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Mrs. Helen Clark (Peterborough): I understand that it has been hard in the past for police to define where laundered money has come from—from crime, drugs or indeed terrorism. Can my right hon. Friend assure me that the Bill will remove that anomaly?
Mr. Denham: Certainly it is our intention to remove a number of anomalies that have prevented effective measures to recover the proceeds of crime. The different treatment of different types of criminal offence, including drug trafficking and money laundering, is one of the problems that it is designed to tackle.
The Government's view of the importance of tackling crime through its finances is one that is increasingly shared in other countries, leading other Governments to review their own laws on dealing with the proceeds of crime. To go further, which is the aim of the Bill, we need to put in place an effective legal framework and legal powers. The Bill will do that, and I shall explain its role and structure presently.
This important Bill needs to be supported by other action. First, resources and a new priority for financial investigation and the recovery of criminal assets are needed. That is why we have ensured that more than £45 million will be available in the current settlement period to strengthen asset recovery arrangements and we have recently announced funding for 86 additional financial investigators for the police service in England and Wales.
Secondly, we need expertise. The work is complex and it needs skilled people, more financial investigators trained to common high standards and prosecutors and judges equipped to deal with difficult cases. We are preparing for that now. We have recently announced the appointment of a development manager to plan a new centre of excellence in financial investigation, and to help us begin delivering improved training in advance of legislation.
Thirdly, we need international co-operation. Criminals use national boundaries to protect both themselves and their money. The United Kingdom is in the forefront of moves to establish common standards on money laundering and arrangements for cross-border co-operation in the European Union, the G8, the United Nations and the Financial Action Task Force. Improvements made by the Bill will apply to the recovery of money generated by crime overseas as they will to domestic crime.
There are major developments in the financial sector itself. The Financial Services and Markets Act 2000 established the Financial Services Authority as the single regulatory body for financial business in the United Kingdom. Earlier this year, the FSA published a hard-hitting report on allegations that UK banks had laundered funds on behalf of General Abacha, the former
President of Nigeria, and his family and associates. The report made it clear that 15 of 23 banks identified had significant weaknesses in their anti-money laundering controls.Under its existing powers, the FSA was able to order immediate action to rectify the deficiencies, but when the Financial Services and Markets Act 2000 comes fully into force on 30 November, the authority will acquire tough new powers to make rules on money laundering, penalise breaches and mount criminal prosecutions, and it has stated publicly that those powers will be rigorously applied.
The Government have set a target of doubling receipts from the proceeds of crime by 2004. In real money, that is a target of just under £60 million. The Government and the law enforcement and prosecution agencies have drawn up a strategy for achieving this, which we will publish shortly.
The increased focus on asset recovery must be accompanied by a comprehensive updating of the legislation. I shall set out what we see as the problems in the current legislation. The confiscation and forfeiture powers and the money laundering offences are set out in the Drug Trafficking Act 1994 and the Criminal Justice Act 1988, as amended by the Proceeds of Crime Act 1995. Frankly, the legislation has failed to keep pace with the increasingly sophisticated measures used for hiding and laundering criminal assets.
For a start, the separate treatment of drug trafficking and other criminal activity makes the legislation ineffective against today's versatile criminal entrepreneurs. When dealing with criminal groups, it is often in practice impossible to distinguish between the proceeds of their drug trafficking and those of other activities. The courts have called for the abolition of this distinction in the criminal law on money laundering.
Secondly, to prosecute money laundering and confiscate criminal proceeds, it is necessary to find them. The law at present does not give the police and customs enough help; a search warrant on its own is of little use if they do not know where to search. With modern technology, money can be transferred from one bank account to another at the touch of a button. We need new investigative powers to facilitate the tracing of assets.
Thirdly, even if investigators find the assets, they have no powers to freeze them. Restraint orders, which prohibit defendants and their associates from disposing of assets, are not available until the defendant is about to be charged. That is far too late. By that time, the defendant will often have realised that he or she is under investigation and will have placed their assets beyond reach. Moreover, the restraint procedures themselves are costly and inaccessible, which is why last year fewer than 300 such orders were made.
The complexity of the confiscation system deters the courts and the practitioners. The system produces only about 1,200 confiscation orders each year, compared with over 65,000 defendants found guilty of offences in the Crown court, most of which are for acquisitive crime.
Mr. David Kidney (Stafford): I fully support the Bill, but the Home Office commentary says that there will be
protection for innocent third parties. Does that mean that the investigative and restraint procedures will be time-limited?
Mr. Denham: It is difficult to impose specific time limits. That is a matter for the court's discretion. The court has a wide power to vary the discharge of any restraint order if there is an application by the person affected by it. If a court were dissatisfied by the progress of an investigation, it would be able to discharge the restraint order. However, to put a time limit in the Bill would not be the right way forward.
Mr. Douglas Hogg (Sleaford and North Hykeham): On third parties, where a legitimate bill is owed—to a builder, say—and cannot be paid because there is a freezing order on the assets of a suspected person, who will protect the interests of the innocent third party, namely the builder? Is there some mechanism whereby the builder can get protection and at least some of the money that he is owed in good faith?
Mr. Denham: There is provision for the freeing up of assets to enable the continuation of the conduct of legitimate business. The right hon. and learned Gentleman makes a not unreasonable point, but the provision that he seeks will be available to the court under those circumstances.
In addition to there being relatively few confiscation orders, they are poorly enforced. Each year, receipts amount to only 40 to 50 per cent. of the value of orders made. Enforcement procedures need to be strengthened.
The institutional arrangements of the criminal justice system are stacked against asset recovery. The police and prosecution agencies have historically focused—understandably, perhaps—on detecting and prosecuting the criminal. Magistrates courts find it difficult to give priority to confiscation orders in their enforcement of a wider range of court orders and sentences.
There is a further problem. Except where drug or terrorist cash is discovered at the border, current legislation provides no means of recovering criminal proceeds other than after a conviction. However, many major criminal figures have become untouchable by criminal prosecution. They organise or finance the criminal activity of others and profit from the results, but remain remote from the commission of particular crimes. That often makes it impossible for law enforcement authorities to build a case against them.
Criminal proceedings may be impossible for other reasons, for example where the suspect is abroad and cannot be extradited, or where the suspect has died. In many of these cases, law enforcement has compelling evidence that assets were derived from unlawful activity, and this is often supplemented by evidence that property has been concealed and that no legitimate explanation for the property exists.
The law enforcement agencies regularly encounter cases such as those I have outlined, and a survey last year identified 400 individuals or groups with estimated combined assets of £440 million who potentially fell into this category.
I emphasise that the prosecution of criminals must always take priority, and will continue to do so. However, I do not believe that it is acceptable that ownership of the
proceeds of crime should remain immune from any form of legal challenge where criminal proceedings are not available.
Mr. David Tredinnick (Bosworth): Will not the test of the Bill be the word "potential"? Have the Government thought through carefully how to overcome the degree of potentiality when it comes to assets? Although it might be easy to estimate the amount of assets involved in a case, has the Minister any plans to define and clarify the word "potential" in that context when the Bill is being considered in Committee?
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