Criminal Finances Bill

Richard Arkless Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 25th October 2016 Commons Chamber

[Sir Edward Garnier (Harborough) (Con)]

I begin by declaring an interest. I have been instructed in the past, and I am currently instructed, by the Serious Fraud Office in a number of matters that touch on this Bill and some of its predecessor legislation.

I apologise to my right hon. and hon. Friends on the Front Bench, and to the shadow Home Secretary, the hon. Member for Hackney North and Stoke Newington (Ms Abbott), for the fact that I might not be able to be here for the wind-ups. I hope that my right hon. Friend the Minister for Policing and the Fire Service will forgive me. All being well, however, the debate may run short—if I do not talk too much—in which case I shall be here.

Like the shadow Home Secretary, I broadly support the principle behind the Bill, which I assume is entirely uncontroversial. We all want the criminals whom we hope will be touched by it to be caught and to be prevented from committing such financial crimes. The days when people went into banks with sawn-off shotguns are long over. Criminals are now much more sophisticated: they go round the back with a set of wires, metaphorically, and extract money out of banks and other financial institutions through computer crime, rather than by using violence. We need to keep up with them. As my hon. Friend the Minister for Security said, we have to be craftier than the crafty hoods.

In our enthusiasm to pass the Bill, however, there are one or two matters about which we need to be a little cautious, although I am sure that, during its passage, the Government will think about how to get the detail right. It could be said that many of the points I am going to set out would be better made on Report than on Second Reading, but I might as well make them while I am on my feet.

Unexplained wealth orders, as a matter of principle, are in line with provisions in the Proceeds of Crime Act 2002 and similar measures, in that they reverse the burden of proof by making the respondent to the order explain himself, rather than requiring the prosecution or the state to make the case against him. That principle is now accepted in our criminal law, and that will continue as long as there are sufficient protections for the respondent. Under the Bill, the High Court may, on an application made by one of the prosecution authorities or enforcement agencies, make an unexplained wealth order in respect of any property if it is satisfied that each of the requirements for making the order is fulfilled. The order will be made in the High Court and the application will be made to the High Court in relation to a respondent who has a criminal connection, but also to politically exposed persons. We need to be careful that politically exposed persons, who will, as I understand it, be foreigners, are sufficiently protected from the making of an application that could trash their reputation and that, even when that is not acceded to by the High Court judge, none the less still leaves him or her exposed to the allegations made against them. I suppose that, to a lesser extent, the same could be said of a respondent with some form of criminal connection.

It seems to me that the way around that is to do what has been done with deferred prosecution agreements in the Crime and Courts Act 2013. Paragraphs 7 and 8 of schedule 17 to that Act provide a way of dealing with those issues so that reputations cannot be damaged until the necessary time when a particular state of affairs has been proved. In deferred prosecution agreements, the parties—the Serious Fraud Office in this case—apply to the court for a declaration that entering into a deferred prosecution agreement with the respondent is likely to be in the interests of justice and that

“the proposed terms of the DPA are fair, reasonable and proportionate.”

That hearing takes place in private. Once the court is satisfied, and the parties are agreed, that the terms of the order are correct, the judge makes an order that is made public, and also makes public the judgment that he made in the private hearing some days or weeks earlier.

That is a perfectly sensible way of maintaining the interests of doing justice in public, while holding in private the initial hearing in the event of an order not being made, or of it being altered in a way that makes the respondent look a lot less guilty than he might otherwise have looked. That allows a hearing to be heard without damaging an innocent man’s reputation. That is simply a matter of mechanics, and if the Government can spare the time between now and when the Bill leaves the House of Commons, we could achieve the end that we all want, without causing collateral or unintended damage.

I am also a little concerned—perhaps this can be dealt with at a later stage—that clause 1 deals with income as though that were all that needs to be considered. Proposed new section 362B(3) of the Proceeds of Crime Act 2002 states:

“The High Court must be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.”

Proposed new subsection (6)(d) notes that

“‘known’ sources of the respondent’s income are the sources of income (whether arising from employment, assets or otherwise) that are reasonably ascertainable from available information at the time of the making of the application for the order.”

If “income” simply means money received, I understand that; but if it means income as opposed to capital, we need to make clear that by income we mean not just the interest from capital or a salary, but all that the respondent owns, so that we can capture the distinction between income and capital. A respondent could be capital-rich, but income-poor. We need to avoid a situation where he can get away from the order by saying that his income does not amount to much when we all know, or can anticipate, that his capital is larger. I am sure that plenty of the houses that the shadow Home Secretary spoke about are bought with cash—essentially, they are bought for great lumps of capital—rather than from borrowing.

