Serious Crime Bill [Lords]
The Committee consisted of the following Members:
Kate Emms, Oliver Coddington, Committee Clerk s
† attended the Committee
The Chair: Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets during sittings. Please remember the rules on refreshments: no teas and coffees, but water is allowed. Please ensure that all electronic devices are turned off or switched to silent. As a general rule, I and my fellow Chair do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period in Public Bill Committees is three working days, so amendments should be tabled by the rise of the House on a Monday for consideration on a Thursday, and by the rise of the House on a Thursday for consideration on the following Tuesday.
Before we begin our line-by-line consideration of the Bill, some brief explanation may be useful to those relatively new to Public Bill Committees. The selection list for today’s sitting is available in the room. It shows how the amendments selected for debate have been grouped together. Amendments grouped together are generally on the same or a similar issue. The Member with their name on the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on any or all amendments in the group. A Member may speak more than once in a single debate.
At the end of the debate on a group, I will call the Member with the lead amendment again. Before they sit down they need to indicate whether they wish to withdraw the amendment or press it to a vote. Similarly, if another Member wishes to press a grouped amendment or a new clause to a vote, they should let me know. I will assume that the Government wish the Committee to reach a decision on their amendments. Decisions on amendments do not take place in the order they are debated, but in the order that they appear on the amendment paper. I have discretion to decide on separate stand part debates on clauses and schedules, taking account of the extent of debate on amendments.
The adjournment of the Committee this morning will be at 11.25 and is automatic. This afternoon it is in the hands of the Whips, but around 5 pm is conventional. I understand there may be consensus around making brisk progress on the Bill, given the nature of the matter with which it is concerned. I hope these explanations are helpful. Before we begin line-by-line consideration, we need to dispose of the programme motion and the motion to report written evidence.
(2) the proceedings shall be taken in the following order: Clauses 1 to 45; Schedule 1; Clauses 46 to 53; Schedule 2; Clauses 54 to 66; Schedule 3; Clauses 67 to 73; new Clauses; new Schedules; Clause 74; Schedule 4; Clauses 75 to 78; remaining proceedings on the Bill;
The Parliamentary Under-Secretary of State for the Home Department (Karen Bradley): I am delighted to serve under your chairmanship, Mr Davies, and that of your co-Chair, Ms Clark. I welcome all right hon. and hon. Members to the Committee. My hon. Friend the Solicitor General and I look forward to detailed discussions on the provisions in the Bill with all members of the Committee. We have sufficient time to discuss the Bill and I look forward to lively contributions reflecting our debate on Second Reading.
Clause 1 deals with the determination by a court of the extent of interest that a defendant holds in named property. The serious and organised crime strategy sets out proposals to strengthen the Proceeds of Crime Act 2002 by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties. Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order out of whatever assets he or she has available. A confiscation order specifies an amount to be paid. It does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. Such claims also reduce the amount of money available for recovery. Some of the claims may be perfectly legitimate. However, others will be spurious and designed simply to frustrate the confiscation process. To tackle such abuses and to help speed up the confiscation process, clause 1 will confer on the court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process.
In deciding whether to make a determination of any particular case, it is expected that judges will exercise the power to determine the defendant’s interest in property in those cases where their experience allows them to do so. That includes matters regarding property law, the nature of the property and the likely number and/or complexity of any third-party interest. To protect legitimate
The court is only able to make a determination if anyone who the court thinks is or may be a person holding an interest in the property is afforded a reasonable opportunity to make representations. Subject to exceptions, any determination as to the extent of the defendant’s interest in a particular property is binding on any court or other person involved in the enforcement of the confiscation order. The exceptions are where it is open to a court appointing an enforcement receiver to hear representations or in proceedings before the Court of Appeal or Supreme Court.
The exception in relation to any appeal to a higher court speaks for itself, but let me explain how the enforcement receiver fits into this process. On the application of a prosecutor to the Crown court, a receiver may be appointed to realise property where a confiscation order has been made but not been satisfied, and there is no appeal. The court may confer certain powers on the receiver, including taking possession of the property, managing and dealing with the property and realising it. Under the associated clause 4, a person affected by determination may make representations to a receiver where their interest in the property came to light only after the determination had been made. In such circumstances, it is right that the court appointing the receiver should be able to consider such representations and not be bound by the earlier court decision.
There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes account of when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.
“(4A) An interested person who is found by the court to have provided incomplete or false information in a deliberate attempt to mislead the court is guilty of an offence and is liable on conviction of indictment, to imprisonment for a term not exceeding 6 months, or to a fine, or to both.”.
