Criminal Finances Bill (Third sitting)

Richard Arkless Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 17th November 2016 Public Bill Committees

[Dr Huq]

Once again, we have no problems with any of that, particularly as it allays some of those concerns about overseas property that were anticipated by amendment 1.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Unexplained wealth orders: Scotland

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

I beg to move amendment 57, in clause 4, page 14, line 35, leave out “£100,000” and insert “£50,000”.

This amendment reduces the threshold for the value of property that UWO may be issued for in Scotland to £50,000.

It is a pleasure to serve under your chairmanship again, Sir Alan. Essentially, we are asking for the threshold or limit for which an unexplained wealth order can be granted to be reduced, in Scotland only, from £100,000 to £50,000. I cite three main arguments for making that suggestion. We state in the explanatory notes that that would bring the threshold in line with international standards. The level in Ireland is €5,000, while the level in Australia is 100,000 Australian dollars, which equates to around £60,000.

I also refer the Minister to the drastic difference in asset valuations north and south of the border, particularly in property prices. Property prices in London average at £487,000. The unexplained wealth order threshold in England and Wales is set at £100,000, which is just less than a quarter of the average property price. Property prices in Scotland are significantly lower. In my constituency the average is £120,000, while in North Ayrshire they are less than £100,000. Applying the same rationale of a percentage of the overall property price, our threshold should be substantially lower. We suggest that a reasonable level would be £50,000.

I also draw the Minister’s attention to the point that reducing the threshold in Scotland, where there are lower asset valuations, is a no-lose situation for the Government. The threshold in itself is not the main benchmark to trigger these unexplained wealth orders; it is the test. The test for Scotland, which we agree with, is set out in proposed new subsection 396B(3) of the Proceeds of Crime Act 2002. That test must be met in every single circumstance, whether the threshold is £5, £10 or £100,000. Even if the limit was set at £500,000, that test must be met. Given the lower asset valuations in Scotland, it is a no-lose situation to bring the threshold down.

I envisage criminals perhaps acquiring properties in a lower-asset valuation jurisdiction and creeping below the £100,000 threshold. We do not want to end up with some criminals getting off the hook and us having to come back to Parliament to try to lower the threshold. We are not suggesting that the threshold is lowered in England and Wales—that is a matter for the Minister and Members for England and Wales. Clearly there are arguments, given the higher property prices, but I suggest, for the reasons I have set out, that it would be sensible to lower the threshold for Scotland. It would be a no-lose situation for the Government to agree to the amendment.

[Mr Wallace]

I thank the hon. Gentleman for his point. The point to note is that an unexplained wealth order is made against the person and therefore their collective assets, rather than an individual asset. Therefore, whether a successful gangster with a huge amount of money chooses to buy 10 houses where property prices are low—in any part of the United Kingdom—or one house, the order is against that person and catches all their wealth however it is stored.

I want to put the hon. Gentleman at his ease on his view that there is such a difference between Scotland and England. The threat of organised crime is exactly the same. Unfortunately for all of us, there are successful gangsters on both sides of the border who make considerable amounts of money. Therefore, the argument about the £100,000 threshold is that it will catch serious criminals on both sides of the border. We are going to go after their wealth. We must also remember that it is about the person rather than the property. I therefore urge him to withdraw his amendment. If he does so, I am happy to meet him to discuss this issue further—there are other opportunities for that, should he like to do so—and to explore the different options at the threshold.

[Richard Arkless]

Given that we are almost wholly persuaded by my arguments to reduce the threshold, I am tempted to press the amendment to a vote. However, taking the Minister at his word—I have no reason to disbelieve him—we will be happy to withdraw the amendment if we are assured that those further conversations could happen. We do not see any harm in that, and perhaps we can develop those conversations as we go through the stages of the Bill. Given his gracious assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Mr Wallace]

The clause brings us for the first time to devolution and separate court systems in the United Kingdom. Clauses 4 to 6 provide for unexplained wealth orders in Scotland on effectively the same terms as clauses 1 to 3 do for England, Wales and Northern Ireland. As such, much of what we have discussed relating to the substance of unexplained wealth orders applies equally here.

The reason for separate provisions for Scotland is the different court structure and the separate existing practice and procedure that relates to civil recovery. I assure the Committee that there will be a consistent approach to unexplained wealth orders across the United Kingdom. All the safeguards and other measures will apply in Scotland as they do elsewhere in the United Kingdom.

As we are adding to the criminal law, I will specifically mention the creation of a parallel offence of knowingly or recklessly making a statement that is false or misleading, but I do not think there is anything more to concern the Committee relating to unexplained wealth orders that we have not already discussed.

[Dr Huq]

We entirely support the Government on the clause.

[Richard Arkless]

I rise to reiterate our support that the clause stands part of the Bill.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Interim freezing orders

Question proposed, That the clause stand part of the Bill.

[Mr Wallace]

The clause supplements clause 4 in appropriate cases. It provides that the court can also issue an interim freezing order in relation to property subject to an unexplained wealth order in Scotland. It is important to note that it provides in Scotland what clause 2 provides in England, Wales and Northern Ireland. The safeguards and processes are similar. It is also closely modelled on freezing powers that already exist in civil recovery.

[Richard Arkless]

Although we accept the principal contents of the clause, I reiterate the concerns I made on the Floor of the House on Second Reading. The test to implement a freezing order in proposed new section 396I(2) is that the court

“considers it necessary…for the purposes of avoiding the risk of any recovery order that might subsequently be obtained being frustrated.”

Therefore, essentially the judge will have to decide whether there is reasonable suspicion that the alleged criminal will abscond with that property. We are clearly keen to avoid that situation.

How does the Minister see that paragraph being interpreted by the judiciary? Is there a danger that it is over-prohibitive or too onerous? How will it be evidenced? How on earth can a judge determine whether that person is likely to abscond with the property? The fact that they have been subject to an unexplained wealth order might reasonably suggest in itself that that would be enough to compel the profit to be frozen? We are trying to avoid an unexplained wealth order being granted, but then some pest from another jurisdiction wriggles with the freezing order and gets the property out of the country, and the unexplained wealth order will have no effect. We are keen to make sure that does not happen in Scotland or, indeed, in the rest of the UK.

[Mr Wallace]

The hon. Gentleman makes an interesting point and my response is “judicial discretion.” It is up to the sheriff or the judge to weigh up the evidence, and the individual or party, before him. The likelihood and ability that they may flee and so on may well come into that.