I am concerned about the Bill’s use of the words “purports to comply”. I appreciate that that expression is to be found in earlier, similar Acts but, to me, purporting to do something means either doing or attempting to do one’s best, or doing something speciously—appearing, falsely, to do something. Albeit that we accept that that expression is used in earlier legislation, we need to be clear that to pretend to do something should not be a defence or an answer to an accusation of failure to comply with an unexplained wealth order.

I turn to the question of enforcement, which has been brought up on several occasions. Let us assume that an unexplained wealth order is made, and let us assume that there is a hearing, initially perhaps ex parte—singlehanded—by the authority. The matter then either comes back for a hearing between both parties, or moves on in some other way. It is all very well making these orders, but that will do no good if we do not have the necessary police officers or investigators to ensure that they are enforced.

I have noticed that in the past with confiscation orders. Very often, the courts make an order, and either the order is never put into action or very little of the amount required from the offender is ever recovered. We need to make sure that this legislation is not simply written in air; it must have real teeth to deter those who think they can get away with this sort of misbehaviour, and to enable the Treasury to recover the ill-gotten gains. I dare say that the same could be said in relation to suspicious activity reports.

Finally on unexplained wealth orders, is there to be any form of appeal system? It strikes me that under proposed new section 362H, an application for an unexplained wealth order may be made without notice, and I have dealt with points about that. Will the procedure be susceptible to any sort of appeal, and if not, why not?

I turn to the “failure to prevent” provisions, which my hon. Friend the Minister mentioned in his opening speech. I heartily approve of this new system for dealing with corporate misconduct. We saw it first in our jurisdiction under section 7 of the Bribery Act 2010. Although there have been only a few cases involving section 7, it strikes me as being a sensible way of dealing with the difficulty that we face, under English law at least, in pinning criminal liability on corporations. In the United States, a corporate body can be held to be criminally liable because it employed the criminal. It is vicariously liable for employing the criminal and his activities are pinned on the company. In this country—certainly in this jurisdiction—we rely on the Victorian principle of the directing mind. Nowadays, in huge international companies that have hundreds of thousands of employees posted right across the world, albeit that the headquarters of the company may be in this jurisdiction, it is extremely difficult to demonstrate that the directing mind of the company knew what the criminal employee was up to. Section 7 of the Bribery Act gets around that.

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

Although I accept the directing mind principle, does the right hon. and learned Gentleman agree that when employees engage in less than ethical practices—such practices have caused a lot of the problems that we have seen in the UK over the past six or seven years—unless the liability goes to the top of an organisation, the organisation will never develop the protocols and processes required to make sure that those employees are responsible for their actions? Does he accept that point?

[Sir Edward Garnier]

What the hon. Gentleman says is perfectly true, but I am not sure whether that constitutes accepting what he says. The point I am trying to get across is that companies can avoid liability in the absence of the “failure to prevent” system under section 7 of the Bribery Act. Individuals can be prosecuted and imprisoned, but the company gets away free. The advantage of section 7 is that it brings the company within the ambit of responsibility.

Yes, the compliance system in banks and financial institutions is nowadays much more sophisticated and vigorously engineered, so that everybody from top to bottom should know what they are supposed to do and not do, and so that such a culture goes right the way through the company. It seems to me that there is no excuse for failing to behave properly, since we should all now know what to do. The compliance world is certainly keen to ensure that employees in banks and so forth know what they are supposed to do.

I want the Government not to limit the “failure to prevent” provisions to section 7 of the Bribery Act and those clauses in this Bill that deal with tax evasion, but to expand the regime to all offences that can sensibly be brought under it, as set out in part 2 of schedule 17 to the Crime and Courts Act 2013. The schedule covers 40 or 50 economic or financial crimes that corporations should be required to prevent. That would put a blanket across a range of criminal financial offences that are not dealt with at the moment, such as fraud, theft, false accounting, the suppression of documents, dishonestly retaining a wrongful credit, the exportation of prohibited or restricted goods and so on. There is a list for the Government to look at. I hope that thought will be given not just to expanding the regime to the evasion of taxation both in this country and abroad, but to some of, if not all, the offences listed in the schedule.