It is a pleasure to serve under your chairmanship, Mr Davies. Crime is changing, and serious and organised crime is rapidly rising. It poses a major threat to our
Specifically in relation to proceeds of crime, it is welcome that there have been some moves on the part of the Government, in particular as a consequence of the damning reports by the National Audit Office and the Public Accounts Committee last year. There are some welcome proposals in relation to proceeds of crime which range from the important to the modest. However, there are omissions, and we will therefore seek to move amendments as appropriate. I have to say that we are yet to be convinced that the Government have an overall serious strategy to send an unmistakeable message that crime should not pay and that ill-gotten gains will be recovered.
As the Minister said, it was in 2002 that the Proceeds of Crime Act was introduced. It expanded the law on money laundering to cover any crime rather than just drug-related offences, and it provided wide-ranging powers to deprive criminals of their main motivation—the money and property that they accumulate through illegal activities.
However, it has become clear that the way the asset recovery regime is governed is inadequate. The National Audit Office report on confiscation orders, which was released just over a year ago, drew attention to the poor progress that the Government have made on asset recovery. It specifically found that in 2012 and 2013 courts in England and Wales imposed 6,392 confiscation orders with a total value of £1.6 billion but that the various agencies only successfully confiscated £133 million of that amount.
In reality, we have a system in which there are numerous different players, including the National Crime Agency, the Crown Prosecution Service, Her Majesty’s Revenue and Customs, and regional asset recovery teams. Sometimes, there is a lack of clarity as to who is responsible and no clear overall direction of travel.
Therefore, we welcome the introduction of proposals to strengthen the proceeds of crime regime, which go some way to addressing some of the current roadblocks to the recovery of ill-gotten gains. However, if the aim is truly to deprive criminals of their ill-gotten gains, the Government have not gone far enough. We must stop the Mr Bigs who are laughing at the system because of its flaws and loopholes. What is needed is rigorous enforcement of the law.
In addition, a very important point will come up throughout our consideration of this Bill. We must recognise that the import of asset recovery lies not only
I stress again that this part of the Bill is not only about confiscation, critical though confiscation is, but about seeking to prevent further crimes of this nature in future. Therefore, we need to take this opportunity to examine the problems associated with the Proceeds of Crime Act 2002 as it currently stands, and to see whether the proposals in the Bill fully address those problems, or whether more can be done to tackle those problems and improve enforcement.
In summary, this process is about strong political will, including a strong ministerial lead; later, we will consider clauses that specifically address those issues. It is also about creating an effective overall strategy, and about recognising that reductions in public expenditure in key areas do not help. Those reductions have damaged effective enforcement by agencies, ranging from the reductions in the budgets of RARTs on the one hand to the reductions in the strategic capacity of the CPS on the other: the CPS has suffered a 27% cut in its budget. We would argue that those are false economies, given the need to properly invest in what could benefit the taxpayer and deter crime. According to work done by the Library, one example of the potential gain from increased asset recovery is that it could bring in an additional £243 million in 2015 and 2016 if increased by 20%. That once again strongly makes the point that it is wise to invest in a serious strategy and unwise to cut back on key areas in the enforcement of proceeds of crime.
I have set out the context of the clause and the amendment is quite straightforward. We want to further strengthen the provision of information amendments made by the Government by criminalising those who seek to mislead the court about the extent of their assets. While the Bill currently addresses those who fail to comply with an order under that section by giving the court such powers as it believes appropriate, we wish to go one step further by adding another facet of deterrence. The defendant or any other interested person would be liable to either a stint in jail or a fine for making false claims, sending an unmistakeable message that if someone lies to assist crime or organised criminals, they will potentially pay the price with their liberty.
Karen Bradley: I thank the hon. Gentleman for his comments. Clauses 1 to 4 deliver on the commitment in the serious and organised crime strategy to strengthen the asset recovery regime by ensuring that criminal
I want to ensure that members of the Committee are aware of our serious and organised crime strategy. We launched it in October 2013 and it sits under the four Ps programme: pursue, which means pursuing the bad guys; protect, which means ensuring that people do not become victims of bad guys; prevent, which means ensuring that people do not become bad guys in the first place; and finally, prepare, which means ensuring that we can give the support needed to victims of bad guys. That is what this Government are working on.
