Criminal Finances Bill

Rupa Huq Excerpts

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

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

This is the first time that I have spoken from the Dispatch Box and I am pleased to find it accommodates even people of Rupa size.

I am pleased to be responding for the Opposition on the Criminal Finances Bill, which touches on issues that have been catapulted into the public eye with both the Panama papers scandal and the anti-corruption summit held here in May under the previous Prime Minister—how long ago that all seems now.

We have had a good debate today, which has strayed into the murky underworld of illicit finance, terrorism and international aid as well as home affairs, and we have had contributions from my right hon. Friends the Members for Barking (Dame Margaret Hodge) and for Leicester East (Keith Vaz), my hon. Friend the Member for Islwyn (Chris Evans), the right hon. and learned Member for Harborough (Sir Edward Garnier) and the hon. Members for Kingston and Surbiton (James Berry) and for Dumfries and Galloway (Richard Arkless) among others.

This Bill seeks to tackle money laundering and corruption, to recover the proceeds of crime and to counteract terrorist financing, all measures Labour supports. This seems like good news in a year in which that has been in short supply on many fronts, but we must temper our reasons to be cheerful by identifying certain omissions and sounding some notes of caution.

First, the green ticks. We welcome the eye-catching unexplained wealth orders, which would force individuals with assets way above their means to account for those possessions, which can now include jewellery and art work as well as property. The new seizure and forfeiture powers will mean that such assets can be frozen and possession of them can be taken. As a London MP, I am all too aware of genuine Londoners who want to get a foot on the property ladder, but the transactions involving the ill-gotten gains of gangsters are messing things up for those people and creating an over-heated property market.

We also commend the fact that the investigatory powers are being extended to politically exposed persons. A thumbs up, too, for the new offence of failure to prevent the facilitation of tax evasion being applied to corporations and regulatory bodies. We also applaud the improved data sharing between the private and public sectors, and the Government’s extension of disclosure orders to money laundering investigations, bringing them into line with corruption and fraud investigations. Also to be commended are the strengthened suspicious activity reports. The period of investigation used to be 31 days. I think that there will now be six extension periods, adding up to 186 extra days. We live in an age when terrorism is probably the biggest threat of our time, so we also welcome the extension of powers to include terrorists’ property and finances.

So, what’s not to like? We acknowledge the steps being taken to tighten the net on corrupt practice, and we shall not seek to divide the House this evening, but more could be done to end the status of the UK as a magnet for dirty money. There should be no safe havens, particularly in our own back yard, where the proceeds of international corruption often turn up. Taken as a package along with its overseas territories and Crown dependencies, the UK constitutes the most secretive tax jurisdiction in the world. That is not a record to be proud of. Good work has been done in the reports produced by the Public Accounts Committee and the Home Affairs Committee, when they were chaired by my right hon. Friends the Members for Barking and for Leicester East, but not all their suggestions have been taken up. Many Members on both sides of the House have flagged up the fact that action must be taken on our overseas territories and Crown dependencies, and we argue that they need public registers of beneficial ownership. The British Virgin Islands and the Cayman Islands are among the worst offenders, and we administer them. We assert that this is the most gaping hole of all.

A trick has been missed. Applying transparency to those opaque corporate structures is a key part of the solution, but the Bill does not go there. We know that 75% of the corruption cases investigated by the Met police’s proceeds of corruption unit involve companies in secrecy jurisdictions, and that 78% of the companies involved are registered in the UK’s overseas territories or Crown dependencies. We need full transparency, but the Bill does not go far enough. A measure on the failure to prevent economic crime was trumpeted in May 2016, but it is missing from the Bill. Without some degree of transparency in company ownership, we cannot be completely aware of the scale of the problem or the damage that is being done. Kenya, Nigeria and Afghanistan have all conceded this point.

It has been pointed out that the people interpreting the rules need resources, and the weaponry that we use for crime-fighting could do with an update. The National Crime Agency will have more work to do, so the Bill will have cost implications in that regard. The agency is the successor to several bodies that have been merged. Notwithstanding the one-off cash injection that it received in the spending review, it needs consistency in its funding rather than just receiving one-off blockbuster sums. My right hon. Friend the Member for Leicester East eloquently made the point that there were serious question marks over the IT system designed to support the suspicious activity reports regime. It was originally designed to deal with some 20,000 cases, but, as he said, it is currently processing 381,882 of them. It is creaking at the seams. A new system was promised—I think its name is ELMER—and I again ask the Minister to tell us when we can expect it.

[Keith Vaz]

Will my hon. Friend give way?

[Dr Huq]

Will it come off my time?

[Hon. Members]

No.

[Dr Huq]

Okay. Go ahead.

[Keith Vaz]

I can assure my hon. Friend that I would never want to reduce her time. I congratulate her on making an excellent maiden Front-Bench speech.

The delay in ELMER, and in the new system that the Government will want to put in place as technology moves on, will lead to more criminal activity. The quicker this is done, the better.

--- Later in debate ---

[Dr Huq]

I am grateful to you, Madam Deputy Speaker, and to my right hon. Friend for his intervention. I will resist the temptation to sing, rap or recite poetry and will finish well before 10 minutes to 7.

My right hon. Friend makes a good point. We cannot fight modern cyber-wars with catapults. Technology changes and we need to upgrade this wholly inadequate system. We were told that that was happening; we want to know when.

New powers for the Serious Fraud Office are all well and good, but it needs officers with the right training. Since it was set up in 2009, it seems as though the public purse has been used to train officers in financial crime, yet we are simultaneously powerless to prevent them from falling prey to private sector poaching, so something needs to be done. There was to be a working group on the recruitment and retention of investigators—what became of that? Are some of those deficiencies to be plugged at a later stage?

At the moment, 27 separate bodies are responsible for asset recovery—people who investigate SARs—and they are often in the private sector and sometimes funded by the groups they regulate, so there is a mismatch. It would not be a bad idea to have an overall SAR tsar or tsarina to get some coherence. What progress is being made on the anti-corruption strategy due by the end of the year? I understand that a joint ministerial council will meet at the Foreign Office next week. Will tax issues be on the agenda? If the Minister does not know, will he have a word with his friends in the Foreign Office to find out? If it is not on the agenda, can I politely suggest that it be added urgently?

What are the Government doing to ensure transparency in our overseas territories and Crown dependencies? What is the plan? My right hon. Friend the Member for Barking suggested that the Government could at least set a timetable to allow them time to adjust. In the meantime, will the Government give them every support to transition their business? They have propped up this business model for a long time and they need to move away from facilitating corruption. Without action in our tax havens, the small bits of good news in the Bill will be overshadowed by the Government’s failure to act. The Government should be able to persuade their own territories to follow their lead. Members on both sides of the House paid tribute to the former Prime Minister and his ambitions in this area.

We need to get away from the idea that not paying tax, whether by avoidance or evasion, is a victimless crime. Countries in the developing world lose three times as much to tax havens through illicit funds and re-laundering than they gain in aid. It adds up to a trillion pounds a year and we are pumping aid into these places at the same time—it makes no sense. Given our straitened circumstances, we should be justifying every pound spent, but HMRC estimates the tax gap to be £36 billion, including £5.2 billion owed to our Exchequer from tax evasion. My right hon. Friend the Member for Barking quoted the same figures, but other interest groups say that they are conservative estimates. By definition, secret transactions and hidden money mean that we do not really know the true extent. For that £5.2 billion, we could get 42,000 full-time doctors or 54,054 nurses a year. As my right hon. Friend the Member for Leicester East pointed out, we have a poor record of recovering costs, and these things do not pay for themselves.

The practices that this Bill seeks to tackle expose the dark side of globalisation, its links to terrorism, and the way global financial cross-border crime, terrorism and all these things can be done nowadays at the click of a mouse, meaning that illicit funds can fuel a golden age of money laundering. That is entirely possible and we do not want it to happen. We do not want illicit funds to finance terrorist operations, aided and abetted by financial secrecy jurisdictions of our own.

Governments can hold all the summits they like and people can orate good intentions, but warm words need to be matched with action. This Bill is a case of “could do better” on the Government’s report card, and I urge them to work together with us. In Committee, we will be pressing the Government on some of the issues outlined today—and more. When the opportunity for reform presents itself, the Government will surely not want to go down as having bottled it. We will not oppose this Bill on Second Reading, and we look forward to contributing constructively to its passage through Parliament.

Criminal Finances Bill (First sitting)

Rupa Huq Excerpts

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

[The Chair]

We will now hear oral evidence from the National Crime Agency, the National Police Chiefs Council and the Metropolitan police. Before calling the first Member to ask questions, I remind Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme motion that the Committee has agreed for this section, which will end at 10.20 am. Will the witnesses please introduce themselves for the record?

Donald Toon: Good morning, Chair. I am the prosperity director for the National Crime Agency. As part of my role I am responsible for the agency’s response to financial crime, including the operation of the UK Financial Intelligence Unit and, therefore, the suspicious activity reporting system. I am also responsible for our work on money laundering and asset recovery. As part of the agency, we have a responsibility to co-ordinate the law enforcement response to serious and organised crime, in this case in respect of money laundering and criminal finances.

Mick Beattie: Good morning. I work for the National Police Chiefs Council, which is the governing body of chief officers for the policing forces of the UK. I report directly to Mick Creedon, the national lead for financial investigation asset recovery. I am also the subject-matter lead for the regional organised crime units, which is the serious organised crime response from UK policing.

Detective Superintendent Harman: Good morning. I am a detective superintendent with the Metropolitan Police Service, specifically the SO15 counter-terrorism command. I head up the national terrorist financial investigation unit. Our responsibility is the investigation and prosecution of terrorist financing offences and financial investigation more generally within a counter-terrorism context.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Q Thanks very much for coming in today. I have an easy question first. Because you all enforce this every day, what are the current difficulties with the legislation that we have in recovering assets from individuals who are suspected of involvement in criminal activity overseas?

Donald Toon: One issue is the ability to have an effective overseas end to the investigation. A particular problem around international corruption has been the need to have evidence from overseas, often from a difficult jurisdiction if we are talking about political-level corruption, that is capable of being used in a UK court to take action to recover assets. From our perspective, the introduction of the unexplained wealth order is a particularly important step in response to that.

The other issue, perhaps, has been very much the ability to have sufficient time to be able to get evidence from overseas in standing up a law enforcement response to a suspicious activity report, where that report may be looking for a defence against money laundering, commonly known as a consent SAR. The difficulty there is that we run against a 31-day moratorium period. Essentially, if we cannot have a law enforcement case in front of a court within 31 days for restraint of the assets, there will be a deemed consent and transactions will continue. That is acutely difficult when we are looking for information from overseas. In some jurisdictions that can take an extended period.

Another piece in the Bill that is particularly useful is the extension of the moratorium period, subject to court order, of up to 186 days. In terms of references to the legislative position, it is very much that ability either to get evidence or find a mechanism by which we do not need to rely on overseas evidence, particularly when we are talking about difficult jurisdictions.

The other area that is particularly difficult for us has been very much around the ability to access beneficial ownership information overseas. Although not strictly part of this Bill, that has been a recent focus for legislative change. That is a particular issue for Crown dependencies and overseas territories. I can expand on that as necessary.

Mick Beattie: Yes, I echo those sentiments. Over the past 13 years, operational use of the Proceeds of Crime Act 2002 has thrown up some operational challenges, many of which have been addressed in the Bill. In terms of investigative resources, an example of that would be disclosure orders. The current system operates as follows: if you have a suspect A identified as having accounts in bank B, then an investigator investigating that person for money laundering would go to the court for a production order. If the court approves the order and it is then served on a financial institution that subsequently gives over the information required that identifies yet another account at bank C, then the investigator has to go back to the court to obtain another production order, and go through the same process of serving an order on the second bank.

If that bank again identifies another account at another bank, then the process is repeated. When awarded, a disclosure order, or something like it, lasts for the lifetime of the investigation, and can be served on anybody with an interest in or information relating to the matter. The resource implications could be massively improved from something like a disclosure order.

As far as items of portable wealth are concerned, legislation exists that refers to cash seizure. We have civil legislation that caters for anything over £1,000 that is deemed to be identified as resulting from criminal conduct or being used in criminal activity, but criminals are adaptive. They can transfer that cash into items of wealth such as watches and jewellery, which are easy to transport. The new legislation relating to that gives us more opportunities to search and seize those kinds of items.

[Dr Huq]

Q In relation to what you said about portable wealth, do you think the £100,000 limit is about right, or can people convert money into things worth £95,000 by buying paintings up to that value?

Mick Beattie: They can, and obviously they can collaborate among themselves to do that. Getting through that is an operational challenge for us. We have to try and investigate that as part of the investigation, and we have to look for those kinds of things. Anybody who facilitates that is potentially committing money laundering offences themselves, and can be brought into the investigative chain.

[Dr Huq]

Q Is £100,000 a good figure or is it an arbitrary figure plucked from the air?

Mick Beattie: I do not know how the figure came about. It is a high figure, but we are talking about serious and organised crime and criminals here, and they operate in those kinds of areas of value. I would not know the origin of the £100,000 figure.

Detective Superintendent Harman: There are a great deal of positives around international co-operation in the counter-terrorism area, as you might expect. There are strong relationships across the world for the purposes of sharing intelligence, and doing so quickly. As with our colleagues, what can slow us down is when we are looking for evidence that we can use in a court during a criminal prosecution. That can take a bit more time, so the first challenge is the time that it can take.

There is also the issue of the visibility of what money is used for. We may very well be able to show that money was sent out to Syria, for example, and we may have a strong case for believing that that money was used for terrorist purposes in theatre, but to follow that money into the hands of a terrorist and show what is was actually used for is and probably always will be a challenge for us. Where this Bill may help us is in the fact that the more that banks—they often have an international visibility and reach—can tell us about transactions, the more they can share information with each other and build up that picture. That will help us in our international anti-terrorism efforts.

The other point I would make is that in terrorism we are often talking about smaller amounts of money. Sadly, it does not cost a great deal of money to commit a terrorist attack, depending on its scale. Spotting those smaller amounts within the financial system and dealing with those smaller amounts moving overseas is again more challenging, although not impossible.

[Dr Huq]

Q The Public Accounts Committee did a report on confiscation orders. It said that there was a tension between whether the point is to disrupt crime or recover criminal assets—sometimes they are facing in two different directions. Would you three agree with that? If we enact all the clauses in the Bill, will the new version improve the mismatch between those two limbs?

Donald Toon: I am not sure I would necessarily feel that there was a tension overall. The issue from our perspective is around the roles and responsibilities of the agencies involved that are using the legislation. The statutory duty of the National Crime Agency is to secure an effective response to the threat from serious and organised crime. One aspect of that is to make use of the powers in the Proceeds of Crime Act 2002 for the disruption of criminality. From our perspective, that is the responsibility of the agency. It is about the relentless disruption of serious and organised crime, where we are able to do so, using whatever tools are available to us, rather than purely focusing on the recovery of assets. That said, to be effective in using financial disruption we will very often use either the criminal confiscation process or civil recovery, which ultimately recover assets.

One of the points to cover is that, from our perspective, it is very much about asset denial. If we are talking about overseas, large-scale corruption, the point is about denying the criminal, the corrupt individual or their representatives access to the funds. If that means the funds are ultimately dissipated, for example, through legislation, we have still denied the criminal that access. Our focus is fundamentally around the vulnerability within the system, rather than purely about getting money and assets back for the Government and the taxpayer. That is a particular point when talking about overseas criminality.

[Dr Huq]

Q Do you think £100,000 is about right as a threshold or should it be lower for the unexplained wealth order?

Donald Toon: I think it is a perfectly reasonable value. The vast majority of property involved is of high value. If we are talking about property in the UK linked, for example, to non-European economic area politically exposed persons, it is almost certainly going to be of significant value. A small case from our perspective would be somewhere a little under £1 million. The majority of the casework in that space will be multiple millions, if not much higher.

Mick Beattie: For me, anyone who enters the criminal justice system should not be leaving it with their criminal assets intact. It is all about removing those criminal assets. First, they provide the symbolism of wealth and status that money or assets can provide. Secondly, removing those assets is a good mechanism for reinforcing the compensation programme—we can compensate victims as a result of confiscation, with the enforcement capability behind it. It also stops reinvestment into crime, as mentioned by Donald. Commodity purchase is required to perpetuate the continuing criminality.

For me, it is all about removing those assets and everything associated with it and the image that is portrayed by the retention of those assets. It is well documented by some that serious and organised criminals are quite happy or quite prepared to do the time relevant to a prison custodial sentence. What really hurts them and their associates and family members is the denial and removal of the assets and the image that portrays to the public. It gets a lot of positive reception when we carry that out. From a public perception point of view, we know how much they appreciate the removal of assets.

[Dr Huq]

Q And on asset recovery?

Detective Superintendent Harman: Counter-terrorism is quite a different context for asset recovery, as you will appreciate. The people we are interested in are not looking to make a profit, and they are not looking to embark on an enterprise that is going to last for a long period of time and create a huge amount of wealth. They are looking to get money to achieve an objective. Our absolute priority is keeping the public safe and stopping a terrorist attack. Our absolute priority is therefore getting hold of that money and controlling it before it can be used. It is not much good to us to be retrospective after the fact: we are looking at stopping the attack. For us, it is about seizing assets before they can be smuggled overseas, seizing assets while they are sitting in a bank account, and interrupting and intercepting transactions that banks have hopefully reported to us as being suspicious.

Yes, of course, some of our terrorists do use crime to make money to commit terrorism, but really, we are not so much in the business of seizing huge amounts of assets. We are looking at stopping the cash before it can be used to hurt the public.

[Dr Huq]

Q What do you think of the £100,000 figure?

Detective Superintendent Harman: It sounds a reasonable figure to me when we are dealing with a higher end, it certainly does, but we operate less in that realm. We are more about the slightly smaller amounts causing a great deal of harm.

[The Minister for Security (Mr Ben Wallace)]

I want to clarify the point: the seizure threshold is £1,000 and the unexplained wealth order threshold is £100,000. I did not want members of the Committee to get confused about the two. If we are talking about taking money out of a bank account, it is at the £1,000 level; if we are talking about confiscating assets on an unexplained wealth order, it is £100,000.

--- Later in debate ---

[The Chair]

We will now hear evidence from HMRC, the Serious Fraud Office and the Crown Prosecution Service. Gentlemen, please present yourselves and give a brief background to why you are here.

Simon York: Good morning. My name is Simon York. I am the director of Her Majesty’s Revenue and Customs fraud investigation service. We deal with criminal attacks and the most serious tax fraud against the tax system. I am here because we use a range of proceeds of crime powers alongside tax powers. We also have a specific provision in the Bill on the corporate offence of failing to prevent the facilitation of tax evasion, among a number of important provisions for us.

Nick Price: I am Nick Price. I am head of the Crown Prosecution Service proceeds of crime service. Why am I here? We have been working closely with the Home Office and partner agencies in bringing the Bill together.

Mark Thompson: I am the chief operating officer of the Serious Fraud Office. I was appointed only in September and before that I was head of the proceeds of crime division in the SFO for the previous four years. That is why I am here.

[Dr Huq]

Q Thank you for coming in. I guess to the layperson there are many bodies involved in these issues—the police, who we have just heard from, the CPS, HM Courts and Tribunals Service and the Serious Fraud Office. The natural thinking is that there should be more co-operation between different bodies. I notice that the report from the Home Affairs Committee says that one person should take the overall lead. Where do you stand on being more joined-up and having a more overall person? It said for the recovery of criminal assets it should be the National Crime Agency that co-ordinates and oversees the various different agencies operating at local levels, with the proviso of adequate resources and tools. Where do you stand on the point about an overarching person and who that should be, if we did have one?

Simon York: We all work closely across law enforcement on a whole range of issues tackling criminality including the proceeds of crime, and that co-operation is really important. What we find particularly useful in HMRC, though, is the ability to use tax powers, proceeds of crime powers and criminal investigation powers in concert. That is what we find works best. We will use whatever combination of powers gets us the right result that allows us to confiscate, recover and prevent the losses. It is important to us that we have the ability to do that in the range of other things.

[Dr Huq]

Q And you are happy with how it is at the moment with you all working in concert. Does anyone think there should be overall supervision?

Nick Price: We all work very closely together. It is worth the Committee being aware that the CPS has lawyers embedded with HMRC, the NCA and the regional organised crime units where the regional asset recovery teams work. We work very closely with the SFO. So, we already work very closely.

In terms of overall supervision, the Committee will be aware that there is a Criminal Finance Board that is ministerially chaired. Sitting beneath that are a number of sub-groups. There is a criminal finance improvement plan. Those things draw together the agencies with real strategic oversight as well.

Mark Thompson: The only thing I would add to that would be the need for integration between those tackling proceeds of crime and those who are in a criminal investigation. I actually think one lead agency would make things worse, not better. The reason these things are successful is that I have proceeds of crime people working in the Serious Fraud Office alongside our criminal investigators, and that is the best way to tackle these crimes.

[Dr Huq]

Q Part 3 of the Bill introduces the controversial criminal offence of failing to prevent the facilitation of tax evasion. Some people who have given evidence to the HMRC consultation have argued against the new corporate offence. How do you rate the risk posed to the Exchequer from illegal tax evasion, compared with tax avoidance and other activities that contribute to the tax gap? There are some really scary figures; the most shocking one I saw was that over the last 26 years, the Government have collected 26p of every £100 generated by criminal activity. What do you think of the new offence? Nobody here has a crystal ball, but could you comment on the scale of offshore tax evasion?

Simon York: We estimate the tax gap in relation to tax evasion as a whole as around £5 billion a year. That includes a range of different types of evasion, such as what is colloquially known as offshore evasion. This is certainly an important issue. Corporates can be significant facilitators of tax evasion, as we have seen on a number of occasions. There is a real public and, I think, political appetite to tackle it. We find a difficulty in attributing criminal liability to these sorts of corporate entities. We think this is an important proposal in improving corporate behaviour in this area—deterring bad behaviour and improving good behaviour. This is by no means the only provision or capability that we need to tackle tax evasion, which is a very broad issue, but it is an important one in tackling a very specific area.

Nick Price: I cannot really add a great deal to what Simon said on that topic.

Mark Thompson: Me neither. Tax is HMRC’s primary responsibility.

[Dr Huq]

Q This is modelled on section 7 of the Bribery Act 2010. Am I right in thinking that so far under that Act there have been zero prosecutions—[Interruption]—or a very low level of prosecutions, shall we say?

[Mr Wallace]

We are getting there.

[Dr Huq]

That is only from 2010, so it is not an old Act, and again, nobody here is Mystic Meg, but do you have the tools in this legislation to bring about successful prosecutions or are there too many obstacles, such as that the SFO is involved and that behavioural change would be needed, as you said? Do you foresee there being a low or high level of prosecutions when the Bill is enacted?

Simon York: A good result would be that corporates change their behaviour and that there is less facilitation of tax evasion, and consequently, less tax evasion. We certainly have the tools, through a combination of this proposed legislation and our existing capability—HMRC is a very competent and successful law enforcement agency and criminally investigates many people and convicts them successfully every year, so I think we have that capability. Do I think we will have a lot of prosecutions in this area? I hope not, but I think we will be looking for a number to act as part of this deterrent to show that the legislation has teeth and to show that we mean business.

Nick Price: I would just make a quick general observation: all prosecutions are difficult and we operate an adversarial system, which of course we are well used to. This is a really useful piece of potential legislation, with some really useful elements to it. Are we going to see a phalanx of extra prosecutions coming over the horizon? Perhaps not, but there are some really useful aspects of the Bill that we will no doubt deal with shortly.

Mark Thompson: In my experience, it is not inherently a numbers game, in terms of numbers of prosecutions. We have found that the section 7 offence of the Bribery Act is a useful tool for us as prosecutors. It focuses the corporate mind and there has been a large response from the private sector in complying with that. I would be surprised if the tax evasion offence did not have the same implications.

[The Chair]

Thank you. May I point out that we have got 30 minutes left, and eight other Members of Parliament want to ask questions? I remind both witnesses and Members that it is your time, and that witnesses are here today to answer as many questions as possible.

--- Later in debate ---

[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.

[Dr Huq]

Q Are there any other changes to the existing proceeds of crime regime that you would like to see in the Bill? I was thinking of some sort of parallel enhanced supervision of the property market. Is there anything else on your wish list that you would have liked to see?

Nick Price: From a CPS perspective, we are content with the provisions in the Bill for now. It is too early at this stage to know how those will play out and the impact they will have. Inevitably, we will assess the use of these provisions as we go forward.

Mark Thompson: These are the second changes to the Proceeds of Crime Act 2002 in relatively recent succession. We still need to work out exactly how we use all these powers effectively. Like the CPS, I am content with where we are.

Simon York: We are content and very supportive.

[Dr Huq]

Q Finally, I would like to ask a question that I asked the other selection of witnesses. The Public Accounts Committee’s report on confiscation orders said that sometimes there is a bit of tension between whether the point of those orders is to disrupt crime or to recover the proceeds and collect criminal assets. What would you say to that statement?

Nick Price: From a CPS perspective, as I said earlier we deal with cases at the low end of the spectrum, and we deal with cases that are very much at the high end of the spectrum. In all those cases, there are victims. In many of those cases, there are people worthy of compensation. I do not believe there necessarily is, and I would not see it as, a tension. We deal with the full range of cases, and it is important we do that.

Mark Thompson: From our perspective, we only deal with the top end of fraud and corruption cases. Inevitably, there is a financial element, and it behoves us to consider confiscation and compensation of victims in all those cases, which is what we do.

Simon York: Our aim is to take the profit out of crime, whichever way we do that. Whether it is disrupting criminals or recovering proceeds afterwards, it is all part of that overall picture.

[The Chair]

I thank the witnesses for appearing in front of us. We are grateful for the concise and informative way in which you have helped us today. We will now move on to the next panel.

Examination of Witnesses

Alex Cobham and Professor Richard Murphy gave evidence.

[The Chair]

We will now hear evidence from Tax Research UK and the Tax Justice Network. You have until 11.25 am prompt. Even if we are not concluded by then, I will adjourn the Committee because Members have to be over in the House for other business. Would you introduce yourselves and outline the work you do?

Professor Murphy: I am Richard Murphy, the director of Tax Research UK. I am a chartered accountant and also a professor of practice in international political economy at City University.

Alex Cobham: I am Alex Cobham, chief executive of the Tax Justice Network and a visiting fellow at King’s College London.

[Dr Huq]

Q It is a pleasure to serve under your chairmanship, Sir Alan. It is good to have two academics in front of us; I am an academic trapped in an MP’s body.

Part 3 of the Bill would introduce the new criminal offence of failure to prevent facilitation of tax evasion. How do you rate the risk posed to the Exchequer by illegal tax evasion? We have just heard the figure of £5 billion a year. Is that accurate? Is it a conservative estimate? What are your thoughts on tax evasion versus tax avoidance and other activities that contribute to the tax gap? What would you say is the true scale of offshore tax evasion?

Professor Murphy: I have probably prepared the only alternative estimate to HMRC’s. My estimate is that tax evasion in the UK could be as high as £70 billion a year, in contrast to the HMRC estimate of £5 billion. Let us put that in the context of a £1.8 trillion UK economy. My estimate of tax avoidance is around £25 billion a year, as opposed to the Revenue’s, which again is around £5 billion. I believe its estimates are wrong. I think this Bill is focusing heavily on types of tax evasion that are a small part of the problem. The biggest part of the problem is the domestic economy; the biggest risk within the domestic economy is the fact that HMRC does not collect tax returns from 1 million UK domestic companies a year. The problem is with HMRC in this case.

Alex Cobham: We find Richard’s analysis rather more compelling than HMRC’s on the tax gap in general. Perhaps the difference is that we consider the international avoidance element to be particularly badly treated in the HMRC methodology. In some ways, if all your estimates are lower than they should be but in proportion, that is not a big deal, because it is not telling you to go the wrong way, but if your estimates of avoidance are significantly depressed compared with your evasion estimates, and you then put your policy emphasis according to those bad estimates, that does matter. I think we would be concerned that the tax gap is not a neutrally wrong estimate; it drives attention towards evasion rather than avoidance. We think evasion is important—certainly Richard’s numbers show that—but we are concerned that it encourages HMRC to take avoidance less seriously, and that is a risk.

[Dr Huq]

Q Several stakeholders who responded to the HMRC consultation—these clever people who know how to get around the rules—argued that a new corporate offence was unnecessary. It sounds as if you take issue with that. Do you think there is enough in the Bill to provide the significant behavioural change that is really needed to drive this out?

Alex Cobham: I think the behavioural change question is really important. There are two elements of it: one is how directly it affects the behaviour of actors involved in the process, but the second is how it affects the wider behavioural change. Over the years, we have had any number of economic models of tax behaviour, all of which have suggested that, in country after country, if we were rational economic maximisers we would be much more abusive about tax than we actually are. The reason for that is that we do not respond just to the risk of being caught and the price of being caught. Paying tax is a social act, and by and large two things drive people’s tax compliance. One is the extent to which tax revenues are redistributed and seen to be redistributed in a fair way—the more you think that, the more likely you are to contribute. The other is your perception of other people’s compliance. If you think that the people at the top—the big companies and wealthy elites—are systematically not paying their fair share, the prospects of you complying as a normal citizen are much lower. Who wants to be the only mug if the big guys are not playing the game?