[Richard Arkless]

I completely understand and respect those points. The point of an unexplained wealth order is that the wealth is unexplained. We do not know the nature of the criminal. We know nothing about them. We have no idea whether they are likely to abscond. I suggest that it would be difficult for the judge to make that determination, and if he cannot do so under the Act, he will probably, as the judiciary is entitled to do, err on the side of caution and not implement the freezing order, but implement the unexplained wealth order.

[Mr Wallace]

The provision reflects the existing civil recovery arrangements in both Scotland and England. In other civil recovery procedures, that is how it is dealt with at the moment. That is why it is framed that way in the Bill.

I take the hon. Gentleman’s point concerning the worry about flight and so on, but if criminals are obviously residents of the UK or European economic area and there is a link to serious organised crime, those making the application cannot just turn up, but will have to present evidence, so there will be scrutiny and the judge or sheriff will be able to weigh up whether there should be a freezing order.

[Richard Arkless]

I accept that and am happy to support the clause. The Minister’s constructive response provides an opportunity to discuss this and to examine the legal points to ensure that criminals do not to fly with the cash before we can get our hands on it. No one wants that.

[Mr Wallace]

We can discuss that at length when we discuss the £50,000 threshold, which I am happy to do. As the hon. Gentleman knows, we are grateful to the Scottish Government with whom we have worked hand in hand on much of the Bill. Because we have accepted recommendations, advice and help from the Justice Minister in Scotland on some of the framing of the Bill, it is one we can agree on. We have accepted some of the guidance from the hon. Gentleman’s Government north of the border.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

External assistance Disclosure orders

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dr Huq]

Clause 6 makes Labour’s Proceeds of Crime Act 2002 even better so we will not obstruct it.

[Richard Arkless]

I reiterate that we will not stand in the way of clause 6 standing part of the Bill.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Disclosure orders: England and Wales and Northern Ireland

--- Later in debate ---

[The Chair]

Order. I am sure the Minister will visit that when we get to it.

[Richard Arkless]

I have a very quick point to make on amendment 9. I apologise if I missed it—I had my head buried in some papers—but could the Minister clarify why Scottish Ministers are being removed from the list of people who can apply to the sheriff?

[The Chair]

Order. Amendment 9 is in the next group, which we have not quite moved on to yet.

[Richard Arkless]

My apologies, Sir Alan. I got ahead of myself.

Amendment 8 agreed to.

--- Later in debate ---

[Mr Wallace]

The amendments will remove references to Scottish Ministers from the list of persons who may make applications to the sheriff for extending the moratorium period and for making a further information order under the Proceeds of Crime Act 2002 or the Terrorism Act 2000. In our ongoing dialogue with the Scottish Government and with law enforcement partners, we have clarified that Scottish Ministers do not require those powers. In Scotland, they would be used by the Crown Office and Procurator Fiscal Service, the National Crime Agency, the police and HMRC in respect of the moratorium period and by the procurator fiscal, the police and the NCA in respect of further information orders. We are acting on the advice of the Scottish Government, with whom we have consulted extensively in the development of the Bill and will continue to do so. We are making these amendments to ensure that the new measure will work effectively in Scotland.

[Richard Arkless]

The Minister’s explanation was comprehensive and persuasive and accords with my understanding of the Government’s position. We will not stand in the way of the clause.

[Dr Huq]

Ditto. We agree and will not stand in the way of the clause.

Amendment 9 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Criminal Finances Bill (Fourth sitting)

Richard Arkless Excerpts

Committee Debate: 4th sitting: House of Commons
Thursday 17th November 2016 Public Bill Committees

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

I beg to move amendment 58, in clause 12, page 40, line 1, and end insert—

“(g) betting slips;

(h) casino chips.”

This amendment includes betting materials that can be used to store the proceeds of criminal activity.

[The Chair]

With this it will be convenient to discuss Government new clause 10.

[Richard Arkless]

Amendment 58 would extend the definition of “listed asset” in proposed new section 303B of the Proceeds of Crime Act 2002 to include betting slips and casino chips. The Minister helpfully acknowledged on Second Reading that he would consider tabling an amendment to deal with those two means of retaining value, and I understand that new clause 10 has been tabled in that regard.

Although I fully commend the spirit of new clause 10, it will achieve that change not by adding to the definition of listed asset but by expanding the definition of cash to include gaming vouchers and fixed-value casino tokens. On the latter, we are in agreement: in effect, the new clause does what it says on the tin. It will extend the meaning of cash and therefore make fixed-value casino tokens catchable. Our concern is that “gaming voucher” is specifically defined in new clause 10 as

“a voucher in physical form issued by a gaming machine”.

We do not believe that that covers betting slips. Therefore, although we welcome the tone and construct of new clause 10, we feel that there is one means of retaining value that it does not cover, and that is covered in amendment 58.

[The Minister for Security (Mr Ben Wallace)]

I am grateful to the hon. Member for Dumfries and Galloway for his amendment, which was set out in his party’s manifesto for this year’s Scottish Parliament elections. The Government take this issue seriously, as do the Scottish Nationalist party and the Scottish Government.

As we have heard, to avoid detection, criminals use a range of means to transfer value among themselves. Law enforcement agencies and prosecutors—particularly those operating in Scotland—have made us aware of criminals’ use of gaming vouchers and casino chips to do that. There has been media coverage of drug dealers using fixed odds betting terminals to convert cash obtained from street drug dealing into vouchers issued by those machines. Those vouchers can either be converted into cash at the bookmaker, thus laundering the funds, or transferred to another person to pay the drug dealer’s debts.

The Proceeds of Crime Act contains provisions that enable law enforcement agencies to seize cash, but those provisions do not extend to the type of criminal tactic that I have just described, so clauses 12 and 13 seek to allow those agencies to freeze, seize and seek forfeiture of illicit funds held in bank accounts and other forms of criminal property used to transfer value. It has always been the Government’s intention to include gambling vouchers and casino chips in those provisions, as I made clear on Second Reading. When the Bill was introduced, we were still looking at the best way of achieving that in legislation, but I tabled new clause 10 on Monday—I apologise for doing so at the beginning of the Committee stage and not giving hon. Members more time to look at it—which will add gambling vouchers and casino chips to the definition of cash in the Proceeds of Crime Act and allow law enforcement agencies to seize those items on the same basis as they can seize cash, where their individual or aggregate value is more than £1,000.

Officers will have to demonstrate to a court that they have reasonable grounds for suspecting that vouchers or casino chips are either proceeds of crime or intended for use in unlawful conduct. That is an important safeguard that we apply to all forms of seizure. Law enforcement agencies will need to show why they seek the detention of the property, and will be able to seek administrative forfeiture of vouchers or tokens, or the agreement of a court. In all cases, an individual who believes that such vouchers or tokens are theirs legitimately will be able to challenge their detention or forfeiture.