Finally, I want to make a small point, which I suppose comes back to resources. In an online article in “The Brief” from The Times this morning, a senior lawyer at a City firm of solicitors complained that tax officials were failing to use existing tools against tax avoidance schemes while seeking to expand their powers. He said:

“The huge range of swingeing powers HMRC has been given in recent years may have helped its image…but to date they have been little used as an enforcement tool, and some may question whether public time and resources could have been better spent.”

He also said:

“Before granting HMRC yet further powers…parliament should consider very carefully whether such powers are actually needed and ask HMRC to explain why some of the powers it has been granted in recent years have been under-utilised.”

I do not know whether that is pinpoint accurate, but it seems to me that we can do both: we can make better use of the powers provided to HMRC and ensure that it uses them; and we can also widen the ambit of our ability to catch those involved in financial crime and our ability to prevent it by introducing the “failure to prevent” provisions in this Bill in, I hope, an expanded form.

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

Before I go through my speech, I think I can sum up our position on the Bill very succinctly. The crux is that we support in principle the aims of the Bill. To be truthful, there is not much within the four corners of the Bill that we would dispute. Our problem is not with what is in the Bill but with what is not in the Bill, as I will make clear in my speech.

When I studied the financial system at university in the 1990s, the focus of financial crime and of the Government with regard to it was on anti-money laundering regulations and proceeds of crime legislation, which were specifically geared towards getting at the proceeds of drug traffickers and, quite frankly, bank robbers. For the most part, that has worked. Long gone are the days when criminals could easily legitimise buckets of cash from ill-gotten gains. Thankfully, long gone are the days when the only concern involved in robbing a bank was being caught red-handed. The perception of criminals was that if they could evade capture and did not flash the cash, they could eventually spend the money. In many cases, criminals could be incarcerated for crimes and still look forward to spending loot they had stashed when they were eventually released. Money now needs to be accounted for; banks must consider the sources of funds and be satisfied that they are indeed legitimate. Police now have powers to recoup proceeds of crime even if they have been spent by the criminals, and pass them back to the victims.

In my view, we simply could not believe in the rule of law unless we supported such an evolution in rules and regulation. Fairness and the rule of law should be at the heart of everything we do as a society. It is not fair to anyone to live in a world where criminals are free to generate cash and spend it without fear of repercussion. There simply must be a level playing field for the vast majority of society who play by the rules. The past changes did not merely disincentivise criminals; they drove a police coach and horses right through their plans. There are many famous bank robbers and drug traffickers. We know them; we have watched all the films. I suggest that they simply would not have committed those crimes had we had tougher money laundering regulations then.

The challenges today are very different. We live in an era of evolving financial crime and now face a very different threat from that which we faced a generation ago, when I was at university. It is the threat of grand corruption, particularly in relation to politically exposed people, facilitated for the most part—perhaps unwittingly —by the City of London.

Earlier this year The Guardian revealed through the Panama papers how a powerful member of Gaddafi’s inner circle had built a multimillion-pound portfolio of boutique hotels in Scotland and luxury homes in Mayfair, Marylebone and Hampstead in London. He was head of Libya’s infrastructure fund for a decade and has been accused by Government prosecutors in Tripoli of plundering money meant for schools, hospitals and archaeology. Scottish police have confirmed that they are investigating. Libya has made a request for an asset freeze, but that has not yet been implemented.

These challenges are such that new and tougher legislation is required to give law enforcement the tools to really do something about this problem. We in the Scottish National party support that principle. Although I do not wish to undermine your Office’s consideration of the Bill, Madam Deputy Speaker, I respectfully suggest that the Bill applies to Scotland. There are specific clauses on how the provisions will apply to Scotland.

As far as devolved competencies go, the SNP Scottish Government have demonstrated their commitment to tackling criminal finances and tax avoidance, and boast a successful track record in doing so. In Scotland we have introduced robust anti-avoidance rules on devolved taxes, described by commentators as among the toughest in the world. The SNP Government’s approach to devolved taxes demonstrates that we are deadly serious about tackling tax avoidance in Scotland. For example, the Revenue Scotland and Tax Powers Act 2014 established the Scottish general anti-avoidance rule, which will allow Revenue Scotland to take counter-action against artificial tax avoidance schemes, making it more difficult for people to circumvent the requirement to pay tax.

That said, although we support the broad principle at stake here, we note with interest the clear terms of the most recent Tory manifesto:

“We will continue to lead the world on tax and transparency…We are also making it a crime if companies fail to put in place measures to stop economic crime”

and

“We will…crack down on tax evasion and aggressive tax avoidance”.

Admirable principles, and ones we support, but we have real doubts that the Bill goes far enough to achieve those goals, as I and my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) will make clear as we move through the debate.

