Chapter 3: Scotland

Production orders

Clause 367: Production orders

496.     The power for a sheriff to make a production order is available for all three types of investigations specified in clause 330. Similar powers exist at present in section 18 of the Proceeds of Crime (Scotland) Act 1995 and section 31 of the Criminal Law (Consolidation) (Scotland) Act 1995. Under subsection (1), an application for a production order may be made by an appropriate person: clause 397 specifies the appropriate person in relation to each type of investigation.

Clause 368: Requirements for making of production order

497.     The Human Rights Act 1998 requires a judge not to act in a way which is incompatible with Convention rights. So, for example, an appropriate person will have to satisfy the sheriff that any infringement of, for example, a suspect's right to privacy under Article 8(1) of the Convention is proportionate to the benefit to be gained from making an order (which must in any event be substantial (see subsection (3)). It is unnecessary, therefore, to retain the "public interest" test contained in section 18 of the Proceeds of Crime (Scotland) Act 1995 and in section 31 of the Criminal Law (Consolidation) (Scotland) Act 1995 as one of the requirements for making a production order.

Clause 369: Order to grant entry

498.     This power might be used, for example, to enable a proper person, as specified in clause 397, to be granted entry to a building in circumstances where a production order has been made in respect of material in a particular office in that building.

Clause 372: Government departments

499.     Clause 372 extends the scope of a production order to cover material held by an authorised government department and is similar to existing powers in section 20 of the Proceeds of Crime (Scotland) Act 1995 and section 35 of the of the Criminal Law (Consolidation) (Scotland) Act 1995. In addition, in order to reflect the effect of devolution in Scotland under the Scotland Act 1998, provision is made to ensure that the Scottish Administration is, for the purposes of this clause, treated as government departments.

Search warrants

Clause 374: Search warrants

500.     Powers to issue warrants derive from the existing powers in section 19 of the Proceeds of Crime (Scotland) Act 1995 and section32 of the Criminal Law (Consolidation)(Scotland) Act 1995. As in clause 367, an application for a warrant may be made by an appropriate person as set out in clause 397. A warrant may be issued either if a production order has been made and not complied with and there are reasonable grounds for believing that the material specified in the warrant is on the premises, or if clause 375 is satisfied (subsection (6)).

Clause 375: Requirements where production order is not available

501.     The same change to the "public interest" test is made here as in the case of production orders (see the note on clause 368 above). Subsection (1)(b) refers to two sets of conditions. The first set of conditions (subsections (3) and (4)) might be met, for example, where the person who owns the material is abroad and therefore it is not possible to communicate with that person. In such circumstances, it is clear that a production order in respect of that person would have no effect. The second set of conditions (subsections (5) to (9)) might be met where it is impossible to describe the material (for the purposes of a production order) and access will not be gained without a warrant (e.g. to the residence of the suspect).

Clause 377: Further provisions: confiscation, civil recovery and money laundering

502.     This clause makes additional provisions in respect of warrants issued for confiscation, civil recovery and money laundering investigations. Subsection (3) provides that warrants will continue in force for one month from the day on which they were issued. Search warrants will also authorise the person executing it to require that information which is held on computer and which he believes is relevant to the investigation to be produced in a form which it can be taken away and is visible and legible.

503.     Subsection (2) gives power for a sheriff to make a civil recovery investigation warrant subject to such conditions as he thinks fit. In addition a person executing a civil recovery search warrant will have no automatic right to use reasonable force (in contrast to the position where a constable executes a search warrant). Subsection (5) gives a sheriff power to authorise the person executing the civil recovery investigation warrant to use reasonable force if he thinks it is necessary to make the warrant effective.

Disclosure orders

Clause 378: Disclosure orders

504.     Under subsection (1), the Lord Advocate may apply to the High Court for a disclosure order in respect of a confiscation investigation and the Scottish Ministers may apply to the Court of Session for a disclosure order in respect of a civil recovery investigation. Because of the necessarily invasive nature of such an order, it is not thought appropriate that such a power should be available for investigations into money laundering offences, although comparable powers exist in the Terrorism Act 2000 in relation to terrorist offences as well as terrorist funding.

