Proceeds of Crime Bill

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Mr. Bob Ainsworth: The amendments would provide that the test for valuing any gift made by the defendant should be at the time the property was transferred to another person, not when the defendant first obtained it. Under amendment No. 274 read with subsection (2), where the defendant transfers the property for significantly less than the value of the property, the recipient would not be penalised if the value of that property subsequently depreciated.

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Amendment No. 275 would do much the same in a different way. It would place the onus on the recipient of a gift to show, on a balance of probabilities, that he was a bona fide purchaser of the property without notice that the property was obtained by the defendant as a result of, or in connection with, his criminal conduct. It is a similar concept to one in part 5 on civil recovery.

These definitional clauses have been carried forward from previous legislation. Under the Bill, as under existing legislation, a gift is, in so far as its recipient is concerned, exactly what it says it is. It is property for

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which the recipient has given no or inadequate consideration: the whole justification for recovering it is based on that fact.

I acknowledge some unfairness in the operation of the clause. Even if the other assurances that I have given to the hon. Gentleman come to naught, we may be heading for agreement on Grieve amendment mark 3 here. As he pointed out, the starting point of clause 78 is the value of property when the defendant first obtained it, not when it was transferred to a third party for significantly less than its full value. I am inclined to agree that the valuation of a gift should apply when the defendant transferred that gift to a third party.

The clause takes no account of any subsequent depreciation in the value of the property after transfer. An innocent purchaser of a car, for example, could be worse off if there were depreciation, so I sympathise with the hon. Gentleman's theory. In giving the matter further consideration, I have no desire to provide a loophole whereby the defendant or the gift recipient engaging in criminality escape confiscation. The point should be examined further, and I firmly undertake to do that if the hon. Gentleman withdraws the amendment.

Mr. Davidson: May I ask the Minister for clarification of two points? If someone has done a Grieve and sold the asset on, to what extent will the degree of innocence be examined? If someone buys a gold Rolex for £5 in a pub, surely his innocence is in doubt. Secondly, will he explain the position on transfers to members of one's family? It is frequently discovered that a major criminal has no assets whatever, as he has transferred everything to his wife's name. Are such transfers included within the concept of tainted gifts?

Mr. Ainsworth: They certainly are, and we can further clarify the point when we reach later amendments. My hon. Friend is right that that is a widely used method of placing assets beyond confiscation and we must guard against it. However, the hon. Member for Beaconsfield is largely correct, so the Bill probably needs to be changed along the lines that he suggests. We must examine that rather than automatically accepting his drafting.

Mr. Grieve: I apologise for intervening. I should also have commented on amendments Nos. 276 and 277, which relate to clause 81, but I was so hooked on clause 78 that I did not discuss them. Those amendments are consequential and suggest a possible way of approaching the value of tainted gifts. I was conscious that if new clause 5—or something along those lines—was accepted, my anxiety about the effect of my probing amendments, which have potential downsides and would reword clause 81, would be unnecessary.

Mr. Ainsworth: I am glad of that clarification. I was not going to be as kind to the subsequent amendments as to those that we have discussed. Is the hon. Gentleman indicating that he does not intend to insist on the amendments if we examine the issue that he raised? I understand his point, he made it well and we must examine the matter.

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Norman Baker: The Minister has responded sensibly and constructively to the amendments. I agree that there was a problem.

There is an argument about the £5 watch in a pub. However, the question is about the intention and motivation of the person who obtains the goods. If the person genuinely believes that the goods are not stolen and that the transaction is above board, why should he or she be penalised? That would not be the case with a £5 Rolex watch. Someone may have received Railtrack shares that would have significantly decreased in value over time, and doubtless would continue to decrease after they had been obtained. It is almost sharp practice to sell a person Railtrack shares, although that is not covered by the clause. However, there is a question about innocence of motivation when a person obtains goods.

Throughout our proceedings, the Minister has been constructive and has undertaken to examine bits and pieces such as this clause. He half said that he would examine a matter that I raised this morning. Can he give us a list of the matters that he is examining—I am losing track—and say how he aims to return to them?