Asset recovery is an absolutely vital part of all four strands of the four Ps strategy. Clearly, if we are pursuing organised criminals, we need to take off them the money they have made through ill-gotten gains. That will prevent them from continuing their criminal activities, so it helps with the prevent side of our strategy. In terms of “protect”, if people know that they cannot keep their assets, they are less likely to become criminals and therefore make someone a victim. “Prepare” is the compensation side of the criminal assets recovery strategy, meaning that victims get the support they need.
The cases that the shadow Minister highlighted are very important and show why we have brought this Bill before the Committee. I chair the Criminal Finances Board, which has a criminal finances improvement plan. He will have seen that plan; it is open for other Committee members to see if they wish, and I would be more than happy to get copies of it for them. That clear plan sets out how we will address the defects and deficiencies in the system.
The funding of the regional asset recovery teams is not going down. The Government spent £9.857 million on them in 2012-13 and £10.246 million in 2013-14. I have visited those teams in the regional organised crime units, and they do fantastic work. They work with the Crown Prosecution Service, the police and HMRC to ensure that all the agencies that come into contact with criminals and criminal finances work together. I am pleased with the work they are doing, but they can do more. The Bill will give them more weapons and tools to enable them to get money off the criminals. As the hon. Gentleman rightly said, that is a massive deterrent. Many organised criminals see jail as just part of the job, but they want to keep hold of the money and assets that enable them to continue being criminals. I want to prevent them from doing that, and I know that the hon. Gentleman shares that aim.
It may assist the Committee’s consideration of the amendment if I explain how clauses 1 to 4 will address the issue of third-party rights more generally. The Bill brings forward the determination of third-party interests
In addition, clauses 1 to 4 confer new powers on the court to make a binding determination about the extent of any third-party interests. To protect any legitimate third-party claims, those provisions enable third parties who have or may have an interest in the property to make representations to the court about the extent of their interest. The court will consider the evidence presented and make a binding decision about the extent of the interest held by the third party.
As part of that process, clause 2 confers on the court the power to order any interested person, such as someone making a claim against the defendant’s property, to provide the court with any information it considers necessary to enable it to determine the defendant’s interest in the property. That power will be used to tackle individuals who attempt to make bogus claims—in all likelihood in collusion with the defendant—to place assets out of reach of confiscation. If an individual has a genuine claim, it is unlikely that a court order will be required to make them produce that information. Individuals who are in collusion with the defendant are unlikely to want to co-operate with the court unless they are compelled to do so by the power of a court order. If a person fails to comply with the court order without reasonable cause, clause 2 also allows the court to draw such inferences as it believes are appropriate. The court retains flexibility through the use of the word “may” to make determinations if it sees it as appropriate to do so.
Amendment 33 seeks to make deliberate attempts to mislead the court by providing incomplete or false information a criminal offence, punishable by a term of imprisonment not exceeding six months, a fine or both. Proposed new section 18A(5) of the Proceeds of Crime Act makes it clear that where a court draws inferences as a consequence of a failure to provide the information requested in the order, the court can deal with the failure to comply with the order as it deems appropriate. That could include a finding that the party is in contempt of court.
When a court holds someone in contempt, it may sentence them to up to two years in prison. Therefore, the court’s existing sentencing powers are stronger than those envisaged by the amendment. We do not, therefore, believe that the creation of a criminal offence for a failure to comply with the court order is necessary. Moreover, the creation of such an offence might be taken to imply a setting aside of the court’s powers to deal with an interested person through contempt proceedings, which, as I have indicated, would lead to a weakening of the current sanction. I therefore ask the hon. Gentleman to withdraw his amendment.
Jack Dromey: The Minister is right that a Labour Government introduced the legislation. However, all parties think that we need to go further, that there were defects in the original legislation and that there are problems relating to having an effective enforcement strategy.
On the effective enforcement strategy, a study by ACPO referred to the impact of the further fund reduction of 25% as a whole on the ability of the agencies concerned in regional asset recovery teams to discharge their duties in full. It argues strongly that
“This investment would bring increased receipts, improved attack on the finances of organised crime, improved direction of scarce resources and improved connectivity with the private sector thereby tapping into their intelligence more effectively.”
It goes on to make a powerful argument that one of the wisest investments we could make from the public purse is in a serious strategy on recovering the proceeds of crime. For every £1 invested, we are talking about potentially immense benefits. Sending that message—pursue, no hiding place and prevent—is key.
The Minister makes the point that we could have contempt of court proceedings if someone deliberately misleads. Of that there is no doubt. However, it is disappointing that the Government are not prepared to go one step further to enshrine in law the unmistakable message that, if someone lies to protect a criminal friend or criminal assets, that is against the law and they will pay the price accordingly. We hoped that the Minister would go one step further, but we note the Government’s position. I beg to ask leave to withdraw the amendment.
