Criminal Finances Bill

Lord Brown of Eaton-under-Heywood Excerpts

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

[Lord Brown of Eaton-under-Heywood (CB)]

My Lords, if my speech appears somewhat bland, as I fear it may, it is not for any want of enthusiasm for the Bill, but rather because I have not yet had time to give it the full and detailed scrutiny that it undoubtedly requires.

I applaud the Bill’s intent: in broad terms to strengthen and widen our powers to strip international and domestic criminals—fraudsters, money launderers, terrorists, tax evaders, gross human rights abusers and so on—of their ill-gotten gains. I am in no position to criticise, but I regret the Bill’s length and complexity at 171 pages. This is in the context of an existing regime essentially based on the Proceeds of Crime Act 2002, the subject of a leading Oxford University Press textbook, which itself is more than 700 pages. There have been a large number of reported cases on POCA over the last 15 years, all of which resulted in lengthy judgments—alas, not all easily reconcilable. Indeed, I had the misfortune to sit on several of them, though fortunately not on one of the last leading cases, Waya, heard in the Supreme Court in 2011-12. The first hearing, before five justices, failed to produce any coherent judgment, even by a majority. It had to be relisted some months later before nine justices, including the then Lord Chief Justice, my noble and learned friend Lord Judge. The judgment then took a further nine months to prepare. I mention these matters only to emphasise the inherent complexity of this area of the law and the absolute need to produce clarity and, wherever possible, simplicity in the provisions being introduced by the Bill.

That the Bill is highly desirable in principle cannot be doubted. The May 2013 foreword by the then director of the Serious Fraud Office to the OUP book I mentioned referred to the huge improvement effected by POCA on the very limited scheme, first introduced in the Criminal Justice Act 1988, for ensuring that crime should not pay, but it also recognised remaining weaknesses and gaps in the POCA scheme. The editors of that book suggested, in their preface, the need to re-examine the existing regime and for new and reinvigorated emphasis to be placed on the recovery of ill-gotten gains.

On the statistics, the editors pointed out the regrettable failure of POCA to have made any effective breakthrough in terms of recovery—rather the reverse. The annual proceeds of crime in 2013 were estimated, very roughly, at between £19 billion and £48 billion a year. Annual recovery by way of all measures—cash forfeitures, criminal confiscation, civil recovery and, indeed, penal taxation—amounted in each of the five years from 2006-07 to 2010-11 to between only £125 million and £161 million. It is greatly to be hoped that, with the enlarged enforcement powers provided by the Bill, a very substantially higher proportion of criminal gains will be recovered by the state and, to my mind altogether more importantly still, stripped from the criminals.

There is much to be welcomed in the Bill. Of course, it goes well beyond curing the deficiencies in the existing POCA scheme. A number of the individual measures positively gladden the heart. Prominent among them, surely, are the unexplained wealth orders, the enhanced and improved suspicious activities report regime, forfeiture of assets of gross human rights violators—the so-called Magnitsky amendment—corporate responsibility regarding facilitating tax evasion, measures to combat terrorist financing and so forth. Close scrutiny of these and much else will, of course, be for another day—or, rather, days—but for now I simply put on record my necessarily preliminary but otherwise full support for the Bill and wish it well.

Criminal Finances Bill

Lord Brown of Eaton-under-Heywood Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 28th March 2017 Lords Chamber

[Lord Brown of Eaton-under-Heywood (CB)]

My Lords, in common with the noble Lord, Lord Faulks, I too oppose Amendment 1. These unexplained wealth orders, in my submission, are to be welcomed and we must do nothing to dampen them at their outset. However, to put the criminal burden of proof into the very first provision would, I suggest, do just that. This provision surely should be based on the balance of probabilities.

Government Amendment 6 will introduce into new Section 362B(2) being inserted by the Bill, as the test of satisfaction,

“that there is reasonable cause to believe”.

