Part 4A of that Schedule, provision which is equivalent to section 301(4) and (5) of the Proceeds of Crime Act 2002.

Amendment 21, in schedule 3, page 127, line 18, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 22, in schedule 3, page 127, line 20, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 23, in schedule 3, page 127, line 28, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

Schedule 3, as amended, agreed to.

Clause 33 ordered to stand part of the Bill.

Schedule 4

Forfeiture of money held in bank and building society accounts

Amendments made: 24, in schedule 4, page 129, line 1, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 64, in schedule 4, page 129, line 7, leave out “inspector” and insert “superintendent”.

This amendment has the effect that a police officer must be of at least the rank of superintendent, rather than inspector, in order to be a senior officer for the purposes of new Part 4B of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Amendment 65, in schedule 4, page 131, line 37, leave out “: England and Wales and Northern Ireland”.

This amendment is consequential on amendment 66.

Amendment 66, in schedule 4, page 131, line 38, leave out “made by a magistrates’ court”.

This amendment has the effect of extending the application of the provision in new Part 4B of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 about the administrative forfeiture of terrorist money held in bank and building society accounts from England and Wales and Northern Ireland to the whole of the UK.

Amendment 67, in schedule 4, page 134, line 11, leave out “a magistrates’” and insert “the relevant”.

This amendment is consequential on amendment 66.

Amendment 68, in schedule 4, page 134, line 16, after “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 69, in schedule 4, page 134, line 22, after “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 70, in schedule 4, page 134, line 26, after first “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 71, in schedule 4, page 134, line 29, after first “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 72, in schedule 4, page 134, line 35, leave out “, is to be paid into the Consolidated Fund.” and insert—

“—

(a) if, before being forfeited, the money was held in an account in relation to which an account freezing order made by a magistrates’ court had effect, is to be paid into the Consolidated Fund;

(b) if, before being forfeited, the money was held in an account in relation to which an account freezing order made by the sheriff had effect, is to be paid into the Scottish Consolidated Fund.”

This amendment is consequential on amendment 66.

Amendment 25, in schedule 4, page 138, line 15, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

Schedule 4, as amended, agreed to.

Clause 34

Extension of powers to accredited financial investigators

Amendments made: 26, in clause 34, page 90, line 28, leave out from beginning to end of line 17 on page 91 and insert—

“Counter-terrorism financial investigators

63F Counter-terrorism financial investigators

(1) The metropolitan police force must provide a system for the accreditation of financial investigators (“counter-terrorism financial investigators”).

(2) The system of accreditation must include provision for—

(a) the monitoring of the performance of counter-terrorism financial investigators,

(b) the withdrawal of accreditation from any person who contravenes or fails to comply with any condition subject to which he or she was accredited, and

(c) securing that decisions under that system which concern—

(i) the grant or withdrawal of accreditations, or

(ii) the monitoring of the performance of counter-terrorism financial investigators,

are taken without regard to their effect on operations by the metropolitan police force or any other person.

(3) A person may be accredited if he or she is—

(a) a member of civilian staff of a police force in England and Wales (including the metropolitan police force), within the meaning of Part 1 of the Police Reform and Social Responsibility Act 2001;

(b) a member of staff of the City of London police force;

(c) a member of staff of the Police Service of Northern Ireland.

(4) A person may be accredited—

(a) in relation to this Act;

(b) in relation to the Anti-terrorism, Crime and Security Act 2001;

(c) in relation to particular provisions of this Act or of the Anti-terrorism, Crime and Security Act 2001.

(5) But the accreditation may be limited to specified purposes.

(6) A reference in this Act or in the Anti-terrorism, Crime and Security Act 2001 to a counter-terrorism financial investigator is to be construed accordingly.

(7) The metropolitan police force must make provision for the training of persons in—

(a) financial investigation,

(b) the operation of this Act, and

(c) the operation of the Anti-terrorism, Crime and Security Act 2001.”

This amendment provides for a new system of accreditation and training of financial investigators for the purposes of exercising certain powers under the Terrorism Act 2000 and the Anti-terrorism, Crime and Security Act 2001.

Amendment 27, in clause 34, page 91, line 24, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 28, in clause 34, page 91, line 36, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 29, in clause 34, page 91, line 38, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 30, in clause 34, page 91, line 45, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 31, in clause 34, page 92, line 2, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 32, in clause 34, page 92, line 5, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 33, in clause 34, page 92, line 7, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 34, in clause 34, page 92, line 11, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 35, in clause 34, page 92, line 14, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 36, in clause 34, page 92, line 16, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 37, in clause 34, page 92, line 20, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 38, in clause 34, page 92, line 22, leave out “designated accredited” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 39, in clause 34, page 92, line 26, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 40, in clause 34, page 92, line 28, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 41, in clause 34, page 92, line 36, leave out “designated” substitute “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 42, in clause 34, page 92, line 42, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 43, in clause 34, page 92, line 44, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

Question proposed, That the clause, as amended, stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 35 stand part.

[Mr Wallace]

Across UK policing, more use is being made of skilled individuals who are not warranted police officers to support the full range of police work, allowing warranted officers to focus on the activities that need their specific training and experience. The financial aspects of terrorism investigations are unlike proceeds of crime investigations—this is not about identifying illicit wealth and taking the profit out of crime. For terrorism, financial investigation allows the police to disrupt terrorist activity by removing access to funds, and to make links in terrorist investigations.

As I set out last week, clause 34 provides for the creation of a new category of civilian financial investigator, to be known as a counter-terrorism financial investigator, which will exercise certain existing investigatory powers, including applying to a court for production orders, financial information orders or account monitoring orders, and to seize terrorist cash or moveable stores of value. The investigator will also be able to use new disclosure order powers being created under the Terrorism Act 2000 and the new bank account seizure and forfeiture powers in the Anti-terrorism, Crime and Security Act 2001.

The new provisions do not confer on counter-terrorism financial investigators any of the search powers available in the legislation for terrorist investigations, and the Government amendments we debated last week will ensure that the investigators will be subject to training and monitoring by the Metropolitan Police Service. The changes are entirely consistent with the changes currently being brought in through the Policing and Crime Bill, which will give chief officers a greater ability to designate civilians with the powers of constables.

Finally, clause 35 introduces offences of obstructing or assaulting the investigators. It is important that a civilian performing the functions of, and exercising the same powers as, a police officer is afforded the same legal protections from assault or wilful obstruction as their police counterparts. That is consistent with the approach taken in the Proceeds of Crime Act 2002 and elsewhere in the Bill. I hope the clauses stand part of the Bill.

[Dr Huq]

We support the clauses but we also have tabled a forthcoming new clause that questions a couple of things. If we are looking at increasing workload, we like the idea of the extension of powers of the accredited financial investigators, but we would like to see some commensurate resources. On the other stuff, public servants should never be assaulted in the line of duty, so we wholeheartedly support that provision.

Question put and agreed to.

Clause 34, as amended, accordingly ordered to stand part of the Bill.

Clause 35

Offences in relation to accredited financial investigators

Amendments made: 44, in clause 35, page 93, line 3, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 45, in clause 35, page 93, line 4, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 46, in clause 35, page 93, line 7, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 47, in clause 35, page 93, line 36, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 48, in clause 35, page 93, line 37, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 49, in clause 35, page 93, line 41, leave out “designated” and insert “counter-terrorism”.—(Mr Wallace.)

See the explanatory statement to amendment 16.

Clause 35, as amended, ordered to stand part of the Bill.

Clause 36

Meaning of relevant body and acting in the capacity of an associated person

Question proposed, That the clause stand part of the Bill.

[Mr Wallace]

Mrs Main, this is like an auction—the speed at which you are dealing with matters. The only person who can understand these things is the auctioneer.

Clause 36 defines essential terms that establish the scope of the new corporate offences of domestic and foreign failure to prevent tax evasion. It defines those entities that can be liable under the new offences, and those persons for whom a corporation can be liable if it fails to prevent them from facilitating tax evasion. The relevant bodies that can be liable under the new offences are defined as bodies incorporated and partnerships, not individual men or women, reflecting the responses to HMRC’s consultation on the provisions. The new offences can therefore be committed by companies, whether established to make a profit or for charitable purposes; partnerships; and similar entities established under foreign law. Indeed, the not-for-profit sector publically welcomed the offence applying to its sector, recognising that charities can be misused to facilitate tax evasion. Individuals involved in facilitating tax evasion will of course continue to face prosecution under existing tax evasion offences.

We will go on to debate the provisions in greater depth, but for now it is important to stress that part 3 of the Bill creates offences of corporate failure to prevent the criminal facilitation of tax evasion. They are not offences of corporate failure to prevent tax evasion itself and do not create a legal obligation for corporations to prevent their client’s tax evasion.

The clause also defines broadly the persons who could attract liability for a relevant body. Those include an employee, an agent and any other person who provides services for, or on behalf of, the relevant body. That mirrors the similar offence of corporate failure to prevent bribery in the Bribery Act 2010. That is important because we have seen in the past that corporations structure their affairs to try to insulate themselves from liability by deliberately contracting out the most risky services, typically to persons based in the most secretive jurisdictions. The definition of associated persons in the clause addresses that and closes that potential loophole.

However, it is important to appreciate that not every act of, say, an employee will give rise to criminal liability for the relevant body. For example, where an employee who has gone home from work and is acting in their private capacity criminally facilitates a tax evasion offence by their partner, that will not give rise to any liability for the employing relevant body because the criminal facilitating act was not done in the capacity of employee. I hope that that explanation provides a useful introduction to how the subsequent clauses will function.

[Dr Huq]

We support the clause. The Minister mentioned the Bribery Act 2010, from which there has been an unusually small number of successful convictions. Does he have any thoughts as to whether there will be a beefed-up number from this legislation? That is largely what I wanted to ask about it. Many big companies have been blogging that it is a bad idea, which makes me think that it must be a good one.

[Mr Wallace]

In response to what has been said by the Opposition spokeswoman, it is important to note that the Bribery Act has two effects: prosecution, but also change of behaviour. If one goes out to many parts of the world where British companies are engaged in export or trying to win orders, it is clear that the message has gone out loud and clear not to bribe them and not to be involved in bribery. I was in Kenya a couple of weeks ago, and it is clear that British businesses there—people wishing to do business—do not even ask. That is a cultural change so, as I said, the effect is twofold. One thing that can be said about the Bribery Act is that it certainly went to the heart of things. There were no favours drawn: the first person convicted under the Bribery Act was an employee of the Ministry of Justice, and was convicted quite soon after the introduction of the legislation, so we all work under it, whether we are a civil servant or a business.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Clause 37

Failure to prevent facilitation of UK tax evasion offences

Amendment made: 50, in clause 37, page 95, line 40, after “England” insert “and Wales”.—(Mr Wallace.)

This amendment corrects an omission in clause 37(8)(b).

Question proposed, That the clause, as amended, stand part of the Bill.

[Mr Wallace]

Clause 37 creates a new offence that will apply to relevant bodies who fail to prevent persons acting in the capacity of persons associated with it from criminally facilitating a UK tax evasion offence. It also provides a defence for the relevant body of proving that it had in place reasonable procedures designed to prevent persons associated with it from criminally facilitating tax evasion, or that it was not reasonable in the circumstances to expect them to have such procedures.

The offence will apply to any legal person, based anywhere in the world. It does not matter where in the world a relevant body is based. If people are criminally facilitating UK tax fraud, that body can commit the offence and be tried by the UK courts. The offence was first announced in March 2015 and has been subject to two public consultations, including one on draft clauses and guidance. A succession of high-profile data leaks has shown the lengths to which some people will go to hide their taxable income and gains from HMRC, and that there are professionals willing to help them to perpetrate that fraud. There has been unprecedented international action to increase tax transparency around the globe, but that must be coupled with action to tackle those professionals and corporations who are complicit in tax crime.

The existing criminal law already makes it an offence to evade tax. When an individual taxpayer evades their tax, they can be prosecuted. When a professional such as a banker or an accountant is complicit in the fraud, that individual can also be prosecuted. However, for the relevant criminal acts to be attributed to the corporation itself, the existing law on corporate criminal liability requires the most senior members of a corporation to be involved in and aware of those acts. At present, they can simply say, “I did not commit the crime” and blame the individual employee for the offence. That current approach to corporate criminal liability simply does not reflect the decentralised way in which decisions are made in large multinational organisations, and it can leave them beyond the reach of the criminal law.

The new offence will change that. By moving beyond seeking to attribute specific criminal acts to the relevant body, and by focusing instead on its failure to prevent those who act in its name from breaking the criminal law, we can better ensure that relevant bodies take reasonable steps to ensure that crimes are not committed when services are being provided on their behalf. The improved approach to criminal corporate liability has already been adopted with success in relation to the Bribery Act 2010. Businesses are already accustomed to the offence of corporate failure to prevent bribery and much of the new offence will be familiar. I know that hon. Members would like the approach that we are taking to go further still, to cover fraud more generally, money laundering and false accounting. That is an issue to which we will come later, in the debate on new clause 6, which has been tabled by the hon. Member for Ealing Central and Acton.

It is important to note that the offence we are considering is one of tax fraud—tax crime. It is not about tax non-compliance that falls short of being criminal, such as accidental non-payment of taxes. There has been much discussion about how the offence will operate in relation to tax avoidance. Tax avoidance, and even aggressive avoidance, is not a crime and falls outside the scope of this measure. The Bill is, after all, about criminal finances. However, it is right that we distinguish between actions that are within the letter if not the spirit of the law, and fraudulent acts dressed up and marketed as tax planning. We must robustly challenge those who mislabel their criminal behaviour as avoidance or planning; and the Act will address such behaviour.

The clause is not intended to criminalise conduct that is not currently against the criminal law. It is not primarily about what is a crime, but rather about who is held to account before the criminal courts. It seeks to ensure that when crimes are committed in the name of a relevant body, that relevant body can be placed in the dock, alongside the taxpayer evading their tax and the professional enabler criminally facilitating that offence.

I stress that reasonable prevention procedures are needed for the defence to be available. “Reasonable” does not mean excessively burdensome, unduly expensive, disproportionate or foolproof; nor does it demand the impossible. It means taking a risk-based and proportionate approach. Under clause 39, the Government will issue guidance to help business to assess its risks and put prevention procedures in place.

As is the case for the individual accountant, it will not matter where the relevant body is based. British businesses have welcomed the global reach of the new offence as it requires businesses providing services to UK taxpayers, regardless of where in the world those businesses are based, to operate to the same high standards as British businesses. I welcome the cross-party support, and support from the NGOs that I have met, that has been expressed for the measure.

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[Richard Arkless (Dumfries and Galloway) (SNP)]

We support the clause and, like the Opposition spokesperson, we commend its international reach. We look forward to discussions, perhaps this afternoon, on new clause 6, but instinctively, like Opposition Members, we are minded to take the clause further.

As time goes on, we ought to monitor the issue of designing processes that demonstrate that reasonable measures have been taken not to facilitate tax evasion. As a consumer finance lawyer, I have seen large multinational organisations roll out various folders of processes, procedures and protocols, but we were not always convinced that those had been followed to the letter. Some sort of monitoring mechanism would be most helpful.

We ask the Government to take note of the evidence we heard last week that these measures could disproportionately impact smaller organisations; larger organisations may be more suited to gathering this information in order to set out processes and procedures. We should keep an eye on those two things. We look forward to discussions on new clause 6 and support the clause.

[Mr Wallace]

To clarify, I think that statutory guidance is first published in draft. Given the hon. Gentleman’s experience, I would welcome his input on whether that guidance is appropriate. We did that with the Bribery Act; I remember when that came out. Statutory guidance is an important tool for small businesses, because big businesses have big compliance departments and can do all the work even without the statutory guidance, but for small or medium-sized businesses, the statutory guidance is a good starting point. It is really important both that we get it right, and that we get it written in plain English.

I reiterate the offence created by the clause: if someone in a Crown dependency or overseas territory—I know that hon. Members are interested in those—is advising UK citizens to evade UK tax, it does not matter that they have no nexus here; they are criminally at risk. As regards trying to change the behaviour of overseas territories or tax havens, this offence will allow us to prosecute people anywhere in the world who are encouraging people to evade UK tax. That is a major and significant step. If someone on a Caribbean island calls themselves a tax consultant and encourages British people to evade tax, we will come after them. That is a major change that goes beyond the shores of the United Kingdom. I hope that the action that we have taken to stop that will go some way to alleviating colleagues’ concerns about the behaviour of some tax havens around the world.

Question put and agreed to.

Clause 37, as amended, accordingly ordered to stand part of the Bill.

Clause 38

Failure to prevent facilitation of foreign tax evasion offences

[Dr Huq]

I beg to move amendment 5, in clause 38, page 96, line 6, after “United Kingdom” insert—

“Crown dependency or British overseas territory”.

This amendment would extend the offence of failure to prevent facilitation of foreign tax evasion offences to companies incorporated in a British Overseas Territory or Crown Dependency.

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[Richard Arkless]

We are interested in hearing what the Minister has to say on the clause before we make any submissions. We take the point about the link to a UK company, but we are also concerned about this House’s authority to legislate—or be seen to be legislating—over Crown dependencies.

[Mr Wallace]

I understand the importance that Members attach to the amendments, and what they are trying to do. They allow us to begin the debate on the response of the British overseas territories and Crown dependencies to tax evasion, and fraud and corruption more broadly. I am sure that that debate will continue as we consider other amendments later today.

The Opposition’s amendments 5, 6 and 7 are designed to give the foreign tax evasion offence a broad scope, and to ensure that corporate complicity in tax evasion is tackled effectively. On that objective, I share the intentions of the hon. Member for Ealing Central and Acton. Before addressing the amendments specifically, I want to clarify that the foreign tax evasion offence in clause 38 would, as drafted, apply to a relevant body that is incorporated under the law of the UK, or carrying out part of a business activity from the UK, and where a person acting in the capacity of an associated person of the relevant body criminally facilitates tax evasion from within the UK, regardless of where the relevant body is based. The offence would, therefore, require there to be some nexus with the UK for our authorities to exercise jurisdiction; that would include a bank that is based or doing business in the overseas territories and Crown dependencies also doing business in the UK.

However, the hon. Lady’s amendments would criminalise, under the UK law, a situation where there is no link to the UK. For example, if a Norwegian were to set up a business in a tax haven, and that business were to advise an American citizen on how to evade tax, and it had nothing to do with the UK at all—we had no loss of revenue and no business with either the Norwegian or the American—the hon. Lady would be asking us to criminalise that person, and effectively to become the world’s policeman on that issue. We would have no nexus whatsoever to go after that individual; neither they nor the company helping them to evade tax would be British. We would perhaps have some ability, in some instances, to help our neighbour’s tax authorities, as we share data under agreements reached over the last year or so. For example, if we find out that someone is helping the French to evade tax, our law enforcement agencies do share information.

The amendment seeks to force Crown dependencies and overseas territories to change their law. It seeks to use neo-imperialism, to use the hon. Lady’s term, to force our will on territories with those statuses. That is a major step to take. As I said earlier, we have come a long way—90% of the way—with the establishment next year of automatic sharing of data via beneficial registers of ownership. Yes, that is not public, and I know that we will come on to that later in the Bill, but we have come a considerable way, and we should remember that.

We should also remember that because of the City of London, there will not be many financial organisations that do not have a nexus in this country. I am not going to finger a particular country, but the bank of a fictitious country with tax haven status would not be much of a bank if it did not have an operation in the UK. If that bank was encouraging people to evade tax, even if they were not British citizens or were not evading UK tax, we could deal with it, because it would have a branch here. If those concerned were convicted, they would most likely lose their banking licence. A bank that cannot trade in one of the major financial institutions of the United Kingdom is effectively a dud. In a sense, we could take quite considerable action. The fundamental difference is that we think there has to be a link. The alternative is to impose our will directly on these Crown dependencies and overseas territories.

I would like to correct the hon. Lady on two things. They are not “our” territories; we do not own them. The Crown dependencies have never been ours. They have never been part of the British Empire—well, they have never been part of our colonies. We do not even own the overseas territories. We have a governing oversight, but they have Parliaments and elections of their own, and they make their own decisions.

I think the direction of travel—my officials have been directly in touch with the Crown dependencies and the overseas territories—has been right. We are going some considerable way from where we were three or four years ago. Those places have smelt the coffee, and the world is moving forward.

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[The Chair]

With this it will be convenient to discuss the following:

New clause 7— Corporate probation order—

‘(1) A court before which a relevant body (B) is convicted of an offence under section 37 or 38 of this Bill may make a corporate probation order in relation to B.

(2) A corporate probation order—

(a) shall require B to implement a compliance procedure or make changes to an existing compliance procedure to prevent persons acting in the capacity of a person associated with B for committing UK tax evasion facilitation offences or foreign tax evasion facilitation offences;

(b) may require B to appoint an external body to verify that compliance programme, costs of which shall be met by B.

(3) A corporate probation order may be made only on an application by the prosecution specifying the terms of the proposed order. Any such order must be on such terms (whether those proposed or others) as the court considers appropriate having regard to any representations made, and any evidence adduced, in relation to that matter by the prosecution and on behalf of B.

(4) Before making an application for a probation order the prosecution must consult such enforcement authority or authorities as it considers appropriate having regard to the nature of the relevant offending.

(5) An organisation that fails to comply with a corporate probation order is guilty of an offence, and is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) For the purposes of this clause “relevant body” has the same meaning as in section 36.’

This new clause would allow courts to require bodies found guilty of a UK or foreign tax evasion facilitation offence to make steps to improve their internal procedures to minimize the chance of persons working for that company committing the same offence in the future.

New clause 8—Facilitation of tax evasion offences: disqualification of directors—

‘(1) Where a body (B) has been convicted of an offence under sections 37 and 38 of this Act the Secretary of State must arrange for the relevant enforcement authorities to investigate the conduct of the directors of B.

(2) The purpose of the investigation under this subsection is to determine whether the directors of B were grossly negligent by failing to ensure that B had in place reasonable prevention procedures.

(3) In section 8 of the Company Directors Disqualification Act 1986, after sub-paragraph (ii) insert—

(iii) an investigation under section [Facilitation of tax evasion offences: disqualification of directors] of the Criminal Finance Act”

(4) For the purposes of this section—

“enforcement authorities” means one or more the bodies listed in subsection 362A(7) of the Proceeds of Crime Act 2002.

“prevention procedures” has the same meaning as in subsection 37(3) where B was convicted of an offence under section 37, or as in subsection 38(4) where B was convicted of an offence under section 38.’

This new clause would require the Secretary of State to investigate the directors of a company found guilty of a UK or foreign tax evasion offence to see whether the directors should be subject to a disqualification order for the failure to have proper procedures in place to prevent agents of that company facilitating tax evasion.

[Mr Wallace]

Perhaps I may clarify for the hon. Member for Ealing Central and Acton that I said she used the word “neo-imperialism”—I never implied that she wanted to be neo-imperialist, but some people could describe it as that if we were to impose our will on Parliaments in some of our overseas territories.

Clause 38 creates a new offence that will be committed by relevant bodies that fail to prevent persons associated with them from criminally facilitating evasion of taxes owed to a country other than the United Kingdom. We have seen that criminals seeking to provide services to further their clients’ tax evasion will try to operate between the gaps between the legal systems of different countries. The measure will ensure that the UK is not a safe harbour for professional facilitators or the businesses for which they work. The new overseas tax evasion offence can be committed by relevant bodies that are formed or incorporated in the UK, or which are carrying out a business activity in the UK, or where the criminal act of facilitation occurs within the UK.

There is a necessarily broad scope for the new offence. It holds corporations that carry out a business in the UK, or the representatives of which are acting in the UK, to operate to the same high standards as UK businesses. The message is clear. Tax evasion is a crime. It is wrong. It is no less wrong where the revenue loss is suffered by another country. If a body is part of UK plc, or sends people to the UK, it is not okay to allow people to criminally facilitate the evasion of taxes, wherever they are owed.

The offence requires a dual criminality. Essentially, that means that, for a relevant body to be liable, the criminal law of the country suffering the tax loss must recognise tax evasion and the facilitating of tax evasion as criminal offences in their jurisdiction, and the laws must be broadly equivalent to those in the UK.

The offence does not require relevant bodies to have a thorough understanding of the tax laws in each jurisdiction, but rather to ask itself the question, “If we were providing these services to a UK taxpayer client, would this be legal?” If the answer is yes, there is no question of criminal liability under the new overseas fraud offence.