I turn to the hon. Gentleman’s point and why we have used the term “gaming vouchers” rather than “betting slips”. In discussions with law enforcement agencies, we have identified that there is a major concern about the laundering of proceeds of crime through machines that provide a guaranteed return if they are played in a certain way. Those machines produce pay-out vouchers with a value that can then be cashed in. Betting slips, such as those used for horse racing, are used for betting with no guaranteed return and, therefore, are much more risky for use in money laundering.

However, once the points had been raised by the hon. Gentleman, I asked officials to examine whether there is potential to extend the Bill to ensure that we cover betting slips as well. As someone who likes the horses and knows his way round a losing—rather than a winning —bet, I understand that the ability to exploit that type of bet could potentially lead to such money laundering.

[Mr Wallace]

If memory serves me right, the Gambling Commission has the power to carry out a range of investigations and to impose conditions on bookmakers. I hear the hon. Lady’s point loud and clear. I have the same concern in my part of the world in the north-west about whether bookmakers are properly regulated and carrying out their obligation to report suspicious bets, as they currently do under the law. That is more a question of whether we are doing enough to enforce the law. Existing laws are quite strong, though some bookies’ shops—I suspect, as she does—have a way to go. If criminals know that we can seize their FOBT print-outs, they might be less likely to stick their money in the FOBT in the first place. We have put provisions in the Bill because they are pretty canny. When POCA came in in 2002, they realised that we could seize cash, so off they went. They are pretty good at moving the cash. No doubt, one day we will be back again, maybe saying that they have used telephone cards or whatever, and we will have to adapt the legislation in time.

The Government’s amendment chooses to put the provision into POCA, as opposed to the route chosen by the Scottish Nationalist party, because we believe that these items are better placed in cash provisions, because they have no real use other than to be turned into cash. The listed items of moveable property have an intrinsic use as well as being a store of value, and they need to be dealt with under the provisions that we have introduced into the Bill.

The listed items of moveable property clause also contains detailed provision about dealing with non-severable property and competing joint-owner claims that are not relevant to gambling vouchers. As I said, we are considering this as part of the Treasury’s review of regulation under the change to the fourth anti-money laundering directive when it comes to self-reporting of suspicious activity and fixed odds betting. That is under review by the Treasury as well, so I hope everyone will get their collar felt if they do not comply with one directive or another.

I hope hon. Members will agree that that would achieve the results they were after and, accordingly, I invite them to withdraw their amendment.

[Richard Arkless]

I thank the Minister for his comments and it is clear that extending the definition of cash, as the Government intend in the Bill, achieves the same outcome as we desired in extending the list of assets. I accept the Minister’s point that those assets have an intrinsic value, and perhaps the other ones are best suited to the extension of the definition of cash.

On the basis of the Minister’s commitment to examine the specific issue of betting slips and if we can agree that the evidence suggests that they are a moveable item that can store value that could be easily used by criminals, I am sure—given his tone—that we could discuss that further down the line. Given that assurance and the long list of things that we will consider as the Bill passes through its stages, I will take the Minister at his word. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Mr Wallace]

As a former Member of the Scottish Parliament, I might be accused of favouring one part of the United Kingdom over another with all the concessions.

--- Later in debate ---

[Richard Arkless]

Given the Minister’s time in Scotland, he might want to refer to my party as the Scottish National party, not the Scottish Nationalist party.

[Mr Wallace]

Well, I will not say what we used to call it when I was in the Scottish Parliament. We will call it the SNP. I never say “separatists”, obviously.

Clause 12 will create new powers to seize and forfeit moveable items of property where they are suspected to be the proceeds of crime. Criminals launder the proceeds of their crimes to benefit from their criminal activity and carry it on. They are resourceful in using any mechanism to hold and move illicit funds, and we need to ensure that we are able to respond to that threat. Criminals hold the proceeds of crime in a variety of forms, which act as a store of value and a means through which such value can be transferred. Some, such as cash, gold and diamonds, can be easily moved or concealed. In some cases, these items can be readily sold for cash or dissipated through other means.

We want to take action to prevent criminals from transferring their illicit funds however they choose to do it, and the clause should be seen as part of a framework for seizing such assets, alongside the existing cash seizure provisions in the Proceeds of Crime Act and the new provisions in clause 13 for the freezing and forfeiture of funds held in bank accounts.

The cash seizure and administrative forfeiture procedures in POCA were designed to prevent cash from being moved or dissipated in the time that it would take to seek a restraint order. Cash seizure is widely used, both inland and at the UK border. The existing legislation does not allow law enforcement agencies to take the same action in the case of other highly mobile stores of value. Evidence suggests that those items are being used to move value both domestically and across international borders.

The clause will give law enforcement agencies new powers to seize and forfeit certain listed items, such as precious metals and stones, where they have reasonable grounds to suspect that those items are the proceeds of crime or are intended for use in unlawful conduct. The clause will strengthen law enforcement agencies’ ability to disrupt criminal funding by preventing value from being transferred and enable the recovery of criminal property.

The Bill sets out the list of items that can be seized by agencies. The list has been drawn from discussions with law enforcement agencies and from reviewing the approach taken by other states. We have set the minimum value level for the seizure of listed items at £1,000, which is the same as for cash. There will be no upper limit, again mirroring the existing cash provisions. We have set no higher limit, as we believe there are potential circumstances where the value of the item is likely to be significant, and law enforcement agencies need the power to seize the item if there is reasonable suspicion that it is the proceeds of crime. There is evidence of that, particularly in relation to works of art being used to store illicit value and then transferred internationally. Some Members might have heard last week that a French impressionist painting was discovered in a mafia house. Should we discover one of those in the United Kingdom, I do not think we would like to cap what we could seize. I want to be clear that we do not intend that this power should be used indiscriminately. That is why the power can be used only in respect of certain listed items and is subject to oversight by a court.

We have also introduced two additional safeguards. First, within six hours of the seizure, a senior officer must review the seizure and authorise the continued detention. Secondly, we are not, in these cases, permitting administrative forfeiture. That procedure is available in the existing cash forfeiture system and allows a law enforcement agency to forfeit cash without obtaining a court order, in circumstances where the owner does not object. Owing to the possibility of greater complexity of the cases, such as property being jointly owned and difficult to sever, administrative forfeiture is not appropriate. We want to ensure that law enforcement agencies have the powers they need to seize such items. At present, there is a short list, but we intend that it will be amended over time to reflect changes in criminal behaviour.