‘(2) In this section, a “reasonable opportunity” shall be interpreted as no more than a period of 21 days from the date of notice given by the court arising from the duty in subsection (8A).”.
What is clear from the experience of the proceeds of crime regime is that criminals will pull any stroke to avoid confiscation. Sadly, the evidence is that the most successful in pulling such strokes to keep their ill-gotten gains are the “Mr Bigs”. Part of their stock in trade is to have third parties saying, “The money is mine”, or, “I have a stake in the house.”
In the other place, the Labour Front-Bench team succeeded in pushing through some important changes to the Bill on third-party interests. Although the Government initially rejected the amendments tabled on Report, they made some welcome concessions. The Bill now brings forward the determination of third-party interest from the enforcement stage to the confiscation hearing, and confers new powers on the court to make binding determinations as to the extent of any third-party interest. Additionally, the court is now afforded the power to order an interested party, such as someone making a claim against the defendant’s property, to provide the court with any information.
We wish to go further, and legitimately so. We wish to do more to disrupt criminal cash flows through third parties, so we propose that the time limit during which third parties can declare their interest be set at 21 days. We understand that the restraint process has to be quick and efficient, but it is also important to tackle bogus claims and to make it more difficult for anything that may frustrate efforts to recover the money early on in the process.
The value of the property that ends up being confiscated can be eroded when people other than the defendant make claims against funds that are deemed by the authorities to have been obtained due to illicit or nefarious
The former leader of the aptly named Adams family gang was asked to pay £650,000. He said that he could not afford it, adding that he felt “like a ponce” living off his wife. However, when the court heard that he and his wife had spent on average £97,000 per year since his release from prison, his request was rightly rejected by a judge. Cases such as that demonstrate the deviousness of criminals and the need to strengthen further the measures to reduce bogus claims.
Additionally, practitioners have noted that because the process is long and drawn out criminals are afforded more than enough time to drum up bogus claims to protect their ill-gotten assets. Indeed, as the Bill made its way through the other place, the then Parliamentary Under-Secretary of State, Lord Taylor of Holbeach, conceded:
“Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders…I wholeheartedly agree that we need to improve the effectiveness of the way in which the confiscation regime addresses third-party interests.”—[Official Report, House of Lords, 2 July 2014; Vol. 754, c. 1725-1727.]
We want to build on the progress made in the other place. We therefore propose limiting to 21 days the amount of time during which third parties can declare an interest in assets. Investigations of claims that come later in the recovery process halt the process while the claims are assessed. By ensuring that third parties come forward quite early on, such delays can be significantly reduced.
We should without hesitation allow a third party to express an interest, but there is no reason why that should not be done quickly. Allowing for delay gives the devious and unscrupulous time to get away with it, or to help their criminal friends to do so.
Karen Bradley: As the hon. Gentleman has explained, amendment 31 relates to provisions in part 1 of the Bill on the determination of third-party interest and specifically to cases in which a receiver is appointed. As I indicated in my response to the previous amendment, the decision by the court as to the extent of the defendant’s interest in a particular property is binding, subject to an exception whereby it is open to a court that has appointed an enforcement receiver to hear representations. It may assist the Committee if I explain briefly how that process will work.
If a confiscation order has been made but has not been satisfied and there is no appeal, it is open to the prosecutor to apply to the Crown court to appoint a receiver to realise the property. At that enforcement stage the court is able to confer a variety of powers on the receiver, including powers to take possession of, manage, deal with and realise the property. However,
Clause 4 limits the ability of an individual affected by a determination of interest to make representations to the court at the enforcement stage, as it is anticipated that such individuals will have had ample earlier opportunities to do so prior to the determination being made. That is in line with our objective to speed up the process by which third-party claims are dealt with. The clause permits an affected person to make further representations to the court only when they were not given a reasonable opportunity to make those representations earlier or when the court considers that the determination would result in a serious risk of injustice.
That is the background against which amendment 31 seeks to limit further the opportunities for a party to make representations. It would deem persons who have not made representations within 21 days of notice of the court’s determination to have had a reasonable opportunity to do so and so make them ineligible to make representations at the enforcement stage.
