Draft Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022

Holly Lynch Excerpts

Monday 12th December 2022 General Committees

[Holly Lynch (Halifax) (Lab)]

It is a pleasure to serve under you as Chair this afternoon, Mrs Murray, and I thank the Minister for his opening contribution. As he has said, the regulations will increase the threshold amount specified in section 339A of the Proceeds of Crime Act 2002 from £250 to £1,000. In practice, this will increase the value of transactions that a bank or similar firm can carry out in operating an account for a customer without committing one of the main money laundering offences laid out in POCA. By doing so, the Government seek to reduce the number of ineffective defence against money laundering suspicious activity reports, while also improving the effectiveness of the anti-money laundering system and enabling law enforcement to focus on—as the explanatory memorandum says—

“opportunities that lead to asset seizure”.

We are keen to support these measures, which seek to enhance the quality of suspicious activity reports coming from the private sector and hasten their utilisation by law enforcement. However, I am keen to probe whether we are satisfied that that is what the regulations will do in practice. We appreciate that increasing the threshold will hopefully lessen the burden on the NCA’s UK Financial Intelligence Unit, but is the Minister not concerned that these measures will inadvertently increase the prevalence of so-called smurfing among criminals, a potential problem raised with us by the Royal United Services Institute? Through that practice, money laundering payments are broken down into smaller amounts under the threshold, specifically to evade law enforcement.

Moreover, reducing the reporting burden on businesses for low-value money laundering will not necessarily mean that businesses are somehow mandated to redirect their resources towards detecting or reporting on high-value suspicious and criminal activity. The main argument for the change seems to be an attempt to prevent the Financial Intelligence Unit from being overwhelmed, rather than there being no intelligence or criminality below that threshold. I understand that in recent years, there has been an exponential increase in the number of reports that the UKFIU has had to deal with. It now receives over 400,000 reports per annum, which we can appreciate is a massive challenge for a unit with only 200 members of staff.

In its 2020 report, the UKFIU recorded a 20% increase in the total number of SARs, and an 80% increase in defence against money laundering SARs from the previous year. The explanatory memorandum states that only 2% were refused consent in 2019-20,

“of which only 1,062 progressed towards asset denial.”

Of that 2%, how many of those would have no longer been captured under the changes?

In its May 2022 follow-up report into the UK’s mutual evaluation report, the Financial Action Task Force noted continued concerns about the under-resourcing and IT constraints of the financial intelligence unit, including its failures to meet the target of 200 staff that the task force recommended more than 15 years ago.

Our noble friends in the other place have already considered these regulations, and Lord Sharpe of Epsom told Members, who asked him about resourcing of law enforcement on this crime type, that 75 additional officers were being recruited to the UKFIU, which we welcome. He told the Committee that 45 of those officers were already in post, and the milestone for recruiting the remaining 30 is at the end of this financial year, 2022-23. That was on 24 November, so can the Minister update us on whether any further progress has been made?

I will make the point again that we recognise these changes will tighten up the information being provided to the FIU, but we are not entirely convinced that the changes amount to an overall enhancement of the money laundering framework that we must have in place if we are to drive this out of our economy.