--- Later in debate ---

[Mr Wallace]

I beg to move amendment 17, page 114, line 30, leave out “6” and insert “12”.

This amendment increases the maximum period of imprisonment from 6 to 12 months (in line with other provisions in the Bill) in the case of an offence in Scotland of making false etc. statements in response to a disclosure order under the new provisions inserted into Schedule 5A to the Terrorism Act 2000.

The amendment will increase the maximum sentence for making false or misleading statements in response to a disclosure order to 12 months’ imprisonment, following a summary conviction in Scotland. The maximum penalty for the offence following a conviction on indictment will remain two years’ imprisonment. In our ongoing discussions with the Scottish Government, I have been advised that the summary courts in Scotland have general powers to impose sentences of up to 12 months and that this is therefore the correct approach for offences that can be tried summarily or on indictment. It will help to ensure the best use of the sheriff courts in Scotland.

[Richard Arkless]

That is a fair assessment of the position in Scots law. A sentence of 12 months is more consistent with the rest of the Bill and with the summary powers of sheriff courts in Scotland. Also, we have a presumption against lower sentences in Scotland and I would not like a lower sentence of less than six months to be caught by that presumption unintentionally. We support the amendment.

[Dr Huq]

We also support the amendment.

Amendment 17 agreed to.

Schedule 2, as amended, agreed to.

Clause 30

Sharing of information within the regulated sector

Question proposed, That the clause stand part of the Bill.

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.

--- Later in debate ---

[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?

Criminal Finances Bill (Second sitting)

Richard Arkless Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Roger Mullin]

Q Are you content with what exists?

Nausicaa Delfas: Yes.

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

Q I would like to push Ms Delfas on the point about banking culture. Do you see a link between banking culture and criminality? Do you think that a bad banking culture—to put it in layman’s terms—could be a conduit for criminality, or could exacerbate the potential for criminality in the financial sector?

Nausicaa Delfas: Obviously, we regard banking culture as incredibly important. We believe that it should be driven from the top down. We have not seen connections with criminality. We actually see that a lot of the sector operates well. Where there would be any issues around crime, they would obviously need to be detected and rooted out.

[Richard Arkless]

Q Do you agree with the Government’s decision to row back from the oversight committee and the reverse burden of proof? You rightly mentioned that it was a decision by Government. Do you agree with that decision?

Nausicaa Delfas: The regulations operate well as they are. Obviously, cases need to be made but I question what this has to do with the Bill.

[Richard Arkless]

Q The inference is clear. There is a link between banking culture and a financial system with banks being susceptible to criminality. I think it would be remiss for us to ignore that dynamic.

Nausicaa Delfas: What is really important here and what the Bill really promotes is how best to detect and prevent the financial system being used for financial crime. I think that should be our focus, so that many of the Bill’s provisions such as information sharing actually help to make the system more effective, so that crime and money laundering can better be detected and better information be given to law enforcement agencies to be able to deal with the issue. I think that is the focus here and that is absolutely right.

[Richard Arkless]

Q We heard evidence earlier that the new provisions for corporate economic crime may disproportionately impact smaller organisations, the theory being that larger organisations would find it easier to demonstrate protocols and processes that they could use to rebut the allegations that employers and their systems have failed to flag it up. Is that something that your members have discussed and that you have a view on? This may well be obvious, but as a former consumer lawyer, I can tell you the amount of times that big banks used to roll out their processes and protocols in defence of various actions, which smaller companies found it hard to do. Is that something that concerns you that might impact widely and disproportionately on your membership?

Anthony Browne: I agree with the general principle of your question. I have not had discussions with my members regarding this Bill. In terms of regulation more generally, there is no doubt that it can often benefit large organisations at the expense of smaller ones for exactly the reasons that you claim. It can act as a barrier to entry for smaller banks or as a barrier to growth for exactly the reasons you say: they do not have the resources, scale or internal expertise to deal with some very complex issues. The more complex a regulation is, the more that issue will be realised, as it were.

It is important to distinguish between proportionality ––we support proportionality of regulation––on the prudential side and proportionality on the conduct side. Proportionality on the prudential side, in terms of the capital that banks have, is a more straightforward issue. On the conduct side, it is quite difficult to argue that there should be lower standards for smaller banks because then the criminals or the misconduct would all be focused at smaller banks and you would create an unintended consequence. We massively support competition in the banking sector. We have done a lot of work to try to ensure that there is a level playing field and to remove any barriers to growth or entry.

[Richard Arkless]

Q Do you think that your members are in favour of the Bill’s corporate claim provisions? How do you think your members would react to those provisions being extended beyond tax evasion?

Anthony Browne: As I said in response to the question from Dr Huq, we do not think it is necessary, but we accept it and we have worked very closely with the Government on it. We are doing tax guidance–– 60 pages of guidance for banks to help them comply. In terms of extending it to a general criminal offence in respect of facilitating economic crime more widely, I just make this observation. There are lots of different bits of regulation and legislation on different elements of financial crime. There is tax evasion, counter-terrorism finance, money laundering and bribery. They all operate in a different way, and we would like to see a more coherent view of financial crime more generally. This is a longer term aim and this Bill is part of it. They are all different aspects of financial crime, so we are not opposed to the broad principle of extending it but we would say that it would need very careful consultation. You would need to think through very carefully how it might operate in order to make sure that there are no unintended consequences because there are a lot of very detailed complexities. You need to make sure that it would work effectively in the way that you, Parliament and the Government intend.

[Antoinette Sandbach (Eddisbury) (Con)]

Q Back in 2012, Coutts was fined £8.75 million by the FCA for systemic failings that had resulted in an unacceptable risk that it had handled the proceeds of crime. Do you think part 3 of the Bill will effectively address those risks at a banking level? In the not so distant past, we had HSBC Switzerland accounts being used to evade UK tax. Are you confident that the measures in part 3 will address those systemic failings in the banking sector?

Nausicaa Delfas: The Bill’s provisions will certainly help law enforcement to address these issues and, by virtue of that, will also have an impact on the banks themselves.

--- Later in debate ---

[Dr Huq]

Q Is there anything you would like to see?

Nausicaa Delfas: Yes, there are other points. I have mentioned the lower threshold on information sharing. There are other ideas that we have in terms of how the SARs regime could be improved so that it is better quality rather than quantity. One is information sharing. Other ideas would probably not be in the Bill but are for future thought. What are the incentives for people who are submitting the SARs? For example, there is criminal liability on an MLRO. Is that right? Obviously, it is a difficult question but there are certainly incentives to report defensively.