505.     Once a disclosure order has been made, the Lord Advocate or the Scottish Ministers may use the extensive powers set out in subsection (5) throughout the relevant investigation. Thus, unlike the other orders covered by this Part which have to be applied for separately on each occasion, a disclosure order gives the Lord Advocate or the Scottish Ministers continuing powers for the purposes of the relevant investigation. A person may require that evidence of the authority to exercise disclosure powers be provided. Where this happens, it is envisaged that a copy of the disclosure order will be given to the person.

Clause 379: Requirements for making of disclosure order

506.     Because of their intrusive nature, it is not anticipated that disclosure orders will be sought unless other powers, such as production orders, have already been sought or would demonstrably not suffice to enable the required information to be obtained. Indeed, this would be one of the points the High Court or the Court of Session would be expected to consider as part of its consideration of the proportionality test which would apply by virtue of section 6 of the Human Rights Act 1998.

Clause 380: Offences

507.     As the disclosure order obliges persons to comply with certain requirements, sanctions to compel such compliance are required. There is a maximum penalty of six months imprisonment and/or a level 5 fine (currently £5000) for non-compliance and two years imprisonment and/or an unlimited fine for knowingly or recklessly making a false or misleading statement.

Clause 381: Statements

508.     As part of the Government's response to the judgment of the European Court of Human Rights in the case of Saunders v UK, Schedule 3 to the Youth Justice and Criminal Evidence Act 1999 amended a number of compulsory disclosure powers in order to prevent a statement obtained under compulsion from a person from being used to incriminate him (subject to exceptions). Similar provision is made in this clause.

Customer information orders

Clause 384: Customer information orders

509.     A customer information order would require all (or a targeted sample of) banks and other financial institutions to provide details of any accounts held by the person who is the subject of a confiscation or money laundering investigation. The order also applies to persons who appear to hold a property which is subject to a civil recovery investigation. Under subsection (1) an application for a customer information order will be made to the sheriff court by the appropriate person as defined in clause 397. As with disclosure orders, a person may require the person serving the order to demonstrate that they have the authority they claim.

Clause 385: Meaning of customer information

510.     Clause 385 sets out the definition of "customer information" for individuals and for companies and partnerships. Subsections (2)(f) and (3)(i) require financial institutions to produce evidence of identity obtained in compliance with the relevant existing legislation, currently the Money Laundering Regulations 1993 [SI 1993 No.1933]. By virtue of clause 441(5), any order made by the Scottish Ministers under subsection (4) to extend the meaning of "customer information" will be subject to annulment in pursuance of a resolution of the Scottish Parliament.

Clause 387: Offences

511.     As with the disclosure order, there are two offences connected with customer information orders. As the sanctions are directed at non-compliant institutions rather than an individual they are solely financial. The maximum penalties are a level 5 fine (currently £5000) for non-compliance and an unlimited fine for knowingly or recklessly making a false or misleading statement.

Clause 388: Statements

512.     Like the disclosure order, the customer information order requires an institution to divulge information. Clause 388 sets out the standard conditions on the use of such information to prevent information obtained under compulsion from being used against the financial institution in criminal proceedings against it (subject to certain limited exceptions) (see clause 381).

Account monitoring orders

Clause 391: Account monitoring orders

513.     Clause 391 has the effect of requiring a financial institution to provide specified information in relation to an account (for example, details of all transactions passing through the account) during a specified period up to a maximum of 90 days. The information would normally be provided in the form of a bank statement. An account monitoring order may be obtained in respect of all three types of investigation specified in clause 330 and can be applied for by an appropriate person as specified in clause 397.

Clause 392: Requirements for making of account monitoring order

514.     As part of his consideration of the proportionality test that he must apply by virtue of section 6 of the Human Rights Act 1998, the sheriff might want to satisfy himself that an order of this type (rather than a production order) is necessary for the purpose of the investigation.

