Criminal Finances Bill

Lord Kennedy of Southwark Excerpts

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

As a PEP, I was keen to support Amendment 10, in the name of the noble Lord, Lord Sharkey. I also had a chap from the Royal Bank of Scotland come round to see me and ask me what my first salary was in 1982—bizarrely, I remember that it was £4,900—and he spent a lot of time going through records that I had long forgotten about. I am not convinced that there is the protection that the noble Lord, Lord Faulks, specified earlier. One particular concern is that the provision talks about income, not capital. In any event, I am not sure why it should not be absolutely clear-cut that the Government’s intention is not to attack PEPs in this House or in the other place.

[Lord Kennedy of Southwark (Lab)]

My Lords, the Bill was welcomed by all sides of the House at Second Reading. Unexplained wealth orders are a device to give law enforcement agencies powers to require a person suspected of involvement in or association with serious criminality to explain the origin or source of assets which appear disproportionate to their income.

Amendment 1, in the name of the noble Lord, Lord Hodgson of Astley Abbotts, seeks to insert the words, “beyond reasonable doubt” after the word “satisfied”, when requiring a person to comply with an order. This raises an important point, but I am not convinced that introducing this higher test is needed here. It would make it more difficult for law enforcement agencies to get permission to seek the source of the wealth which has led them to suspect that the person’s lawfully obtained income would be insufficient for the purposes of obtaining their assets. I agree with the remarks made about this amendment by the noble Lord, Lord Faulks, who said that the higher evidential test would not be welcome in this regard. I also agree with the comments made by the noble and learned Lords, Lord Brown of Eaton-under-Heywood and Lord Phillips. I also agree with the comments by the noble Lord, Lord Blair of Boughton, on the investigatory role—the test and procedure would be difficult there as well.

Amendments 2 and 7, in the name of the noble Lord, Lord Faulks, give a better definition in relation to a person’s connection to a property, and the Government should reflect carefully on this during the passage of the Bill and possibly bring an amendment forward on Report.

Amendment 5, also in the name of the noble Lord, Lord Faulks, would provide an additional power to require a person to answer questions under oath. Again, that seems a reasonable additional power to take, which could be used at the discretion of the court. I very much take the point that the noble Lord made about the William Hill defence in terms of how one acquires assets and wealth. We need to look at that important point.

On Amendments 8 and 9, I thought that the £100,000 value in respect of a property was about right, that the £50,000 figure proposed by the noble Baroness, Lady Williams of Trafford, was too low, and that the figure proposed by the noble Baroness, Lady Hamwee, was far too high. However, having sought advice from law enforcement agencies, I understand the motivation behind the amendment of the noble Baroness, Lady Williams of Trafford, and I am content that the figure she proposes may well be right.

There is a whole series of government amendments in this group which I am content with, as they seek to prevent a person subject to one of these orders seeking to circumvent it through complicated financial means and transactions.

This has been a very useful debate, with some well-informed contributions that posed a number of questions for the noble Baroness. I am sure that she will reflect on those as we may want to come back to some of those points on Report.

The noble Lord, Lord Leigh of Hurley, made important points about property and the problems associated with it. I think that we shall debate an amendment in the name of the noble Lord, Lord Faulks, in the next group which concerns property.

[The Minister of State, Home Office (Baroness Williams of Trafford) (Con)]

My Lords, I thank all noble Lords who have taken part in this excellent debate. We have had some very good contributions from noble Lords from around the Committee on the significant new powers of the unexplained wealth order. I will do my best to respond to all the points that were made. I apologise in advance if I take some time to do so.

As noble Lords will know, the measures in this Bill are largely focused on serious and organised crime, but it also provides important new powers to tackle terrorist financing. Last week’s horrific attack reminds us all of the very real nature of this threat. I would like to take a moment to pause and think about the families of those who have been killed and those who still lie injured in hospital. I again pay tribute to the men and women of the police and other law enforcement and intelligence agencies who are so committed to keeping us safe—to PC Keith Palmer, but also to his many colleagues who work in Parliament and across the country. We must ensure that they have the powers they need to investigate and disrupt terrorists and terrorist groups. The powers in Part 2 of the Bill, which we will come to later, will do just that.

I return to the amendments in this group on unexplained wealth orders—or UWOs. The UK is a world leader in the fight against global corruption and the UWO is a substantial new power that will assist UK law enforcement agencies to do so. I welcome the continued cross-party support for these measures. I remind noble Lords that a UWO is a court order that requires a person to provide information which shows that they obtained identified property legitimately. If the person provides information in response to a UWO, the enforcement authority can then decide whether to investigate further, take recovery action under POCA or, if they are satisfied, take no further action. If the person does not comply with a UWO, 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.

