Serious Crime Bill [HL]

Lord Harris of Haringey Excerpts

Wednesday 2nd July 2014 Lords Chamber

Moved by

[Lord Harris of Haringey]

3: Clause 7, page 7, line 3, at end insert—
“13C Application of assets arising from the proceeds of crime to investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be applied equally to the investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”

[Lord Harris of Haringey (Lab)]

My Lords, aren’t we doing well? When was the last time that we got through the first seven clauses of a Home Office Bill within an hour of starting Committee stage? The Minister must be doing something right on this occasion.

However, I will try to improve our batting average now. At Second Reading, I declared my interest as chair of the National Trading Standards Board. In that capacity, I was invited four months ago by Yeading Junior School to attend an assembly that was based around lesson plans which had been funded by the Proceeds of Crime Act. The lesson plans were produced by the Illegal Money Lending Team for England, based in Birmingham, which my board funds. They were designed to teach junior school children how to use their money, how to save, how they should avoid debt and, above all, how they and their families should avoid loan sharks.

The Minister’s right honourable friend the Secretary of State for Education, with whom I know his department has a continuing feud, would no doubt be delighted to discover that those nine and 10 year-olds put on a play that included a section on avoiding loan sharks conducted entirely in Latin—which is not something that I thought many children in the London Borough of Hillingdon were used to speaking. None the less, it was an interesting performance; it was not, I hasten to add, a core part of the lesson plans produced by the Illegal Money Lending Team.

The point about the initiative was that it inspired young children to learn about the dangers of them and their families being ensnared by loan sharks. The funding for it had been provided by POCA moneys taken from loan sharks who had been convicted in the courts. It is an example of some of the community work that the Illegal Money Lending Team supports through funds confiscated from loan sharks, but it also demonstrates the value that can be gained from the Proceeds of Crime Act 2002.

It is clearly a valuable and important mechanism, and I think that all noble Lords who have spoken in Committee today share a desire to see it strengthened. It is good, because it hits criminals where it hurts most: in their pocket. They are often less concerned about the formal penalties that they might incur than the fact that their ill gotten gains will be taken from them.

The Minister has told us how the Bill will make it more difficult for criminals to evade confiscation. That is all to the good and welcome—although, as we have heard, there are possibilities for making the provisions stronger and no doubt we will continue to pursue them as the Bill proceeds. This amendment would ensure that a greater share of the assets recovered from offenders was reinvested in the communities and neighbourhoods affected by their criminal activities and that those funds should be put towards preventing crime and addressing its consequences.

At Second Reading the Minister said that there would be a review of ARIS, which on this occasion is the asset recovery incentive scheme rather than a foreign terrorist organisation with a similar name,

“to ensure that it works to support front-line agencies”.—[Official Report, 16/6/14; col. 697.]

When the Minister responds, I hope that we will have some clarification from the Government about the terms of the review and whether they will consider placing ARIS on a formal legislative basis and allow local authorities in particular—although the same arguments apply to the police—in their role both as investigating authorities but also as prosecuting authorities to receive a greater share of the proceeds of crime. The most likely use of these funds is that they would be applied within local government to funding accredited financial investigators in trading standards and community crime prevention projects. They could also support community crime prevention projects that had proved very successful.

The amendment would place ARIS on a formal legislative basis and would allow local authorities in their roles as both investigating and often prosecuting authorities to receive potentially more than 50% in the division of the proceeds of crime, which could then be applied to crime prevention. The most common use of the incentive payments that local authorities receive is to fund the posts of accredited financial investigators. The reason that these are important is that they make a very significant contribution to the work of trading standards. They enhance investigations by providing intelligence support. They undertake the money-laundering investigations and ensure that the proceeds of crime are recovered through confiscation and cash forfeiture.

There are a number of examples of the positive work that accredited financial investigators do. This includes dealing with landlords who have illegally converted properties into houses of multiple occupancy and then rented them to vulnerable members of the community. I believe that the London Borough of Hounslow prosecuted a case such as this in 2010, which resulted in a confiscation order of £180,000. There are also examples where one of these accredited financial investigators has had an essential role in identifying the victims, resulting in them being compensated. What often happens in these cases is that a lot of material is seized but it requires detailed financial investigation to track down where the moneys have come from and who has actually been defrauded by the fraudsters concerned. A major case was undertaken by Cambridgeshire County Council involving rogue traders, which resulted in the successful prosecution of 15 defendants, who between them received combined prison sentences of 40 years and were served with a £250,000 compensation order—all of which was then paid to the victims who had been defrauded of their life savings.