The offence is not about the UK policing the world’s tax affairs. We envisage that a prosecution for the overseas tax evasion offence will take place only where there would otherwise be a failure of justice—for example, where the country suffering the tax loss was unwilling or unable to take action because of an inability to handle a complex international fraud trial, or was unable to investigate and prosecute because of corruption concerns. I will leave my explanation of the clause there and allow the hon. Member for Ealing Central and Acton to speak to her new clauses before I respond.

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your stewardship, Mrs Main. The Minister referred to this as the Criminal Finances Bill and the clue is in the name. People who commit an offence and go to prison come out and go on probation. New clause 7 would create a similar thing—a sort of corporate probation order that would allow courts to require bodies found guilty of a UK or foreign tax evasion facilitation offence to take steps to improve their internal procedures and minimize the chance of a person working for that company committing the same offence in future. That would be an important step in encouraging large organisations to take responsibility for those they hire and the actions they undertake, and more importantly in ensuring that financial crime and misconduct is not repeated by others in the organisation.

Before making an application for a probation order, the prosecution would have to consult enforcement agencies. Once a corporate probation order had been issued, any organisation that failed to comply with it would be subject to a fine. Currently, the only remedies a court may impose upon a company convicted of an offence is a fine, disgorgement of profit and compensation. Corporate probation orders would be an additional tool that prosecutors could seek. Courts could impose conditions requiring companies to undertake remedial action to their management and compliance procedures to ensure that the offending is not repeated.

Under the Corporate Manslaughter and Corporate Homicide Act 2007, courts can impose remedial orders on companies to require them to remedy any management failure that led to an offence occurring. This provides a workable pre-existing model for such orders. Under the Crime and Courts Act 2013, if a company is offered a deferred prosecution agreement, or DPA, a prosecutor can require a company to implement a compliance programme or make changes to an existing compliance programme. There is no equivalent power in relation to convictions. DPAs are reserved for companies that self-report their misdemeanours and co-operate with enforcement authorities.

Although prosecutors could, theoretically at least, use financial reporting orders to require a company to provide financial information, under the Serious Organised Crime and Police Act 2005, it is not clear that that would include information on compliance procedures. Additionally, such orders are heavy-handed, require separate court proceedings and require a prosecutor to prove that the risk of reoffending is sufficiently high.

The effect of that discrepancy is a ridiculous imbalance: companies that self-report and co-operate may be subject to greater monitoring of their compliance programme than companies that do not and are convicted. The result is that the companies that most need monitoring of their compliance procedures—those whose procedures did not pick up the wrongdoing in the first place—get none, which is a huge deterrent to self-reporting, and puts a greater burden on enforcement agencies.

The Opposition believe that corporate probation orders are required to remedy that clear anachronism. Companies and defence lawyers have noted the more stringent compliance programme monitoring requirements under DPAs as one factor, among others, that puts companies off self-reporting wrongdoing to the Serious Fraud Office. The discrepancy between what happens under DPAs and what happens on conviction is creating a disincentive for companies to self-report.

At the end of the day, we need to encourage self-reporting in a framework in which companies feel that they are able to work with enforcement agencies to deal with rogue elements or individuals. The alternative would see the continuation of a culture of secrecy in which those at the top deliberately turn a blind eye to what those at the bottom do, and in which financial misconduct is not limited to an individual, but instilled and passed on to others in an organisation.

--- Later in debate ---

A disqualification order for those guilty of tax evasion offences is only right, so that they cannot continue to sit on the board of the company in question, or the board of any other company for that matter, to encourage further financial misconduct and send out the wrong message. The new clause is not about pointing the finger at those who commit themselves day in, day out, to their companies’ and the country’s health and wealth; it is about isolating and identifying individuals in those companies and ensuring that they are held accountable for their actions, thus preventing them from working in the financial industry again, and encouraging an environment of openness and transparency rather than a milieu that turns a blind eye.

[Mr Wallace]

I am grateful to the hon. Member for Bootle and pleased to say that the Government are supportive of what he is trying to achieve—that the new offences should be as effective as possible at changing corporate behaviour, and that law enforcement should have the tools it needs to police the new laws effectively. However, I hope to reassure him and his hon. Friends that those matters are already provided for.

As the hon. Gentleman said, new clause 7 would introduce a system of corporate probation orders, which would allow a court to require relevant bodies found guilty of the new corporate offences to make changes to their prevention procedures. Hon. Members should be aware that clause 43(2) adds those offences to the list of offences for which a serious crime prevention order can be imposed under the Serious Crime Act 2007. Serious crime prevention orders allow for a court passing sentence on a person or corporate body to impose prohibitions, restrictions or requirements to prevent, restrict or disrupt involvement in serious crime. Those orders are already available and can successfully disrupt tax fraud. Where such an order is made against a relevant body, its terms may require the body to allow a law enforcement agency to monitor how it provides services in the future.

Additionally, where the corporation in question is in the regulated sector, the regulator may, quite independently of a serious crime prevention order, undertake monitoring of the relevant body, relevant to failings in its systems and controls. For example, the Financial Conduct Authority could take steps to disqualify directors or put extra conditions on to the companies. It is the Government’s view that the hon. Gentleman’s objective can be achieved by applying the existing power to impose serious crime prevention orders on conviction of the new offences, or within the terms of the deferred prosecution agreement. Those orders can do anything that corporation probation would do.

New clause 8 would create a duty on the Secretary of State to investigate the directors of a company found guilty of a UK or foreign tax evasion offence, to see whether they should be disqualified. The existing law already allows the Secretary of State to apply to a court to have a director disqualified where he or she believes that that is in the public interest. A court can grant such an order when it is satisfied that the director’s conduct makes him unfit to be concerned in the management of the company. There is no evidence of which we are aware that the power is not being used in the appropriate cases. When not used, it is not used for appropriate reasons. When company directors are charged with offences, the sentencing court can consider disqualification.

Where the new offence is charged and the relevant body is not tried alongside a director, prosecutors will still be able to refer cases to the Secretary of State so that an application for disqualification can be considered. Indeed, there may be cases when sentencing judges recommend that this is done in their sentencing remarks. In short, rather than creating new law, we again consider it proper for the new offences to sit alongside, and work within, the existing legislative framework for disqualifying directors. If regulators have evidence that a director is unfit to be concerned in the management of the company, they can refer the case to the Secretary of State to make an application to have that director disqualified.

I hope that the hon. Members for Ealing Central and for Bootle, and others, agree that these points are therefore already accounted for, that they do not feel the need to move their new clauses, and that clause 38 can stand part of the Bill.

Question put and agreed to.

Clause 38, as amended, accordingly ordered to stand part of the Bill.

Clause 39

Guidance about preventing facilitation of tax evasion offences

Question proposed, That the clause stand part of the Bill.

Clause 39 requires the Government to produce guidance on reasonable prevention procedures, and empowers the Government to agree supplementary guidance produced by others, such as industry and trade bodies. The aim of the guidance is to help organisations to understand and avoid committing the new offences by undertaking a risk assessment and establishing reasonable prevention procedures to address their risks. The guidance is vital to the success of the offences and will mean higher levels of compliance with the new legislation, creating the desired culture change, and ultimately leading to a reduction in the criminal facilitation of tax evasion. In parallel, it will help to avoid an unnecessarily defensive approach to compliance, whereby excessive prevention procedures are adopted that constitute an undue regulatory burden.

Whether any relevant body can avail itself of the reasonable procedures defence will always be a matter for the criminal courts. The guidance will be only an illustrative set of principles, not a list of absolute requirements. Departure from the guidance will not mean that the defence is unavailable and that the relevant body is guilty. There may well be many different approaches—all equally reasonable—to preventing tax evasion facilitation offences by those who act in the relevant body’s name. Equally, following the guidance does not lead the relevant body to safe harbour rendering it immune from prosecution. Even full compliance with the guidance might not amount to having reasonable prevention procedures if the prevention procedures ignore a particular risk that the relevant body’s particular business carries.

Her Majesty’s Revenue and Customs consulted with industry extensively on what support was needed to ensure compliance with the new offences. The overwhelming feedback revealed a desire for guidance akin to that already produced for the similar offence of corporate failure to prevent bribery in the Bribery Act 2010. The last draft guidance was published at the same time as the introduction of the Bill and has received positive feedback. HMRC continues to work with a number of leading financial service trade bodies on developing detailed supplementary guidance for the sector. I hope the clause stands part of the Bill.

[Dr Huq]

We all need guidance in life. The measures sound eminently sensible and the Minister described them cogently. We support the clause.

Question put and agree to.

Clause 39 accordingly ordered to stand part of the Bill.

Clause 40

Offences: extra-territorial application and jurisdiction

Question proposed, That the clause stand part of the Bill.

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[The Chair]

With this it will be convenient to discuss clause 41 stand part.

[Mr Wallace]

Clause 40 provides for the extraterritorial application of the corporate failure to prevent offences. The UK’s criminal courts will have jurisdiction to try the domestic tax offence in clause 37, regardless of where the conduct took place. The UK courts claim jurisdiction as a result of the UK suffering the tax loss. With respect to the foreign tax offence, our courts again claim jurisdiction on the basis that the relevant body has a nexus with the UK, such that it can be regarded as part of UK plc and thus is required to abide by the criminal law of this country. We have seen, and our partners in other jurisdictions have confirmed that they have also seen, that those deliberately facilitating tax evasion will typically offshore illicit services to try to avoid detection and to hide in the gaps between domestic legal systems.

Those facilitating offshore tax evasion often do not provide those services from within the geographic borders of the country whose tax loss they are facilitating. It is therefore vital that both the domestic and the overseas tax evasion facilitation offences capture activity that takes place outside the United Kingdom. Failure to apply the laws in such a way would lead to loopholes that could be easily exploited. By its very nature, the foreign tax evasion offence is likely to raise a complicated range of competing interests and issues, including those relating to international relations and diplomatic affairs.

Clause 41 puts appropriate safeguards in place by requiring that a decision to prosecute the offence is taken only by, or with the authority of, the director of these prosecuting bodies: the Director of Public Prosecutions, the director of the Serious Fraud Office or the Director of Public Prosecutions for Northern Ireland. A similar protection is in place for prosecutions for the corporate failure to prevent bribery under section 7 of the Bribery Act. I hope the clauses stand part of the Bill.

[Dr Huq]

Her Majesty’s loyal Opposition support clause 40.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clause 41 ordered to stand part of the Bill.

Clause 42

Offences by partnerships: supplementary

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider clauses 43 and 44.

[Mr Wallace]

Clause 42 makes provision for rules of criminal procedure in relation to the prosecution of companies to apply to prosecutions of partnerships for the new offences in part 3. It mirrors section 15 of the Bribery Act 2010 and provides that proceedings for an offence under clauses 37 or 38 are to be brought in the name of the partnership and not that of an individual partner; and that any resulting fine is paid out of the assets of the partnership. The clause also applies existing rules of criminal procedure applicable where bodies corporate are prosecuted. They cover various matters including the transfer of cases from the magistrates court to the Crown court, the representation of the relevant body in court, the entering of pleas and the taking of action in the relevant body’s absence.

As I mentioned in debating an earlier group, clause 43 amends a number of pieces of existing legislation, adding the new offences created by part 3 to the lists of offences for which various powers are available, which will assist the effective investigation and prosecution of the offences. That includes allowing the CPS to require suspected persons to answer questions or provide information in relation to those offences; allowing for serious crime prevention orders to be imposed on relevant bodies; and providing for deferred prosecution agreements.

Clause 44 is simply an interpretation clause, defining terms within part 3. I hope the clauses stand part of the Bill.

[Dr Huq]

We support the clauses.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clauses 43 and 44 ordered to stand part of the Bill.

New Clause 9

Immigration officers

‘(1) Section 24 of the UK Borders Act 2007 (seizure of cash) is amended as follows.

(2) For the heading substitute “Exercise of civil recovery powers by immigration officers”.

(3) For subsection (1) substitute—

(1) Chapters 3 to 3B of Part 5 of the Proceeds of Crime Act 2002 (civil recovery) apply in relation to an immigration officer as they apply in relation to a constable.”

(4) In subsection (2)(a), for “section 289” substitute “sections 289 and 303C and Chapter 3B”.

(5) In subsection (2)(c), for “and 297A” substitute “, 297A and 303E and in Chapter 3B (see section 303Z2(7))”.

(6) In subsection (2)(d), for “section 292” substitute “sections 292 and 303G”.

(7) In subsection (2)(e), for “and 293A” substitute “, 293A, 303H and 303I”.

(8) In subsection (2)(f), in the words before sub-paragraph (i), after “295(2)” insert “or 303L(1)”.

(9) In subsection (2)(f)(ii), after “298” insert “or (as the case may be) 303O”.

(10) In subsection (2)(g), after “298” insert “, 303O or 303Z14”.

(11) In subsection (2)(h), after “302” insert “, 303W or 303Z18”.” .—(Mr Wallace.)

Immigration officers exercise the civil recovery powers conferred by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002 by virtue of section 24 of the UK Borders Act 2007. These amendments of section 24 provide for immigration officers to be able to exercise the civil recovery powers conferred by new Chapters 3A and 3B of Part 5 of the Proceeds of Crime Act 2002 (see clauses 12 and 13 of the Bill) in the same way.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Forfeiture of cash

‘(1) In section 289(6) of the Proceeds of Crime Act 2002 (meaning of cash for purposes of Chapter 3 of Part 5 of that Act), after paragraph (e) insert—

“(f) gaming vouchers,

(g) fixed-value casino tokens,”.

(2) After section 289(7) of that Act insert—

“(7A) For the purposes of subsection (6)—

(a) “gaming voucher” means a voucher in physical form issued by a gaming machine within the meaning of the Gambling Act 2005 (see section 235 of that Act) that represents a right to be paid the amount stated on it;

(b) “fixed-value casino token” means a casino token that represents a right to be paid the amount stated on it.”

(3) In Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist cash), in paragraph 1 (meaning of terrorist cash)—

(a) after sub-paragraph (2)(e) insert—

(f) gaming vouchers,

(b) fixed-value casino tokens,”;

(b) after sub-paragraph (4) insert—

“(5) For the purposes of sub-paragraph (2)—

(a) “gaming voucher” means a voucher in physical form issued by a gaming machine within the meaning of the Gambling Act 2005 (see section 235 of that Act) that represents a right to be paid the amount stated on it;

(b) “fixed-value casino token” means a casino token that represents a right to be paid the amount stated on it.””—(Mr Wallace.)

This new clause provides for casino tokens and what are commonly referred to as “ticket in ticket out vouchers” to be treated as cash for the purposes of the civil recovery powers conferred by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002 and by Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Brought up, read the First and Second time, and added to the Bill.

New Clause 18

Forfeiture of terrorist cash

‘(1) Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist cash) is amended as follows.

(2) In paragraph 3 (detention of seized cash)—

(a) in sub-paragraph (2)(a), for “three” substitute “6”;

(b) after sub-paragraph (8) insert—

“(9) Where an application for an order under sub-paragraph (2) relates to cash seized under paragraph 2(2), the court, sheriff or justice may make the order if satisfied that—

(a) the condition in sub-paragraph (6), (7) or (8) is met in respect of part of the cash, and

(b) it is not reasonably practicable to detain only that part.”

(3) After paragraph 5 insert—

Part 2A

Forfeiture of terrorist cash without court order

Cash forfeiture notice

5A (1) This paragraph applies while any cash is detained in pursuance of an order under paragraph 3(2).

(2) A senior officer may give a notice for the purpose of forfeiting the cash or any part of it if satisfied that the cash or part is terrorist cash.

(3) A notice given under sub-paragraph (2) is referred to in this Schedule as a cash forfeiture notice.

(4) A cash forfeiture notice must—

(a) state the amount of cash in respect of which it is given,

(b) state when and where the cash was seized,

(c) confirm that the senior officer is satisfied as mentioned in sub-paragraph (2),

(d) specify a period for objecting to the proposed forfeiture and an address to which any objections must be sent, and

(e) explain that the cash will be forfeited unless an objection is received at that address within the period for objecting.

(5) The period for objecting must be at least 30 days starting with the day after the notice is given.

(6) The Secretary of State must by regulations made by statutory instrument make provision about how a cash forfeiture notice is to be given.

(7) The regulations may (amongst other things) provide—

(a) for a cash forfeiture notice to be given to such person or persons, and in such manner, as may be prescribed;

(b) for a cash forfeiture notice to be given by publication in such manner as may be prescribed;

(c) for circumstances in which, and the time at which, a cash forfeiture notice is to be treated as having been given.

(8) The regulations must ensure that where a cash forfeiture notice is given it is, if possible, given to every person to whom notice of an order under paragraph 3(2) in respect of the cash has been given.

(9) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of either House of Parliament.

(10) In this Part of this Schedule—

“senior officer” means—

(a) a senior police officer;

(b) an officer of Revenue and Customs of a rank designated by the Commissioners for Her Majesty’s Revenue and Customs as equivalent to that of a senior police officer;

(c) an immigration officer of a rank designated by the Secretary of State as equivalent to that of a senior police officer;

“senior police officer” means a police officer of at least the rank of superintendent.

Effect of cash forfeiture notice

5B (1) This paragraph applies if a cash forfeiture notice is given in respect of any cash.

(2) The cash is to be detained until—

(a) the cash is forfeited under this paragraph,

(b) the notice lapses under this paragraph, or

(c) the cash is released under a power conferred by this Schedule.

(3) If no objection is made within the period for objecting specified in the notice under paragraph 5A(4)(d), and the notice has not lapsed, the cash is forfeited (subject to paragraph 5D).

(4) If an objection is made within the period for objecting, the notice lapses.

(5) If an application is made for the forfeiture of the whole or any part of the cash under paragraph 6, the notice lapses.

(6) If the cash or any part of it is released under a power conferred by this Schedule, the notice lapses or (as the case may be) lapses in relation to that part.

(7) An objection may be made by anyone (whether a recipient of the notice or not).

(8) An objection means a written objection sent to the address specified in the notice; and an objection is made when it is received at the address.

(9) An objection does not prevent forfeiture of the cash under paragraph 6.

(10) Nothing in this paragraph affects the validity of an order under paragraph 3(2).

Detention following lapse of cash forfeiture notice

5C (1) This paragraph applies if—

(a) a cash forfeiture notice is given in respect of any cash,

(b) the notice lapses under paragraph 5B(4), and

(c) the period for which detention of the cash was authorised under paragraph 3(2) has expired.

(2) The cash may be detained for a further period of up to 48 hours (calculated in accordance with paragraph 3(1A)).

(3) But if within that period it is decided that neither of the applications mentioned in sub-paragraph (4) is to be made, the cash must be released.

(4) The applications are—

(a) an application for a further order under paragraph 3(2);

(b) an application for forfeiture of the cash under paragraph 6.

(5) If within that period an application is made for a further order under paragraph 3(2), the cash may be detained until the application is determined or otherwise disposed of.

Application to set aside forfeiture

5D (1) A person aggrieved by the forfeiture of cash in pursuance of paragraph 5B(3) may apply to a magistrates’ court or (in Scotland) the sheriff for an order setting aside the forfeiture of the cash or any part of it.

(2) The application must be made before the end of the period of 30 days starting with the day on which the period for objecting ended (“the 30-day period”).

(3) But the court or sheriff may give permission for an application to be made after the 30-day period has ended if the court or sheriff thinks that there are exceptional circumstances to explain why the applicant—

(a) failed to object to the forfeiture within the period for objecting, and

(b) failed to make an application within the 30-day period.

(4) On an application under this paragraph the court or sheriff must consider whether the cash to which the application relates could be forfeited under paragraph 6 (ignoring the forfeiture mentioned in sub-paragraph (1)).

(5) If the court or sheriff is satisfied that the cash to which the application relates or any part of it could not be forfeited under that paragraph the court or sheriff must set aside the forfeiture of that cash or part.

(6) Where the court or sheriff sets aside the forfeiture of any cash—

(a) the court or sheriff must order the release of that cash, and

(b) the cash is to be treated as never having been forfeited.

Release of cash subject to cash forfeiture notice

5E (1) This paragraph applies while any cash is detained under paragraph 5B or 5C.

(2) The person from whom the cash was seized may apply to a magistrates’ court or (in Scotland) the sheriff for the cash to be released.

(3) On an application under sub-paragraph (2), the court or sheriff may direct the release of the cash or any part of it if not satisfied that the cash to be released is terrorist cash.

(4) An authorised officer may release the cash or any part of it if satisfied that the detention of the cash to be released is no longer justified.

Application of cash forfeited under cash forfeiture notice

5F (1) Cash forfeited in pursuance of paragraph 5B(3), and any accrued interest on it—

(a) if first detained in pursuance of an order under paragraph 3(2) made by a magistrates’ court or a justice of the peace, is to be paid into the Consolidated Fund;

(b) if first detained in pursuance of an order under paragraph 3(2) made by the sheriff, is to be paid into the Scottish Consolidated Fund.

(2) But it is not to be paid in—

(a) before the end of the period within which an application under paragraph 5D may be made (ignoring the possibility of an application by virtue of paragraph 5D(3)), or

(b) if an application is made within that period, before the application is determined or otherwise disposed of.”

(4) In paragraph 7(4) (release of cash on appeal against decision in forfeiture proceedings), after “of” insert “the whole or any part of”.

(5) In paragraph 9 (victims), after sub-paragraph (3) insert—

“(4) If sub-paragraph (5) applies, the court or sheriff may order the cash to be released to the applicant or to the person from whom it was seized.

(5) This sub-paragraph applies where—

(a) the applicant is not the person from whom the cash claimed was seized,

(b) it appears to the court or sheriff that the cash belongs to the applicant,

(c) the court or sheriff is satisfied that the release condition is met in relation to the cash, and

(d) no objection to the making of an order under sub-paragraph (4) has been made by the person from whom the cash was seized.

(6) The release condition is met—

(a) in relation to cash detained under paragraph 3, if the conditions in that paragraph for the detention of the cash are no longer met,

(b) in relation to cash detained under paragraph 5B or 5C, if the cash is not terrorist cash, and

(c) in relation to cash detained pending the conclusion of proceedings in pursuance of an application under paragraph 6, if the court or sheriff decides not to make an order under that paragraph in relation to the cash.”

(6) In paragraph 19 (general interpretation), in sub-paragraph (1), at the appropriate places insert—

““cash forfeiture notice” has the meaning given by paragraph 5A(3),”;

““senior officer” (in Part 2A) has the meaning given by paragraph 5A(10),”.”—(Mr Wallace.)

This new clause makes various amendments of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 to bring it into line with the provision made by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002, including amendments to provide for the forfeiture of “terrorist cash” by the giving of a forfeiture notice. This administrative forfeiture regime will apply throughout the UK; the equivalent regime under the 2002 Act is limited in its application to England and Wales and Northern Ireland.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Review of Scottish Limited Partnership

“(1) The Secretary of State must undertake a review into the extent of financial criminal activity associated with Scottish Limited Partnerships, and lay a copy of the review before the House of Commons within six months of this Act receiving Royal Assent.

(2) In conducting the review the Secretary of State must consult—

(a) the Scottish Government;

(b) the National Crime Agency;

(c) the Serious Fraud Office;

(d) the Financial Conduct Authority;

(e) HMRC;

(f) interested third sector organisations; and

(g) any other persons he deems relevant.

(3) The review must set out what steps the Government intends to take to prevent Scottish Limited Partnerships being used for criminal purposes.”—(Roger Mullin.)

This new clause would require the Secretary of State to conduct a review of financial criminality associated with Scottish Limited Partnerships and set out what steps the Government intends to take to prevent Scottish Limited Partnerships being used for criminal purposes.

Brought up, and read the First time.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I beg to move, That the clause be read a Second time.

It is a great pleasure to serve under your chairmanship, Mrs Main. Before I go into the substance of the new clause, I place on the record our thanks to the Minister for his willingness to discuss the issue with us both before and after Second Reading. Although I am a relatively new Member of Parliament, this is the fifth Bill Committee on which I have served in just over a year, and this is the most listening Minister I have come across. I would like to acknowledge that.

[Mr Wallace]

That’s my career over.

[Roger Mullin]

Yes, this is the gentle dagger.

I rehearsed on Second Reading many of the specific instances of abuse using Scottish limited partnerships. I do not intend at this moment to repeat all that, but for the Minister’s benefit, I would like to add to what has already been said.

First, we have had further discussions with the Law Society of Scotland and others. They indicate a willingness to assist us in moving forward to address what the solutions may be to Scottish limited partnerships. I have also had discussions with an individual who was named in evidence to us, Mr Richard Smith, who has undertaken a lot of research into this matter. He, too, has indicated a willingness to assist.

