EUC Report: Money Laundering

Lord Rosser Excerpts

Monday 19th December 2011 Lords Chamber

[Lord Rosser]

My Lords, I, too, thank the noble Lord, Lord Hannay of Chiswick, and his committee for this report. It is clear from what he said that there has been some helpful progress over the past few months, and I hope that the Minister will be able to provide an update on exactly where we are now in relation to the Information Commissioner’s recommendations and the committee’s recommendations. As has already been said, the number of suspicious activity reports is considerable and appears to be growing by more than 500 a day, with nearly 2 million entries on the database.

As the noble Lord, Lord Hannay, said, this is the second recent report on money laundering. The first, in 2009, contained a recommendation that,

“The Information Commissioner should review and report on the operation and use of the … database, and should consider in particular whether the rules for the retention of data are compatible with the jurisprudence of the European Court of Human Rights”.

The second report, which we are considering tonight, includes the report from the Information Commissioner and the reiterated recommendation from the committee’s first report that,

“consideration should be given to amending the Proceeds of Crime Act 2002 to include a de minimis exclusion”,

which arises from the committee’s concerns about the requirement to report suspicions about the commission of trivial criminal offences and now the commissioner’s doubts about the justification of reporting transactions where there is a very low level of suspicion.

In their two letters of response in May and June this year—I do not know whether there have been further letters—the Government, as did the previous Government, rejected the introduction of a de minimis requirement,

“primarily due to the opportunities for criminals to exploit the threshold of any de minimis approach based on either the value or the seriousness of the crime”.

The Government state in their response that:

“Reports on the laundering of small amounts can and do help in identifying and tackling serious crime”.

That may well be the case but, when he responds, can the Minister provide some evidence to back up the statements in his department’s response of 17 May this year about the de minimis threshold?

The committee says that it is of the belief that,

“the Information Commissioner’s report justifies our view that the … database is not fully compliant with the Data Protection Act and the Human Rights Act”.

A considerable amount of information has to be provided, ideally in a suspicious activity report—namely, the subject’s full name, date of birth and addresses, as well as subject details, such as national insurance number, vehicle registration, driving licence, passport and phone numbers, website addresses, details of occupation and employer, details of any associates of the subject, and company details, including full legal name, designation, country of incorporation and contact details. The list does not end there.

Each suspicious activity report was assigned a deletion date of 10 years after receipt and was automatically deleted unless it had been amended or updated, in which case the deletion date was reset to six years following that event. There is also a procedure for earlier deletion of individual SARs where all necessary activity relating to an SAR has been undertaken, but it does appear that only a relatively small number of SARs compared with the total number have been permanently deleted from the database, although I understand from what the noble Lord, Lord Hannay, has said that some further progress appears to have been made in this regard.

The Information Commissioner queried whether there was any evidence of the value of data over time, such as SARs, being accessed which had been on the system for, say, longer than five years. Evidence was provided of the number of times that SARs received in 2004 or earlier were accessed by end-users during each month in 2009. What the figures showed was that the number of checks dropped substantially when records were over seven years old, and in addition it is possible that some of the older hits could have occurred when searching on similar names and not because of concerns about unlawful activity by that person. The Information Commissioner was not satisfied that there was currently sufficient evidence to support the long-term retention of SARs of no concern, and it raised concerns about compliance with the Data Protection Act.

Indeed, the committee was apparently also concerned that SARs were routinely retained for 10 years on a database to which there was wide access, especially in those cases where it could be shown that the initial suspicion was unfounded. The committee referred particularly to,

“the ruling of the European Court of Human Rights that the retention on the DNA database of the DNA of persons not convicted of a criminal offence could amount to a breach of their right to respect for private life under Article 8 of the European Convention on Human Rights”.

While, as I understand it, the Serious Organised Crime Agency has been considering this point with the Information Commissioner, does the Minister feel that there is any conflict between the Government’s intended change in policy on retention of DNA and the current revised policy, as I understand it, on retention of SARs as mentioned by the noble Lord, Lord Hannay of Chiswick—particularly bearing in mind the extent of information retained about an individual and their associates?

In his letter of 24 June of this year responding to the committee’s report, Mr James Brokenshire, the Parliamentary Under-Secretary for Crime and Security, said that he would provide an update on progress being made by the SARs committee towards the end of this year. Can the Minister say what progress has been made by this committee in seeking to improve the effectiveness of the regime, including considering whether legislative changes are necessary?

Apart from the committee’s own inquiry there has been very little in the way of post-legislative scrutiny of the relevant legislation that introduced the requirement to report suspicions over financial transactions to the Serious Organised Crime Agency. The law focuses on reporting, but there are no additional safeguards on the face of the legislation to prevent a disproportionate retention or to prevent reporting of cases likely to be of little, or indeed of no, interest. It seems that the Information Commissioner’s view is that any legislation which engages significant privacy concerns should include on the face of it a requirement on the Government to report to Parliament on how the measures have been deployed, including evidence of the extent to which the expected benefits and possible risks have been realised in practice, and the continued need for the measures in question. I simply ask the Minister: what is the Government’s view on that point?

The committee’s report also states that it is estimated—and I think I have got the figures right—that between 125,000 and 175,000 businesses could be subject to the SARs reporting requirements, but that apparently only approximately 5,000 actually report. No doubt there may be good reasons for that, but could the Minister say what interpretation the Government put on this piece of information and whether any checks are done to ensure that those who are subject to the reporting requirement are actually carrying out their responsibilities if they have suspicions of potentially questionable financial transactions?

The committee concludes its report by repeating its view that the Information Commissioner’s report justifies the view that the database is not fully compliant with the Data Protection Act and the Human Rights Act. It goes on to say that it looks forward to hearing from the Minister what steps the Government and SOCA will take to comply with the commissioner’s recommendations and the committee’s recommendations. As I said at the beginning, clearly some progress has been made on these issues over the past few months, but I hope that tonight the Minister will provide an updated response to the committee.