Proceeds of Crime Bill

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Clause 399


Amendment proposed: No. 545, in page 227, line 24, leave out

    'but excluding a lease which is not a long lease'.—[Mr. Bob Ainsworth.]

Question put, That the amendment be made:—

The Committee divided: Ayes 17, Noes 5.

Division No. 47]

Ainsworth, Mr. Bob Baker, Norman Brooke, Annette Clark, Mrs. Helen David, Mr. Wayne Davidson, Mr. Ian Foulkes, Mr. George Harris, Mr. Tom Hesford, Stephen
Lazarowicz, Mr. Mark Lucas, Ian McCabe, Mr. Stephen McGuire, Mrs. Anne Robertson, John Stinchcombe, Mr. Paul Stoate, Dr. Howard Watson, Mr. Tom

Field, Mr. Mark Grieve, Mr. Dominic Hawkins, Mr. Nick
Johnson, Mr. Boris Wilshire, Mr. David

Question accordingly agreed to.

Clause 399, as amended, ordered to stand part of the Bill.

Clauses 400 and 401 ordered to stand part of the Bill.

Clause 402

Modifications of the 1986 Act

6.30 pm

Mr. Ainsworth: I beg to move amendment No. 563, in page 229, line 10, leave out from 'which' to end of line 11 and insert—

    'an order under section 50 or 52 is in force;'.

The Chairman: With this it will convenient to take Government amendments Nos. 564 to 592, 595, 596, 598, 599 and 601.

Mr. Ainsworth: The amendments are highly technical, although the issue that they address is

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relatively straightforward. As drafted, part 9 provides that if a restraint order is made or a receiver is appointed under the confiscation legislation before a bankruptcy order is made under the insolvency legislation, confiscation takes precedence and the property that is affected does not form part of the bankrupt's estate. However, we recently discovered that those arrangements are flawed because a bankrupt's estate is assessed at the time when the bankruptcy order is made. When property is excluded from the bankrupt's estate, there is no way of putting it into the estate if it ceases to be excluded after that date.

Under those circumstances, the restrained property would be returned to its owner. It would not form part of the bankrupt's estate because it did not do so when the bankruptcy order was made. The result would be that the creditors would lose out. The amendments will rectify that situation.

Mr. Wilshire: After I said that I appreciated that we have more time, it is a shame that we had to curtail our debate on a wide range of measures—I do not believe that anyone was wasting time—in order to move on to a new part. Although there are 32 amendments in the group, I suspect that we will have more time than we need on them. I flag that up, although I understand that I am probably out of order.

I worked my way through all 32 amendments, and I appreciate that some are repetitive and do the same thing to subsequent clauses. It seems like several years ago, but I suspect that it was only last November that I made the point that every amendment must be justified. That is not an argument for the Minister to stand up and work his way through 32 amendments, but I would be grateful if he would flesh out his comment that they are technical. What are the technicalities? As I said, I am not asking him to explain 32 times, but a bit more information than we have been given would be helpful.

Having made that general point, I wish to turn my attention to amendment No. 567, which is lurking in the group of 32. If I understand it correctly, it proposes that the bankruptcy proceedings would deal with what is left over after everything else has been dealt with. Essentially, the group of amendments define the property concerned, and amendment No. 567 proposes adding in what is left over after confiscation proceedings. It raises a serious point, which the Minister must address; I look forward to hearing his response. I am sure that the hon. Member for Glasgow, Pollok will be relieved to know—[Interruption.]

The Chairman: Order. I must remind members of the Committee that if they wish to engage in private conversations, they should do so outside the Room. I wish to hear what is said by the speaker who has the Floor.

Mr. Wilshire: Thank you, Mr. Gale.

As I was saying, the hon. Member for Glasgow, Pollok will be relieved to know that I am not arguing in favour of making bankruptcy a loophole. I readily accept that the principle of the legislation is absolutely right: we must ensure that bankruptcy cannot be used

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as a way of diverting funds. It has been and can be done; it is an attractive loophole at present.