Many mechanisms and vehicles are provided for in the Bill. One of the most important, and perhaps the easiest for the public to understand, is the unexplained wealth order. The Bill will enable a court—in Scotland, the Court of Session, upon application by Scottish Ministers—to make an unexplained wealth order. The order will require an individual or organisation to explain the origin of assets if there are reasonable grounds for suspecting that that individual or organisation may be involved in criminality or intend to use that wealth for criminal purposes, and the value of the assets exceeds £100,000.

The order will be available to the court where assets appear disproportionate to known legitimate income—for example, as recently reported, when a taxi driver owns a £1 million fish tank. Failure to provide a response to the order and explain the legitimate source of funds would give rise to a presumption that the property was recoverable, making any subsequent civil recovery action much easier.

As a lawyer, the notion of reversing the burden of proof is not one that sits comfortably with me, but, as in other areas, I consider it to be proportional to the issue at stake. Sound legal principles, such as the presumption of innocence and the burden of proof being on the Crown, should not inadvertently protect criminals, which I suspect may have happened thus far.

Unexplained wealth orders will also help to expose the owners of property. Land Registry figures show UK real estate worth more than £170 billion is held by more than 30,000 tax haven companies. The key to this provision is that a criminal conviction will no longer be necessary before law enforcement can pierce the criminals’ veil that camouflages their wealth. Getting away with the crime itself will no longer protect a criminal’s wealth. The Bill will allow for this power to be applied to foreign politicians and officials, or those associated with them, known as politically exposed persons, helping to tackle the issue of proceeds of grand corruption overseas being laundered in the UK.

I have a couple of specific questions for the Minister relating to unexplained wealth orders. There is a provision relating to interim freezing orders. If an unexplained wealth order is made, one could presume that the respondent would be keen to hotfoot it out of the country with a stash of cash. Freezing orders are available if the court is satisfied that they are necessary. Will the Government consider strengthening this position to ensure that the hotfoot temptation is not available to these criminals? I could imagine the rush to flee—I think we all could. Perhaps an automatic freezing order on the granting of the application for the unexplained wealth order can be considered. Will the £100,000 threshold create a new “out” for grand corruption? Will politically exposed people collaborate with many people to do numerous transactions under £100,000? That should also be considered and we should ensure that the provisions catch those types of activities.

Current legislation does not make it easy to seize criminals’ assets in the form of bank accounts and other value assets, such as precious metals and jewels, or indeed casino chips and high value betting slips. There is evidence, however, that these moveable items are being used increasingly, both domestically and across international borders. The Bill will create new civil powers similar to existing cash seizure and forfeiture schemes in current legislation, which would close that gap. The powers will be exercisable where there is reasonable suspicion that the property is the proceeds of crime or will be used in unlawful conduct.

The SNP’s 2016 manifesto stated:

“We will argue for changes in the law at Westminster to enable the police to seize items of monetary value from criminals, such as high value betting slips and casino chips.”

I was pleased to hear the Minister state that the changes will be included in a forthcoming amendment. I was struggling to conceive how criminals could be caught by the face value vouchers provisions currently in the Bill, so I was grateful for that statement and I thank the Minister for making it.

On corporate failure to prevent tax evasion, the Bill attempts to legislate on what we understand as corporate economic crime. As we heard from the Minister, the Bill will create two new offences. We support the measures as far as they go, but we see this as a huge missed opportunity. For example, nothing in the Bill would criminalise the banks themselves for their employees rigging the LIBOR market. I suspect that when the public begin to understand which corporate crimes are dealt with in the Bill and which ones are not, they may see this as a slight cop-out and a continuation of the status quo that has got us into so much difficulty. It is uncontroversial to hold companies to account for the tax evasion of their employees. It is tax evasion, for goodness’ sake. The public would expect it to be criminally sanctionable as is. What the public want are stronger measures to hold companies, in particular banks, liable for the crimes of their resident rogue bankers. It seems strange that the Government have ducked this issue.

Speaking as someone who has worked for a well-known retail bank—something that I do not advertise as much these days as I used to—I can testify with absolute certainty that until the banks themselves are in the frame they will never, as I claimed in my intervention, develop the risk management and other protocols necessary to make sure that their agents or employees do not commit these crimes. Only when liability goes to the top will we ever begin to solve these issues.

Will the Government consider reacting to what the public understand as corporate crime, and make banks liable for practices that have caused so much economic heartache to so many ordinary people since 2008? Why should the innocent ordinary punter pay for the mistakes of rogue bankers? If we make these bosses liable, we will see a tightening up almost instantly.