There is one thing that I think is really important for the Bill. On the technical side we can have concerns about how it is framed, and on the enforcement side we might have concerns whether the resources are actually there to make it happen, but what is perhaps missing from that discussion is whether or not we have consistent reporting about the performance under this measure. If, year on year, we hear HMRC saying, “This is our estimate of the tax gap in this area. This is the amount of evasion we have stopped and the number of prosecutions, the revenue at risk in that area,” then, “This is the number of those cases where we have also gone after the facilitator, and so this is the proportion where we are consistently tracking this all the way through,” what you do, apart from giving HMRC a useful metric to demonstrate progress—if HMRC thinks this is the biggest part of the tax gap, then clearly it needs to be tracking this, showing the reduction over time—it also shows the public this is not just one more piece of tax law that may be more form than substance.

Particularly if you think about the Google tax law, for example, there is a growing sense of a lack of trust among the public that when tax laws are passed they are actually meaningful or meaningfully enforced. This is a great opportunity to go the other way, to make sure from the beginning that you will have that accountability and, to go back to your question, to have that in place in a way that is likely to drive behavioural change both of the immediate actors and facilitators but also of the wider public.

Professor Murphy: Can I make three brief points? The first one is that the law as drafted is going to be very difficult to prosecute. We have seen that from the Bribery Act 2010 on which it is based. The number of prosecutions is likely to be very low indeed. This is a strict liability offence—tax evasion triggers the potential liability. The defence that is provided is that there are systems in place. That means that the company—the corporate entity that permits the action—has a defence available to it. That defence will largely be available only to the biggest companies. They will have systems that can be easily documented. Most money laundering training systems now in place in large companies will provide an automatic defence to them: the defence is that they have the systems in place and that there was a bad apple who did the wrong act. Therefore, I think the chance of prosecutions against large companies under this Bill is remote in the extreme.

I think at most this will reinforce the impression that smaller companies are subject to penalty and larger companies are not. First, the chance of prosecution is low because the amounts of money involved will not attract SFO attention—by and large the SFO goes for high-profile cases and there will not be many here that can be prosecuted. Secondly, the behavioural change resulting from this Bill will be very low indeed. There are vastly better ways to achieve behavioural change in this Bill.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

Q One of the attempts to deliver that kind of behavioural change is among the new clauses I am submitting. Will they garner your support for asking the Secretary of State, for example, to make an annual report to Parliament about unexplained wealth orders, to make it a duty to prevent corruption, and to establish quite swiftly a publicly accessible register of beneficial ownership of UK properties? Do you think the good intentions of the Bill could do with a boost to make sure the foot is on the accelerator on some of this?

Professor Murphy: I would entirely agree with a number of points you make. In fact, I would support all those measures. I do not need to comment further; they would all help.

It is clear that transparency is of enormous benefit. The biggest problem with regard to transparency in this country is that 400,000 companies a year in the UK do not file an annual return with the Registrar Of Companies and do not file accounts as required by law. We have no idea what those companies do. They are struck off. It is assumed they have no tax liability, so it is just assumed they have not traded. That is a completely unreasonable assumption for the registrar to make. HMRC does not pursue these companies. I did some research in 2014 on the recovery of penalties imposed on these companies for non-compliance. More than 99% of the penalties imposed were not paid.

In other words, we have an enormous hole in our economy, so we cannot rely upon these systems of registrars and beneficial ownership. The proposed register of beneficial ownership in the UK is simply a voluntary honesty box arrangement, because there are only four extra people being tasked to monitor it. When 400,000 companies do not even file a return, which is where they would disclose their beneficial ownership data, the chance that we will have reliable information is incredibly low indeed. We have to get down to very basic levels to get this right.

I am not saying that the Bill is wrong, but in terms of direction of effort, parliamentary time and resources, there are many more important tasks that would bring about the behavioural changes that Alex has talked about that would encourage compliance.

Criminal Finances Bill (Second sitting)

Rupa Huq Excerpts

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

[The Chair]

Before I call Dr Huq, I want to apologise to you; the Minister is involved in the debate in the Chamber at the present, as is the Whip, who is also on the Committee. Hopefully they will be able to attend, but perhaps not during your session.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Q 7070 Thank you for coming to give evidence. To continue the thread, although I guess you were not here this morning, I will compare some of your answers to what we heard from the panels then. Part 3 of the Bill would create a new criminal offence to prevent the facilitation of tax evasion. Quite a few of the stakeholders who provided evidence to the HMRC consultation do not think that that is necessary. Why do you think that might be, and do you think that it is needed or not?

Nausicaa Delfas: If I can answer from the FCA’s perspective, we would be looking at systems and controls in banks in any event. Tax evasion is a predicate offence to money laundering, so that is something we would look at in any event, but we do not have a view on the provision in the Bill; it is just our perspective.

Anthony Browne: We are not convinced that it is necessary, but we are not opposed to it, and we accept it. We think it is probably better to lead as a regulatory approach with the co-operation of the regulators and the banks in a partnership way, but we accept the Government’s wishes to do it.

[Dr Huq]

Q So it is a good step up, but it was not absolutely necessary?

Anthony Browne: We think that it would be better to use regulation to enforce this, rather than creating a criminal offence for banks as such, although there are also already criminal offences for individuals.

Amy Bell: Our view is that there is already a predicate offence in relation to this, but our tax law committee has been involved, and they are generally happy with the drafting.

[Dr Huq]

Q There is also evidence that since 2009, a lot of specialist trained investigators of financial crime who were trained on the public purse have jumped ship and gone over to the commercial sector, some of them even to gambling. An amendment that we are tabling would keep people within—I cannot remember the exact wording, but they would have to repay the cost of training. Do the three of you have any thoughts on that and potential poaching?

Nausicaa Delfas: I do not have a view on poaching, but we have accredited investigators at the FCA.

Anthony Browne: I do not have any views on this, but I can ask my members about it. There is clearly circulation between law enforcement authorities generally and banks on a two-way basis, in the sense that people at banks go to work for law enforcement authorities and vice versa. If you ask the law enforcement authorities and certainly the banks, it is actually very valuable to get that exchange of information, insight and expertise across the two. This is partly a development of the fact that the battle against financial crime, to which the banks are very committed, is a lot more of a partnership now.

Law enforcement authorities see that the banks are fully committed to this and working to the same ends. We have the same goal in mind: banks do not want to handle illicit money. Bringing the expertise of law enforcement experts within the banks helps the battle against financial crime. I do not have a view on the costs of training.

Amy Bell: We do not have a view on that either. It is not something that we see very often, people coming from law enforcement into solicitors’ firms. It happens occasionally but not on a widespread basis. We prefer investigators.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Q A lot of research indicates that about 70% of major organisational crises are caused by culture. Why has the FCA scrapped the proposed review of the culture of banks? How is that going to assist in an attack on criminality?

Nausicaa Delfas: You are aware that the FCA is looking at culture with each individual institution. Although we would not be conducting that particular piece of work, we are doing other work. In terms of the Bill, I do not have anything further to add.

Anthony Browne: It was an investigation into the culture of retail banking and it was a decision for the FCA what it did with it. We did not ask for them not to do it at any time and would have been very happy for them to do it. As Nausicaa said, the FCA does a lot of work on culture already. The banks are doing a lot of work on culture through a lot of different means. We completely agree with your assessment of the importance of culture and of getting a better culture in banking. That is why from the chairmen and chief executives down they are spending so much time, effort and money trying to improve the culture in banks.

--- Later in debate ---

[Tristram Hunt]

Q I will pursue this slightly differently. Do you have any sense of the international comparisons? Is the UK behind the curve on these investigations or is it out in front?

Anthony Browne: I do not know.

[Dr Huq]

Q Can you think of anything that is not in the Bill that you would have liked to have seen in it? I was kind of thinking sideways—maybe enhanced supervision of the property market or something. I know that is not one for you three directly, but if there is anything you would like to see in the Bill, we are told that the Minister is in listening mode.

[Mr Wallace]

Always.

Anthony Browne: We broadly support this Bill and almost all the provisions in it. The one thing we would like to see changed in the Bill is the threshold for intelligence sharing, which is a point that Ms Delfas made earlier. It would be beneficial and make the regime more effective if you lowered the threshold for intelligence sharing. If there was activity that was just below the formal level of suspicion, so that banks do not deal with it as a suspicious activity report, if they could at that stage share intelligence with other banks like two pieces of a jigsaw, they could find out that something happening in bank A is also happening in bank B.

That could raise it to a suspicious activity and so enhance the intelligence sharing and make it far more useful and effective. We are worried that the way it is prescribed at the moment would actually be a lot less effective than either the Government or the banks want.

[Dr Huq]

Q Do you think that the £100,000 for an unexplained wealth order is about right as the threshold where that kicks in? Would you like to see it higher or lower?

Anthony Browne: I do not have a view on that, but I can get back to you.

Nausicaa Delfas: I do not particularly have a view but, certainly from our experience, the cases of money laundering tend to be of higher value. I do not have a view on the figure as such.

[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.

--- Later in debate ---

[The Chair]

You informed me, Mr Leask, that you were defended earlier by one of our Scottish Members, who explained that you were the chief reporter of The Herald, not “The Glasgow Herald”. We were put right on that.

[Dr Huq]

Q Thank you for coming in, gentlemen. Part 3 of the Bill introduces a new criminal offence to prevent the facilitation of tax evasion.

--- Later in debate ---

On resuming—

[Dr Huq]

Before we were so rudely interrupted, Toby, because of the stuff you have published, I was going to ask you—this may also be relevant to David—about the new corporate offence, which will apply to tax evasion offences both in the UK and overseas. Will the foreign tax offence have a significant impact on developing countries?

Toby Quantrill: Potentially, yes. We very much welcome the extraterritorial nature of this. We would like to see this extended beyond tax evasion to all financial criminal activities—we are slightly puzzled as to why it is restricted in that respect.

The question will be implementation. As long as sufficient resources are put into implementation, we think this has the potential to have quite a significant impact around the world and in developing countries. So, yes, we welcome it.

[Dr Huq]

Q The same question about other jurisdictions—which Scotland might be if certain things continue going in one direction.

David Leask: The thing that we have been interested in at The Herald is the way in which some of these Scottish companies are directly marketed as a means of not paying tax. In that respect, when you have UK entities explicitly sold off the peg as a way of not paying tax, perhaps that is something that you will want to think about.

[Dr Huq]

Q How do you rate the risk posed to the Exchequer by illegal tax evasion? We heard different figures this morning: the witness from HMRC told us the tax gap was £5 billion and the professor said it was £70 billion. Do you have estimates on that?

Toby Quantrill: No, we do not take a particular view on the tax gap. It is clearly significant. There are many different ways of calculating it, but our main view is it is significant. It goes beyond pure resources and finance; this is about fairness and justice as well. It is about people everywhere in the world understanding that if they pay their taxes, so should everybody else.

[Dr Huq]

Q Christian Aid’s evidence keeps going on about the need for the beneficial registers of ownership to be made public. Will you stress again why you think it is important that it can be consulted when needed, and why it is not enough just to have it?

Toby Quantrill: As I said, we welcome the Bill overall. We very much welcome the leadership that has been shown by successive Governments. David Cameron especially at the G7 at Lough Erne put the issue of financial transparency and tax on to the global agenda, and the UK is the first of the G20 countries to create a public register of beneficial ownership, so that UK companies registered in the UK have to put on the public record who really owns them and who sits behind them.

Our concern is that this is a criminal finance Bill that does not address the question of our overseas territories and the role that they play in the global system of corruption and financial crime. That is strange and rather odd. We do not really understand why that has not been included. For us, what is really critical is that the company secrecy that is enabled in our overseas territories in places such as the BVI and Cayman Islands needs to be dealt with by doing exactly what we have done in the UK. We need to ensure that the registers of beneficial owners that are being created are put on to the public record and made public. We would like to see that done through this Bill or through some other process, but done with a clear timeline so that we know when it will happen, because that is not something that can wait. As I say, I represent civil society from across the world in many respects and there is a clear concern about the role the UK plays.

[Dr Huq]

Q Do you have a list of your investigations?

David Leask: No. Sorry.

[Dr Huq]

Q The Public Accounts Committee has raised concerns that there is not a sufficient number of successful prosecutions of offshore tax evasion for it to deter people effectively. Do you agree and do you think that the new corporate offence in part 3 will make a difference?

Toby Quantrill: I think it has the potential to make a difference. The critical thing is to avoid these things happening in the first place. It is important to have some sort of measure that creates the requirement to put in place the measures to stop this from happening. As I said, it is a measure that we welcome. We especially welcome the fact that it applies to the way that UK companies act anywhere in the world.

[Antoinette Sandbach]

Q I am not as familiar with the Scottish devolution settlement as you are, but I had always understood that Scotland had a separate legal jurisdiction.

David Leask: That is correct.

--- Later in debate ---

[The Chair]

Thank you very much for that. We are time limited. We have until 4.52 pm, which does not leave us much time at all, so will Members please be concise with their questions?

[Dr Huq]

Q It is great to have you here, Dame Margaret. You were the Chair of the Public Accounts Committee when a landmark report came out in 2014. How much of the stuff that you recommended is reflected in this legislation? You hinted that there are some omissions that need addressing. Could you tell us about those?

Dame Margaret Hodge: Again, in the context of general welcome for the Bill, let me talk about three issues, including the overseas territories and Crown dependencies. What is missing is a clause in the Bill— I know an amendment has been tabled already and I hope the Committee will consider it carefully—that provides for registers of beneficial ownership that are open to the public. Let me just quote from somebody who made a statement about this because it is really important:

“Now some people will question whether it is right to make this register public. Surely we can get the same effect just by compiling the information and using it within government and sharing it between governments? Now of course, we in government”—

that gives it away a bit—

“will use this data to pursue those who break the rules, and we’re going to do that relentlessly, but there are also many wider benefits to making this information available to everyone. It’s better for businesses here, who’ll be better able to identify who really owns the companies they’re trading with. It’s better for developing countries, who’ll have easy access to all this data without having to submit endless requests for each line of inquiry. And it’s better for us all to have an open system which everyone has access to, because the more eyes that look at this information the more accurate it will be.”

That was actually David Cameron when his Government launched the UK public register of beneficial ownership.

We have given the overseas territories and the Crown dependencies three years to come on board with this. It was first raised by David Cameron in 2013. I think that is long enough. I know there is a reluctance by the Government and that they feel that we have come some way, but that commitment to openness and transparency is vital. It is at the heart of ensuring that we really tackle corruption and money coming into the UK. If we cannot get the commitment in the Bill, which is what I would love, we are seeking a timeline that says that, within a certain time if the overseas territories and Crown dependencies have not come on board with public registers, we will instruct them through Order in Council to do so. We have the powers to do that.

[Dr Huq]

Q Are there examples of where that has been done before? You probably know more than me but I think there is precedent.

Dame Margaret Hodge: There are plenty of examples where we have used those powers. May I quote again from a Government White Paper? This is particularly about the overseas territories, which is a slightly different position from the Crown dependencies. This is a Government White Paper—I understand that there have been some questions about that during your consideration today. The paper says:

“As a matter of constitutional law the UK Parliament has unlimited power to legislate for the Territories.”

We do have that power. I am sure you heard examples this morning. A Conservative Government used it to outlaw capital punishment. A Labour Government used it to outlaw discrimination on the grounds of sexuality. We used it in the Turks and Caicos when there was systemic corruption and maladministration, and we should use it again. This is so much at the heart of the whole agenda. It would be a terrible missed opportunity if we did not, during the course of the Bill, go for public registers of beneficial ownership. I just cannot see an argument against it.

[Dr Huq]

Q A last question from me: the new corporate offence relates to cases of tax evasion, so is there a case for extending it to come down on companies for facilitating tax avoidance?

Dame Margaret Hodge: Or economic crimes. Can I just say again that I really welcome the Bill? This is the first time that we have tried to get at those companies and organisations that are actually responsible for devising many of the schemes that lead to aggressive tax avoidance or evasion. It is a really important toe in the water and a first step forward. The real experts on this are Edward Garnier, Nigel Mills and Catherine McKinnell—all lawyers who have been arguing strongly that the provisions ought to cover all economic crime.

Another amendment could be really helpful. If we could at least have a report to Parliament showing how the failure to prevent tax evasion power is actually being used by the enforcement authorities, I think that would really improve the Bill. I would like to see how much it is used. We could then see how effective it is, as with the unexplained wealth orders—it is important to report to Parliament once a year on the progress made on the use of unexplained wealth orders. I cannot see anything particularly controversial about that sort of amendment, so I would do it for both. Of course, I think you will find that the lawyers think we should do this for all economic crimes. I am with the lawyers on this.

[Antoinette Sandbach]

Q Dame Margaret, I am very interested by your proposal that that should apply effectively to every company’s beneficial ownership, because it was, of course, the Government that you were part of in 1998 that passed the Data Protection Act, which recognised that there should be privacy around individuals and disclosure of their data. Why, at that time, did you not—

Dame Margaret Hodge: Sorry, I am trying to think what you are getting at here. I do not quite understand what aspect of the Bill you are referring to. I am really sorry.

--- Later in debate ---

[The Chair]

We are now going to hear oral evidence from the Royal United Services Institute, Corruption Watch, Global Witness and Transparency International UK. I have got to warn you before we start that we have had votes and they have put everything back. We are also restricted on time because there are Members who have got other things to go to, as do two of the panel, so we are going to conclude by 5.30 pm at the very latest. Can you briefly introduce yourself and be very concise, because Members want to ask questions?

Duncan Hames: Good afternoon. I am the director of policy at Transparency International in the UK.

Tom Keatinge: I am director of the Centre for Financial Crime and Security Studies at RUSI.

Chido Dunn: I am from Global Witness, and I work on governance and corruption issues.

Dr Hawley: I am from Corruption Watch.

[Dr Huq]

Q I have an easy question first of all. What difficulties in recovering assets from individuals suspected of involvement in criminal activities overseas have you encountered? Can we start with Susan Hawley?

Dr Hawley: I think Chido and Tom might be better placed to start off with that one.

Chido Dunn: Based on our investigation in Global Witness, the use of anonymous companies incorporated in places such as the overseas territories and Crown dependencies—[Interruption.]

[The Chair]

Order. I am afraid we have some bad news for you. We are suspended for 15 minutes for a vote.

--- Later in debate ---

[The Chair]

We have around about 12 minutes left, so would all Members and witnesses be concise in their questions and replies?

[Dr Huq]

Q Are you confident that enforcement agencies will have sufficient resources to make full use of the new powers in the Bill? I am thinking of the creaking IT system, ELMER, which was designed to cope with 20,000 SARs a year, and the figure at the moment, before this legislation, is more than 300,000.

Tom Keatinge: Resourcing is clearly a major issue. Cynically, one of the reasons for involving the private sector is to harness it to do some of the work. The point that I was trying to make in my remarks was that implementation will be critical. I do not believe we have the resources that we need. For the structure as it currently exists, the question is whether we are tackling financial crime the right way or whether we can make more efficient uses of the resources we have. Do we really need to have 381,000 SARs a year, and everything that that means for resourcing? We do not have them for the structure that we have now. Is the structure we have the right one? That is the question that we need to answer.

Duncan Hames: I would not go as far as to say that we were confident, although I am sure that people make special pleading cases with every area of Government spending. Reform of the use of the consent SAR would help to give more time for law enforcement bodies to collect the information they need to know how best to respond to it. That is a welcome measure in the Bill.

Chido Dunn: One argument made for public registers in places such as the overseas territories is that there can be more eyes than just law enforcement and Government actors. People such as journalists and civil society actors like us can help the process by identifying potential crimes and alerting the authorities to them.

Dr Hawley: We would like to ensure that the National Crime Agency’s international corruption unit, which will bear the brunt of enforcing unexplained wealth orders, is adequately resourced. We have concerns that at the moment there is not enough transparency in the funding model of that unit. It is partly funded by the Department for International Development, which leaves a whole series of countries that are not DFID priority countries to be funded. We need transparency that the Home Office is putting up the matching funding to cover those countries, because UWOs are going to be global—they will not be just for DFID priority countries.

[Antoinette Sandbach]

Q Mr Keatinge, may I pick up on the point about reporting to Parliament? It is very easy to get data in the public domain about the number of requests or prosecutions under a particular Act: you can use the Freedom of Information Act, or parliamentarians can table written questions to get those data in the public domain. Why do you feel that that requires a report? Dr Hawley, in relation to the cadre of specialised financial crime judges, why do you say that judges are not capable of adequately dealing with financial cases when effectively you have juries sitting on them? If you cannot explain them to the jury, you will certainly not be able to explain them to the judge.

Tom Keatinge: Let me take your first question. The way in which we seek to tackle financial crime in the UK cuts across a number of different Departments. There are many cooks in this particular kitchen, for various reasons. As an outsider, my question is: who is ultimately accountable for ensuring that the Bill is used effectively when it is enacted? Should there be a commissioner? Ultimately, what I would like to see is someone who has to report to Parliament what has happened as a result of the new legislation. As for where that information comes from, I accept that it can be brought to light by Freedom of Information Act requests or other means, but I would like to see someone made accountable for explaining how the Act has been used.

Dr Hawley: Judges play a key role in instructing the jury how to interpret some parts of the law. These are incredibly complex cases. In a way, we are reflecting what has been expressed to us by some in the law enforcement community who are trying to put these complex cases to judges who are not specialists and so do not have the level of knowledge about the crimes that they would like.

Criminal Finances Bill (Third sitting)

Rupa Huq Excerpts

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

[The Chair]

We now begin line-by-line consideration of the Bill. Before we begin, would everybody who has a mobile phone switch it off so we can get on with the business of the day? Although it is a bit cold at the moment, hon. Members may remove their jackets if they wish to.

The selection list for today’s sitting is available in the room, and shows how selected amendments have been grouped together for debate. Amendments grouped together are generally about the same or similar issues. A Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments in that group. A Member may speak more than once in a single debate, and I will work on the assumption that the Minister wishes the Committee to reach a decision on all Government amendments. Please note that decisions on amendments do not take place in the order in which they are debated, but in the order in which they appear on the amendment paper. In other words, debate occurs according to the selection and grouping list, and decisions are taken when we come to the clause that that amendment affects. I hope that explanation is helpful.

The Bill contains 51 clauses, which is a substantial number considering that we only have today and two days next week to discuss it. I would appreciate it if Members could be concise and full in their presentation as possible, so the examination can be as full as possible. After all, it is Members’ time and the House’s time. I will use my discretion on whether to allow separate stand part debates on individual clauses and schedules following the debate on relevant amendments.

Clause 1

Unexplained wealth orders: England and Wales and Northern Ireland

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I beg to move amendment 1, in clause 1, page 1, line 17, after “sought” insert—

“(and the property specified may include property located outside the United Kingdom)”

This amendment would ensure that unexplained wealth ordered may be issued for property located outside the UK.

It is a pleasure to serve under your chairmanship, Sir Alan.

In summary, we welcome the Bill. The unexplained wealth orders are a good thing, but amendment 1 is an example of where we think the measures could go a little bit further and be further improved. The amendment would provide that property located outside the UK could be utilised in an unexplained wealth order brought before an individual. It is meant to be a technical rather than political amendment. We are happy to work with the Government, but I think we can all drink to this amendment regardless of political affiliation.

The amendment would facilitate information sharing across different jurisdictions and would provide the United Kingdom with vital information regarding illicit financial activity that has taken place elsewhere across the globe. Reports by both the Select Committee on Home Affairs and the Public Accounts Committee hinted at this, and there is even a line in the Government’s action plan for anti-money laundering and counter-terrorism finance from April that says we should increase

“the international reach of law enforcement agencies and international information sharing to tackle money laundering and terrorist financing threats.”

Therefore, if an individual provides false and/or misleading information in relation to an unexplained wealth order, they can be prosecuted, but we would widen the scope of the property that comes under such an order so that we can question those who might be resident in the UK regarding their suspected illicit activities regardless of where their wealth is. As we know, people travel and cross borders, so we might not be able to recover wealth from that person. That throws up issues around cross-jurisdictional co-operation, and it is one area where confiscation orders kept hitting a brick wall and coming to grief.

We can glean intelligence on behaviour abroad and share it with other states, which would act as a disincentive to come to the UK to corrupt politically exposed persons who may contaminate our economy with their illicit wealth. If criminals know that on entering the UK, there is a process and our enforcement agencies can compel them to talk about their suspect wealth or property regardless of where they have placed it, they will think twice about coming here. We want to restrict their ability to move. That would send out a powerful message that the UK is not a soft touch when it comes to dodgy financial dealings, which I think we can all agree would be a good thing.

The current threshold at which a UWO can be served under the Bill is £100,000, but what if a criminal or suspected criminal has property of £50,000 here in the UK and has moved £50,000 of property elsewhere? Our enforcement agencies have concluded that, on the balance of probability, both combined are beyond the means of the person in question. I would like to think that the Bill already covers that, but we have tabled this probing amendment to confirm it. We are talking about portable wealth, which extends to jewellery and paintings, which have ultimate portability, because someone could leg it to a foreign country with them. My conclusion is that we would be unable to issue an unexplained wealth order if property is split between two places. I suspect I am right but am happy to be proved wrong.

The scenario I mentioned raises another question. If an individual acquires property of a value that reaches the unexplained wealth order threshold of £100,000 and manages to transfer it out of the UK, it is only after they have done so that our enforcement agencies become aware of it. Does that mean that an unexplained wealth order cannot be issued to that person because the property is now outside the UK? I want some clarification from the Minister on those things. I imagine that the answer is “Yes, we cannot do that”, but if the answer is, “No, we can do it”, it would be even better, because Opposition Members want unexplained wealth orders to be a success.

Finally, the amendment would introduce an element of operational efficacy. If all our enforcement agencies were aware that they were able to factor in stuff that is located outside the UK properly from the beginning of their investigations, it could contribute to our agencies being quicker off the mark. They could sound a warning alarm bell. They would be oriented from the get-go to cast their net as widely as they can to hold criminals to account. That is largely what we seek to do through the amendment.

[The Minister for Security (Mr Ben Wallace)]

It is a pleasure to serve under your chairmanship, Sir Alan. As we begin the line-by-line scrutiny, it might be useful if I give the Committee a brief outline of how unexplained wealth orders will work.

In short, an unexplained wealth order is a civil investigatory tool. It is a court order that requires a person to provide information that shows they obtained identified property legitimately. If the person provides information and responds to an unexplained wealth order, the enforcement authority can then decide whether to investigate further, take recovery action under the Proceeds of Crime Act 2002 or take no further action. If the person does not comply with an unexplained wealth order, either by not responding or not responding fully to the terms of the order, the property identified in the order is presumed to be recoverable under any subsequent civil recovery proceedings. It is important to note that the unexplained wealth order does not in itself lead directly to recovery action. It is designed to be an investigatory power and a precursor to civil recovery action.

An unexplained wealth order is an order made against a person, requiring them to provide information to explain how they obtained the property. It is important for all of us to understand this crucial factor: the unexplained wealth order is made against a person, not against property, and does not itself result in the recovery of that property. That is the vital point in relation to amendment 1.

In the Proceeds of Crime Act, it is clear that, if an order is to be made against a person or a property overseas, it must be explicitly stated on the face of the legislation. For example, section 282A of POCA provides that a civil recovery order can be made against property overseas if there is a connection with the UK. Section 375A of POCA also provides that an evidential request can be made overseas in constructing a case for civil recovery.

The same is already the case with unexplained wealth orders. New section 262A(2)(b) in clause 1 of the Bill provides that the person on whom the order will be served must be named, and it expressly provides that

“the person specified may include a person outside the United Kingdom”.

The unexplained wealth order therefore has global effect. The definition of “property” in the POCA already encompasses all property, whether it is situated at home or abroad. An unexplained wealth order can therefore list any property, wherever it is in the world. The court has an associated power to make an interim freezing order in respect of that property.

Clause 3 inserts a provision into POCA that an enforcement authority can request assistance from an overseas state concerning the freezing of property overseas that is subject to an unexplained wealth order. I therefore assure the hon. Lady that unexplained wealth orders will be effective against property anywhere in the world. Accordingly, I invite her to withdraw her amendment.

[Dr Huq]

I thank the Minister for his reassurance. It was a probing technical amendment to clear up that point, and he has sufficiently clarified it, to my mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Dr Huq]

I beg to move amendment 2, in clause 1, page 2, line 31, at end insert—

“(8) Persons who are members of an enforcement authority must co-operate with other persons who are members of other enforcement authorities for the purposes of making application to the High Court for an unexplained wealth order.

(9) In particular, the duty imposed on a person by subsection (8) requires a person—

(a) to engage constructively, actively and on an ongoing basis in any process leading to an application being made for an unexplained wealth order, and

(b) to have regard to activities of a person within subsection (8) so far as they are relevant to the making of an application for an unexplained wealth order.”