There are a number of government amendments in this group and I turn to them first. These are, by and large, technical changes to the provisions to help them function most effectively, but I will highlight a few for the benefit of noble Lords. As regards trusts, we have tabled government Amendments 3, 4, 6, 12, 14, 15, 17, 19, 21, 30 to 32, 36, 38 to 40, 52, 53, 174 and 175. Perhaps the biggest addition to the provisions made by the government amendments are the measures to ensure that a UWO can be served in situations where property of interest is held in trust or involves corporate structures. This, I believe, picks up some of the concerns raised by my noble friend Lord Faulks. The amendments will also allow subsequent UWOs to be obtained on additional individuals such as trustees in complex cases where this is necessary. The amendments are not a silver bullet in cases where trusts and corporate entities are involved. However, they are a significant improvement and will close a potential gap.

UWO thresholds are addressed by government Amendments 8 and 33, which would reduce the threshold for a UWO to be obtained from £100,000 to £50,000. Noble Lords rightly questioned how we settled on the balance. It followed representations from authorities in Scotland—including from the SNP during Commons consideration of the Bill—and Northern Ireland. It reflects the fact that the higher threshold could disadvantage law enforcement agencies in certain parts of the country where financial returns may not be as high or may be spread more evenly across criminal groups, and where property, in particular, has a lower value.

The threshold, however, is still an important safeguard, together with the other qualifying criteria that must be met before a UWO can be made by the court. It remains our view that the orders should be used in the most complex cases, where obtaining evidence has proved difficult, and this will be reflected in the supporting guidance.

The noble Baroness, Lady Hamwee, tabled a related amendment to push the threshold up rather than down. She helped us to reflect on the balance that must be struck in circumscribing the new power. However, based on our consultation with law enforcement agencies, I suggest that her proposed threshold of £500,000 would be prohibitive. It would stop the agencies using this power in significant cases involving serious and organised crime, and noble Lords have been clear that they want to see the most effective use of UWOs. I hope that the noble Baroness will be satisfied that our approach strikes the appropriate balance.

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[Lord Hodgson of Astley Abbotts]

My Lords, I support this amendment and the sentiments that have been expressed. Like other noble Lords, I am not sure whether it will do anything other than send a signal that this is something we are very serious about. An important aspect of not allowing it to become too London-centric—the darkened squares that my noble friend referred to in his opening remarks—is the ripple effect. What happens in central London ripples out through the country. I think the Lloyds Bank review says that Oxford is now the most unaffordable town in the country in terms of local wages to local house prices. If we can stop the ripple, or at least inhibit the ripple, that will have an effect much wider than merely the darkened squares to which my noble friend referred. As my noble friend Lord Deben said, if we take this further out, there are implications for social cohesion, as some of our less well-off and less well-resourced fellow citizens are finding themselves squeezed out by gentrification in an increasingly wide range of towns and cities across the country.

[Lord Kennedy of Southwark]

My Lords, Amendment 11 is tabled in the names of the noble Lord, Lord Faulks, and my noble friend Lord Anderson of Swansea. My noble friend was taken ill yesterday, and I am sure we all wish him a speedy recovery. This amendment would add a new paragraph to subsection (4) which clearly specifies that where,

“the respondent has a financial interest in land or property ... which is registered in the name of an overseas company”,

which could be being used as part of a complicated financial arrangement to hide from the authorities their unexplained wealth, the court can make an unexplained wealth order. I support the aims of this amendment. It highlights another way that a person can seek to avoid having to explain their wealth. This amendment seeks to address that in a very clear way. My noble friend Lord Rooker raised some important points, and I am sure the Minister will respond to them in her remarks.

Like the noble Lord, Lord Deben, I have had a bank account for 38 years. I have only ever had one—I opened it when I was 16. I went into the bank at Camberwell Green and have kept it in pretty reasonable order for those 38 years. All the things you have to do—saying who you are and having to give your mother’s maiden name—are very irritating, but there are clearly issues with funds travelling backwards and forwards that must have gone through a bank somewhere. If they are ever to be brought to account for things, that is something we must address in these debates.

