Corporate Economic Crime

Richard Arkless Excerpts

Tuesday 3rd November 2015 Westminster Hall

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

It is a pleasure for me, too, to serve under your chairmanship, Mr Stringer. I thank the hon. Member for Ealing North (Stephen Pound) for introducing the debate. I also thank the hon. Members for Neath (Christina Rees), for Aberavon (Stephen Kinnock) and for Edmonton (Kate Osamor) for their thoughtful and insightful contributions.

The debate is predicated on the widely held public view that the bankers seem to have got away with it over the last five, six or seven years. Whether that is correct or not, it is certainly the widely held public perception. The urgings from the Opposition and the Conservatives’ manifesto pledge seemed to indicate that they were inclined to address that widely held view. I welcome that, and it is right that the issue is addressed. As we have heard from Opposition Members, corporate economic crime has increased over the last few years, and there is a question about whether both the means and the inclination and the will to tackle it exist.

I speak on behalf of the Scottish National party, of course, and section 7 of the Bribery Act applies only to England and Wales, not to Scotland. Most of the prosecutions that could be brought by the Serious Fraud Office or another entity relate to subjects—financial crime and financial regulation—that are reserved functions. However, Scotland has a long and well established criminal court system, which could bring charges for individual crimes to bear on individual directors, but as we have heard, those tools may not be up to the job. The SNP would be very interested, to say the least, in Government proposals on this point, but we recognise that there are difficulties. We, too, live in a jurisdiction where the prevalent public perception is that the bankers have got away with it. My constituents, like people across Scotland, are demanding that something be done.

I should declare a slight interest as a former practising lawyer, qualified on both sides of the border. Having come to this debate fairly recently, one difficulty I would point to is the difference between holding a company, as opposed to an individual, criminally liable. I am not saying that we could not get around that problem in law, but it strikes me, as a legally qualified person, that there are difficulties involved in bringing an entity into the realms of criminal liability. However, if the Government come up with proposals to get round that, I would certainly look at them.

The message to the Government from the SNP and Scotland is that if they do consider giving Scotland more tools to address these reserved issues, they should carefully consider the provisions that already exist in Scots law and make sure that the principles of Scots law are not set aside. It is in that spirit of co-operation that I come to the debate, and I am very interested to hear what the Minister has to say. We welcome moves to tackle this issue, but we are cautious about how they can be achieved.

When it comes to how the bankers have apparently got away with it, the message I hear from my constituents and from people across Scotland is really about actions and consequences. Over the last five to eight years, many ordinary people have, they would argue, suffered enormous consequences as a result of the actions of others. The public’s view in Scotland—I suppose this is replicated across the rest of the UK—is that there are people in the financial services industry who are earning huge sums and have suffered no consequences as a result of their actions or the actions of the company they are employed by. On the face of it, that needs to be addressed. We in Scotland are very interested to hear what the Minister has to say about what seems to be a substantial tide of opinion. Of course, we recognise that there are difficulties, which need to be addressed in any proposals.

[Stephen Pound]

The hon. Gentleman brings a wealth of experience and knowledge to the matter, which is welcome. In the context of what he was saying about perceptions, is he aware that in the summer BIS consulted the business community about whether to water down Labour’s Bribery Act guidance to businesses? That surely sends completely the wrong signal to business. Does the hon. Gentleman agree that when there is consultation on whether even a measure as modest yet effective as the Bribery Act 2010 is potentially dilutable—if there is such a word—it sends an appalling signal?

[Richard Arkless]

Yes, wholeheartedly. The public perception is real and tangible, and in my view it is entirely based in fact. The Government’s reluctance to continue on the road, and the suggestion that the 2010 Act, which does not apply to Scotland, might even be watered down, sends entirely the wrong message. If we can convince the public that we are serious about the issue, the trust in financial services that has evaporated in the past five to 10 years can, I hope, be restored. The reason Parliament thought it right to bail out the banks was their intrinsic role in the economy, and that has not changed; however, the public need to have confidence in the financial services sector. For the time being, they do not have such confidence, and I will be interested to see what the Government will propose.

--- Later in debate ---

[Mr Raab]

I will not give way again at this point, but perhaps I will shortly.