This amendment would require enforcement authorities to co-operate when making applications for unexplained wealth orders.

[The Chair]

With this it will be convenient to discuss new clause 12—Unexplained wealth orders: duty to prevent corruption—

“In Chapter 1 of Part 8 of the Proceeds of Crime Act 2002 (investigations: introduction), after section 342, insert the following—

‘342A Unexplained wealth orders: duty to prevent corruption

(1) A relevant authority must exercise its functions in relation to unexplained wealth orders in the way which it considers is best calculated to contribute to the prevention of corruption.

(2) For the purposes of this section it is immaterial whether corruption is being prevented in the United Kingdom or elsewhere.

(3) In considering under subsection (1) the way which is best calculated to contribute to the prevention of corruption a relevant authority must have regard to any guidance given to it by—

(a) in the case of the National Crime Agency, the Secretary of State,

(b) in the case of the Director of Public Prosecutions or the Director of the Serious Fraud Office, the Attorney General,

(c) in the case of Her Majesty’s Revenue and Customs or the Financial Conduct Authority, the Chancellor of the Exchequer, and

(d) in the case of the Director of Public Prosecutions for Northern Ireland, the Advocate General for Northern Ireland.’”

[Dr Huq]

We heard in the evidence session on Tuesday from many different bodies, including Her Majesty’s Revenue and Customs, the Serious Fraud Office, and the National Crime Agency. One problem with the existing confiscation orders is that the buck seems to be passed between many of them, and there is confusion about who the lead investigator is. The amendment would introduce a duty on all those agencies to co-operate, even before it got as far as the Crown Prosecution Service and Her Majesty’s Courts and Tribunals Service. Those people feel stymied, and they cannot investigate—it does not get that far because of squabbling over where the buck stops. The amendment seeks to address the lack of co-operation among UK law enforcement agencies that devolve responsibility for investigating cases.

There is an example that people may know about. It is the quite famous case of Sergei Magnitsky, the Russian who was murdered, and who uncovered what had been going on at Hermitage Capital Management. Bill Browder, an American, has spoken to an all-party parliamentary group here and is quite vocal on these issues. The murdered chap blew the whistle on $230 million in Russian Government frauds. Hermitage Capital Management discovered that, and there is a timeline on which it sought every possible avenue to open a money laundering investigation in the UK. Every single UK enforcement agency refused to open an investigation, stating that it was not its responsibility to investigate.

In 2010, Hermitage filed a complaint with the Metropolitan Police Service, highlighting the UK nexus of criminal activity. The MPS replied that the responsibility for investigating the fraud did not lie with the MPS. Hermitage then attempted to take legal action through the Serious Organised Crime Agency, requesting that an investigation begin in connection with the $230 million in fraud. SOCA replied that it was not the appropriate body for the job. In 2012, Hermitage filed another complaint with the Serious Fraud Office, which gave evidence to us on Tuesday, to highlight those financial crimes, which occurred in a UK jurisdiction. The SFO refused to do anything. In its words,

“matters do not fall within the offences that the SFO is permitted to investigate.”

In 2013, Hermitage filed a complaint with HMRC seeking a review of the company formation agent that facilitated the money laundering in the UK. HMRC answered that confidentiality precluded an investigation. In 2015, Hermitage filed a complaint with the NCA, which also gave evidence to us on Tuesday, outlining the flow of money—the fraudulent $230 million—to the UK. The NCA replied that it was a domestic criminal investigation relating to money laundering in the UK and therefore that the NCA was not the most effective way forward.

The amendment would create a duty for UK authorities to co-operate and take constructive action. We used to talk about joined-up thinking. That is essentially what the amendment is with regard to unexplained wealth orders. It would strengthen the Bill and ensure that provisions are not rendered ineffective because everyone says, “It is not my responsibility.”

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[Tristram Hunt]

I am happy for the amendment to be withdrawn, but it would be nice to hear something more on Report. I take the point about the precision of focusing on corruption when other serious criminal activities are involved, but some language on a duty to prevent corruption would be good. The important element is the duty; I hope that the wording on corruption and other serious criminal activity might be added to that.

[Dr Huq]

If I understood correctly, the Minister said that no primary legislation is required to do what the amendment would do, and that there are already flags and a joined-up process. Are we confident that something like the Magnitsky case, with all the stuff that happened—everyone closing the door to Bill Browder, year upon year—would not happen again with unexplained wealth orders?

[Mr Wallace]

On the Magnitsky case, it would be inappropriate to comment on a case that could be under continuing investigation. The main point is that our law enforcement agencies have operational independence. It is for them to decide the priorities for how they spend their resource and work together. We do an awful lot, without primary legislation, to ensure that they work together. They liaise through regional bodies such as the regional organised crime units, and through the national co-ordinators and everything else.

Our view is that primary legislation is unnecessary because, whether it is through the code of practice, which will be published alongside the Bill, or in the operational day-to-day running of the organisations, joint working is part of their remit and, effectively, their duty. We do not think it is necessary to put anything in the Bill because we fear that that could pervert their priorities and interfere with their operational independence.

[Dr Huq]

I thank the Minister for that explanation. We will leave it where it is. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Tristram Hunt]

I beg to move amendment 59, in clause 1, page 3, leave out line 28.

This amendment would allow unexplained wealth orders to be issued to politically exposed persons in the United Kingdom and EEA States.

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[Mr Wallace]

Clause 2 acts in tandem with clause 1 in appropriate cases. It provides that the court can also issue an interim freezing order in relation to property that is subject to an unexplained wealth order. The interim freezing order provides that the property cannot be dealt with in any way while subject to that order. There is no point in putting an unexplained wealth order on something if it can immediately be sold, as we might lose the asset. The freezing order can be used to keep it in place.

It is important to split the obtaining of an unexplained wealth order and the freezing of property into two different matters. Although they will be done at the same hearing, they are different decisions with separate considerations. Some colleagues have asked why we are not providing that property must be frozen in every case. Freezing someone’s property is a very invasive measure and may not be necessary in every case. For example, there may be no suspicion that the property will be dissipated—perhaps it is a house that has been owned and occupied by the same person for many years—or that a civil recovery order will be frustrated in some other way.

We would not want unexplained wealth order applications to be rejected solely on the grounds of a technicality related to the freezing decision. It is also important to note that if property is frozen, the court may quite reasonably expect the case to progress at a far quicker pace than if no freezing order was in place. On that last point, I should flag up the fact that, under clause 1, if property is subject to an interim freezing order, the enforcement authority is given a deadline of 60 days to decide the next steps. The freezing order would then be discharged after a further 48 hours.

The expectation is that if an enforcement authority is to go forward with civil recovery action, it will obtain a property freezing order, with many of same provisions and safeguards, to apply immediately to the same property once the interim freezing order is lifted. The property would remain frozen.

An application can be made for the variation or discharge of the freezing order. The court can also provide that property can be released to meet affected persons’ reasonable living expenses, their need to carry on their business and their legal expenses. I hope that what I have said reassures hon. Members that the freezing order provisions are properly circumscribed.

[Dr Huq]

The Minister has given a full and cogent account of why interim freezing orders are being introduced. As a London MP, I know how dirty money in the property market has skewed the entire London property market, meaning that genuine people cannot get a foot on the ladder. It sounds as if sufficient safeguards are being put in place, so we will not stand in the way of the clause.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

External assistance

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[Mr Wallace]

Clause 3 supplements clause 1, on unexplained wealth orders, and clause 2. It provides for a request to be sent to another country to freeze property there that is subject to an unexplained wealth order, which addresses the point that the hon. Member for Ealing Central and Acton made in the debate on her amendment 1 about going after property abroad.

I will make two points for the benefit of the Committee. First, an unexplained wealth order can apply to property outside of the UK. That reflects the operation of existing civil recovery powers, which can include property overseas if a sufficient connection can be shown with the United Kingdom—for example, where the suspected criminal is British, the criminality is thought to have taken place in this country or there are victims in the UK.

Secondly, there is no international law that expressly provides for the freezing of property in relation to unexplained wealth order-type powers. We will need to liaise closely with other countries in relation what existing international law may underpin such a request, as well as working on obtaining wider recognition of unexplained wealth orders. The clause primarily creates legal certainty that such a request can be made. We also encourage recognition of such requests as part of the wider fight against international crime and corruption.

[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.

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[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.

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[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

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[Mr Wallace]

The Proceeds of Crime Act 2002, which was introduced by the last Labour Government, provides a suite of powers to be used in connection with a range of investigations, including confiscation and civil recovery. A disclosure order is one of those powerful tools and requires any person having relevant information to answer questions, provide information or produce any document that is relevant to the investigation. Disclosure orders are flexible, practical and efficient. Their use avoids the need to seek multiple orders over the course of an investigation. The changes we are making extend the power to seek disclosure orders in money laundering investigations that were previously explicitly excluded. This exclusion was primarily because of concerns over self-incrimination. However, that protection is maintained in the new provisions, ensuring that individuals who are subject to a money laundering investigation cannot be compelled to provide information that might incriminate them.

Clause 7 also changes the definition of who can apply for a disclosure order, removing the need for a prosecuting body to be responsible for its application. Significantly, this change does not lead to a reduction in the level of seniority of the person who can apply. An appropriate officer can apply for a disclosure order only on the approval of the senior appropriate officer, ensuring that the application process is safeguarded. These changes will be reflected in the statutory code of practice on the investigation tools in the Proceeds of Crime Act 2002.

Clause 8 replicates in Scotland the provisions contained in clause 7 for England and Wales that enable an application for disclosure orders in money laundering investigations, providing an essential UK-wide response.

[Dr Huq]

I am convinced by the Minister’s persuasive words that red tape will be removed. We can apply for disclosure orders and yet maintain vital safeguards, so we will support clause 7 and clause 8, which extends the power to Scotland.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.

Clause 9

Power to extend moratorium period

[Mr Wallace]

I beg to move amendment 8, in clause 9, page 28, line 34, at end insert “(subject to the restriction mentioned in section 336A(6))”

This amendment clarifies that the 186 day maximum period for extending the moratorium period also applies to a decision of the appeal court in Scotland.

[Mr Wallace]

Clause 9 inserts in part 7 of POCA a scheme for the extension of the suspicious activity report moratorium period beyond 31 days. As the action plan for anti-money laundering and counter-terrorist finance sets out, the Government see a more robust law enforcement response as central to tackling money laundering. It might help if I briefly explain how the suspicious activity report regime works.

Where a company in the regulated sector—a bank, an accountancy firm or a legal firm—suspects that they may commit a money laundering offence, they are obliged to submit a suspicious activity report to the National Crime Agency seeking consent to proceed. The National Crime Agency then has a seven-day period to determine whether it is necessary to refuse consent to the company to proceed with the transaction. If consent is refused, the 31-day moratorium period begins. During the moratorium period, law enforcement agencies need to gather the necessary evidence to instigate civil recovery proceedings or a criminal investigation in relation to the money laundering activity. However, money laundering investigations can be multi-layered and complex. Money launderers obfuscate the financial trail to distance proceeds from their criminal source; funds are often moved overseas.

New section 336A of the Proceeds of Crime Act 2002 states that the court may not grant a further extension of the moratorium period if the effect would be to extend the period of more than 186 days in total, beginning with the day after the end of the initial 31-day moratorium period. The amendment makes that clear. Amendment 15 replicates in Scotland what clause 28(2) already does for England and Wales. Amendments 52, 53, and 56 are consequential to that.

The criminal’s property, referred to in POCA as “free property”, which may be in the form of cash, is available for consideration in confiscation unless it is already subject to a forfeiture or deprivation order. When a court considers making a confiscation order under POCA, it must not take into account certain types of property when calculating the amount of the order. This is to ensure fairness to the defendant and prevent the double counting of assets.

Clause 28 amends POCA to clarify the situation in relation to cash that has been seized and is being detained pending the decision of a forfeiture application. Cash that is detained in anticipation of the forfeiture application being made is already excluded, so this is an extension of the existing principle in section 82 of POCA. The amendment extends that to Scotland. We hope to be making an equivalent amendment in respect of Northern Ireland in due course—we are awaiting their formal agreement.

Amendments 50 and 51 will correct an error in clauses 37 and 38, which incorrectly refer to England when they should refer to England and Wales. That is merely to ensure that the text of the Bill reflects the intent of the policy, which is for the measure to extend to England and Wales. Amendment 55 will correct another typographical error.

[Dr Huq]

It sounds as if the amendments are tidying up some sloppy mistakes. On the whole, however, I know that the SARs extension to the moratorium period was very much welcomed by the witnesses we heard from. I have seen that some law firms do not like the policy, but I think it is a good idea. The previous period of 31 days was not long enough. Does the Minister have an inkling of how many times the maximum would be used—I think it is 200 days?

[Mr Wallace]

It is 186 days.

[Dr Huq]

It is something like 186 days plus the 30 days, so if we add it all together it is more than 210. It gets stretched out a lot. Is that likely to be used very sparingly? There are people on the other side who think it is too long.

[Mr Wallace]

The timescale is really just a reflection of what the investigatory agencies have said to us: that some of these cases are very complex. Some of the ways in which people hide their wealth—they sometimes freeze it themselves—and who they are mean that the process will take time. We want to ensure that our agencies have time to investigate, rather than being under the sort of pressure where effectively they run out of time. Those people exploit that. That is the reason for the longer period. Hopefully it will not be used, but the very fact that it is there will give power to the elbow of the agencies trying to do the job.

[Dr Huq]

I thank the Minister for his response. We support the proposal, but we have a concern, which will come up in a new clause at the end, about the architecture of crime fighting. There could be better resource for all the different agencies that will be looking at these issues and particularly for the ELMER IT system. It was envisaged that that system would deal with 20,000 SARs a year, but the figure is 380,000 at the moment and will probably rise even higher after the Bill is passed. That does not relate to the clause, but I wanted to sound a word of caution.

[The Chair]

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

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[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.

[Mr Wallace]

Clause 9 inserts in part 7 of POCA a scheme for extending the suspicious activity report moratorium period beyond 31 days. As the action plan for anti-money laundering set out, the Government see a more robust law enforcement response as central to tackling money laundering. I have already explained the SARs regime, so we do not need to hear about that again.

As the national risk assessment set out, the UK is vulnerable to abuse by professional enablers from the legal, accountancy and finance sectors. The level of expertise involved can make it difficult to progress a money laundering investigation substantially in only 31 days. That is particularly the case when the law enforcement agency needs to obtain evidence from overseas authorities, which is another reason for an extension for a further length of time—the hon. Member for Ealing Central and Acton asked why it needed to be so long—or to undertake complex asset-tracing inquiries. Accordingly, the moratorium period may be lifted and funds dissipated before the investigation has progressed sufficiently to determine whether civil or criminal proceedings should be undertaken.

We need to provide law enforcement agencies with an appropriate amount of time to undertake investigations. This clause provides for the extension of the moratorium period by a court for periods of up to 31 days. That can be repeated up to a total of 186 days from the end of the initial 31-day moratorium period. The hon. Lady is better at adding up than me, so she produced the right figure. Providing an extension of the moratorium period enables law enforcement officers to continue investigating particularly complex transactions, such as those involving overseas grand corruption or other serious crime. The clause ensures that proceeds of crime are not dissipated when there is a suspicion that money laundering activity has taken place and when the law enforcement agency has not had the opportunity to complete its inquiries.

The Government recognise that there may be concerns about the length of time for which an individual’s property could be withheld from them. The clause does not allow unlimited extension of the moratorium period. The court must approve the application to extend the moratorium period each time an extension is sought. Law enforcement agencies must demonstrate to the court that it is reasonable in all circumstances for the moratorium period to be extended. They must satisfy the court that the investigation is being carried out diligently and expeditiously and that further time is required to progress the investigation.

An application to extend the moratorium period will be made to the Crown court, which provides a senior level of judicial authorisation. The owner of the property will be able to make representations in person before the court and is provided with the opportunity to appeal the decision to extend the moratorium period. An application may be made only by a senior officer who has a remit to undertake financial investigation. A senior officer is at the police rank of inspector or equivalent.

Money laundering is an enabler of serious and organised crime. The clause will help to stop criminals profiting from their criminal behaviour. It gives our law enforcement agencies the time to progress critical investigations into money laundering where they have genuine reasons for being unable to progress their investigation substantially in 31 days.

[Dr Huq]

The Minister has put it very well. All the witnesses stated that 31 days was not enough. Here we have appropriate checks and balances. A legal procedure is gone through to extend the period; it cannot be open-ended; and appeals procedures are built in. The Minister also praised my maths, which never happens normally—I am a qualitative person usually—so for that reason as well as all the other reasons, we will not stand in the way of the clause.

Question put and agreed to.

Clause 9, as amended, accordingly ordered to stand part of the Bill.

Clause 10

Sharing of information within the regulated sector

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

[Mr Wallace]

The clause introduces a new provision into the Proceeds of Crime Act 2002. As the action plan for anti-money laundering also set out—it seems to make a regular appearance—the Government see public-private partnership as central to tackling money laundering and terrorist financing. A major part of that approach is to provide support for the effective exchange of information, both within the private sector and between the public and the private sectors, to increase our collective knowledge of threats and vulnerabilities, to help the regulated sector to protect itself and to improve the quality of the UK’s financial intelligence.

Both the private sector and law enforcement agencies hold significant amounts of information that can be of great use to each other. The private sector holds data on financial transactions and related personal data; law enforcement agencies hold intelligence on money laundering and terrorist financing. When those data have been shared, there have been benefits to both sectors.

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Any organisation sharing or receiving data will also be required to handle the data in accordance with their existing data protection requirements. I stress that the sharing of data is entirely voluntary. That in itself provides an additional level of protection, as a regulated sector company will not be required to provide information to another company if it does not know or trust it.

[Dr Huq]

I described joined-up thinking in my remarks on amendment 2. The Minister has reassured us. I have seen that some people have civil liberties concerns, but he has told us that the sharing of information will be a last resort in extreme cases, and that it will happen largely on a voluntary basis anyway.

The Government action plan on money laundering said that what is needed is a

“collaborative approach to preventing individuals becoming involved in money laundering.”

It discussed different agencies, supervisors and the public and private sectors working together. The clause does all those things, and we support it.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Further information notices and orders

Amendment made: 10, in clause 11, page 38, leave out line 2.—(Mr Wallace.)

This amendment removes a reference to the Scottish Ministers from the list of persons who may make an application to the sheriff for a further information order under new section 339ZJ of the Proceeds of Crime Act 2002.

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

[Mr Wallace]

Clause 11 creates a new power to issue further information orders. In the anti-money laundering action plan the Government set out our commitment to improving the financial intelligence that would be available to both the law enforcement agencies and the private sector. Improving our financial intelligence is essential to allow the identification of the major risks from money laundering, and to identify where resources from both the public and private sectors should be focused.

The action plan also contained a commitment to do more to tackle money laundering internationally, through sharing information and intelligence, and working through international bodies such as the Financial Action Task Force. The suspicious activity reports regime, run by the UK Financial Intelligence Unit at the National Crime Agency, is central to the UK anti-money laundering regime, and to the development of financial intelligence. The regime took more than 380,000 reports in 2014-15 from the regulated sector, including banks, lawyers and accountants.

Clause 11 will allow the UK Financial Intelligence Unit, following the receipt of a suspicious activity report, to request further information from any member of the regulated sector, irrespective of whether that entity raised the SAR.

There are a number of reasons why the UKFIU needs such a power. First, there are occasions where the SAR does not contain all the information necessary to allow the UKFIU to determine whether action, including an investigation, should be undertaken. That is particularly important when determining how scarce resources should be allocated. The intention is to drive up the quality of SARs and to enable improved intelligence analysis for the better identification of risk and threat.

Secondly, the UKFIU can use the power when it needs information in order to develop effective intelligence to identify the major threats from money launderers. That intelligence will be used to inform the work of law enforcement agencies and can be shared with the private sector to help them put in place effective counter-measures to the threats they face from money laundering.

Thirdly, it will allow the UKFIU to seek further information on behalf of a foreign financial intelligence unit to support investigations or intelligence development in that country. That will be subject to the appropriate safeguards, and the UK will benefit from the ability to request equivalent information from foreign financial intelligence units. The provision will also ensure that the UK is compliant with the relevant Financial Action Task Force recommendations ahead of the its evaluation of the UK anti-money laundering regime in 2018.

The clause will allow the National Crime Agency to direct that further information is provided and, if it is not provided, to apply to a court for a further information order to require the person to provide the information requested. We are keen to support appropriate information sharing between financial intelligence units, and we know that FATF and its members want to do more in that area. Incidents such as the attacks in Paris, where financial intelligence was needed to support the investigation, illustrate the need to be able to share such information. However, I would like to be clear that there should be safeguards in place for international information sharing. As with a request driven by the NCA itself, a court order will be required where a regulated entity does not provide information if requested to do so by the NCA. That in itself is an important safeguard. I am, as ever, open to discussing this issue with hon. Members if it is felt that additional safeguards may be appropriate.

On a separate point, I know that the issue of privileged information is of concern to Members, and I want to be clear that the UK Financial Intelligence Unit will not be able to request the provision of privileged information as part of this measure. This is an important safeguard for those who hold such information, and we do not believe that it should be requested under this power.

[Dr Huq]

It appears that the clause enacts some of the recommendations of the action plan for anti-money laundering and counter-terrorist finance that the Government issued in April 2016. We will support the clause.

Question put and agreed to.

Clause 11, as amended, accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Andrew Griffiths.)

Criminal Finances Bill (Fourth sitting)

Rupa Huq Excerpts

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

[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.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Amendment 58 looks quite attractive. The hon. Member for Dumfries and Galloway and I served together on the Select Committee on Justice and went to America. I was quite tempted by his amendment, but I am now reassured by the Minister that Government new clause 10 addresses those concerns. It is added to the list for the ever longer meeting they will have.

[Mr Wallace]

You can come along.

[Dr Huq]

Can I come too? Okay. One point occurs to me—to dispel any suspicions of HMRC regulating the art market, how will those paintings be valued? I imagine it is the best of three, with experts, but I wonder how that will be enforced.

[Mr Wallace]

I am not an art historian or expert. We would probably get Philip Mould from the television to come along. In reality, like with everything else, there is probably a proper valuation process held and items are disposed of that way. If they wanted my services, I would be useless.

[The Chair]

Order. To help the hon. Lady, I think she will find that, in the evidence produced on Tuesday, one of the witnesses from Her Majesty’s Revenue and Customs said that they recovered assets and then called in experts who valued them.

[Dr Huq]

Thank you, Sir Alan. I guess there is a serious point behind this: sometimes it is unclear who is the prime enforcer. We want some reassurance, which I am sure will come, that structures are in place, but we are big fans of the clause on the whole.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

Forfeiture of money held in bank and building society accounts

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

[Mr Wallace]

The clause introduces a new provision into the Proceeds of Crime Act 2002. Criminals need to launder the proceeds of their crimes to carry on their criminal activity. As I outlined on clause 12, we need to ensure that we are able to respond to that threat.

POCA already contains provisions for the seizure of cash, but we do not have an equivalent power to take quick and effective action against funds held in bank accounts, and criminals know that. Given the use made by criminals of the banking system, we need to plug that gap. At present, it is difficult for law enforcement agencies to take action against many such accounts because their values are below the limits for civil recovery. The clause will allow the police or the National Crime Agency to seek the freezing and forfeiture of those funds.

The clause will give law enforcement agencies new powers to freeze and forfeit funds held in bank and building society accounts. The measure will have two significant effects. First, it will be easier and quicker for law enforcement agencies to seize the illicit funds held by criminals who abuse the banking system to store and transfer the proceeds of their crime. Secondly, it will also make it clear to criminals that we can take immediate and effective action against their abuse of the financial system.

The provisions we are putting in place will support the forfeiture of funds in bank accounts that have been suspended by the banks when they have serious concerns regarding the use of the accounts. The banks welcome the certainty that will bring. The provision will of course be accompanied by appropriate safeguards. An account cannot be frozen unless there are reasonable grounds to suspect that the funds in it are the proceeds of crime or will be used to fund criminal activity. The freezing of an account will be overseen by a court, which will be able to make an exclusion to allow the account to be used to support a person’s reasonable living expenses or to continue to run a legitimate business.

Forfeiture can be undertaken administratively by the law enforcement agency exercising the provision in uncontested cases. When the forfeiture application is contested, the matter will be decided by the court. The funds in the account will not be transferred to the law enforcement agency account until the forfeiture order is made. I hope that sufficiently reassures the Committee about the need for the power and how it will be used.

[Dr Huq]

It sounds like there will be sufficient judicial oversight in this space. We know that a lack of bank regulation previously led to some nasty incidents in our history, so we support the clause.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Serious Fraud Office

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

[The Chair]

With this it will be convenient to discuss the following:

That schedule 1 be the First schedule to the Bill.

Clauses 15 and 16 stand part.

Government amendment 11.

Government new clause 9—Immigration officers.

[Mr Wallace]

We come to chapter 4 of the Bill. This group concerns clauses 14 to 16, schedule 1, amendment 11 and new clause 9, which relate to provisions that grant officers of a number of agencies access to new powers under the Proceeds of Crime Act.

Clause 14 and schedule 1 amend POCA to grant officers of the Serious Fraud Office direct access to the wide range of powers under POCA without the unnecessary existing step of their having first to be accredited and monitored as accredited financial investigators by the National Crime Agency. We are also granting officers access to the new powers proposed elsewhere in the Bill, including the power to extend the moratorium period under clause 9 and the new seizure and forfeiture powers in clauses 12 and 13.

It is, of course, only right that those using the intrusive powers provided by POCA are trained and monitored to ensure that the powers are not misused. However, officers of the SFO are experienced and well trained in the use of POCA powers and have appropriate oversight arrangements.

Clauses 15 and 16 amend part 5 of POCA to grant the powers for the civil recovery of assets to both HMRC and the Financial Conduct Authority. Expanding the civil recovery powers to HMRC and the FCA will improve both the capability and capacity for civil recovery. It will ensure they have access to the full suite of investigatory powers to support them in their civil recovery investigations. The use of those powers is governed by an existing code of practice, which will be amended. The Bill will also enable the SFO, HMRC and the FCA to apply for unexplained wealth orders. As we have discussed, the civil recovery provisions in POCA are robust and powerful, and giving additional bodies access to those powers will strengthen the UK’s overall response to serious and organised crime.

Clauses 12 and 13 provide for new freezing, seizure and forfeiture powers. At present, the Bill allows the police, the National Crime Agency, the SFO and accredited financial investigators to use those powers. Amendment 11 and new clause 9 will extend the use of those important new powers to immigration officers to support their investigations into immigration offences and to take action against criminal property that is the proceeds of immigration crime, or that is being used to fund further immigration offences. Those officers will also be able to seize suspected criminal property obtained through offences unrelated to immigration if they encounter them during immigration investigations. The amendment will strengthen the UK’s ability to tackle money laundering and will allow for the seizure of more criminal assets.

[Dr Huq]

We will support the clause. However, the amendment will lead to an increased workload for agencies such as the SFO and others. Our new clause will be debated later, but we would like an assurance that the blockbuster funding model that they currently operate, which seems to momentarily splash cash, will be replaced with some sort of consistent funding model, because their workload is going to increase and the investigation time in the courts is increasing. That is my only caveat.

[Mr Wallace]

In response to the hon. Lady, some of the measures in the Bill actually make their jobs easier. Although it might give them more people to catch, the fact that they are going to have disclosure orders and that they will be able to use things such as unexplained wealth orders as an investigatory measure, and the fact that we are going to improve the subject access request data sharing regime, so that the private sector produces more quality referrals rather than just a blurb of quality, will hopefully make their jobs easier when it comes to an investigation. In one sense, all of those barriers that they have to get through at the moment will be removed, which, hopefully, will make them more productive.

I recognise the hon. Lady’s point about the funding of the SFO and other agencies. Under the comprehensive spending review and the SDSR, we found quite a lot. SFO officers are already doing this work. It is here to be—[Interruption.] My writing is appalling. One of the reasons we want to remove their need be accredited financial investigators is that that is another hurdle that will get in their way and make them less productive, so we have removed some of those issues.

[Dr Huq]

It is the NCA as well. Both of those big reports from the Home Affairs Committee and the Public Accounts Committee said that there should be more consistent funding, but I am not going to let that niggle get in the way right now because we have a whole clause on that coming at the end.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Schedule 1 agreed to.

Clauses 15 and 16 ordered to stand part of the Bill.

Clause 17

Search and seizure warrants: assault and obstruction offences

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

[Mr Wallace]

This clause, and those that follow, fill a gap in the general law relating to those who conduct investigations of being placed in danger of being assaulted or obstructed. It is a general offence to assault another person, but in addition to that, police officers and HMRC officers are protected by specific offences that relate to the obstruction or assault of those officers in the course of their duties.