As I hope I demonstrated earlier, our aim in the Bill is to ensure that the enforcement of confiscation orders can be carried out more effectively while protecting the genuine rights of third parties and ensuring that they have a mechanism to make representations when it is appropriate for them to do so. Those opportunities will in any event be extremely limited, and we do not consider it appropriate or necessary to limit them further through a time restriction. The term “reasonable opportunities” affords a degree of flexibility that is entirely appropriate—a period that is reasonable in one instance may not be in another. However, I am clear that we can rely on the courts properly to police these provisions. If it is apparent to the court that a defendant or third party is seeking to play the system and to delay the making of their representations, the court will be alive to that and rule appropriately.
In short, I have some sympathy with the amendment’s underlying intention, but it imposes an unnecessarily tight straitjacket on the court. I hope that, having heard my remarks, the hon. Gentleman will be content to withdraw it.
Jack Dromey: The Minister said the amendment was not appropriate. One can conceive of circumstances where it might not be possible to make representations within 21 days, but that would be the exception, rather than the rule. The Government could therefore have amended the Bill in favour, at the very least, of a presumption of 21 days, other than in exceptional circumstances where it was not possible to make representations.
There has been movement elsewhere in the Bill, and it is to be regretted that the Government will not go this one step further, but we note their position. I beg to ask leave to withdraw the amendment.
‘(6A) Where the Supreme Court makes an order under subsection (6)(b) that gives rise to the award of costs to the appellant, such an award shall be calculated using the currently applicable legal aid rates.”.
On capping trial costs, restraint orders are mostly made ex parte—without the defendant present—but many defendants then appeal them and incur significant defence costs. Indeed, there have been cases, which I will refer to later, in which the most expensive lawyers have been hired, and the public purse has ultimately had to pick up the tab, with all the disincentives that can flow from that in terms of effective enforcement. As things stand, if defendants win their appeal, the CPS is liable for their costs, which can be very high, and that can act—I stress again—as a disincentive for prosecutors to get a restraint order in the first place. Our amendment would cap the costs recoverable by the defendant at legal aid rates.
A key point raised by practitioners is that if a restraint order is made and a receiver is appointed, but the order is then overturned or set aside on appeal, a serious issue arises about who should pay for the receiver’s work, which can be extremely expensive. Of course, somebody succeeding on appeal is entitled to recover their costs; the problem is: should they be entitled to recover the costs of Rolls-Royce lawyers who, as one prosecutor said to me, charge fees of an arm and a leg, when the public purse faces the consequences? That is against the background of the CPS undergoing cuts to its budget of 27% during this Parliament.
We do not want the fact that prosecutors face reduced resources on the one hand, and the risk involved in tackling the Mr Bigs on the other, to act as a disincentive. Let me cite a case that the CPS won in the Crown court, with the decision then overturned in the Court of Appeal. The issue was whether the threshold for restraint was the same as, or higher than, the arrest threshold. The order was for £1 million, and it had a significant impact on CPS lawyers’ view of whether they should take such risks in the future. We are therefore suggesting that a defendant should be able to recover costs only—I stress again—at legal aid rates, because otherwise we might end up with prosecutors becoming more risk averse, and with a disincentive to tackling large-scale restraint orders. The result would be to give sophisticated criminals ever-greater possibilities to evade the law.
I note that in the other place, on behalf of the Government, Lord Taylor of Holbeach said that this amendment “merited further consideration”. Lord Bates, again on behalf of the Government, agreed in principle on Report. We are retabling the amendment to probe the Government about their progress to date in light of those welcome statements in the other place.
The issue is clear. We cannot allow fabulously wealthy criminals hiring the most expensive lawyers to act as a disincentive to effective enforcement. If the Government believe, as I think they do, that that principle is right, I hope they will agree to provide for that in the Bill.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): It is a pleasure to serve under your chairmanship. Mr Davies. Amendment 32 is perfectly sensible. In many other spheres of criminal law, costs are generally awarded at legal aid rates. There is nothing new or drastic about the proposal; it is entirely sensible, especially in light of several recent cases. I am not sure about Rolls-Royce lawyers—I am an Austin 7 myself—but, whatever the case, the amendment is entirely reasonable. It is wrong for the public purse to have to bear those huge extra funds, which are often not merited.
Karen Bradley: Clause 7 makes provision for compliance orders that allow the Crown court to impose any restrictions, prohibitions or requirements that it believes are appropriate to ensure that a defendant pays a confiscation order and that the order will be effective. The order will be made at the time that a confiscation order is granted. Breach of such an order will be contempt of court.