The reason why the incentivisation scheme is so important—here I am talking about local authorities but exactly the same arguments apply to the police—is that it enables them to fund the specialist resource to pursue some of the financial aspects. It means that the financial investigation can be integrated into the rest of the investigation right at the beginning. That is much more cost-effective than pursuing it at the end of the investigation to see whether assets can be saved. It also means that there is much more depth in the investigation that takes place. It is important to see if the provisions can be strengthened in that way.

The London Borough of Enfield has used the money that it has obtained from the Prevention of Crime Act scheme since 2011 to fund a specific post. That has had a series of impacts: it has allowed it to undertake the first prosecution nationally for money laundering against an illegal poker den, where the defendant was sentenced to 15 months, and to provide financial evidence in a case against a trader convicted of operating a fraudulent HGV training school, resulting in a 44-month conviction following a month-long trial. There is a series of examples of where the presence right at the beginning of an accredited financial investigator has enabled the local authority to pursue the case in much more depth and enable it to go forward.

--- Later in debate ---

[Lord Taylor of Holbeach]

I have been trying to think of a nice adjective to describe the noble Lord, Lord Harris of Haringey. I know that he did not really like me calling him mischievous. However, this amendment has been very worth while because it has enabled the House to discuss this matter. The noble Baroness is absolutely right; along with other noble Lords, I was not particularly aware of the working of this mechanism, so it has been useful to have this debate. The description the noble Lord, Lord Harris, gave of how the system works is absolutely right; it is dealt with under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme.

The objective of the scheme is to provide law enforcement agencies with incentives to boost asset recovery as a contribution to reducing crime and delivering justice by giving them a direct stake in the proceeds they generate from that work. The speech by the noble Lord, Lord Deben, was very useful; I do not care whether his sentences are short or long, they are of high value. It was an extremely interesting contribution, as were the contributions of all noble Lords, including that of my noble friend Lord Phillips of Sudbury. They were very much to the point, because making the most of the potential of this money is really important. The scheme is a non-statutory mechanism which has advantages for returning to law enforcement, prosecution agencies and the courts a proportion of the assets they recover. Public bodies with the functions of an investigator, a prosecutor or an enforcement authority can use the powers within POCA to recover criminal assets and can become part of the scheme thereby.

It is also important to remember that the scheme does not just apply to money recovered under confiscation orders but also, as the noble Lord demonstrated, to assets recovered through the other routes to recover assets provided for in the Proceeds of Crime Act, such as the seizure and forfeiture of cash, the civil recovery scheme and the taxation of criminal proceeds. Under the existing scheme, for assets recovered by means of a confiscation order, the Home Office retains 50% of the recovery receipts and returns the remainder to investigation agencies, which receive an 18.75% share of the receipts, prosecution agencies, which also receive an 18.75% share of the receipts, and enforcement agencies—in most cases this is the Courts Service—which receive a 12.5% share of the receipts. For cases where cash has been forfeited under the cash seizure powers in the Proceeds of Crime Act, the Home Office retains 50% of the receipts and the investigative agency—in the majority of cases this is the police, but it is not always so—retains the other 50%.

The use to which each agency decides to put the money received under the scheme is a matter for that agency. Because amounts received through asset recovery are unpredictable, and given that it depends on the nature of the cases dealt with by each agency each year, we have not laid down any specific guidance on the use of such money. However, we have previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance. I sense that noble Lords would feel that that is the right thing to do. The noble Baroness, Lady Smith, made clear her support for the needs for resources to drive up performance. My noble friend Lord Phillips of Sudbury felt that that was a primary objective for this money. But also, when appropriate, it can fund local crime-fighting priorities on behalf of the benefit of the community.