There are two very good reasons for specific offences. Those officers, by the very nature of their actions and work, face a much higher danger and likelihood of being assaulted. For example, they often enter the residences of serious criminals. I am sure the Committee sees that that is a wholly different scenario from what is envisaged in the general offence of assault. We, as law-abiding citizens, are not actively placing ourselves in situations that put us in danger.

Although we are unaware of any prosecutions relating to the assault or obstruction of police officers or others while exercising powers under the Proceeds of Crime Act, there is wide recognition that it is an important safeguard. It is a gap in the law that under POCA, investigators of certain agencies are put in situations where they could be assaulted or obstructed, and yet there are no connected offences. Section 453A of POCA has already created assault and obstruction offences for civilian accredited financial investigators operating under the Act. The clause provides that those who can execute search and seizure warrants in civil recovery investigations have a similar protection.

[Dr Huq]

We have had two good debates on the Floor of the House recently about the assault of police officers. These are very good provisions, and we are happy to support them.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Assault and obstruction offence in relation to SFO officers

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

[Mr Wallace]

The clause addresses a gap in the law relating to those who conduct investigations being placed in danger of being assaulted or obstructed. Much of what I said in relation to clause 17 also applies here. We are extending powers to SFO officers elsewhere in the Bill—in clause 14 and schedule 1, as well as clauses 12 and 13. In doing so, we place them in the position of being vulnerable to being assaulted or at least obstructed.

Unlike the police, HMRC officers and others, there is no specific offence that relates to SFO officers who are assaulted or obstructed in the course of their duties in general. The Bill therefore creates one to support the more general provisions of extending powers to the SFO. SFO officers currently access the powers in POCA as accredited financial investigators, and there are offences of assault and obstruction that relate to them. As accredited financial investigators, they are therefore protected by the offences in section 453A. The clause will simply copy the same approach, to reflect the fact that they will be able to operate the powers in their own right.

[Dr Huq]

This appears to us an entirely logical extension of the anti-assault powers. I know that taxmen are not always the most popular people, but I think MPs and used car salesmen are the most unpopular in the rankings of professions. We thoroughly support the clause.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Obstruction offence in relation to immigration officers

Amendment made: 11, in clause 19, page 72, line 36, at end insert—

“( ) section 303C as so applied (powers to search for a listed asset);

( ) section 303J as so applied (powers to seize property);

() section 303K as so applied (powers to detain seized property);”—(Mr Wallace.)

This amendment is consequential on NC9.

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

[Mr Wallace]

This clause is similar to clauses 17 and 18. It addresses the need for an offence of obstruction, in this case to apply to immigration officers. Much of what I have already said in relation to such an offence also applies here. Under section 21(1)(g) of the Immigration Act 1971, a person commits an offence if they obstruct an immigration officer who is lawfully acting in accordance with their powers under that Act. That obstruction offence does not apply to the exercise of powers under the Proceeds of Crime Act.

As immigration officers now regularly use their powers under POCA—in particular since the extension of those powers in the Crime and Courts Act 2013—it is consistent for them to have a related obstruction offence. The clause amends POCA to create such an offence. Immigration officers are already covered by a general assault offence under section 22 of the UK Borders Act 2007, so no further provision is required in relation to assault. We are also amending immigration officers’ power of arrest without warrant to include this new offence.

[Dr Huq]

Again, Her Majesty’s Opposition entirely support this clause in relation to obstruction of immigration officers in the line of duty.

Question put and agreed to.

Clause 19, as amended, accordingly ordered to stand part of the Bill.

Clause 20

External requests, orders and investigations

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

[Mr Wallace]

Clause 20 makes a technical change, consequential to clause 18. Under section 444 of POCA, an Order in Council can be made to set out the procedure for providing assistance to other countries in freezing and confiscating property in the UK that is related to their cases. The Order in Council can create provisions that correspond to those available in our own domestic cases. The clause ensures that any offence created relating to the assault or obstruction of an SFO officer mirrors the one that we are creating domestically under clause 18. I hope the clause stands part of the Bill.

[Dr Huq]

Again, we have heard that these criminals often do not respect borders and maps, so we support the move to extend the provisions to external requests.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Seized money: England and Wales

--- Later in debate ---

[Mr Wallace]

Amendments 12, 13 and 14 are a logical extension of powers that are already within POCA. Section 67 of POCA provides the magistrates court with a power in relation to money seized by the police or HMRC under the Police and Criminal Evidence Act 1984 that has to be paid into a bank or building society account. The court can order that money be paid to the court in satisfaction of a confiscation order. The money still belongs to the criminal. Therefore, section 67 avoids the ridiculous scenario of money being paid back into the criminal bank account when there is an outstanding confiscation order to pay. The amendments do not break new ground, but extend the established logic of section 67. When the police have possession of a criminal’s money, they should be able to transfer that across in the payment of a confiscation order, rather than return it to the criminal.

The amendments do three things. First, section 67 currently applies only to police and HMRC officers. The amendments effectively extend the powers to law enforcement officers who have the power to seize money, including immigration officers and SFO investigators. Secondly, the provision will now apply to money that has been seized under any power relating to a criminal investigation or proceeding, or under the investigatory powers in POCA. Instead of being limited to money seized under the Police and Criminal Evidence Act, this removes an unnecessary restriction. Many other powers of seizure should come from this provision’s scope, such as those in the Immigration Act 2016.

Thirdly, section 67 currently applies only to money that has been paid into a bank or building society account. That is another false limitation. For example, if money has evidential value it will not be paid into an account. It may be required at a trial as evidence that it is contaminated with a trace of drugs or explosives. It would be odd that a convicted drug trafficker with an outstanding confiscation order has his money returned by the police purely because that money was used as evidence in his trial, and not paid into his bank account.

There was no provision equivalent to section 67 in Scotland. Section 67 applied in England and Wales, and was similar to section 215 for Northern Ireland. I draw the Committee’s attention to clause 23, which introduces a similar power in Scotland. In constructing clause 23, we have been made to rethink the scope of section 67. We have come to the conclusion that it should be extended in the ways I have just described. We are also looking into whether to make similar amendments to the powers being introduced in Scotland and to the existing powers in Northern Ireland, and I will update colleagues in due course. I am sure the Committee will agree that this is an entirely sensible extension of the existing power to support the enforcement of confiscation orders.

[Dr Huq]

We do not oppose the amendment.

Amendment 12 agreed to.

Amendments made: 13, in clause 21, page 73, line 18, leave out subsection (2) and insert—

“( ) For subsection (8) substitute—

(8) In this section—

“appropriate person” means—

(a) in a case where the money is held in an account maintained with a bank or building society, the bank or building society;

(b) in any other case, the person on whose authority the money is detained;

“bank” means an authorised deposit taker, other than a building society, that has its head office or a branch in the United Kingdom;

“building society” has the same meaning as in the Building Societies Act 1986;

“relevant seizure power” means, subject to subsection (9), a power to seize money conferred by or by virtue of—

(a) a warrant granted under any enactment or rule of law, or

(b) any enactment, or rule of law, under which the authority of a warrant is not required.

(9) A power to seize money conferred by Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 is not a “relevant seizure power” for the purposes of this section.”

This amendment defines terms used in amendment 12 and makes a consequential change to the Bill.

Amendment 14, in clause 21, page 73, line 23, leave out “subsection (8)(a)” and insert—

“the definition of “bank” in subsection (8)”.—(Mr Wallace.)

This amendment is consequential on amendment 13.

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

[Mr Wallace]

The clause is a technical amendment to POCA, specifically to update references to the definition of “bank” in three sections. The current reference in POCA is to the Banking Act 1987, which was repealed in December 2001, before POCA was commenced. The reason for its repeal was to remove bank regulation from the Bank of England, and to make it independent. Although no universal definition of a bank was given in the Banking Act, and nor is there any such definition in the subsequent legislative changes, a bank is defined by its activity as a deposit taking institution.

The only references in POCA affected by the change are those in three sections: section 67, section 215, and paragraph 6 of schedule 3. In addition, the definition will apply for the purpose of the new powers in the Bill to freeze and forfeit funds in a bank account.

Section 67 provides that where a confiscation order is made against a person, and moneys belonging to that person are held in a bank or building society account maintained by the police or HMRC, those institutions can be ordered to pay those moneys to the court. Section 215 makes equivalent provisions for Northern Ireland, and paragraph 6 of schedule 3 to POCA refers specifically to a Scottish provision relating to the deposit of certain moneys by an administrator into an “appropriate bank or institution”.

These changes replicate, as much as possible, the previous provisions, while recognising that the legislation in the area has now changed. I hope the clause will stand part of the Bill.

[Dr Huq]

Once again, I am proud that the Proceeds of Crime Act was a Labour Act that we pushed through when we were in government. It is now being updated to reflect contemporary circumstances.

Question put and agreed to.

Clause 21, as amended, accordingly ordered to stand part of the Bill.

Clause 22

Seized money: Northern Ireland

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

[The Chair]

With this it will be convenient to consider clauses 23 to 28 stand part.

--- Later in debate ---

[Mr Wallace]

I am touched by the love of Scotland expressed by my hon. Friend the Member for Dover—although his constituency is closer to France than Scotland. I might be able to help him on some of his technical questions.

My hon. Friend’s first question was about why the miscellaneous provisions relate to Scotland, how they are processed and why they are different. Sections 67 and 215 of the 2002 Act provide that a magistrates court can require a bank or building society to pay a sum of up to £5,000 if it fails to comply with an order. However, there is no precedent for such a provision in Scottish law. Also, the equivalent orders in Scotland will apply to law enforcement authorities, as well as to banks and building societies. It was therefore considered more appropriate for any, hopefully rare, wilful non-compliance with an order in Scotland to be dealt with as contempt of court.

Clause 24 addresses recovery orders relating to heritable property. Although it is Scottish Ministers, as the enforcement authority, who apply for a recovery order, once granted it is for the trustee for civil recovery to recover possession of any heritable property to which the recovery order applies. That is because the effect of a recovery order is to vest the property in the trustee for civil recovery. Under existing law, however, a trustee for civil recovery is unable to seek recovery of possessions directly in the Court of Session so must raise a separate action in a lower court, namely the appropriate sheriff court. That can lead to defenders rehashing arguments that were unsuccessful before the Court of Session and incurring costs for those days, which ultimately compromises the amount recovered. Such delays also permit those involved in criminality to continue occupying a property despite the Court of Session having determined that the property was obtained through unlawful conduct and should therefore be recovered.

My hon. Friend is rightly concerned about sitting tenants whose house is owned by a crook and who suddenly find that it is forfeited or frozen. The primary policy obligation is the effective recovery of the proceeds of crime, which is generally best served by recovering the heritable property concerned and selling it so that proceeds from the sale can be added to the public purse. A primary function of the trustee for civil recovery is to realise the value of the property for the benefit of the enforcement authority, which, in Scotland, is the Scottish Ministers. It was never intended that the trustee should take on the functions of a landlord in relation to any sitting tenants.

However, we are considering introducing amendments to other legislation in consequence of the clause, as was well pointed out by my hon. Friend the Member for Dover, with a view to ensuring that any legitimate tenant receives fair notice that a recovery order is being sought in respect of the property concerned and that, if granted, they will have to vacate the property within a certain period of time, and that adequate support is put in place to safeguard against homelessness.

Let me move on to the fourth point, relating to the definition of “bank”—I remember this being a particularly gripping part of the Bill when I was reviewing the legislation. The Banking Act 1987 provided a definition of a bank; these amendments simply update the definition to ensure that it is current, as the Banking Act has been repealed.

[Dr Huq]

I am reassured to hear that tenants’ rights, which are often under-regulated in this country, will be dealt with in the legislation.

I have a question about clause 26, which is on accredited financial investigators. We have had those in this country since 2009. Even though I do not have the exact figures—my iPad is not getting wi-fi—there is evidence that we have not hung on to all of them. People have been trained as specialist investigators out of the public purse. We live in an age where we should justify every pound of public money, and we seem to have lost those people to the private sector. A lot of them have been poached.

[Charlie Elphicke]

This was exactly my concern as I studied the Bill in great detail. However, I feel that my hon. Friend the Member for Louth and Horncastle, who is extraordinarily able and learned in these matters, answered that question by saying that one should be able to draw on skills across the whole nation by contracting them in. I thought that was quite a powerful point.

[Dr Huq]

It was a powerful point. As I was going to say if the hon. Gentleman had allowed me to finish the sentence I had embarked on, this issue will be addressed at the end in one of our new clauses. Perhaps we could build in some way of, if not exactly giving them golden handcuffs, then retaining them or even getting the cost of the training repaid, whatever that is. We see the same happening across other sectors. We hear of junior doctors being lost to Australia. It would be a tragedy if we trained these people up and then off they went, poached by the private sector. We have heard of examples where they have gone to the gambling industry, which my hon. Friend the Member for Swansea East has experience of in her role on the all-party group on fixed odds betting terminals. I flag that issue up now, but we will come back to it later in a new clause.

[Mr Wallace]

I have heard the hon. Lady’s sentiment. We will discuss the new clause later. I understand the point that we invest in people and we as the taxpayer should extract that investment back. We will no doubt discuss that further.

On the final concern raised by my hon. Friend the Member for Dover about the governance of accredited financial investigators, the use of the power in the clause is covered by a code of practice that will be amended. That mirrors the application processes elsewhere in POCA whereby civilians authorise applications. I am happy to provide those codes of practice for my hon. Friend to look at.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clauses 23 to 27 ordered to stand part of the Bill.

Clause 28

Confiscation orders and civil recovery: minor amendments

Amendment made: 15, in clause 28, page 78, line 33, at end insert—

‘(2A) In section 148 (free property: Scotland), in subsection (3)(b) for “or 297D” substitute “, 297D or 298(4)”.” —(Mr Wallace.)

Clause 28(2) amends section 82 of the Proceeds of Crime Act 2002, which determines what constitutes “free property” in relation to confiscation proceedings in England and Wales, by providing that property detained under section 298(4) of the 2002 Act is not free property. This amendment provides for a corresponding change to be made to section 148, which applies in the case of confiscation proceedings in Scotland.

Clause 28, as amended, ordered to stand part of the Bill.

Clause 29

Disclosure orders

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

[Mr Wallace]

We now move on to part 2 of the Bill, relating to terrorist property. In our discussions so far we have focused on clauses that are about ensuring we take the profit out of serious and organised criminality. Terrorism finance is different. Individuals who raise and move funds for the purpose of terrorism are not concerned with profit, but with causing the loss of life. It is essential that the tools available for terrorist finance investigations and the powers available to seize terrorist cash and property are as comprehensive as those available for dealing with other financial crime or, in some cases, more robust. Part 2 of the Bill is included for that purpose.

The relevant clauses therefore largely reflect the existing provisions relating to financial crime, but have been adapted as needed to respond to what is a different type of threat. As I explained earlier, disclosure orders are available for confiscations, civil recovery and exploitation proceeds investigations. Clause 29 and schedule 2, which it introduces, are very similar to clauses 7 and 8, and extend disclosure orders to money laundering investigations, but do so for terrorist finance investigations. The clause will make disclosure orders available for terrorist finance investigations, which will give law enforcement agencies the means to obtain information that is significant for investigating suspected terrorist finance offences or for identifying terrorist property.

The clause makes it possible for the police to apply to the court for an order to compel an individual to answer questions, to provide information or to produce documentation that is assessed to be relevant to progressing a terrorist finance investigation. It will be an offence to fail to comply with such an order without reasonable excuse, and to make a false or misleading statement in response to such an order. Either offence is punishable by a possible term of imprisonment of up to two years.

This is a robust measure, which is appropriate when we consider the type of threat with which we are concerned. However, it will operate with a number of safeguards: the application for an order must be made by a senior police officer, at least a superintendent, or authorised by such an officer; and the court must be satisfied that the information sought will be of substantial value, and that it is in the public interest for it to be provided, before making an order.

The action plan for money laundering and counter-terrorism finance, to which I have referred on numerous occasions, identified the need for a more robust law enforcement response to tackle money laundering and terrorist finance in all its forms. The measure is part of that response.

[Dr Huq]

The Minister is absolutely correct that the Government’s action plan of April 2016 identified this as a crucial area in need of examination. Terrorism is the threat of our modern age, along with climate change, so we go along with the clause.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Schedule 2

Disclosure orders

[Mr Wallace]

I beg to move amendment 16 in schedule 2, page 109, line 9, leave out “designated” and insert “counter-terrorism”.

This amendment, and amendments 18, 20, 21 to 25, 27 to 49 and 54, are consequential on amendment 26.

--- Later in debate ---

[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.

[The Chair]

With this it will be convenient to discuss clause 31 stand part.

[Mr Wallace]

Collaboration between law enforcement and the private sector is incredibly important for countering terrorism, as it is for combating serious and organised crime. The importance of such close collaboration will be a key theme that features prominently in the forthcoming revised Contest counter-terrorism strategy.

Clauses 30 and 31 mirror the provisions in clauses 10 and 11, but for terrorist finance investigations.

As I have outlined to the Committee in relation to part 1 of the Bill, the Government are committed to improving public-private partnerships. We must support the regulated sector to come together to share expertise and information to help it protect legitimate businesses from being exploited for criminal or terrorist intent. In some cases, the detailed picture held by the regulated sector might be key to understanding particular threats. Closer working with the regulated sector can only enhance our understanding of terrorism and provide opportunities to protect against it or disrupt it. Clearly, the financial sector in particular can play a vital part in terrorist finance investigations and tracking terrorist property.

Clause 30, like clause 10 on money laundering, will enable firm-to-firm information sharing through a legal gateway, which will provide immunity from civil liability, encouraging the reporting sector to share information to detect and prevent money laundering and terrorist financing. The joint money laundering intelligence taskforce has demonstrated that there is potential for information sharing in relation to terrorist financing to support effective law enforcement action and disrupt threats to our national security. The clause is an important measure that enables us to take forward that agenda. Although obligations to protect customers’ personal data remain important and must be respected, where it is possible to overcome barriers to the effective sharing of information to progress an investigation, the Government will do what we can to allow it.

Clause 31 will allow the National Crime Agency or the police, following receipt of a report under section 21(2)(a) of the Terrorism Act 2000, to request further information from any member of the regulated sector, irrespective of whether that entity raised the original suspicious activity report. It will also allow the National Crime Agency to seek further information on behalf of a foreign authority. Just as in clause 11, in the event that a member of the regulated sector does not comply with a request for more information, the provision will also allow the NCA or the police to obtain a court order to ensure that it is provided.

The two clauses will allow better information flows within the regulated sector and between the regulated sector and law enforcement agencies, generating better intelligence for law enforcement agencies and helping firms better protect themselves. I commend the clauses to the Committee.

[Dr Huq]

Clauses 30 and 31 revisit the information sharing themes that we have been discussing all day. We thoroughly commend them. They build on another good piece of Labour legislation, the Terrorism Act 2000. Unfortunately, terrorists have become ever more ingenious in the evil schemes that they dream up in the 16 years since, which is why the clauses are necessary.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Clause 31

Further information notices and orders

Amendments made: 18, in clause 31, page 86, line 1, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 19, in clause 31, page 86, leave out line 3. —(Mr Wallace.)

This amendment removes a reference to the Scottish Ministers from the list of persons who may give a further information notice under new section 22B of the Terrorism Act 2000.

Question put and agreed to.

Clause 31, as amended, ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Andrew Griffiths.)

Criminal Finances Bill (Fifth sitting)

Rupa Huq Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[The Minister for Security (Mr Ben Wallace)]

Good morning, Mrs Main. I am delighted to serve under your chairmanship. This group deals with the provisions in the Bill that allow for the seizure and forfeiture of terrorist property. I suggest that we covered some of this ground in our debates last week on clauses 12 and 13, which will do likewise for proceeds of crime, and I will seek to avoid repeating all the same points.

Clause 32 and schedule 3 cover the seizure and forfeiture of moveable personal items such as precious metals and gemstones where they are earmarked for terrorism, are the resources of a proscribed organisation or are intended for use in terrorism. Clause 33 and schedule 4 give law enforcement agencies new powers to freeze funds held in bank or building society accounts that are suspected to be terrorist money, and provide for such funds to be forfeited if law enforcement agencies or the courts are satisfied that that is the case. Hon. Members will know that the threat from terrorism is constantly evolving. In the same way that we should have a mechanism to deal with criminals who launder money to evade disruption, we should have the ability to seize items that represent terrorist property.

Although this is a powerful new measure, several safeguards are built into the Bill to ensure that the interference with individuals’ rights to enjoy private property is managed in a way that is proportionate and guards against innocent parties being disadvantaged. Seized property may initially be detained for only 48 hours before an application must be made to a magistrates court in England, Wales or Northern Ireland, or to the sheriff in Scotland, for further detention for up to two years. There is therefore judicial oversight of this provision. Individuals who are joint owners of property will be able to claim back the value of their share.

Denying access to funding is already a key part of our counter-terrorism strategy, but the current powers in the Terrorist Asset-Freezing etc. Act 2010 may not always be the most appropriate operational route for combating the financing of terrorism, as they are designed to freeze the entirety of someone’s economic assets, carry a relatively high threshold for use and do not include forfeiture powers. That is why we have tabled several amendments to this part of the Bill.

New clause 18 will ensure that UK law enforcement agencies have the ability to seek forfeiture of terrorist cash without requiring a court order. An administrative forfeiture power is already provided for in the Proceeds of Crime Act 2002, as amended by the Policing and Crime Act 2009. However, the terrorist cash provisions in the Anti-terrorism, Crime and Security Act 2001 were not amended at that time, and we seek to address that anomaly. The new clause will ensure that the best use is made of both the courts’ and the police’s time and resources by providing that there is no need for law enforcement bodies to involve the courts where forfeiture is uncontested.

However, these provisions are not without oversight. Where terrorist cash is seized, extended detention beyond an initial 48-hour period is already subject to oversight by a magistrates court, or the sheriff in Scotland. There is therefore early judicial involvement in the detention and forfeiture process. In addition, the administrative forfeiture of cash will be exercisable only by a senior officer who is a police officer of at least the rank of superintendent.

The other amendments in this group make several technical and consequential changes to complement those provisions. In particular, they address inconsistencies in the definition of “senior officer” in the Anti-terrorism, Crime and Security Act 2001 and the Terrorism Act 2000 to ensure that such a person is at least the rank of superintendent. The amendments will also ensure that a court can order that property be detained under the powers in ACSA for up to six months per application, with an overall cap of two years, which is consistent with the Proceeds of Crime Act, and that these administrative forfeiture powers can be applied for and implemented in Scotland. Taken together, these measures will strengthen law enforcement agencies’ ability to disrupt terrorist financing in a proportionate and effective way.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

I apologise for being slightly late, Mrs Main. Her Majesty’s Opposition support the amendments.

Question put and agreed to.

Clause 32 accordingly ordered to stand part of the Bill.

Schedule 3

Forfeiture of certain personal (or moveable) property

Amendments made: 61, in schedule 3, page 117, line 36, leave out “3” and insert “6”.

This amendment has the effect that an order for the detention of seized property under new Part 4A of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 may be made for a period of up to 6 months, rather than 3 months. This is in line with the provision made by Part 5 of the Proceeds of Crime Act 2002.

Amendment 20, in schedule 3, page 122, line 28, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 62, in schedule 3, page 122, line 38, leave out “inspector” and insert “superintendent”.

This amendment has the effect that a police officer must be of at least the rank of superintendent, rather than inspector, in order to be a senior police officer for the purposes of new Part 4A of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Amendment 63, in schedule 3, page 126, line 33, at end insert—

“(5) If sub-paragraph (6) applies, the court or sheriff may order the property to which the application relates to be released to the applicant or to the person from whom it was seized.

(6) This sub-paragraph applies where—

(a) the applicant is not the person from whom the property to which the application relates was seized,

(b) it appears to the court or sheriff that the property belongs to the applicant,

(c) the court or sheriff is satisfied that the release condition is met in relation to the property, and

(d) no objection to the making of an order under sub-paragraph (5) has been made by the person from whom the property was seized.

(7) The release condition is met—

(a) in relation to property detained under paragraph 10C or 10D, if the conditions in paragraph 10C or (as the case may be) 10D for the detention of the property are no longer met, and

(b) in relation to property detained under paragraph 10G, if the court or sheriff decides not to make an order under that paragraph in relation to the property.”

This amendment adds to new paragraph 10O of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001, which concerns the release of property seized under new Part 4A of that Schedule, provision which is equivalent to section 301(4) and (5) of the Proceeds of Crime Act 2002.

Amendment 21, in schedule 3, page 127, line 18, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 22, in schedule 3, page 127, line 20, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 23, in schedule 3, page 127, line 28, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

Schedule 3, as amended, agreed to.

Clause 33 ordered to stand part of the Bill.

Schedule 4

Forfeiture of money held in bank and building society accounts

Amendments made: 24, in schedule 4, page 129, line 1, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 64, in schedule 4, page 129, line 7, leave out “inspector” and insert “superintendent”.

This amendment has the effect that a police officer must be of at least the rank of superintendent, rather than inspector, in order to be a senior officer for the purposes of new Part 4B of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Amendment 65, in schedule 4, page 131, line 37, leave out “: England and Wales and Northern Ireland”.

This amendment is consequential on amendment 66.

Amendment 66, in schedule 4, page 131, line 38, leave out “made by a magistrates’ court”.

This amendment has the effect of extending the application of the provision in new Part 4B of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 about the administrative forfeiture of terrorist money held in bank and building society accounts from England and Wales and Northern Ireland to the whole of the UK.

Amendment 67, in schedule 4, page 134, line 11, leave out “a magistrates’” and insert “the relevant”.

This amendment is consequential on amendment 66.

Amendment 68, in schedule 4, page 134, line 16, after “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 69, in schedule 4, page 134, line 22, after “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 70, in schedule 4, page 134, line 26, after first “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 71, in schedule 4, page 134, line 29, after first “the”, insert “relevant”.

This amendment is consequential on amendment 66.

Amendment 72, in schedule 4, page 134, line 35, leave out “, is to be paid into the Consolidated Fund.” and insert—

“—

(a) if, before being forfeited, the money was held in an account in relation to which an account freezing order made by a magistrates’ court had effect, is to be paid into the Consolidated Fund;

(b) if, before being forfeited, the money was held in an account in relation to which an account freezing order made by the sheriff had effect, is to be paid into the Scottish Consolidated Fund.”

This amendment is consequential on amendment 66.

Amendment 25, in schedule 4, page 138, line 15, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

Schedule 4, as amended, agreed to.

Clause 34

Extension of powers to accredited financial investigators

Amendments made: 26, in clause 34, page 90, line 28, leave out from beginning to end of line 17 on page 91 and insert—

“Counter-terrorism financial investigators

63F Counter-terrorism financial investigators

(1) The metropolitan police force must provide a system for the accreditation of financial investigators (“counter-terrorism financial investigators”).

(2) The system of accreditation must include provision for—

(a) the monitoring of the performance of counter-terrorism financial investigators,

(b) the withdrawal of accreditation from any person who contravenes or fails to comply with any condition subject to which he or she was accredited, and

(c) securing that decisions under that system which concern—

(i) the grant or withdrawal of accreditations, or

(ii) the monitoring of the performance of counter-terrorism financial investigators,

are taken without regard to their effect on operations by the metropolitan police force or any other person.

(3) A person may be accredited if he or she is—

(a) a member of civilian staff of a police force in England and Wales (including the metropolitan police force), within the meaning of Part 1 of the Police Reform and Social Responsibility Act 2001;

(b) a member of staff of the City of London police force;

(c) a member of staff of the Police Service of Northern Ireland.

(4) A person may be accredited—

(a) in relation to this Act;

(b) in relation to the Anti-terrorism, Crime and Security Act 2001;

(c) in relation to particular provisions of this Act or of the Anti-terrorism, Crime and Security Act 2001.

(5) But the accreditation may be limited to specified purposes.

(6) A reference in this Act or in the Anti-terrorism, Crime and Security Act 2001 to a counter-terrorism financial investigator is to be construed accordingly.

(7) The metropolitan police force must make provision for the training of persons in—

(a) financial investigation,

(b) the operation of this Act, and

(c) the operation of the Anti-terrorism, Crime and Security Act 2001.”

This amendment provides for a new system of accreditation and training of financial investigators for the purposes of exercising certain powers under the Terrorism Act 2000 and the Anti-terrorism, Crime and Security Act 2001.

Amendment 27, in clause 34, page 91, line 24, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 28, in clause 34, page 91, line 36, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 29, in clause 34, page 91, line 38, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 30, in clause 34, page 91, line 45, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 31, in clause 34, page 92, line 2, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 32, in clause 34, page 92, line 5, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 33, in clause 34, page 92, line 7, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 34, in clause 34, page 92, line 11, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 35, in clause 34, page 92, line 14, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 36, in clause 34, page 92, line 16, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 37, in clause 34, page 92, line 20, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 38, in clause 34, page 92, line 22, leave out “designated accredited” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 39, in clause 34, page 92, line 26, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 40, in clause 34, page 92, line 28, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 41, in clause 34, page 92, line 36, leave out “designated” substitute “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 42, in clause 34, page 92, line 42, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 43, in clause 34, page 92, line 44, leave out “designated” and insert “counter-terrorism”.— (Mr Wallace.)