We have heard from banks other ideas in which we can see the merit, such as having a sort of centralised transaction monitoring system to be able to see how transactions are flowing through banks. That is another very big issue that would need to be looked at. Again, it would improve the effectiveness of the system.

There are other provisions such as reliance. A bank cannot rely on another bank’s due diligence of a customer, so the customer has to go through due diligence again with the second bank. There would be a question about whether legal liability on the second bank could be removed, so that it could rely on the due diligence of the first bank, provided it had done some checks.

All those things are ideas that we are happy to share, or have shared, with the Government for the future, in terms of improving the regime overall, its effectiveness and efficiency. Mr Browne mentioned that his members estimate that the current regime costs them about £5 billion. Things that can reduce the cost and relate to effectiveness are welcome.

[Richard Arkless]

Q You have made it clear that you are broadly supportive of the measures in the Bill and you have given the reasons why. I think most people in the Committee are broadly supportive. The point of contention comes when some of us do not think that the Bill goes far enough.

I am quite perturbed by some of the answers you have given in relation to what could be done to make it easier for the people you regulate or your members. I am not getting the impression that those are things that you think would make it easier to catch the criminals. Am I confused by this? It smacks of self-preservation. What I want to hear are things that we could put in the Bill to make it easier to catch the criminals, not to make your lives easier.

Nausicaa Delfas: I am not suggesting how we can make our lives, or anyone else’s, easier. I am suggesting exactly what you said: to improve effectiveness in terms of being able to produce useful intelligence that helps to prevent money laundering in the financial system. That is certainly our aim; it is not to make anything easier. I think the Bill contains good provisions that will go towards that aim. We can always think about these issues and what we can do in future. We are certainly supportive of the Bill.

[The Chair]

That brings to an end the time allotted for questions. I want to thank all the witnesses who have come forward to give evidence. At some point, copies of your evidence will be available. Thank you very much for attending.

Examination of Witnesses

David Leask and Toby Quantrill gave evidence.

--- Later in debate ---

[Carolyn Harris]

Q This is a blank piece of paper. If you had the opportunity to write what is in the Bill, what would be on it?

Toby Quantrill: There is already an amendment—new clause 4—that we support. The critical thing is to see action, whether within the Bill or through other means, to get the outcome we are looking for. All I would write on that paper is simply a public register of beneficial owners in overseas territories by whatever means. As I said at the start, this is a Criminal Finances Bill, and it seems odd not to include that issue in it.

David Leask: I have nothing to say on that, I am afraid.

[Richard Arkless]

Q First, David, thank you for your groundbreaking work. I was very heartened to hear what Ben, the Minister, said about reading your work and taking note of it. I was encouraged to hear that. Let me be the matchmaker in the middle here. Would you be willing to work with the Government and provide them with all the evidence you have uncovered in the past few months, based on what Ben has said?

David Leask: It is entirely published in the pages of what Mr Wallace would like to call the Glasgow Herald. It is therefore up to date. I can offer you a subscription, if you like.

[Richard Arkless]

Q Perhaps that is something that the Minister could consider. He very helpfully expressed a willingness in the Chamber to have a look at the issue, and he clearly demonstrated that he is doing so, so hopefully there can be communication from here on. For lay people watching this who find it difficult to conceptualise how transparent companies can be conduits within a system that can lend itself to criminality, is there a way that you can explain very simply what it is about SLPs that makes them susceptible to criminality?

David Leask: In some ways, the way to look at that is to ask how they are being sold and marketed off the peg, and what people find attractive about them. I am sure you could find lawyers who can identify some of the weaknesses in the Scottish limited partnership, but what fascinates me is the way in which they are sold. They are companies that have legal personalities, which means that, for example, you can open up a bank account with such a company—or a firm, strictly speaking.

[Richard Arkless]

Q How do they differ from normal companies, then?

David Leask: That is normal for a company with a legal personality. I will start again. Imagine that you are sitting somewhere like Kiev, and you open up the internet to look at agencies that are offering offshore companies. You will see a menu drop down and you will be offered a limited partnership in Canada or a limited company in the Czech Republic. You will have to choose the one that best fits your bill.

In this case, the Scottish limited partnership has legal personality, like many other types of company, which means you can open a bank account. These agencies will then offer, right there on the same internet page, to open a bank account for you. That bank account is often going to be in Switzerland, or even more often in Latvia. It is almost as if you are able to pick and choose the areas of the world where they have the weakest regulation. For Britain, that is going to be corporate law. For Latvia, it is going to be banking. You had bankers in here earlier talking about what they can do in Britain against money laundering; perhaps there are other jurisdictions where it is weaker.

You have to see a Scottish limited partnership or an English limited liability partnership as part of a kit that you can buy online. It is essentially a do-it-yourself kit for tax avoidance at best and money laundering at worst. That will include all the things that certain people like about SLPs: the fact that they have legal personality, that you do not have to say who the ultimate owner of the company is, and that there are no tough reporting restrictions. As I said, we have 25,000 SLPs in Scotland; I have never seen a single one of them file accounts, and I do not think that any ever have. I am happy to be proven wrong on that, because I have not read the paperwork for all 25,000. Some of them are perfectly legitimate businesses.

The next thing is that because there is no taxation on a Scottish limited partnership that does not operate in the United Kingdom, the agencies are quite entitled to tell people who want to invest in an overseas offshore company that they can have a zero-tax company, and they are bluntly marketed in that way. There is no taxation, so there is no need to say who you are and no need to file any accounts. There is then, of course, the extra element of these companies, which is that they do not fall under the blacklists that some Governments have imposed on their citizens.

Lastly, there is the simple prestige of owning a company or a firm in the European Union, in the United Kingdom, and in Scotland. It is about that particular cocktail being of particular interest to certain types of people. Some of those people might then look around those menus and find another type of company. That might be a British company or an English company, or it might be one elsewhere, but they will pick on the weakest regulatory regime they can for any part of their kit to launder money. In the case of companies, I am sorry to say that I think that is Britain.

[Richard Arkless]

Q That is very useful, Mr Leask. Thank you very much indeed.

Mr Quantrill, it seems from the discussion today that most people around this table would agree with most of the Bill’s content. As you have rightly said, the point of contention comes with what is not in the Bill. You have mentioned overseas territories and Crown dependencies, but those aside, could you quickly run us through perhaps two or three aspects that you think ought to be included in the Bill but are not?

