Draft Proceeds of Crime Act 2002 (Investigative Powers of Prosecutors: Code of Practice) Order 2024 Draft Proceeds of Crime Act 2002 (Search, Recovery of Crypto Assets and Investigations: Codes of Practice) Regulations 2024 Draft Proceeds of Crime Act 2002 and Terrorism Act 2000 (Certain Information Orders: Code of Practice) Regulations 2024 Draft Terrorism Act 2000 (Code of Practice for Authorised Officers) Orders 2024

Chris Philp Excerpts

Tuesday 16th April 2024 General Committees

[The Chair]

I will call the Minister to move the motion and speak to all the instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the remaining three motions formally.

[The Minister for Crime, Policing and Fire (Chris Philp)]

I beg to move,

That the Committee has considered the draft Proceeds of Crime Act 2002 (Investigative Powers of Prosecutors: Code of Practice) Order 2024.

[The Chair]

With this it will be convenient to consider the draft Proceeds of Crime Act 2002 (Search, Recovery of Crypto Assets and Investigations: Codes of Practice) Regulations 2024, the draft Proceeds of Crime Act 2002 and Terrorism Act 2000 (Certain Information Orders: Code of Practice) Regulations 2024, and the draft Terrorism Act 2000 (Code of Practice for Authorised Officers) Order 2024.

[Chris Philp]

It is a pleasure to serve for the first time under your chairmanship, Dr Huq.

The Government are committed to tackling all forms of economic crime. Decisive action has been taken by expediting the passage of the Economic Crime (Transparency and Enforcement) Act 2022 through Parliament. The Home Office measures in that Act reform the unexplained wealth orders regime to improve transparency of ownership structures and allow more time for law enforcement to review material relating to unexplained wealth orders.

Building on the 2022 Act, the Economic Crime and Corporate Transparency Act 2023 contained a vast range of reforms to the Proceeds of Crime Act 2002 and terrorist financing legislation, specifically the Anti-terrorism, Crime and Security Act 2001 and the Terrorism Act 2000. The reforms include powers to allow the effective seizure of both criminal and terrorist crypto assets, reforms to enable targeted information sharing to tackle money laundering and remove reporting burdens on businesses, new intelligence-gathering powers for law enforcement, and provisions to reform outdated criminal corporate liability laws.

The reforms to UWOs, corporate liability and targeted information sharing are, I am pleased to say, already in force. The new offence of failing to prevent fraud will be brought into force once Government guidance has been published and businesses have familiarised themselves with the guidance, which is being drafted. The majority of the remaining Home Office measures will be commenced on 26 April 2024—in just a couple of weeks’ time. Today we debate the statutory instruments that underpin the codes of practice for those measures. I do not intend to cover the content of the powers—they were debated extensively by both Houses during the passage of the 2023 Act. What we are doing here is simply legislating for the four codes of practice that are being revised and the two new ones being made.

A search, seizure and detention of property code is issued by the Home Secretary for officers in England and Wales to guide the exercise of search and seizure powers in the context of criminal confiscation investigations. There are two codes of practice to guide law enforcement in the use of search and seizure powers for both civil forfeiture and counter-terrorism investigations. One is issued under the 2002 Act and the other under the 2000 Act in relation to powers in the 2001 Act. These codes are also issued by the Home Secretary.

[Charlotte Nichols (Warrington North) (Lab)]

The Minister refers to terrorism, but could he clarify whether that would capture state entities involved in state terror, such as the North Korean regime, which we know is involved extensively in cyber-crime?

[Chris Philp]

Terrorism is defined in those Acts and will be facts-specific. If an agent of a foreign Government committed certain acts on our soil and those acts fell within the definitions contained in the Terrorism Act 2000 or other terrorism legislation, the terrorism provisions would be engaged. Whether cyber-attacks conducted extraterritorially would meet those thresholds would be facts-specific; it would depend on the nature of the acts themselves. Clearly, acts by hostile states are of very significant concern and have in a number of cases been debated in Parliament. My right hon. Friend the Minister for Security and the Home Secretary are working very hard to counter those state threats, which emanate from a number of countries. The hon. Lady has mentioned one such country; others include Iran, China and Russia.