Why do we consider that a review is needed? A lot of research has been undertaken, including by Mr David Leask, who gave evidence to the Committee just last week. However, in our view, before the Government move towards precisely how they will take action to secure SLPs from abuse in the future, it would do us a lot of good if we conducted a detailed review, sponsored by the Government, to ensure that all forms of abuse are properly understood. It would be good to do that before we move towards saying what the precise solutions will be. Therefore, it would be valuable if the Minister, when he comments on the new clause, indicates whether he thinks there is still scope for the Government to consider a detailed review such as that which we have discussed.

I shall conclude now and allow the Minister to respond. Our hope is that the response will be such that there will be no need for us to push the new clause to a vote.

[Mr Wallace]

I thank the hon. Gentleman for his kind words. As the son of a Fifer, I know that one always does well to listen to a Fifer—or one faces the consequences.

I am also grateful to the Scottish National party and The Herald newspaper for raising this issue. It is a genuine issue of abuse, as they have rightly pointed out. We have taken important steps to prevent the misuse of corporations for money laundering, corruption and tax evasion. The UK’s public register of company beneficial ownership went live this year—we were the first G20 country to put such a register in place. At the London anti-corruption summit, we committed to going further and creating a register of the beneficial ownership of foreign companies that own real property or wish to be involved in public sector procurement contracts in the UK.

However, we must not be complacent. Hon. Members have rightly raised the issue of Scottish limited partnerships a number of times. I hope they are assured that I take it very seriously. The stories in The Herald and the intelligence assessments that I have received from our law enforcement agencies are very concerning.

As I committed to do on Second Reading, I have spoken on this subject to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Stourbridge (Margot James), who is responsible for small business, consumers and corporate responsibility, and she shares my concerns about the abuse of SLPs. We agreed that we need to get the balance right between ensuring that the UK remains a good place to do business for the law abiding and cracking down on abuse. Her Department recently published a discussion paper that invites views on a number of questions about transposing corporate transparency requirements under the fourth anti-money laundering directive. The catchy name is “Implementation of the Fourth Money Laundering Directive—Discussion paper on the transposition of Article 30: beneficial ownership of corporate and other legal entities”.

[Peter Dowd]

Too pithy.

[Mr Wallace]

I can repeat it for those who want to write it down. That was launched on 3 November. I think that it is a six-week consultation. As a starting point, I strongly urge the Scottish National party to make a submission.

[Roger Mullin]

We are aware of that consultation with a snappy title, and it is our understanding that, appropriately, submissions have to be in by St Andrew’s day— 30 November. We intend to make a submission.

[Mr Wallace]

One issue raised in the paper is whether SLPs should be brought within the scope of the directive by including them on the UK’s public company beneficial ownership register, which would go some way to revealing the people behind some of those arrangements. The Government propose that SLPs should be on the register, although we must wait to see the responses to the consultation before we make a final decision. Hopefully my office will be in touch with hon. Members to arrange a meeting to discuss both that and some of the other issues they have raised.

New clause 1 proposes a statutory review of SLPs. The existing discussion paper already provides for interested parties to submit their views on identifying the beneficial owners of SLPs, which is a good first step. I reassure hon. Members that officials and Ministers in multiple Departments are looking closely at the wider issues related to SLPs, and I hope we will have more to say about that on Report. For now, I hope the hon. Gentleman feels suitably encouraged to withdraw his new clause.

[Roger Mullin]

I thank the Minister for his encouraging response. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

National Crime Agency: Report on staff training

“Section 3 of the Proceeds of Crime Act 2002 is amended as follows, after subsection (7) insert—

‘(8) The National Crime Agency must make an annual report to Parliament on the provision of training to persons under this section.’”.—(Dr Huq.)

This new clause would require the National Crime Agency to make a report to Parliament about the training it provides to its staff in financial investigation and the operation of the Proceeds of Crime Act.

Brought up, and read the First time.

--- Later in debate ---

Secondly, the Government are wholly aware of this issue. In fact, I believe there was meant to be a working party on recruitment and retention of key financial staff. Whatever happened to that? Sometimes these things get swept under the carpet or become a talking shop, so I would be curious to know what happened to that. It was a Whitehall working paper—we have not heard any concrete suggestions come out of the other end of that about how this problem is to be remedied. The Government’s plan on this is as mysterious and as tightly under wraps as the PM’s plan for Brexit, but let us not be political. I would like to ask the Minister whether he is opposed to this new clause—I would have thought he was a sensible man; it is quite sensible stuff. If he is opposed to it, can he please explain what he will do to stem the poaching of accredited financial investigators?

[Mr Wallace]

The Government recognise the importance of ensuring that investigation and prosecution agencies have sufficient expertise and resources to carry out their functions under the Proceeds of Crime Act 2002. Section 3 of the Act places a statutory duty on the National Crime Agency to provide a system for the accreditation of financial investigators who use the powers under POCA. This is done through the National Crime Agency’s Proceeds of Crime Centre. The accreditation system includes provision for monitoring performance and, importantly, accreditation can be removed from an investigator who fails to meet the accreditation standards.

The training can be lengthy and expensive. The Home Affairs Committee, during its recent inquiry into asset recovery, identified the risk of the private sector poaching trained resources with the promise of better pay and benefits. It was a good report. I read it in full as well as the Public Accounts Committee report.

The NCA already publishes statistics on the training activities undertaken by the Proceeds of Crime Centre in its annual report. Their last report showed the delivery of 95 training courses, support for 760 delegates through that training, and the completion of 1,400 registrations and re-accreditations. Those statistics are already published annually.

New clause 5 provides for the use of agreements to tie accredited financial investigators to their agencies, so that they would pay the cost of their training if they voluntarily left the employment of the agency that has funded their training. However, these agencies have tried such agreements and found them difficult and costly to enforce. In most cases, the benefits of such agreements are minimal.

Even if an effective and enforceable form of cost training agreement could be found—I do not want to dismiss the idea out of hand today—making it a requirement in primary legislation would not be appropriate. The operational agencies who use financial investigators should be given the freedom to manage their workforce according to their needs.

In line with the hon. Lady’s concerns, the criminal finance board, which I chair with my hon. Friend the Economic Secretary to the Treasury, commissioned a working group to examine the retention and training of financial investigators. It has not gone away or been swept under the carpet; I assure hon. Members that nothing is swept under the carpet in my Department. There is no conspiracy either—we do not do conspiracies in my Department; we are the conspiracy, according to some. That group is also considering what actions can be taken to incentivise investigators to stay and develop their career within the public sector.

The hon. Lady also referred to ELMER—the database of the suspicious activity reports IT regime. We have committed to replacing the SARs IT regime by October ’18, but in the meantime we have taken steps to upgrade and maintain it as part of the SARs reform package. We have not finished reforming the SARs programme, and before we roll out a new system we need to know what the new suspicious activity reports will look like, because if we are going to have a software database in order to cope with that effectively, we need to know what we are planning to cope with.

I am therefore alive to the issues and will be following the issues raised by the right hon. Member for Leicester East. I will visit to look at the system directly; I will have to bring my 1980s computer knowledge up to date to see whether I can remotely understand what I am looking at. I will certainly make sure that it is on because, like the hon. Member for Ealing Central and Acton, it is not my or the Government’s intention for the system to grind to a halt. It is very important.

It is also important that we register that we are keen to make sure that all those people who benefit from that system—not just the Government but the banks and the other people who use it—perhaps make a contribution towards the new system. That is important. It is for their benefit as well for the system to work successfully and efficiently.

I hope that demonstrates to the hon. Lady that I take both matters seriously. I think the training has already been dealt with, because it is published in the National Crime Agency’s annual report. I hope she is inclined to withdraw her motion on that basis.

[Dr Huq]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Annual reporting: Adequacy of resources

“(1) In Part 12 of the Proceeds of Crime Act 2002 (miscellaneous and general), after section 455, insert—

“455A Annual reports on resources

(1) A relevant authority must, no later than 1 June in each calendar year, prepare an annual report on the adequacy of the resources available from money voted by Parliament for the exercise of any functions of that authority—

(a) under this Act;

(b) in connection with investigations into terrorist financing offences under the Terrorism Act 2000;

(c) under Part 3 of the Criminal Finances Act 2017.

(2) In this section, “a relevant authority” means—

(a) the National Crime Agency;

(b) the Director of Public Prosecutions;

(c) the Director of the Serious Fraud Office, and

(d) Her Majesty’s Revenue and Customs.

(3) The reports prepared in accordance with subsection (1) shall be sent—

(a) in the case of the National Crime Agency, to the Secretary of State;

(b) in the case of the Director of Public Prosecutions and the Director of the Serious Fraud Office, to the Attorney General, and

(c) in the case of Her Majesty’s Revenue and Customs, to the Chancellor of the Exchequer.

(4) The person receiving annual reports in accordance with subsection (3) must lay those reports before each House of Parliament in the form in which they were received no later than 30 June in the same calendar year, together with a statement on plans for future resources to be provided from money voted by Parliament.”.”.—(Peter Dowd.)

This new clause would require the National Crime Agency and other agencies to report annually to Parliament on the adequacy of its resource to fulfil its functions relating to combating financial crime.

Brought up, and read the First time.

--- Later in debate ---

It is up to the Minister to take us where we would all like to be. We need well resourced agencies that are able to deliver the tasks set out for them in the Bill. Ultimately, the new clause would allow Parliament to hold the Government to account, through annual reports from professionals and experts on the ground, on their funding of enforcement agencies, and on the impact of that funding on the ability to prevent and disrupt attempts to hide the proceeds of crime. Given the seriousness of the issue we face—the loss of billions of pounds to the Exchequer—that is not too big an ask of the Government.

[Mr Wallace]

In my response to the hon. Member for Ealing Central and Acton on new clauses 2 and 5, I explained what we are doing to assess the capacity and capability of investigator resource. The new tools in the Bill are a key part of strengthening our response to economic crime. The Government continue to invest in law enforcement agencies through the asset recovery incentivisation scheme, which returns recovered assets back to the frontline. A top-slice of £5 million has been set aside every year until the end of this Parliament to fund key national asset recovery capabilities, and I can announce today that we are going further. We made a manifesto commitment to return a greater percentage of recovered assets to policing, and we are implementing that commitment by investing in policing the whole Home Office share of amounts above a certain baseline collected by the multi-agency regional asset recovery teams. That will give the agencies greater financial resources, if performance continues to increase—100% of the Home Office share, rather than the 50% that they currently get. There we are: an announcement in a Bill Committee—a new way of venturing forward.

Let us be honest: I say to the hon. Member for Bootle that in Government, we never have enough resources across all our priorities, because different priorities are preyed on by events such as flooding in the west of England, or issues for the Home Office such as a surge in terrorism. I therefore question the use of the word “adequacy” in the new clause. We can scrutinise accounts or budgets, but asking a police officer whether he feels he has enough is like asking, “How long is a piece of string?” Of course we never have enough for crime fighting across the country. If I had millions of pounds, I could find things to spend that money on immediately, and so could every Member in this Committee Room.

I am concerned about whether it would be right and fair to publish a report to Parliament, as the new clause demands. The agencies that use their powers under the Proceeds of Crime Act already report on their resources and results through the departmental annual accounts, which are subject to scrutiny from the National Audit Office and the Public Accounts Committee. The use of criminal justice tools and powers is also subject to scrutiny by Her Majesty’s inspectorate of constabulary and, in the case of terrorism legislation, by the independent reviewer of terrorism legislation. The criminal finances board also closely monitors performance and resourcing issues. I hope that the hon. Members for Ealing Central and Acton, and for Bootle, can see that there is already significant scrutiny of resourcing. I invite the hon. Member for Ealing Central and Acton to withdraw the motion.

[Dr Huq]

I was interested to hear a groundbreaking announcement in this Committee. I completely get the Minister’s point that we will never feel satiated, and that there will always be inadequacy, but my hon. Friend the Member for Bootle made a really powerful case. He mentioned SARs and the ELMER IT regime. Originally, 20,000 SARs were anticipated, but there are now 381,882—my hon. Friend said there were “up to” 381,000 of them, but there are even more, and the figure is rising.

I want to mention the NCA’s ability to cope with the greater workload. It takes an increasing length of time to get investigations into the courts. We have heard that it could take more than 200 days, with the new SARs regime. The NCA was created as a successor to several different organisations. The budget of those it replaced was £812 million, but the NCA’s new annual budget was £474 million. Those figures put the situation into context. The Government have cut that budget even further since the NCA’s creation; it received £411 million in 2015-16. I accept that there was a one-off £200 million cash injection last year, but the agency needs steady long-term funding to carry out its functions effectively. It is no good just sprinkling blockbuster sums now and then; it needs a consistent funding model.

My hon. Friend the Member for Bootle made some powerful points. For effective crime fighting, we should not have agencies that are overworked and under-resourced. The announcement that 100% of assets will go to the Home Office conflicts with an amendment that we have tabled.

[Mr Wallace]

Not the Home Office; it is going to the law-enforcement agencies.

[Dr Huq]

Okay, so it is within the system. We have tabled new clause 20, which is about repatriating assets to the jurisdictions they came from. Some charities—Christian Aid and all those people—are saying that third-world health budgets get robbed when someone buys a house in Hampstead with such proceeds. Are we going to—

--- Later in debate ---

[Richard Arkless]

I would like to make a very small point about the Minister’s comments on new clause 3. He rightly suggests that if we were to ask any police officer or public servant whether they had enough resources, the answer would clearly always be no, but the new clause does not seem like a generic question about whether there is enough generally. The hon. Member for Bootle is asking whether adequate resources are available for specific functions to be exercised under the Proceeds of Crime Act 2002. That is a marked departure from asking any Department the generic question, “Have you got enough, guv?”, to which we would almost certainly know the answer. The new clause is about activities undertaken under the Act, and I do not think it is fair to categorise the suggestion as the Minister did.

[Mr Wallace]

Perhaps I can clarify some of the issues. Obviously the word “adequate” is subjective. We heard evidence in Committee from members of the law enforcement agencies, and they did use the word “enough”. My point is that we scrutinise the accounts in this place, and then compare that with agencies’ performance and outcomes. That is how we come to a decision—subjective, often—on whether there are adequate resources. It is not necessary to put that in primary legislation.

Perhaps I could clarify for the hon. Member for Ealing Central and Acton the issues around asset recovery and where those funds go. At the moment, if we recover assets from drug dealers, for example, the money is split, with 50% going to the Home Office, and 50% to the Crown Prosecution Service and all the other agencies—the National Crime Agency or the police—involved in that operation, so that they can invest it in their capabilities, and use it to increase their ability to fight crime. I can say today that further to our manifesto commitment, in future, instead of having that 50% of the cake, they will be able to keep 100% of the amount coming in above the baseline, which was set in 2015, if I am not mistaken. They have a very strong incentive to ensure that they are rewarded for their good work, and to make sure that we go after big sums as well as small. That is important.

On the point the hon. Lady raised about returning money that is stolen—we will come back to this—we sent back £27 million to Macau recently. Where we identify the ownership of stolen assets that we can return to a foreign country or wherever, we will, and we have already done that. My colleague the Minister for Immigration signed a memorandum of understanding with the Nigerian Government in August to make it even easier for us to return stolen property or assets to a country’s people. It is absolutely our intention to do that.

Across the money laundering piece, we can identify the owners of certain assets and take steps to return them. Other assets that accrue because of the high margins in the illicit trade of, say, drugs may be harder to return. In fact, the people who contributed to those sums may have committed a crime themselves, so there is a difference there. I recently saw in Mombasa some confiscated stuff that we will be returning, as soon as we can get through the paperwork. It is not our intention to divvy up the proceeds from the house in Knightsbridge and hand them all over to the National Crime Agency, and rob the third country from which the money was stolen.

[Dr Huq]

I wanted clarification on just one other thing. The Home Affairs Committee report wanted ELMER replaced by the end of December. Am I right in thinking that the Minister referred to October 2018?

[Mr Wallace]

2018.

[Dr Huq]

So it will not be December?

[Mr Wallace]

No. As I said earlier, we have spent money updating and making sure that ELMER is maintained, but we are also in the process of drawing up a SAR reform policy. There are a number of reasons why there are so many referrals—380,000-odd—but the Bill will hopefully cut that number. We want quality, not quantity. At the moment, we are getting quantity, partly because in the suspicious activity regime, if a body makes the report, its defence is halfway there—that is the tick-box bit that is highlighted in the report. Also, many institutions currently report a fragment of the transactions, because they say that they are unable to report the complete transaction due to data-sharing barriers. That is why this Bill removes those barriers. Hopefully, instead of 15 pieces of a transaction being reported as 15 separate SARs, we will get one, because one institution will be able to report the transaction from beginning to end.

We are already taking steps to reduce demand on the system. The system is working; people should not think it has stopped working. The challenge is the analysis, and making sure that we act on the suspicious reports and are quick enough to discard the ones that are not, because we want quality, not quantity.

This time last year, we agreed a £200 million capital improvement budget for the National Crime Agency between 2016 and 2020. That is a huge sum of money for it to spend on a whole range of capital projects to bring them up-to-date. We all have lessons to learn—Labour Governments and Conservative Governments—from rushing into IT replacement projects that cost much more than anyone envisaged. It is therefore important we get the new SARs regime right before we replace the system. I assure hon. Members that that is at the forefront of my mind. We are not going to fall over—that is the main thing—and we will make sure that when we replace it, we do so with the right system, so that we are not all back in this Committee Room in a few years’ time saying, “The SARs regime is not working.” I hope that clarifies the point for the hon. Member for Ealing Central and Acton.

[Peter Dowd]

I started by talking about Parliament being able to have reports from the agencies concerned, given the seriousness of the issue facing us. The Minister, reasonably, told us that 100% of the proceeds will go to the appropriate agencies and be divvied up as appropriate. I completely accept that, in good faith, and repeat the point made earlier: that he is a reasonable man. I do not challenge the Minister’s reasonableness; my challenge is based on the fact that Parliament, given the nature of this issue, is perfectly entitled to receive reports from agencies—no doubt articulated through the Departments in some fashion—on their resources. A definition of “adequacy” is that something is proportionate, or sufficient for its purpose. That is a matter for Parliament to discuss. It will not necessarily be able to do anything other than discuss it, but the discussion may produce views and experiences for the Minister to consider.

As to the Minister’s point that this is not something to go into primary legislation, about this time last year I was on the Committee that for 17 sittings considered the Housing and Planning Bill. There were all sorts of things in that Bill far less important to the health and integrity of the nation. Indeed, in the past, local government Acts—primary legislation—have even included provisions on how many hours off a person in one local authority can have, compared with a person in another. Primary legislation can be used in a range of ways. It is for the Government of the day to say, “We have nothing to fear from the reports coming before Parliament, from openness and transparency, or from challenge.”

[Mr Wallace]

Anyone who is a victim of financial crime takes that crime incredibly seriously; the same goes for victims of violent crime. The National Crime Agency has a number of threats to deal with, including drugs, firearms, child sexual exploitation, financial crime and foreign national offenders. Our police forces deal with a range of threats. Are we to say, on the principle that the hon. Gentleman has set out, that primary legislation should require our law enforcement agencies to produce a report every year, under each heading across the whole range of crime, on whether they believe they have adequate funding to do their job? If so, I envisage that our law enforcement agencies will be full of people doing reports all year, arguing about whether resourcing is “adequate”, and submitting them to Parliament, rather than getting on and prosecuting the people we need prosecuted.

[Peter Dowd]

That is a fair point, but we know that, every day, Parliament debates issues that are far less important for the body politic, security and the safety of the country. The point that I am trying to make is that the issue is of great importance and significance. It is so different in degree as to be different in kind. My hon. Friends and I therefore say that Parliament should have this opportunity. This is not a technical proposal. I repeat that, given the nature of the threat to the country, and the importance that people place on the safety of the country, we would like the report to be made to Parliament.

Question put, That the clause be read a Second time.

Criminal Finances Bill (Sixth sitting)

Ben Wallace Excerpts

Committee Debate: 6th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

It is a pleasure to serve under your chairmanship again, Mrs Main. My hon. Friend the Member for Bootle made an excellent speech. New clause 6 is supported by Amnesty International, CAFOD, Corruption Watch, Global Witness, ONE, Rights and Accountability in Development, Tax Justice Network, The Corner House, Traidcraft and Transparency International UK. Those are some heavyweight organisations. Before we adjourned, my hon. Friend asked what happened to the consultation promised at the anti-corruption summit. I would be interested to hear the answer.

[The Minister for Security (Mr Ben Wallace)]

New clause 6 highlights an issue raised on a number of occasions when we heard from interested parties about the Bill last week. I am pleased that the Opposition have tabled it, because it allows me to restate that the Government appreciate those concerns and agree that the damage caused by economic crime facilitated by those working for major companies is serious and affects individuals, businesses and the wider economy, and indeed the reputation of the United Kingdom as a place to do business.

As the hon. Member for Ealing Central and Acton is aware, the Labour Government took action in the Bribery Act 2010 in respect of bribery committed in pursuit of corporate business objectives. The Act is widely respected as both a sound enforcement tool and a measure incentivising bribery prevention as part of good corporate governance. We have already debated the new corporate offence of failure to prevent tax evasion created in the Bill. The provisions followed a process of extensive consultation, as did the Bribery Act 2010. I trust that hon. Members will agree that such an approach is necessary when considering the adequacy of the existing legal framework in matters involving complex legal and policy issues.

In respect of the current law governing corporate criminal liability for economic crime, the Government announced that a consultation would take place in May this year. I confirm that we will publish a call for evidence on the subject. In keeping with the considered and methodical approach adopted for the reforms on bribery and tax evasion, the call for evidence will form part of a two-part consultation process. It will openly request and examine evidence for and against the case for reform and seek views on a number of possible options. Should the responses that we receive justify changes to the law, the Government will then consult on firm proposals. The Government believe that it would be wrong to rush into legislation in this area for the reasons I have given. In the light of my assurances and the forthcoming publication of the call for evidence, I invite the hon. Gentleman to withdraw the new clause.

[Peter Dowd]

As I have said, the job of the Opposition is to push the issue as much as we can. As to what the hon. Member for Dumfries and Galloway said about subsection (2), the reality is that we are building into the new clause the capacity for someone to defend themselves, but not stating categorically, “Someone commits an offence if this happens.” There is room for manoeuvre, which is only right. However, in the light of what the Minister has said and the assurance he has given, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

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).”’—(Tristram Hunt.)

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.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

I beg to move, That the clause be read a Second time.

The purpose of new clause 14 is to require the Secretary of State to establish a publicly accessible register of the beneficial ownership of UK property by foreign companies within six months of the commencement of the Act. That is another helpful intervention to support the Minister in his work.

As I read in The Observer on Sunday, money launderers use anonymous offshore companies to acquire properties in the UK with the proceeds of crime. That became evident from the Panama papers. More than 2,800 secret companies set up by Mossack Fonseca held 6,000 Land Registry titles in the UK with combined historical costs in excess of £7 billion. In London alone more than 40,000 properties —one in every 10 in the borough of Westminster—are owned by offshore companies with unknown beneficiaries. There is not only an impact on housing costs in the capital, which can, indeed, spread to St Albans, Mrs Main, but a fear about money laundering and the hiding of finance through the use of London property essentially as a reserve currency.

Requiring offshore companies holding property titles in the UK to declare their beneficiaries would be fully in line with the legal obligations of UK companies to disclose persons with significant control, which came into effect in June. Requiring the Government to set up a public register of the persons with significant control of non-UK corporations holding properties and other assets, or PSCs willing to do business in the UK, will naturally tie the two purposes together: the commitment to lift offshore secrecy; and the passing of the Bill with the aim of the eradication of money laundering in the UK. It will build on exactly what the Minister suggested with reference to the former Prime Minister’s anti-corruption speech in Singapore, and the anti-corruption summit. I hope the Minister will agree to the new clause.

[Mr Wallace]

At the London corruption summit earlier this year, the Government announced that we plan to create a beneficial ownership register of overseas companies that own or wish to purchase property in the United Kingdom. The Government remain committed to delivering that policy and are developing the detail of how the register will work before we issue a call for evidence in the coming months. Our intention is to bring forward legislation to provide a statutory basis for the register in due course and as soon as possible.

The UK leads the world in corporate transparency. That is a position that the UK Government are rightly proud of: we are the first in the G20 to have started a public register of beneficial ownership. We should build on that position, and I am determined that we complete what we started at the summit.

The proposal is that the register will apply throughout the whole of the United Kingdom. That is important to ensure that control of companies owning land is transparent wherever in the UK the land is. However, Scotland and Northern Ireland have different land registration requirements from England and Wales, which makes the drafting of the legislation more complex. The Government therefore believe that it is important to spend time to get the policy and its implementation correct, and to consult on the policy before legislating.

--- Later in debate ---

[Peter Dowd]

Three!