[Sir Edward Garnier]

As a first step, would the hon. Gentleman encourage the Government to look at the schedule to the 2013 Act, where the economic and financial crimes are set out, to see whether we could get “failure to prevent” provisions added to this Bill on a wider basis? Perhaps the hon. Gentleman and I could then get together to try to persuade the Government to introduce the American vicarious liability system of corporate criminal liability.

[Richard Arkless]

I have a great deal of sympathy with both of the right hon. and learned Gentleman’s points. I suggest, however, that the first one is rather a half-house measure that does not go far enough. It will not pin criminal liability on the banks. On the second point about vicarious liability, it is interesting to note that the United States is often considered as the free market monster of the entire world, yet the US feels comfortable with criminalising banks for the actions of their rogue employees. I suggest that we should do the same in the UK.

[Mr Wallace]

It is a joy as a non-lawyer to be skewered between two barristers in this place, but may I point out to the hon. Gentleman that one reason why the Bill imposes an unlimited fine for a conviction of corporate facilitating of tax evasion is that we believe it will change behaviour. It is one thing to fine a company for a capped fee, but we need to change the attitude not only of the bosses but of the shareholders—and massive fines make a difference. If that is coupled with our provision to increase the powers of the Financial Conduct Authority, we hope that both will help to change behaviour.

[Richard Arkless]

I agree with the Minister, but my point is that under the Bill, corporate economic crime extends only to tax evasion and not beyond it. Within the four corners of the Bill, there is relatively little to disagree with, but it does not go beyond tax evasion, which I think is a huge omission.

SNP Members can support other parts of the Bill without much hesitation—for example, the expansion of the suspicious activity reports regime, information sharing disclosure orders and combating terrorism. We support all those measures in principle. Notwithstanding our in principle support, we do not think it goes far enough, as I have said.

I shall shortly go through some of the issues that we think are missing from the Bill. Before I do so, however, I wish to make a small point about the time we have had to consider this Bill and its contents. We do not agree that the Scottish Government were given adequate time to scrutinise them. The Bill has been instructed and drafted with high speed, admirable though that may be, but with limited consultation. Only in the last fortnight were we shown draft clauses that related to unexplained wealth orders and mobile items of value—and even then, they were tagged “in confidence”. That said, we welcome the move to extend to Scotland the powers for wealth orders and disclosure orders, as requested by the Scottish Government.

For these reasons, the Scottish Government have not had the chance—and neither have I—to consider the Bill in sufficient detail, to consult Scottish stakeholders properly or to provide the Minister and the Government with some detailed advice. The Scottish Government will do so in due course. In addition, we are already aware of concerns among some Scottish stakeholders, particularly the civil recovery unit, that their advice has not been fully listened to and acted upon by the Home Office, and that the current approach adopted in the draft seizure and forfeiture powers provisions may not be the most effective available. I would encourage the Minister to continue his dialogue with the Scottish Government. He demonstrated yesterday evening that that is ongoing, for which I thank him.

So what is missing? It remains the case for us that the most notable aspect of the Bill is what is not in it. The headline objective of the Tory manifesto in this context was to deal with tax evasion, but, as has already been pointed out, the Bill makes absolutely no mention of the United Kingdom overseas territories and Crown dependencies. Given the aforementioned statement of intent in the Tory manifesto and the problems highlighted by the Panama papers—and the public reaction to the Panama papers—that omission seems very odd and very peculiar indeed.

[Joanna Cherry (Edinburgh South West) (SNP)]

The OECD estimates that tax havens may be costing developing countries a sum up to three times the size of the global aid budget. Does my hon. Friend agree with me, and with the charity Christian Aid, that the most effective way in which the Government could tackle corruption and counter the financing of terrorism would be to set a deadline by which the overseas territories and Crown dependencies would have to adopt the same level of transparency as the rest of the UK, and does he agree that the Bill constitutes a missed opportunity for them to do so?

[Richard Arkless]

Unsurprisingly, I agree wholeheartedly with my hon. and learned Friend. I should like the Minister to consider whether there is any way in which we could compel the overseas territories and Crown dependencies to publish registers of beneficial ownership, which would provide much needed transparency in what is turning out to be a bottleneck in the fight against tax evasion.

[Joanna Cherry]

Does my hon. Friend agree that there is a precedent? The Government have repeatedly legislated in respect of overseas territories—for example, on issues relating to corruption, abolishing the death penalty, pirate radio, and the decriminalisation of homosexuality.