See the explanatory statement to amendment 16.

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

[The Chair]

With this it will be convenient to discuss clause 35 stand part.

[Mr Wallace]

Across UK policing, more use is being made of skilled individuals who are not warranted police officers to support the full range of police work, allowing warranted officers to focus on the activities that need their specific training and experience. The financial aspects of terrorism investigations are unlike proceeds of crime investigations—this is not about identifying illicit wealth and taking the profit out of crime. For terrorism, financial investigation allows the police to disrupt terrorist activity by removing access to funds, and to make links in terrorist investigations.

As I set out last week, clause 34 provides for the creation of a new category of civilian financial investigator, to be known as a counter-terrorism financial investigator, which will exercise certain existing investigatory powers, including applying to a court for production orders, financial information orders or account monitoring orders, and to seize terrorist cash or moveable stores of value. The investigator will also be able to use new disclosure order powers being created under the Terrorism Act 2000 and the new bank account seizure and forfeiture powers in the Anti-terrorism, Crime and Security Act 2001.

The new provisions do not confer on counter-terrorism financial investigators any of the search powers available in the legislation for terrorist investigations, and the Government amendments we debated last week will ensure that the investigators will be subject to training and monitoring by the Metropolitan Police Service. The changes are entirely consistent with the changes currently being brought in through the Policing and Crime Bill, which will give chief officers a greater ability to designate civilians with the powers of constables.

Finally, clause 35 introduces offences of obstructing or assaulting the investigators. It is important that a civilian performing the functions of, and exercising the same powers as, a police officer is afforded the same legal protections from assault or wilful obstruction as their police counterparts. That is consistent with the approach taken in the Proceeds of Crime Act 2002 and elsewhere in the Bill. I hope the clauses stand part of the Bill.

[Dr Huq]

We support the clauses but we also have tabled a forthcoming new clause that questions a couple of things. If we are looking at increasing workload, we like the idea of the extension of powers of the accredited financial investigators, but we would like to see some commensurate resources. On the other stuff, public servants should never be assaulted in the line of duty, so we wholeheartedly support that provision.

Question put and agreed to.

Clause 34, as amended, accordingly ordered to stand part of the Bill.

Clause 35

Offences in relation to accredited financial investigators

Amendments made: 44, in clause 35, page 93, line 3, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 45, in clause 35, page 93, line 4, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 46, in clause 35, page 93, line 7, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 47, in clause 35, page 93, line 36, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 48, in clause 35, page 93, line 37, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 49, in clause 35, page 93, line 41, leave out “designated” and insert “counter-terrorism”.—(Mr Wallace.)

See the explanatory statement to amendment 16.

Clause 35, as amended, ordered to stand part of the Bill.

Clause 36

Meaning of relevant body and acting in the capacity of an associated person

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

[Mr Wallace]

Mrs Main, this is like an auction—the speed at which you are dealing with matters. The only person who can understand these things is the auctioneer.

Clause 36 defines essential terms that establish the scope of the new corporate offences of domestic and foreign failure to prevent tax evasion. It defines those entities that can be liable under the new offences, and those persons for whom a corporation can be liable if it fails to prevent them from facilitating tax evasion. The relevant bodies that can be liable under the new offences are defined as bodies incorporated and partnerships, not individual men or women, reflecting the responses to HMRC’s consultation on the provisions. The new offences can therefore be committed by companies, whether established to make a profit or for charitable purposes; partnerships; and similar entities established under foreign law. Indeed, the not-for-profit sector publically welcomed the offence applying to its sector, recognising that charities can be misused to facilitate tax evasion. Individuals involved in facilitating tax evasion will of course continue to face prosecution under existing tax evasion offences.

We will go on to debate the provisions in greater depth, but for now it is important to stress that part 3 of the Bill creates offences of corporate failure to prevent the criminal facilitation of tax evasion. They are not offences of corporate failure to prevent tax evasion itself and do not create a legal obligation for corporations to prevent their client’s tax evasion.

The clause also defines broadly the persons who could attract liability for a relevant body. Those include an employee, an agent and any other person who provides services for, or on behalf of, the relevant body. That mirrors the similar offence of corporate failure to prevent bribery in the Bribery Act 2010. That is important because we have seen in the past that corporations structure their affairs to try to insulate themselves from liability by deliberately contracting out the most risky services, typically to persons based in the most secretive jurisdictions. The definition of associated persons in the clause addresses that and closes that potential loophole.

However, it is important to appreciate that not every act of, say, an employee will give rise to criminal liability for the relevant body. For example, where an employee who has gone home from work and is acting in their private capacity criminally facilitates a tax evasion offence by their partner, that will not give rise to any liability for the employing relevant body because the criminal facilitating act was not done in the capacity of employee. I hope that that explanation provides a useful introduction to how the subsequent clauses will function.

[Dr Huq]

We support the clause. The Minister mentioned the Bribery Act 2010, from which there has been an unusually small number of successful convictions. Does he have any thoughts as to whether there will be a beefed-up number from this legislation? That is largely what I wanted to ask about it. Many big companies have been blogging that it is a bad idea, which makes me think that it must be a good one.

[Mr Wallace]

In response to what has been said by the Opposition spokeswoman, it is important to note that the Bribery Act has two effects: prosecution, but also change of behaviour. If one goes out to many parts of the world where British companies are engaged in export or trying to win orders, it is clear that the message has gone out loud and clear not to bribe them and not to be involved in bribery. I was in Kenya a couple of weeks ago, and it is clear that British businesses there—people wishing to do business—do not even ask. That is a cultural change so, as I said, the effect is twofold. One thing that can be said about the Bribery Act is that it certainly went to the heart of things. There were no favours drawn: the first person convicted under the Bribery Act was an employee of the Ministry of Justice, and was convicted quite soon after the introduction of the legislation, so we all work under it, whether we are a civil servant or a business.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Clause 37

Failure to prevent facilitation of UK tax evasion offences

Amendment made: 50, in clause 37, page 95, line 40, after “England” insert “and Wales”.—(Mr Wallace.)

This amendment corrects an omission in clause 37(8)(b).

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

--- Later in debate ---

[Dr Huq]

We support the clause, its global reach and the idea of weeding out corporate bad apples, if that is not mixing too many metaphors—weeds and apples at the same time. The Minister is correct; we think the clause could go further. We have tabled amendments to the next clause.

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

We support the clause and, like the Opposition spokesperson, we commend its international reach. We look forward to discussions, perhaps this afternoon, on new clause 6, but instinctively, like Opposition Members, we are minded to take the clause further.

As time goes on, we ought to monitor the issue of designing processes that demonstrate that reasonable measures have been taken not to facilitate tax evasion. As a consumer finance lawyer, I have seen large multinational organisations roll out various folders of processes, procedures and protocols, but we were not always convinced that those had been followed to the letter. Some sort of monitoring mechanism would be most helpful.

We ask the Government to take note of the evidence we heard last week that these measures could disproportionately impact smaller organisations; larger organisations may be more suited to gathering this information in order to set out processes and procedures. We should keep an eye on those two things. We look forward to discussions on new clause 6 and support the clause.

[Mr Wallace]

To clarify, I think that statutory guidance is first published in draft. Given the hon. Gentleman’s experience, I would welcome his input on whether that guidance is appropriate. We did that with the Bribery Act; I remember when that came out. Statutory guidance is an important tool for small businesses, because big businesses have big compliance departments and can do all the work even without the statutory guidance, but for small or medium-sized businesses, the statutory guidance is a good starting point. It is really important both that we get it right, and that we get it written in plain English.

I reiterate the offence created by the clause: if someone in a Crown dependency or overseas territory—I know that hon. Members are interested in those—is advising UK citizens to evade UK tax, it does not matter that they have no nexus here; they are criminally at risk. As regards trying to change the behaviour of overseas territories or tax havens, this offence will allow us to prosecute people anywhere in the world who are encouraging people to evade UK tax. That is a major and significant step. If someone on a Caribbean island calls themselves a tax consultant and encourages British people to evade tax, we will come after them. That is a major change that goes beyond the shores of the United Kingdom. I hope that the action that we have taken to stop that will go some way to alleviating colleagues’ concerns about the behaviour of some tax havens around the world.

Question put and agreed to.

Clause 37, as amended, accordingly ordered to stand part of the Bill.

Clause 38

Failure to prevent facilitation of foreign tax evasion offences

[Dr Huq]

I beg to move amendment 5, in clause 38, page 96, line 6, after “United Kingdom” insert—

“Crown dependency or British overseas territory”.

This amendment would extend the offence of failure to prevent facilitation of foreign tax evasion offences to companies incorporated in a British Overseas Territory or Crown Dependency.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 6, in clause 38, page 96, line 7, after “United Kingdom” insert—

“Crown dependency or British overseas territory”.

This amendment would extend the offence of failure to prevent facilitation of foreign tax evasion offences to companies doing business in a British Overseas Territory or Crown Dependency.

Amendment 7, in clause 38, page 96, line 9, after “United Kingdom” insert—

“Crown dependency or British overseas territory”.

This amendment would extend the offence of failure to prevent facilitation of foreign tax evasion offences to conduct conducted in a British Overseas Territory or Crown Dependency.

[Dr Huq]

These amendments in my name and those of my hon. Friends the Members for Swansea East, and for Bootle, seek to extend the offences of failure to prevent facilitation of foreign tax evasion, and all the other good work described in clause 37, for which the Scottish National party and ourselves praised the Minister, to companies incorporated in a UK overseas territory or Crown dependency. I stress how much we welcome the new offences on failing to prevent tax evasion, and the fact that they can apply anywhere in the world, as the Minister pointed out. However, we wish that they related to all economic crime, rather than just tax evasion, and that they covered companies doing business in overseas territories and Crown dependencies, and offences committed there.

This is quite a chunky Bill that is broad in scope, but this seems to be the gaping hole—the elephant in the room. Almost all those who gave evidence, and all the speeches on Second Reading, including those from respected Members on both sides of the House, such as the right hon. and learned Member for Harborough (Sir Edward Garnier), mentioned that this was a bit of an oversight. There is no mention of the issue at all in the Bill, and that is why we tabled these probing amendments to help the Committee better understand exactly how the new offences relate to the UK’s tax havens, as the Minister termed them; that is how they are perceived all around the world.

I raise the issue because we all know that the UK may well be facilitating tax evasion through its overseas territories. It is worth pointing out that the Foreign and Commonwealth Office appoints a Governor in each of these jurisdictions. The opaqueness and lack of transparency in these places makes it difficult to know the scale of the problem, but we know that developing countries are losing out massively. This legislation rightly seeks to hold directors of companies in the UK accountable for their business’s actions, but why does it not also apply to the UK’s overseas territories? The lack of accountability of directors there is dangerous.

Let us take the example of the British Virgin Islands, the jurisdiction that received the most mentions in the Panama papers, I believe, which is nothing to be proud of. Given its role in the Panama papers, is it not reasonable to talk about having more oversight of this UK-governed territory? It has more than 450,000 companies; nobody quite knows the exact number. That is at least 15 companies for every person—an unusually large number of companies. Every person would need to have 13 board meetings every day to get through all of them in a year.

It sounds like a bold suggestion, but we think that more action is needed. I have five questions for the Minister. When the UK receives information on the beneficial owners of companies registered in the British Virgin Islands, will it use it and look for potential tax evasion? Is there an active duty on the part of the Government? What action will they take if they find any tax evasion? How will owners of British Virgin Islands companies be held to account for their actions? What discussions has the Minister had with leaders of overseas territories and Crown dependencies about these excellent new offences? Are any of them minded to consider introducing something similar on a voluntary basis? We do not want to look like neo-imperialists, going into countries and making them do stuff, so what are they doing of their own volition? If offences are committed in UK-governed overseas territories, under what circumstances would prosecutions be possible under this new legislation?

The last question is the most important one, and the one that would help me to understand this: does the Minister concede that, as clause 40(1) refers to clause 38(2), his Bill effectively allows places such as the British Virgin Islands and the Cayman Islands to facilitate tax evasion on an industrial scale, provided that the companies have no business dealings in the UK? There has to be that link first; they have to have an office, or be somehow incorporated, in the UK. Sham businesses go to those territories only because they are implicitly backed by UK law. Historically, overseas territories and Crown dependencies have been able to market the attractiveness of their financial services by highlighting the fact that the UK rule of law underpins their systems; thus the situation is perpetuated. The fact that people can stash their dirty cash there is part of the unique selling point of these places. I am curious about how the provisions would apply to overseas territories and Crown dependencies if that UK link was not there.

[Richard Arkless]

We are interested in hearing what the Minister has to say on the clause before we make any submissions. We take the point about the link to a UK company, but we are also concerned about this House’s authority to legislate—or be seen to be legislating—over Crown dependencies.

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[Richard Arkless]

We agree with that summary from the Government. The Minister describing the amendment as “neo-imperialism” put the seal on my view of it. The Scottish National party is reluctant to legislate on areas where there is no locus and no nexus and we fully accept that that is the position of the Crown dependencies. We accept the Minister is keen to see that direction of travel continue. In that vein, we have held meetings with representatives of the Crown dependencies over the last few weeks and have been assured that their co-operation in providing information for the register of beneficial ownership is groundbreaking. It will be co-operative and give the authorities in the UK the armoury they need to tackle financial criminality.

I agree it is very likely, if not probable, that organisations facilitating tax evasion, whether in the Crown dependencies or overseas territories, will have a link to the UK and are more likely, more often than not, to have their head office in the UK. We may need to address that again once we leave the European Union, but we can discuss it.

[Dr Huq]

I listened carefully to what the Minister said and was slightly disappointed. I said precisely that I do not want to be neo-imperialist. I do not want to rush into these countries, which is why I asked what was happening already and whether there is any way those people can do things on their own. I did not say that we own those places; I simply said that the UK rule of law underpins their systems.

The Prime Minister said on the steps of Downing Street that she wants an economy that works for everyone. This looks like an anomaly from all the evidence we have had from all those groups, and from all the speeches on the Floor of the House on Second Reading. However, we are not going to push the measure to a vote. It was a probing amendment. I wanted to hear more about the anomaly where there is a direct UK connection. I do not think it is sufficient to turn a blind eye while this goes on.

The Minister mentioned what has happened in some of these places and I have information that will be more relevant when we consider new clause 21. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 51, in clause 38, page 96, line 37, after “England” insert “and Wales”.—(Mr Wallace.)

This amendment corrects an omission in clause 38(7)(b).

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

[The Chair]

With this it will be convenient to discuss the following:

New clause 7— Corporate probation order—

‘(1) A court before which a relevant body (B) is convicted of an offence under section 37 or 38 of this Bill may make a corporate probation order in relation to B.

(2) A corporate probation order—

(a) shall require B to implement a compliance procedure or make changes to an existing compliance procedure to prevent persons acting in the capacity of a person associated with B for committing UK tax evasion facilitation offences or foreign tax evasion facilitation offences;

(b) may require B to appoint an external body to verify that compliance programme, costs of which shall be met by B.

(3) A corporate probation order may be made only on an application by the prosecution specifying the terms of the proposed order. Any such order must be on such terms (whether those proposed or others) as the court considers appropriate having regard to any representations made, and any evidence adduced, in relation to that matter by the prosecution and on behalf of B.

(4) Before making an application for a probation order the prosecution must consult such enforcement authority or authorities as it considers appropriate having regard to the nature of the relevant offending.

(5) An organisation that fails to comply with a corporate probation order is guilty of an offence, and is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) For the purposes of this clause “relevant body” has the same meaning as in section 36.’

This new clause would allow courts to require bodies found guilty of a UK or foreign tax evasion facilitation offence to make steps to improve their internal procedures to minimize the chance of persons working for that company committing the same offence in the future.

New clause 8—Facilitation of tax evasion offences: disqualification of directors—

‘(1) Where a body (B) has been convicted of an offence under sections 37 and 38 of this Act the Secretary of State must arrange for the relevant enforcement authorities to investigate the conduct of the directors of B.

(2) The purpose of the investigation under this subsection is to determine whether the directors of B were grossly negligent by failing to ensure that B had in place reasonable prevention procedures.

(3) In section 8 of the Company Directors Disqualification Act 1986, after sub-paragraph (ii) insert—

(iii) an investigation under section [Facilitation of tax evasion offences: disqualification of directors] of the Criminal Finance Act”

(4) For the purposes of this section—

“enforcement authorities” means one or more the bodies listed in subsection 362A(7) of the Proceeds of Crime Act 2002.

“prevention procedures” has the same meaning as in subsection 37(3) where B was convicted of an offence under section 37, or as in subsection 38(4) where B was convicted of an offence under section 38.’

This new clause would require the Secretary of State to investigate the directors of a company found guilty of a UK or foreign tax evasion offence to see whether the directors should be subject to a disqualification order for the failure to have proper procedures in place to prevent agents of that company facilitating tax evasion.

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[Mr Wallace]

I am grateful to the hon. Member for Bootle and pleased to say that the Government are supportive of what he is trying to achieve—that the new offences should be as effective as possible at changing corporate behaviour, and that law enforcement should have the tools it needs to police the new laws effectively. However, I hope to reassure him and his hon. Friends that those matters are already provided for.

As the hon. Gentleman said, new clause 7 would introduce a system of corporate probation orders, which would allow a court to require relevant bodies found guilty of the new corporate offences to make changes to their prevention procedures. Hon. Members should be aware that clause 43(2) adds those offences to the list of offences for which a serious crime prevention order can be imposed under the Serious Crime Act 2007. Serious crime prevention orders allow for a court passing sentence on a person or corporate body to impose prohibitions, restrictions or requirements to prevent, restrict or disrupt involvement in serious crime. Those orders are already available and can successfully disrupt tax fraud. Where such an order is made against a relevant body, its terms may require the body to allow a law enforcement agency to monitor how it provides services in the future.

Additionally, where the corporation in question is in the regulated sector, the regulator may, quite independently of a serious crime prevention order, undertake monitoring of the relevant body, relevant to failings in its systems and controls. For example, the Financial Conduct Authority could take steps to disqualify directors or put extra conditions on to the companies. It is the Government’s view that the hon. Gentleman’s objective can be achieved by applying the existing power to impose serious crime prevention orders on conviction of the new offences, or within the terms of the deferred prosecution agreement. Those orders can do anything that corporation probation would do.

New clause 8 would create a duty on the Secretary of State to investigate the directors of a company found guilty of a UK or foreign tax evasion offence, to see whether they should be disqualified. The existing law already allows the Secretary of State to apply to a court to have a director disqualified where he or she believes that that is in the public interest. A court can grant such an order when it is satisfied that the director’s conduct makes him unfit to be concerned in the management of the company. There is no evidence of which we are aware that the power is not being used in the appropriate cases. When not used, it is not used for appropriate reasons. When company directors are charged with offences, the sentencing court can consider disqualification.

Where the new offence is charged and the relevant body is not tried alongside a director, prosecutors will still be able to refer cases to the Secretary of State so that an application for disqualification can be considered. Indeed, there may be cases when sentencing judges recommend that this is done in their sentencing remarks. In short, rather than creating new law, we again consider it proper for the new offences to sit alongside, and work within, the existing legislative framework for disqualifying directors. If regulators have evidence that a director is unfit to be concerned in the management of the company, they can refer the case to the Secretary of State to make an application to have that director disqualified.

I hope that the hon. Members for Ealing Central and for Bootle, and others, agree that these points are therefore already accounted for, that they do not feel the need to move their new clauses, and that clause 38 can stand part of the Bill.

Question put and agreed to.

Clause 38, as amended, accordingly ordered to stand part of the Bill.

Clause 39

Guidance about preventing facilitation of tax evasion offences

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

Clause 39 requires the Government to produce guidance on reasonable prevention procedures, and empowers the Government to agree supplementary guidance produced by others, such as industry and trade bodies. The aim of the guidance is to help organisations to understand and avoid committing the new offences by undertaking a risk assessment and establishing reasonable prevention procedures to address their risks. The guidance is vital to the success of the offences and will mean higher levels of compliance with the new legislation, creating the desired culture change, and ultimately leading to a reduction in the criminal facilitation of tax evasion. In parallel, it will help to avoid an unnecessarily defensive approach to compliance, whereby excessive prevention procedures are adopted that constitute an undue regulatory burden.

Whether any relevant body can avail itself of the reasonable procedures defence will always be a matter for the criminal courts. The guidance will be only an illustrative set of principles, not a list of absolute requirements. Departure from the guidance will not mean that the defence is unavailable and that the relevant body is guilty. There may well be many different approaches—all equally reasonable—to preventing tax evasion facilitation offences by those who act in the relevant body’s name. Equally, following the guidance does not lead the relevant body to safe harbour rendering it immune from prosecution. Even full compliance with the guidance might not amount to having reasonable prevention procedures if the prevention procedures ignore a particular risk that the relevant body’s particular business carries.

Her Majesty’s Revenue and Customs consulted with industry extensively on what support was needed to ensure compliance with the new offences. The overwhelming feedback revealed a desire for guidance akin to that already produced for the similar offence of corporate failure to prevent bribery in the Bribery Act 2010. The last draft guidance was published at the same time as the introduction of the Bill and has received positive feedback. HMRC continues to work with a number of leading financial service trade bodies on developing detailed supplementary guidance for the sector. I hope the clause stands part of the Bill.

[Dr Huq]

We all need guidance in life. The measures sound eminently sensible and the Minister described them cogently. We support the clause.

Question put and agree to.

Clause 39 accordingly ordered to stand part of the Bill.

Clause 40

Offences: extra-territorial application and jurisdiction

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

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[Mr Wallace]

Clause 40 provides for the extraterritorial application of the corporate failure to prevent offences. The UK’s criminal courts will have jurisdiction to try the domestic tax offence in clause 37, regardless of where the conduct took place. The UK courts claim jurisdiction as a result of the UK suffering the tax loss. With respect to the foreign tax offence, our courts again claim jurisdiction on the basis that the relevant body has a nexus with the UK, such that it can be regarded as part of UK plc and thus is required to abide by the criminal law of this country. We have seen, and our partners in other jurisdictions have confirmed that they have also seen, that those deliberately facilitating tax evasion will typically offshore illicit services to try to avoid detection and to hide in the gaps between domestic legal systems.

Those facilitating offshore tax evasion often do not provide those services from within the geographic borders of the country whose tax loss they are facilitating. It is therefore vital that both the domestic and the overseas tax evasion facilitation offences capture activity that takes place outside the United Kingdom. Failure to apply the laws in such a way would lead to loopholes that could be easily exploited. By its very nature, the foreign tax evasion offence is likely to raise a complicated range of competing interests and issues, including those relating to international relations and diplomatic affairs.

Clause 41 puts appropriate safeguards in place by requiring that a decision to prosecute the offence is taken only by, or with the authority of, the director of these prosecuting bodies: the Director of Public Prosecutions, the director of the Serious Fraud Office or the Director of Public Prosecutions for Northern Ireland. A similar protection is in place for prosecutions for the corporate failure to prevent bribery under section 7 of the Bribery Act. I hope the clauses stand part of the Bill.

[Dr Huq]

Her Majesty’s loyal Opposition support clause 40.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clause 41 ordered to stand part of the Bill.

Clause 42

Offences by partnerships: supplementary

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

[The Chair]

With this it will be convenient to consider clauses 43 and 44.

[Mr Wallace]

Clause 42 makes provision for rules of criminal procedure in relation to the prosecution of companies to apply to prosecutions of partnerships for the new offences in part 3. It mirrors section 15 of the Bribery Act 2010 and provides that proceedings for an offence under clauses 37 or 38 are to be brought in the name of the partnership and not that of an individual partner; and that any resulting fine is paid out of the assets of the partnership. The clause also applies existing rules of criminal procedure applicable where bodies corporate are prosecuted. They cover various matters including the transfer of cases from the magistrates court to the Crown court, the representation of the relevant body in court, the entering of pleas and the taking of action in the relevant body’s absence.

As I mentioned in debating an earlier group, clause 43 amends a number of pieces of existing legislation, adding the new offences created by part 3 to the lists of offences for which various powers are available, which will assist the effective investigation and prosecution of the offences. That includes allowing the CPS to require suspected persons to answer questions or provide information in relation to those offences; allowing for serious crime prevention orders to be imposed on relevant bodies; and providing for deferred prosecution agreements.

Clause 44 is simply an interpretation clause, defining terms within part 3. I hope the clauses stand part of the Bill.

[Dr Huq]

We support the clauses.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clauses 43 and 44 ordered to stand part of the Bill.

New Clause 9

Immigration officers

‘(1) Section 24 of the UK Borders Act 2007 (seizure of cash) is amended as follows.

(2) For the heading substitute “Exercise of civil recovery powers by immigration officers”.

(3) For subsection (1) substitute—

(1) Chapters 3 to 3B of Part 5 of the Proceeds of Crime Act 2002 (civil recovery) apply in relation to an immigration officer as they apply in relation to a constable.”

(4) In subsection (2)(a), for “section 289” substitute “sections 289 and 303C and Chapter 3B”.

(5) In subsection (2)(c), for “and 297A” substitute “, 297A and 303E and in Chapter 3B (see section 303Z2(7))”.

(6) In subsection (2)(d), for “section 292” substitute “sections 292 and 303G”.

(7) In subsection (2)(e), for “and 293A” substitute “, 293A, 303H and 303I”.

(8) In subsection (2)(f), in the words before sub-paragraph (i), after “295(2)” insert “or 303L(1)”.

(9) In subsection (2)(f)(ii), after “298” insert “or (as the case may be) 303O”.

(10) In subsection (2)(g), after “298” insert “, 303O or 303Z14”.

(11) In subsection (2)(h), after “302” insert “, 303W or 303Z18”.” .—(Mr Wallace.)

Immigration officers exercise the civil recovery powers conferred by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002 by virtue of section 24 of the UK Borders Act 2007. These amendments of section 24 provide for immigration officers to be able to exercise the civil recovery powers conferred by new Chapters 3A and 3B of Part 5 of the Proceeds of Crime Act 2002 (see clauses 12 and 13 of the Bill) in the same way.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Forfeiture of cash

‘(1) In section 289(6) of the Proceeds of Crime Act 2002 (meaning of cash for purposes of Chapter 3 of Part 5 of that Act), after paragraph (e) insert—

“(f) gaming vouchers,

(g) fixed-value casino tokens,”.

(2) After section 289(7) of that Act insert—

“(7A) For the purposes of subsection (6)—

(a) “gaming voucher” means a voucher in physical form issued by a gaming machine within the meaning of the Gambling Act 2005 (see section 235 of that Act) that represents a right to be paid the amount stated on it;

(b) “fixed-value casino token” means a casino token that represents a right to be paid the amount stated on it.”

(3) In Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist cash), in paragraph 1 (meaning of terrorist cash)—

(a) after sub-paragraph (2)(e) insert—

(f) gaming vouchers,

(b) fixed-value casino tokens,”;

(b) after sub-paragraph (4) insert—

“(5) For the purposes of sub-paragraph (2)—

(a) “gaming voucher” means a voucher in physical form issued by a gaming machine within the meaning of the Gambling Act 2005 (see section 235 of that Act) that represents a right to be paid the amount stated on it;

(b) “fixed-value casino token” means a casino token that represents a right to be paid the amount stated on it.””—(Mr Wallace.)

This new clause provides for casino tokens and what are commonly referred to as “ticket in ticket out vouchers” to be treated as cash for the purposes of the civil recovery powers conferred by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002 and by Schedule 1 to the Anti-terrorism, Crime and Security Act 2001.

Brought up, read the First and Second time, and added to the Bill.

New Clause 18

Forfeiture of terrorist cash

‘(1) Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist cash) is amended as follows.

(2) In paragraph 3 (detention of seized cash)—

(a) in sub-paragraph (2)(a), for “three” substitute “6”;

(b) after sub-paragraph (8) insert—

“(9) Where an application for an order under sub-paragraph (2) relates to cash seized under paragraph 2(2), the court, sheriff or justice may make the order if satisfied that—

(a) the condition in sub-paragraph (6), (7) or (8) is met in respect of part of the cash, and

(b) it is not reasonably practicable to detain only that part.”

(3) After paragraph 5 insert—

Part 2A

Forfeiture of terrorist cash without court order

Cash forfeiture notice

5A (1) This paragraph applies while any cash is detained in pursuance of an order under paragraph 3(2).

(2) A senior officer may give a notice for the purpose of forfeiting the cash or any part of it if satisfied that the cash or part is terrorist cash.

(3) A notice given under sub-paragraph (2) is referred to in this Schedule as a cash forfeiture notice.

(4) A cash forfeiture notice must—

(a) state the amount of cash in respect of which it is given,

(b) state when and where the cash was seized,

(c) confirm that the senior officer is satisfied as mentioned in sub-paragraph (2),

(d) specify a period for objecting to the proposed forfeiture and an address to which any objections must be sent, and

(e) explain that the cash will be forfeited unless an objection is received at that address within the period for objecting.

(5) The period for objecting must be at least 30 days starting with the day after the notice is given.

