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Certainly in my experience—and it is one of the reasons why the Serious Fraud Office was set up—many a prosecution in the late 1980s and early 1990s was investigated by officers of county constabularies who, although well meaning, were often out of their depth when it came to dealing with the elements of fraud. That often coloured the way in which the prosecution was conducted. By the time the prosecutor, and certainly
barristers, got involved, it was evident that the whole case was completely on the wrong track. There were real problems.
We may have an opportunity to debate in Committee the extent to which the Serious Fraud Office has been able to take a grip on the matter, but it is worth remembering that many frauds that concern individuals do not fall within the Serious Fraud Office’s remit. They are simple straightforward frauds, but they nevertheless have sufficient complexity to merit having officers—certainly police officers and, in my view, members of the Crown Prosecution Service—working on them who have an understanding of the concepts and pitfalls. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) made a fair point, but there are resource implications, so to that extent, I am sympathetic to the Solicitor-General and the problems that he faces.
The Solicitor-General: Certainly, the fraud review led by the Attorney-General will examine some of those issues, particularly how the police have dealt with fraud—mainly lower-level frauds that do not fall within the ambit of the Serious Fraud Office. I hope that, as a result of that review, we will see some improvements in the policing of fraud. Without wishing to widen our debate too much, I believe that the larger police forces will allow greater specialisation so that chief constables can identify the experts to focus on fraud cases. That should help to ensure that police forces have the level of expertise that the hon. Gentleman wants. Having larger forces will help.
Mr. Grieve: I am not wholly convinced by the Solicitor-General’s arguments on the last point, especially, of course, as one of the most effective police forces in dealing with fraud is the City of London police, which is rather a small force. My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) may agree from personal experience not only that it deals with fraud rather effectively, but that its general policing is pretty effective at every conceivable level. I am afraid that that is where the Solicitor-General and I part company.
The Solicitor-General: The City of London police are expert at dealing with fraud, but we have given them more than £1 million extra to ensure that they are, and the City gives them even more. That costs extra resources. If he wants to replicate the specialism of the City of London police across the country, I would be interested to see his commitment to doing so.
Mr. Grieve: Our commitment is to tackle crime at every level and as was clear at the last election, to do so, we were prepared to invest in the police force—indeed, to a greater degree than the Government were prepared to do themselves.
David Taylor (North-West Leicestershire) (Lab/Co-op): Is the hon. Gentleman unimpressed, as I am, by the Solicitor-General’s specific contribution in saying that we have given £1 million to the City to improve the capacity to investigate fraud? Should not those costs fall entirely on the City of London? Why should the general taxpayer be required to provide money in that way?
Mr. Grieve: At the risk of straying mildly but not too far away from this issue, if the City of London was allowed to raise and keep its own rate precept of both business and domestic rates entirely to itself, so that none of it was sent to any other part of the country, including the hon. Gentleman’s constituency, I am sure that it would not ask the Government for a ha’penny. In those circumstances, he might go away and usefully review the statistics on what happens to the City’s money, which it raises both from the business community and from its domestic residents.
I look forward to engaging with the Solicitor-General in the debates in Committee for sensible scrutiny of the Bill. In its framework, it appears well judged. We will try to ensure that, when it leaves the House, it is improved in any area where that is required.
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Mr. Brian Jenkins (Tamworth) (Lab): I speak in support of the Bill today. It looks to be a good Bill—one that has had a very long gestation period, which reflects its complexity, rather than its size. It is one of the better Bills for me, as it is rather slim. It is a credit to all concerned in the consultation on and the production of the Bill that it has been drafted so concisely. The accompanying explanatory notes are well laid out and a great help to people like myself, a non-lawyer, in understanding the logic behind the Bill.
Fraud is not a victimless crime; it is an insidious, indiscriminate crime that wreaks long-term damage on UK business, not only in cash terms but in undermining confidence in the institutions that are needed to trade and create wealth. It hits the pockets of individuals and creates misery for many families. It costs the people of our country dear, and I should like to extend the figure that my hon. and learned Friend the Solicitor-General put on that: it is now approaching £20 billion a year. It is a large business, and its proceeds keep organised crime funded. It also funds terrorist organisations—the very groups that are pledged to bring down our way of life. So I welcome this approach to tackling those problems, but I remind my hon. and learned Friend that the Bill is only part of the solution: we cannot will the end without providing the means.
Let me talk about the enforcement of the Bill and, if I have time, about the responsibility of financial institutions in their struggle against fraud. Who do we envisage investigating alleged fraud? Will we ensure that all investigating police officers tasked with applying the law will be trained to understand it, able to contend with modern technology or have access to specialist support? Will they be properly supported by Crown Prosecution Service lawyers?
