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Proceeds of Crime Bill

Proceeds of Crime Bill

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Standing Committee B

Thursday 24 January 2002


[Mr. Roger Gale in the Chair]

Proceeds of Crime Bill

9.15 am

The Chairman: Good morning, ladies and gentlemen. I am pleased to see that the Committee has made at least modest progress during my absence. It has been suggested from certain quarters that a stand part debate on clause 324 is desired. I have studied the Hansard reports of the debates during my absence from the Chair. There has already been considerable debate on that clause, and, given the debates that are likely to take place on the remaining amendments, I am not at the moment minded to permit a clause stand part debate. I say that so that Members of the Committee can raise other issues during the debate on the remaining amendments—but that does not mean that I shall permit discussions that are out of order.

Clause 324

Failure to disclose: regulated sector

Mr. Dominic Grieve (Beaconsfield): I beg to move amendment No. 97, in page 187, line 33, at end insert—

    'and he was directly involved in the activities by virtue of which the business is regulated.'.

The Committee will be aware that the line in the Bill that the amendment would affect says that the knowledge must have come to the person concerned

    ''in the course of a business in the regulated sector.''

At our previous sitting, we touched on the wording of schedule 6. I am mindful particularly of some comments made by the Minister during that debate, when his interpretation of the schedule was different from mine. I understood schedule 6 not to refer to, or in any way qualify, the nature of the staff working in the business who might be liable. I wait with interest to hear about his understanding of the schedule, because I am the first to accept that that has a bearing on whether the amendment is necessary.

Mr. Mark Lazarowicz (Edinburgh, North and Leith): Does the hon. Gentleman accept that the definition of the phrase ''directly involved'' itself could lead to a substantial debate? Does he intend to table further amendments to define that term further, and provide information to the court on how it should be applied?

Mr. Grieve: The hon. Gentleman makes a good point. We tabled the amendment to stimulate discussion. It would exclude those working in a business in the regulated sector who are not

    ''directly involved in the activities by virtue of which the business is regulated.''

On Tuesday we referred to the fact that employees in a business in the regulated sector will include people who advise, place money and transfer money, but also

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those who work in the canteen—unless that is subcontracted out—and cleaners. More specifically, employees will include those who, although they may be involved in the business itself or in its core activities that fall within the regulated sector, are only clerical staff, or carry out executive functions that do not, or would not usually, involve their having to focus on whether money laundering is taking place. It is that issue that I want the Committee to think about.

It is wrong that, within organisations, we should criminalise people whose standing and function would not normally involve their having to make the judgments that the clause is designed to penalise if they are not properly made. I want the Committee to explore the issue of who should, and who should not, be included under the provisions. As we said on Tuesday—the Under-Secretary knows my views on the matter—the offence under the clause is not one only of knowledge, but one of negligence. Following the votes on Tuesday, the clause has been preserved in that form, but it worries me that executives within an organisation could subsequently be told by the courts that they should have done something that it was not part of their job description to do. Irrespective of a person's function in a business, once he is working within the regulated sector he can be caught under the clause.

On Tuesday the Minister hinted that, under the wording of schedule 6, that was not the case. I inferred that he was suggesting that it was only to the extent to which the activities of the business were within the regulated sector that people would fall foul of clause 324. My understanding of what he said was that staff such as cleaners or canteen workers employed by a business within the regulated sector would not be caught under the provisions. That may be so, but I wait to be persuaded that that is what schedule 6 means.

Even if the Minister were right about schedule 6, several people could be caught under the clause. We should think about excluding people whose work—such as clerical work—makes it inappropriate for them to be criticised for performing executive functions that others have told them to do.

Mr. Lazarowicz: I find the hon. Gentleman's exposition of amendment No. 97 interesting, although I am not persuaded by it. In fact, it would protect individuals whom even he would not wish to protect. For example, if the head of personnel of an organisation were to hear over lunch at work that money had been stashed away in an account in Bermuda, he would presumably not be regarded as being directly involved in the activities by virtue of which the business was regulated. Under the amendment, such a person would escape prosecution. Surely that cannot be right.

Mr. Grieve: The hon. Gentleman makes another good point. But let us look at the matter from a slightly different angle. Let us suppose that I overhear two people in a City restaurant talking about stashing away or laundering money, and they identify the bank for which they work. As I do not work within the regulated sector, I am under no obligation to make a report under the clause. I would consider myself to be

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morally blameworthy if I did not—but as a matter of law, I would not fall within the clause.

A personnel manager would ordinarily have no part to play in financial management or the transfer of money in a large organisation. He would not come by the information that the hon. Gentleman mentions any differently from the way in which I would come across similar information sitting in a City restaurant. If the personnel manager has no executive or scrutiny function relating to money laundering in his organisation, it might be argued that he is morally blameworthy for not tipping off the authorities, but why should we criminalise him?

Through those two examples I have tried to point out that the personnel manager of such an organisation does not seem to be in such a favoured position that we should say to him, ''You have a different responsibility from that of someone outside the regulated sector who came by the same information.''