Mr. Ainsworth: My extended resource is keeping a list of all of those matters. I am trying to give people a fair indication of the degree of sympathy that I feel with points that are raised. I will return to the Committee after examining all such points. I am not intending to dip into matters that were raised during discussions on part 2 before we have concluded our consideration of that part. We will try to ensure that all points are addressed. The current point must be examined. In the absence of the hon. Member for Spelthorne, we need not waste any more time, which will annoy him on his return.

Mr. Grieve: I am grateful to the Minister. I reassure the hon. Member for Glasgow, Pollok because, as the hon. Member for Lewes said, the amendment would not prevent the court from examining critically the transaction that he described.

Mr. Stinchcombe: I genuinely appreciate the hon. Gentleman's point about changes in value. However, we cannot live with amendment No. 275 for two reasons. First, he cannot insert the full value formulation of equities in his amendment because the trigger is a transaction significantly less than full value: the £5 Rolex. Secondly, the amendment does not address constructed notice, rather than actual notice.

Mr. Grieve: The hon. Gentleman may be right. My failing—or advantage—was that I approached the matter after deciding that I did not like the provision. I took a blunderbuss approach. I drafted a series of amendments that do not all necessarily tackle the issue. The more I consider the matter, the more I prefer new clause 5.

Amendment No. 275 would protect the purchaser from the full rigour of subsection (1) if he could prove that he had acted in a bona fide way. In those circumstances, an alternative framework would have

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to be available. I have set out to provide that framework in new clause 5, which states that the difference in value

    ''shall be recoverable from the defendant''.

I take the hon. Gentleman's point about constructed notice. There may be a fault with my drafting, but I repeat that I intended to protect a bona fide purchaser for value.

Mr. Stinchcombe: With the greatest respect, that is where the error occurs. The person cannot be a purchaser for value because of the introductory words to the clause.

Mr. Grieve: I disagree. The introductory words to the clause—I assume that the hon. Gentleman means subsection (1)—

Mr. Stinchcombe: I refer to the words:

    ''consideration whose value is significantly less''.

Mr. Grieve: Yes, but let us reread subsection (1), because the hon. Gentleman may be right, but I am not sure that I follow his point. It states:

    ''If the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time the defendant obtained it, he is to be treated as making a gift.''

Let us take an example. A defendant obtains £1 million as the proceeds of crime. On the advice of Sotheby's, he purchases a painting that he believes is worth £1 million. It is subsequently discovered that the painting is not a Rembrandt but a copy and he sells it for £100,000 to a third party. The third party has the bona fide belief that £100,000 is the painting's true value. Indeed, that may well be the painting's true market value at the time that it is sold. The third party falls liable to reimburse the balance of £900,000 to the director on confiscation.

Mr. Tom Harris (Glasgow, Cathcart): Apart from the fact that the hon. Gentleman's example is a tad contrived, is not he misinterpreting the meaning of the word ''value''? In his example, surely the value of the painting at the time that the defendant bought it would be £100,000 regardless of the fact that he paid £1 million for it.

Mr. Grieve: I do not think that that is right at all. It is perfectly possible for a chattel to have a value based on people's estimation of it, and for people not to give it the same value later. It is still the same chattel.

Let us leave aside decisions about whether the painting is a Rembrandt. Take Sir Lawrence Alma-Tadema, whose paintings sold for thousands of pounds when he painted them. Some 50 or 100 years later, they were worth virtually nothing. In the 1880s, a painting by Alma-Tadema sold for £5,000 or £10,000, which was a colossal sum in those days. In the 1950s, it could have been picked up in the sale room for a few hundred pounds, and anybody who had been sensible enough to buy it would have discovered that, by the 1970s, it was worth hundreds of thousands of pounds. That is how that article has fluctuated in value. That

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may be an extreme example, but it is not difficult to think of numerous kinds of property assets that might fluctuate similarly.

If someone has purchased such a property for the value that was appropriate at the time that it was transferred to him, and provided that he was unaware of the—if I can use the expression—funny money origin of the assets of the defendant, so that the purchase was not a linked transaction that in some way connects him to the criminality of the defendant, he should not be penalised; and yet, the clause, possibly unintentionally, does exactly that.

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