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6.10 pm
Mr. Howard Flight (Arundel and South Downs): I congratulate the hon. Member for Central Fife (Mr. MacDougall) on his useful grass-roots comments on fighting drug crime.
The main part of the Bill sets up the Assets Recovery Agency and the various new mechanisms for the recovery of the proceeds of crime through both civil and criminal proceedings. All hon. Members must support that in principle. The mechanisms to date have not worked well. It is wrong in principle that there should be an incentive for people to benefit from crime and, even if they are caught and sent to prison, to come back and live comfortably on the proceeds. It must therefore be right to tighten up the law in this area.
It was wrong for some hon. Members to belittle the comments on human rights made by my hon. Friend the Member for West Dorset (Mr. Letwin). As many outside professional bodies have pointed out, there are aspects of the Bill which may not be satisfactory from a human rights point of view. I hope that those will be addressed in detail in Committee.
The Crown Prosecution Service, the Assets Recovery Agency to be established by the Bill, the National Criminal Intelligence Service and the Financial Services Authority will all—dare I say it—have their snouts in the trough of the money recovered through the proposed initiatives. The particular roles of each body, as my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) pointed out, and the costs should be examined and possibly simplified.
From conversations with members of the Crown Prosecution Service about whether it is justifiable to introduce legislation that could lead to injustice, it seems that the view of those responsible for catching crooks and finding drug money is that it does not matter too much that the law may lead to injustice. They want it so that they can go for the real crooks and argue that it will never be their intention to use the law against innocent staff or unreasonably. That is probably a fairly held view, but it sits slightly uncomfortably with the principle of Anglo- Saxon law—"the law's the law." It is not to be used only when it suits people; it is to be obeyed by everybody.
There are concerns that with the use of the civil courts to confiscate assets, people could be found not "guilty" but "probably guilty". That would trespass across the barriers of our tradition that a person is innocent until proven guilty, rather than guilty until proven innocent. The Law Society and others have pointed out that third-party businesses could be caught in the Bill's net. An independent trader could go bankrupt as a result of having assets restrained as part of a larger investigation over a protracted period. Although it is not very likely, no one would want such an injustice to occur.
On money laundering, I welcome the regulation of exchange bureaux. I have long thought it extraordinary that they were not properly regulated, although they were obvious targets for money laundering. I am somewhat concerned about the new criminal offence of failure to disclose suspicions that another person is engaged in money laundering. It is one thing to report knowledge; it is another thing to report a suspicion, but as others have pointed out, reasonable grounds for suspicion are subjective.
I should declare an indirect interest. As the register records, I am still chairman of the investment management business which I built up over 20 years. The requirements that apply to such a business are slightly different from those that apply to banking, but one of the positive aspects has been working with the police.
They come in with videos and teach the on-line staff what to look for. That should remind the House that it is not grandees who might suffer injustice, but ordinary junior on-line staff. When money flows through, they are the people at the coal face who must look for evidence of money laundering and who in future will have to look properly for terrorist funds. Do the Government intend to include in the Bill, through amendments in Committee, their proposals relating to terrorist finance, or will those be the subject of a separate Bill?
Mr. Connarty: I respect the hon. Gentleman's disclosure that he has some knowledge of the industry. If someone came into his business with a large sum, would he investigate where the person got it, or would he just take the money and invest it for them? If he was unhappy with the answers given, would he consider bringing in the authorities, or would he say to the person, "Take your money elsewhere. I don't want to be involved with it and I don't mind where you got it"? If the matter is not drawn to the attention of the authorities at the level of his business, how will the authorities ever have a chance of getting on to such people?
Mr. Flight: I thank the hon. Gentleman for his question. First, if someone came in with a large sum in cash, one would immediately report him. Failure to report is a criminal offence for which one could go to jail. Secondly, if a potential new client says, "I want you to manage some funds for me," one has to check where the funds come from, check the person's identity and get references. There is a lengthy procedure to establish the propriety of that individual. If people are investing in unit trusts, there are procedures similar to banking procedures to check that the money has come from a proper bank and who the potential investors are.
