Proceeds of Crime Bill

[back to previous text]

Mr. Grieve: I am grateful to the Minister for that full explanation. I make no criticism by noting that we remain none the wiser about why those interesting distinctions were introduced in amendments to the 1988 Act. We would have to go to the Library and dig out old Committee Hansard reports to be further enlightened about that.

With regard to those distinctions, it is clear that the draftsman was looking at issues that arise in each clause differently, even if they were intended to cover a series of offences. The Minister has chosen a different approach—a consistent test approach—in the clauses that we are debating, with the exception of clause 324 where, interestingly, the he has chosen a different test. I suspect that that will be the subject of lengthy debate when we come to discuss that clause. The priorities have been reordered.

The attempt by my hon. Friend the Member for Surrey Heath and me to get the Committee to accept a different test of ''knowingly'' has failed, but I do not wish to be seen as attempting to wreck clause 323. It is a valid clause, and I do not want it to fall by the wayside, so I will not oppose it, but I hope that when the Bill reaches another place those who are—perhaps—better versed in the law than we are will consider the matter. I am concerned about the plethora of alternative offences that are punishable with the same maximums and yet have a different test applied to them.

I do not share the Minister's confidence that there will not be a change in the way in which prosecutions are brought. In the ordinary course of events, it is inevitable that prosecutors will follow the line of least resistance and prosecute under part 7, because it has a lesser test. That might well happen—indeed, I would do it myself if I were in that position.

An odd anomaly is developing, but previous draftsmen have attempted to keep the two offences—handling stolen goods, and acquiring, using or having possession of criminal property—along the same tracks.

I would like the Minister to go away and canvass his officials again, as I suspect that he might have to do that when the Bill goes to another place, even if he does not have to do that here. He has acknowledged that there are different tests, which we will address when we consider clause 324. I continue to worry about the matter, but not to the extent that I wish to prevent the clause from standing part of the Bill.

Question put and agreed to.

Clause 323 ordered to stand part of the Bill.

Column Number: 1068

Clause 324

Failure to disclose: regulated sector

11.45 am

Mr. Grieve: I beg to move amendment No. 487, in page 187, line 27, leave out from 'suspects' to end of line 28.

The Chairman: With this it will be convenient to take amendment No. 524, in page 187, line 28, leave out 'suspecting' and insert 'reasonably believing'.

Mr. Grieve: We now come to one of the central issues of part 7. The clause provides for the serious offence of failing to disclose in the regulated sector. It states:

    ''(1) A person commits an offence if each of the following three conditions is satisfied.

    (2) The first condition is that he—

    (a) knows or suspects, or

    (b) has reasonable grounds for knowing or suspecting,

    that another person is engaged in money laundering.

    (3) The second condition is that the information or other matter—

    (a) on which his knowledge or suspicion is based, or

    (b) which gives reasonable grounds for such knowledge or suspicion,

    came to him in the course of a business in the regulated sector.

    (4) The third condition is that he does not disclose the information or other matter to a constable, a customs officer or a nominated officer as soon as is practicable after it comes to him.''

Last week, the hon. Member for Redcar alluded to the fact that we are introducing a criminal offence that is founded on negligence. Instead of a subjective test of the state of mind of the person who commits the offence, the court's test is whether a person should have had reasonable grounds to know or suspect that another person is engaged in money laundering. Therefore, it is possible for a person to be convicted of the offence although he could satisfy the court that at no time did it cross his mind that he was dealing with money laundering that should have been reported.

It is also noteworthy that the provision is a clear departure from the previous regime that operated under the Drug Trafficking Act 1994. Section 52 of that Act states:

    ''A person is guilty of an offence if . . . he knows or suspects that another person is engaged in drug money laundering,''


    ''the information, or other matter, on which that knowledge or suspicion is based came to his attention in the course of his trade, profession, business or employment''.

For an offence to be committed under the Act, a defendant must know or suspect that another person is engaged in drug money laundering. That is the very test that applies to other criminal offences in part 7, but for the offence under clause 324 the Minister is happy to move to a negligence test. The only other difference between the 1994 Act and the clause is that the Act applies to trades and professions, while the clause applies to the regulated sector.

The size of the regulated sector and the nature of the crime do not make me believe that a different test

Column Number: 1069

would be fair on the basis that if a person is in the regulated sector, he jolly well ought to know certain information. It is worth pointing out that, as the Bill is drafted, a person in the regulated sector may range from a partner in a senior firm of solicitors or the director of a major banking enterprise down to the most junior member of staff, who could be jailed for five years for failing to report actions that did not appear suspicious until viewed with the benefit of hindsight.

