Proceeds of Crime

Tom Brake Excerpts

Tuesday 12th June 2012 Commons Chamber

[James Brokenshire]

The right hon. Gentleman, the Chairman of the Home Affairs Committee, makes an important point about international co-operation—one that we certainly recognised in the organised crime strategy that was published last summer. Criminals may wish to hide or to secrete assets not only in the EU, but throughout the world, so the need to look at the matter in an international context is an important one to which I shall return during my contribution.

In our domestic legislation, we have taken some important steps forward. The Proceeds of Crime Act 2002 is the principal piece of domestic legislation for the restraint and confiscation of the proceeds of crime. It is an advanced and powerful piece of legislation that in most areas goes beyond the minimum standards of the directive that we are debating this evening. It provides a single scheme for the confiscation of the value of the proceeds of crime, following any criminal conviction and regardless of the amount.

If a defendant has been convicted of a listed serious offence or has a number of convictions, the court can assume that all their property is the proceeds of crime and can be factored into the amount of a confiscation order, a power known internationally as “extended confiscation”. It allows for the confiscation of assets that have been transferred to family members or other third parties; it enables the freezing of assets by a court from the beginning of an investigation in order to prevent their dissipation; and it provides civil recovery powers, an intrinsic part of our approach to this area of law, whereby the focus is on the property, not on the person who holds it, and no conviction is required. That is a particularly useful tool for tackling high-level organised criminals for whom it is hard to obtain a conviction.

In 2010-11 UK law enforcement agencies froze or recovered more than £1 billion of criminal assets. The amount of assets recovered has increased year on year since the 2002 Act, and one of this Government’s first steps on entering office was to do away with some of the arbitrary targets that the previous Government imposed on law enforcement professionals. This has galvanised their professionalism and their approach to ensuring that more assets are recovered or frozen. Certainly, the UK is recognised as a leader in this field. However, the Government want to do more, particularly on international asset recovery, as we made clear in our organised crime strategy of July 2011.

In 2008, it was estimated that some £560 million-worth of UK criminal assets were held abroad. That underlines the level of sophistication that a number of organised crime groups are seeking to deploy in order to hide or to shield assets. Improved international co-operation is therefore a necessary step towards recovering that money. That is why we welcome the aims of the directive, if not some of its provisions. It is right that we seek to drive up standards throughout the EU and find better ways of working together with our EU partners. To that end, the directive covers confiscation following a criminal conviction, extended confiscation, third-party confiscation, non-conviction-based confiscation, and powers to freeze assets. The UK already has all those powers under the Proceeds of Crime Act, and so, in almost all areas, we exceed the minimum standards established by the directive.

The purpose of the directive is to require member states to be able to freeze and confiscate the proceeds of cross-border serious and organised crime. The Commission argues that the confiscation of the proceeds of crime in the EU is under-utilised despite the existing EU legal framework. It says that there are three problems with the current EU legal framework: its incomplete or late transition into domestic law, diverging national provisions that make mutual recognition more difficult, and the low utilisation of confiscation in practice. The directive therefore creates minimum standards for the freezing, management and confiscation of the proceeds of crime. The Commission intends that minimum standards will lead to greater co-operation, but a mutual recognition instrument has not yet been published.

It is vital that we get the detail right, and we must pay great attention to the effect of the directive on our existing domestic regime and its likely operational impact. In that regard, the Government have identified a serious problem with the directive. As drafted, it poses a very real threat to our domestic non-conviction-based confiscation regime. Operational partners have expressed concern that opting in at this stage poses a risk to the powers used by our law enforcement agencies to target and disrupt the most serious organised criminals. Our non-conviction-based confiscation powers are civil law measures that allow prosecution agencies to take action against property that they think has been acquired through unlawful activity. The action is not taken against an individual, and no criminal conviction is necessary. As I said, it is a particularly useful tool for tackling the high-level organised criminals against whom it is very difficult to achieve a criminal conviction.