Your Lordships will notice that new subsection (3) sets out a different test, that of being,

“satisfied that there are reasonable grounds for suspecting that the known sources of the … lawfully obtained income would have been insufficient”,

while new subsection 4(b) says there should be,

“reasonable grounds for suspecting that … the respondent is, or has been, involved in serious crime”,

and so forth. To “suspect” something is merely to suspect that it may be the case; to “believe” something is to believe that it is the case. These tests therefore differ. I do not know, but perhaps the one under new subsection (3) could be tightened. Rather than trying to introduce the criminal burden in the first provision, those who would like to make these orders more difficult might at least want to consider whether “reasonable grounds for suspecting” should be uplifted to the requirement the Government are introducing in amended new subsection (2): that there is “reasonable cause to believe”. For my part, I would introduce as the first provision a balance of probability test and leave the others essentially where they stand.

My only further thought is that if the House—to my mind, unwisely—were to raise the threshold remotely as high as the amendment in the name of the noble Baroness, Lady Hamwee, suggests, you would want the lowest test to be enshrined in the Bill; whereas with a lower sum in question, you might want a correspondingly higher test. Those are thoughts, because this, after all, is at an early stage and these are essentially probing amendments.

[Lord Blair of Boughton]

I am glad that I did not interrupt the noble Lord, Lord Faulks, because he and the noble and learned Lord, Lord Brown, approach this matter from long knowledge of the law. I would like to consider the amendment of the noble Lord, Lord Hodgson, in relation to the investigative process. UWOs are effectively a search warrant. That is the test, and that is not beyond reasonable doubt. You have a search warrant because you think something might be happening. When you have executed the search warrant, you know whether it has happened or not and at that point, you might charge someone with a criminal offence, for which the test would be “beyond reasonable doubt”. From an investigative point of view, that amendment would put at the front of the operation a test which is almost impossible to pass unless you issue the order and effectively use a search warrant on the individual’s bank balances.

--- Later in debate ---

[Lord Deben (Con)]

My Lords, I support the amendment because I have been for many years concerned about housing. This issue is a matter not just of corrupt investment but of investment in housing for purposes which are other than housing. This is a very serious social issue in London and other cities. If the Government do not take it seriously, they will reap the whirlwind.

The number of such houses and flats—real estate—in London in particular, causes considerable resentment among those unable to buy their own home. It is no good any party any longer ignoring it. All parties have to admit that they have not solved this problem. This is not a party-political comment, but it is an increasingly serious matter because it is creating divisions in our society which are greater than they have ever been. I ask Members of your Lordships’ House to remember when it was possible for them as young people to buy a house or a flat in London, now to think about their children or grandchildren unable to do so and to recognise the divisive effect of that. It is against that background that this amendment should be considered.

The second issue is simply that most of us are fed up with the intrusive questions asked by people with whom we have banked for most of our lives, including being asked to send one’s utility bills to a bank with which one has had an account that has been in reasonable order for 60 years because it has to meet the perfectly understandable anti-money laundering arrangements. The second resentment is that normal, ordinary British people have to go through this amazing series of hoops to bank money or get money out if they wish to do anything which is slightly out of the ordinary, yet they know perfectly well that the banks must have been involved in the transmission of money in situations which are, at the very best, dodgy.

I, too, sought some figures about who has been prosecuted for this. It actually beggars any kind of belief that no bank of any kind has ever helped anybody to buy, with improperly gained foreign money, property in London. I am sorry but that does not stand up. So the second disillusion that comes is that decent people in this country go through this kind of unbelievable series of hoops knowing both that they must accept them because of the security that we properly wish to impose and that others avoid this to the tune of millions and millions of pounds.

The third reason this amendment is so important is that there is a real concern in this country, with the atmosphere of Brexit, about attitudes to foreigners. I am an absolute and continuous remainer and will not be pushed off that by anybody’s arguments, so I am biased. However, I do not like the society we are building in circumstances of antagonism to foreigners of all kinds. That makes it even more important that where dishonourable activities take place and money earned dishonourably elsewhere is invested in this country that is dealt with clearly and transparently, so that the kind of accusations that are and have been made against people who invested here honourably are totally distinct from that which has been unacceptable.

My fourth reason—and last, as the House will be pleased to note—is that we recently, honourably, passed the Modern Slavery Act. We are beginning to be serious about the way in which people are exploited and the benefits of that exploitation coming to people in this country. People are serious about this, the Government have been serious about it and it has all-party support. If we are serious about the Modern Slavery Act, we must also be serious about the proceeds of crime and often of exploitation being brought into this country and used in the real-estate world. That is why I beg my noble friend to take this amendment very seriously. It addresses some deep disillusion in our society and also some deep injustice in the society of the world. This is not just a passing amendment to tease out the Government’s position here and there but a fundamental amendment that challenges the whole of our society to behave in a way that we can be proud of, rather than one that facilitates activities we should condemn.