[Mr Wallace]

It is getting higher—we will be getting into double figures for The Observer’s readership if we are not careful.

The best time to examine the register is when we have had a full consultation. We have worked closely with the Scottish Government and the Northern Ireland Executive to ensure that we get it right. As the Scottish National party has pointed out, things such as Scottish limited partnerships were set up often for landowners to avoid ownership obligations way back in 1907, if I am not mistaken. Therefore, legislating is easier said than done, and we want to ensure that we get it right so that there are no loopholes or areas in which people can hide in the shadows, which might happen if we rushed it. We want to ensure that public means public. I therefore urge the hon. Gentleman to withdraw his new clause.

[Tristram Hunt]

I thank the Minister for his response. I understand that such a register throws up legal complexities and matters to do with the interrelationship between the English property market and legal system and the Scottish and Welsh ones. That is why it should be a UK-wide process. I am willing to admit that six months might seem a little aggressive in terms of the full publication of the register. The Minister said “in due course” and “as soon as possible”. On Report, perhaps he will give us slightly greater clarity about the commitment with which the Government are approaching the register. I very much welcome his enthusiasm. On that basis, I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

New Clause 15

Failure to prevent facilitation of tax evasion offences: exclusion from public procurement

‘(1) In section 57 of the Public Contract Regulations 2015 after paragraph 3(b) insert—

“(c) the contracting authority is aware that the economic operator is a body that has been convicted of an offence under section 37 or 38 of the Criminal Finances Act 2017.”’—(Tristram Hunt.)

This new clause would ensure that companies convicted of failure to prevent a tax evasion facilitation offence are excluded from public procurement.

Brought up, and read the First time.

[Tristram Hunt]

I beg to move, That the clause be read a Second time.

The new clause builds on new clause 6, which we looked at earlier. Exclusion is the key means of incentivising good corporate governance. The threat of exclusion from public procurement is known to be one that companies fear more than fines. Making the new offences subject to exclusion would ensure that companies take preventing such offences seriously. The UK’s anti-corruption summit committed to excluding corrupt bidders from public procurement contracts, so it is important that companies that facilitate tax evasion are similarly excluded.

Under the Public Contract Regulations 2015, public authorities must exclude companies found to be in breach of their obligations related to the payment of taxes. Unless the Bill specifies whether the new offences under clauses 37 and 38 will constitute such a breach, the Crown Commercial Service, which is often narrow in its approach, is unlikely to consider that they do. The purpose of the new clause therefore is to urge Ministers to ensure that the Crown Commercial Service understands there to be a breach in that context.

[Mr Wallace]

I am grateful to the hon. Gentleman for tabling his new clause because it allows us to cover another important element of the tax evasion offence we debated earlier. I also thank him for meeting me to discuss those proposals.

New clause 15 would create mandatory exclusion from public contracts of a relevant body convicted of an offence under part 3 of the Bill. I fully agree that, where an organisation has been convicted under the new offences and grave professional misconduct has taken place, it should be possible to exclude that organisation from public contracts.

I am pleased to say that existing law already allows for that by virtue of the Public Contracts Regulations 2015, which allow for the exclusion of a body from a public contract

“where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable”.

That is quite a low threshold if you ask me; nevertheless, it allows us to do it. I know the hon. Gentleman will be interested in this part, because it is a European angle to his proposal. I am advised that it is not possible lawfully to include a new mandatory exclusion under regulation 57, as proposed by the amendment. Regulation 57 contains a list of offences based on the six categories set out in the EU public contracts directive. The categories outlined in the directive are exhaustive. Case law indicates that member states are not free to add new additional grounds for exclusion to those set out in the directive.

[Peter Dowd]

Not yet.

[Mr Wallace]

I hope the Committee is satisfied that, where there has been grave professional misconduct by an organisation convicted under the new offences, contracting authorities will have the discretion to exclude them from public contracts.

[Tristram Hunt]

I thank the Minister for his answer. As my hon. Friend the Member for Bootle quietly alluded, this might be something we will have to look at again amid the welter of opportunities—count them!—thrown up by Brexit. [Hon. Members: “Hear, hear!”]

As a result of European regulations, I am willing to accept the Minister’s point. On Report, will he say whether we could have included in the statistical bulletins on unexplained wealth orders and other elements of the Bill an account of any corporations excluded from public procurement as a result? Is there a statistical account of whether any companies have fallen foul of the measure? Could we gain some account of that?

[Mr Wallace]

I am grateful for the hon. Gentleman’s idea, which I think is a good one. I will certainly try to ensure it is released in any statistical bulletins. When the Bill is up and running, I would like to know as much as he would how many people are precluded from public procurement practices.

[Tristram Hunt]

I thank the Minister. On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 16

Failure to prevent facilitation of tax evasion offences: reporting

‘The Secretary of State must make an annual report to Parliament containing the number of prosecutions brought and convictions made under section 37 and 38 of this Act.’ —(Tristram Hunt.)

This new clause would require that the Secretary of State reports annually on the number of prosecutions brought and convictions made for failure to prevent the facilitation of UK and foreign tax evasion offences.

Brought up, and read the First time.

[Tristram Hunt]

I beg to move, That the clause be read a Second time.

The new clause would

“require the Secretary of State reports annually on the number of prosecutions brought and convictions made for failure to prevent the facilitation of UK and foreign tax evasion offences.”

That is connected to an earlier new clause about culture change within Government to ensure the right degree of ministerial push and importance given to the implementation of the Bill, and to ensure that attention is given at the top of the Home Office and in ministerial offices, which is something a report to Parliament encourages. The fear that I and some of my colleagues have is that, if that detail is hidden away in obscure departmental documents, it does not necessarily have the drive and political push it deserves. The new clause is therefore another attempt to support the Minister in his job, and to encourage proper transparency about this interesting and in many ways useful Bill.

[Mr Wallace]

I do not want to look ungrateful to the hon. Member who is, as he says, trying to help me enhance the Bill and do my job. I am incredibly grateful for all the suggestions from hon. Members over the last few weeks.

[Nic Dakin (Scunthorpe) (Lab)]

Wonderful.

[Mr Wallace]

I am not that grateful.

New clause 16 would require the Secretary of State to report annually to Parliament on the number of prosecutions brought and the number of convictions made under the new corporate offences. Under the domestic tax evasion offence, HMRC will be the investigating authority and the decision on whether to prosecute will rest with the Crown Prosecution Service. In relation to the overseas offence, the Serious Fraud Office and the National Crime Agency will be the investigating authorities and the decision to prosecute will rest with the SFO or the CPS.

It is important to emphasise that, as with the corresponding offence under the Bribery Act 2010, the number of prosecutions alone will not be a true metric of the level of success of the measure. The new corporate offences are not only about responding to wrongdoing but about changing corporate culture and behaviour. True success will lie in changing corporate culture and preventing wrongdoing from occurring in the first place.

In any case, all of the prosecuting authorities already undertake extensive public reporting on investigations and prosecutions. For example, HMRC publishes quarterly performance updates and the CPS publishes an annual report. Neither of those documents are obscure—they are weighty but not obscure. I can confirm that information relating to the new offences will be included in those existing formats. Accordingly, I invite the hon. Member for Stoke-on-Trent Central to withdraw his new clause.

[Tristram Hunt]

I will not detain the Committee with an inquiry into the difference between “weighty” and “obscure”; these things can often be lost in the mists of time. As we did not quite generate the success that we needed to on new clause 11, I will not put the measure to a Division. However, I urge the Minister to ensure that, having created this interesting Bill and having delivered these interesting reforms, if the reforms are going to be put to proper effect and have the political momentum—a terrifying word—behind them, then a degree of political transparency and support connected to Parliament is important. On that basis, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 19

Whistleblowing in relation to failure to prevent the facilitation of tax evasion

‘The Chancellor of the Exchequer shall conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector, including the protection of anonymity, in relation to the disclosure of suspected corporate failure to prevent facilitation of tax evasion, and report to Parliament within six months of the passing of this Act.’—(Roger Mullin.)

This new clause would conduct a review into the facilitation and protection of whistleblowers with a focus on the protection of anonymity for those who suspect corporate failure to prevent the facilitation of tax evasion.

Brought up, and read the First time.

--- Later in debate ---

That it should take parliamentary inquiries to deal with something that was in the public domain—that a senior bank official had been sacked for doing his job—tells us something about what has been wrong and what many consider still is wrong with much of the remaining close-knit culture in the financial sector. Despite changes since that time, we remain unconvinced that enough has been done to explore the culture in the financial sector and properly safeguard whistleblowers, hence we have tabled new clauses 19 and 22. I am sure we will return to this issue many times as many of us try to secure a much more sensible regime, but in the meantime I will be pleased to listen to the Minister’s response.

[Mr Wallace]

I am grateful to the hon. Member for Kirkcaldy and Cowdenbeath for his contribution. New clause 19 would require a review of arrangements to facilitate whistleblowing in the banking and financial sectors. Whistleblowing can play an important part in bringing wrongdoing to light. The Government value the contribution of whistleblowers and believe they should be able to highlight wrongdoing without fear of retribution. To that end, the UK has put in place a strong framework of employment rights for workers who disclose malpractice in the public interest.

If a worker loses their job or suffers some other detriment —being overlooked for promotion, for example—as a result of blowing the whistle, they may bring a claim to the employment tribunal for unfair dismissal or detriment. To qualify as a protected disclosure under the Public Interest Disclosure Act 1998, the legislation that protects whistleblowers, the issue in question must fall into one of the categories listed in that Act. Those categories include both criminal offences and failure to comply with the law in other ways, so the issues in the Bill are certainly catered for, as is any new offence as soon as it comes into force.

To retain their employment protections, whistleblowers must generally make their disclosures either internally to the employer or to the relevant prescribed person named in statute. Two such prescribed persons are most likely to deal with issues covered by the Bill. HMRC is prescribed for matters about the administration of UK taxes, and the Financial Conduct Authority is prescribed for matters relating to the conduct of banks and all other funds and firms subject to the Financial Services and Markets Act 2000. MPs are now also prescribed persons, so Public Interest Disclosure Act remedies will also apply if a person suffers a detriment in employment as a result of disclosure to us.

Both HMRC and the FCA have published information for whistleblowers on how to disclose wrongdoing in their workplace. They both accept, and act on, anonymous disclosures. The Public Interest Disclosure Act 1998, under which disclosures are made and protected, was comprehensively reviewed as recently as 2014. There is a code of practice and guidance for its use. The Government are taking significant steps to ensure that effective arrangements are in place to facilitate whistleblowing in relation to tax evasion or other matters. I am not sure that, as yet, I see a case for further review at this stage.

On new clause 22, I agree with hon. Members that the culture of the financial services sector, as well as other sectors such as advisory, accounting and legal, plays a key role in preventing financial crime. That is the very reason that the Government are legislating for the new corporate offences in part 3 of the Bill—to drive culture change among businesses in relation to preventing complicity in and facilitation of tax evasion. A key measure of the success of the new offences will be how businesses respond and drive culture change.

We have engaged extensively with business over the last 18 months on the offences, both in the UK and overseas. We have seen examples of good practice in a number of sectors and organisations, which have responded swiftly to the new measures and are proactively seeking to drive culture change and operate to the highest standards. Some organisations have been slow to react, but HMRC officials have been working with them and their representative bodies to support business in putting in place compliance procedures.

Given that ongoing engagement, I do not believe it would be prudent to conduct a statutory review immediately following Royal Assent, although I share the same objectives as hon. Members. It is the Government’s view that we should focus our efforts on effectively implementing the new offences, and on using them to help trigger further cultural change, prior to diverting resources to a further review of the arrangements. I would be happy to discuss that further with hon. Members in case they have specific concerns that I should raise with other ministerial colleagues, which I am also happy to do. I hope I have provided adequate assurances for now or that we can agree to disagree. I hope the hon. Gentleman feels able to withdraw the new clauses.

[Roger Mullin]

I thank the Minister for his remarks, particularly his conclusion, when he indicated an open mind, as is only to be expected from him. However, we remain concerned about culture. He mentioned the role of the FCA. After the comments made last week by the FCA representative, I would have thought that the FCA itself needs a bit of a culture review to see whether it is fit for purpose.

[Mr Wallace]

When the Bill was being rolled out, I specifically asked for a meeting with the FCA to demand that when it comes into force—hopefully it will do so—they will up their game. The overall intention of the Bill is not just the criminal prosecution of individuals, but to bring about cultural change. As a regulator, I would like steps to be taken. One of the things that I welcome in the English part of the Bill is that the perpetrators are faced with unlimited fines for some of the offences—there is no cap on fines. With large fines, we change not only employees’ habits, but shareholders’ behaviour, which is important.

[Roger Mullin]

I think the Minister for those remarks and I particularly welcome his remarks about his meeting with the FCA. He is to be commended for that, and we would fully support him. Given his remarks, we will not at this stage push either of the new clauses to a Division, but we will reserve our position and perhaps return to it on Report. I beg to ask leave to withdraw the new clause.

Clause, by leave, withdrawn.

New Clause 20

Recovery orders: repatriation

‘(1) The Proceeds of Crime Act 2002 is amended, after section 266, by inserting—

“266A Recovery orders: repatriation

(1) Where a court—

(a) issues a recovery order under section 266; and

(b) has reasonable grounds for suspecting that property subject to the recovery order was obtained through unlawful conduct in a foreign country,

the court must issue a repatriation order in relation to that property.

(2) A repatriation order shall provide that within a year of the property’s having been recovered the property must be repatriated back to its country of origin.

(3) When a repatriation order has been issued, the Secretary of State shall send a request for cooperation and assistance to a representative of the government of the country of origin, in consultation with relevant third parties, and must, upon a court having issued a recovery order, endeavour to agree with that representative—

(a) as to how such property or the value of such property will be used upon its being repatriated to ensure that wherever possible the property repatriated will be used in a manner that will contribute to the implementation of Sustainable Development Goal 16, that benefits victims of the unlawful conduct, or that ensures the repatriated property is used for the original purpose from which it was diverted;

(b) a mechanism for accounting for the disbursement of the property and for making public a report on the use to which the property has been put.

(4) For the purposes of this section—

“relevant third parties” will include civil society actors and non-governmental organisations; independent audit bodies; the Department for International Development and multilateral development banks; and

“victims” will include communities affected by the unlawful conduct as well as the State.

(5) A repatriation order shall not be issued where—

(a) the court is satisfied that on the balance of probabilities that successful repatriation would lead to the property or the value of the property being subject to conduct that, were it within its jurisdiction, would violate the Human Rights Act 1998;

(b) the court is satisfied that on, the balance of probabilities, that successful repatriation would most likely result in such property being subject to illicit financial activity by a Politically Exposed Person in its country of origin; or

(c) the court is satisfied that, on the balance of probabilities, the property would not reach and/or be used for the purposes as agreed to by the Secretary of State and the representative of the country of origin.

(6) The UK may retain the total value of the recovered property where the Secretary of State and the relevant enforcement agency take all appropriate steps as set out in section (3) subsections (a) and (b) to assist the State in question in repatriating such property and yet receive no cooperation from the other State within a year of having taken such appropriate steps.

(7) For the purposes of subsection (6) “cooperation” is defined as the foreign State’s conclusively demonstrating to the Secretary of State and enforcement agency of its having done or being in the process of implementing the necessary steps required to ensure that the property or value of such property will be used for the ends laid down in section (3) (a) and the court is satisfied on the balance of probabilities that the property or value of such property will be used in accordance with those activities and probabilities as laid down in subsection (5)(a), (b) and (c).

(8) The court may order that a repatriation order may grant that the property could be given, subject to an agreement between the Secretary of State and a representative of the government of the country of origin, to a non-state actor who may distribute the property in accordance with subsection (3)(a) and (b) above.

(9) Upon application by the relevant enforcement agency the court may increase the time period within which repatriation must happen up to a maximum of five years if the court is satisfied that operational circumstances preclude the possibility of repatriation within the period previously required.

(10) The relevant enforcement agency may apply to the court for further extensions to the time period, where there is less than a year before the date of repatriation.

(11) Where the court grants an extension the enforcement agency in conjunction with the Secretary of State must publish a public report detailing the reasons why it sought an extension to the deadline for repatriation.

(12) Where the Secretary of State in conjunction with the enforcement agency publishes such a report as set out the Secretary of State may omit sensitive operational information which would preclude the possibility of repatriation being successful should such details be published.

(13) Such a report without redacted information will be passed to the Secretary of State upon each application made to the court for an extension.

(14) No later than one year after such property is repatriated all such reports will be made public in an uncensored form.””—(Dr Huq.)

This new clause would require property that was subject to a recovery order to be repatriated to its country of origin where the money was options through unlawful conduct in that country.

Brought up, and read the First time.

--- Later in debate ---

There is a third dimension to the new clause: it provides the UK with soft power to influence other states, to ensure that the UK does not stand idly by where there is corruption and systemic human rights violations. Nor can it be even remotely complicit by returning value to countries if it could be used for untoward purposes. I am open to questions from the Minister and tweaks to the clause, but I hope that he will agree that the principle is a good one.

[Mr Wallace]

First, I think that we all support what we are trying to do: returning money that we take off the bad guys to whomever it belongs to. If that is not possible—I used the example earlier of a criminal enterprise whose wealth was created by drug dealers, rather than by ripping off a state or somebody else’s assets—we return it to the prosecution authorities to ensure that they can continue.

Significantly, in the past, we have seen money paid back in cases of grand corruption. The UK is party to the UN convention against corruption, article 57 of which clearly requires embezzled funds to be paid back to the victim state, so we are already obliged under international law to do that. We must do that, and it is what we want to do. The £28 million returned to Macau that the hon. Lady and I both mentioned fell under the auspices of that convention. As we are subject to international law, there is no requirement to put such provisions in our domestic legislation. Nothing in our law prevents us from returning recovered assets.

Sharing and repatriating assets in asset recovery cases is a fast-developing issue in international law, and it is something that the UK fully supports. For example, there is a requirement, under the EU framework decision on the mutual recognition of confiscation orders, that at least 50% of assets recovered on behalf of another member be sent back to that state. The UK can return assets to any country, and where underpinning international agreements are required, we enthusiastically pursue them. For example, we recently concluded an asset-sharing agreement with Nigeria, under the formal title I referred to earlier.

This helpful debate on the Opposition’s new clause has allowed us to put these points on the record, but I trust that the Opposition will agree that there is no need for further primary legislation. Asset return happens anyway, with my full support and encouragement. Indeed, strict requirements in an Act could restrict our flexibility and make it harder to obtain effective asset-return agreements tailored to the peculiarities of individual cases. I am aware of a number of cases in which another country’s Government members have requested that we effectively co-return assets for certain projects, for fear of them disappearing into other parts of that Government that are corrupt. That type of flexibility is important to make sure that moneys returned do indeed get to the right place, rather than going back to the same place, and the same individual turning the assets of crime back into another townhouse in London.

That flexibility is really important, and while I cannot bind any successor Government, it would be odd if any Government chose to say, “No, thank you, we are going to keep everything, break our international law obligations, and upset a number of countries around the world by just pocketing this for ourselves.” It is not what we have done in the past, and it is not what we will do in the future. I urge the hon. Member for Ealing Central and Acton to look to our obligations under international law; I hope that that will satisfy her that we do not need more restrictive primary legislation on this issue.

[Dr Huq]

I listened carefully to the Minister. The 14 subsections in new clause 20 have a set of in-built checks and balances, and I know that the development charities would be disappointed if the new clause was not in the Bill. I accept, as I said, that things are being done on this front—the Macau example is a very good one—but as I understand it, the Minister says that there is no need for the new clause because there are international agreements. He mentioned the EU framework; the first money laundering directive also came from the EU, and we are leaving the EU, so I think it is no bad thing to put our own defence in the Bill, if only for ourselves. We would like to put the new clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

that is the Minister opposite me, is it not?

[Mr Wallace]

That’s me!

[Dr Huq]

Yes. The Minister was quoted in the Jersey States Assembly in a question about the fact that

“the U.K. Government hopes the Crown Dependencies might have made their Registers of Beneficial Ownership of Companies public by the end of this year, or into next year.”

The Deputy asked whether the Chief Minister would

“advise what discussions he has had”

and what steps were being taken to put in place the good work that the Minister has mentioned. The following answer came back:

“The U.K. Government accepts, and has accepted in conversations with us, that our approach meets the policy aims that they are trying to meet and international bodies, standard setters and reviewers, have acknowledged that our approach is a leading approach and is superior to some other approaches taken.”

The answer is quite long, and I will bore people if I read it all out, but in essence it was, “We’re doing enough, and we’ve been told that it’s fine.” That is quite scandalous. A supplementary question was also asked. The Chief Minister of Jersey has said, “We’re doing what we’re doing, and it’s enough.” That does not go far enough. As long as such countries can get away with that, they will do that. There is a race to the bottom. They are all saying, “We don’t have to do it; no one else is doing it.”

As I am sure the Minister knows, Orders in Council have been made over the years in relation to different things. One was made in 1991 to abolish capital punishment for the crime of murder in the Caribbean territories of Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos Islands. In 2009, the UK Government suspended the ministerial Government and the House of Assembly of the Turks and Caicos Islands. The Government basically went in to run the thing: direct rule from London was imposed, despite opposition and criticism. There is a longer list of examples. That has been done before. It seems from the Chief Minister’s answer that Jersey thinks it can get away with it. Could we perhaps set a date of, say, 2020 and say that if it has not published entirely public registers of beneficial ownership by then, we will presume that all money coming through is dirty, or something like that? That may concentrate minds.

I could go on and on about the new clause, but I was told to be brief this afternoon, so I will end there for now. I am curious to hear the Minister’s response.

[Roger Mullin]

The SNP has been very supportive of everything today, but I have to say that for the past year and a half I have been having discussions with the Isle of Man authorities, including with the First Minister there, and I have found them genuinely willing to engage in discussions. I think that the language used about the Isle of Man was unfortunate.

[Mr Wallace]

As the hon. Lady rightly says, this subject has been raised significantly, both on Second Reading and elsewhere. New clause 21 would set a legislative timetable for the UK Government to ensure that overseas territories have a public register of beneficial ownership, and to work with Crown dependencies to achieve the same outcome. There is considerable interest in this specific issue and I am pleased that this amendment allows us to debate it. I understand where the Opposition are coming from and appreciate the desire for these jurisdictions to have publicly accessible registers of beneficial ownership information—David Cameron made this an ambition in 2015. I would be grateful if the hon. Lady clarified why she chooses to treat Crown dependencies differently from overseas territories when it comes to some of the measures; that would be helpful to all Members.

While the overseas territories and Crown dependencies are separate jurisdictions with their own democratically elected Governments, and are responsible for their own economic diversification and fiscal matters, we have been working with them on their role on company transparency. If public registers emerge as a new global standard, the UK Government would expect all relevant jurisdictions to meet that standard. However, it would be wrong to say that, in the absence of public registers, no efforts have been made to increase corporate transparency and tackle tax evasion and corruption. The Crown dependencies and those overseas territories with financial centres are already taking a number of important steps on beneficial ownership and tax transparency, which will put them well ahead of most jurisdictions. This includes some of our G20 partners and other major corporate and financial centres, including some states in the United States. These measures will prevent criminals from hiding behind anonymous shell companies and mark a significant increase in the ability of UK law enforcement authorities to investigate bribery and corruption, money laundering and tax evasion.

I asked officials whether there has ever been an example of our imposing legislation on the Crown dependencies. As far as we can find out, in recent history there has never been an example of our imposing legislation on Crown dependencies without their consent. That is important—we have not gone around imposing our will on Crown dependencies as we see fit. Where we have done so on overseas territories, it has been on very strong moral issues such as capital punishment. Both in Crown dependencies and overseas territories, people have moved quite significantly and, I have to say to the hon. Lady, far more significantly than in 13 years of a Labour Government. We cannot sit here and ignore the elephant in the room.

Under our Government, we now have a position where the debate in this room is about the word “public” and whether registers are going to be public. It is not about whether these islands and other places will have a central register of beneficial ownership. By next year, they will either have a direct central register or linked registers and that is 90% of the way. By the way, our law enforcement agencies will have automatic access to that information.

The best thing, in my view, would be to say, “Yes, we know what David Cameron’s intention was in 2015 when he made that statement; yes, the United Kingdom pretty much leads the world in making our register public for the whole of the United Kingdom”, but also to say, “Let us revisit this once we get the Bill through, once we see whether our law enforcement agencies can use that access to prosecute, deter, change culture and show the way forward.” If that is not happening, of course we can have these debates again, but we should recognise that a lot of those countries have moved without our imposing our will on them, and we are hopefully giving access to our National Crime Agency and HMRC—all the things that we struggled to get for very many years. Let us see where that journey takes us. Our intention is clear. We pretty much lead the world in this. I urge hon. Members to recognise that we are going a long way.