(6) The Secretary of State must by regulations made by statutory instrument make provision about how a cash forfeiture notice is to be given.

(7) The regulations may (amongst other things) provide—

(a) for a cash forfeiture notice to be given to such person or persons, and in such manner, as may be prescribed;

(b) for a cash forfeiture notice to be given by publication in such manner as may be prescribed;

(c) for circumstances in which, and the time at which, a cash forfeiture notice is to be treated as having been given.

(8) The regulations must ensure that where a cash forfeiture notice is given it is, if possible, given to every person to whom notice of an order under paragraph 3(2) in respect of the cash has been given.

(9) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of either House of Parliament.

(10) In this Part of this Schedule—

“senior officer” means—

(a) a senior police officer;

(b) an officer of Revenue and Customs of a rank designated by the Commissioners for Her Majesty’s Revenue and Customs as equivalent to that of a senior police officer;

(c) an immigration officer of a rank designated by the Secretary of State as equivalent to that of a senior police officer;

“senior police officer” means a police officer of at least the rank of superintendent.

Effect of cash forfeiture notice

5B (1) This paragraph applies if a cash forfeiture notice is given in respect of any cash.

(2) The cash is to be detained until—

(a) the cash is forfeited under this paragraph,

(b) the notice lapses under this paragraph, or

(c) the cash is released under a power conferred by this Schedule.

(3) If no objection is made within the period for objecting specified in the notice under paragraph 5A(4)(d), and the notice has not lapsed, the cash is forfeited (subject to paragraph 5D).

(4) If an objection is made within the period for objecting, the notice lapses.

(5) If an application is made for the forfeiture of the whole or any part of the cash under paragraph 6, the notice lapses.

(6) If the cash or any part of it is released under a power conferred by this Schedule, the notice lapses or (as the case may be) lapses in relation to that part.

(7) An objection may be made by anyone (whether a recipient of the notice or not).

(8) An objection means a written objection sent to the address specified in the notice; and an objection is made when it is received at the address.

(9) An objection does not prevent forfeiture of the cash under paragraph 6.

(10) Nothing in this paragraph affects the validity of an order under paragraph 3(2).

Detention following lapse of cash forfeiture notice

5C (1) This paragraph applies if—

(a) a cash forfeiture notice is given in respect of any cash,

(b) the notice lapses under paragraph 5B(4), and

(c) the period for which detention of the cash was authorised under paragraph 3(2) has expired.

(2) The cash may be detained for a further period of up to 48 hours (calculated in accordance with paragraph 3(1A)).

(3) But if within that period it is decided that neither of the applications mentioned in sub-paragraph (4) is to be made, the cash must be released.

(4) The applications are—

(a) an application for a further order under paragraph 3(2);

(b) an application for forfeiture of the cash under paragraph 6.

(5) If within that period an application is made for a further order under paragraph 3(2), the cash may be detained until the application is determined or otherwise disposed of.

Application to set aside forfeiture

5D (1) A person aggrieved by the forfeiture of cash in pursuance of paragraph 5B(3) may apply to a magistrates’ court or (in Scotland) the sheriff for an order setting aside the forfeiture of the cash or any part of it.

(2) The application must be made before the end of the period of 30 days starting with the day on which the period for objecting ended (“the 30-day period”).

(3) But the court or sheriff may give permission for an application to be made after the 30-day period has ended if the court or sheriff thinks that there are exceptional circumstances to explain why the applicant—

(a) failed to object to the forfeiture within the period for objecting, and

(b) failed to make an application within the 30-day period.

(4) On an application under this paragraph the court or sheriff must consider whether the cash to which the application relates could be forfeited under paragraph 6 (ignoring the forfeiture mentioned in sub-paragraph (1)).

(5) If the court or sheriff is satisfied that the cash to which the application relates or any part of it could not be forfeited under that paragraph the court or sheriff must set aside the forfeiture of that cash or part.

(6) Where the court or sheriff sets aside the forfeiture of any cash—

(a) the court or sheriff must order the release of that cash, and

(b) the cash is to be treated as never having been forfeited.

Release of cash subject to cash forfeiture notice

5E (1) This paragraph applies while any cash is detained under paragraph 5B or 5C.

(2) The person from whom the cash was seized may apply to a magistrates’ court or (in Scotland) the sheriff for the cash to be released.

(3) On an application under sub-paragraph (2), the court or sheriff may direct the release of the cash or any part of it if not satisfied that the cash to be released is terrorist cash.

(4) An authorised officer may release the cash or any part of it if satisfied that the detention of the cash to be released is no longer justified.

Application of cash forfeited under cash forfeiture notice

5F (1) Cash forfeited in pursuance of paragraph 5B(3), and any accrued interest on it—

(a) if first detained in pursuance of an order under paragraph 3(2) made by a magistrates’ court or a justice of the peace, is to be paid into the Consolidated Fund;

(b) if first detained in pursuance of an order under paragraph 3(2) made by the sheriff, is to be paid into the Scottish Consolidated Fund.

(2) But it is not to be paid in—

(a) before the end of the period within which an application under paragraph 5D may be made (ignoring the possibility of an application by virtue of paragraph 5D(3)), or

(b) if an application is made within that period, before the application is determined or otherwise disposed of.”

(4) In paragraph 7(4) (release of cash on appeal against decision in forfeiture proceedings), after “of” insert “the whole or any part of”.

(5) In paragraph 9 (victims), after sub-paragraph (3) insert—

“(4) If sub-paragraph (5) applies, the court or sheriff may order the cash to be released to the applicant or to the person from whom it was seized.

(5) This sub-paragraph applies where—

(a) the applicant is not the person from whom the cash claimed was seized,

(b) it appears to the court or sheriff that the cash belongs to the applicant,

(c) the court or sheriff is satisfied that the release condition is met in relation to the cash, and

(d) no objection to the making of an order under sub-paragraph (4) has been made by the person from whom the cash was seized.

(6) The release condition is met—

(a) in relation to cash detained under paragraph 3, if the conditions in that paragraph for the detention of the cash are no longer met,

(b) in relation to cash detained under paragraph 5B or 5C, if the cash is not terrorist cash, and

(c) in relation to cash detained pending the conclusion of proceedings in pursuance of an application under paragraph 6, if the court or sheriff decides not to make an order under that paragraph in relation to the cash.”

(6) In paragraph 19 (general interpretation), in sub-paragraph (1), at the appropriate places insert—

““cash forfeiture notice” has the meaning given by paragraph 5A(3),”;

““senior officer” (in Part 2A) has the meaning given by paragraph 5A(10),”.”—(Mr Wallace.)

This new clause makes various amendments of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 to bring it into line with the provision made by Chapter 3 of Part 5 of the Proceeds of Crime Act 2002, including amendments to provide for the forfeiture of “terrorist cash” by the giving of a forfeiture notice. This administrative forfeiture regime will apply throughout the UK; the equivalent regime under the 2002 Act is limited in its application to England and Wales and Northern Ireland.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Review of Scottish Limited Partnership

“(1) The Secretary of State must undertake a review into the extent of financial criminal activity associated with Scottish Limited Partnerships, and lay a copy of the review before the House of Commons within six months of this Act receiving Royal Assent.

(2) In conducting the review the Secretary of State must consult—

(a) the Scottish Government;

(b) the National Crime Agency;

(c) the Serious Fraud Office;

(d) the Financial Conduct Authority;

(e) HMRC;

(f) interested third sector organisations; and

(g) any other persons he deems relevant.

(3) The review must set out what steps the Government intends to take to prevent Scottish Limited Partnerships being used for criminal purposes.”—(Roger Mullin.)

This new clause would require the Secretary of State to conduct a review of financial criminality associated with Scottish Limited Partnerships and set out what steps the Government intends to take to prevent Scottish Limited Partnerships being used for criminal purposes.

Brought up, and read the First time.

--- Later in debate ---

[Roger Mullin]

I thank the Minister for his encouraging response. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

National Crime Agency: Report on staff training

“Section 3 of the Proceeds of Crime Act 2002 is amended as follows, after subsection (7) insert—

‘(8) The National Crime Agency must make an annual report to Parliament on the provision of training to persons under this section.’”.—(Dr Huq.)

This new clause would require the National Crime Agency to make a report to Parliament about the training it provides to its staff in financial investigation and the operation of the Proceeds of Crime Act.

Brought up, and read the First time.

[Dr Huq]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss

New clause 5—Accredited financial investigators: Recovery of training costs—

“(1) The Secretary of State shall have a duty to work with enforcement authorities to ensure that enforcement authorities have in place training cost agreements with staff who are trained by the enforcement authority to be accredited financial investigators.

(2) For the purposes of this section

“Enforcement authority” has the same meaning as in section 362A(7) of the Proceeds of Crime Act 2002

“training costs agreement” means an agreement requiring an employee who has been trained as an accredited financial investigator to repay the cost of their training if they voluntarily leave the employment of the enforcement authority within 3 years of their training being completed.

“accredited financial investigators” has the same meaning as in section 47A(2) of the Proceeds of Crime Act 2002.”.

This new clause would place a duty on the Secretary of State to work with enforcement agencies to ensure that the agencies have appropriate HR arrangements in place to recover the costs of training accredited financial investigators where the AFI leaves the employment of the agency within 3 years of completing their training.

[Dr Huq]

New clause 2 would ensure that the National Crime Agency makes an annual report to Parliament on the training it provides to enforcement agency staff who are defined under both this Bill and the Proceeds of Crime Act 2002 as having the power to exercise civil recovery proceedings. We selected the National Crime Agency to be subject to the proposed duty because it is the sole body responsible for the training of other enforcement agencies with such powers under POCA.

Our main reason for wanting to introduce a duty on the National Crime Agency to make an annual report is that new clause 2 is nothing new. All this stuff was in the two influential Select Committee reports—the report by the Select Committee on Home Affairs on the proceeds of crime, and the report by the Public Accounts Committee. The report by the Home Affairs Committee showed that there is a lack of understanding at enforcement level regarding confiscation orders. There is sometimes confusion about where the buck stops.

The Home Affairs Committee report makes it clear that that misunderstanding is manifested in a number of ways, and I will give two quick examples. Some enforcement staff are not aware of their power to exercise civil recovery procedures and/or actions to that end, and confiscation orders are regularly not factored in at the beginning of criminal investigations—that is on page 13 of the report. The Home Affairs Committee alleges that, as a result, criminals regularly have time to hide their assets and that that has contributed to the poor recovery rate of confiscation orders. We know there is a lot wrong with those orders and that a lot of money falls through the cracks. According to the Committee report, as of last year there was a total of £1.6 billion in outstanding debt from confiscation orders.

The Public Accounts Committee also recently reported that administering the orders costs £100 million, yet £175 million was recovered through the orders last year. I am not arguing that that is solely down to staff training or a lack of knowledge among the staff, but the Home Affairs Committee report makes it clear that a number of causal factors contribute to the poor rate of recovery. Those factors include, but are not limited to, the overworked ELMER IT system for suspicious activity reports. My right hon. Friend the Member for Leicester East eloquently mentioned that several times in the debate on the Floor of the House. The creaking IT system is overloaded and overworked as it is. I cannot account for where he is now, but I am sure that he will be there when needed. That is one factor. There is also a reluctance among barristers and judges to specialise in asset recovery law, as the Home Affairs Committee report also mentioned. Arguably, there is a lack of specialist confiscation courts.

Obviously, we are not arguing that the amendment would suddenly wave a magic wand to remedy those problems, but building in the audit mechanism through an annual report would allow us to identify weaknesses in the context of training provided by the National Crime Agency. One problem contributing to the poor recovery rate for confiscation orders, as I mentioned earlier, is that they are not factored into the very beginning of criminal procedures. The Minister talked about behaviours. If there were a regular report, we could identify similar behaviours and remedy the problem. In theory, we would increase the rate of recovery. To that end, Labour see the duty to report as being a cost-effective performance enhancer. There is nothing quite like the fear of having to make a statement that must be relayed on the Floor of the House orally or in writing or both, and it would focus the mind on the tasks at hand.

Regular reporting would allow Parliament to assess in real time the necessity of adjusting NCA training—that form of crime and the techniques underpinning it change in real time. Since the Proceeds of Crime Act 2000, 16 years ago, we have seen technology change how such evil crimes are effected—hopefully, they are ineffective. To that end, I draw Members’ attention to the debate on whether NCA training should be mainstreamed or extended to new enforcement agencies. Detective Superintendent Clark, head of the economic crime directorate at the City of London Police, has been positive about the idea of mainstreaming National Crime Agency training, so that some of it can be taken over. That is on page 9 of the Home Affairs Committee report.

That level of detail may be for another day, but the point I am trying to make is that regular reports to Government would allow the House to keep a closer eye on the quality and quantity of training provided. The reports could then be factored into more well-informed discussions at a later date about things such as mainstreaming training. Whether or not we are now living in an age of austerity, everyone in this House wants best value for money from our public services, particularly when budgets are tight. When it comes to underperforming services, we can all agree that making institutional or procedural change, rather than just throwing money around in an unfocused way, can help to drive up standards. I believe that regular, up-to-date, detailed reports would provide this and future Governments with the ability to make such changes.

The amendment is not intended to be political; it is technical. I know that the Minister is a reasonable man, and I think that he will agree that it is fair and reasoned. Everyone in the House appreciates the great work done by the NCA on our behalf, but it is only fair that we monitor and have an up-to-date understanding of the training that it provides.

[The Chair]

Dr Huq, would you like to speak to new clause 5 at the same time?

[Dr Huq]

Yes. New clause 5 is simple and does what it says on the tin. We want the Secretary of State to work with the enforcement agencies, using accredited financial investigators, to hammer out some form of agreement whereby if an accredited financial investigator chooses to leave his post within the first three years of qualifying as an AFI, they must repay the cost of training before doing so. There are some figures.

--- Later in debate ---

[Mr Wallace]

The Government recognise the importance of ensuring that investigation and prosecution agencies have sufficient expertise and resources to carry out their functions under the Proceeds of Crime Act 2002. Section 3 of the Act places a statutory duty on the National Crime Agency to provide a system for the accreditation of financial investigators who use the powers under POCA. This is done through the National Crime Agency’s Proceeds of Crime Centre. The accreditation system includes provision for monitoring performance and, importantly, accreditation can be removed from an investigator who fails to meet the accreditation standards.

The training can be lengthy and expensive. The Home Affairs Committee, during its recent inquiry into asset recovery, identified the risk of the private sector poaching trained resources with the promise of better pay and benefits. It was a good report. I read it in full as well as the Public Accounts Committee report.

The NCA already publishes statistics on the training activities undertaken by the Proceeds of Crime Centre in its annual report. Their last report showed the delivery of 95 training courses, support for 760 delegates through that training, and the completion of 1,400 registrations and re-accreditations. Those statistics are already published annually.

New clause 5 provides for the use of agreements to tie accredited financial investigators to their agencies, so that they would pay the cost of their training if they voluntarily left the employment of the agency that has funded their training. However, these agencies have tried such agreements and found them difficult and costly to enforce. In most cases, the benefits of such agreements are minimal.

Even if an effective and enforceable form of cost training agreement could be found—I do not want to dismiss the idea out of hand today—making it a requirement in primary legislation would not be appropriate. The operational agencies who use financial investigators should be given the freedom to manage their workforce according to their needs.

In line with the hon. Lady’s concerns, the criminal finance board, which I chair with my hon. Friend the Economic Secretary to the Treasury, commissioned a working group to examine the retention and training of financial investigators. It has not gone away or been swept under the carpet; I assure hon. Members that nothing is swept under the carpet in my Department. There is no conspiracy either—we do not do conspiracies in my Department; we are the conspiracy, according to some. That group is also considering what actions can be taken to incentivise investigators to stay and develop their career within the public sector.

The hon. Lady also referred to ELMER—the database of the suspicious activity reports IT regime. We have committed to replacing the SARs IT regime by October ’18, but in the meantime we have taken steps to upgrade and maintain it as part of the SARs reform package. We have not finished reforming the SARs programme, and before we roll out a new system we need to know what the new suspicious activity reports will look like, because if we are going to have a software database in order to cope with that effectively, we need to know what we are planning to cope with.

I am therefore alive to the issues and will be following the issues raised by the right hon. Member for Leicester East. I will visit to look at the system directly; I will have to bring my 1980s computer knowledge up to date to see whether I can remotely understand what I am looking at. I will certainly make sure that it is on because, like the hon. Member for Ealing Central and Acton, it is not my or the Government’s intention for the system to grind to a halt. It is very important.

It is also important that we register that we are keen to make sure that all those people who benefit from that system—not just the Government but the banks and the other people who use it—perhaps make a contribution towards the new system. That is important. It is for their benefit as well for the system to work successfully and efficiently.

I hope that demonstrates to the hon. Lady that I take both matters seriously. I think the training has already been dealt with, because it is published in the National Crime Agency’s annual report. I hope she is inclined to withdraw her motion on that basis.

[Dr Huq]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Annual reporting: Adequacy of resources

“(1) In Part 12 of the Proceeds of Crime Act 2002 (miscellaneous and general), after section 455, insert—

“455A Annual reports on resources

(1) A relevant authority must, no later than 1 June in each calendar year, prepare an annual report on the adequacy of the resources available from money voted by Parliament for the exercise of any functions of that authority—

(a) under this Act;

(b) in connection with investigations into terrorist financing offences under the Terrorism Act 2000;

(c) under Part 3 of the Criminal Finances Act 2017.

(2) In this section, “a relevant authority” means—

(a) the National Crime Agency;

(b) the Director of Public Prosecutions;

(c) the Director of the Serious Fraud Office, and

(d) Her Majesty’s Revenue and Customs.

(3) The reports prepared in accordance with subsection (1) shall be sent—

(a) in the case of the National Crime Agency, to the Secretary of State;

(b) in the case of the Director of Public Prosecutions and the Director of the Serious Fraud Office, to the Attorney General, and

(c) in the case of Her Majesty’s Revenue and Customs, to the Chancellor of the Exchequer.

(4) The person receiving annual reports in accordance with subsection (3) must lay those reports before each House of Parliament in the form in which they were received no later than 30 June in the same calendar year, together with a statement on plans for future resources to be provided from money voted by Parliament.”.”.—(Peter Dowd.)

This new clause would require the National Crime Agency and other agencies to report annually to Parliament on the adequacy of its resource to fulfil its functions relating to combating financial crime.

Brought up, and read the First time.

[Peter Dowd]

I beg to move, That the clause be read a Second time.

This is not a technical clause. It goes to the heart of transparency of resources for the enforcement agencies concerned. It is crucial that they are adequately funded, given the nature of the task that they are dealing with. They are chasing billions of pounds of evaded tax in relation to crime, with a particular emphasis on concerns around terrorism, and it is therefore perfectly legitimate for Parliament to be directly reported to on the adequacy of resources. That is the starting pitch.

In the evidence session, I, along with other Members, in particular the hon. Member for Portsmouth South, as I recall, asked many questions of witnesses about the resources available to law enforcement agencies. To Detective Superintendent Harman, who heads the national terrorist financial investigation unit at the Met, the hon. Lady asked:

“Are you confident that the enforcement agencies will have sufficient resources to make full use of the new powers in the Bill?”––[Official Report, Criminal Finances Public Bill Committee, 15 November 2016; c. 9, Q8.]

“Yes” was the response from the police officer and the witness accompanying him. I have to say, it is a pleasure to have the police helping us with our inquiries, rather than the other way around.

Clearly, the adequacy of resources goes to the heart of the ability of enforcement agencies to stamp out and tackle abuse within the financial sectors, particularly that which is linked to crime and terrorism. It is self-evident that, if the resources are not there, or if they are not used forensically and wisely, the agencies concerned will certainly not fulfil the intention of the Bill. It is worth reminding hon. Members of the intention of the Bill, as set out in the explanatory notes—I alluded to this in the evidence sessions last week—namely,

“to give law enforcement agencies, and partners, the capabilities and powers to recover the proceeds of crime, tackle money laundering and corruption, and counter terrorist financing.”

It is fair to say the Government could not be any more plain on this matter. The measure is, after all, the Criminal Finances Bill, so the clue is in the title. Given that we all agree with the Government’s intention as set out in the overview of the Bill—in the section relating to its mission—it is incumbent upon us to establish whether the resources are available to effect that good and laudable intention, notwithstanding the view expressed by the superintendent and his colleagues that they felt that they had enough money.

One way of holding the Government to account is to ensure that those intentions are backed up with the wherewithal to carry them out through a parliamentary annual review, given the crucial nature of these issues. All those who were asked about the adequacy of the resources to do the job agreed that the intention of the Bill was sound, and I do not dispute that. However, aside from the enforcement agencies themselves, which felt that they had enough to do the job—I am not sure whether that was in hope rather than in expectation—it is fair to say that most of the other witnesses’ enthusiasm for that element of the equation was not quite as clear-cut, although I would stand corrected and am challengeable on that.

For illustration purposes, Members may recall that when I asked the witnesses representing the Centre for Financial Crime and Security Studies at the Royal United Services Institute, Corruption Watch, Global Witness and Transparency International a question about whether they felt that—in their experience—the resources were available to do the job, there was a bit of a tumbleweed moment, with sideways looks at one another. I read the clear body language—and you do not have to be an experienced psychologist to have spotted it—that in their experience they felt that there clearly were not enough resources, and that they felt that that would hinder the enforcement agencies in doing their job. In response to the question from my hon. Friend for Ealing Central and Acton about the adequacy of resources, the director of the Centre for Financial Crime and Security Studies Mr Keatinge said:

“Resourcing is clearly a major issue. Cynically, one of the reasons for involving the private sector is to harness it to do some of the work…I do not believe we have the resources that we need.” ––[Official Report, Criminal Finances Public Bill Committee, 15 November 2016; c. 69-70, Q150.]

I accept that that is a view, but it is a view that has been reached after asking expert witnesses. We at least have to listen to them and take on board some of the concerns that they had. Moreover, when I followed up with the representative from the Metropolitan Police Authority, the National Crime Agency and the National Police Chiefs Council earlier the response to the hon. Member for Portsmouth South, I felt that they had begun to row back a little on their unequivocal answer to the hon. Lady.

That is why it is paramount that the professionals, and those whose day to day job is to tackle financial crime adequately, are adequately equipped with the resources to do the job. That is why we have to challenge them, and it is our responsibility to challenge them. In a sense, it is Parliament’s responsibility to challenge the Government and the Executive, and one of the best ways of doing that is for the information to be reported directly, rather than articulated through some sort of pontifical process to Parliament. I can inform Members now—I do not think I have to, but I will—that the people the law enforcement agencies are trying to catch are ahead of the game in relation to the crimes that they are committing, and we need to ensure that the enforcement agencies have the resources to do the job.

A clear example of where annual reporting would be effective is in the oversight of the IT system for SARs, which I know the Minister has referred to as being revamped or changed. As far as I am aware, ELMER is designed to process up to 20,000 suspicious activity reports; it is currently processing up to 381,000 of them. Of those, only 15,000 are looked at in detail, as was noted in the Home Affairs Committee’s fifth report of the 2016-17 Session, “Proceeds of crime”. That raises the question of whether reporting that many SARs is simply over the top, and borne out of caution on the part of banks. If so, then that approach wastes a good deal of time for those doing the reporting, and for the receiving agencies, who have to search through the haystack. Alternatively, if the reporting numbers are, to all intents and purposes, a reasonable reflection of concern that has reached a mutually agreed threshold, that raises another question: why are so many reports being ignored, brushed aside or not acted on? The Minister has reassured us that they are not under his office carpet.

--- Later in debate ---

[Mr Wallace]

In my response to the hon. Member for Ealing Central and Acton on new clauses 2 and 5, I explained what we are doing to assess the capacity and capability of investigator resource. The new tools in the Bill are a key part of strengthening our response to economic crime. The Government continue to invest in law enforcement agencies through the asset recovery incentivisation scheme, which returns recovered assets back to the frontline. A top-slice of £5 million has been set aside every year until the end of this Parliament to fund key national asset recovery capabilities, and I can announce today that we are going further. We made a manifesto commitment to return a greater percentage of recovered assets to policing, and we are implementing that commitment by investing in policing the whole Home Office share of amounts above a certain baseline collected by the multi-agency regional asset recovery teams. That will give the agencies greater financial resources, if performance continues to increase—100% of the Home Office share, rather than the 50% that they currently get. There we are: an announcement in a Bill Committee—a new way of venturing forward.

Let us be honest: I say to the hon. Member for Bootle that in Government, we never have enough resources across all our priorities, because different priorities are preyed on by events such as flooding in the west of England, or issues for the Home Office such as a surge in terrorism. I therefore question the use of the word “adequacy” in the new clause. We can scrutinise accounts or budgets, but asking a police officer whether he feels he has enough is like asking, “How long is a piece of string?” Of course we never have enough for crime fighting across the country. If I had millions of pounds, I could find things to spend that money on immediately, and so could every Member in this Committee Room.

I am concerned about whether it would be right and fair to publish a report to Parliament, as the new clause demands. The agencies that use their powers under the Proceeds of Crime Act already report on their resources and results through the departmental annual accounts, which are subject to scrutiny from the National Audit Office and the Public Accounts Committee. The use of criminal justice tools and powers is also subject to scrutiny by Her Majesty’s inspectorate of constabulary and, in the case of terrorism legislation, by the independent reviewer of terrorism legislation. The criminal finances board also closely monitors performance and resourcing issues. I hope that the hon. Members for Ealing Central and Acton, and for Bootle, can see that there is already significant scrutiny of resourcing. I invite the hon. Member for Ealing Central and Acton to withdraw the motion.

[Dr Huq]

I was interested to hear a groundbreaking announcement in this Committee. I completely get the Minister’s point that we will never feel satiated, and that there will always be inadequacy, but my hon. Friend the Member for Bootle made a really powerful case. He mentioned SARs and the ELMER IT regime. Originally, 20,000 SARs were anticipated, but there are now 381,882—my hon. Friend said there were “up to” 381,000 of them, but there are even more, and the figure is rising.

I want to mention the NCA’s ability to cope with the greater workload. It takes an increasing length of time to get investigations into the courts. We have heard that it could take more than 200 days, with the new SARs regime. The NCA was created as a successor to several different organisations. The budget of those it replaced was £812 million, but the NCA’s new annual budget was £474 million. Those figures put the situation into context. The Government have cut that budget even further since the NCA’s creation; it received £411 million in 2015-16. I accept that there was a one-off £200 million cash injection last year, but the agency needs steady long-term funding to carry out its functions effectively. It is no good just sprinkling blockbuster sums now and then; it needs a consistent funding model.

My hon. Friend the Member for Bootle made some powerful points. For effective crime fighting, we should not have agencies that are overworked and under-resourced. The announcement that 100% of assets will go to the Home Office conflicts with an amendment that we have tabled.

[Mr Wallace]

Not the Home Office; it is going to the law-enforcement agencies.

[Dr Huq]

Okay, so it is within the system. We have tabled new clause 20, which is about repatriating assets to the jurisdictions they came from. Some charities—Christian Aid and all those people—are saying that third-world health budgets get robbed when someone buys a house in Hampstead with such proceeds. Are we going to—

[The Chair]

Would the hon. Lady please face the Chair?

[Dr Huq]

I think we will press the new clause to a vote.

[Richard Arkless]

I would like to make a very small point about the Minister’s comments on new clause 3. He rightly suggests that if we were to ask any police officer or public servant whether they had enough resources, the answer would clearly always be no, but the new clause does not seem like a generic question about whether there is enough generally. The hon. Member for Bootle is asking whether adequate resources are available for specific functions to be exercised under the Proceeds of Crime Act 2002. That is a marked departure from asking any Department the generic question, “Have you got enough, guv?”, to which we would almost certainly know the answer. The new clause is about activities undertaken under the Act, and I do not think it is fair to categorise the suggestion as the Minister did.

[Mr Wallace]

Perhaps I can clarify some of the issues. Obviously the word “adequate” is subjective. We heard evidence in Committee from members of the law enforcement agencies, and they did use the word “enough”. My point is that we scrutinise the accounts in this place, and then compare that with agencies’ performance and outcomes. That is how we come to a decision—subjective, often—on whether there are adequate resources. It is not necessary to put that in primary legislation.

Perhaps I could clarify for the hon. Member for Ealing Central and Acton the issues around asset recovery and where those funds go. At the moment, if we recover assets from drug dealers, for example, the money is split, with 50% going to the Home Office, and 50% to the Crown Prosecution Service and all the other agencies—the National Crime Agency or the police—involved in that operation, so that they can invest it in their capabilities, and use it to increase their ability to fight crime. I can say today that further to our manifesto commitment, in future, instead of having that 50% of the cake, they will be able to keep 100% of the amount coming in above the baseline, which was set in 2015, if I am not mistaken. They have a very strong incentive to ensure that they are rewarded for their good work, and to make sure that we go after big sums as well as small. That is important.