A lot has been said about the London housing market. Any suggestion that it could be a safe haven for corrupt money should be of concern to us all. What a terrible thing that we even have to contemplate that. It contributes to the housing crisis in London. I referred to the Transparency International report in my contribution at Second Reading. It did some work in 14 developments and found that 1,616 companies and individuals bought properties and that only 450 were registered to people who were living in the UK. Forty per cent of purchases in London, totalling £1.6 billion, were bought by investors from countries with a high risk of corruption. We do not want any suggestion of our capital city being seen as a safe haven for corrupt money, as that must concern us all. The noble Lord, Lord Faulks, made the point that whole parts of central London are in darkness. Ten per cent of Westminster is owned by faceless companies. Properties with an abnormally low use of electricity suggests that they are not lived in on a regular basis. Transparency International also found that 140 properties with a value of £4.2 billion have been bought by investors who represent a high money-laundering risk. My friend the Mayor of London, Sadiq Khan, has launched an inquiry into the impact of foreign investment flooding into London’s housing market. The noble Lord, Lord Faulks, referred to this.

The other problem is the trickle-down effect. It causes property prices to be abnormally raised and is putting whole sections of the capital out of the reach of ordinary law-abiding citizens. That must worry us all, and very regrettable it is. About a year ago, I was standing at this Dispatch Box discussing with the Minister the Housing and Planning Bill—the cost of rents, how we get people living in safe, warm, dry properties, how people can afford to buy property and whether starter homes are the right answer. The way money has come in has made it more difficult for families, which must be of regret to us all. That is something we need to address in this Bill. The noble Lord, Lord Faulks, made the point that there may well be very little legislative time in the next Session, so we should take the opportunity that this Bill gives us.

The noble Lord, Lord Deben, talked about housing. I am happy to accept that all parties have failed in the past. There is no question about that—we all need to do very much more about it. I live in Lewisham. The noble Lord was the Member of Parliament for Lewisham at one time; I am a councillor in his old constituency. It is a great area to live in, not the most expensive part of London, but I could not now afford to buy the house that I live in. I have lived there for 13 years and the rent the people in the house next to me pay is more than my mortgage. It is ridiculous. If corrupt money has led to that, it is a bad situation.

This amendment raises important issues, and the Minister should reflect on them very carefully. If we can find some way forward before the Bill becomes law, we should do that.

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[Lord Faulks]

My Lords, I am sure the whole House shares the concern that the noble Baroness has expressed about whistleblowing and its importance generally. However, I respectfully submit that this amendment is a pretty substantial response to that. It seeks to set up a whole department—the office of the whistleblower. I accept that this is something of a probing amendment and therefore bears the standard for what the noble Baroness may hope to come, but it is little short of a job-creation scheme. The proposed functions of the office of the whistleblower are extensive and it would have powers. Of course, if an office is created, those who are given that office will appoint others to work for them and powers will be exercised. If they are not exercised it would be suggested that they were not doing their job. Before we know where we are, we will have a substantial bureaucracy that runs the risk of having the same problems that exist in other areas of bureaucratic supervision of financial institutions.

The question of incentives is interesting. I accept that that they have had some success in the United States and, as we heard from the noble and learned Lord, in Mauritius too. But as to the question of “retaliatory action against whistleblowers”, a whistleblower has remedies in civil law in any event. When she comes to respond to the Minister, will the noble Baroness give us some idea what is meant by the provision with regard to “retaliatory action against whistleblowers”? The criminal law exists and civil remedies exist for employees and I wonder whether that is not inviting something rather too much. Of course, she rightly acknowledges that whistleblowers are not entirely based in the financial institutions; they exist in the NHS and have recently been considered by Sir Robert Francis and in all other government departments.

The real question is whether the establishment of this no doubt expensive bureaucracy will deter and whether it will result in the detection of what would otherwise not have been detected. While I applaud the general thrust of the amendment, I wonder whether it is something of an overreaction.

[Lord Kennedy of Southwark]

My Lords, the noble Baroness, Lady Kramer, raised the issue of whistleblowing in her contribution at Second Reading and now proposes this new clause today with the noble Baroness, Lady Hamwee. As we have heard, it would establish an office of the whistleblower. The purpose would be to offer much-needed protection to whistleblowers who expose criminality, corruption, fraud and other illegal activity. The price that whistleblowers often pay for alerting the authorities to illegal and criminal activity is to lose their jobs and have their careers ruined and destroyed.