[Richard Arkless]

The Minister will forgive me if I am wrong, but he has only outlined the position and the progress made by the Crown dependencies in having registers and information sharing. Will he elaborate on the overseas territories or did I miss something?

[Mr Wallace]

I am grateful to the hon. Gentleman for pointing that out. I meant and/or the overseas territories. The full house will, hopefully by next year, have those registers in place with automatic sharing enabled for our law enforcement agencies, and vice versa—should someone choose to use our country to hide tax from those other countries, their law enforcement agencies will be able to have it.

What I notice about all this is that the world is changing. Transparency is in the ascendancy, secrecy is not. Whether these places are overseas territories or other countries that are nothing to do with the United Kingdom, it is not secrecy that makes them competitive or attractive, but the tax rates and surrounding regulations. That is generational change. Yes, there will be people who wish to hide their wealth for all the wrong reasons, but we are now in a position where our agencies and bodies of law and order will be able to access those areas. They will not have to rely on leaks or third-hand information.

I would not be surprised if, in five or 10 years, we are talking about entirely different countries around the world, maybe even countries that we might think would not be harder to access, but actually are. Those countries might have a more developed legal system and a more protective privacy system that makes it harder for our forces of law and order to get hold of data. I certainly think that these places have come 90% of the way, and we should see whether that works for us. We all have the intention and the United Kingdom is leading by example.

The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far. Irrespective of the point raised by the hon. Member for Ealing Central and Acton about their attitude and about whether they were pushed or forced, they were not pushed there by a gunboat. It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which, after all, makes a real difference. Therefore, I urge the hon. Lady to withdraw the new clause.

[Dr Huq]

It is not good enough to say that we just have to pat ourselves on the back and that everything is fine. I am a bit disappointed with the Minister for trotting out that thing about 13 years of Labour. What did Labour do? We passed the Proceeds of Crime Act 2002, which the Bill amends; the Serious Organised Crime and Police Act 2005; the Bribery Act 2010, section 7 of which we discussed so much this morning; and the Money Laundering Regulations 2007. We created the Serious Organised Crime Agency to ensure a single, intelligence-led response to organised crime.

[Mr Wallace]

Will the hon. Lady give way?

[Dr Huq]

Let me finish this list. We also passed the Terrorism Act 2000, part 3 of which we have been amending here, as well as part 2 of the Anti-terrorism, Crime and Security Act 2001—legislation to deal with all these things that we have been talking about, such as terrorist funding. It is a bit low of the Minister to trot out that one about 13 years of Labour. We have been consensual and friendly all the way through this Committee, saying what good legislation this is, so that is a bit tawdry. [Interruption.]

[The Chair]

Order. It is a bit difficult to hear what the hon. Lady has to say. Is the Minister intervening?

[Mr Wallace]

We could say that that is a whole list of missed opportunities for Labour to impose its will on the Crown dependencies. The point is that this takes time. I do not expect Labour to rustle up a perfect, tax-transparent solution to the problem; I did not expect Labour to do it in 13 years, and it is unreasonable to say suddenly, “We are going to impose it in the Bill.” There has been a direction of travel all the way through the last decade and a half. This has been about building a slow but thorough process to make sure that we got to where we are. We will be back again on economic crime and reviews of regulators, and to build on some of these issues.

--- Later in debate ---

[The Chair]

With this, it will be convenient to discuss the following:

That schedule 5 be the Fifth schedule to the Bill.

Clauses 46 to 51 stand part.

[Mr Wallace]

The remaining clauses in part 4 are relatively technical and straightforward. I am tempted to sit down after saying that. They are also similar to other pieces of legislation, so I will not delay us much longer, beyond highlighting a few points.

Clause 46 allows the Secretary of State to make by regulation such provision as they consider necessary in consequence of this Bill. Clause 47 sets out the procedural requirement for making regulations in respect of the devolved Administrations, while clause 49 covers the Bill’s territorial extent. Most of the Bill extends to England, Wales, Scotland and Northern Ireland. As I stated on Second Reading, we expect the Scottish Government and the Northern Ireland Executive to seek legislative consent motions from their legislatures; I welcome that, and support them in doing so. I am grateful for our constructive and ongoing engagement with the devolved Administrations.

As this brings us to the end of the Committee, I pay tribute to the Chair and co-Chair for their expeditious and authoritative chairing of our proceedings, and to the many members of the House authorities that have facilitated our consideration of the Bill. They include the Clerks of the Public Bill Office, the Doorkeepers, Hansard and many others.

I am grateful for the constructive approach taken by the Opposition Front Benchers and the Scottish National party in trying to make the best of the Bill. It is not over yet; I understand that there is a long way still to go. I am grateful for the amendments that were tabled, including those from the hon. Member for Stoke-on-Trent Central. I thank the hon. Members for Dumfries and Galloway, and for Kirkcaldy and Cowdenbeath, for pointing out the issues to do with Scottish limited partnerships and other concerns; I shall meet them for discussions.

The fact that the Committee stage is to finish early is a testament to the significantly cross-party approach, it says here. We shall, I hope, return to the Floor of the House with the Committee’s strong endorsement of the Bill as well drafted legislation that will make a difference in the fight against organised crime.

Since I took on my present job, I have had to deal with a range of matters, including terrorists and serious organised crime. The bit that scares me the most is the serious and organised crime—the wealth of those individuals, and the impunity with which they operate. I cannot say how helpful the Bill will be, at least in taking away their profit and returning it to the countries or people they have stolen from or, failing that, to the forces of law and order. When I go to sleep at night, it is serious and organised crime that scares me more than anything else in my brief. I hope that we have gone a long way towards at least deterring those engaged in it, and sending a strong message to people who think that such behaviour is permissible.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Schedule 5

Minor and Consequential Amendments

Amendments made: 54, in schedule 5, page 140, line 11, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 73, in schedule 5, page 140, line 32, at end insert—

‘( ) In paragraph 5, in sub-paragraph (1), for “this Schedule” substitute “any provision of this Schedule other than Part 2A”.

( ) In that paragraph, omit sub-paragraph (4).”

This amendment is consequential on NC18.

Amendment 74, in schedule 5, page 140, line 33, at end insert—

‘( ) In paragraph 8(1), for “this Schedule” substitute “paragraph 6”.”

This amendment is consequential on NC18.

Amendment 75, in schedule 5, page 140, line 34, at end insert—

‘( ) After paragraph 9 insert—

Restrictions on release

9A Cash is not to be released under any power or duty conferred or imposed by this Schedule (and so is to continue to be detained)—

(a) if an application for its forfeiture under paragraph 6, or for its release under paragraph 9, is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded;

(b) if (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the cash is connected, until the proceedings are concluded.”

( ) In paragraph 10, in sub-paragraph (1) after “Schedule,” insert “and the cash is not otherwise forfeited in pursuance of a cash forfeiture notice,”.

( ) In that paragraph, after sub-paragraph (8) insert—

“(8A) If any cash is detained under this Schedule and part only of the cash is forfeited in pursuance of a cash forfeiture notice, this paragraph has effect in relation to the other part.””

This amendment is consequential on NC18.

Amendment 55, in schedule 5, page 141, line 27, leave out “303O(4) and insert “303O(5)”

This amendment corrects an incorrect cross-reference.

Amendment 56, in schedule 5, page 142, line 2, at end insert—

( ) in paragraph (b) (as amended by section 28 of this Act), for “or 298(4)” substitute “, 298(4) or 303O(5)”;” —(Mr Wallace.)

This amendment is consequential on amendment 15 and corresponds to the amendment of section 82 of the Proceeds of Crime Act 2002 made by paragraph 18(3)(b) of Schedule 5 to the Bill, as amended by amendment 55.

Schedule 5, as amended, agreed to.

Clauses 46 to 48 ordered to stand part of the Bill.

Clause 49

Extent

Amendment made: 52, in clause 49, page 102, line 34, at end insert—

“() section 28(2A);” —(Mr Wallace.)

This amendment is consequential on amendment 15.

Clause 49, as amended, ordered to stand part of the Bill.

Clause 50

Commencement

Amendment made: 53, in clause 50, page 103, line 5, after “25” insert “and 28(2A)”—(Mr Wallace.)

This amendment is consequential on amendment 15.

Clause 50, as amended, ordered to stand part of the Bill.

Clause 51 ordered to stand part of the Bill.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Dr Huq]

It has been a pleasure to serve under your chairmanship, Mrs Main, and that of Sir Alan Meale in the earlier sittings. I commend the Minister on the Bill. We can all sleep safely in our beds because of it. I am fortunate that my first Front-Bench service has been with such a nice Minister. I look forward to working constructively with the Government on Report—even if there were some tiny things. However, let us not raise those.

Criminal Finances Bill

Ben Wallace Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st February 2017 Commons Chamber

[The Minister for Security (Mr Ben Wallace)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 1—Civil recovery: gross abuse of human rights—

‘(1) Part 5 of the Proceeds of Crime Act 2002 (civil recovery of the proceeds etc. of unlawful conduct) is amended as follows.

(2) In section 241 (which defines unlawful conduct), after subsection (2), insert—

“(2A) Conduct which—

(a) occurs in a country or territory outside the United Kingdom and has been designated as conduct by a person connected to a gross human rights abuse in accordance with the provisions of section 241B, and

(b) if it occurred in a part of the United Kingdom, would be or would have been unlawful under the criminal law of that part at the relevant time,

is also unlawful conduct.”

(3) After section 241 (which defines unlawful conduct), insert—

“241A Conduct connected to a gross human rights abuse

(1) “Conduct connected to a gross human rights abuse” means—

(a) involvement by a Person (“A”) in torture or other serious breaches of human rights and fundamental freedoms against a Person (“B”) where B sought or seeks—

(i) to expose illegal activity carried out by foreign public officials, or

(ii) to obtain, exercise, defend or promote human rights and fundamental freedoms,

(b) activities by a Person (“C”) as an agent in a matter relating to an activity by A described in paragraph (a),

(c) activities by a Person (“D”) to profit from, materially assist, sponsor, or provide financial, material or technological support for, or goods and services in support of, an activity by A described in paragraph (a),

(d) commission by a Person (“E”), whether or not a foreign public official, of the illegal activity described in paragraph (a)(i).

(2) For the purposes of this section, it is immaterial where the conduct occurred.

(3) In this section “human rights and fundamental freedoms” means the “Convention rights” as defined in section 1 of the Human Rights Act 1998.

241B Designation of conduct connected to a gross human rights abuse

‘(1) The High Court may make an order designating that the actions of the respondent constitute conduct connected to a gross human rights abuse and, if considered appropriate, that—

(a) a person is prohibited from dealing with property, funds or economic resources owned, held or controlled by the respondent if the person knows, or has reasonable cause to suspect, that the person is dealing with such property, funds or economic resources,

(b) a person is prohibited from making property, funds or financial services available (directly or indirectly) to the respondent if the person knows, or has reasonable cause to suspect that the person is making the funds or financial services so available,

(c) a person is prohibited from making funds or financial services available to any person for the benefit of the respondent if the person knows, or has reasonable cause to suspect, that the person is making the funds or financial services so available.

(2) An order under subsection (1) may only be made on application.

(3) An application for an order under subsection (1) may be made by—

(a) the Secretary of State,

(b) an individual, or

(c) an entity, including a non-governmental organisation.

(4) An application for an order under subsection (1) must be supported by a statement of information which addresses—

(a) the circumstances surrounding the respondent’s conduct connected to a gross human rights abuse, and

(b) the nature and extent of the respondent’s involvement.

(5) An application for an order under subsection (1) may be made without notice to the respondent to a judge in chambers.

(6) The Court must be satisfied that it is in the public interest to make an order under subsection (1).

(7) The Court shall reach a decision on an order under subsection (1) on the balance of probabilities.

241C Duration, extension, variation and discharge of an order

‘(1) The High Court shall specify the duration of an order under section 241B(1) which shall not exceed two years.

(2) In determining the duration of an order, the Court shall have regard to the likely duration of consequential proceedings under this Part.

(3) The Court may extend an order for a maximum period to two years at any time before it expires, if it is satisfied that the requirements of a designation order continue to be met.

(4) An extension application may be made without the need for a hearing if the court considers it appropriate.

(5) An application to extend, vary or discharge an order may be made to the court by—

(a) the Secretary of State,

(b) the applicant,

(c) the respondent, or

(d) any person affected by the order.

(6) An application to discharge a designation order must be made by the applicant as soon as reasonably practicable in circumstances where the requirements of an order are no longer satisfied.

241D Appeals, etc.

‘(1) The following persons may appeal to the Court of Appeal in respect of the High Court’s decision on matters falling to be decided under sections 241B and 241C—

(a) the applicant,

(b) the respondent, or

(c) any person affected by the order.

(2) On an appeal under subsection (1) the Court of Appeal may—

(a) confirm the decision, or

(b) make such orders as it believes appropriate.

(3) An appeal lies to the Supreme Court from a decision of the Court of Appeal on an appeal under this section.

(4) An appeal under this section lies at the instance of any person who was a party to the proceedings before the Court of Appeal.

(5) On an appeal under this section the Supreme Court may—

(a) confirm the decision of the Court of Appeal, or

(b) make such order as it believes is appropriate.

241E Standard to be applied

All matters to be determined by a court under sections 241B to 241D are to be decided on the balance of probabilities.

241F Costs

In the exercise of its discretion, a court may, on application, make a costs capping order in respect of proceedings under sections 241B to 241D.

241G Duties in respect of gross abuse of human rights

‘(1) It shall be the duty of the Secretary of State to apply for an order under section 241B where the Secretary of State is satisfied that—

(a) the requirements for the making of an order are met; and

(b) it is in the public interest to make the application.

(2) It shall be the duty of the Secretary of State to maintain a public register of—

(a) individuals in respect of whom orders have been made under section 241B(1),

(b) the circumstances giving rise to the making of such orders, and

(c) any decisions of a court under sections 241C and 241D in relation to such orders.

(3) In any case where a relevant authority considers that evidence is available of property being held by a person in respect of whom an order has been made under section 241B which may represent property obtained through unlawful conduct, it shall be the duty of the relevant authority to seek to initiate proceedings for civil recovery under this Part.”

(4) In section 304 (which defines recoverable property), after subsection (1), insert—

“(1A) Property of a person who is the subject of a designation order under section 241B is presumed to have been obtained through unlawful conduct unless the contrary is shown by the respondent.””

This new clause extends the scope of unlawful conduct for the purposes of Part 5 of the Proceeds of Crime Act 2002 to cover to certain actions connected to a gross human rights abuse which has taken place abroad.

Government amendments 58 and 59.

[Mr Wallace]

Some time has passed since we last considered this Bill. There was, as hon. Members will recall, a great deal of cross-party consensus on it, both on Second Reading and in Committee, and I hope that we will be able to continue in that same spirit of constructive debate and healthy scrutiny today.

This first group of amendments concerns the extremely grave matter of gross human rights abuses or violations. The Government are committed to promoting and strengthening universal rights globally, and I welcome the opportunity to debate this issue. In particular, these amendments have been prompted by the harrowing case of Sergei Magnitsky. Magnitsky was not a serious criminal; he was a lawyer who tried to blow the whistle on large-scale tax fraud in Russia, and he believed that he would be protected by the law. Unfortunately, he died in state custody in 2009 after suffering both mistreatment and assault, and being denied medical attention. I share the strong feelings of many hon. Members about this case, and I want to reassure the House that the Government have expressed, both publicly and to the Russian Government, our serious concerns about Mr Magnitsky’s death. Of course, we must also remember that his case is only one of many atrocious human rights violations committed globally each year.

As I am sure that hon. Members will highlight, the US has legislated to prohibit the entry of certain named individuals to the US and to forbid them use of the US banking system. Less than two months ago, President Obama’s Administration extended the legislation so that it could be applied to those involved in human rights violations, wherever in the world they have taken place. That sends an important signal that perpetrators of gross human rights violations will face consequences. However, we have an entirely different legal system, which merits a different approach.

I pay tribute to those hon. Members who have raised this issue by tabling new clause 1—in particular, my hon. Friend the Member for Esher and Walton (Mr Raab), the right hon. Members for Barking (Dame Margaret Hodge) and for Carshalton and Wallington (Tom Brake), and the hon. Member for Ross, Skye and Lochaber (Ian Blackford). I am grateful to hon. Members for giving me advance notice of the amendment, and am pleased to have had the opportunity to discuss it with many of its signatories.

It has always been the Government’s position that for further legislation to be warranted on this issue, there would need to be a real case that existing powers were insufficient. I hope that hon. Members will agree that we should avoid doing anything that might have an impact on the effectiveness of our existing sanctions and civil recovery powers. The National Crime Agency has confirmed that it has considered all the material provided to it on the Magnitsky case. It concluded that the individuals whom we believe to be connected to the case do not reside in the UK, and it has identified no assets of value in the United Kingdom that are connected to the case, so the additional powers proposed in new clause 1 would have no obvious material effect on the individuals involved in this case.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

The point about the Magnitsky Act in the US is that it pulls together the visa ban, the ban on using American banks and the inability to trade there; the advantage is that it is all pulled together. I appreciate that the scenario is different in this country, but will the Minister please explain how he intends to pull the links together in this country, using the different pieces of existing legislation?

[Mr Wallace]

I am grateful to my hon. Friend for that point. I will get to that later in my speech, but we have to recognise this difference between the United States and the UK: here, most of our sanctions regimes are under the European Union umbrella. Of course, there will be time to discuss those sanctions, and the United Kingdom’s post-Brexit arrangements, at a later date. When it comes to sanctions, we have slightly different dispersals of authority and power from the United States, which often can, and does, act entirely unilaterally in this area; we should point that out.

One problem with new clause 1 is that we think it would be non-compliant with our domestic human rights law, because it contains no derogations. It would freeze all the assets of a designated individual, so they would not have any funds for living expenses or medical treatment, or to pay for legal representation. The reversal of the burden of proof, so that it would be assumed that all assets owned by designated individuals were the proceeds of their unlawful conduct, would also be an unprecedented step. That is incongruous with the existing civil recovery regime and could be judged by the courts to be disproportionate.

However, we recognise the strength of feeling on this matter, and understand the deterrent effect that such an amendment would have on those who seek to profit from the gross abuse or violation of human rights overseas.

[Tom Brake (Carshalton and Wallington) (LD)]

The Minister is clearly very well informed on this issue, and I know that he has had meetings on the subject. If assets connected to the case were identified in the UK—I know that there is a dispute with Bill Browder, who believes that there are such assets here—is the Minister confident that existing legislation or his new clause 7 would enable them to be frozen?

[Mr Wallace]

I am grateful to the right hon. Gentleman for his point. I have to respect the boundaries of our law enforcement agencies. As a Minister, I cannot direct them to take action; they have an operational freedom and independence that we value greatly in this country. They have said to me that should actionable evidence be presented to them, they would be free to follow that up and enforce the law. Speaking as the Minister, where actionable evidence of gross human rights abuses or other criminal offences is presented, of course we would like to see action taken. This is not about trying to shelter people who have been involved in those offences; it is about trying to make sure that the appropriate action is taken when the correct evidence is presented. I absolutely concur with the right hon. Gentleman’s point: it is important to understand that we need to act on the evidence. If there is evidence, we could take action, even without this legislation. I certainly urge our law enforcement agencies to take action to make sure that people are held to account for the atrocious murder in Russia of Mr Magnitsky.

We have tried to come some way towards meeting many of the concerns of hon. Members by tabling new clause 7 and the consequential amendments 58 and 59. They would widen the definition of “unlawful conduct” in part 5 of the Proceeds of Crime Act 2002 to include torture or

“the cruel, inhuman or degrading treatment”

of those exposing corruption, or obtaining, exercising, defending or promoting human rights, including in cases where that conduct was not an offence in the jurisdiction in which it took place. That would allow any assets held in the UK that were deemed to be the proceeds of such activity to be recovered under the provisions in part 5.

[Chris Bryant (Rhondda) (Lab)]

The Government’s new clause 7 contains no duty on the Government to act at all; they can simply ignore the provisions. That is one of the key differences between new clause 7 and new clause 1, tabled by the hon. Member for Esher and Walton (Mr Raab).

[Mr Wallace]

The hon. Gentleman talks about duty, but there are lots of criminal offences on the statute books on which the Government do not have a duty to act. We leave it to the interpretation and freedom of our law enforcement agencies to act. Are we to say that the duty in this case is greater than the duty on the police to act on burglary or on a whole range of other criminal offences? The fundamental issue is that the hon. Gentleman wants to put a duty on the Government for one specific type of criminal offence, which would, I am afraid, hinder the freedom of our law enforcement agencies to take the appropriate action when the evidence was presented to them.

[Chris Bryant]

But in the Government’s new clause, as opposed to new clause 1, there is no provision for third parties to bring a case to the courts to allow the seizure of assets, so, yet again, the Government are closing off the options for tackling money laundering in London and the UK.

[Mr Wallace]

I am afraid we are not. The National Crime Agency, the Serious Fraud Office and Her Majesty’s Revenue and Customs are not full of people who do not want to do their job. They want to enforce the law: they want to go out and catch the criminals and stop money laundering. It is slightly insulting to imply that if we did not put a duty on them, they would not do it. They would do it. The problem with new clause 1 is that it would allow non-governmental organisations and individuals—it does not define whether those NGOs or individuals are foreign or from the UK—to go to the court, with limited liability, to force the Government to take action, without a high threshold at all.

For example, under new clause 1 a Cuban exile living in Florida who does not like the rapprochement with the Cuban Government could come to our courts to allege human rights abuse and make an application against the Cuban ambassador’s assets in this country, and actually confiscate or freeze those assets. It would not only preclude us from making peace or moving on with some countries, but would allow massive amounts of vexatious claims based on gimmick politics. That is why we have to respect the professionalism and independence of our law enforcement agencies and allow them to make the case based on the evidence presented to them.

[Chris Bryant]

That is simply not the case. For example, we already regularly have lots of vexatious applications from Russia for the extradition of Russians who are now resident in the United Kingdom, but the court decides. New clause 1 would not allow an individual to decide that somebody’s assets must be frozen; a court would decide.

[Mr Wallace]

First, the hon. Gentleman misses the point that courts do not like vexatious complaints. They do not like time-wasting applications with what would be in the case of new clause 1 limited liability for those people who want to use the court’s time to make a statement. Secondly, applications for deportation are often made by the state. The hon. Gentleman would open it up to individuals all over the world to come to our courts, without liability, to make the case for or to make a gesture out of freezing individuals’ assets, without any recourse to the state or even necessarily to evidence. That would open up a whole can of worms for countries around the world.

I shall give another example. We have sponsored and supported the peace deal in Colombia. Should the Colombian Government at some stage choose to send somebody with a background in the FARC to represent them or to be a cultural attaché in their embassy or something, and somebody in Colombia does not like that, under new clause 1 they could, as an individual, come to a court here and make a tokenistic application. The judiciary might throw it out, but there is capped liability, so the court’s time could be wasted writ large by lots of people making statements and blocking the courts.

[Mr Djanogly]

Have the Government considered whether any application should go first to the Attorney General before being allowed to proceed? That might stop the abuse that the Minister is suggesting.

[Mr Wallace]

We did consider that in consultation with the office of the Attorney General and the Solicitor General, but it was felt that there was not the appropriate need for that, so we progressed with new clause 7 as it is drafted. We should remember that we are putting on the statute book a new power to take action based on gross human rights abuse, torture and degrading treatment. We have not done that before and it is a major step. It is a major signal to countries around the world that if evidence is presented, we could interdict with their assets. That sends the powerful message that London and the United Kingdom are not bases for them to put their assets or ill-gotten gains from such behaviour.

[Sir Eric Pickles (Brentwood and Ongar) (Con)]

Surely that is the substantive point. The concern would be that we would get not only vexatious complaints, but complaints designed for publicity, in the almost certain knowledge that such complaints would not be seen through by the courts and there would be virtually no cost to the people making the complaint. New clause 7 provides the opportunity to nab the guilty, and it says to people that bloodstained dictators have no place putting their money in this country.

[Mr Wallace]

My right hon. Friend is absolutely right that it sends a message, but it also respects the independence of our law enforcement agencies so that they can apply the law and take action when they are presented with evidence, which will ensure that the courts’ time is not wasted and that we get successful results when we deal with these individuals. It will also ensure that it is done in a way such that the Executive retains the initiative to carry out the process and prevent vexatious complaints. Judges will tell us that they do not want their courtrooms to become public relations arenas in which people can make vexatious applications; they want their courts to be able to decide on the basis of evidence. Under new clause 7, they will be able to do that, but we respect the operational independence of our law enforcement agencies.