Toby Quantrill: There are a couple of other areas I would highlight. I think my colleagues from Transparency International and Corruption Watch UK will give evidence; we support them and work with them closely. In part 1, could the unexplained wealth orders be extended so that they also apply to assets held in, for instance, the overseas territories? That would be helpful. We welcome the fact that the “failure to prevent” legislation is extraterritorial in nature, but perhaps that could be extended to other financial crime, beyond tax evasion.

[Richard Arkless]

Q Do you have any idea of which crimes you would extend it to?

Toby Quantrill: Just broadly.

[Richard Arkless]

How about market manipulation?

Toby Quantrill: Yes, those sorts of things. I do not have a particular list in front of me, but it seems strange to limit it to just one specific type. Beyond that, our main focus has been on the one issue, as I have probably made very clear.

[Tristram Hunt]

Q I was struck by what you said about the debate in Africa about the amount of money flowing out of that continent. We obviously give a huge amount of money to different countries in Africa through development aid. Will you give us a sense of the nature of people’s frustration about some of the money leaving the continent of Africa and their analysis of where they see London and its role in all this? What kind of reforms are being urged in many of those countries on the continent that, on the one hand, we are supporting through development aid, but from which on the other hand, it seems to me, we are allowing too much wealth to leave?

Toby Quantrill: As I say, this issue has been picked up by a number of civil society coalitions—our networks of partners and organisations across Africa—as being critical. They highlight the fact that on the one hand we are providing aid and on the other, we are facilitating these losses, which may massively extend, in terms of volume, way beyond—I think this goes beyond more than money, though. The other frustration is the fact that we are talking a lot about corruption, but, through our overseas territories and other forums—property ownership and so on is being dealt with appropriately—we are perhaps helping to facilitate or not doing enough to clamp down on some of the kind of flows of corrupt money, supporting corruption and so on. It is very hard to get into a lot of detail, because a lot of this activity, by its very nature, is secret and hard to pin down.

The best example is a very real one, which has been used before. A very good investigation was run by Global Witness into a particular case in the Democratic Republic of Congo. There was the massive underselling of mining rights—as low as 5% of market value—out of the country to a company registered in the British Virgin Islands and a number of others. Today, a new press release from Global Witness also links this to companies in the Cayman Islands, at extra money. Those rights are then sold on to other companies including, for instance, Glencore, at massively inflated prices. Somewhere in the middle somebody is making a lot of money and we do not know who. It is estimated that the losses from that particular transaction could be worth as much as $1.3 billion to the DRC, so the people of the DRC are being ripped off and they do not know who to blame for that. They do not know who to point the figure at, because they cannot find out.

Draft Terrorism Prevention and Investigation Measures Act 2011 (Continuation) order 2016

Richard Arkless Excerpts

Wednesday 26th October 2016 General Committees

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

It is a pleasure to serve under your chairmanship, Mr Flello. Many of the points that I intended to make have been adequately made by the Government and the Opposition speakers, so I will try to keep my submission as brief as possible.

We agree that the police should have powers to fight terrorism, which is the great threat that our generation faces, and that the primary role of the Government is, among other things, to keep its citizens safe. We welcome the changes that have been alluded to by the hon. Member for Ealing Central and Acton, which came as a result of recommendations made by the independent reviewer of terrorism legislation only a couple of years ago. We support the changes that she took us through, so I will not seek to divide the Committee this afternoon.

Of course, we do have concerns. The first is about the effectiveness of the orders. I was expecting—perhaps naively, as a new Member—to be taken though how TPIMs have worked over the past five years and how effective they have been in achieving the objective of fighting terrorism. Unfortunately we have not heard that; instead, we have heard a substantive debrief of what the orders can achieve in theory, and while I welcome that, it would have been nice to have a debrief of what has happened over the past five years, so we could assess their effectiveness. Sadly, that has been lacking.

It was my understanding that there was only one TPIM order, but if I am wrong about that I would be grateful if the Minister explained that when he sums up. On the accusation that, because there is only one order, our making that point means that we want things to be more liberal, that is absolutely not the case. We are making that point because these orders can be made only if it is necessary and proportionate to do so, so the inference is that it has not been necessary and proportionate to do so more than once in the past three or four years. If that is the case, that calls into question the effectiveness of the orders. I echo the hon. Lady’s point about the statutory consultations and I hope the Minister can clarify that requirement.

The former Chair of the Home Affairs Committee, the right hon. Member for Leicester East, who is no longer in his place, talked about individuals who have absconded. I accept that these cases are sometimes very sensitive and that we must not prejudice the effectiveness of the orders by releasing into the public domain information that could aid the bad guys, but I cannot help but think that if those two individuals were caught, the Government would be very quick to tell us. Surely, if they were caught, telling everybody that they had been caught demonstrates that this process is effective. It is difficult for me not to conclude the opposite—that they have not been caught. I struggle to conceive of anything sensitive unless they have not been caught, because clearly that would make the public think that the orders have not been effective. It is very difficult to escape that conclusion, but any clarity the Minister can give would be very welcome.

I will be grateful if the Minister can address those points. I reiterate that we will not divide the Committee, but we urgently require clarification on those points.

--- Later in debate ---

[Mr Wallace]

We should all recognise that we do not take TPIMs lightly and that they are not our first preference. Our first preference is to achieve a prosecution, but very often in counter-terrorism it is necessary to make a decision about the prosecution and, if that is not possible, the disruption of individuals who place a threat. Sometimes TPIMs are placed on people released from prison, and sometimes that they are placed on people about whom we have intelligence to indicate they pose a threat but we do not have the criminal prosecution level that we require at that time. It is not easy for either this Government or the Government who bought in control orders to decide to go down that path. Nevertheless, it is something we have all felt that we have to do as the threat has increased over the past 15 years.

As long as safeguards are in place and as long as people can appeal to the court and test the case that is put before them, the courts will uphold the legislation. I think that, in the change from control orders to TPIMs, it was right to have a higher threshold. Good counter-terrorism action has to keep communities onside. We cannot look like we are bending the law for a specific group of people. We have to keep people onside to ensure their support.

TPIMs serve a role in counter-terrorism in this country and they are successful in a number of areas. Size does not matter. The number of TPIMs is not necessarily the issue. What matters is that they are one of the tools in the toolbox that we can use to ensure that we protect the public. We cannot decide whether the policy is successful based on the number of TPIMs issued a year. One individual subject to a TPIM could wreak large amounts of damage to the community if we did not have some level of supervision. Six is the current figure, and that was released today. Two reports—a written ministerial statement and a memorandum to the Home Affairs Committee—were published at 1 o’clock today, and they indicate that there are between one and six active TPIMs. We cannot grade the total number with the threat posed.