There are already at retail, so to speak, and at higher level quite demanding procedures to identify money laundering. One of the reasons why the rules have been tightened up is that some banks have no doubt been lazy. That accusation is directed at London and even more so at the United States. There are other countries where nothing at all has come to light, not so much in British dependencies, as we have heard, as in the whole of Latin America, Africa and Asia. I suspect that the proceeds of drugs are largely ending up not in bank accounts in North America or London but in assets in certain other parts of the world. That problem has not yet been effectively addressed.
Mr. Connarty: The hon. Gentleman's answer raises my estimation of his integrity. My question was whether, if someone's response to his questions did not satisfy him, he would report that person to the authorities, and whether he thought that anyone else in his position should do the same?
Mr. Flight: Absolutely yes. It is already an offence not to do so. If someone cannot answer questions in a way that allays any suspicion that they may have been involved in money laundering, it is an offence under the Proceeds of Crime Act 1995 not to report that individual.
Clause 325 is the "tipping off" clause and is extremely important. The practical collaboration between people in the financial services industry and the police is just as important as the law. When the Bank of Credit and
Commerce International—BCCI—applied to the UK for a banking licence, the licence was granted, but ironically, when it applied to Guernsey, the application was turned down. The Guernsey Financial Secretary had contacted the international police authorities immediately, and had been advised that the organisation had a bad name. He therefore refused to grant it a licence.Banks need to know what businesses to look out for, and potentially even which individuals to look out for. They need to be able to open the books if inquiries follow. Such collaboration needs the backing of the law: neither banks nor investigating authorities can act illegally. I feel that there is scope for much more practical collaboration, and I welcome measures to increase the investigative powers of the police, but I fear that some parts of the Bill could be detrimental to co-operation that is already crucial and will become even more important in the pursuit of terrorist money.
Clause 325, incidentally, contains a drafting error, of which the Government may be aware. It refers to a "disclosure", in the context of a disclosure to a third person who is not a constable or an authorised person, but it does not actually say that: it also uses the term "disclosure" in a different sense from making a disclosure to a constable. That needs to be tightened up.
The Minister probably knows of the practical issues raised by the Institute of Chartered Accountants in relation to the money-laundering provisions. I am sure that they will be considered in more detail in Committee.
It is crucial for efforts to combat money laundering to be focused, and not sidetracked to other agendas. Allusion has been made to unfair treatment as between smaller and larger countries. Some activities of the Organisation for Economic Co-operation and Development were sidetracked into what was seen as the pursuit of unfair tax competition, and the establishment of sanctions against smaller countries, mostly in the West Indies, at a time when there were arguably far greater "unfair tax advantages" in Holland and in certain American states.
I am pleased that, in May, the United States Financial Secretary reversed US policy on that front. He did not want the pursuit of money laundering and terrorist funds to be sidetracked into other political agendas. The Bill currently going through Congress, while encouraging the use of sanctions to pursue terrorist money, makes it clear that they should not be used to further political objectives such as tax harmonisation. I trust that when we get around to producing measures for the pursuit of terrorist funds we will take the same stance.
It is strange that the initiative on money laundering never took account of the problem of terrorist funds where clean money is used for filthy ends, concentrating purely on dirty money being made clean. The aspects are different: they will require different focuses and different codes of conduct if those in the finance industry are to pick up what is needed and report it duly to the right authorities.
The Bill, especially if there is practical collaboration, has the potential to tighten things up here; but we must then ensure that they are tightened up elsewhere in the world. There will be fewer problems, potentially, as a result of the tightening up that is already proceeding in the United States and is due to begin in continental Europe, which is ahead of us in some respects; but we must face the issue of how to tighten up in other parts of
the world if we are not to drive a problem that has been intermittent here into territories where there is little or no scope for policing.
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