Clause 393: Statements

515.     As with the disclosure and customer information orders, an account monitoring order compels an institution to divulge information. Similar to the provisions for disclosure orders and customer information orders, clause 393 sets out the standard conditions on the use of such information to prevent self-incriminatory information being used as evidence in criminal proceedings against the financial institutions (subject to certain limited exceptions).

Clause 395: Supplementary

516.     Subsection (4) allows application to be made to discharge or vary an account monitoring order.

General

Clause 396: Jurisdiction of sheriff

517.     Clause 396 gives the sheriff jurisdiction to grant a production order, search warrant, customer information order, or account monitoring order in respect of property which is located anywhere in Scotland. Subsection (2) provides for the execution of any such order throughout Scotland without the necessity of endorsement or backing by the sheriff of the sheriffdom where the property or information is located.

Clause 397: Interpretation

518.     In Chapter 3, the various clauses provide that the appropriate person will apply to the court for the relevant production order, search warrant, customer information order, or account monitoring order. Clause 397 defines appropriate person as being a procurator fiscal in relation to confiscation or money laundering investigations and the Scottish Ministers in relation to a civil recovery investigation. Similarly, the various clauses provide that the relevant orders will be executed by a proper person. Clause 397 defines a proper person as being a constable (which is further defined as including a customs officer) in relation to confiscation or money laundering investigations and the Scottish Ministers or a person named by them, in relation to a civil recovery investigation.

Chapter 4: General

Interpretation

Clause 398: Criminal conduct

519.     The definition of 'criminal conduct' is similar to the one given for confiscation proceedings (see clauses 76, 143 and 227) and is only relevant to confiscation investigations. The effect of subsection (5) is that the powers in this Part may be used from the date of its commencement irrespective of whether the conduct was committed or the property in question was obtained before the Bill is enacted.

Part 9: Insolvency etc.

Bankruptcy in England & Wales

Clause 402: Modifications of the 1986 Act

520.     In this context, "the 1986 Act" means the Insolvency Act 1986. The purpose of Part 9 is to explain what happens when the same property is subject both to criminal confiscation legislation and to insolvency legislation. The Part is United Kingdom-wide and is largely based on existing legislation. Clauses 402-404 deal with the interaction of the insolvency legislation of England and Wales (primarily, the Insolvency Act 1986) with the confiscation legislation of England and Wales, Scotland and Northern Ireland. This is necessary because both the criminal confiscation legislation and the insolvency legislation throughout the United Kingdom affect property in other jurisdictions.

521.     The basic rule expressed by clause 402 is that, if at the time a person is adjudged bankrupt under the 1986 Act a restraint order has been made or a receiver or administrator has been appointed in respect of any of his property that property is excluded from his estate for the purpose of the bankruptcy. So any of that property first goes to satisfy the confiscation order, rather than being dispersed to creditors. The legislation is designed to prevent defendants from attempting to use the insolvency legislation to defeat the purpose of the confiscation legislation.

Clause 403: Restriction of powers

522.     Clause 403, on the other hand, explains the circumstances under which the bankruptcy legislation takes priority. If a person is adjudged bankrupt before a restraint order is made or a receiver or administrator appointed no property that is for the time being comprised in the bankrupt's estate may then be placed under restraint or subject to realisation under the confiscation legislation. However, once the creditors have been satisfied, any remaining property may be used to satisfy the confiscation order.

Clause 404: Tainted gifts

523.     Clause 404 deals with the procedure under the insolvency legislation for voiding a gift made by a bankrupt to a third party, so that it can be used to pay creditors. The clause provides that the insolvency powers are not to be exercised when criminal proceedings or a revaluation application have been started against a bankrupt and have not been concluded, or when the property of the person to whom the gift was made is subject to a restraint order. The purpose of the clause is to ensure that a gift made by the defendant is treated as a tainted gift under the confiscation legislation, rather than as a voidable gift under the insolvency legislation.

Sequestration in Scotland

Clause 405-407: Modifications of the 1985 Act; Restriction of powers; Tainted gifts

524.     Clauses 405-407 make corresponding provision in relation to property which may form part of the debtor's estate under the Scottish insolvency legislation (primarily, the Bankruptcy (Scotland) Act 1985).

