Proceeds of Crime Bill

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Mr. Stinchcombe: That is not entirely right, as the definition of criminal property in clause 329(3) has two parts. The first condition is that criminal property

''constitutes a person's benefit from criminal conduct'',

and the second is that

''the alleged offender knows or suspects that it constitutes or represents such a benefit.''

Mr. Wilshire: I am grateful for that explanation, but it does not reassure me at all.

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Not being a lawyer, I consider such matters in personal terms. I do not know what other Members do, but when I am in need of cash, I use the cashpoint in this building. I am aware that 3 or 5 per cent. of the gross domestic product of this planet is involved in money laundering. Therefore, when I withdraw the money that I have in my pocket—I apologise to the hon. Member for Glasgow, Pollok for having £20 notes, which probably makes me a suspected person, because I should have £5 notes—it might suddenly cross my mind, as I wait for the notes to be counted out, that somewhere along the line, laundered money will have got into the banking system. I mean no ill to Lloyds bank, with which I have banked for more years than I wish to confess, but it is inevitable, despite the best endeavours of the banks, that that will have happened. As I wait for the money to come out, it might occur to me that the money that Lloyds bank is giving me may, in one way or another, be laundered money. Having suspected that, I therefore have criminal property, which has been transferred from the cash machine to my pocket.

Mr. Field: I presume that the Minister will explain to Committee members that the fact that we have all been serving on this Committee will mean that we have notice of the fact that every cash withdrawal that we make might be the proceeds of crime.

Mr. Wilshire: Indeed—

Ian Lucas: How would the prosecution prove that the money in the hon. Gentleman's possession was criminal property?

Mr. Wilshire: I have no idea. I have never been hauled before a court and had that happen to me. I am only observing that if I understand clause 329 correctly—[Interruption.] The Minister could have explained it to me. My intervention would be unnecessary if he had addressed hon. Members' concerns—but he did not, so he must listen to my worries.

According to the provision, if I take money out of the cash machine and I suspect that it is criminal property, it is criminal property. Yet, the Minister tells me that I should not worry because all I have to do is make a disclosure. If that is the case, the policeman at the end of the corridor by the cafeteria should be given a large book, because every time any of us withdraw money from the cash machine, we must go to him and say, ''I have just taken this out of the cash machine. It might be criminal property, and I am making a disclosure before I buy my tea in the cafeteria.''

If that is what the provision states, the Minister's way of solving the problem is stupid and he must do something about it. I would be grateful for reassurance that we do not have to go through that rigmarole every time we get money from a bank.

There is a serious point—[Hon. Members: ''Aha.''] There just might be one lurking behind my example. As we said previously—the hon. Member for Glasgow, Pollok found this difficult to believe—people can possess reasonable and sometimes large amounts of cash for perfectly legitimate reasons. Yet if a person pays that money into a bank, the bank will have to go through the most enormous contortions. An employee

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will probably have to go to the police and say, ''Somebody walked into this bank this morning. We don't know where the money's come from. We've asked a few questions, but we don't know how many we ought to ask. We can't be certain that the money is legitimate, so we're reporting it.''

Some people keep significant amounts of cash for reasons that are private, rather than criminal.

Mr. Foulkes: Such as?

Mr. Wilshire: I hesitate to say. Some people wish to keep their properly gained profits from the knowledge of their friends and relatives.

Mr. Foulkes: And the taxman.

Mr. Wilshire: That is possible. A person could own a large amount of cash during a year that must, in due course, be included in tax returns. However, that person is entitled to keep that cash without telling anybody until the deadline for the submission of a tax return. No crime would have been committed. If we say that banks must disclose the existence of money before the deadline for tax returns, we are exploring dangerous territory.

Mr. Ainsworth: I am fascinated by what the hon. Gentleman says. Will he turn his mind to the fact that guidance is already widely used in the sector, and more will accompany the Bill? How does that impact on the problems that he appears to be exposing?