The Home Office has monitored the scheme annually since its inception. The results of that monitoring show that more than 90% of money distributed through the scheme is reinvested in asset recovery work, such as the recruitment of financial investigators. If we get more money, we will be able to have more investigators—and I think that everybody can see that this vicious circle could be a virtuous circle, if we implement it correctly. As the noble Lord, Lord Harris, said, these investigators carry out the recovery work, and there is a balance that can be spent on police operations and community projects. Some examples of the community work that has been paid for include alcohol awareness and crime reduction projects, mentoring programmes and assistance for elderly and vulnerable people. The noble Lord, Lord Harris, gave a classic example of community work in the confiscation of money. His own field case, which he also mentioned, is a very good example.

Over the past three years, more than £238 million has been returned to front-line agencies. However, we believe that the proposed changes that are being made in the Bill will ensure that agencies are able to apply for and enforce more orders more successfully. This in turn should lead to more funds being received by front-line agencies through the scheme. The share of the money that is retained by the Home Office forms part of the department’s core budget line and, as such, is put towards the delivery of front-line services through mechanisms such as police grant.

One key objective of the Government’s criminal finances improvement plan, which was published on 19 June, is to ensure that the Asset Recovery Incentivisation Scheme works effectively for front-line agencies. It is with that in mind that the review has been set up, and we intend to complete it by the end of the year. I hope that it will please noble Lords to note that the emerging findings from the review will be presented to the board in September, so if this Bill takes its normal course we should be able to update the House on Report on how that review is going.

The noble Lord asked about the terms of the review. The whole purpose is to investigate the process and see how we can make it better. It is being developed with the aim of ensuring that the scheme works effectively for all agencies charged with asset recovery responsibilities. All will be involved. For example, the Local Government Association will be a consultee within the process, with anyone else who is currently involved in the asset recovery process.

I was asked—or rather, challenged, “Is it appropriate to leave an organisation for distributing money on this non-statutory basis, or should we consider a statutory alternative?.” I think that the debate has shown that there are ways of making the process work well without a statutory basis. But of course, that is the sort of thing that any review should properly consider.

I hope that the noble Lord, Lord Harris, will be generous and withdraw his amendment. We in our turn are grateful to him for giving us the opportunity of describing the working of ARIS, and the review that we have in mind.

[Lord Harris of Haringey]

I am grateful to the Minister for that response. I am also grateful to the other noble Lords who have contributed to this short debate, especially the noble Lord, Lord Deben, for his comments on hypothecation. I have always appreciated—although this may be a difficult thing for someone with his religious commitment to hear—that he is something of a heretic in such matters. His is a heresy that I share, in terms of making things happen, and in the belief that a bit of hypothecation can sometimes mean that we achieve results all over the place.

Some of the points that have been made require a moment’s clarification. I do not think that the identification of neighbourhoods, which the noble Baroness, Lady Hamwee, mentioned, is necessarily a problem. As the Minister has made clear, 90% of the money distributed through the incentivisation scheme is ploughed back into financial investigators; the noble Lord, Lord Phillips, also made that point. Only a small proportion goes beyond there, and the authorities concerned, whether they are local authorities or the police, make good use of it. I was involved with the board of the Safer London Foundation, which made very good use of the Proceeds of Crime Act moneys that the police received, in connection with local community projects around London. The authorities concerned spend a great deal of time in deciding what is and is not an appropriate use of those resources.

The important point behind the amendment is the need to think carefully about how we maximise the money recovered, and I hope the review will do that. I know that the Minister is part of a wing of the Government that is committed to the reduction of taxes, but in this context there is, essentially, a 50% tax, because the money goes into either the Home Office or the Treasury, depending on the precise route—although I rather suspect that the Home Office does not “feel” the money that comes back to it, because it all disappears into the Treasury and goes through into the main funding of the Home Office.

If 50% of the money is retained by the Home Office or the Treasury, there may be little incentive for the agencies concerned to pursue complicated financial investigations that are not essential to achieving a conviction but are additional to achieving a conviction. If the proportion distributed through the incentivisation scheme were higher, substantially more money might be recovered, because people would be incentivised, and would say, “This really is worth investing those resources in”. The Home Office and the Treasury might then find that they got more resources rather than less. I hope that the review will consider these issues, and I look forward to hearing—perhaps by Report—about its developing findings. On that basis I am happy to beg leave to withdraw the amendment.

Amendment 3 withdrawn.