Will judges be trained and maintained as specialists in fraud cases, to retain and reinforce expert knowledge and skill within the law? One cannot imagine going into hospital for a knee operation, or for neurosurgery, and being told that a heart surgeon will do the operation. It is ridiculous that a judge who has presided competently over a fraud trial might never oversee another fraud trial in his career. Society cannot afford such a waste of resources.
With regard to the financial institutions, it is no longer acceptable, if it ever were, for companies to pay out on claims without making thorough checks on their
legitimacy, and merely to recoup their losses by passing on the costs to all policyholders through increased premiums. The scale of the problem was highlighted by Norwich Union, which, in 2004, identified and prevented 15,000 insurance frauds. It estimated that 4,000 would have met the criminal level of burden of proof. Because it did not want to over-burden the police, it submitted just 41 of the most serious cases, in which there were possible links to organised crime and the evidence was overwhelmingly persuasive. Of those, 27 were taken up by the police, and 18 came to court and resulted in conviction. I applaud Norwich Union’s attempt to tackle fraud, but until every organisation, bank and insurance company takes the same stand against organised crime and fraud, the costs of which are met through extra bank charges and premiums, it will not be tackled seriously.
Do the police have the resources to process all such cases? Do we seriously intend to use—I look to the Solicitor-General to give an answer—the Proceeds of Crime Act 2002, and to channel funds to the police for this activity, so that it becomes self-funded? Does he have any other ideas about finding resources?
Speaking not as a lawyer, but as the man on the Clapham omnibus, let me examine the plain English guide in the explanatory notes. The Law Commission recommended that the conspiracy to defraud charge should be abolished, but then had concerns that limitations on scope meant that certain types of secondary participation and fraud might still only be caught by the common law charge. Will my hon. and learned Friend give some examples? I listened closely to what he said, but he knows that there is still concern. Alternatively, will he say that the Government do not know exactly what the situation might be but that it would be prudent to leave the provision in place, as a belt and braces approach, while they reassess the legislation as they intend to do?
If the Solicitor-General has no specific time scale in mind, does he have in mind a number of cases on which case law can be built up? Until such time, will he not throw out the legislation but reinforce it with a belt and braces approach? This is the man on the Clapham omnibus speaking, not the lawyer, as the general public will not take it kindly if we throw out old legislation and replace it with new legislation that contains a loophole.
As I look through the explanatory notes, I see in relation to fraud by false representation that there is no legal definition of dishonesty. That is a surprise to me and will come as a surprise to people outside. What we have is a tortuous two-stage test as established in the case of R v. Ghosh in 1982. The first question is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If that is answered in the affirmative, the second question must be whether the defendant was aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people. That is a tough test, and it is becoming tougher by the week. It is certainly becoming tougher for those who do not come from the same culture and background as others in this country. What constitutes
“honest” and “dishonest”, and what is reasonable and honest behaviour, without a definition of dishonesty?
Paragraph 16 of our “Everyman’s Guide”, the explanatory notes, refers to “phishing” for internet details. My hon. and learned Friend spoke of ties with Japan and other countries, but are we going to extend the provision to America? An internet bank could be established in America and the proceeds could go to Belize, and when the bank folded it could be found that no crime had been committed because no section of jurisprudence covered the total area. Will my hon. and learned Friend work closely with his colleagues to try to close the loophole generated by internet sites based overseas?
“Fraud by failing to disclose information”.
When I read that, I thought “Here we go”. I must say that it is a very brave idea. It may have escaped others’ attention that we now live in a capitalist society. Capitalists make profit, if not through sheer exploitation of individuals through labour, then through exploitation of knowledge, skills and money. That is a legal activity; it only becomes illegal when dishonesty makes it a criminal fraud. But as I have said, dishonesty is a rather nebulous concept in law because there is no firm definition, only cases in relation to which definitions can be established. Until we can establish firmly what constitutes dishonesty, the pursuit of wealth and gain through exploitation of knowledge and skills in a capitalist society must remain legal. That is one of the problems with which we shall have to struggle on for a bit longer.
“Fraud by abuse of position”,
causes me a few more worries. I am not talking about family membership; I am talking about a much more difficult problem. I am not talking about insurance salesmen, who must declare to their clients what commission they are being paid, what the risks are and so forth. I am not even talking about building societies that try to sell endowment mortgages: people must be well aware of those risks as well. Insurance salesmen and those selling endowment mortgages are paid for their services and can be regulated, but I am not sure whether my hon. and learned Friend has thought about this: what happens when a company’s directors are in a position of power, influence and authority, and decide that although they are already well paid, they will shovel bucketloads—shedloads—of money into their own pension fund, while the pension fund of the workers for whom they are responsible becomes a black hole? They may say, “We will put X per cent. into our pension fund and X per cent. into our employees’ pension fund”, but when they shovel money into their own pension fund, will they be guilty of fraud by abuse of position at any time in the future? If so, I—the man on the Clapham omnibus—would very much like to sit on the jury, especially if it affects my pension fund.