[Richard Arkless]

Again unsurprisingly, I agree with my hon. and learned Friend. Where there is a political will, there will be a way. If the Government were inclined to legislate in relation to the overseas territories and Crown dependencies, I have no doubt that that could be done, but the omission indicates to me that there was not the necessary political will.

We do not believe that the Bill will tackle tax avoidance appropriately. Avoidance has increased under the Conservative Government. Last year the UK tax gap was a staggering £36 billion, and, despite the positive rhetoric emanating from the Tory Front Bench, it has increased by £2 billion on last year. More needs to be done in the Bill to achieve everyone’s stated aims.

Why does the Bill not address the tax code? The UK has one of the most complex tax codes in the world, which has clearly led to opportunities both to create new loopholes and to exploit existing ones. We therefore call on the Treasury to convene a commission, and to report back within two years following a comprehensive consultation on the simplification of the tax code. By opening the door to a simplified tax system, the Government could boost tax yield, encourage compliance, and avoid exploitative loopholes such as the Mayfair loophole and employee benefit trusts.

Changes are one thing, but they could become meaningless if we do not allocate the resources that are necessary to ensure that the Bill and subsequent measures have real effects. We think that the Government’s decision to close 137 HMRC offices will be completely counterproductive in relation to the laudable aims of the Bill. Those resources are needed to boost compliance, not to mention the human cost that has been incurred by families, employees, communities and local businesses.

Let me make one final point to the Minister, which will be expanded later by my hon. Friend the Member for Kirkcaldy and Cowdenbeath, and which we discussed yesterday evening. My request is for the wholly reserved issue of Scottish limited partnerships to be dealt with in the Bill, which it is not at present.

It is the view of the Scottish Government that a legislative consent motion will be required to give effect to the provisions covering seizure and forfeiture powers and unexplained wealth orders, and some of the minor and technical changes in the Proceeds of Crime Act 2002. The motion will also include the specific provisions on civil recovery and criminal confiscation that the Scottish Government require to be included in the Bill.

We will not trigger a Division this evening, but we want to reiterate very firmly that the Bill does not go nearly far enough in dealing with what I think is a real and tangible outcry from the public, given what has happened over the last five, six or seven years. If we are serious about creating and maintaining confidence in the banking system—which has completely evaporated—we need to tackle this issue head on, and do more than we are doing in the Bill.

[James Berry (Kingston and Surbiton) (Con)]

I rise to support the Bill—not to complain about what is not in it, but to praise the Government and agree with them on what they have put in this bold Bill.

I should declare I am a barrister and have represented a number of police forces across the country. That experience has taught me two things. The first is a genuine admiration for the men and women of our fantastic police service for their dedication to the task of keeping us safe. Thanks to their excellent work, led by Chief Superintendent Glenn Tunstall, Kingston is now the safest borough in London. However, as I learned at our recent police awards, even in London’s safest borough, there are humbling examples of everyday heroism and compassion by our police officers. We do not hear enough about them, but we are truly grateful.

I pledged at the election to do what I could to give the police the tools they need to do their job. That leads me on to the second thing my experience with the police has taught me: there are a number of powers in this Bill that the police have been, and still are, hamstrung without —where they are powerless to act in the face of wrongdoing.

Before talking about those powers, I want to make a broader point. I am proud to serve as a London MP, representing those who live and work in the best city in the world. London is the world’s financial services capital and I know the Government are working as hard as they can to ensure that that remains the case after Britain’s exit from the EU. But over the last few years there have been reports that London is becoming the capital of something rather more insidious—money laundering.

Following the global financial crisis, property in London has become one of the safest investments in the world. Rich criminals and money launderers are attracted to it in the same way as people who make their money legitimately. Put shortly, Londoners want this stain removed from their city. The Bill will help to do that.

It is not just London: the National Crime Agency assesses that billions of pounds in proceeds of international corruption are laundered into or through the UK every year. Her Majesty’s Revenue and Customs estimates that £4.4 billion was lost to the Exchequer last year alone due to tax evasion in the UK. Globally, laundered money is estimated to amount to 2.7% of GDP, or $1.6 trillion. To put that in perspective, there are only nine countries in the world with GDPs greater than that.

As the leading nation in the world for soft power, and as a nation that is trying to lead the global debate on anti-corruption, we need to ensure that our house is in order. The Bill is part of the Government’s wider efforts to ensure that that is the case. I want to touch on a few aspects of the Bill.