All that explains why we tabled the new clause. As I have said, it would allow any assets held in the UK that were deemed to be the proceeds of the activities I outlined to be recovered under the provisions in part 5. Of course, any civil recovery would be subject to all the existing processes and legal safeguards in the Proceeds of Crime Act 2002. The court would need to be satisfied, on the balance of probabilities, that the property in question was the proceeds of crime, or was likely to be used to fund further criminal activity. Law enforcement agencies would, as ever, need to consider which of their powers to utilise on a case-by-case basis.

I hope Members will agree that the new clause would send a clear statement that the UK will not stand by and allow those who have committed gross abuses or violations around the world to launder their money here. I have been the Minister in charge of the Bill from the beginning, and when colleagues from either side of the House have tabled amendments, I have asked my officials, “Do they have a point?” I have asked my officials about the evidence set against Mr Magnitsky’s killers and to find out whether we have actually done the work we say we are doing. I make sure; I do not just take things at face value. It is important to say that I am confident that we have not taken action in this case because we have not yet had the evidence to do so or the assets have not been located in the right place. I have checked that out and verified it.

I have come to the House today with an attempt to put a compromise in statute—to put gross human rights abuse on record for the first time. I hope we can send the right message to the regimes, criminals and individuals around the world, while at the same time respecting the law enforcement agencies so that they can carry out their job unhindered by political interference, or by third-party groups or anyone else who might want to use publicity rather than actual evidence to further their cause. That is really important. I shall pause my comments there and wait to hear from other Members, and then respond at the end of the debate.

[Richard Arkless (Dumfries and Galloway) (SNP)]

It is not fair for us to live in a world in which criminals are free to generate cash and spend it without fear of repercussion. Given what I have learned during the progress of the Bill, I think all Members on both sides of the House would agree with that sentiment. There simply must be a level playing field for the vast majority in society who chose to play by the rules.

Until now, provisions on financial crime have been focused on anti-money laundering regulations and proceeds of crime legislation, which have been specifically geared towards dealing with the proceeds of drug traffickers and bank robbers. In many senses, it has worked. It is not as easy to launder money in 2017 as it used to be, although, sadly, it is not impossible. It used to be the perception of criminals that if they could evade capture and not flash the cash, they could eventually spend their ill-gotten gains. In many cases, criminals looked forward to spending the gains when they were released.

Thankfully, the world has moved on, and this Bill is an attempt to move us another step ahead of the criminals, so that we as a society are fit to attack the finances of criminals in 2017 and beyond. We cannot buy into the rule of law unless we can agree to the evolution of regulations surrounding the financial industry that has happened over the years. Today, we face the threat of grand corruption, particularly in relation to politically exposed people, which is facilitated for the most part—perhaps unwittingly—by the City of London.

Last year, The Guardian revealed, through the Panama papers, how a powerful member of Gaddafi’s inner circle had built a multi-million pound portfolio of boutique hotels in Scotland and luxury homes in Mayfair, Marylebone and Hampstead in London. He was head of Libya’s infrastructure fund for a decade and has been accused by Government prosecutors in Tripoli of plundering money intended for schools, hospitals and infrastructure projects.

Scottish police have confirmed that they are investigating the matter. Libya has made a request for an asset freeze, but, as far as I understand it, the freeze has not been implemented. With the powers contained in the Bill, we could have dealt with such an injustice much more swiftly, so, in general terms, we welcome its provisions. However, as I intimated earlier in this process, our issue is not with what is in the Bill, but with what is not in the Bill. None the less, that list has narrowed as this process has continued.

The Bill does not satisfactorily address corporate economic crime—which we will discuss in the third group of new clauses, which includes proposals on Scottish limited partnerships, on which my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) has done so much to campaign—and the real facilitator of criminal finances: the profit-seeking, responsibility-shedding and self-serving banking culture that we have in the UK and the wider western world. Until we challenge the attitude of the banks that house these moneys, we will never absolutely deal with the criminality. The Bill attempts to deal with the symptoms of the criminality—getting at the assets and seizing them—but it does not deal with the facilitators, the banks, which is a great shame.

New clauses 1 and 7 have been touched on by the Minister, and much of the talk has been about the scope for applicants to bring an application under these provisions. In general terms, those new clauses seek to extend the scope of unlawful conduct. That makes sense in that a public official—or someone acting with the consent or acquiescence of a public official—who is depositing funds in the UK should not be safe on account of that criminality having occurred abroad. I think that most people would agree with that sentiment; it is a sensible and logical step, and one that we support in principle.

The protection of human rights is a profoundly good thing. Violations of human rights should not be allowed to remain hidden behind international borders—they should be there for the world to see—and the consequences of such violations should be global consequences. With the adoption of either new clause 1 or new clause 7, the UK will no longer be a hiding place in that respect, and that is worth lauding.

What are the differences between the new clauses? As has been suggested, there is wider scope for more applicants to make applications under new clause 1. The Government say that that is not necessary, as the judiciary would vet those claims; it would be up to the court, not the applicant, to decide their merits. One other difference is that the ambit of new clause 1 is wider with regard to potential respondents, as it includes more people connected to criminality. Will the Minister touch on the scope of respondents as well as the scope of applicants and the differences between new clauses 1 and 7?

Furthermore, new clause 7 contains a provision, which is mirrored in amendments 58 and 59, to set the limitation period for actions under unlawful conduct to 20 years. In one sense, we welcome that, because without it the standard limitation periods of five and six years would apply. However, given that we are talking about gross violations of human rights—torture and the like—should a perpetrator ever be free from those crimes? Are we saying that, 20 years after someone has committed a gross violation of human rights, their money should be safe? Given that some of these abuses take years to come to light, are there unintended consequences that could let some of the criminals off the hook?

--- Later in debate ---

[Mr Dominic Raab (Esher and Walton) (Con)]

I rise to speak to new clause 1, which is known as the Magnitsky amendment, and to touch on the Government’s new clause 7 in the process.

New clause 1 was tabled by me, the right hon. Member for Barking (Dame Margaret Hodge) and 50 hon. Members representing eight different political parties across the House. That is testimony to the cross-party nature of our ambition, which was kindled by the tragic murder, on the instructions of the Russian state, of the young Russian lawyer, Sergei Magnitsky. In November 2008, Magnitsky was arrested and detained. His crime was to identify the perpetrators of the biggest tax fraud in Russian history, which was committed by the Russian Government against the investment firm, Hermitage Capital, that employed Magnitsky and against the Russian taxpayer to the tune of a mind-boggling $230 million.

For his courage, Sergei Magnitsky was jailed and tortured for almost a year, and then ultimately murdered. The crime was perpetrated by some of the very officials whom Magnitsky had identified. Although those appalling crimes were documented by two Russian investigations, no one has ever been brought to justice in Russia. Perversely, it was Magnitsky who was convicted, posthumously, of fraud—a sickening snapshot of the corrupt and venal state of the Russian justice system today.

Large amounts of the stolen money were subsequently laundered out of Russia, and Hermitage Capital submitted to all the relevant UK authorities detailed evidence of $30 million that was sent to the UK between 2008 and 2012, including to firms run or owned by the Russian mafia. Despite receiving that evidence, the Metropolitan police, the Serious Organised Crime Agency, the Serious Fraud Office, HMRC and the National Crime Agency have never opened a single investigation. Notwithstanding the Minister’s comments, this case also shines a light on the weaknesses of our own justice system, which is what we are here to address today. We should be clear in this House that, although Magnitsky has been the standard-bearing case for reform, it is by no means an isolated case. According to the Home Affairs Committee’s 2016 report on the proceeds of crime, an astonishing £100 billion is laundered through UK banks alone each year, and we know from the NCA that only around 0.2% of that figure is currently frozen.

No one wants Britain to be a competitive global hub that attracts investment and is open to international talent more than I do, but I also want us to be known the world over for our integrity, our commitment to the rule of law and our adherence to the most basic of moral principles. We therefore have to stop turning a blind eye to the blood money of butchers and despots that, frankly, flows all too freely through some UK businesses, banks and property. New clause 1 is designed to address the weaknesses in the current UK asset-freezing regime. I pay tribute to Jonathan Fisher QC, the expert in this field—one of the leading experts in public law and human rights law—who carefully helped us to craft the mechanism.

New clause 1 would enable the Secretary of State, an individual or a non-governmental organisation to convince the High Court to make an order to empower the UK authorities to freeze assets where it can be demonstrated, on the balance of probabilities, to a senior judge that those assets relate to an individual involved in, or profiting from, gross human rights abuses. The clause would put a duty on the Secretary of State to pursue such an order when there is sufficient evidence and when it is in the public interest to do so—there is a measure of flexibility—and would establish a public register of those who are subject to such orders, all against the backdrop of appropriate safeguards and due process in law.

The Government have responded with their own proposal, new clause 7. In fairness, it is only right and proper to pay tribute to the Security Minister and the Foreign Secretary for engaging so seriously with the issue and, ultimately, for being willing to act. New clause 7 would, indeed, mark a significant step forward, principally because it would provide specific statutory grounds for an asset-freezing order based on gross human rights abuses and would target individuals responsible for, or profiting from, such crimes against whistleblowers and defenders of human rights abroad.

My view is that new clause 7 is not as robust as new clause 1, mainly because it does not impose a duty on UK law enforcement agencies to act subject to the flexibility I described, and it omits the third-party application procedure and removes the public register. In each of those three cases, I understand and recognise the Minister’s reasons why that is the Government’s position—it is probably to be expected—and I do not want to let the best be the enemy of the good, but I retain at least a measure of underlying concern. My concern touches on something that is so often the case with criminal justice legislation: the extent to which the new power will be enforced in practice. The hon. Member for Rhondda (Chris Bryant) touched on that, and the concern is probably shared across the House.

If I may be so bold, I would like to elicit some further reassurances from the Minister—which he may feel free to indicate during my speech or his winding-up speech—on the issue of enforcement. First, will he commit to the Government to collecting data on the exercise of the new clause, say, annually, so that the House and the public can properly scrutinise the extent to which it is being exercised in practice? I recognise and understand the Minister’s point that the success of the clause should not be judged only by how many times it is exercised but by its deterrent effect, but I still think that would be a valuable source of reassurance.

[Mr Wallace]

I am delighted to tell my hon. Friend that I will commit to collecting those stats and ensuring that they are published annually alongside other stats on the proceeds of crime.

[Mr Raab]

I thank the Minister for such an immediate, swift and decisive acceptance and provision of assurance. That would be extremely useful. There is only one other aspect on which it would be useful to have some reassurance. I understand that there is a wider ongoing review of UK-wide asset-freezing powers. I can well appreciate why the Government may be reticent about reinventing a bespoke procedural mechanism for one new power, given its relationship with other wider proposals that may be forthcoming, but I hope that the Minister will undertake to factor the proposals made in new clause 1 into the review process and to ensure that any future new proposals on enforcement include the most robust and rigorous mechanism available under UK law applying to new clause 7. If the Minister can give that assurance on top of the one he has just given, I am inclined to accept new clause 7 and to not press new clause 1, heartened by the Government’s commitment to strive to make the new power work as effectively as possible in practice.

For those of us who have campaigned for change, there remains the further issue of visa bans, but that is for another day. Today, the House has the opportunity to lay down some moral red lines in UK foreign policy and to take a lead in denying safe haven to the dirty money of those profiting from the most appalling of international crimes.

--- Later in debate ---

My reading of new clause 1 is that it is more like the US Magnitsky Act, and that it looks not only to seize assets but to stop the undesirables travelling to the UK, trading in the UK, using UK banks and buying UK property. Could the Minister say whether such issues would be dealt with through new clause 7 or perhaps through other legislation that could be used at the same time?

[Mr Wallace]

Perhaps I can inform my hon. Friend and the rest of the House on the visa issue. We can refuse a visa to a person who does not meet the immigration rules. Evidence that a person has been involved in organised crime or in human rights abuses or violations would be taken into account when considering a visa application. We can already do that; the power is there with the Government, and we have exercised it in the past.

[Mr Djanogly]

I am grateful for the Minister’s clarification. It would be helpful if he could say that it is the Government’s position that, when a prosecution is taken under these new provisions, the court should consider a visa exclusion automatically and not as a possible add-on.

Clearly, if the sanctioned person had his or her assets confiscated but could then go on to buy more assets or to conduct business in the UK, new clause 7 may lack the required teeth.

New clause 7(5) refers to proceedings needing to be brought within 20 years, which seems like a short period in any event. Furthermore, it looks to be 20 years from the commission of the gross human rights abuse. Why is it not from the end of the abuse? In other words, if someone has been abused for 20 years plus one day, would the right to prosecute the abuser fail?

Would the court be required to connect the human rights abuse to the assets being seized? For instance, where the individual is accused of organising the torture of three people but steals from only one of the three and then moves the stolen goods into the UK, would the seizure have to be tied to the one incidence of torture that relates to the stolen goods?

My final question is this: after the legislation is put in place, do the Government actually intend to act? Many foreign nationals—not least Russians—really want to live here, rather than in, say, the US, so we have significant influence in setting the standards of civilised behaviour we expect from people who live or stay here. I ask the Minister, as I think my hon. Friend the Member for Esher and Walton did, whether we are now going to say to those who have been merciless in their own countries and who then look to store their ill-gotten gains in the UK, “We do not want you here. We do not want your money here”, and, importantly, “If you do come here, we will act.” If that is the Minister’s position—I think he said it was, but perhaps he could clarify that—I am minded to support Government new clause 7 rather than new clause 1.

--- Later in debate ---

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

I, as a signatory of new clause 1, can be very brief because my right hon. and hon. Friends, and indeed Opposition Members, have made the case with such eloquence on what is known as the Magnitsky amendment. It seems to me, as such a signatory, that the Government have listened. The Minister has quite rightly heard the cross-party voice on these issues and tabled new clause 7, and I certainly congratulate him on having achieved that.

My hon. Friend the Member for Esher and Walton (Mr Raab), who has done such a good job on this issue, pointed out, in accepting the Government new clause, that we must not allow the best to be the enemy of the good. The story that my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles), the anti-corruption tsar, told us about his Paris meeting reminds me of just how complex is the attack on corruption, of which we must all be a part.

I remember a very eminent New York anti-corruption lawyer, who had been involved in a variety of anti-corruption mechanisms, telling me that he was once invited to Afghanistan to give a lecture on how to tackle corruption, and a vast number of Afghan officials turned up in the auditorium. To his horror, observing the Rolex watches on the wrists of so many of those officials, he suddenly realised halfway through the lecture that they had turned up to learn not how to tackle corruption, but how to evade the tackling of corruption.

Corruption is a cancer: it is insidious in a whole variety of ways. One of the good things about the Bill is that it seeks, in a very complex area, to make progress on some very clear aspects of the issue. The former Prime Minister, the former Chancellor of the Exchequer and other Government Members have also made a very big contribution in the fight to tackle corruption in this area.

I want to make two brief final points. The first is that in the Magnitsky case, as I think the Minister has recognised—I know Bill Browder and I was absolutely horrified to hear the tale of the experience he has undergone—it is clear that the British law enforcement agencies have shown, to put it no more strongly than this, a degree of confusion, delay and obfuscation in their handling of such matters. There are issues of administrative co-ordination and effectiveness, and I very much hope that the Minister ensures that tackling this issue remains clearly on his agenda.

My second and final point is that Britain needs to send a very clear signal about the approach we take to human rights abuses and money laundering. The failure to send a very clear signal—I hope that that will be ended by the decision the House will take this afternoon—damages our international relations. Britain’s relations and dealings with Russia are very complex. We need to work with Russia on a number of matters on which we have a common interest, but we also need to be absolutely clear where we stand on the issues—my hon. Friend the Member for Huntingdon (Mr Djanogly) set them out so eloquently in his speech—so that there is no misunderstanding about where the British Government stand on many of the horrific aspects of Russian governance and conduct. I have been a strong critic in this House of Russian abuses of human rights and, indeed, of war crimes in Syria. Given the other dimension of areas on which we must be able to work constructively with Russia, it is extremely important that we in this House are absolutely clear with the Government about where we stand on human rights issues.

[Mr Wallace]

We have had a very important and well-informed debate. I am very grateful to colleagues for their contributions, in particular my hon. Friend the Member for Esher and Walton (Mr Raab). As Minister, I have done my best throughout the process to speak to as many colleagues as possible and to listen to their concerns. I have gone back to the law enforcement agencies and asked them tough questions. I cannot say whether my predecessors did that or not, but I take the view that our job as Ministers is to go beyond the briefing papers we all receive, test their resolve and send a very clear message. I have told the agencies that when the Bill is passed by Parliament and becomes an Act, we want to see prosecutions and we want the powers to be used. I will not interfere in how they choose to apply those powers, and I will not choose which powers they use to achieve the right effect.

The main aim is to ensure that we say loud and clear that we do not want money launderers in this country. We do not want organised criminals. We do not want those who abuse people through torture and inhumane treatment. We want to say, “You are not welcome in this country and nor is your dirty money. If you come to this country, we will try to have you and we will certainly try to have your money. If we can return that money back to the regimes it has been stolen from, we shall do that.” We have already started that process by returning £27 million to Macau recently and signing a memorandum of understanding with Nigeria. If we can do that, we will. Both Government new clause 7 and new clause 1—there are many things I agree with in the spirit of new clause 1—say that loud and clear. I think that our new clause will help to achieve that in relation to the people who want to exploit laws around the world, whether through immunities, state sponsorship, state umbrella or tacit support.

I highlighted to my hon. Friend the Member for Esher and Walton that annual reporting will cover the use of this provision. The Government have already agreed, in our response to the Public Accounts Committee and the Home Affairs Committee, to publish a set of annual asset recovery statistics. As I made clear in Committee, it will cover the annual use of unexplained wealth orders. I am also pleased to commit today that it will include the use of this provision.

[Mr Djanogly]

Will it also include the names and titles of people from whom the assets have been taken?

[Mr Wallace]

I will have to check and get back to my hon. Friend, but any court action is a matter of public record. If someone is prosecuted under the Proceeds of Crime Act 2002 or has their assets frozen, that will become a matter of public record available to all—that is very important.

To reiterate the point about sanctions, the Government are undertaking an assessment of existing sanctions policy post-Brexit to ensure we can continue our proactive approach. It is right that any changes to our sanctions regime are considered in that context, rather than making changes at this point. We will of course continue a dialogue with parliamentary colleagues on this work, and I will absolutely ensure that the spirit of new clause 1, tabled by my hon. Friend the Member for Esher and Walton, is carried forward in those discussions. The time to do that, however, is not with this legislation; it is when an assessment is made post-Brexit to consider sanctions in the wider picture.

I want to talk about the duty of law enforcement agencies to use the powers. Part of the rule of law and the strength of our system, as opposed to perhaps some other regimes we have talked about today, is that our agencies are operationally independent. As a Minister, I do not sit behind a desk and use the agencies to pick on people or political rivals I do not like. We leave the agencies, as much as possible, to be operationally independent. That is a part of the balance and safeguards in our society.

[Chris Bryant]

But if the prosecuting authorities were, for a corrupt reason, to choose not to prosecute, there are powers, through the courts, to ensure that they do so.

[Mr Wallace]

I am afraid I have too positive a view of the integrity of our law enforcement agencies to say—or even allude to the fact—that there could be some corrupt reason they may not use their powers. We all have constituents who write to us and say, “I made a complaint to the police and they didn’t take any action.” Sometimes that is valid and we try to get a better result for them. Hon. Members who have met Bill Browder have brought their evidence to this House and made representations to the National Crime Agency. They cross-examined a National Crime Agency witness in Committee. However, we also have constituents who do not like the outcome of their complaint—that a crime has not been judged to have been committed. That is a disappointment they sometimes have to live with and it is our job as Members of Parliament to tell them, “I’m afraid it does not constitute a crime.” Sometimes the police have to make that case. Sometimes constituents may seek to deal with that by changing the law to create a crime that may be appropriate or up to date. However, it is important to respect operational independence, tempting as it may be sometimes to wish to reprioritise their priorities to suit the issue of the day.

[Chris Bryant]

rose—

[Mr Wallace]

I really do have to press on. Hon. Members have made a considerable number of valid queries and I have a small book, handed to me from the Box, to get through.

The hon. Member for Dumfries and Galloway (Richard Arkless) raised a number of issues relating to the unlimited nature of retrospective offences. Torture is an offence where the UK applies universal jurisdiction. On that basis, the provisions are retrospective in so far as they relate to torture, even where it occurs prior to the enactment of the Bill. However, the Government new clause would cover conduct constituting cruel, inhumane and degrading treatment only after the Act comes into force.

We have already taken significant legal steps to suspend the requirement for dual criminality; that is, providing for civil recovery to be pursued against property not necessarily unlawfully obtained in the country in which the conduct took place. We think this is a suitably proportionate approach. We have already gone further than we do in some other areas. We can take action where the unlawful event took place when it was not in this country. That is something we have to balance.

The recovery of proceeds of crime is generally subject to a 20-year limitation period under the Limitation Act 1980. The hon. Members for Rhondda (Chris Bryant) and for Dumfries and Galloway asked about the timescale for claiming the proceeds of crime. Under POCA, it starts when the property is obtained through unlawful conduct. Under new clause 1 it seems to run from the date of the conduct itself, so that could possibly mean a shorter timescale than that under Government new clause 7. I reassure the hon. Member for Dumfries and Galloway that new clause 7 covers conduct linked to torture, such as: assisting it, directing it, facilitating it or profiting from it even when that linked conduct is not conducted by a public official. It therefore goes wider than some have feared.

We must also consider what evidence is needed to allow for assets to be recovered. Any civil recovery would be subject to all existing processes and legal safeguards in the Proceeds of Crime Act. The court would need to be satisfied, on the balance of probability, that the property in question was the proceeds of crime or was likely to be used to fund further criminal activity. Law enforcement agencies would, as ever, need to consider which of their powers to utilise on a case-by-case basis. It would also apply to inherited wealth. That would not be excluded. Inherited wealth would be covered by the ability to recover assets, so I hope I can reassure the hon. Member for Rhondda on that point.

I reiterate to my hon. Friend the Member for Esher and Walton that the Government agree with the spirit of his new clause. We want to say loud and clear that organised criminals, crooks and corrupt individuals are not welcome in this country, and neither is their money. I was pleased to contribute to the implementation of the Bribery Act 2010, introduced by the last Labour Government, and its statutory guidance, under the previous Conservative Government. That is part of this whole package: the Bill comes alongside the Bribery Act and some other measures. I do not want London and the UK to be fuelled by dirty money, and I do not want people to be profiting from it. One of the best ways of making London and the UK open for business is through the rule of law—and, I would say, a competitive tax base. People should want to come to the UK for those reasons, not because they can hide or launder their money. It does not make us a better host for these individuals. I hope that the new powers in the Bill will help us tackle the problem, and I am keen to ensure that upon its enactment we start to deal with these individuals and get the money back to where it belongs.

There was little in the well-articulated speech of my hon. Friend the Member for Huntingdon (Mr Djanogly) that I did not agree with. He is absolutely right about sending a message. There are regimes around the world that deliberately take advantage of Britain’s openness, the quality of places to live and what we have to offer, and they need to be sent a message that we are serious and that they should go elsewhere—although we would like to catch them first and put them in prison, to be brutally honest.

I think I have clarified the point from the hon. Member for Rhondda about inherited wealth. On the worries about the London property market, I must add that it is not just nice townhouses in Knightsbridge being bought up, but huge portfolios up and down the country, and it does not just apply to overseas citizens either. For instance, other parts of the Bill deal with drug dealers, including those in my part of the world, in the north-west, the north-east and Northern Ireland, funnelling money into property.

As part of the Government’s work on the implementation of the fourth anti-money laundering directive, they have consulted on whether estate agents should carry out checks on the buyers of properties as well as the sellers. I was surprised, as I suspect were colleagues, to find out that currently they only carry out such checks on sellers. We intend to publish the response to the consultation “imminently”—that is what my note says—and I think that we will all be looking at it carefully.

The hon. Gentleman also asked about freezing orders and people quickly moving the money. Part 5 of the Proceeds of Crime Act 2002 provides for interim freezing orders, allowing for the freezing of property while the courts consider the case. I recognise that the Home Affairs Committee report on the proceeds of crime and the recovery of assets pointed out some valid problems in the system, however, and I have asked that the Department set about being timely when making cases for the confiscation of funds and assets so that the gaps do not allow criminals and bad people to move the money beforehand.