The hon. Lady referred to the manifesto commitment, which specifically cites tax evasion. I will go on to say a little about that. I thought that one of the best points in her original speech was about the intelligence gap. That feeds the point that I have been making that we should not confuse the difficulties or challenges that we have in enforcing, which is what the intelligence gap is all about, with the breadth of the criminal base that we have on the statute books. That is a very important distinction, which she made rather well.

The bottom line is that there is no point in legislating for the sake of it. The hit and hope approach does not do any good; in fact, it feeds public mistrust. Frankly, we saw far too much of that under the Labour Government. I want to know that when we legislate we are putting in place a model, a criminal offence on the statute book, that will deliver prosecutions, convictions and the wider deterrent effect that we all want.

[Richard Arkless]

The Minister uses the vivid phrase “hit and hope” and has given three reasons why the Government will not pursue the position in their manifesto. I ask this very simple question: were those three reasons not prevalent before the manifesto was written?

[Mr Raab]

We are taking forward the manifesto commitment. We have an ongoing consultation on tax evasion and, if the hon. Gentleman bears with me, I will come on to it. The other point made in the manifesto commitment is about the need to punish and deter. That is not just about legislation; it is about the enforcement regime. Over the years, hon. Members have been far too willing just to nod legislation through without thinking properly about how it will be enforced in a targeted and effective way.

Having said all that, I can give examples of very good outcomes, including in the high-end serious and complex cases dealt with by the Serious Fraud Office, which emerge from within the existing legislation and even pre-Bribery Act in some instances. There are other outcomes aside from criminal prosecutions. Deferred prosecution agreements are a further and significant tool. Civil recovery orders are an option.

The SFO cases involving prosecution or substantial civil recovery orders for a corporate have included the cases of AMEC, BAE, Innospec and Macmillan. Fines and civil recovery orders for more than £40 million were issued in SFO cases between 2008 and 2012. Nearly £30 million was paid by BAE to the people of Tanzania, following a settlement with the SFO and the US Department of Justice. More recently, last year, the SFO completed the Innospec and Smith & Ouzman prosecutions, both of which resulted in the conviction of the corporate as well as senior officials in relation to foreign bribery. And the SFO had its first prosecutions under the Bribery Act—they were associated with a biofuel fraud—albeit not under section 7.

The director of the SFO has said that there are current cases that may prove suitable for prosecutions under section 7 of the Bribery Act. Hon. Members will appreciate that I cannot go into too much detail on things that are subject to either a pending prosecutorial decision or investigation. The Crown Prosecution Service and Her Majesty’s Revenue and Customs have had important successes, too, and some have also been very high-profile.

On tax avoidance, HMRC is responsible for policing the tax and excise laws. It has a range of tools and powers to secure compliance, including the power to conduct criminal investigations in appropriate cases in line with HMRC’s criminal investigation policy. Since 2010, HMRC has increased the number of criminal investigations leading to prosecution by 500%. That is a very clear example of where we have managed not only to have the legislation in place but to deliver a quantum leap in successful law enforcement. I am sure hon. Members from all parts of the House agree that that is what we should be aiming for.

Marketed tax evasion schemes have been one strand of priority work for HMRC during this period, and the CPS has brought a number of complex prosecutions against individuals. There are a number of high-profile examples, including Vantis and cases relating to the film industry. I have acknowledged the suggestions that have been made about extending the remit of section 7. Although Ministers have decided to halt that work for the time being, the criminal law is always monitored and if any clear and well evidenced difficulties come to light on which we can take targeted action, we will, of course, do so.

A proposed new offence of failing to prevent the facilitation of tax evasion, whether onshore or offshore, was the subject of public consultation by HMRC between July and October this year. The consultation closed on 8 October, and the Government are considering the responses. That clearly falls within the area of the manifesto commitment that Opposition Members have enjoyed citing. That work is ongoing.

Deferred prosecution agreements, which became available on 24 February 2014, are one of the critical law enforcement tools that the Government have brought into being. To date, no DPAs have been concluded, but I am aware that a number of cases in the pipeline may yield DPAs. Under a DPA, a prosecutor charges a company with a criminal offence, but proceedings are automatically suspended. The regime has been designed carefully and we consulted on all its aspects. There are important safeguards in place, which is why we need to be a bit careful about the rather gung-ho suggestion that we should follow the American approach lock, stock and barrel. If we did so, concerns would be raised by Members on both sides of the House about the lack of safeguards in place.