The first is unexplained wealth orders. We have seen many cases in the press where individuals suspected of grave criminal offences are living lavish lifestyles well beyond what any legitimate income they could evidence could possibly support. It is insulting to the many hard-working people in the UK who play by the rules and go to work day in, day out to earn an honest living to support themselves and their families to see this happening. It creates a feeling of impunity in the upper echelons of criminality.

Unexplained wealth orders will require those suspected of being involved in, or associated with serious criminality to explain the origin of assets of over £100,000 that appear disproportionate to their known income. A failure to provide a response, or a satisfactory response, could lead to a presumption that the property in question is recoverable in civil proceedings.

Unexplained wealth orders will have to be made by a High Court judge on application by a relevant law enforcement officer. Even with those protections, as might be expected of a lawyer, I ask the Minister to give a little more assurance about the nature of the protections in place, given that the measure does reverse the burden of proof that normally rests on the Crown. I am sure that he will be able to provide that reassurance, and I entirely agree with the hon. Member for Dumfries and Galloway (Richard Arkless) that that appears to be proportionate in this case, given the severity of the situation that law enforcement officers face.

Secondly, on enhanced forfeiture powers, I have spent many mornings in magistrates courts up and down the country making applications under the Proceeds of Crime Act 2002. I have some familiarity with this area. The current powers under the POCA apply to cash. The police may seize it when they have reasonable grounds to suspect that it is the proceeds of crime. They may then apply to the magistrates court to forfeit that cash. A classic example is a shoebox found in a house containing some drugs and rolls of cash. However, the provisions apply to cash alone. The more sophisticated criminals do not have rolls of cash and a little bit of cannabis or cocaine in a shoebox. They have their money in bank accounts and in high-value items of personal property, which are much harder to trace and much easier to move around, domestically and internationally. Such items include precious metals and jewels—and indeed betting slips. I am grateful to the hon. Member for Dumfries and Galloway for drawing those to the Government’s attention. His information appears to be being acted on. The seizure and forfeiture provisions in the Bill extend the cash seizure powers in POCA to bank accounts and high value-items. That will mean that the law and the police’s powers are keeping up with the ways in which crimes are being committed. That is a welcome move.

I now turn to part 3 and the new offence of corporate failure to prevent tax evasion. This is another manifesto commitment that the Government are delivering on today. It is already the case that a taxpayer who fraudulently evades a responsibility to pay tax commits a criminal offence. A person such as a banker, accountant or tax adviser who knowingly assists a taxpayer to fraudulently evade a responsibility to pay tax is committing a criminal offence, but the company employing that banker, accountant, tax adviser or other professional who criminally facilitates tax evasion does not commit any offence. The company is outside the reach of the law. The Bill aims to bring those companies within the reach of the law, not to duplicate the criminal liability of their employee or agent but to criminalise a failure by the company to prevent those acting on its behalf from facilitating tax evasion. It will criminalise the company for allowing an atmosphere to be created in which that tax evasion is possible.

That might seem draconian, but it is absolutely necessary. Companies will have a defence, much as they do under health and safety legislation, if they can show that they had reasonable prevention procedures in place. The new offence will be the stick that will drive up companies’ efforts to ensure that their internal procedures do the utmost to prevent their employees from facilitating tax evasion. It will drive up standards in the whole sector, and that is long overdue.

[Richard Arkless]

I am listening with great interest to what the hon. Gentleman is saying. Does he agree that there is a real case to be made for extending the provisions on corporate economic crime beyond the tax evasion issues covered by the remit of the Bill?

[James Berry]

That is certainly something that could be looked at and consulted on, but the Bill is achieving a manifesto commitment to do exactly what it says on the tin. That is what the Government are trying to deliver today.

[Richard Arkless]

rose—

[James Berry]

I will carry on, if I may.

--- Later in debate ---

[Brandon Lewis]

My right hon. Friend makes an important point, particularly by outlining the importance of the Bill’s Committee stage to ensure that Members have a chance to have an input into the debate, as indeed they have had this afternoon. He should have great faith in my hon. Friend the Minister for Security, who is determined to work with colleagues to ensure that the Bill is robust. The Bill gives a clear message to those who want to try to usurp our system that that will not continue—we will not allow it. Although we are a country that is open for business, we are also a country that believes in fairness and that will ensure that fairness prevails.