Bankruptcy in Northern Ireland

Clauses 408-410: Modifications of the 1989 Order; Restriction of powers; Tainted gifts

525.     Clauses 408-410 contain corresponding provision in relation to property which may be subject to proceedings under the Northern Irish insolvency legislation (the Insolvency (Northern Ireland) Order 1989).

Winding up in England & Wales and Scotland

Clause 411: Winding up under the 1986 Act

526.     Clause 411 deals with the situation where an insolvent company rather than an individual holds realisable property. Broadly, if action is taken under the confiscation legislation before a winding up order is made, confiscation takes precedence over insolvency. The provision is thus analogous to that which applies to bankruptcy in England and Wales or Northern Ireland, and sequestration in Scotland. Clause 411 covers the company insolvency legislation of both England and Wales and Scotland. The same legislation, the Insolvency Act 1986, applies to company insolvency in the two jurisdictions.

Clause 412: Tainted gifts

527.     Clause 412 makes provision like that in clauses 404, 407 and 410 for the situation where a tainted gift is made not by an individual but by a company. The purpose of the clause is to ensure that a gift made by a defendant which is a company is treated as a tainted gift under the confiscation legislation, rather than as a voidable gift under the company insolvency legislation.

Winding up in Northern Ireland

Clause 413: Winding up under the 1989 Order

528.     The Insolvency Act 1986 does not apply to company insolvencies in Northern Ireland. In Northern Ireland, the relevant legislation is the Insolvency (Northern Ireland) Order 1989. Clause 413 contains provision similar to that in clause 411, except that it deals with the situation where a company insolvency falls under the 1989 Order rather than the 1986 Act.

Clause 414: Tainted gifts

529.     Clause 414 makes provision like that in clause 412. It covers the situation where a gift qualifies both as a tainted gift under the confiscation legislation and as a voidable gift under the Northern Ireland company insolvency legislation.

Floating charges

Clause 415: Floating charges

530.     A floating charge is a charge over the property of a company or society. Unlike an ordinary charge, it does not attach to any particular property of the company or society but "floats" over all its property. The charge-holder may under certain circumstances have a receiver appointed to recover the value of the charge.

531.     Clause 415 applies to companies which may be wound up in any part of the United Kingdom. It is designed to address the situation where a charge-holder's receiver might be appointed at the same time as a confiscation receiver. It establishes a scheme of priorities so that only one of the receivers acts at any given time. It provides that if a charge-holder's receiver has been appointed, then any property in relation to which that receiver's functions are exercisable is not subject to restraint or realisation action under the confiscation legislation. Any property left after the value of the charge had been distributed to creditors would, however, subsequently be available for restraint and realisation.

532.     Conversely, if a restraint order is made or realisation action is taken against property before the appointment of the charge-holder's receiver, it is the charge-holder's receiver who is prevented from taking action in relation to the property. This does not mean that the charge-holder can no longer recover the value of the charge. The confiscation receiver's functions must still be exercised in this situation in accordance with clause 69, which requires the powers of restraint and receivership to be exercised with a view to allowing third parties to retain or recover the value of any interest held by them. This includes an interest under a floating charge.

Limited liability partnerships

Clause 416: Limited liability partnerships

533.     Limited liability partnerships are a new form of corporate structure created by the Limited Liability Partnerships Act 2000. Clause 416 provides that clauses 411, 413 and 415 (company insolvency and floating charges) are to apply to limited liability partnerships in much the same way as they apply to any other company.

Insolvency practitioners

Clause 417: Insolvency practitioners

534.     Clause 417 reproduces existing legislation and explains what is to happen when an insolvency practitioner takes action against property subject to a restraint order. The main purpose of the provision is to protect insolvency practitioners who unwittingly interfere with property subject to a restraint order from liability, except insofar as is caused by their negligence, and to enable such insolvency practitioners to recover their expenses.

Part 10: Information

England and Wales and Northern Ireland

Clause 420: Use of information by Director

535.     Clause 420 ensures that the Director can use information obtained in connection with any one of his functions to assist him in exercising any of his other functions. For example, information obtained in the course of a criminal confiscation investigation may be used by the Director in a civil recovery investigation.