The noble Baroness is right to highlight that we need to do more to offer protection and compensation to people who come forward and alert the authorities to the illegal activity. The noble and learned Lord, Lord Phillips, supported action and I agree. However, I agree with the noble Lord, Lord Faulks, that setting up an office may not be the right way to go about that. What is definitely needed is further protection in statute and regulation. It may not need an office to be established. I will be interested to hear the response from the noble Baroness, Lady Williams of Trafford, to this amendment. I entirely accept that it is a probing amendment and I think that we should take the opportunity that this Bill affords us to do something to address the issue of whistleblowers and the precarious position that they can find themselves in, which the noble Baroness, Lady Kramer, has highlighted to the House today. I accept that whistleblowing goes across a variety of sectors, but we are dealing with the financial services sector and this would be a good place to start.

[Baroness Williams of Trafford]

My Lords, I am grateful to the noble Baroness for allowing us to debate this important issue. Whistleblowers play a valuable role in society by bringing wrongdoing to light that could otherwise go unchallenged. Individuals should be able to report malpractice in the workplace without fear of reprisal; and employers should be prepared to work with staff to resolve concerns, particularly by means of effective internal procedures.

The Employment Rights Act 1996, as amended by the Public Interest Disclosure Act 1998 and subsequently, provides employment protection for workers in all sectors who have blown the whistle. It enables them to seek redress if they are dismissed or suffer detriment at the hands of the employer because they have made a “protected disclosure” about wrongdoing that they have witnessed at work. To qualify for the protections, a worker must generally make their disclosure either to their employer or the relevant “prescribed person”. “Prescribed persons”’ are typically regulatory bodies for the sector in which the whistleblower works or the type of wrongdoing involved.

I assure noble Lords that, over recent years, the Government have taken steps to support a cultural change in relation to whistleblowing in all sectors, including financial services. A number of statutory and non-statutory improvements have been made. This includes guidance for whistleblowers on how in practice to make disclosures while preserving their employment protections; and guidance for employers including a non-statutory code of practice which we will review this year. We have fulfilled the commitment to keep the prescribed persons list up to date with annual reviews, and we now have guidance in place for prescribed persons. The next update will require prescribed persons to report annually on the number of whistleblowing disclosures they have received and broadly the action that resulted.

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I hope that noble Lords and the noble Baroness are reassured that the Government are taking action to address barriers to people coming forward to whistleblow, and she will feel able to withdraw her amendment.

[Lord Kennedy of Southwark]

I agree with the Minister that the office is not the right way forward, but is she saying that everything is fine?

[Baroness Williams of Trafford]

I am saying that the Government looked at this in 2014, certainly in terms of the financial incentives, and there are various mechanisms in the different sectors for whistleblowers to come forward. The ultimate sanction for employers is unlimited compensation, depending on the type of wrongs that that employer engages in.

[Lord Kennedy of Southwark]

I am sorry to come back on this, but I take it that the Government do not think that anything further needs to be done on this at the moment.

[Baroness Williams of Trafford]

The Government are never complacent in any area of law they introduce; I would never say that everything is perfect.

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[Baroness Vere of Norbiton (Con)]

My Lords, we now come to two proposed changes that the Government are seeking to make to the seizure and forfeiture powers set out in Chapter 3 of Part 1 of the Bill. In the House of Commons we introduced amendments to allow law enforcement agencies to seize casino chips and gaming vouchers where they had the suspicion that they were either the proceeds of crime or would be used to commit further offences. The Government were also asked to consider whether similar provisions could be introduced to allow the seizure of betting slips. Government Amendments 80, 82, 83 and 138 to 140 make such provision. If law enforcement agencies suspect that the funds used to place a bet are the proceeds of crime, they will be able to seize the betting slip. These provisions will be subject to the same safeguards as for cash seizure and we will be working with bookmakers and their trade associations to ensure that they are used effectively.

At present, Clause 14 allows for the seizure and forfeiture of moveable stores of value but makes no allowance for deductions for legal expenses on the part of the person the item was seized from. Government Amendments 88, 90 to 101 and 142 to 155 will therefore allow for a deduction to meet legal expenses from recovered sums following the forfeiture of the item. Where appropriate, the court will determine whether legal expenses should be paid and will provide for that as part of the forfeiture order. These amendments make similar provisions in Schedule 3 in relation to items seized where there is a suspicion of terrorist financing. I beg to move.

[Lord Kennedy of Southwark]

I am happy to support these amendments, which are both sensible and proportionate. Ensuring that betting slips can be seized is a sensible move, as indeed is the whole series of amendments.

[Lord Stevens of Kirkwhelpington (CB)]

My Lords, I also support this group of amendments. I declare an interest as my son is the head of the financial recovery unit of the Metropolitan Police. This is one area of the Bill that had an immense weakness. To ensure that the provisions work properly as far as officers working on the front line are concerned, these amendments must be inserted into the legislation.