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Mr. Letwin: I am doubly grateful to the Minister for his courtesy in giving way, but will he explain whether the Government think that the serious default provision in that compensation scheme will be effective?
Mr. Denham: Yes, we do. There has to be a scheme for those who are seriously wronged by the way in which the director goes about his business. The detail of how the scheme is intended to operate and the tests that will be applied are matters that will be considered in detail in Committee. We have given some care and thought to getting the matter right, and I look forward to discussing it further in detail, but it is important that the scheme exists as one of the protections under part 5.
Part 5 also provides for the forfeiture of cash in magistrates court proceedings. Under the Drug Trafficking Act 1994, provision already exists for the seizure and forfeiture of cash discovered at the border and suspected to be the proceeds of, or intended for use in,
drug trafficking. In 1999-2000, £4.4 million was forfeited in the magistrates courts under that procedure, but it is available only in relation to drug trafficking and cash discovered at external borders. Those restrictions are no longer defensible, so we propose that the police and customs should be empowered to seize cash that they reasonably suspect to be derived from, or intended for use in, crime, and to seek its recovery in civil proceedings. That power will apply to cash discovered anywhere in the United Kingdom.To ensure that the powers can be exercised effectively, the law enforcement authorities will need to be able to search for suspect cash, where they believe that it is being carried by an individual or that it is on premises where they are lawfully present, so the Bill will establish a new search power for that purpose, with appropriate and substantial checks and safeguards. Like the existing cash forfeiture scheme, that power will only be available where a substantial sum of cash is discovered, perhaps similar to the existing minimum threshold of £10,000.
Part 6 will give the director taxation powers. Experience here and abroad has shown that taxation is a powerful tool for recovering criminal assets. Criminals and their associates are often unknown to the tax authorities and would be liable to heavy payments if their tax position were examined. Of course, current tax law does not exempt income and gains from tax liability simply because they are derived from an illegal business. So if the director concludes that civil recovery proceedings are not viable or should not be pursued, but has reasonable grounds to suspect a person of having received income or gains derived from unlawful activity, he will be able to assess the person's tax position and, if necessary, issue a tax demand.
The director will, with one exception, apply normal Inland Revenue rules and policies. The exception is that, unlike the Inland Revenue, the director will be able to raise an income tax assessment where he cannot identify the source from which the income has derived. Taxpayers dealt with by the director will have an avenue of appeal to the special commissioners and of complaint to the Parliamentary Commissioner for Administration. The director will be required to treat tax information with the same confidentiality as the Revenue.
Neither part 5 nor part 6 will have any impact on the ordinary taxpayer, who will continue to be dealt with by the Inland Revenue. Evasion of tax payable on legitimate income or gains will not fall within the purview of the director.
Under the Bill, the distinction between the offence of laundering drug proceeds and the offence of laundering other criminal proceeds will be removed. The need under present law for the prosecution to prove whether the proceeds derive from drug or non-drug offences is one reason for the small number of prosecutions brought. It will be an offence for a person working in regulated sectors such as banking to fail to report money laundering. The offence will be committed if the defendant had reasonable grounds to know or suspect that money laundering was taking place, but the court will be required
to take account of whether a defendant complied with industry guidelines. Under the Bill, those guidelines will need to be endorsed by the Treasury.
Mr. Tom Harris (Glasgow, Cathcart): My right hon. Friend mentioned the provisions in relation to bankers. He may be aware that, earlier this year, the Government introduced the Financial Investigations (Northern Ireland) Order 2001 to combat money laundering in Northern Ireland, and that article 6 created a power to issue a general solicitors circular under which solicitors are obliged to provide limited information about clients who are under investigation. Can he confirm that a similar provision will be included in the Bill?
Mr. Denham: As it stands, the Bill applies to the regulated sector of the financial services industry. However, as some right hon. and hon. Members know, a European directive is going through the system which may change the boundaries of the regulated sector. If it does, it will be necessary to consider whether the legislation requires any changes.
At the moment, the law makes it too easy for people to turn a blind eye to money laundering. The prosecution must prove that the defendant knew or suspected that there was money laundering. It is reasonable to expect people working in professions such as banking and handling high-value business to work to certain standards of competence and vigilance.
Part 8 provides powers for tracing and investigating suspected criminal assets. That will include a new customer information order requiring banks to inform the investigator if they hold an account for a person under investigation, and an account-monitoring order requiring banks to inform the investigator of movements of such an account over a period.