The hon. Member for Rhondda and my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles), the anti-corruption tsar, will recognise that within Government we always have to satisfy the competing concerns of Departments. They will both know—the hon. Gentleman was a Foreign Office Minister and my right hon. Friend is a former Secretary of State for Communities and Local Government—of the competing interests within Government when it comes to legislating, and inevitably amendments have to walk a fine line between several challenging diplomatic and political issues, but I trust that the House agrees that the Government have taken a constructive approach. I have been determined to listen to colleagues and produce something that sends a strong message while also providing powers to allow us to act against people who abuse human rights.

I want to finish by congratulating my hon. Friend the Member for Esher and Walton on tabling new clause 1. It was important that we have this debate. He is a formidable campaigner and has successfully articulated the case and imbued the Bill with the spirit of his new clause. I hope that the House will support Government new clause 7.

Question put and agreed to.

New clause 7 accordingly read a Second time, and added to the Bill.

New Clause 8

Her Majesty’s Revenue and Customs: removal of restrictions

‘(1) The following provisions, which impose restrictions on the exercise of certain powers conferred on officers of Revenue and Customs, are amended as follows.

(2) In section 23A of the Criminal Law (Consolidation) (Scotland) Act 1995 (investigation of offences by Her Majesty’s Revenue and Customs), omit the following—

(a) in subsection (2), the words “Subject to subsection (3) below,” and the words from “other than” to the end of the subsection;

(b) subsection (3).

(3) In section 307 of the Criminal Procedure (Scotland) Act 1995 (interpretation), omit the following—

(a) in subsection (1), in paragraph (ba) of the definition of “officer of law”, the words “subject to subsection (1A) below,”;

(b) subsection (1A).

(4) In the Proceeds of Crime Act 2002 omit the following—

(a) in section 289 (searches), subsections (5)(ba) and (5A);

(b) in section 294 (seizure of cash), subsections (2A), (2B) and (2C);

(c) section 375C (restriction on exercise of certain powers conferred on officers of Revenue and Customs);

(d) section 408C (restriction on exercise of certain powers conferred on officers of Revenue and Customs).

(5) In the Finance Act 2007, in section 84 (sections 82 and 83: supplementary), omit subsection (3).”

This new clause, together with amendments 20, 25 and 28, removes restrictions on the exercise of certain powers by HMRC officers. The restrictions prevented the powers being exercised in relation to certain former Inland Revenue functions.—(Mr Wallace.)

Brought up, and read the First time.

[Mr Wallace]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Natascha Engel)]

With this it will be convenient to discuss the following:

New clause 5—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 costs

(1) Pursuant to Part 3 of the Civil Procedure Rules (The Court’s Case Management Powers) the High Court must make a costs capping order, in respect of—

(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 an award for costs on the indemnity basis 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 uncapped costs on the indemnity basis against enforcement agencies where they have brought unsuccessful applications for unexplained wealth orders or interim freezing orders. It seeks to define such civil actions as within “exceptional circumstances” required for the purposes of Practice Direction 3F to Part 3 of the Civil Procedure Rules under which the court has the power to make a cost capping order.

Amendment 1, page 3, clause 1, leave out line 29.

This amendment would allow unexplained wealth orders to be issued to politically exposed persons in the United Kingdom and EEA States.

Government amendments 2 to 19.

Motion to transfer clause 12(3).

Government amendments 20 to 57 and 60 to 72.

[Mr Wallace]

We now come to a group of amendments relating to law enforcement investigative and recovery powers. It is primarily composed of Government amendments that I hope the House will agree are, for the most part, technical and uncontroversial. I therefore do not intend to linger on each of them, but I will quickly summarise the key amendments for the benefit of hon. Members.

New clause 8 and other consequential amendments remove the restriction on HMRC’s criminal powers being used for former revenue functions. This ring fence arose following the merger of Her Majesty’s Customs and Excise and the Inland Revenue in 2005. In the intervening period, legislative changes have brought most major taxes within the scope of HMRC’s criminal justice powers, but there remain some anomalies. For example, investigators cannot use certain powers to fight stamp duty tax fraud. Fraud is a crime, regardless of which function of HMRC it is committed against, and the amendments will ensure that the necessary powers are available in all such cases. They do not provide HMRC with any new criminal justice powers.

Amendments 2 to 15, 70 and 71 relate to the power in clause 9 to allow an extension of the moratorium period in which law enforcement agencies can investigate a suspicious activity report before a transaction is allowed to proceed. These amendments will deliver a number of minor and technical improvements to this provision: they will allow an automatic extension to the moratorium period while a court hearing is awaited to make a decision on an application; they will help to ensure that a company does not provide any information to the customer whose transaction is subject to a suspicious activity report, other than the fact that an SAR has been made; they will allow immigration officers to apply for an extension; and they will allow for an explicit right of appeal in Northern Ireland.

The majority of the remaining amendments in this group—amendments 22 to 24, 26, 27, 29 to 38, 46, 47, 49 to 57, 60 to 69 and 72—clarify the operation of the seizure and forfeiture powers that the Bill adds to the Proceeds of Crime Act 2002 and the Anti-terrorism, Crime and Security Act 2001. Many of these changes are extremely technical in nature, but I will highlight a few of the more significant ones. They will allow the director general of the National Crime Agency to designate the level of senior officer that can authorise the use of certain powers—unlike in the police, no such designation currently exists in law. They will ensure that any interest accrued on forfeited funds while in the agency’s account is returned to the owner of the funds if that person successfully appeals against the forfeiture. They provide that, where the NCA has used the powers, and a court determines compensation should be paid, the NCA will be responsible for paying that compensation. They will introduce a duty on the police and others to consult the Treasury to ensure that the full range of terrorist asset-freezing powers are considered before exercising the related power provided by the Bill. They will require consultation with the devolved Administrations before the provisions in clause 12 relating to the seizure of gaming vouchers and betting slips are commenced. This will ensure that the provisions are implemented effectively in Scotland and Northern Ireland.

On the devolved Administrations, we hope the Scottish Parliament will approve their legislative consent motion on the Bill shortly. Although the Government assert that none of the provisions are devolved with respect to Wales, I note that the Assembly has already provided such a motion. The Government have had extensive discussions with the Northern Ireland Executive about the Bill, and plans were in place for a legislative consent motion to be considered by the Assembly—law enforcement authorities in Northern Ireland are keen to ensure they have access to the powers in the Bill—but the suspension of the Assembly prior to elections has prevented the motion from being pursued at this time. These are clearly extremely unusual circumstances, but the Government remain committed to the central principles of the Sewel convention. We will therefore commit not to commence provisions on matters devolved to Northern Ireland without the appropriate consents having been obtained. It is our intention to pick this up with the Executive, following those elections. It may not be possible to resolve this before the Bill receives Royal Assent. We are most likely to make further amendments to the Bill in the House of Lords to put beyond doubt that all the relevant provisions can be commenced at separate times for different areas of the United Kingdom.

[Gavin Robinson (Belfast East) (DUP)]

The Minister will be aware that although the aspiration is to see an early return to the Stormont Executive, the likelihood of that happening in the immediate future is somewhat fraught. Given that the Bill will inevitably conclude before we see the return to the institutions of Stormont, will he outline what steps will be taken to regularise issues, once the Assembly has been restored?

[Mr Wallace]

We are in ongoing discussions with the Northern Ireland Assembly, and we hope that the Northern Ireland Assembly elections are completed and that Stormont takes up the reins again, so that devolution returns to Northern Ireland. That is our starting-point, and it is what we all wish. There was a good cross-party consensus for these provisions for Northern Ireland in the Assembly earlier. I cannot remember the exact date of the election—the hon. Gentleman might have to remind me. Let us plan for normality in Northern Ireland and make sure that we get to a good position.

[Gavin Robinson]

The election is planned for 2 March. I agree with the aspiration to see a return to Stormont as soon as possible, but does the Minister believe that there would be some merit in at least corresponding with the leaders of each political party to attain affirmation of the measures at this stage, for fear that we do not see a return in a reasonable period?

[Mr Wallace]

I am grateful to the hon. Gentleman, and I will certainly put that suggestion to officials. My view would be that pre-suspension of the Assembly is the place we are at, and although there has been a change of a leader, I am not sure that we have had any signal that it has gone backwards. The date of 2 March gives me some good hope. I have never known the other place move at the speed of light, so I hope we shall have time to make sure that this gets through.

Finally, this group includes two proposals concerning unexplained wealth orders: new clause 5, in the name of a number of the officers of the all-party parliamentary groups on anti-corruption and responsible tax, and Opposition amendment 1. I will allow hon. Members the opportunity to speak to those amendments and will respond to them in my closing remarks.

[Carolyn Harris (Swansea East) (Lab)]

The Opposition support the spirit of the Bill and broadly support this group of amendments. We welcome new provisions to prosecute those professionals who fail to prevent tax evasion, as well as welcoming unexplained wealth orders, under which assets can be seized if owners are unable to explain how they were funded. We, of course, support the Government’s effort to tighten up state powers against white-collar crime, but we have concerns that they are squandering the opportunity that the Bill provides to stamp out the everyday corruption of the super-rich who are getting a free ride at the expense of the wider society, thereby fuelling inequality.

Another problem is that, amid the Government’s cuts to public services, the Bill could be very difficult to enforce. Although I understand the giving of new powers to HMRC, are the Government not concerned about how HMRC will carry out its new duties? Given that the coalition Government decimated HMRC’s budgets by £100 million and that HMRC is set to lose 137 of its offices by 2027, there seems little point in creating laws that cannot be enforced—unless, of course, it is to give the impression that the Government are doing something. This, I fear, is a theme that has sadly run through our proceedings on the Bill so far.

We Opposition Members argue that it is crucial for the agencies involved in civil recovery powers to have sufficient resources to do their jobs properly. We therefore request a distinct and clear annual report that details the resources allocated to the agencies that are concerned solely with the task of carrying out these recovery powers.

In previous stages, the Government objected on the grounds that the asset recovery incentivisation scheme would allow frontline agencies to keep 100% of what they recover, but this argument is seriously flawed. In theory, yes, the agencies could retain the total value recovered, but as the Public Accounts Committee made clear in its progress review of confiscation orders and as the Home Affairs Select Committee made clear in its review of the Proceeds of Crime Act 2002, these agencies’ recovery rates have been typically poor. Consequently, it remains to be seen how these agencies will improve their rate of recovery to benefit from the new incentivisation scheme.

Another reason that the Government gave is that anyone who wanted to find out this information could in theory obtain it by going to a number of different sources. Yet again, this is flawed. We previously argued for a detailed reporting of resources, specifically for these agencies, in the exercise of the powers laid down in the Bill and the Proceeds of Crime Act 2002.

The Government have already blocked a number of measures that Labour has proposed to make this a meaningful and effective Bill. We proposed a corporate probation order. If a company was found to have committed a failure to prevent offence, it would have been subject to an independent review of its compliance procedures and it would have had to pay the full costs of such a review. This was coupled with allowing for the removal of directors from companies who failed to ensure that proper procedures were in place to prevent UK and foreign tax evasion offences from taking place. The Government believed that this was unnecessary because UK law could already deal with such cases of negligence. Although there may be a case for some UK law to be used to a similar effect, it would not be an identical effect.

While there is an implied threat to the EU that the Government could change the UK’s economic model into one of a tax haven, there is a strong case for legislation to protect both UK citizens and citizens from around the world. With the potential for a race to the bottom and the destruction of workers’ rights and the slashing of corporation tax, it could be argued that a Brexiteer Government would foster an environment where tax evasion was implicitly encouraged.

As my colleagues have said, and will no doubt say again, the Bill must do more to tackle the deeply entrenched and extraordinarily costly phenomenon of tax avoidance. Tax avoidance is, in effect, living to the letter of the law, but not in the spirit of the law. Repeated investigations of companies that sail close to the wind but know that they have bought the lawyers and accountants to make their tax abuse legal is both very frustrating and extremely costly. As the UK general anti-abuse rules show, there are ways to minimise the risk of corporate abuse of the tax system, and these should be absorbed into the Bill.

Spain, Canada and Australia each have a single agency responsible for supervising and enforcing anti-money laundering regulations—Britain has 22. Worse still, according to Transparency International UK, 15 of these 22 supervisors also lobby on behalf of the interests of their sector, creating clear conflicts of interest and a system inefficient to its core. The Government raised this problem in their action plan that preceded the Bill, but they were not concerned enough to convert this into proposed legislation. The system needs reform and the Bill needs to reflect this. Unless the Government accept all these concerns and indeed all the changes suggested in the Opposition amendments, the Bill is likely to fail on the intention to clean up money laundering and tax evasion.

[Richard Arkless]

I want to talk briefly about what I must admit is probably my favourite section of the Bill—the part that deals with unexplained wealth orders. I think it is an excellent provision, which is likely to drive a Trojan horse right through the assets of criminals who choose to lodge them in the United Kingdom.

The hon. Member for Amber Valley (Nigel Mills) made some very valid points about new clause 5. Indemnity costs can be easily translated to mean, in layman’s terms, full costs. In other words, every single hour and every penny of the expense on the file can be charged to the losing party, with no assessment of whether those costs are reasonable. Given that we are talking about politically exposed people, potentially in other jurisdictions, we can imagine the number of officials travelling back and forth on flights. All that will find its way on to a costs sheet, and all of it will be recoverable to the payee in indemnity costs. We could end up with an inequality of arms, not in favour of the Government but in favour of the respondents, which I think would be very dangerous.

The threat of indemnity costs acts as a major litigation risk for the claimants or pursuers, or, in this case, the applicants. If they know that they are likely to be in for a bigger bill, they will think twice about making applications. These are our law enforcement agencies, and I believe that they should be able to pursue their applications with determination, without fear or favour, and without the risk of incurring indemnity costs which would be deeply disproportionate. That would be very bizarre and counterproductive.

I thank the hon. Member for Amber Valley for tabling his probing new clause, and I shall be pleased to hear what the Government have to say about it. As a boring, pedantic lawyer, I think it worth mentioning that indemnity costs are very rare, and arguably arise only in proportionate circumstances. However, we are talking about politically exposed people with potentially limitless funds. The better they can make their case in court, the more likely it is that they will be awarded indemnity costs if they are successful, and I think that we should take that risk out of the equation.

As I have said, the unexplained wealth orders provision is an excellent feature of the Bill. Let me explain exactly how the orders would work. The Bill will enable a court in Scotland—the Court of Session—on application by Scottish Ministers to make an unexplained wealth order. Such orders will require individuals or organisations to explain the origin of their assets if there are reasonable grounds for suspecting that they may have been involved in criminality, or intend to use that wealth for criminal purposes, and if the value of the assets exceeds £100,000. During earlier stages of the Bill, the Minister and I discussed that threshold, and I should be pleased if he could update me on his thoughts about it.

[Mr Wallace]

In response to what has been said about the issue, and the sensible suggestions made by the hon. Gentleman, we are considering options for potentially lower thresholds, to be dealt with in the other place. We will of course inform him when there is agreement across the Government.

[Richard Arkless]

That is very co-operative of the Minister, and I greatly appreciate it. I may not have his confidence in the other place, but we will wait with bated breath.

Unexplained wealth orders will be available to the courts when assets appear disproportionate to known legitimate income. For example, it was reported recently that a taxi driver owned a £1 million fish tank. That is not to say that taxi driving is not a potentially lucrative trade, but the asset could certainly be disproportionate to that person’s income. Failure to provide a response to an order and explain the legitimate source of funds would give rise to a presumption that the property was recoverable, which would make any subsequent civil recovery action much easier.

I must say, as a lawyer, that the notion of reversing the burden of proof does not automatically sit very comfortably with me, but, as in other areas, I consider it to be proportionate to the issue at stake. Sound legal principles such as the presumption of innocence, and the burden of proof being on the Crown, should not inadvertently protect criminals, which I suspect may have been the case thus far. The key aspect of this provision is that a criminal conviction will no longer be necessary before law enforcement can pierce the criminal’s veil that camouflages his wealth. Getting away with the crime itself will no longer protect a criminal’s wealth. The Bill will allow this power to be applied to foreign politicians and officials or those associated with them, known as politically exposed people. That will enable the issue to be tackled substantively and determinedly for the first time.

I agree with some of what was said by the hon. Member for Swansea East (Carolyn Harris) about resources. Part of the reason for introducing provisions for unexplained wealth orders is the fact that many law enforcement agencies think that there is a raft of applications, ready to be made immediately. There are properties and asset groups and accumulations in this country, and in some cases we do not know where they come from. If the Act receives Royal Assent, this power will land on the desks of law enforcement agencies that potentially have applications piled up. I think that, in those circumstances, resources are a very viable concern.

I hope that the Minister will be able to give us some reassurance, which unfortunately he has not been able to give thus far during the Bill’s passage, that enough resources will be allocated to make unexplained wealth orders work. This is probably the best part of the Bill, and it needs to work. If it does work, we shall make huge strides in ensuring that this country cannot be used as a safe haven for dirty money.

[Mr Wallace]

This has been a short and helpful part of our proceedings today. I am pleased that Members in all parts of the House agree in principle with the concept of the unexplained wealth order. I think that it will be an incredibly useful tool. The first group of amendments dealt with another tool that could be used to ask people to explain where their wealth came from, even without the evidence or the intelligence that would link them to the offence of gross human rights abuse that we are seeking to introduce.

The use of unexplained wealth orders to put the onus on individuals to tell us where they acquired their wealth will obviously be a strong step towards clearing the United Kingdom of people who seek to harbour their ill-gotten gains here, but we should not forget that it will also deal with criminals in the UK who are “washing” their wealth and depositing it elsewhere in the community. Such people sometimes hide in plain sight.

What I am about to say is no different from what I have said to the National Crime Agency. I would like to see this provision used sooner rather than later. We in Parliament always get lobbied for new offences—lots of people come along and lobby us, and there is always either a Home Office Bill or a Ministry of Justice Bill going through this House—and a lesson I have learned in my 12 years in Parliament is that if offences are not used sooner rather than later, many of them just sit on shelves. It is therefore important that the law enforcement agencies hear Parliament today say, “We are—hopefully—going to give you these powers; we want them to be used.”

[Richard Arkless]

Given that we want to start using these orders immediately, resource is a key issue. It is difficult to put a price on this, but has any assessment been made within Government of what this is going to cost in the next two to three months after Royal Assent, because there are a lot of applications ready to be made and we need the resources to make them?

[Mr Wallace]

I can reassure the hon. Gentleman and the hon. Member for Swansea East (Carolyn Harris) that one part of government that has not seen a significant reduction in its budgets is the area of the regional organised crime units, the national crime agencies and the security and intelligence agencies, which assist us in tackling organised crime and money laundering. The National Crime Agency has a capital budget of £50 million this year, with £427 million of funding. It is supported in England and Wales by the regional organised crime units, which have got £519 million of funding. The figures for the Serious Fraud Office are £45 million, with £5 million of capital this year, and the figures for HMRC are £3.8 billion in resource and £242 million in capital. Of course, in terms of crime-fighting, the question is, “How long is a piece of string?”

[Dr Huq]

I am listening intently to what the Minister is saying, and I am reminded of an Evening Standard report—from earlier this year, I think—headed: “Home Office reveals new Criminal Finances Bill will target just 20 tycoons a year.” The report says that is based on the Home Office’s own impact assessment which

“predicts that the power will remain unused in its first year ‘as part of the learning curve’, and thereafter will be used in only 20 cases each year.”

That is because of resource implications, which is precisely the point raised by the hon. Member for Dumfries and Galloway (Richard Arkless). Does the Minister have any comment to make on that?

[Mr Wallace]

The impact assessment is not linked to access to funds. The impact assessment is a judgment as to how it would see these powers being used. Probably like the hon. Lady, I would like to see them used an awful lot more, but that is an impact assessment, and the NCA does not follow the impact assessment. If the evidence is presented or the cases are put before it that allow it to do 100, it will do 100. It is not restricted by the impact assessment. I would therefore not be too distracted by the London Evening Standard and the impact assessment.

Instead, I would focus on the fact that we have well resourced our law enforcement agencies to tackle this, and this Bill will give them the power. They have the political support of both sides of the House to exercise that power, so let us see how far we go. However, I would be delighted to join the hon. Lady in asking, in 12 months’ time or whenever the Bill goes through, why we have not used them more; I will be asking the NCA and all the other organisations to try to make sure they have done so.

The hon. Member for Swansea East made a point about the asset recovery incentivisation scheme, or ARIS, funding for the recovery of assets not really being worth the paper it was printed on—I think that was what she was trying to say, if she will forgive me for putting words in her mouth. However, since 2006, under an arrangement under her last Government, £764 million has gone into funding those law enforcement agencies, and in the last three years £257 million has gone in. Hopefully, with the new arrangement, above the baseline of, I think, £146 million—I will correct that in writing if it is not £146 million—100% will be kept.

We are also following on from the excellent reports from the Home Affairs Committee and the Public Accounts Committee looking into why we have not achieved enough in terms of confiscation orders and recovery of assets. I have told officials I am particularly concerned that it was suggested in one of those reports that the focus seemed to be on small assets—the collection rate was higher for smaller amounts of money, but lower among millionaires—and I have specifically directed officials that we must look at turning the tables. I want all assets collected that are subject to confiscation, but those reports are a good guideline and we did not ignore that specific point. We will certainly make sure that we build on it and improve on it, because there is money in it for us all, should we do it, and I am very keen that we should.

New clause 5, tabled by my hon. Friend the Member for Amber Valley (Nigel Mills), seeks to prevent the courts from awarding uncapped costs against enforcement agencies when they have brought unsuccessful applications for unexplained wealth orders or related interim freezing orders. I appreciate that this is to ensure that law enforcement agencies do not feel constrained in their ability to apply for an unexplained wealth order, for fear of incurring financial liability. But, as law enforcement representatives told the Public Bill Committee in November, this is a natural part of the state wielding its investigative powers, and they are certainly not pressing for a provision of this type. It is a well-established principle that the losing party pays the winning party’s legal costs. This is an important check and balance on parties bringing spurious claims, or the state using its powers erroneously.

At the same time, the civil procedure rules do already allow for capping in exceptional circumstances, so law enforcement agencies would be able, as things stand, to apply for a cost-capping order in appropriate cases. I undertake to ensure that this point is included in the code of practice that will support the use of these orders. I trust that Members will agree that this is a far more sensible way forward than a blanket rule for all unexplained wealth order cases.

It is crucial that the initial cases are thoroughly developed to ensure that the orders have the greatest possible impact. We are already actively engaging with law enforcement officers and prosecutors to encourage the use of the new powers being introduced by the Bill. Ultimately, it will be for the enforcement authorities to decide when to use them, but we will—as, no doubt, will Her Majesty’s loyal Opposition—monitor and review the use of the orders once they have been introduced. This will inform future support or changes that may be needed to ensure that they are being used to maximum effect.

The hon. Member for Swansea East explained from the Opposition Front Bench the objective behind her amendment 1. However, as I explained when this issue arose in Committee, politically exposed persons in the UK and European economic area can, in fact, already be made subject to an unexplained wealth order. These orders can be made in two situations: first, where an individual is suspected of involvement in serious crime; and secondly, in relation to non-EEA politically exposed persons. An unexplained wealth order can thus be made in relation to politicians and senior officials in Europe, when they are suspected of being involved in serious criminality. In such an investigation, if evidence exists of links to serious organised crime, it should be available, obtainable and readily provided, and it would be unreasonable and disproportionate, for example, for Members of this House to be made subject to an order without any evidence of criminality.

However, for investigations into grand corruption involving countries outside Europe, including the developing world, that evidence is far less likely to be available. It will be much harder in some countries where corruption is endemic to get the evidence to bring to the court at first about wealth hidden in London. That is why we have chosen to have a lower threshold for evidence when applied to countries outside the EEA.

We should not forget that unexplained wealth orders are not an end in themselves; they are part of a process leading eventually, should those concerned not be able to give satisfactory answers, to another action in court to confiscate the assets. As I said when I met the right hon. Member for Hackney North and Stoke Newington (Ms Abbott) to discuss this, I do not want unexplained wealth orders also to produce a lot of derelict empty buildings that are caught up in legal dispute and sitting around London being no good for anyone. I want them to be used and be placed on people whom we have linked to serious crime, and then, should they not be able to satisfy the court, for us then to go to the next step and recover that asset, so that the houses and the housing market are freed up, and any money is returned to whoever it has been stolen from—a country, or other people. An order is therefore a step in the process, not an end in itself.

I hope that I have sufficiently reassured the House on these points, and that the Opposition will feel inclined to not press their amendment.

Question put and agreed to.

New clause 8 accordingly read a Second time, and added to the Bill.