I think that the Standing Committee should start hammering out—unless my hon. and learned Friend can give us an answer today—whether that would be covered by the Bill, and if not, why not.
The explanatory notes tell us:
“The term ‘abuse’ is not limited by a definition”,
“a wide range of conduct.”
“makes clear that the offence can be committed by an omission as well as by positive action.”
I have some difficulty with that as well.
“For example, an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer”
will commit an offence. If the employee is conspiring with the rival, fair enough. If it is a malicious act against the employer, fair enough. However, the employee may be plain stupid. Are we going to start charging people for fraud because of their stupidity? Proof must be provided that not only the company but the person involved made a gain.
My friendly notes say that the definition of property includes intellectual property, “although in practice intellectual property is rarely ‘gained’ or ‘lost’.”
It must be understood that, although the information and knowledge may not be gained or lost, the holder’s equity in that intellectual property can be seriously weakened once that has been leaked into the market. I therefore wish that we would move away from the view that intellectual property cannot be gained or lost.
We have talked about making or supplying articles for use in fraud. I understand that one or two Members are a bit concerned about the software that is loaded on their computers, and rightly so. Software may come with a package and all that stuff. The notes refer to programmes that “can be used” for fraud. Someone will be capable of being charged with having in their possession something that can be used for fraud. For an offence to be committed under the Bill, it should be made clear that the article has been used for fraud or is intended to be used for fraud—one must see that something has been downloaded or used in that manner, rather than someone just being in possession of something that can be used for fraud.
Clause 11 deals with obtaining services dishonestly. Again, this is a cracker. We have to understand the wording in law with regard to people in general. The notes say that it is an offence dishonestly
“to obtain services for which payment is required, within intent to avoid payment.”
I can see someone going to the court and saying, “M’lud, the trouble is that it says here ‘with intent to avoid payment’. I had no intent to avoid payment. I just had no cash. I intend to pay it when I have money. I will put my name down and put a paper or slip in.” When we look at these Bills, can we make sure that it is clear that, if people do not have the money to pay, they may still intend to pay?
Later we have another classic one: the decoder example. I am sure that the Minister is fully aware of all the packages that are available on the internet now for terrestrial and other channels. If he is fully aware of all the channels that are paid for and the ones that are not paid for, can he give me an indication, because I am not?
The package in my house comes through cable. We get channels that we should normally pay for but that we do not pay for because it is all-in: television, telephone and everything else. We pay once a month, so
they are paid-for channels. If I get a freeview box and put it on top of the television, I cannot get the paid-for channels through the freeview box. However, if they attach the channels as part of a package, they come with the freeview box.
Imagine the nephew of some person on a council estate walking in and saying, “Auntie, you have not got a freeview box. I can supply one to you. I have a mate who has a freeview box.” Very good. He puts it in and it is £50 for the box. She does not know that she can get a box for £30. In it goes, and the card goes in. She is sitting happily watching the television. She has her freeview box on top of the television. There is a knock at the door and someone says, “You are viewing channels you are not supposed to view.” She will say, “I did not know that. If I go to the market, I can see freeview boxes every week. What makes this one different?”
The BBC is chasing up people using televisions without a licence. So why should we chase up people who watch Sky movies or any other such product? Why is Sky not chasing them up? I can understand why it is a criminal offence to make such a decoder box, and why, if such information comes to us and we find these people out, we should chase them up. But I am not sure why we should do so simply to help Mr. Murdoch make a few more million pounds.
I turn finally to the Visiting Forces Act 1952. Under the Bill, any member of the visiting forces cannot be charged because all such offences will be regarded as offences against property. Why? I recognise that visiting forces from certain parts of the world might want to have some independence of local legislation, but no serviceman of a force coming to Britain should be able to stand aside from the 1952 Act. Visiting servicemen will be able to supply such articles in this country without being tried, unless their commanding officer decides to try them.
With those few caveats, I welcome the Bill. I hope that we will fund and resource it properly, and that we will show the people of this country that we are serious about such crime, which is not a victimless crime. It causes great distress to many families, especially when people have their identities or passports pinched, or their bank cards are fraudulently made and the bank continues to issue cards in their name, even after they have told it to stop doing so. In the meantime, it bears no risk because it can pass the charges on. If someone introduced a Bill seeking compensation from financial institutions that pass on, by increasing premiums, such costs to the people on whom they impose their incompetence, I would back that as well. That said, I wish this Bill well.
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