Civilian staff working for the police and customs services will for the first time have access to investigation powers, provided that they have been accredited as financial investigators by the agency. That will make it easier for police and customs to expand their financial investigation capacity. The Home Secretary will have power by order to list other law enforcement agencies and departments whose accredited financial investigators are to have access to the investigation powers.
The Bill also makes provision to extend investigation powers to the director of the new agency. The director will not have a law enforcement role, so will not carry out money-laundering investigations. He will, however, have access to the investigative powers for the purpose of carrying out either a confiscation or a civil recovery investigation. The additional power of a disclosure order, which is not provided for other agencies, will be available to the director, under which the director will be able to require persons to answer questions and provide information. That power is based on a similar power to that of the director of the Serious Fraud Office.
The Bill is innovative and strengthens the law substantially. I know that it will be the subject of much detailed scrutiny in Committee, and I am sure that many points of principle and substance will be raised in this debate. However, the Bill is fair and proportionate to the problem that it addresses—a major one for our society and our economy. The Bill forms part of a wider strategy. It will be backed by resources and expertise. Importantly,
the recovered assets fund, which we established earlier this month, will enable us to plough back a significant proportion of the receipts that the Bill generates into the fight against crime and the use of measures in the local community. That will help step up the battle against crime and to reduce crime. I commend the Bill to the House.
Mr. Speaker: I remind the House that Back-Bench speeches are restricted to 15 minutes.
4.18 pm
Mr. Oliver Letwin (West Dorset): We on the Conservative Benches share the Government's desire to deprive people who profit hugely from very evil acts, but who cannot directly be related to some of those evil acts, of the ill-gotten gains on which they subsist. I suspect that that is common ground among members of all parties, and certainly between the Government and ourselves. For that reason, I shall not recommend that my hon. Friends oppose the Bill.
However, some of the provisions of at least two parts of this immense Bill—parts 2 and 5—give rise to serious concerns about the balance between the state and the individual, and about civil liberties. I shall explain in a moment why it is evident from the Minister's comments that the Bill has not wholly been absorbed by the Government Front-Bench team. Therefore, before I recommend that my hon. Friends vote for the Bill on Third Reading, we will need to be convinced in Committee that those concerns have been adequately handled.
The Minister, reading from a script all too familiar to those of us who are used to Whitehall briefings, described the contents of part 2 but did not give its flavour. The Minister and I first encountered one another on the Standing Committee that considered the Social Security Bill in 1997. Although I have a high regard for him and his sense of balance between the state and the individual, I am not convinced that the Bill's flavour has been conveyed to him, let alone to the House.
The purpose of part 2 is to allow the confiscation in criminal proceedings of property from prospectively evil individuals, but that is not how it is structured. Clauses 6(2)(c) and 70(1) are based on what can only be described as an Al Capone method. The House will recall that when Al Capone was rightly being pursued by the law enforcement agencies in Chicago, it proved impossible to secure a conviction for the many appalling murders that he committed. A successful effort was made instead to entrap him for tax evasion; broadly the same method is envisaged in part 2.
Clauses 6(2)(c) and 70(1) allow the process of confiscation to be triggered by a summary offence, such as the absence of a tachograph in a cab. So if our prospective villain owns a cab that does not contain a tachograph and is convicted of that offence in a magistrates court, clauses 6(2)(c) and 70(1) can be used to trigger the process leading to confiscation. The Minister might not believe me, but he needs to attend to the details. The Bill might not reflect his intentions, but it is how it is. I do not want to overstate the case. It is not true that that conviction alone would suffice to bring about confiscation, but it could trigger the process. That is an
important consideration. As I describe the rest of the process, I hope that the House will remember that it can originate from a minor event that has nothing to do with a serious criminal action.The next stage in the process is, I think, unknown to English law hitherto, and we have not had time to investigate how far it is known in other jurisdictions. The departure from English law should have merited a considerable description in the Minister's speech. The court has to decide whether the person—in this case, the individual responsible for the tachograph offence—also has a criminal lifestyle. That is the key feature of part 2. According to clauses 6(4) and 75(2)(c), a criminal lifestyle has the remarkable feature—I do not know whether the Minister was fully aware of what he accurately said—of consisting of any set of offences defined without limit by the Secretary of State in regulations that we have not seen.
We are dealing with a process that can be triggered by a minor summary offence that leads to an individual being reported to a Crown court by a prosecutor for an investigation into the possibility of confiscation. The court has to decide whether that person has engaged in a criminal lifestyle, which is defined without limit by the Secretary of State in regulations that we have not seen. [Interruption.] That is worrying.
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