[Lord Brown of Eaton-under-Heywood]

My Lords, I start with a very pedantic point. If this amendment is to go ahead, it needs to begin with an “or”. As the noble and very clever though not technically learned Lord points out, this is a further alternative to the two already listed in new Section 362B(4). The next point is that of course the property here envisaged, registered in the name of an overseas company in which the respondent has an interest, is not—I repeat, not—the same property as referred to in subsection (1), in respect of which one seeks to have an unexplained wealth order made. It is a different property altogether.

I have great sympathy with the amendment and the policy underlying it. Like the noble Lord, Lord Deben, I deplore the extent to which London properties are in foreign ownership nowadays. But I respectfully wonder how far the amendment would go—if any distance—in actually dealing with that problem and with money laundering. Surely with regard to most of the people who buy and own these London properties—if they are not already PEPs, or politically exposed persons, and we know that a lot of them probably are—nobody questions how much money they have. But would it not then be rather difficult to satisfy the earlier requirement —which, again, has to be satisfied to make one of these orders—in new subsection (3)? Each of the various requirements set out in proposed new subsections (2), (3) and (4) has to be satisfied. First you have to show that they hold property of the relevant value; then, in new subsection (3) you have to be satisfied that,

“there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property”.

The property there being referred to is not property in London registered in the name of an overseas company, it is the property in respect of which you are seeking a UWO.

Those points need to be borne in mind before one goes down this particular road. It is not going to be the panacea that some who have contributed to the debate thus far seem to think it is likely to be.

[Baroness Kramer (LD)]

My Lords, I do not pretend for a moment to have the drafting skills of the noble and learned Lord, Lord Brown of Eaton-under-Heywood, but I associate myself with all the other comments that have been made on the amendment. Rather than repeat the issues that have been so well described, I want to pick up the point that the noble Lord, Lord Faulks, made—that this Bill is a real and rare opportunity to tackle this problem, which, as he will have heard, exercises Members on all sides of the Committee and is essentially a non-partisan series of concerns.

When I had the privilege of sitting where the Minister is sitting, I brought a Bill through this House which was fondly and informally known as the “Dump it in here” Bill. It is perfectly possible, even at this stage, for the Government to come forward with some well-drafted language that would achieve the goals that have been described by various noble Lords today and by others who have been concerned about this issue. The Government have been looking at it for a long time. Given the fact that it will be difficult to get new legislation through in the next couple of years, I urge the Government to look at drafting that language—they have the capacity to do it and would be in a position to do it—that would bring into the Bill the kinds of remedies that would require the public register of beneficial interest for property ownership that presently we do not have in the UK. I met representatives of the British Virgin Islands the other day. The British Virgin Islands actually has such a register and would be delighted to provide mechanisms and recommendations to the British Government if they felt they needed advice in this area.

--- Later in debate ---

[Lord Rosser]

My Lords, I have Amendment 72 in this group. The Bill provides for extensions to the suspicious activity reports regime under which private sector companies report suspected money laundering—or, at least, they are meant to. The extensions or enhancements enable the moratorium period during which the relevant law enforcement agencies can gather evidence to be extended and provide a power enabling the UK Financial Intelligence Unit in the National Crime Agency to obtain further information from suspicious activity reporters. The enhancements also create a legal basis for sharing information between companies in order that they can build up a clearer picture of suspected money laundering.

Amendment 72 would provide for a procedure, through the National Crime Agency, for prioritising the most serious suspicious activity reports to target effectively the use of scarce law enforcement resources. Private sector companies and professionals, such as accountants, are required by law to make a suspicious activity report every time they become aware that a person might be in possession of the proceeds of crime, and that applies equally even if the amounts involved are small or if the information is far from conclusive or far from being considered fully reliable. The same duty to report applies whether the suspicion relates to a theft of a few pounds from petty cash or to what could be serious organised crime.