However, I am worried about taking the principle too far. Genuine bankruptcy proceedings against someone with a great amount of ill-gotten gain will not be a ruse to divert money. The person will lose the proceeds of crime as a result, and the effect will be what the Bill is trying to achieve. The money is taken away via the bankruptcy route, which is different from the proceeds of crime route, but the effect on the person would be the same and the objectives of the legislation would be achieved.

I am concerned about genuine bankruptcies. As I understand it, laundered money often finds its way into legitimate businesses, and innocent people trade with such businesses in good faith. A person who is running a legitimate business, albeit on the proceeds of crime, may genuinely go bankrupt. If we say that in such a situation the proceeds of crime procedures will take precedence over the bankruptcy procedures, the creditor who in good faith engaged in business with the legitimate business would be hit by the legislation. That concerns me.

As it stands, the legislation says that bankruptcy proceedings against someone who is running a legitimate business on laundered money must follow the proceeds of crime procedures. Amendment No. 567 clearly states that the courts can revert to bankruptcy proceedings with the money that is left over. My concerns are that there will be a delay—it could be a considerable delay—before the proceeds of crime procedures are completed and, when they are, there may not be much money left over. Often, the innocent are hurt most in bankruptcy proceedings.

Therefore, I have concerns about the bankruptcy proceedings, with regard to a legitimate business that is run with the proceeds of crime. Those proceedings might take two or three years: the business might have many creditors who are not involved in any illegal activity, and who can have had no knowledge of what was going on, because they were doing business with a perfectly legitimate organisation. They might be asked to wait for three or four years. Who knows how long such proceedings could take? During that period, they might go bankrupt, because, for instance, they are unable carry on their business. That cannot be right.

The proceedings might not take two or three years, but problems might arise even if it is a quick process. For instance, it would not be right if someone were to discover that they were owed £100,000 by a business that they thought was legitimate and, through no fault of their own, although the legitimate part of that business had £100,000 of assets that could have been paid to them, another procedure takes that money away from them, even though they are entirely innocent. Under normal circumstances, the creditor would have received that money and could continue in business, but if that money were taken away because of this legislation, an innocent person could go bankrupt.

I am sure that that is not the Minister's intention. I presume that his intention is to ensure that it is impossible for bankruptcy to be used as a loophole,

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and I support that goal. However, it is possible for a bankruptcy that is not being used as a loophole to take place. Therefore, I ask the Minister to examine whether it would be possible to table an extra amendment—which could be added to the existing 32—that would draw a distinction between the person who is involved in crime and who tries to make money disappear via a concocted bankruptcy and an innocent creditor who is legitimately and unwittingly trading with someone who is involved in crime. Such a creditor should not be prosecuted, or caught up in the matter.

I am sure that the Minister does not want innocent people to be caught up in a damaging way in such a situation. I hope that the Minister can say to us that a distinction can be drawn between somebody who uses the bankruptcy route as a loophole and someone who goes bankrupt for genuine reasons. We must provide safeguards to protect the innocent.

Mr. Hawkins: Although I want to focus on other issues, I wish to express my agreement with everything that my hon. Friend has said. It is unnecessary for me to go over that ground again, as he has covered it so ably, and I look forward to hearing the Minister's response.

I am surprised that there are so many amendments to one part of the Bill. It is extraordinary that it should need to be so substantially rewritten. The legislation is complex. My hon. Friend the Member for Beaconsfield and I have occasionally remarked that it is too complex, and that it will be difficult to operate it at the sharp end. I hope that the Minister can explain why the Government needed to do so much rewriting. As there has already been a draft Bill, it must be an embarrassment to the Government that such an enormous amount of rewriting needs to be done. That is a general point.

I turn to a more detailed point with regard to Government amendment No. 593. I notice that it is in the name, not of all the Ministers—or the Ministers and the Whip—as some of them have been, but only of the Minister of State, Scotland Office. In these days of devolution, and with so many hon. Members representing Scottish constituencies in the United Kingdom Parliament, it is ironic that a Scottish Minister should reintroduce a reference to legislation that predates the Act of Union.

I am always delighted when reference is made to Acts of Parliament that were written in the days that are almost—although, happily, not completely—beyond recall. Legislation was simple in those days. It is a pleasure to see it being used again.

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Prepared 29 January 2002