Mr. Stephen McCabe (Birmingham, Hall Green): Does the hon. Gentleman draw no distinction between information overheard at a table in a restaurant and information gleaned by a personnel manager by virtue of the fact that he works in a company that performs illegal activities?

Mr. Grieve: I think that the hon. Gentleman has misunderstood the purpose of the argument that I was having with the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz).

Mr. McCabe: I did not misunderstand the argument.

Mr. Grieve: My point was that although the hon. Member for Edinburgh, North and Leith made a fair point, and although it could be argued that the personnel manager may be in a different category, it could also be argued that he is in a similar category to someone sitting in a restaurant.

Where do we draw the line? Interestingly, a line is clearly being drawn; if I understand correctly, the Minister will soon tell the Committee where it has been drawn. I had not previously fully appreciated that. My understanding was that everyone in the regulated sector, from top to bottom, including businesses that traded with or were involved in the sector's regulated component, would be covered. I therefore assumed, and made the—perhaps erroneous—suggestion on Tuesday, that that applied to those as far down as the cleaner. The use of discretion may mean that a cleaner is never prosecuted, but granting discretion to the prosecuting authorities does not commend itself to me if, in fairness, we should be drawing the line elsewhere.

The best thing I can do is listen to what the Minister has to say. Subject to what he says, we may be able to pursue the debate further. I make it clear that this is a probing amendment—but that does not mean that I shall withdraw it; I may decide to press it to a Division. However, I could be convinced that there is a better way of approaching the subject than mine. The

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amendment has drawbacks, but so does the clause as presently drafted, particularly now that the Committee has decided to keep the negligence offence in the clause.

Mr. Nick Hawkins (Surrey Heath): Although my hon. Friend has rightly said that he and I will be interested to hear from the Minister, I shall first raise some additional issues with which I would like the Minister to deal.

On Tuesday, when we debated matters relating to the clause under other amendments, the hon. Member for Glasgow, Pollok (Mr. Davidson), among others, poked some gentle fun in his usual skilful and humorous way at my hon. Friend the Member for Beaconsfield (Mr. Grieve) and me and described us as the cleaners' friends.

While we are dealing with the amendment and talking about where the line should be drawn, I should reinforce my hon. Friend's reading of schedule 6. I have re-read it carefully, and I do not see that any line is drawn in the Bill. I hope that the Minister will say that at a later sitting, in another place or on Report, he will propose some Government amendments to clarify the position. Having talked to his officials, the Minister may perchance have been persuaded by the arguments made by myself, my hon. Friend and others on the Committee earlier in the week.

Once in a while there is a happy coincidence in our work as parliamentarians—although it is rare that two things happen in the right order on the right day. For many years, Mr. Gale, you and I have been members of one of the most effective parliamentary cross-party groups—the all-party group on insurance and financial services, of which your fellow Chairmen, Mr. McWilliam and Mr. O'Brien, are also members. You will know that many all-party groups of Members who share a common interest or professional background meet only once in a blue moon, but the all-party group on insurance and financial services is one of the most active, and meets most weeks.

9.30 am

It just so happens that I received an urgent fax earlier this week from the administrative organiser of our all-party group saying that a delegation of American legislators were on a short visit to the United Kingdom and wished to discuss some urgent issues concerning the financial sector. They were able to meet some of our all-party group this morning for a working breakfast, and in the hour before the Committee started, my colleagues and I were briefed on matters directly germane not only to this legislation, but to this amendment.

Some Members of the Committee may be sceptical—the hon. Member for Glasgow, Pollok in particular has said that no harm would come to the City of London from the imposition of the extra regulatory burdens in the Bill. However, the chairman of the National Conference of Insurance Legislators in America, David Counts, from Texas, says:

    ''We cannot exist without Lloyds of London''.

The leading members of the conference, American legislators from Texas, New York, Minnesota and

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Illinois, have come to Europe, and London in particular, to see how our regulatory climate may be changing in the aftermath of 11 September, and how that will affect their business.

It is germane to the amendment that so many multinational insurance companies, especially American ones, have operations in London. They are concerned about the way in which junior staff—of the type whom I said that the British Bankers Association were concerned about—may be affected, when they should not face the full penalties of criminal law. Anyone who trades in the London market would be worried by the introduction of a new law that brings the kind of criminal sanctions that would follow this legislation. It would hit vulnerable people who cannot possibly have the same level of expertise or training as those whom the Bill should hit.

It is important to put that concern on the record, because it was ventilated to me in strong terms less than an hour ago. The same view was expressed by the president of the National Conference of Insurance Legislators, Senator Larkin from New York, Representative Terry Parke, the immediate past president, from Illinois, vice-chairman Senator Oliver from Minnesota and by the executive directors. We also met a senior representative from Lloyds, Mr. Matcham, and an old friend of my hon. Friend the Member for Beaconsfield and myself, Marie-Louise Rossi, the chief executive of the International Underwriting Association of London.


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Prepared 24 January 2002