On the point the hon. Lady raised about returning money that is stolen—we will come back to this—we sent back £27 million to Macau recently. Where we identify the ownership of stolen assets that we can return to a foreign country or wherever, we will, and we have already done that. My colleague the Minister for Immigration signed a memorandum of understanding with the Nigerian Government in August to make it even easier for us to return stolen property or assets to a country’s people. It is absolutely our intention to do that.

Across the money laundering piece, we can identify the owners of certain assets and take steps to return them. Other assets that accrue because of the high margins in the illicit trade of, say, drugs may be harder to return. In fact, the people who contributed to those sums may have committed a crime themselves, so there is a difference there. I recently saw in Mombasa some confiscated stuff that we will be returning, as soon as we can get through the paperwork. It is not our intention to divvy up the proceeds from the house in Knightsbridge and hand them all over to the National Crime Agency, and rob the third country from which the money was stolen.

[Dr Huq]

I wanted clarification on just one other thing. The Home Affairs Committee report wanted ELMER replaced by the end of December. Am I right in thinking that the Minister referred to October 2018?

[Mr Wallace]

2018.

[Dr Huq]

So it will not be December?

[Mr Wallace]

No. As I said earlier, we have spent money updating and making sure that ELMER is maintained, but we are also in the process of drawing up a SAR reform policy. There are a number of reasons why there are so many referrals—380,000-odd—but the Bill will hopefully cut that number. We want quality, not quantity. At the moment, we are getting quantity, partly because in the suspicious activity regime, if a body makes the report, its defence is halfway there—that is the tick-box bit that is highlighted in the report. Also, many institutions currently report a fragment of the transactions, because they say that they are unable to report the complete transaction due to data-sharing barriers. That is why this Bill removes those barriers. Hopefully, instead of 15 pieces of a transaction being reported as 15 separate SARs, we will get one, because one institution will be able to report the transaction from beginning to end.

We are already taking steps to reduce demand on the system. The system is working; people should not think it has stopped working. The challenge is the analysis, and making sure that we act on the suspicious reports and are quick enough to discard the ones that are not, because we want quality, not quantity.

This time last year, we agreed a £200 million capital improvement budget for the National Crime Agency between 2016 and 2020. That is a huge sum of money for it to spend on a whole range of capital projects to bring them up-to-date. We all have lessons to learn—Labour Governments and Conservative Governments—from rushing into IT replacement projects that cost much more than anyone envisaged. It is therefore important we get the new SARs regime right before we replace the system. I assure hon. Members that that is at the forefront of my mind. We are not going to fall over—that is the main thing—and we will make sure that when we replace it, we do so with the right system, so that we are not all back in this Committee Room in a few years’ time saying, “The SARs regime is not working.” I hope that clarifies the point for the hon. Member for Ealing Central and Acton.

Criminal Finances Bill (Sixth sitting)

Rupa Huq Excerpts

Committee Debate: 6th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

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

We broadly support new clause 6, tabled by the Opposition, which seeks to extend corporate financial crime beyond the provisions in the Bill as drafted—beyond tax evasion and bribery. We are generally supportive. It is worth mentioning the point made by the hon. Gentleman that the provisions in new clause 6(4) defining a criminal financial offence are at the moment corporate offences that require the directing mind to be present. To my mind, the new clause would merely remove the directing mind provision from those offences.

We broadly support the new clause, but I question subsection (2)(b), which states that a defence could be that

“it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.”

Although the provision seeks to catch other offences, it strikes me that the bank or organisation would merely need to demonstrate that it was not reasonable to have prevention procedures in place. To my mind, that defeats the purpose of extending the offence so widely. Nevertheless, we broadly support the new clause, and I would like to hear from the Minister about the Government’s inclination, if not to accept new clause 6, then to recognise that, at some future point, corporate financial crime could be extended beyond the provisions agreed in the Bill.

Another way of framing new clause 6 would be to codify specifically the exact offences within the three Acts. That might have negated the need for subsection (2)(b), which strikes me as a direct negative that might defeat the purpose. I would be interested to hear what the Minister has to say about the thought process, but generally speaking we support extending corporate financial crime, and are provisionally minded to agree to and support the new clause.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

It is a pleasure to serve under your chairmanship again, Mrs Main. My hon. Friend the Member for Bootle made an excellent speech. New clause 6 is supported by Amnesty International, CAFOD, Corruption Watch, Global Witness, ONE, Rights and Accountability in Development, Tax Justice Network, The Corner House, Traidcraft and Transparency International UK. Those are some heavyweight organisations. Before we adjourned, my hon. Friend asked what happened to the consultation promised at the anti-corruption summit. I would be interested to hear the answer.

[The Minister for Security (Mr Ben Wallace)]

New clause 6 highlights an issue raised on a number of occasions when we heard from interested parties about the Bill last week. I am pleased that the Opposition have tabled it, because it allows me to restate that the Government appreciate those concerns and agree that the damage caused by economic crime facilitated by those working for major companies is serious and affects individuals, businesses and the wider economy, and indeed the reputation of the United Kingdom as a place to do business.

As the hon. Member for Ealing Central and Acton is aware, the Labour Government took action in the Bribery Act 2010 in respect of bribery committed in pursuit of corporate business objectives. The Act is widely respected as both a sound enforcement tool and a measure incentivising bribery prevention as part of good corporate governance. We have already debated the new corporate offence of failure to prevent tax evasion created in the Bill. The provisions followed a process of extensive consultation, as did the Bribery Act 2010. I trust that hon. Members will agree that such an approach is necessary when considering the adequacy of the existing legal framework in matters involving complex legal and policy issues.

In respect of the current law governing corporate criminal liability for economic crime, the Government announced that a consultation would take place in May this year. I confirm that we will publish a call for evidence on the subject. In keeping with the considered and methodical approach adopted for the reforms on bribery and tax evasion, the call for evidence will form part of a two-part consultation process. It will openly request and examine evidence for and against the case for reform and seek views on a number of possible options. Should the responses that we receive justify changes to the law, the Government will then consult on firm proposals. The Government believe that it would be wrong to rush into legislation in this area for the reasons I have given. In the light of my assurances and the forthcoming publication of the call for evidence, I invite the hon. Gentleman to withdraw the new clause.

--- Later in debate ---

[Roger Mullin]

I think the Minister for those remarks and I particularly welcome his remarks about his meeting with the FCA. He is to be commended for that, and we would fully support him. Given his remarks, we will not at this stage push either of the new clauses to a Division, but we will reserve our position and perhaps return to it on Report. I beg to ask leave to withdraw the new clause.

Clause, by leave, withdrawn.

New Clause 20

Recovery orders: repatriation

‘(1) The Proceeds of Crime Act 2002 is amended, after section 266, by inserting—

“266A Recovery orders: repatriation

(1) Where a court—

(a) issues a recovery order under section 266; and

(b) has reasonable grounds for suspecting that property subject to the recovery order was obtained through unlawful conduct in a foreign country,

the court must issue a repatriation order in relation to that property.

(2) A repatriation order shall provide that within a year of the property’s having been recovered the property must be repatriated back to its country of origin.

(3) When a repatriation order has been issued, the Secretary of State shall send a request for cooperation and assistance to a representative of the government of the country of origin, in consultation with relevant third parties, and must, upon a court having issued a recovery order, endeavour to agree with that representative—

(a) as to how such property or the value of such property will be used upon its being repatriated to ensure that wherever possible the property repatriated will be used in a manner that will contribute to the implementation of Sustainable Development Goal 16, that benefits victims of the unlawful conduct, or that ensures the repatriated property is used for the original purpose from which it was diverted;

(b) a mechanism for accounting for the disbursement of the property and for making public a report on the use to which the property has been put.

(4) For the purposes of this section—

“relevant third parties” will include civil society actors and non-governmental organisations; independent audit bodies; the Department for International Development and multilateral development banks; and

“victims” will include communities affected by the unlawful conduct as well as the State.

(5) A repatriation order shall not be issued where—

(a) the court is satisfied that on the balance of probabilities that successful repatriation would lead to the property or the value of the property being subject to conduct that, were it within its jurisdiction, would violate the Human Rights Act 1998;

(b) the court is satisfied that on, the balance of probabilities, that successful repatriation would most likely result in such property being subject to illicit financial activity by a Politically Exposed Person in its country of origin; or

(c) the court is satisfied that, on the balance of probabilities, the property would not reach and/or be used for the purposes as agreed to by the Secretary of State and the representative of the country of origin.

(6) The UK may retain the total value of the recovered property where the Secretary of State and the relevant enforcement agency take all appropriate steps as set out in section (3) subsections (a) and (b) to assist the State in question in repatriating such property and yet receive no cooperation from the other State within a year of having taken such appropriate steps.

(7) For the purposes of subsection (6) “cooperation” is defined as the foreign State’s conclusively demonstrating to the Secretary of State and enforcement agency of its having done or being in the process of implementing the necessary steps required to ensure that the property or value of such property will be used for the ends laid down in section (3) (a) and the court is satisfied on the balance of probabilities that the property or value of such property will be used in accordance with those activities and probabilities as laid down in subsection (5)(a), (b) and (c).

(8) The court may order that a repatriation order may grant that the property could be given, subject to an agreement between the Secretary of State and a representative of the government of the country of origin, to a non-state actor who may distribute the property in accordance with subsection (3)(a) and (b) above.

(9) Upon application by the relevant enforcement agency the court may increase the time period within which repatriation must happen up to a maximum of five years if the court is satisfied that operational circumstances preclude the possibility of repatriation within the period previously required.

(10) The relevant enforcement agency may apply to the court for further extensions to the time period, where there is less than a year before the date of repatriation.

(11) Where the court grants an extension the enforcement agency in conjunction with the Secretary of State must publish a public report detailing the reasons why it sought an extension to the deadline for repatriation.

(12) Where the Secretary of State in conjunction with the enforcement agency publishes such a report as set out the Secretary of State may omit sensitive operational information which would preclude the possibility of repatriation being successful should such details be published.

(13) Such a report without redacted information will be passed to the Secretary of State upon each application made to the court for an extension.

(14) No later than one year after such property is repatriated all such reports will be made public in an uncensored form.””—(Dr Huq.)

This new clause would require property that was subject to a recovery order to be repatriated to its country of origin where the money was options through unlawful conduct in that country.

Brought up, and read the First time.

[Dr Huq]

I beg to move, That the clause be read a Second time.

The new clause would place a duty on the Secretary of State—and the enforcement agencies vested with the power to do so—to receive recovered property under the Proceeds of Crime Act 2002, and to repatriate recovered property where a court is satisfied that the property or the value of the property was begotten by illicit means. I hinted at the issue this morning. The clause builds on former Prime Minister David Cameron’s global forum for asset recovery, which came about after the anti-corruption summit of May 2016. We Opposition Members commend him for that. How he is missed. We have seen the forum begin to bear fruit, with the Government having signed a memorandum of understanding with Nigeria last September. There has clearly been limited progress on repatriation, but the Crown Prosecution Service’s most recent asset recovery strategy laments the low take-up of mutual legal assistance requests:

“Since London is a global centre for finance, there are a large number of criminal proceeds deposited in its financial institutions. Despite this, historically the CPS has not received a high volume of incoming MLA requests for the restraint and recovery of assets.”

Many of the people from the charitable sector who gave evidence worry that, at the end of the process, little will go back to those communities and third-world economies.

The Minister said on Second Reading, in relation to repatriating illicit wealth, that

“It is important to note that we are already doing this. In November 2015, the UK returned £28 million to Macau, which were the proceeds of corruption laundered in the UK. That is a concrete example of our giving back money to those countries that have been robbed by crooks who have used Britain to launder the money or to make the money in its jurisdiction. I want to see more of that and to see it go further.”—[Official Report, 25 October 2016; Vol. 616, c. 198.]

Through this new clause, we seek to help him with that process. He has made a clear commitment to seeing repatriation go further, and to ensuring that there is more of it. The CPS has also stated that mutual legal assistance is seriously underused, and that massive sums of illicit wealth are simply not subject to such requests and are therefore not being repatriated.

The new clause would not obstruct the Minister or the Government in their desire to see greater repatriation of illicit wealth. In fact, it would aid the Government in realising their aims. The new clause seeks to provide a different avenue from mutual legal assistance for repatriating illicit wealth, and it has a number of in-built safeguards to ensure that the UK repatriates such wealth to deserving countries, as well as safeguarding against the UK’s time being wasted.

Although the new clause is substantial in scope and takes up a number of pages in the amendment paper, we are not trying to cause an argument for argument’s sake. A precedent for repatriating wealth has been set, and the Committee has heard an example. The new clause would streamline the process, and I hope that the Government will take that in good faith; the new clause is technical, rather than political.

This is how we envisage the new clause working: where a court is satisfied that property is recoverable and issues a recovery order, and where it is also satisfied that the property was acquired with wealth illicitly obtained abroad, it may instruct a receiving enforcement agency to take steps towards repatriating that wealth upon the property being initially recovered. We term that a “repatriation order”—that is snappy.

Once such an order has been made, the Secretary of State would request co-operation and assistance in the repatriation process from a representative of the Government of the country of origin. The Secretary of State would then be free to enter into consultation with any other relevant third party. After that initial contact, an agreement would be reached with the aforementioned actors on how the value of the property would be used on repatriation.

The purpose of the measure is international development. In the new clause, proposed new section 266A(3)(a) of the Proceeds of Crime Act 2002 states that

“wherever possible the property repatriated will be used in a manner that will contribute to the implementation of Sustainable Development Goal 16”,

or the repatriated property will benefit the victims of the crime, or it will be used for its original purpose. The Government have some flexibility and room for discretion in the phrase “wherever possible”. Proposed subsection (4) contains a list of definitions.

--- Later in debate ---

[Mr Wallace]

First, I think that we all support what we are trying to do: returning money that we take off the bad guys to whomever it belongs to. If that is not possible—I used the example earlier of a criminal enterprise whose wealth was created by drug dealers, rather than by ripping off a state or somebody else’s assets—we return it to the prosecution authorities to ensure that they can continue.

Significantly, in the past, we have seen money paid back in cases of grand corruption. The UK is party to the UN convention against corruption, article 57 of which clearly requires embezzled funds to be paid back to the victim state, so we are already obliged under international law to do that. We must do that, and it is what we want to do. The £28 million returned to Macau that the hon. Lady and I both mentioned fell under the auspices of that convention. As we are subject to international law, there is no requirement to put such provisions in our domestic legislation. Nothing in our law prevents us from returning recovered assets.

Sharing and repatriating assets in asset recovery cases is a fast-developing issue in international law, and it is something that the UK fully supports. For example, there is a requirement, under the EU framework decision on the mutual recognition of confiscation orders, that at least 50% of assets recovered on behalf of another member be sent back to that state. The UK can return assets to any country, and where underpinning international agreements are required, we enthusiastically pursue them. For example, we recently concluded an asset-sharing agreement with Nigeria, under the formal title I referred to earlier.

This helpful debate on the Opposition’s new clause has allowed us to put these points on the record, but I trust that the Opposition will agree that there is no need for further primary legislation. Asset return happens anyway, with my full support and encouragement. Indeed, strict requirements in an Act could restrict our flexibility and make it harder to obtain effective asset-return agreements tailored to the peculiarities of individual cases. I am aware of a number of cases in which another country’s Government members have requested that we effectively co-return assets for certain projects, for fear of them disappearing into other parts of that Government that are corrupt. That type of flexibility is important to make sure that moneys returned do indeed get to the right place, rather than going back to the same place, and the same individual turning the assets of crime back into another townhouse in London.

That flexibility is really important, and while I cannot bind any successor Government, it would be odd if any Government chose to say, “No, thank you, we are going to keep everything, break our international law obligations, and upset a number of countries around the world by just pocketing this for ourselves.” It is not what we have done in the past, and it is not what we will do in the future. I urge the hon. Member for Ealing Central and Acton to look to our obligations under international law; I hope that that will satisfy her that we do not need more restrictive primary legislation on this issue.

[Dr Huq]

I listened carefully to the Minister. The 14 subsections in new clause 20 have a set of in-built checks and balances, and I know that the development charities would be disappointed if the new clause was not in the Bill. I accept, as I said, that things are being done on this front—the Macau example is a very good one—but as I understand it, the Minister says that there is no need for the new clause because there are international agreements. He mentioned the EU framework; the first money laundering directive also came from the EU, and we are leaving the EU, so I think it is no bad thing to put our own defence in the Bill, if only for ourselves. We would like to put the new clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

Brought up, and read the First time.

[Dr Huq]

I beg to move, That the clause be read a Second time.

We discussed this subject this morning in connection with clause 38. The new clause would make it incumbent on the Secretary of State to do all that she can to ensure that there are public registers of beneficial ownership in the UK’s overseas territories and Crown dependencies for companies operating and registered in their jurisdictions.

Proposed new subsections (2) to (5) delineate the steps that the Secretary of State would take to ensure that such registers were adopted. Proposed new subsection (3) states that those territories that failed to do so by a specific time would be subject to an Order in Council. I know what was said this morning, but there is precedent for that; I could go through a whole list of examples, but I will not bore the Committee with that quite yet.

The Government have created a Bill with the express intention of stamping out financial crime and clearing up the UK and London’s image. We quite rightly no longer wish to be seen as a country that is a soft touch, or as a City where dirty money can be hidden. To me and others, it is therefore astounding that there is no mention at all of the UK’s overseas territories and Crown dependencies in the Bill.

Thanks to the Panama papers, we and the rest of the world know that the UK overseas territories and Crown dependencies facilitate corruption, money laundering and tax evasion on a global scale. I am sure that the Minister is sick to death of hearing about the issue—we heard about it so many times in the evidence, and pretty much in every speech on Second Reading, with both Government and Opposition Members mentioning it—but I am afraid to say that the public are also sick of hearing about the double standards that exist for the politicians and wealthy elite who do not pay their taxes.

Opinion polling and recent research has shown that more than eight in 10 people think that it is morally wrong for businesses to avoid paying tax, even if that is legal or looks like, prima facie, a victimless crime. Only 20% of people think that any political party has done enough, and 77% think that the Government should be doing more to ensure that companies stop tax-dodging; among leave voters, that figure rises to 83%. More than two thirds of people want the Government to insist on public registers of beneficial ownership in the overseas territories and Crown dependencies. Again, there is a whole alphabet soup of different organisations and charities involved. This is all according to ComRes polling done on the issue for Oxfam and Christian Aid.

The issue will continue to reappear until the Government start listening to the people, finally step in and, if needs be, compel overseas territories to toe the line. None of us wants overseas territories to have registers forced on them, so we would be delighted if they did something. Christian Aid suggested a timeline, a set of goals being put in place to make something happen, because nothing will happen overnight; those jurisdictions are used to propping up tax evasion, so they will not fall into line quickly. A set of dates and objectives, however, would be extremely helpful.

We have already heard today about how overseas territories and Crown dependencies are making progress, but it is not swift enough. They have had three years, but nothing has happened. Under the former Prime Minister, they were first asked to take action three years ago, but not one of them bothered to consult on that request. The ones that responded to it largely said a simple no to the supposed consultations. In April 2014, they were asked again to do so in a letter from the former Prime Minister, but only one, Montserrat, committed to adopting a public register. The worst offenders, however, the ones that facilitate the stealing of wealth from developing countries and so in effect harbour blood money —the British Virgin Islands and the Cayman Islands—ignored the Foreign and Commonwealth Office’s request to meet and discuss the issue. I tried to ask about that this morning, but did not get a proper answer.

At every step of the way, the overseas territories and Crown dependencies have sought to frustrate any real progress. I did not mention any particular ones by name in my speech on Second Reading, but I had a really snotty, or not very friendly, letter from the Isle of Man, basically saying, “How very dare you. You don’t understand any of this.”

The Library brief on beneficial ownership cites a Minister who said:

“We have made huge progress in ensuring that we have registers of beneficial ownership in the overseas territories…The progress that has been made in the overseas territories is the greatest under any Government in history, which perhaps is one reason Transparency International said that the summit had been a good day for anti-corruption.”—[Official Report, 15 June 2016; Vol. 611, c. 1745.]

However, the brief also states:

“Given that some of the Crown Dependencies and British Overseas Territories have already…said very firmly that they will not be creating public registers, it seems likely that any further negotiation towards such registers will not be easy.”

That is an impartial brief. Transparency International recognises that some people are setting their faces against this.

--- Later in debate ---

[Mr Wallace]

That’s me!

[Dr Huq]

Yes. The Minister was quoted in the Jersey States Assembly in a question about the fact that

“the U.K. Government hopes the Crown Dependencies might have made their Registers of Beneficial Ownership of Companies public by the end of this year, or into next year.”

The Deputy asked whether the Chief Minister would

“advise what discussions he has had”

and what steps were being taken to put in place the good work that the Minister has mentioned. The following answer came back:

“The U.K. Government accepts, and has accepted in conversations with us, that our approach meets the policy aims that they are trying to meet and international bodies, standard setters and reviewers, have acknowledged that our approach is a leading approach and is superior to some other approaches taken.”

The answer is quite long, and I will bore people if I read it all out, but in essence it was, “We’re doing enough, and we’ve been told that it’s fine.” That is quite scandalous. A supplementary question was also asked. The Chief Minister of Jersey has said, “We’re doing what we’re doing, and it’s enough.” That does not go far enough. As long as such countries can get away with that, they will do that. There is a race to the bottom. They are all saying, “We don’t have to do it; no one else is doing it.”

As I am sure the Minister knows, Orders in Council have been made over the years in relation to different things. One was made in 1991 to abolish capital punishment for the crime of murder in the Caribbean territories of Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos Islands. In 2009, the UK Government suspended the ministerial Government and the House of Assembly of the Turks and Caicos Islands. The Government basically went in to run the thing: direct rule from London was imposed, despite opposition and criticism. There is a longer list of examples. That has been done before. It seems from the Chief Minister’s answer that Jersey thinks it can get away with it. Could we perhaps set a date of, say, 2020 and say that if it has not published entirely public registers of beneficial ownership by then, we will presume that all money coming through is dirty, or something like that? That may concentrate minds.

I could go on and on about the new clause, but I was told to be brief this afternoon, so I will end there for now. I am curious to hear the Minister’s response.

[Richard Arkless]

The SNP generally supports that proposition—we would prefer that Crown dependencies and overseas territories held publicly available registers of beneficial ownership—but to further a point that I made earlier, as the Scottish National party, we are obviously reluctant to compel this place in primary legislation to legislate for jurisdictions where it perhaps does not have locus. Proposed new section 2AA(5) in new clause 5 highlights the constitutional quagmire that that would put this place in. It states that this place would

“take all reasonable steps to support the Crown Dependencies to consent”.

Are we going to try to persuade them to consent? I do not quite understand what that subsection is getting at. If we have jurisdiction, we have jurisdiction; if we do not have jurisdiction, we simply do not have jurisdiction.

In conversations that I have had with the Jersey authorities—I have forthcoming conversations with the Isle of Man authorities, which sent me a similar letter, although I perhaps would not describe it in such terms—they have been at pains to stress that this place does not have competency to make such legislative provisions. I am minded to agree, even though I think it would be a good idea if they did, under their own steam, make those public registers available. Our position is that we support the proposition in principle, but we do not see that this new clause is competent, given the jurisdictional capabilities of this place over the Crown dependencies.

--- Later in debate ---

[Mr Wallace]

I am grateful to the hon. Gentleman for pointing that out. I meant and/or the overseas territories. The full house will, hopefully by next year, have those registers in place with automatic sharing enabled for our law enforcement agencies, and vice versa—should someone choose to use our country to hide tax from those other countries, their law enforcement agencies will be able to have it.

What I notice about all this is that the world is changing. Transparency is in the ascendancy, secrecy is not. Whether these places are overseas territories or other countries that are nothing to do with the United Kingdom, it is not secrecy that makes them competitive or attractive, but the tax rates and surrounding regulations. That is generational change. Yes, there will be people who wish to hide their wealth for all the wrong reasons, but we are now in a position where our agencies and bodies of law and order will be able to access those areas. They will not have to rely on leaks or third-hand information.

I would not be surprised if, in five or 10 years, we are talking about entirely different countries around the world, maybe even countries that we might think would not be harder to access, but actually are. Those countries might have a more developed legal system and a more protective privacy system that makes it harder for our forces of law and order to get hold of data. I certainly think that these places have come 90% of the way, and we should see whether that works for us. We all have the intention and the United Kingdom is leading by example.

The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far. Irrespective of the point raised by the hon. Member for Ealing Central and Acton about their attitude and about whether they were pushed or forced, they were not pushed there by a gunboat. It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which, after all, makes a real difference. Therefore, I urge the hon. Lady to withdraw the new clause.

[Dr Huq]

It is not good enough to say that we just have to pat ourselves on the back and that everything is fine. I am a bit disappointed with the Minister for trotting out that thing about 13 years of Labour. What did Labour do? We passed the Proceeds of Crime Act 2002, which the Bill amends; the Serious Organised Crime and Police Act 2005; the Bribery Act 2010, section 7 of which we discussed so much this morning; and the Money Laundering Regulations 2007. We created the Serious Organised Crime Agency to ensure a single, intelligence-led response to organised crime.

[Mr Wallace]

Will the hon. Lady give way?

[Dr Huq]

Let me finish this list. We also passed the Terrorism Act 2000, part 3 of which we have been amending here, as well as part 2 of the Anti-terrorism, Crime and Security Act 2001—legislation to deal with all these things that we have been talking about, such as terrorist funding. It is a bit low of the Minister to trot out that one about 13 years of Labour. We have been consensual and friendly all the way through this Committee, saying what good legislation this is, so that is a bit tawdry. [Interruption.]

[The Chair]

Order. It is a bit difficult to hear what the hon. Lady has to say. Is the Minister intervening?

--- Later in debate ---

[Dr Huq]

I respect the Minister and I know that he is a reasonable person, but six years into government, he is dragging up the record of a previous Government. I would like to pass on to him the Hansard of the States of Jersey legislature. In it, the question was asked:

“Can the Chief Minister confirm that this is not something that, from Jersey’s perspective, is immediately on the cards”

or is

“the Minister for Security in the UK”—

that is the Minister opposite me—

“under a misunderstanding of what direction the Crown Dependencies are going in?”

The answer from Senator Gorst, from the governing party in Jersey, was as follows:

“they have decided that the best approach for them is a public register. Of course, they are asking others around the world to consider following their approach. We take the approach which meets the international standard which is, as far as we are concerned, a leading approach.”

Judging from that, Jersey has no plans to have a public register until it becomes the international standard.

I accept that the Minister says that it is bad to compel people to do things, but in my last speech, I said that we could work towards some sort of timeline or some dates. Rather than compelling and forcing people to do things, we can encourage them with dates. Already three years have passed, and very little has happened. From what the Chief Minister and all these people in Jersey have said, it looks very much as though they have no intention of taking this action. Earlier, my hon. Friend the Member for Bootle referred to things looking a bit hypocritical from the outside; I worry that people might judge us that way. I have listened carefully to what the Minister said. We will not push the new clause to a vote, but I am sure that he is aware that a lot of people are concerned about the issue. I thought he would be interested to see that Hansard, in which he is mentioned; it is quite flattering. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 45

Minor and consequential amendments

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

[The Chair]

With this, it will be convenient to discuss the following:

That schedule 5 be the Fifth schedule to the Bill.

Clauses 46 to 51 stand part.

[Mr Wallace]

The remaining clauses in part 4 are relatively technical and straightforward. I am tempted to sit down after saying that. They are also similar to other pieces of legislation, so I will not delay us much longer, beyond highlighting a few points.

Clause 46 allows the Secretary of State to make by regulation such provision as they consider necessary in consequence of this Bill. Clause 47 sets out the procedural requirement for making regulations in respect of the devolved Administrations, while clause 49 covers the Bill’s territorial extent. Most of the Bill extends to England, Wales, Scotland and Northern Ireland. As I stated on Second Reading, we expect the Scottish Government and the Northern Ireland Executive to seek legislative consent motions from their legislatures; I welcome that, and support them in doing so. I am grateful for our constructive and ongoing engagement with the devolved Administrations.

As this brings us to the end of the Committee, I pay tribute to the Chair and co-Chair for their expeditious and authoritative chairing of our proceedings, and to the many members of the House authorities that have facilitated our consideration of the Bill. They include the Clerks of the Public Bill Office, the Doorkeepers, Hansard and many others.

I am grateful for the constructive approach taken by the Opposition Front Benchers and the Scottish National party in trying to make the best of the Bill. It is not over yet; I understand that there is a long way still to go. I am grateful for the amendments that were tabled, including those from the hon. Member for Stoke-on-Trent Central. I thank the hon. Members for Dumfries and Galloway, and for Kirkcaldy and Cowdenbeath, for pointing out the issues to do with Scottish limited partnerships and other concerns; I shall meet them for discussions.

The fact that the Committee stage is to finish early is a testament to the significantly cross-party approach, it says here. We shall, I hope, return to the Floor of the House with the Committee’s strong endorsement of the Bill as well drafted legislation that will make a difference in the fight against organised crime.