A couple of core issues have been raised by a number of Members, particularly about the overseas territories. We heard speeches from the right hon. Member for Barking (Dame Margaret Hodge), and the former Chair of the Home Affairs Committee, the right hon. Member for Leicester East (Keith Vaz). We have agreed that UK law enforcement and tax authorities will have, in real time, unrestricted and secure access to things such as the beneficial ownership initiative, and information about corporate and legal entities incorporated in the overseas territories and the Crown dependencies.

The right hon. Lady outlined the excellent work of David Cameron and the strong message that he gave when he was Prime Minister. This is something that the current Prime Minister is determined to continue. We will ensure that there is an end to people usurping the law. It is important that we work closely with our colleagues around the world to ensure that we have a strong and robust system. We have taken a lead on this. Those territories have agreed that they must commit to new global standards in tax transparency so that Her Majesty’s Revenue and Customs can investigate any untoward activity. As a result, later this year, HMRC will have new data on billions of pounds of accounts held in the overseas territories by UK taxpayers. This is a big step forward. I know that we as a Government are determined to ensure that we stamp out that kind of behaviour.

Funding was mentioned by a number of Members, including the right hon. Member for Leicester East. The NCA’s funding has increased from £448 million to nearly £478 million over the past year and police budgets have been protected. Funding for HMRC has also increased—up to £3.6 billion, with the £241 million input that was mentioned earlier.

I can be clear that we are determined to ensure that the police and the NCA have the resources that they need to be able to look at all this in the round, including IT issues. The right hon. Gentleman suggested that I use the debate to discuss the police funding formula, but he will have to excuse me for resisting that temptation for now. Over the past few weeks, I have written to all chief constables and police and crime commissioners to ask them to come to talk to me as we seek to deliver our election manifesto commitment of a fair funding formula for police, which we will do.

In response to comments about the overseas territories and Crown dependencies, I am pleased to announce that the British Virgin Islands and the Turks and Caicos Islands have just—conveniently, as I am here at the Dispatch Box this afternoon—committed themselves to the initiative on beneficial ownership, which many hon. Members have spoken about today. All the overseas territories have now agreed to have central registries, which will be accessible to law enforcement authorities. We will continue to push for all countries to introduce public registers. This is good news, and we will continue to work on it.

[Richard Arkless]

Clearly, I am delighted to hear the good news that the Minister has just given. Can he confirm whether his announcement confirms that those registers will be published?

[Brandon Lewis]

As I said just before the hon. Gentleman intervened, we will continue to push for all countries to introduce public registers. This is a step in the right direction. I welcome it, and we acknowledge that we want to continue to work on this. Another issue raised by his good self, as well as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) and others, was about Scottish limited partnerships. I hope that they will take into account the fact that my hon. Friend the Minister for Security intervened to say that we want to work on that with colleagues across Parliament. We have very much taken those points on board.

My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) and my hon. Friends the Members for Kingston and Surbiton (James Berry) and for Wealden (Nusrat Ghani) spoke passionately and made incisive contributions. In particular, my hon. Friend the Member for Wealden outlined the Bill’s importance given the part that it will play in ensuring that we fight the funding of extremism. We have discussed the Bill’s vital importance in protecting the UK’s position and status as a global financial centre and in ensuring that criminals cannot benefit from the proceeds of their crimes. I expect and hope that right hon. and hon. Members will want to give in-depth scrutiny to the Bill, as they have suggested this afternoon, as we move on to clause-by-clause examination in Committee, and I look forward to a lively debate on its provisions.

I am proud that, by comparison to most European countries, we are positioned high in the league table for having a strong and independent judiciary, as well as a determined law enforcement environment. If we are to maintain our record and position, we always need to stay one step ahead of those who seek to undermine our attempts, especially in such a fast-moving global environment. That is why the Bill is so important, why it is reassuring that it has received principled, cross-party support in the House, as that sends a clear message, and why we must ensure that law enforcement agencies have the powers they need to combat the ability of criminals to launder the proceeds of their crimes, as well as to tackle terrorism financing and to bring more offenders to justice. I hope that the House will agree that that is in the public interest and that the Bill should be passed at the earliest opportunity with clear, continued cross-party support. On that basis, I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Criminal Finances Bill (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Criminal Finances Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 24 November 2016.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Andrew Griffiths.)

Question agreed to.

Criminal Finances Bill (MONEY)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Criminal Finances Bill, it is expedient to authorise—

(1) the payment out of money provided by Parliament of—

(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown or a government department; and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided; and

(2) the payment of sums into the Consolidated Fund.—(Mel Stride.)

Question agreed to.