Criminal Finances Bill (First sitting)

Richard Arkless Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Nic Dakin (Scunthorpe) (Lab)]

Q Thank you for your evidence. You seem to be saying there is more that perhaps could be done, Mr Beattie. What additional things should we take the opportunity to look at in the Bill, to make sure you have the powers you need to do your job?

Mick Beattie: A lot of what we would have liked, we have got. Information sharing between the private and public sectors is done through the NCA UK Financial Intelligence Unit, which is under a lot of pressure. It is a unit that services the whole of UK law enforcement. The Bill allows communication between the banking sector and the UKFIU, which would then release that information to policing. If we had a particular interest, we may have to go back through the UKFIU back into that institution. We would have liked a little bit more direct access, but it is not a problem. It is something we can overcome.

In the early stages, I can understand the reticence from the banking sector. This is a new area of business for them, piloted through the joint money laundering taskforce very successfully. I can understand the small-steps mindset in relation to that—get some understanding, some evidence and some culture. So we are very supportive of what we have got in the Bill.

Donald Toon: From our perspective, the Bill takes us forward on a range of difficult issues, but it does that in a balanced and thought-through way. From law enforcement’s perspective it is always easy to want more power, but that has got to be balanced against the fact that, for example, the financial services sector has to continue to do business.

We are satisfied that this makes the changes and we have been able to set out a clear, operational, evidenced case for the change. Do we think this will stop and it will be the panacea for the future? No, because we are involved in an arms race here. There are people on the other side—whether professionals involved in providing money laundering services or serious criminals—who will always be looking for another opportunity. That is why the Proceeds of Crime Act 2002 has had to be amended so many times since it was first introduced.

Do we think this will stop further amendment? No. Does it actually address the issues we can evidence now? Yes.

Detective Superintendent Harman: I echo that. The answer for us now lies not in more legislation. The Home Office consulted very closely with us. We are seeing the legislation in here that we asked for. The answer now for us is about co-operation with the financial sector, about sharing information. Just like we asked the public for information to help us to fight terrorism, now we are asking the regulated sector, and I think the Bill will help with that.

[Richard Arkless (Dumfries and Galloway) (SNP)]

Q For the most part, my questions have been dealt with by colleagues previously asking about additional powers, but I will come back to one point. There is a huge array of regulatory bodies that cover money laundering in the UK. Do you think that consolidating these would make life easier for you in the pursuit of money laundering activity?

Donald Toon: The Treasury has been doing work on this space now. From our perspective, all those regulated bodies are covered by anti-money laundering regulations and are required to submit SARs. We need to see clear, consistent standards across all parts of the regulated sector. I do not care whether that is achieved through one supervisory body or a number, provided they are all operating to the same set of standards and the same commitment to ensure that SARs are produced—and produced to the necessary quality—and they are prepared to take action against those parts of the regulated sector that they supervise when they do not live up to those standards.

Mick Beattie: I support that. The police get nearly 400,000 suspicious activity reports a year. There are definitely gold nuggets in there, but some of those reports are of such a poor standard, or they are defensive reporting or a means for the bank—really, their own regulators could have a role around the quality of the SARs submitted.

Detective Superintendent Harman: I do not have anything to add to what Mr Toon said.

[Richard Arkless]

Q You make it clear that there is an urge for law enforcement to have additional powers, but a balance needs to be struck. It is for Parliament to strike that balance, so take that out of your contemplation. You are not responsible for striking that balance, so what extra powers would you like to see in the Bill?

Donald Toon: As I have said, what we have in the Bill is what we are able to stand up a sensible evidential case for. We are conscious that we will see the opposition try to adapt. How they adapt, and in particular how some of the powers bed in, is what is going to inform the next stage. It is not something we feel that we are crying out for at this point.

Mick Beattie: I would like to see the courts given the power to defer Crown ownership on assets. I can understand the reasons—third-party ownership and the issues clogging up the courts—why that was not accepted, but that would have been a bonus.

Detective Superintendent Harman: As has been said, we see the powers in the Bill that we feel we need. I do not think we are looking for more powers; we are looking to ensure that we are using the powers well and we are co-operating with all partners in delivering our aims.

[The Chair]

We have eight minutes left before we must wind up this session, and a number of Members still want to ask questions. You will have to be brief on both sides. I call Mr Davies, briefly.

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[Mrs Drummond]

Q Even though they have headquarters over there?