[Richard Arkless]

I accept what the Minister is saying. My point was that if orders are not granted, one has to assume that it is not necessary and proportionate in those circumstances. If six orders have been granted, the inference is that it has only been necessary and proportionate to do that in six cases. I am trying to get an outline of the effectiveness and whether the number is justifiable in terms of effectiveness. It all boils down to necessity and proportionality.

[Mr Wallace]

If we look at the toolbox to stop someone making or being a threat to the public, there is a broad range of tools—it does not just have to be TPIMs. For example, if someone was trying to leave the country and we suspected that they were going to fight with ISIS in Syria, we could remove their passport. Legislation is in place for a Minister to remove that individual’s passport and prevent them from travelling. That is an alternative that could be used. We use a range of powers and tools to disrupt and deter and, if necessary, to restrict people’s ability to threaten society.

Moving to the points raised by the shadow Minister, the hon. Member for Ealing Central and Acton, and the right hon. Member for Leicester East, the former Chair of the Home Affairs Committee, I agree that the independent reviewer of terrorism legislation has been a good post. They have done a tremendous number of reports—both open reports and reports that are more sensitive. They inform Government, along with the Intelligence and Security Committee, which is a cross-party, independent committee. They challenge Government policy and inform us of changes. The post has been a great success. It has also been successful in providing reassurance that people are not too quickly interpreting intelligence into evidence. I am perfectly open to the hon. Lady’s suggestion about whether we should have an independent reviewer for counter-extremism. There is an open consultation on counter-extremism, and I recommend that she and her Front-Bench colleagues contribute to that and put forward her ideas. Discussion will take place once consultation is closed.

Do I anticipate an increase to more than six TPIMs? We should not forget that we have approximately 850 people who we think have gone to fight in Syria. Some of them will come home and it may be a challenge to deal with some of them in another way, so we may see an increase in TPIMs. We may, however, use other tools to ensure that we deal with such individuals. We are pragmatic. The professionals who deal with this issue—the security services and the police—should be free to make those decisions and recommendations. I will not interfere with their professionalism in deciding the appropriate measure or power to use.

On whether we would publish the advice to Ministers from the director-general of MI5, the police and other people, I will certainly reflect on the hon. Lady’s point. I would have to satisfy myself that that would not undermine or threaten national security. I suspect that the Intelligence and Security Committee—it could request to see that advice; it has much more powers thanks to the legislation we passed a few years ago—would have the ability to look at the advice. I would not dare to anticipate the Chair of the ISC, but the ability is there. I am open to the point that the hon. Lady made, but I have to check whether we can do that.

I was asked why we will not tell, say, reveal or publish what has happened to those two individuals who absconded from TPIMs. It is an ongoing police investigation, and we have to be careful when commenting on such things. Let me outline some possible scenarios that are not in any way linked to those individuals: they could have been found, and be abroad or under surveillance; they could have already been dealt with and relocated; or they may not have been found at all. However, publishing that information may threaten our operational capability. If we had people under surveillance abroad, we would want to know who they were mixing with and talking to, and we might not be able to go and get them. If I were to start doing a running commentary on the operational nature of a police investigation, it would seriously undermine the point.

We do not publish the names of individuals who are subject to TPIMs and we do not say if they have relocated or where they have relocated to. The TPIM is as much a tool for us to disrupt terrorist activity as it is about ensuring that we put a protective shield around certain individuals to protect the public from the threat that they may pose. It is easier said than done to say, “Let’s tell you what has happened.” I am not informing the Committee of what we know; I am just giving some scenarios to show that it may not be in the best interest of the police and the people charged with investigation to make those details public.

Overall, I am grateful for the Scottish National party and Labour party Front-Bench support for the measures, which are not done lightly. They are an important tool in our toolbox to ensure that we deal with the threats posed by terrorism, and they are constantly reviewed. All I can say is that we take such matters very seriously. The Home Secretary and I get advice from the professionals who are out there every day on the frontline, dealing with the dangers that many of us are often a long way from. I take the professionals’ views seriously, as do many around the House. That is why TPIMs should be extended, so I urge the Committee to support the order. The measures will be reviewed again as the legislation requires.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Terrorism Prevention and Investigation Measures Act 2011 (Continuation) Order 2016.

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.

Oral Answers to Questions

Richard Arkless Excerpts

Monday 5th September 2016 Commons Chamber

[Amber Rudd]

There is something completely derisory about the right hon. Gentleman trying to lecture the Government on security measures when we know how divided his shadow Front Bench is, with a leader of his party who refuses to defend this country, and a shadow Chancellor who calls for the disbandment of the police and does not support MI5. Government Members are absolutely clear that we will do what is right to support and protect this country. The right hon. Gentleman is right on one element: in my many conversations with European counterparts I always say to them that we will work with them, irrespective of Brexit, to ensure our joint security.

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

11. What discussions she has had with people from other EU countries living in the UK since the EU referendum on their right to live in the UK after an exit from the EU.

[The Minister for Immigration (Mr Robert Goodwill)]

The Prime Minister has been clear that she wants to protect the status of EU nationals here. The only circumstances in which that would not be possible are, as I have already said, if British citizens’ rights in other EU member states were not protected in return.

[Richard Arkless]

In the two months since the EU referendum, the EU citizens in my constituency have become increasingly anxious. They literally lie awake at night wondering whether they will still be able to call my constituency their home. Will the Home Secretary do the decent thing and guarantee that no EU citizens will be used as bargaining chips in the forthcoming negotiations following the triggering of article 50?

[Mr Goodwill]

I repeat again that there is no change in the status of EU nationals living and working in the UK. The issue is not simply about the immigration status of an individual; EU citizens’ rights are far broader than just the right to reside in the UK. The right to work, entitlement to benefits and pensions, the rights of access to public services and the ability to be joined by family members from countries outside the EU all need to be discussed.

Prevention and Suppression of Terrorism

Richard Arkless Excerpts

Wednesday 13th July 2016 Commons Chamber

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

You will no doubt be pleased, Mr Speaker, as will hon. Members, to hear that I intend to keep my comments brief, with a view to freeing up as much time as possible for discussion of the Iraq war inquiry.

Although issues of national security are reserved, the Scottish Government have co-operated closely with the UK Government and will continue to do so. We recognise that the security services and the police require adequate powers to fight terrorism. However, such powers should always be necessary, proportionate and in accordance with the rule of law. We have assessed the four organisations that it is proposed to add to the proscribed list against that benchmark. There is clear evidence that the Global Islamic Media Front propagates jihadist ideology. The MIT has a clear modus operandi of attacking the police and army, and it has made many killings, as the Minister outlined. The Turkistan Islamic party has claimed responsibility for a number of atrocities in China. The JAD was responsible for the awful mall attack we all witnessed earlier this year in Jakarta.