At present there appears to be no means by which information may be quickly screened or sifted to determine which are likely to prove the most significant or important reports requiring full investigation. There were just over 380,000 individual suspicious activity reports in 2015, and considerable time must be spent processing essentially very minor crime reports, which can only be at the expense, resource-wise, of the investigation and detection of crimes at the serious end of the scale. This amendment seeks to address that situation by providing for priority levels based on the intelligence value of each report, or a similar kind of categorisation, which would give an appropriate risk-based approach to determining which economic crimes should be tackled as a matter of urgency.

At Second Reading, the Government said that the issue raised in this amendment on suspicious activity report reform was lacking in the Bill, even though reform of the SARs regime was a crucial part of the Government’s own action plan for anti-money laundering and counterterrorist finance. The Government went on to say that they had established a programme to reform the SARs regime, and were seeking improvements in the short, medium and long term. They then went on to say that, during the review of the SARs regime that the Home Office ran in 2015, a number of regulated-sector companies suggested that suspicious activity reports should be prioritised, which is what this amendment is about. Despite this, they went on to say at Second Reading:

“We will consider this as part of the SARs reform programme”.—[Official Report, 9/3/17; col. 1518.]


However, the review was two years ago, in 2015, and a number of companies affected raised the issue addressed in this amendment in response to the review. Why, two years after the review, cannot the Government make a decision to do something to address this matter of prioritising reports rather than continue to put off making a decision? Surely, in all the discussions that would have taken place on this Bill before it was brought to Parliament and during the debates on the Bill so far in Parliament, prioritising SARs reports, which had after all been raised in the 2015 review, could and should have been considered, since it is directly relevant to the content of the Bill?

I hope that the Government will recognise this reality, and give a positive response to this amendment and, if that is not possible—and I would like to know why, if that is the case—accept that Report is now likely to be another four weeks away, with Third Reading being five weeks away, and agree to bring back a government amendment on Report or at Third Reading to address the issue raised in the amendment.

[Lord Brown of Eaton-under-Heywood]

I want to address only Amendments 58 and 59, both of which I oppose, to new Section 336B on page 28 of the Bill. That section deals with an application under the previous section to extend the moratorium period, which has to be dealt with as soon as is practicable. New subsection (3) says that the court,

“may exclude from any part of the hearing … an interested person”,

or “anyone representing that person”. We see that formulation again in new subsections (4) and (6). They are the people whose presence or otherwise at the hearing is in question.

New subsection (4) allows for a particular application, that certain specified information may be withheld from the interested person or representative, but that order can be made only under new subsection (5), if the court is,

“satisfied that there are reasonable grounds to believe that if the specified information were disclosed”,

something bad would happen—that either,

“evidence of an offence would be interfered with or … the gathering of information …would be interfered with”,

or somebody would be injured, or,

“the recovery of property … would be hindered, or … national security would be put at risk”.

In that situation, new subsection (6) comes into play. Unlike new subsection (3), which we looked at earlier, where the court “may exclude”, in this instance—because it relates to an application under new subsection (4)—the court inevitably “must” direct that the interested person or his representative be excluded. With the best will in the world, I cannot see how we could sensibly leave out new subsection (6), which puts a requirement on the court which is not to be found in new subsection (3), which deals with the general position. Nor would it make any sense whatever to substitute “may” for “must”. You have already got “may” in new subsection (3), but for this situation, “must” is the appropriate direction to the court for the order to be made. I respectfully oppose those amendments.

[Lord Hodgson of Astley Abbotts]

My Lords, I support Amendment 72, in the name of the noble Lord, Lord Rosser. It has been common ground in our discussions this evening that the volume of SARs is rising all the time. There are now over 1,500 a working day and it slightly defies belief that those are all getting anything like the attention that they should. Those of us who have had experience of this find that the National Crime Agency is extremely reluctant to allow any inhibition on its ability to call for SARs at every level. It should be possible to have discussions about automatically asking for a time limit—not that the information could not be asked for subsequently—of 25 or 50 years. One of my most recent PEP inquiries involved events 53 years ago. I simply cannot believe that collecting that sort of information is a good use of my time or the bank’s. There would be a great deal of virtue in my noble friend trying to persuade the NCA that some focus was a good idea. Getting the focus that is badly needed, and things like time and a de minimis figure, would make the whole system much more effective. The amendment tabled by the noble Lord, Lord Rosser, is a first step towards that and is worthy of serious consideration.