Simon York: Yes. That is precisely one of the targets of the legislation. If a company is facilitating tax evasion that is occurring in the UK—someone evading UK taxes—it would absolutely catch that. Equally, if that organisation is based overseas but its representatives are doing business in London to help someone in London to evade taxes in France, it would catch that as well.

[Richard Arkless]

Q First, to Mr York, the UK tax code has a reputation for being unnecessarily complicated. I am sure you are acutely aware of those allegations. To what extent does that complication play a role in criminality? Does it make it more susceptible to criminality? Do any specific examples arise out of the complication that would encourage, facilitate or make criminality easier?

Simon York: I am not sure that it does. Criminality is always pretty straightforward at its core. It is people lying, misrepresenting things and forging things. Sometimes that is disguised within the complexity of the tax system. I mentioned some times when people disguise a fraud as avoidance. We also get quite a lot of criminal attacks over the years that revolve around the VAT system, particularly the cross-border European stuff, known colloquially as MTIC—missing trader intra-community—fraud or carousel fraud. That can appear quite complicated but it is typically the criminal who is creating the complication to try to disguise the activity.

[Richard Arkless]

Q I am acutely aware of time. Mark and Nick, do you think that the threshold of £100,000 for unexplained wealth orders is at a fair level? Should it be lower or higher? International standards would dictate that it should be a little bit lower. What are your views?

Nick Price: From my perspective, it is a reasonable level at which to set the threshold. If you look at the two gateways into an unexplained wealth order—politically exposed persons or people suspected of involvement in serious criminality—you see that the likelihood in those cases is that the overall values will be far more than £100,000. For me, that is broadly where it needs to be.

Mark Thompson: I would agree with that. To make the criminality serious enough, I would have thought that it needs to be at a level that marks that sort of criminality. I think it is about right.

[Richard Arkless]

Q Many properties in my constituency are valued at less than £100,000 but more than £50,000, so I hope we are not basing that on London property prices.

Mr Thompson, on corporate economic crime, it is clear that the provisions in the Bill extend to employees facilitating tax evasion, and it does not go beyond that. Do you think there is a case for going beyond that? It strikes me that there is nothing in the Bill that gets at what the public understand as being the problem with corporate criminality. There is nothing that could catch the riggers of the LIBOR market, for example. There is nothing that could catch swathes of unscrupulous mortgage advisers giving 120% mortgages to dogs in kennels, which many people would argue has caused a great deal of the suffering that we are still all trying to recover from. Is there is a case for that?

Mark Thompson: There is a case for it. The SFO has made that case previously. The Attorney General has also called for consultation. My understanding is that there has not been a consultation yet on that measure, and that the Government may consider one. We have made the point before that it is inequitable that bribery and tax evasion attract these sort of corporate penalties, but that money laundering does not—it is a crime that attracts 14 years in jail. It also seems unreasonable that it is easier under the current law to prosecute small and medium-sized enterprises and not big corporates because of the way they operate. We have made that point before, but my understanding is that it was never going to be in this Bill anyway. It is a wider matter.

[Scott Mann]

Q There are information and data-sharing initiatives as part of the Bill. How would you interact with those measures and with the joint money laundering intelligence taskforce?

Mark Thompson: We do already interact with the joint money laundering intelligence taskforce, and we have a representative who attends it. We have access to that through the National Crime Agency. The data-sharing provisions are mainly for the NCA, and we would benefit from those arrangements. We entirely support them and think they would be advantageous.

--- Later in debate ---

[Victoria Atkins]

Q Professor Murphy, there is good precedence in the world of health and safety, where companies are prosecuted for causing workplace fatalities and accidents or bringing about an environment in which they occur. Do you agree that that success in health and safety bodes well for sending out the message to corporate entities that tax evasion is not permissible and will be prosecuted where evidence of it exists?

[Richard Arkless]

Q Professor Murphy, you have highlighted the difficulty with the Bill’s proposals on tax evasion in relation to corporate economic crime. Your solution would be a position of strict liability. Do you see any case to extend the provisions on corporate economic crime beyond tax evasion, leaving aside the problem of strict liability and enforcing it? Is there a case, for example, to extend the provisions to catch people who rig the LIBOR market, or perhaps mortgage brokers who fraudulently completed application forms that caused the mess we are in? Do you think there is a case for extending corporate economic crime beyond facilitating tax evasion?

[Peter Dowd]

Q On resources for agencies—enforcement or otherwise—in relation to prosecutions and chasing up, do you believe that the authorities have sufficient resource to do their job, or are they just misdirecting the resources that they already have?