I wish to add the calls from Scottish National party Members to the request made by the right hon. Member for Leigh (Andy Burnham) to the BBC to reconsider the language it uses when dealing with terrorist organisations, and in particular, the kind of legitimacy it gives by using the phrase “so-called Islamic State”, which I consider to be appalling. These people are not Islamic and the phrase should not be used any more. The BBC should accede to calls championed by my SNP colleagues that we should use, as the Government now do, the term “Daesh”.

--- Later in debate ---

[Mr Hayes]

Not for the first time, the right hon. Gentleman has done this House a service in drawing our attention exactly to the subject that he raises. He is absolutely right that the media, and particularly the BBC, have a salient responsibility in this respect. The BBC is of course taken seriously, and as a result, the impression that is created from the words that it uses can have devastating effect. I entirely agree with him and others who have made the case in this House today and say, on behalf of the Government, that we should indeed send a message to the BBC that calling organisations “so-called” creates entirely the wrong impression. I hope that, henceforth, it will drop that description in exactly the way he said.

[Richard Arkless]

Will the Minister give way?

[Mr Hayes]

I am drawing my remarks to their exciting conclusion and I do not want to spoil that, but I will give way very briefly.

[Richard Arkless]

Very quickly, can the Minister confirm that he will write to the BBC to request this, and that we will not just have a talking shop in the House today?

[Mr Hayes]

That alone would not be good enough. I will speak to the BBC and write to it. The matter will also be recorded today in Hansard. The letter will leave my office this afternoon, and I will speak to BBC staff by telephone today. As you have often said, Mr Speaker, I never disappoint in this House.

The exciting peroration to which I was about to move is this. Edmund Burke said:

“All that is necessary for the triumph of evil is that good men do nothing.”

The good men of this country, and women—I emphasise that particularly in the current climate—when it comes to the struggle against—

Independent Advocates for Trafficked Children

Richard Arkless Excerpts

Tuesday 28th June 2016 Westminster Hall

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

It is a pleasure to serve under your chairmanship again, Mr Streeter. This is clearly an important and emotive issue—I do not think anything rallies the human spirit quite like looking after children, whether they be our own children or trafficked children, and particularly vulnerable children who need our help.

The right hon. Member for Slough (Fiona Mactaggart) made a vivid and skilled contribution. She clearly has a great deal of knowledge of the issue, and I pay tribute to her for securing the debate and for the work that she has done on the all-party group, which I have learned a lot about in the last couple of days having read up on the subject. I commend you for that very good and sincere work. You provided vivid summaries of the experiences of the trial and put into context how it benefited children.

What came out of your speech was that trust is the central plank of why an advocate is so essential. The role of the advocate creates trust in the system by integrating children into society and giving them hope, and it creates trust in the advocates themselves. The alternative is further overburdening an already overburdened social work department with extra responsibilities, which it clearly would not have the resources to meet. I was interested to hear you talk about the positive feedback from the trials that have already taken—

[Mr Gary Streeter (in the Chair)]

Order. I remind the hon. Gentleman that when he says “you” he is referring to the Chair.

[Richard Arkless]

Apologies, Mr Streeter. I was commending the right hon. Member for Slough because I was interested to hear about the positive feedback from the trials that she spoke of. That prompts a question, which I hope the Minister can help us with later: why on earth were they pulled, and why has section 48 not been invoked since that happened? I would be grateful to hear some answers to that. It is telling that, as she said, Barnardo’s has continued its advocacy policy since the conclusion of the trials. That organisation is dedicated solely to looking after vulnerable children, so if it sees the benefits of advocates, we should all sit up and take note.

My hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) made a point that I would like to echo: this is not about politics. This is not about us in Scotland, Northern Ireland, or any jurisdiction telling another jurisdiction that we are doing a better job. We simply care about the kids, wherever they are; whether they are in Scotland, England, the European Union or the wider world, we want vulnerable children to be protected. It is not to score political points that we say that Scotland is perhaps more advanced in what it is doing; it is to provide a constructive comparison so that we can all look after the children in question. My hon. Friend provided an excellent summary of the position in Scotland, which I am sure the Minister has taken note of.

The hon. Member for Strangford (Jim Shannon) made a powerful point about the need to invoke section 48 immediately. He made the important point that the criterion upon which we should assess the trials is material benefit to children. From what I have heard today and read in preparation for this debate, it strikes me that the trials did have that benefit. If we keep that principle at the forefront of our mind when assessing what happened in the trials, hopefully it will lead us to invoke section 48 so that, frankly, we can get on with it.

I did not think my speech would be complete without hearing from the children themselves. I have a testimony from a child in Scotland who has been through the system there. She says of her advocate:

“I was happy, she was so nice, so nice about everything, we go to different appointments together.”

She said her guardian really

“calmed me down when I was upset. After the appointment she and I would meet and talk together about what happened, and she advised me. She was more than a worker for me, because she was someone I could talk to.”

She said her social worker was very nice, but she had only met her

“for 3 hours in 9 months. We are like strangers when we talk together. But with my Guardian, I talk to her”.

She says that she trusts her guardian and that

“she puts me at…ease”.

She feels as if she can now live her life.

Oral Answers to Questions

Richard Arkless Excerpts

Monday 13th June 2016 Commons Chamber

[James Brokenshire]

I congratulate the hon. Gentleman on his ingenuity in asking the question. The Home Secretary has already responded on the strategic review that is being undertaken, and we are looking at all available Government assets to ensure that we pull them together. The National Maritime Information Centre is designed to assist with that, and we will continue with that work.

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

rose—

[Mr Speaker]

The hon. Gentleman is going to tell us about Stranraer I dare say.

[Richard Arkless]

The previous coalition Government removed the Border Force staff from my home port of Stranraer, in my constituency, a number of years ago. Given the increased threats that we face from contraband and puppy smuggling from the rest of the European Union, will the Secretary of State commit to re-examine that decision, so that we can have appropriate defences at our port in Stranraer?

[James Brokenshire]

The Home Secretary has already indicated that £63 million of additional resource is being made available precisely to focus on smuggling. I am happy to discuss further with the hon. Gentleman any particular issues he may have, but I can assure him about the intelligence-led approach that Border Force takes and how we will deploy resources dynamically to meet any challenges.