New Clause 2

Failure to Prevent an Economic Criminal Offence

“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the criminal purposes of this clause—

“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.

(3) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(5) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”—(Sir Edward Garnier.)

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

Brought up, and read the First time.

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[Nigel Mills]

I accept that we hear the privacy argument a lot—I am sure that it is made in the UK context as well—but we have taken the decision to have transparent registers so that we know who the ultimate beneficial owners of these entities are. If I think through the scenarios in which people would have a right to privacy, I can perhaps see that there might be a good reason not to publish if there is a real issue of individual safety, but I struggle to find many other situations for which there is a good argument for people being able to establish entities or other bodies in the overseas territories without being clear about who the ultimate owner is. If someone owns a company here or is a shareholder, that has to be public. That transparency exists for any kind of entity here, so I am not sure why a different argument ought to apply for our dependencies. In weighing the right to privacy against the right to ensure that we are not letting dirty, corrupt, criminal money into the system, we have to err on the latter side of the equation.

[Mr Wallace]

My hon. Friend gave the example of a toll road in Tajikistan. Because of where we are now, with a commitment to central registers and automatic access for our law enforcement agencies to those registers in countries such as the BVI, we could investigate his example and those responsible could be tracked down. Because it is an offence under the Bill to encourage tax evasion, even in another country—I guess the people who siphon off the toll money are not paying taxes in Tajikistan—we could take action if the BVI bank had a British nexus. We have now gone a long way towards tackling that type of crime because of this Bill and where we have got to since David Cameron’s summit.

[Nigel Mills]

I am grateful to the Minister for making those points, but we should be careful that we do not focus only on one example. There might be good commercial reasons in that case and it might just be a rumour from that country. I was highlighting the question of whether there are sufficient resources in the various law enforcement bodies, either here or elsewhere, to pursue inquiries through the labyrinth of corporate structures that tend to be involved when it comes to the most complex money-laundering or corruption situations.

The advantage of transparency, and one reason why we have chosen to have it here, is that it puts the information into the public domain so that various NGOs or other bodies can do some of the initial investigation, piece together the corporate chains and links, break the corporate veils, and thereby work out where this money is coming from and where it has got to. I am a little sceptical that our law enforcement bodies will ever have the resources to start that process in the vast majority of cases. If we can get the information into the public domain and give people the chance to trace it all the way through and find the answers, that new information can be used by the law enforcement bodies. That is what we are trying to achieve, because enabling transparency will make it much harder to hide the money through a complex structure going through multiple territories and however many different trusts and entities.

It is entirely right and welcome that law enforcement bodies will have timely access to information, but that will not be enough to enable the full tackling of this scourge that we would like to see. That is why I support the effort that has been made with new clause 6 to find a way to send a very strong signal to our territories that we want transparent registers. That is the right thing to do and it is the right direction of travel for the regimes in question. We want our territories to take the lead, rather than waiting for everybody else to do something first. Let us set an example and move first, and not wait for the herd.

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[Caroline Flint]

If we do not have the tools to make the difference, we are not going to see the change that I think everyone across the House wants to see. Without full access to transparent information, investigators will not know what information to request through these agreements, and that is fundamental. That is why public access to the data is important and why David Cameron was exactly right to demand it.

When the Minister responds, I expect him to say that the overseas territories are making real progress on this agenda and that including them in the legislation is not necessary. Let us be clear about the progress that has been made since the former Prime Minister first asked the overseas territories to consider public registers of beneficial ownership back in October 2013. More than three years on, just one overseas territory, Montserrat, has committed to a public register. Hooray for Montserrat! The rest have delayed at every step. Is the Minister satisfied with that outcome, and how does he account for why progress has been so slow?

In April 2014, the then Prime Minister wrote to overseas territory leaders, asking them to consult on public registers. Not all of them even did that. In July 2015, the current Chief Secretary to the Treasury, the right hon. Member for South West Hertfordshire (Mr Gauke), asked those overseas territories with financial centres to develop plans for central registers by November 2015. That deadline was not hit. Press reports last year said that the overseas territories were ignoring Foreign Office Ministers’ letters and meeting requests. At the most recent meeting with overseas territories’ leaders in November 2016, public registers of beneficial ownership were not even mentioned in the final communiqué. That raises the question whether we would have made as much progress as we have if the Panama papers had not been released.

[Mr Wallace]

The right hon. Lady is not being very charitable. Actually, we have achieved an awful lot since David Cameron’s summit. While the registers are not public, we will this year achieve a central register of beneficial ownership in all the overseas territories and Crown dependencies, and where they have needed help in getting there, we have given them help. The hon. Lady said that the issue of the public register had not even been raised. I can tell her that I had a meeting with the overseas territories and Crown dependencies two weeks ago, and I raised it then.

[Caroline Flint]

I thank the Minister for that information, because I did go and read the final communiqué from the meeting in 2016, and while there was some mention of beneficial ownership and private registers, nothing in the communiqué mentioned any journey from private to public registers—the point I made a little earlier. I do welcome the progress that has been made, but, as I will go on to suggest, unless we link the efforts being made on private registers to the endgame of public registers, I fear that we will still have some of the problems that so many people on both sides of the House and outside it have been worried about for some years.

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[Dr Huq]

This group of new clauses contains a fair few of ours, so I shall take a bit longer than I did last time. I want to speak to new clauses 6, 16 and 17 and I want to press new clause 17 to a vote.

Tax evasion was big news in 2016 following the publication of the Panama papers, which threw light on certain opaque offshore companies. Following the leaking of those papers, the overwhelming sentiment was that something needed to be done, and this Bill is that something—or rather, it introduces a set of somethings to deal with the problem. It introduces new corporate offences that will no longer be reliant on the defunct guiding mind principle, it creates unexplained wealth orders and it contains some other eye-catching stuff including the failure to prevent offences under the category of a politically exposed person. It also makes necessary amendments to our pre-existing anti-terrorism legislation. The Minister has pointed out that the Bill builds on a raft of Labour-initiated legislation, including the Proceeds of Crime Act 2002, the Bribery Act 2010 and the Terrorism Acts of 2000 and 2006. On the whole, we support the Bill, and all this stuff is not to be sniffed at.

I also want to mention the new additional monitoring, which the Minister announced on the spot a little earlier, relating to the human rights abuses mentioned in our debate on the first group of new clauses.

As the Bill has progressed, however, it has become apparent that there are chinks in the armoury for fighting money laundering. We welcome what is in it, but concerns are being expressed not only in my party but by a range of charities and non-governmental organisations such as Amnesty International, Christian Aid, Traidcraft, Transparency International, CAFOD and the ONE Campaign. They are concerned about what the Bill does not contain, and the elephant in the room is the issue of beneficial ownership and the UK’s inaction in tackling the financially secretive companies and practices that lie at the heart of the economies of many of our overseas territories and Crown dependencies. Beneficial ownership is entirely not present in the Bill. It is conspicuous by its absence. In other words, I am referring to our “tax havens.” The silence seems bizarre given that we are talking about money laundering, tax evasion and terrorist financing. Whether the Government like it or not, the matter must be addressed. The issue falls within the Bill’s remit because overseas territories are facilitating, aiding and abetting financial crime. The last time I was at the Dispatch Box I said that the UK, along with its overseas territories and Crown dependencies, is the biggest secretive financial jurisdiction in the world, so we have a special responsibility to act and to lead on this agenda, not to be slightly less bad than everyone else. The UK is facilitating some of the largest and most well-known tax havens, so we should be leading not following.

When the Government have been told that they need to “get real” not just by me in Committee but by the court of public opinion after the scandalous events of last year, they need to toughen up and get a grip on overseas territories and Crown dependencies because they facilitate illicit financial activity on a global scale, but the same excuses follow and have been trotted out today: the UK does not have the constitutional legitimacy for the overseas territories and Crown dependencies; and the territories are supposedly adhering to international standards anyway, so making them adopt public registers of beneficial ownership is not necessary. We are also told that the Government do want the territories and dependencies to adopt such registers, that they are working towards that, and that in the light of the progress made the threat of an Order in Council is unnecessary.

The Government say that the time will be right when the rest of world follows the UK’s lead and that they will set a global benchmark for financial territories. At the sixth sitting of the Bill Committee, the Minister told us that only when the time is right and only when there is an international standard for public registers of beneficial ownership will it be imperative for our overseas territories and Crown dependencies to follow suit. He actually claimed that the Crown dependencies and overseas territories with financial centres are already way ahead of “most jurisdictions”, including most G20 nations, on tax transparency. We were told that they are doing enough and that now was not the time to upset the applecart with public registers, particularly when they have agreed to adopt centralised registers. The Minister may recognise his own words from Committee in response to an amendment of mine that was pretty much identical to new clause 6:

“I certainly think that these places”—

the overseas territories and Crown dependencies—

“have come 90% of the way, and we should see whether that works for us. We all have the intention”—

to adopt public registers—

“and the United Kingdom is leading by example.”

In response to our threat of an Order in Council, he said:

“The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far.”

This is the interesting bit:

“It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which…makes a real difference.”––[Official Report, Criminal Finance Public Bill Committee, 22 November 2016; c. 199-200.]

That already seems slightly contradictory.

On the one hand, we hear that we cannot legislate for the dependencies. In fact, I remember the Minister calling me—someone whose parents suffered the worst excesses of the British empire—a neo-imperialist. It was certainly the first time that anyone has called me a neo-colonialist or whatever it was. At the same time, however, we clearly are able to do something and have the option to stop turning a blind eye and to turn inactivity into activity. The Minister himself insisted that the proposal was a “strong measure” that is less preferable to his own formula of cajoling and behind-the-scenes pressure.

[Mr Wallace]

Will the hon. Lady recognise for once that through cajoling and peer group pressure all Crown dependencies and overseas territories will by this year have central registers of beneficial ownership or similar? That is ahead of many G20 countries that do not even have central registers. We have actually come a long way and a lot further than when Labour was in government.

[Dr Huq]

I listened carefully to what the Minister said, and he said something similar in response to my right hon. Friend the Member for Don Valley (Caroline Flint). I will literally eat my hat—not that I am wearing one—if that happens. The registers must be in a format that is easily convertible to public registers.

We are not there yet. As someone who conducted empirical social science research, I wonder where the 90% figure came from. I know such things are often said across the Dispatch Box—in this case, it was in a Public Bill Committee—on the hoof, in the heat of the moment, and I would not want to label the Minister as a purveyor of fake news, but does he really think that we are 90% of the way there? Even if Government Members say that we do not normally do this, there is always a time when, if needed, we can step in, and the Labour party would argue that that time is now.

--- Later in debate ---

[Mr Wallace]

It is a pleasure to follow the hon. Member for Ealing Central and Acton (Dr Huq). I will take this opportunity to respond to the many points that have been raised in this debate. It is a regret that the right hon. Member for Barking (Dame Margaret Hodge) is not in her place, but it is for fully understandable reasons. I pay tribute to her for the work she has done in campaigning for tax transparency, and I send her my best wishes at this time.

Let me now turn to the main thrust of this debate. What has dominated our proceedings is this question of whether our British overseas territories and Crown dependencies should have public registers of beneficial ownership. I am a supporter of transparency. I was the first Member of this House to publish my expenses—long before that was required. It was not a popular thing to do at the time, but I am a great believer in transparency. I learned that from my time in the Scottish Parliament, because I am also a great believer in respecting devolution and respecting constitutional arrangements.

Let me say to my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) that we have not changed our ambition. Our ambition is still to have public registers of beneficial ownership in the overseas territories and Crown dependencies. I repeated that to the leaders of those territories and dependencies just two weeks ago, but how we get there is where there are differences. We must recognise that, ever since David Cameron held that anti-corruption summit, we have come a long way—I am not sure whether it is 90%, 89%, or 85%. I do not know the percentage—I did not do the same course as the hon. Member for Ealing Central and Acton. None the less, we now have a commitment to keep either central registers or linked registers. My hon. Friend the Member for Amber Valley (Nigel Mills) needs to recognise that it is perfectly possible to link registers and to interrogate them centrally. We aim to fulfil that commitment by June 2017.

We are also committed to allowing our law enforcement agencies to have automatic access to those registers. We already do that in some of those territories, with requests coming back within hours. As a Home Office Minister, I am charged with ensuring that we see off organised crime, tackle corruption, and deal with money laundering. I believe that our arrangements do allow us to deal with potential crime and tax evasion. If I did not think that, I would not be here making the point that now is not the time to impose that on our overseas territories and Crown dependencies. I have faith that, at the moment, the capabilities of our law enforcement agencies enable us to interrogate those systems and to follow up and prosecute those people who encourage tax evasion not only in this country, but in other countries. This Bill gives us that extra territorial reach that many other countries do not have.

[Ian Paisley (North Antrim) (DUP)]

Can the Minister give the House a categorical assurance that none of the money made from ill-gotten gains of criminal activity, through fuel fraud in Northern Ireland and the Republic of Ireland, is illicitly put into those countries?

[Mr Wallace]

We find criminals using banking systems all over the world to hide their money, whether that is in Northern Ireland, London, the Republic of Ireland, Crown dependencies or elsewhere. Such places have agreed to work with our law enforcement agencies, and we will allow their law enforcement agencies access to our databases in order to follow up such activity.

The hon. Member for Ealing Central and Acton underplays the success of the United Kingdom’s leadership role. Without imposing on democratically elected Governments in those countries and without imposing our will in some sort of post-colonial way, we have achieved linked registers and access to registers for our law enforcement agencies across many Crown dependencies and overseas territories. We might compare ourselves with our nearest neighbours, the major economies—with all due respect, I do not mean Christmas Island—such as Germany and other European neighbours such as Spain. We are the ones with a public register and we, not them, are the ones ready to have a unified central register. Perhaps we should start by looking at the major economies, rather than sailing out on a gunboat to impose our will on overseas territories that have done an awful lot so far in getting to a position in which I am confident that our law enforcement agencies can bring people to justice. That is the fundamental point of this principle. We have not abandoned our ambition. We have decided that the way to do it is not to impose our will on overseas territories.

The Labour party’s new clause 17 is probably constitutionally bankrupt, if I may use that phrase. It would certainly cause all sorts of problems, although I am not sure that we can actually impose our will on a Crown dependency like that. All the good words of the hon. Member for Ealing Central and Acton seem to have disappeared because the new clause leaves out overseas territories and would apply only to Crown dependencies. If Labour Members think that such a provision is right for Crown dependencies, why is it not right for overseas territories? I do not understand why they have left that out, although I suspect it is because, when it really comes to it, Labour Members do not know what they are talking about. If the Labour party wanted to be successful with this, it might have done it in its 13 years in Government.

I respect devolution and constitutional arrangements, and it is important to do that at this stage. Crucially, if we do this in partnership, we will get there. When we see people being prosecuted and the system of information exchange between law enforcement agencies working, we will have arrived at a successful point. I am confident that we will get there. I do not shy away from telling the overseas territories and Crown dependencies that our ambition is for transparency but, first and foremost, our ambition is for a central register that is easily interrogated by our law enforcement agencies.

[Nick Herbert]

I welcome my hon. Friend’s restatement that the Government remain committed to transparency. Will he give some kind of indication of a timetable, once his policy of registers is fully in place, by which he expects the overseas territories to be able to move to full transparency?

[Mr Wallace]

The first commitment is for the central register to be in place by June this year. Where overseas territories have trouble fulfilling that—for example, they just do not have the capacity to do it—we have offered help to allow them to do so. Hopefully that means that we will keep on target. As for setting a date for the public register, we first have to complete our own, and get it up and running. Once we know what challenges are involved in doing that and seeing how it works, we can have a grown-up discussion with our G20 partners about when they will do that. We should not just focus on the overseas territories and Crown dependencies. Major economies, including our own, are guilty of allowing people to hide illicit funds, which is why we introduced this Bill. I suspect we will find many funds laundered not in those small overseas territories, but in some major economies in the G20. That is important.

[Mark Durkan]

A number of the Minister’s hon. Friends used the argument of competitive disadvantage when speaking against new clause 6. That is not an argument that the Minister has addressed at the Dispatch Box. Will he assure us that he is not saying that, when the time might be right in the future, and as long as any of the territories cite concerns about competitive disadvantage, the British Government would just back off?

[Mr Wallace]

We do have to recognise that there is a difference between secrecy and privacy; we have to respect that and to understand when privacy is an advantage and when it is being used secretly, to create a disadvantage or to avoid detection. So the difference between secrecy and privacy is not as straightforward as it would seem. In our lives, we all deserve some element of privacy. Shareholdings in some very major private companies, for example, are not listed—they have to be declared—and that has been established for many years.

[Mark Durkan]

Just to clarify the point, some of the Minister’s hon. Friends said that their grounds for not supporting new clause 6 were that these territories would be put at a competitive disadvantage if they had to move to public registers. Is that the Government’s case, or is that argument being made by his hon. Friends, but not from the Dispatch Box?

[Mr Wallace]

The United Kingdom Government do not think they are at a competitive disadvantage, and that is why we are progressing with a public register ourselves. However, we will lead by example and by peer-group pressure; we will not lead by imposition. That is fundamentally the difference between the Government and some Members of the House. That is how we are going to get there.

[Caroline Flint]

Will the Minister give way?

[Mr Wallace]

No, I have to press on. I am sorry.

The damage caused by economic crime perpetrated on behalf, or in the name, of companies to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business is a very serious matter, and it comes within the area of corporate failure to prevent economic crime.

The Government have already taken action in respect of bribery committed in pursuit of corporate business objectives, and the Bill will introduce similar offences in relation to tax evasion. Both sets of offences followed lengthy public consultations, as is appropriate for such matters, which involve complex legal and policy issues.

That is why I confirmed in Committee that the Government would be launching a public call for evidence on corporate criminal liability for economic crime. That call for evidence was published on 13 January and is open until 24 March. It will form part of a potentially two-part consultation process. It openly examines evidence for and against the case for reform, and seeks views on a number of possible options, such as the “failure to prevent” model. Should the responses we receive justify changes to the law, the Government would then consult on a firm proposal. It would be wrong to rush into legislation in this area, but I hope hon. Members will recognise that the Government are looking closely at this issue, and I encourage them to contribute to the consultation process.

Let me move on to the issue of limited partnerships, which was raised by the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) and more generally by members of the Scottish National party. I am grateful for the work they have done alongside the Glasgow Herald in highlighting the abuse of the Scottish limited partnership by criminals internationally and domestically, and it is important that we address that issue. We take these allegations very seriously—only recently, the hon. Gentleman highlighted another offence to me—and that is why a call for evidence was issued on 16 January by the Department for Business, Energy and Industrial Strategy on the need for further action.

The “Review of limited partnership law” is an exciting document—I am afraid the graphics man was clearly not in on the day it was created—but I urge members of the Scottish National party to respond to it, and I know they have already done so. They will be interested in one of the questions, which asks:

“What could the UK government do to reduce the potential of Limited Partnerships registered in Scotland being used as an enabler of criminal activity, whilst retaining some or all of the aspects of those Scottish Limited Partnership structures which are beneficial?”

I know the Scottish National party will respond to that.

[Richard Arkless]

What can the Minister tell us about the mystery Committee that is sitting for one hour today and proposing a new type of limited partnership that will, in theory, step into the place of SLPs? That is the sticking issue for me. Is there anything he can say on that point?

[Mr Wallace]

Well, apart from asking the hon. Member for Kirkcaldy and Cowdenbeath how he has enjoyed his hour on the Committee, which he has gone off to attend, I think we should look at this in chronological order. The review is taking place now. Whatever it produces will, of course, be responded to. If it is responded to in legislation, that will succeed whatever is being discussed in that Committee now.

I come now to the issue of tax evasion and the Opposition’s new clause 11, which returns us to the question of corporate transparency in overseas territories. I should stress that the new offences in part 3 of the Bill already apply in those jurisdictions. First, the domestic tax evasion offence applies to any entity based anywhere in the world that fails to prevent a person acting for it, or on its behalf, from criminally facilitating the evasion of UK taxes. The overseas offence applies to any entity that carries out at least part of their business in the United Kingdom. The only circumstances in which a company is outside the scope of these offences is where there is no connection to the UK: no UK tax loss, no criminal facilitation from within the UK, and no corporation carrying out any business. In those situations, it is for the country suffering the tax loss, and not for the UK, to respond. The corporate offences are by no means a one-size-fits-all solution for every country. However, I am pleased to report that Government officials have spoken to revenue authorities, regulators and businesses from across the world about the new corporate offences, and there has been significant interest in them.

--- Later in debate ---

[Mr Wallace]

I beg to move, That the Bill be now read the Third time.

Financial profit is at the heart of almost all forms of serious and organised crime, which directly affects the most vulnerable in society. The Bill will significantly improve our ability to tackle money laundering, corruption, tax evasion and terrorist financing. It is a key part of the Government’s critical work to reduce the flow of dirty money into the City and to cut off the funding streams to the fraudsters, money launderers and kleptocrats.

This country is the largest centre for cross-border banking. The UK is, and will remain, a good place to do business. However, the National Crime Agency estimates that up to £90 billion may be laundered here each year. I have made it clear—as has my right hon. Friend the Prime Minister and, indeed, her predecessor—that we need to make the UK a hostile environment for those seeking to move, hide and use the proceeds of crime and corruption. In an increasingly competitive international marketplace, the UK simply cannot afford to be seen as a haven for dirty money. We must not turn a blind eye to the money of corrupt officials that flows through businesses, banks and property, and that is why the Bill is so important.

I thank the shadow Home Secretary, the right hon. Member for Hackney North and Stoke Newington (Ms Abbott), and the hon. Member for Ealing Central and Acton (Dr Huq), as well as the hon. Members for Dumfries and Galloway (Richard Arkless) and for Kirkcaldy and Cowdenbeath (Roger Mullin), for their input throughout the Bill’s passage so far. Other hon. Members have also brought considerable knowledge and expertise to the proceedings.

The Government, and I as the Minister concerned, have been determined to be open to input from all parties, and I am pleased that we have made some concessions towards addressing the issues raised. I know we have not dealt with all the concerns raised, but I hope that I have made sure that the Bill leaving this place is better than when it was introduced and that it has taken on the points raised by both the Labour party and the SNP, and indeed by my hon. Friends on the Conservative Back Benches.

We had further detailed debate of the Bill on Report today, with many well-informed contributions from all parts of the House. The debate has covered the scope of the unexplained wealth orders and other powers in part 1 of the Bill, as well as the corporate offences regarding the failure to prevent the facilitation of tax evasion.

Of course much of today’s debate has focused on issues that were not part of the Bill itself, notably the new clause in the name of my hon. Friend the Member for Esher and Walton (Mr Raab) and the right hon. Member for Barking (Dame Margaret Hodge) and others, which sought to impose sanctions on those involved in gross human rights abuse or violations overseas. The strength of feeling on this issue is clear, and the treatment of Sergei Magnitsky was undeniably deplorable.

This Government are committed to promoting and strengthening universal human rights globally. Our approach focuses on holding to account those states responsible for the worst violations of human rights and working with those states determined to strengthen protections against abuse. But we have listened to the House, and our amendment will allow for the recovery of property connected with torture or cruel, inhumane and degrading treatment overseas. This sends out the strong message that those seeking to profit from torture and other serious abuses will not be able to do so in the UK.

The House also debated the commitments made by the overseas territories to tackling corruption and money laundering in their financial systems. The UK is at the forefront of the global approach to increasing corporate transparency and tackling tax evasion and corruption. That work started under David Cameron, and it continues.

I share the desire for the Crown dependencies and overseas territories to take further steps towards full corporate transparency. That is why this Government continue to work closely with them towards that goal, but we must recognise the significant progress they have already made, putting them well ahead of many other jurisdictions.

The Bill and the wider package of measures of which it is a part will give agencies the powers they need to ensure that crime does not pay in a Britain that works for everyone. It is important that these powers are available to all parts of the UK, but, as I have said, we will await the outcome of elections in Northern Ireland before we commence the provisions there.

The need for this legislation is significant and particularly timely as we negotiate our future relationship with the European Union. Now, more than ever, we must showcase the UK as one of the best places in the world to do business, as we form new ties with international friends and partners.

Serious and organised crime costs the UK at least £24 billion annually and deprives people of their security and prosperity. We task our law enforcement agencies with combating the evolving threat from both criminals and terrorists, and I pay credit to those agencies for all the work they do on our behalf, but without the necessary powers to pursue and prevent these illicit activities, they fight a losing battle.

This Government have done more than any other to tackle money laundering and terrorist financing, but the scale of the threat is clear and we must do more. This Bill sends the clear message that we will not stand for money laundering or the funding of terrorism through the UK, and I commend it to the House.