We are considering two codes to guide the exercise of powers to investigate suspected criminal property. One code is issued by the Home Secretary; the equivalent code for prosecutors is issued by the Attorney General for England and Wales and the Advocate General for Northern Ireland. The final code being introduced by these draft instruments is a new code to guide the National Crime Agency on the appropriate use of new information order powers, which is issued by the Home Secretary under both POCA 2002 and TAC 2000. The code clarifies the circumstances in which powers may be exercised to ensure that they are applied consistently, which is vital.

The Proceeds of Crime Act 2002 and the Terrorism Act 2000 mandate that the Secretary of State must publish a draft code, consider any representations made, and modify the draft in the light of such representations prior to laying revised codes. The draft codes we are debating today were subject to separate public consultations. Information on the consultations can be found in the explanatory memorandums accompanying the statutory instruments. Among other things, the codes support the recovery of crypto assets. We are concerned that criminals are increasingly using crypto assets to hide money that has arisen from criminal activities.

In conclusion—always the two most popular words I utter in a speech; I see the shadow Minister, who has suffered many such speeches, agrees enthusiastically —the four draft instruments are required to complete commencement of the Economic Crime Transparency and Enforcement Act 2022 and the Economic Crime and Corporate Transparency Act 2023. This will ensure that all necessary legislation is in place and that there is legal certainty about how cases will be dealt with.

--- Later in debate ---

[Chris Philp]

Non-fungible tokens, the value of which, as the shadow Minister hinted, is somewhat volatile— I am not sure that I would recommend to anyone that they invest in NFTs—are covered. In fact, it is possible for the Secretary of State, via regulation-making powers and secondary legislation, to update the provisions on digital currencies or other things in the future in case there are forms of digital assets that we do not know about today that we may want to bring into scope in the future.

Paying compensation to victims, which was raised in an intervention, happens to an extent already. In the financial year 2022-23, about £15 million that had been recovered via confiscation orders was paid out to victims, so that is happening. However, I am sure that it could happen to an even greater extent, given how significant some of the online and crypto-related fraud is.

Capacity is discussed by the Security Minister with both the NCA and the City of London police, who lead on fraud nationally, on a regular basis. They try to recruit experts, obviously, but that can be difficult, because the kind of experts who are skilled in cryptocurrency-related matters command quite a high market price externally in the private sector. None the less, a lot of work is being done to ensure that that capacity is there. When the Home Secretary, the Security Minister and I have our regular meeting with the director general of the NCA in the next week or two, I can certainly repeat that question, but I know that the Security Minister is conscious of this and has worked on it.

In relation to the question posed by my right hon. Friend the Member for Maldon regarding the tracing of assets, although it is absolutely true to say that tracing crypto assets is harder than with a regular bank account —that is of course why criminals like using them—it is by no means impossible, particularly if relevant bits of hardware or certain access codes are obtained. I am sure members of the Committee can imagine that techniques are deployed that enable that to happen, which I will not elaborate on. Although it is harder than with a regular bank account or where money flows through the regular international payments system, it is not impossible by any means, and there are quite a few examples of where intercepts of various kinds or seizure of hardware have led to significant crypto asset recovery. In fact, a case may be coming before the courts in the not-too-distant future where an extremely large amount of crypto assets may be subject to recovery; I am sure that we will all read about that quite a bit in the coming few months. I trust that that answers the questions, and I once again commend the draft instruments to the Committee.

Question put and agreed to.

DRAFT PROCEEDS OF CRIME ACT 2002 (SEARCH, RECOVERY OF CRYPTO ASSETS AND INVESTIGATIONS: CODES OF PRACTICE) REGULATIONS 2024

Resolved,

That the Committee has considered the draft Proceeds of Crime Act 2002 (Search, Recovery of Crypto Assets and Investigations: Codes of Practice) Regulations 2024.—(Chris Philp.)

DRAFT PROCEEDS OF CRIME ACT 2002 AND TERRORISM ACT 2000 (CERTAIN INFORMATION ORDERS: CODE OF PRACTICE) REGULATIONS 2024

Resolved,

That the Committee has considered the draft Proceeds of Crime Act 2002 and Terrorism Act 2000 (Certain Information Orders: Code of Practice) Regulations 2024.—(Chris Philp.)

DRAFT TERRORISM ACT 2000 (CODE OF PRACTICE FOR AUTHORISED OFFICERS) ORDER 2024

Resolved,

That the Committee has considered the draft Terrorism Act 2000 (Code of Practice for Authorised Officers) Order 2024.—(Chris Philp.)