Those of us who practise in the professional sphere know all too well how easy it is, in the course of our work, to miss things. Fortunately, 99 per cent. of the time, it is without consequence. However, when there is a consequence, which sometimes happens to colleagues, I have considerable sympathy for them. The transformation of such a situation from one in which a negligence claim might be attracted into one in which a person may face five years' imprisonment, fills me with horror. The amendment would ensure a much fairer system, which would command much wider public approval and support if the test of knowing or suspecting were introduced.

That is a simple introduction to the amendment, but it is an enormous topic.

I want to hear from the Minister the administrative, legal or public policy justification for creating an offence of negligence of such seriousness. We are not talking about minor offences in administrative law. Anybody looking at this part of the Bill would consider that somebody who had breached the clause would be committing a very serious offence. We must assume that that is the case because we are not talking about a rap over the knuckles or a fine—potentially, we are talking about a long period of imprisonment.

The Committee could regard amendment No. 524 as an add-on or an alternative—I emphasise that it had not even been selected last week, and I am grateful that it has now been selected—but my preference would be for amendment No. 487, which deletes all reference to reasonable grounds for knowing or suspecting, and establishes the offence fairly and squarely on the basis of a state of guilty knowledge in respect of the person in the regulated sector who fails to make the necessary disclosure when he knows or suspects that money laundering is taking place.

Mr. Ainsworth: We had a long debate last Thursday on the various permutations of the state of mind or mens rea element that would apply to part 7. Through tabling amendments Nos. 426 and 428, the hon. Member for Beaconsfield sought to change the mens rea element in clauses 321 and 323 from knowing or suspecting that a property was derived from criminal conduct to knowingly committing the offences. He made it clear—if he did not do so in what he said, he did so when he voted—that his objective was to remove the element of suspicion from those offences.

During that debate, my hon. Friend the Member for Redcar pointed out that the wording of clause 321 would narrow the existing offence of concealing the proceeds of crime, because the mens rea element was

Column Number: 1070

one of having reasonable grounds to suspect, rather than of suspecting. In passing, I should note that she was correct, and I agreed with her that that was the case, so she was right to draw it to the Committee's attention. The activities in that offence must also be shown to have been committed for the purpose of avoiding prosecution or the making of a confiscation order. The present offence is not as wide as we might at first think, even though the objective test of having reasonable grounds to suspect applies. After a long debate, I am sure that the Committee is now clear that the principal money laundering offences under clauses 321 to 323 apply to everyone, not only the regulated sector. The failure to disclose offence under clause 324, which has been mentioned during our discussions, applies only to the regulated sector.

I return now to the amendments, and particularly the negligence test in the failure to disclose offence under the clause. As drafted, the failure to disclose offence would be committed when a person knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering, and the information came to him in the course of conducting his business in the regulated financial sector, but he did not disclose it to a constable, a Customs officer or a nominated officer. There are several options that one may choose in respect of a mens rea element that might be applied to such an offence. Obviously, the top of the range is actual knowledge, which is the stiffest test that may be applied. That is followed by certain other subjective tests, such as believing or suspecting, after which there may be objective tests, such as having reasonable grounds to know or believe, or reasonable grounds to know or suspect.

The amendment would retain the subjective test of knowledge or suspicion of the offence. Where the Opposition part company from the Government's position is that they want the test of having reasonable grounds to suspect to be either deleted or at least raised so that the offence can be committed only under the second limb where there are reasonable grounds for knowing or reasonably believing. The test of suspicion would be removed from that limb. That represents yet another attempt to water down the effect of part 7 and our ability to apprehend those who assist others to launder the proceeds of crime.

In response to amendment No. 487, we consider that an objective test is necessary because we want the financial industry at large to be much more diligent in identifying and reporting instances of money laundering. It is already the test for the requirement to disclose information on transactions relating to terrorism. The relevant provision can be found in the provisions inserted into the Terrorism Act 2000 under schedule 2 to the Anti-terrorism, Crime and Security Act 2001.

The test of reasonable grounds or suspicion will apply only to the regulated sector. It will not apply to the public at large. It is right that such a test should be imposed on the regulated sector because the public have a right to expect that that sector, which is best placed to identify money laundering, should be placed under a greater duty of diligence in detecting it. It is

Column Number: 1071

important that measures are in place to deal with wilful blindness. The amendment would remove that.

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2002
Prepared 22 January 2002