In 2011-12, approximately £20 million-worth of criminal assets were recovered using non-conviction-based confiscation powers. It is important to note that the Proceeds of Crime Act, and the use of the civil standard of proof as structured within the Act, has been upheld by the Supreme Court, and therefore its operation has been subject to judicial scrutiny at the highest level. Because of its criminal law legal base, the directive risks placing non-conviction-based confiscation measures in the UK on to a criminal law footing, opening new avenues of legal challenge to our powers and, in many ways, undermining the court judgments that have been secured in relation to the operation of the Proceeds of Crime Act. If criminal law procedural protections and a criminal law standard of proof were introduced, our domestic regime would be severely weakened and our law enforcement agencies would find it harder to disrupt the workings of some of the most dangerous organised criminals.

This is a technical argument, but it is of great importance to the law enforcement agencies that protect our country from organised crime. Under qualified majority voting, there is no guarantee that we can secure the necessary changes to the text. This Government will not risk hindering the work of law enforcement agencies in tackling high-level criminality. The risk is simply too great.

[Tom Brake (Carshalton and Wallington) (LD)]

Is it not the case that non-conviction-based confiscation powers exist in many other EU countries and that the directive is therefore likely to be changed to increase flexibility and incorporate those powers, rather than to reduce it?

[James Brokenshire]

There is likely to be negotiation and discussion on the directive, as the right hon. Gentleman will know, given the manner in which such instruments are taken forward. However, given the significance of the existing powers and the way in which the regime has been tested before the courts, the key point is that because of the use of qualified majority voting, which I have mentioned, there is no guarantee that there will be the outcome that he suggests. The Government have taken the judgment that that risk is too high. On balance, we believe that not opting in at this stage is the better option. The risk to our civil recovery regime is simply too great, and I am not willing to take it, especially when operational partners have expressed such concern to us.

None the less, it is our intention to play an active part in the negotiation on the directive. Our experience on the recent human trafficking directive shows that the UK can have an influential voice, even when it does not opt in at the outset. In that case, we opted in to the directive at the post-adoption stage. The UK’s recognised experience and expertise in asset recovery will certainly help with the negotiations.

Our wider aim is to establish effective mutual recognition arrangements for both conviction-based and non-conviction-based confiscation orders. Although the draft directive adds nothing to our domestic asset recovery regime, mutual recognition arrangements could greatly improve our ability to recover the proceeds of crime held in other member states. The draft contains no proposal to establish an effective system for the mutual recognition of confiscation orders. Law enforcement partners say that they would welcome such proposals. The Government will consider how best to use our influence on that matter.

It is important to underline the comments of the Chair of the Home Affairs Committee on how mutual recognition can be a powerful tool. It is important to focus on that point. Indeed, the EU Select Committee in the other place has highlighted it as an issue with the directive and it needs careful attention.

--- Later in debate ---

[Tom Brake (Carshalton and Wallington) (LD)]

It is a pleasure to follow the Chairman of the Select Committee on Home Affairs, who has been able to put Members’ minds at rest on the subject of RABITs this evening. It is also a pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who was loquacious, in the earlier Defamation Bill debate, on the joys of coalition. I wanted to point out to him that I feel a particularly heightened sense of joy on coalition partnership working during these European Union debates.

There are a couple of points that I should like to make on this subject. I am sure that all fair-minded Members will acknowledge the value of a robust EU-wide regime for freezing and confiscating criminal proceeds, because cross-border crime is a serious and growing threat to the UK. Inevitably, one of the consequences of the four freedoms of the single market—the free movement of goods, services, people and capital—is the growth in cross-border organised crime and proceeds of crime. I am sure that Members will also agree that it is important that the UK maintains its European and international lead on these issues. That has been the UK’s position since 1998. Indeed, the EU’s 1998 joint action, which the directive would replace, was a UK proposal. Currently, in almost every respect, UK domestic arrangements match or exceed the minimum rules in the directive, so opting out permanently would threaten the UK’s leading role.

I agree that the text of the directive is not perfect and that the UK must use its active observer status to improve it and opt back in. As the Minister indicated, there are legitimate concerns about how the draft directive would interrelate particularly with our non-conviction-based confiscation powers. In response to my intervention on that point, he said that there would be no guarantee that the directive could be changed to accommodate our non-conviction-based confiscation regime. I wonder, however, whether he has any intelligence about whether that would be likely, given the extent to which these non-conviction-based confiscation schemes operate in other EU countries. I hope that he can reassure me that the UK will use its status to seek to galvanise support for ensuring that our non-conviction-based confiscation regime can sit within the scope of the directive and secure other changes deemed preferable so that we can opt back into the directive post-adoption.