Mr. Wilshire: I am well aware that there is guidance, because I have examined it to find out what a bank must do. Those of us who have any interest in offshore banking will know that those involved in that business must ask much tighter questions than before about the origin of transferred money. Many hon. Members have examined that development and understand it.

This measure goes so much further that it puts a bank in the position of having to assume that all cash is suspect, and therefore cannot be handled. Unless the Minister reassures me, I shall have a vision of the whole banking system grinding to a halt because nobody can pay in money, because the bank may suspect it just for a moment. The bank does not need to know whether the money is criminal property under the Bill. Even if it takes reasonable steps to find out whether it is, but still has a lingering doubt about it, the money is criminal property. If that is the case, the banking system will grind to a halt.

The argument that all one has to do is make a disclosure distorts relationships, as I said earlier. Until the Minister explains to my satisfaction why all other options have been dismissed, I cannot support him.

Ian Lucas: I may be able to assist the Committee. Between 1997 and 2001 I was a responsible person under the Financial Services Act 1986—I will continue with these confessions for the benefit of my hon. Friend the Member for Glasgow, Pollok. I was part of a small firm—a general practice—and I employed a financial adviser. During the four years that I was part of that firm, not once did I suspect that any money that I received, or that was in my possession, was the

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proceeds of crime, or criminal money. That is an important point, because we must not get carried away with the idea that what we are discussing will occur frequently.

[Mr. John McWilliam in the Chair]

10.30 am

Mr. Hawkins: I am sure that the hon. Gentleman is right in saying that his experience under that legislation is unique among the members of the Committee. However, I was in a similar position under the previous legislation, when I was a corporate lawyer chairing a compliance committee for a plc.

The hon. Gentleman has stated that in his small firm, suspicion of possession of the proceeds of crime were not a daily occurrence. However, as the people who have been briefing my hon. Friend the Member for Beaconsfield and me have stated, that would be a daily occurrence for firms in the City, which would be very costly, as they would therefore have to bear heavy compliance burdens.

Ian Lucas: I am surprised that the hon. Gentleman suggests that suspicion of possession of the proceeds of crime is a regular occurrence.

Mr. Hawkins: May I mention to the hon. Gentleman what my hon. Friend and I were told, in a meeting held as recently as Monday lunchtime, by a member of the committee that the Law Society of England and Wales established to examine this issue, who works for a very large and highly reputable firm in the City? He told us that he felt that as it is currently drafted—we will address the arguments about whether there should be de minimus provisions later—the legislation would lead to the imposition of an enormous regulatory burden. That applies to this entire group of clauses—not merely to clauses 321 and 323.

What he told us will certainly be true for big firms that deal with big transactions; almost all their transactions will have regulatory implications. [Interruption.] I hear that my hon. Friend the Member for Cities of London and Westminster is agreeing with that point—and many of his constituents would be affected by it.

Ian Lucas: We are talking about suspicion. That must attach to a particular case, and I am surprised that the hon. Gentleman seems to be suggesting that that arises regularly with regard to the transactions of the firms to which he refers.

Mr. Field: With regard to suspicion, my main concern is for large law or accountancy firms that have many international clients, and conduct transactions throughout the regulated financial sector in the City of London.

The reputation of the City of London is at the heart of the matter. Such firms will have to employ an army of regulation and compliance officers to ensure that they are beyond reproach. The hon. Gentleman is right to say that suspicions will probably not arise concerning every transaction—or, perhaps, concerning any transaction undertaken by junior staff. However, an underlying culture will have to be

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established within such large firms, and that will create an enormous regulatory and bureaucratic burden.

Ian Lucas: The hon. Gentleman has made an interesting point. It highlights the difference in approach to this issue between Opposition Members and my hon. Friends. We are striking a balance between the burden—as he describes it—of additional requirements for businesses, and the effect on our constituents of the proceeds of crime—and especially of the proceeds of drug crime.

My experience—which is what I am currently describing—leads me to support the Government's line with regard to the matter under discussion, which is different from that of Opposition Members.

 

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Prepared 17 January 2002