Clause 421: Disclosure of information to Director

536.     Clause 421 enables information to be disclosed to the Director by a person (a 'permitted person') listed in subsection (5). The reference to a constable in subsection 5(a) will include any person with the powers of a constable including, for example, officers of the British Transport Police and the Ministry of Defence Police. Under subsection (6), the Secretary of State will be able to add to the list of permitted persons by order which, by virtue of clause 441(6), will be subject to approval by each House of Parliament. Subsection (7) narrows the designation power to specific functions; for example when designating the Secretary of State for Trade and Industry, the Secretary of State would be required to designate a relevant function within that department such as its insolvency function. Subsections (8) and (9) deal with information provided by the Commissioners of Inland Revenue and Commissioners of Customs and Excise. For information to be passed from either to the Director, the Commissioners, or a person to whom they have delegated the power to disclose, must authorise the disclosure. This is to ensure that there are safeguards in place to protect sensitive personal information held by both bodies.

537.     Disclosures of information that contravene the Data Protection Act 1998, or are prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000, are not permitted (subsection (3)). It is also implicit that the provisions of the Human Rights Act 1998 would need to be taken into account before any disclosure is made by a permitted person or body.

Clause 422: Further disclosure

538.     Subsections (1) to (4) restrict the onward transmission from the Director of information received from either the Commissioners of Inland Revenue or Commissioners of Customs and Excise (or persons who have disclosed on their behalf). As with clause 421(8) and (9), these measures are an acknowledgement of the personal nature of the information. They ensure that it can only be used for purposes connected with the exercise of the Director's functions and with the permission of the providing body.

539.     Subsection (6) enables a provider of information to the Director other than the Commissioners of Inland Revenue or the Commissioners of Customs and Excise to attach conditions relating to its further disclosure, for example where it may contain sensitive operational details.

Clause 423: Disclosure of information by Director

540.     Clause 423 provides that the Director may disclose information to any person or body for any of the purposes set out in subsection (1)(a) to (i). Subsections (2) and (3), however, prohibit disclosure of any information obtained by the Director under Part 6 of the Bill (Revenue Functions) except to the Commissioners of Inland Revenue, or to the Lord Advocate for the exercise of his functions under Part 3 of the Bill. These measures again recognise the delicate nature of information relating to the tax affairs of an individual. The purpose of enabling such information to be disclosed to the Lord Advocate is to ensure that he is on the same footing in relation to his Part 3 functions as the Director would be in relation to his Part 2 functions - the Director would be able to use such information for his Part 2 functions by virtue of clause 420. Similarly, subsection (4) allows the Lord Advocate to disclose such information to Scottish Ministers for the purpose of their functions under Part 5 of the Bill; this is so that Scottish Ministers will be on the same footing as the Director, who, by virtue of clause 420, would be able to use such information in connection with his Part 5 functions.

541.     Subsection (5) provides for the Director to impose conditions on the further disclosure of any information disclosed by him. Subsection (6) prohibits the disclosure of the information in contravention of these conditions. Under subsection (9), the Secretary of State will be able to add to the list of disclosure purposes by order which, by virtue of clause 441(6), will be subject to approval by both Houses of Parliament.

542.     As with clause 421(3), exchanges of information which contravene the Data Protection Act 1998, or are prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000, are not permitted and any disclosure would be subject to the provisions of the Human Rights Act 1998.

Scotland

Clause 424: Exchange of information by Scottish Ministers and Lord Advocate

543.     In Scotland, the Lord Advocate will be responsible for the exercise of the criminal confiscation functions under Part 3 of the Bill and the Scottish Ministers will be responsible for the exercise of the civil recovery functions under Part 5. Clause 424 enables the Lord Advocate to pass information he obtains in the exercise of his functions under Part 3 or under Chapter 3 of Part 5 (Recovery of Cash in Summary Proceedings) to the Scottish Ministers. It also enables the Scottish Ministers to disclose information obtained by them in the exercise of their functions under Part 5 to the Lord Advocate for the purpose of his functions under Part 3.