Since I took on my present job, I have had to deal with a range of matters, including terrorists and serious organised crime. The bit that scares me the most is the serious and organised crime—the wealth of those individuals, and the impunity with which they operate. I cannot say how helpful the Bill will be, at least in taking away their profit and returning it to the countries or people they have stolen from or, failing that, to the forces of law and order. When I go to sleep at night, it is serious and organised crime that scares me more than anything else in my brief. I hope that we have gone a long way towards at least deterring those engaged in it, and sending a strong message to people who think that such behaviour is permissible.

Question put and agreed to.

Clause 45 accordingly ordered to stand part of the Bill.

Schedule 5

Minor and Consequential Amendments

Amendments made: 54, in schedule 5, page 140, line 11, leave out “designated” and insert “counter-terrorism”.

See the explanatory statement to amendment 16.

Amendment 73, in schedule 5, page 140, line 32, at end insert—

‘( ) In paragraph 5, in sub-paragraph (1), for “this Schedule” substitute “any provision of this Schedule other than Part 2A”.

( ) In that paragraph, omit sub-paragraph (4).”

This amendment is consequential on NC18.

Amendment 74, in schedule 5, page 140, line 33, at end insert—

‘( ) In paragraph 8(1), for “this Schedule” substitute “paragraph 6”.”

This amendment is consequential on NC18.

Amendment 75, in schedule 5, page 140, line 34, at end insert—

‘( ) After paragraph 9 insert—

Restrictions on release

9A Cash is not to be released under any power or duty conferred or imposed by this Schedule (and so is to continue to be detained)—

(a) if an application for its forfeiture under paragraph 6, or for its release under paragraph 9, is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded;

(b) if (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the cash is connected, until the proceedings are concluded.”

( ) In paragraph 10, in sub-paragraph (1) after “Schedule,” insert “and the cash is not otherwise forfeited in pursuance of a cash forfeiture notice,”.

( ) In that paragraph, after sub-paragraph (8) insert—

“(8A) If any cash is detained under this Schedule and part only of the cash is forfeited in pursuance of a cash forfeiture notice, this paragraph has effect in relation to the other part.””

This amendment is consequential on NC18.

Amendment 55, in schedule 5, page 141, line 27, leave out “303O(4) and insert “303O(5)”

This amendment corrects an incorrect cross-reference.

Amendment 56, in schedule 5, page 142, line 2, at end insert—

( ) in paragraph (b) (as amended by section 28 of this Act), for “or 298(4)” substitute “, 298(4) or 303O(5)”;” —(Mr Wallace.)

This amendment is consequential on amendment 15 and corresponds to the amendment of section 82 of the Proceeds of Crime Act 2002 made by paragraph 18(3)(b) of Schedule 5 to the Bill, as amended by amendment 55.

Schedule 5, as amended, agreed to.

Clauses 46 to 48 ordered to stand part of the Bill.

Clause 49

Extent

Amendment made: 52, in clause 49, page 102, line 34, at end insert—

“() section 28(2A);” —(Mr Wallace.)

This amendment is consequential on amendment 15.

Clause 49, as amended, ordered to stand part of the Bill.

Clause 50

Commencement

Amendment made: 53, in clause 50, page 103, line 5, after “25” insert “and 28(2A)”—(Mr Wallace.)

This amendment is consequential on amendment 15.

Clause 50, as amended, ordered to stand part of the Bill.

Clause 51 ordered to stand part of the Bill.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Dr Huq]

It has been a pleasure to serve under your chairmanship, Mrs Main, and that of Sir Alan Meale in the earlier sittings. I commend the Minister on the Bill. We can all sleep safely in our beds because of it. I am fortunate that my first Front-Bench service has been with such a nice Minister. I look forward to working constructively with the Government on Report—even if there were some tiny things. However, let us not raise those.

[Richard Arkless]

I add my thanks to you, Mrs Main, and congratulate you on your splendid chairing today. We got through the Bill at a rate of knots, and like other Members, I am delighted to be leaving before 3.30 pm, thanks to you. I do not wish to inflate the ego of the Minister any further, given the compliments that he has had from all sides. Suffice it to say that with the second name Wallace, I wonder what happened.

There is a great deal of cross-party consensus about the objectives of the Bill. It is about making sure that the bad guys, who elicit huge sums of money from criminal activity, have nowhere to hide. We are all focused on that goal, and we will all come together to make sure that that happens. If we can achieve that—subsequent, obviously, to lengthy conversations that we still have to have on a few points, and I am sure that the Minister will treat those conversations as he has done others throughout the Bill process—then I am sure that we can get to a position that will satisfy us, if not in this primary legislation on Report, then certainly within the contemplation of Government in future. That is certainly our objective. Unlike my more experienced colleague, my hon. Friend the Member for Kirkcaldy and Cowdenbeath, who has been an MP for the same amount of time as me, this is my first Bill Committee. It has not been the most contentious in the world, which I suppose I should be grateful for, but I look forward to the other stages on the Floor of the House, and I thank all Members.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Criminal Finances Bill

Rupa Huq Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st February 2017 Commons Chamber

[Mr Raab]

My hon. Friend is absolutely right. We will need a separate legislative vehicle to address the wider question of visa bans, but he makes his point and has been tenacious in powerfully campaigning for this. We will want to move on to that issue at the appropriate time. Today is really about the asset-freezing side of things. We have in this last analysis the opportunity to send a message of solidarity to those who are fighting for the liberty that we in this country hold so dear. We have the opportunity to nurture the flame of freedom on behalf of those brave souls, such as Sergei Magnitsky, who suffered the very worst crimes when standing up for the very highest principles.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

As I rise to speak to this group of amendments, it looks as though new clause 1 might not be moved in favour of Government new clause 7. The Minister started by saying that the Bill has so far enjoyed a degree of cross-party consensus in its parliamentary passage, so I would like to say that Her Majesty’s loyal Opposition will not stand in the way of new clause 7 and will not stand in the way of new clause 1 if it is moved.

I welcome new clauses targeting asset seizure for those guilty of human rights abuses outside Britain who seek to use the UK to conceal their wealth. New clause 1 has become known colloquially as the Magnitsky amendment, and we have heard some of the tragic details of that case. It would bolster the Bill’s aim to tackle the growing concern about money laundering, terrorist financing and corruption. The International Monetary Fund and the World Bank estimate that the annual loss through money laundered globally is between 2% to 5% of global GDP—a staggering $800 billion to $2 trillion. We do not know the true figures because this is all hidden, white-collar crime.

It is estimated that serious and organised crime on our own doorstep costs the UK economy at least £24 billion annually. The amount of money laundered here every year is between £36 billion and £90 billion. That is a loss to our Exchequer, so it is only right that we tighten up the legislation with this Bill, and such an amendment would tighten them up further. Quite simply, those who have blood on their hands from the worst human rights abuses should not be able to funnel their dirty money through our country. In a recent article in The New York Times, the journalist Ben Judah uses quite colourful language to attest:

“Just because there aren’t bodies on the streets of London doesn’t mean London isn’t abetting those who pile them up elsewhere. The British establishment has long feigned ignorance of the business, but the London Laundromat is destroying the country’s reputation.”

Under new clause 1, the names of individuals who have been involved in or profited from human rights abuses would be published, and Ministers would be obliged to apply for a freezing order of up to two years if they are presented with compelling evidence of abuse and it is in the public interest to do so. That would make dictators and despots think twice about using the UK as a safe place to stash their dirty cash. By creating personal costs for the perpetrators of human rights abuses, we can protect whistleblowers around the world, which would be a fitting tribute to the legacy of Sergei Magnitsky.

[Mr Djanogly]

I am pleased to be given the opportunity to speak to this significant legislation, which will certainly help the overall objective of stopping the UK being used as a safe harbour for illegal proceeds, as it currently is all too frequently.

--- Later in debate ---

[Mr Wallace]

I can reassure the hon. Gentleman and the hon. Member for Swansea East (Carolyn Harris) that one part of government that has not seen a significant reduction in its budgets is the area of the regional organised crime units, the national crime agencies and the security and intelligence agencies, which assist us in tackling organised crime and money laundering. The National Crime Agency has a capital budget of £50 million this year, with £427 million of funding. It is supported in England and Wales by the regional organised crime units, which have got £519 million of funding. The figures for the Serious Fraud Office are £45 million, with £5 million of capital this year, and the figures for HMRC are £3.8 billion in resource and £242 million in capital. Of course, in terms of crime-fighting, the question is, “How long is a piece of string?”

[Dr Huq]

I am listening intently to what the Minister is saying, and I am reminded of an Evening Standard report—from earlier this year, I think—headed: “Home Office reveals new Criminal Finances Bill will target just 20 tycoons a year.” The report says that is based on the Home Office’s own impact assessment which

“predicts that the power will remain unused in its first year ‘as part of the learning curve’, and thereafter will be used in only 20 cases each year.”

That is because of resource implications, which is precisely the point raised by the hon. Member for Dumfries and Galloway (Richard Arkless). Does the Minister have any comment to make on that?

[Mr Wallace]

The impact assessment is not linked to access to funds. The impact assessment is a judgment as to how it would see these powers being used. Probably like the hon. Lady, I would like to see them used an awful lot more, but that is an impact assessment, and the NCA does not follow the impact assessment. If the evidence is presented or the cases are put before it that allow it to do 100, it will do 100. It is not restricted by the impact assessment. I would therefore not be too distracted by the London Evening Standard and the impact assessment.

Instead, I would focus on the fact that we have well resourced our law enforcement agencies to tackle this, and this Bill will give them the power. They have the political support of both sides of the House to exercise that power, so let us see how far we go. However, I would be delighted to join the hon. Lady in asking, in 12 months’ time or whenever the Bill goes through, why we have not used them more; I will be asking the NCA and all the other organisations to try to make sure they have done so.

The hon. Member for Swansea East made a point about the asset recovery incentivisation scheme, or ARIS, funding for the recovery of assets not really being worth the paper it was printed on—I think that was what she was trying to say, if she will forgive me for putting words in her mouth. However, since 2006, under an arrangement under her last Government, £764 million has gone into funding those law enforcement agencies, and in the last three years £257 million has gone in. Hopefully, with the new arrangement, above the baseline of, I think, £146 million—I will correct that in writing if it is not £146 million—100% will be kept.

We are also following on from the excellent reports from the Home Affairs Committee and the Public Accounts Committee looking into why we have not achieved enough in terms of confiscation orders and recovery of assets. I have told officials I am particularly concerned that it was suggested in one of those reports that the focus seemed to be on small assets—the collection rate was higher for smaller amounts of money, but lower among millionaires—and I have specifically directed officials that we must look at turning the tables. I want all assets collected that are subject to confiscation, but those reports are a good guideline and we did not ignore that specific point. We will certainly make sure that we build on it and improve on it, because there is money in it for us all, should we do it, and I am very keen that we should.

New clause 5, tabled by my hon. Friend the Member for Amber Valley (Nigel Mills), seeks to prevent the courts from awarding uncapped costs against enforcement agencies when they have brought unsuccessful applications for unexplained wealth orders or related interim freezing orders. I appreciate that this is to ensure that law enforcement agencies do not feel constrained in their ability to apply for an unexplained wealth order, for fear of incurring financial liability. But, as law enforcement representatives told the Public Bill Committee in November, this is a natural part of the state wielding its investigative powers, and they are certainly not pressing for a provision of this type. It is a well-established principle that the losing party pays the winning party’s legal costs. This is an important check and balance on parties bringing spurious claims, or the state using its powers erroneously.

At the same time, the civil procedure rules do already allow for capping in exceptional circumstances, so law enforcement agencies would be able, as things stand, to apply for a cost-capping order in appropriate cases. I undertake to ensure that this point is included in the code of practice that will support the use of these orders. I trust that Members will agree that this is a far more sensible way forward than a blanket rule for all unexplained wealth order cases.

It is crucial that the initial cases are thoroughly developed to ensure that the orders have the greatest possible impact. We are already actively engaging with law enforcement officers and prosecutors to encourage the use of the new powers being introduced by the Bill. Ultimately, it will be for the enforcement authorities to decide when to use them, but we will—as, no doubt, will Her Majesty’s loyal Opposition—monitor and review the use of the orders once they have been introduced. This will inform future support or changes that may be needed to ensure that they are being used to maximum effect.

The hon. Member for Swansea East explained from the Opposition Front Bench the objective behind her amendment 1. However, as I explained when this issue arose in Committee, politically exposed persons in the UK and European economic area can, in fact, already be made subject to an unexplained wealth order. These orders can be made in two situations: first, where an individual is suspected of involvement in serious crime; and secondly, in relation to non-EEA politically exposed persons. An unexplained wealth order can thus be made in relation to politicians and senior officials in Europe, when they are suspected of being involved in serious criminality. In such an investigation, if evidence exists of links to serious organised crime, it should be available, obtainable and readily provided, and it would be unreasonable and disproportionate, for example, for Members of this House to be made subject to an order without any evidence of criminality.

However, for investigations into grand corruption involving countries outside Europe, including the developing world, that evidence is far less likely to be available. It will be much harder in some countries where corruption is endemic to get the evidence to bring to the court at first about wealth hidden in London. That is why we have chosen to have a lower threshold for evidence when applied to countries outside the EEA.

We should not forget that unexplained wealth orders are not an end in themselves; they are part of a process leading eventually, should those concerned not be able to give satisfactory answers, to another action in court to confiscate the assets. As I said when I met the right hon. Member for Hackney North and Stoke Newington (Ms Abbott) to discuss this, I do not want unexplained wealth orders also to produce a lot of derelict empty buildings that are caught up in legal dispute and sitting around London being no good for anyone. I want them to be used and be placed on people whom we have linked to serious crime, and then, should they not be able to satisfy the court, for us then to go to the next step and recover that asset, so that the houses and the housing market are freed up, and any money is returned to whoever it has been stolen from—a country, or other people. An order is therefore a step in the process, not an end in itself.

I hope that I have sufficiently reassured the House on these points, and that the Opposition will feel inclined to not press their amendment.

Question put and agreed to.

New clause 8 accordingly read a Second time, and added to the Bill.

New Clause 2

Failure to Prevent an Economic Criminal Offence

“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the criminal purposes of this clause—

“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.

(3) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(5) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”—(Sir Edward Garnier.)

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

Brought up, and read the First time.

--- Later in debate ---

That concludes my submissions on the new clauses that we have tabled, other than to say again—ad nauseam —that we support the principles of the Bill but we do not believe that it goes far enough in certain areas. We applaud the direction of travel in which it will take the UK economy, and we hope that we will be able to go further. We hope that its provisions will not be caught up in red tape and bureaucracy, and that they will actually work so that we can get at the bad guys’ money and the rest of us who play by the rules can have a fair crack of the whip.

[Dr Huq]

This group of new clauses contains a fair few of ours, so I shall take a bit longer than I did last time. I want to speak to new clauses 6, 16 and 17 and I want to press new clause 17 to a vote.

Tax evasion was big news in 2016 following the publication of the Panama papers, which threw light on certain opaque offshore companies. Following the leaking of those papers, the overwhelming sentiment was that something needed to be done, and this Bill is that something—or rather, it introduces a set of somethings to deal with the problem. It introduces new corporate offences that will no longer be reliant on the defunct guiding mind principle, it creates unexplained wealth orders and it contains some other eye-catching stuff including the failure to prevent offences under the category of a politically exposed person. It also makes necessary amendments to our pre-existing anti-terrorism legislation. The Minister has pointed out that the Bill builds on a raft of Labour-initiated legislation, including the Proceeds of Crime Act 2002, the Bribery Act 2010 and the Terrorism Acts of 2000 and 2006. On the whole, we support the Bill, and all this stuff is not to be sniffed at.

I also want to mention the new additional monitoring, which the Minister announced on the spot a little earlier, relating to the human rights abuses mentioned in our debate on the first group of new clauses.

As the Bill has progressed, however, it has become apparent that there are chinks in the armoury for fighting money laundering. We welcome what is in it, but concerns are being expressed not only in my party but by a range of charities and non-governmental organisations such as Amnesty International, Christian Aid, Traidcraft, Transparency International, CAFOD and the ONE Campaign. They are concerned about what the Bill does not contain, and the elephant in the room is the issue of beneficial ownership and the UK’s inaction in tackling the financially secretive companies and practices that lie at the heart of the economies of many of our overseas territories and Crown dependencies. Beneficial ownership is entirely not present in the Bill. It is conspicuous by its absence. In other words, I am referring to our “tax havens.” The silence seems bizarre given that we are talking about money laundering, tax evasion and terrorist financing. Whether the Government like it or not, the matter must be addressed. The issue falls within the Bill’s remit because overseas territories are facilitating, aiding and abetting financial crime. The last time I was at the Dispatch Box I said that the UK, along with its overseas territories and Crown dependencies, is the biggest secretive financial jurisdiction in the world, so we have a special responsibility to act and to lead on this agenda, not to be slightly less bad than everyone else. The UK is facilitating some of the largest and most well-known tax havens, so we should be leading not following.

When the Government have been told that they need to “get real” not just by me in Committee but by the court of public opinion after the scandalous events of last year, they need to toughen up and get a grip on overseas territories and Crown dependencies because they facilitate illicit financial activity on a global scale, but the same excuses follow and have been trotted out today: the UK does not have the constitutional legitimacy for the overseas territories and Crown dependencies; and the territories are supposedly adhering to international standards anyway, so making them adopt public registers of beneficial ownership is not necessary. We are also told that the Government do want the territories and dependencies to adopt such registers, that they are working towards that, and that in the light of the progress made the threat of an Order in Council is unnecessary.

The Government say that the time will be right when the rest of world follows the UK’s lead and that they will set a global benchmark for financial territories. At the sixth sitting of the Bill Committee, the Minister told us that only when the time is right and only when there is an international standard for public registers of beneficial ownership will it be imperative for our overseas territories and Crown dependencies to follow suit. He actually claimed that the Crown dependencies and overseas territories with financial centres are already way ahead of “most jurisdictions”, including most G20 nations, on tax transparency. We were told that they are doing enough and that now was not the time to upset the applecart with public registers, particularly when they have agreed to adopt centralised registers. The Minister may recognise his own words from Committee in response to an amendment of mine that was pretty much identical to new clause 6:

“I certainly think that these places”—

the overseas territories and Crown dependencies—

“have come 90% of the way, and we should see whether that works for us. We all have the intention”—

to adopt public registers—

“and the United Kingdom is leading by example.”

In response to our threat of an Order in Council, he said:

“The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far.”

This is the interesting bit:

“It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which…makes a real difference.”––[Official Report, Criminal Finance Public Bill Committee, 22 November 2016; c. 199-200.]

That already seems slightly contradictory.

On the one hand, we hear that we cannot legislate for the dependencies. In fact, I remember the Minister calling me—someone whose parents suffered the worst excesses of the British empire—a neo-imperialist. It was certainly the first time that anyone has called me a neo-colonialist or whatever it was. At the same time, however, we clearly are able to do something and have the option to stop turning a blind eye and to turn inactivity into activity. The Minister himself insisted that the proposal was a “strong measure” that is less preferable to his own formula of cajoling and behind-the-scenes pressure.

[Mr Wallace]

Will the hon. Lady recognise for once that through cajoling and peer group pressure all Crown dependencies and overseas territories will by this year have central registers of beneficial ownership or similar? That is ahead of many G20 countries that do not even have central registers. We have actually come a long way and a lot further than when Labour was in government.

[Dr Huq]

I listened carefully to what the Minister said, and he said something similar in response to my right hon. Friend the Member for Don Valley (Caroline Flint). I will literally eat my hat—not that I am wearing one—if that happens. The registers must be in a format that is easily convertible to public registers.

We are not there yet. As someone who conducted empirical social science research, I wonder where the 90% figure came from. I know such things are often said across the Dispatch Box—in this case, it was in a Public Bill Committee—on the hoof, in the heat of the moment, and I would not want to label the Minister as a purveyor of fake news, but does he really think that we are 90% of the way there? Even if Government Members say that we do not normally do this, there is always a time when, if needed, we can step in, and the Labour party would argue that that time is now.

--- Later in debate ---

[Mark Field]

The specific problem is about legislating for the overseas territories rather than the Crown dependencies. I think it is understood across the board that this does not apply to the Crown dependencies. We all recognise that significant progress has been made in recent years, so will the hon. Lady pledge at this juncture not to press new clause 6 to a Division? Let us see further progress in the months and years to come that will hopefully ensure that we move towards a global protocol that keeps everyone happy.

[Dr Huq]

First, I would like to finish what I was trying to say. I was coming to the Crown dependencies and overseas territories, which I realise are two different things. I would also like to hear what the Minister has to say, because at earlier stages of the Bill he was conciliatory and we backed down on some things.

We are dealing with not just new clause 6 but new clause 17. We are looking at both overseas territories and Crown dependencies because, internationally, the UK will be able to lecture and persuade others to adopt transparent finance practices only if its overseas territories and Crown dependencies stop engaging in—

[Robert Neill]

Will the hon. Lady give way?

[Dr Huq]

I will carry on for the moment because I want to make some progress—I am not able to get a sentence out at the moment. The hon. Gentleman will be referenced later in my speech. We worked well together under his excellent stewardship of the Justice Committee.

The previous coalition Government’s White Paper on the overseas territories has already been quoted by my right hon. Friend the Member for Don Valley. It referred to how, as a matter of constitutional law, the UK Parliament has unlimited power to legislate for the overseas territories. The phrase “unlimited power” is pretty clear. On the Crown dependencies, which the right hon. Member for Cities of London and Westminster (Mark Field) mentioned, it appears that not only the Government but the SNP, given the remarks of the hon. Member for Dumfries and Galloway (Richard Arkless), who was a member of the Justice Committee with me, have accepted, or been cowed into believing, that the Crown dependencies are somehow untouchable.

I want to quote from a report by the hon. Member for Bromley and Chislehurst (Robert Neill). The Justice Committee’s 2010 report on the Crown dependencies stated:

“the restrictive formulation of the power of the UK Government to intervene in insular affairs on the ground of good government is accepted by both the UK and the Crown Dependency governments”.

A list of examples was given, but the hon. Gentleman probably knows it better than I did, because he wrote it.

[Robert Neill]

It would not be unreasonable for the hon. Lady to note that I was not Chair of the Justice Committee at that time. Can she give me any example of a time when the United Kingdom has specifically legislated for a Crown dependency, as opposed to acting under the prerogative power through the lieutenant governors, which indeed itself has not been done in many years? The overseas territories are not the same as the Crown dependencies legally. I honestly urge her to reflect on that, because she is genuinely on shaky legal ground.

[Dr Huq]

As I have said, there seems to be a lack of will. The hon. Gentleman talked at length about Gibraltar—[Interruption.] If he will listen to what I say back to him, that might be useful. There is a lack of will to act. People have been lobbying all of us, probably including him. The fact that we have the power to make a change is more significant than examples—if this is needed, it can be done. New clause 16 does not coerce anyone to do anything, but it sets out steps that would facilitate matters.

[Richard Arkless]

Given the principle of parliamentary sovereignty, it is of course open to this place to legislate on Scotland. Is the hon. Lady suggesting that she would legislate on matters that are devolved to the Scottish Parliament?

[Dr Huq]

No, I did not say that. If the hon. Gentleman had listened, he would know that I did not mention Scotland at all.

[Several hon. Members rose—]

[Dr Huq]

I would like to make progress. I will not take any more interventions, because I am still at the very beginning of my speech and the Whips are telling me that they want me to conclude.

The question is not, “Can we do this?” but, “Is it right to do this?” It will come as no surprise that I think that the answer is yes. The Government’s White Paper made it clear that when the law is not working, or there has been a breakdown in order—corruption was mentioned —the UK has the power to act.

[Sir Eric Pickles]

rose—

[Dr Huq]

I have said that I am not giving way any more.

[Sir Eric Pickles]

I didn’t hear you.

[Dr Huq]

It would help if Members were listening to me. How many times have I given way? Numerous times—more than anyone else in our proceedings, which have been going on for many hours—so I would like to make some progress.

Even if, as has been mentioned, it is the British Virgin Islands and the Cayman Islands that are prolific offenders—I think that the British Virgin Islands come up the greatest number of times in the Panama papers—it does not completely absolve the Crown dependencies. Several Members have tried to untangle the difference between Crown dependencies and overseas territories. The Isle of Man managed to rack up 8,000 entries in the Panama papers and is being singled out by the Canadian revenue authorities for investigation. Let us not forget that in October 2015, HMRC defeated the Isle of Man on a tax avoidance scheme that took place from 2001 to 2008 and left a hole in our finances of £200 million. That is a not insignificant sum, and it is money going from our Exchequer. How many hospitals and schools could we have built for that? I do not know the precise answer; it is a rhetorical question. In 2007, the tax havens of Guernsey and Jersey were investigated by our Serious Fraud Office in one of the biggest corruption investigations in African history. These things often join up; the money moves around.

The point is clear: the very structure of the laws pertaining to finance in these places, coupled with their deliberate adoption of complex and opaque institutional structures, is crying out for reform. Globally, these dependencies are at the heart of undermining the rule of law—something that we hold dear—in other countries due to the corruption that they facilitate. Their laws therefore clearly need to be changed, and there is undeniable scope for us to change them. As my right hon. Friend the Member for Barking (Dame Margaret Hodge), who is sadly absent, has said, there is a moral case for us to act, even if there might not be an identical incident in which we have so acted. My right hon. Friend the Member for Don Valley referred to polling that shows enormous public support for such an approach—some 80% of people in a recent poll.

The Bill Committee was told that public registers are not an international norm and that our Crown dependencies and overseas territories are somehow exemplars because they have adopted closed registers of beneficial ownership. Lamentably, that might look like a bit of an alternative fact—dare I say that. I have here a piece of paper—in fact, it is three sheets stapled together—with a list of 46 jurisdictions. Those countries are all dependencies of G20 nation states, so they are in a similar constitutional position to our overseas territories and Crown dependencies, and they all have centralised registers of beneficial ownership. Shall I read out all 46, or does the House want just a smattering? They are: the Ashmore and Cartier Islands, Christmas Island, the Cocos Keeling Islands, the Coral Sea Islands—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The hon. Lady is not going to read out all 46, is she? She has made her point most eloquently, so there is no need to list all 46. We do not read long lists in this Chamber, and the House has got the point she is making.

[Dr Huq]

I am most grateful for that clarification, Madam Deputy Speaker. Some of those on the list are the DOM-TOMs—the départements d’outre-mer and the territoires d’outre-mer—so there is a long list, including Guadeloupe and Martinique, but I shall move on.

It is a bit of a nonsense for the Conservative party to claim that the overseas territories and Crown dependencies are leading the world in financial transparency because of the creation of central registers if 46 other dependencies are doing that already. Not only have some been incredibly slow to catch up with the aforementioned countries, but some of our Crown dependencies and overseas territories are among the worst offenders and have not adopted centralised registers, let alone made them public. More accurately, they have adopted platforms.

The Government ask us to believe that the British Virgin Islands or the Cayman Islands will be able to police their own financial businesses by relying on those businesses, which facilitate crime. It is asking them to mark their own homework and to be judge and jury. Call me a cynic, but I doubt that that is a workable solution. Do we really believe that anonymous companies in the British Virgin Islands—which, for example, allowed the former wife of a Taiwanese President to illicitly purchase $1.6 million of property in Manhattan—would be capable of policing themselves?

There are several other examples. Would Alcoa, the world’s third largest producer of aluminium, be capable of policing itself when it has used an anonymous company in the British Virgin Islands to transfer millions of dollars in bribes to Bahraini officials? Would the anonymous British Virgin Islands-based company used by Teodorin Obiang, the son of the President of Equatorial Guinea, really be capable of policing itself when it allowed him to squirrel away $38 million of state money to buy a private jet? It was thanks to the US Justice Department that he was caught. The Government’s protestation that we are working with the territories and dependencies, and that we are 90% of the way there, is at best highly questionable.

[Robert Neill]

Is that it?

[Dr Huq]

No, there is more.

The main point I want to make is that our Government should be at the forefront of the push to cast off the cloak of secrecy under which terrorists have previously been able to fund their attacks and gangsters have stored their ill-gotten gains. We should not be dragging our feet on this. Some of these jurisdictions, including the British Virgin Islands and the Cayman Islands, have hidden behind the fig leaf of the consultation.

I shall dispense with the rest of what I was going to say, but we wish to press new clause 17 to a Division—[Interruption.] If anyone had listened to me, they would know that I was largely talking about the Crown dependencies.

In conclusion, we could have gone all the way and become the gold standard for other Governments to follow. We could also have dealt with the public disquiet over perceived levels of tax evasion, which the former Prime Minister, to his credit, wanted to tackle. This massive oversight undermines not only the claims made by the former Member for Witney, but citizens in some of the poorest developing countries of the world, which are at the end of these complex supply chains of criminality. Those citizens are the main losers in all of this.

The Home Office’s press release that accompanied the publication of the Bill said that the new offences were aimed at

“sending out a clear message that anyone doing business in and with the UK must have the highest possible compliance standards.”

Although we agree with large parts of the Bill, it does, none the less, fall short. New clause 17, which Her Majesty’s loyal Opposition wish to press to a Division, would go some way towards addressing a number of these issues.