New section 13B of POCA provides for a right of appeal to the Court of Appeal and subsequently the Supreme Court either by the prosecutor against a decision by the court not to make a compliance order, or by the prosecutor or person affected by the compliance order against a decision to make such a compliance order. Such an appeal can include the terms of such an order. The provisions mirror the existing provisions in POCA on appeals in respect of restraint orders.
The hon. Member for Birmingham, Erdington referred to the test for a restraint order. Clause 11 deals with that, but I put on record that the current test for obtaining a restraint order is that there is reasonable cause to believe that the alleged offender has benefited from his or her criminal conduct. Case law and general operational experience have shown, however, that at the earliest stage of a criminal investigation, it can be extremely difficult to show belief, as there will often be little firm evidence at that time.
The hon. Gentleman said that the issue of costs was debated in the House of Lords, with particular reference to the recovery of costs claimed by the defendant in restraint order cases. He referred to the Messrs Bigs, if that is the correct term, using Rolls-Royce lawyers, and my hon. Friend the Member for South Derbyshire would like it put on record that, as Rolls-Royce is one of the major employers in her constituency, it is an extraordinarily wonderful British company of which we should be proud—[ Interruption. ] She mentions that it might be better than Bentley at Crewe, but I could not possibly comment, as Bentley is also a nearby employer to me in Staffordshire Moorlands, which is between Bentley in Crewe and Rolls-Royce in South Derbyshire.
Turning back to the reimbursement of defendants’ costs, we agree in principle that any reimbursement arising from a restraint hearing should be capped at legal aid rates. However, we understand that any changes in this regard will not need primary legislation as provision can be made under the criminal procedure rules. We have therefore undertaken to review the matter with the criminal procedure rule committee, and part of that review will cover the suggestion of a further capping of costs. I hope that that reassures the hon. Member for Birmingham, Erdington and that he will be content to withdraw his amendment.
Jack Dromey: I bow to no one in my admiration for Rolls-Royce, as I used to represent its workers. I just have a problem with cases such as the south London Mr Big—there are certainly Mrs Bigs as well—who drove a Rolls-Royce on the back of ill-gotten gains from crime.
The Minister’s response is very welcome indeed. There was common ground in the Lords, and there is common ground here. That sends an unmistakeable message that someone is absolutely entitled to hire a lawyer and to be represented, but that they are not entitled to hire the most expensive lawyers and then expect the public purse to pick up the tab. The Government’s response is constructive, and I beg to ask leave to withdraw the amendment.
“13C Use of assets arising from the proceeds of crime for investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be used for the benefit of investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”.
This will almost be a rehash of a debate in the other place, but it is important that we have it. Amendment 34 is a probing amendment to give us the opportunity to have a general, albeit short, discussion about the principles that underpin it. I am indebted to Lord Harris of Haringey for first tabling the amendment in the other place, and I shall draw briefly on peers’ comments about it.
Amendment 34 would ensure that all proceeds of crime in the form of assets arising from the Proceeds of Crime Act 2002 would be used for the benefit of investigating and prosecuting, and for enforcement authorities, as well as being reinvested into the communities directly affected by the original crime. I am aware that a review is under way into the effectiveness of the asset recovery incentivisation scheme—ARIS—the results of which will no doubt impact on the matters before the Committee.
When Lord Harris’s amendment was first debated, the other place was informed by Lord Taylor, the then Minister, that the review was likely to be published before the Bill completed its passage through that House. He therefore advised that any debate on the amendment should be resumed at that time. On that basis, the amendment was withdrawn, yet the review has not been published to date. I thought it pertinent to retable the amendment, with some changes, to give the Government an opportunity to update the Committee on when they expect that review to be published.
As hon. Members will know, the ARIS was introduced in 2006. Under the scheme, the Home Office retains 50% of the assets recovered under any confiscation order, with 18.5% given over to investigation agencies, 18.5% to prosecution agencies and 12.5% to enforcement agencies. Conversely, if cash has been seized under the Proceeds of Crime Act, while the Home Office also retains 50%, all the remaining portion is given over to the police.
Quite apart from that rather opaque means of dividing the receipts, there is a further sticking point: it is left to the agencies themselves to determine how to allocate
No one in this Committee or elsewhere would argue with that. However, that would presumably include the appointment of financial investigators to track the networks used by criminals and perpetrators of fraud and, in some cases, to identify victims. Investing in such asset recovery work is commendable, of course, but I would support going further by determining how the assets that arise from the proceeds of crime are reinvested.
“The processes are not straightforward. When an order is made, the court must separately determine the value of the benefit the defendant received from criminal conduct and the available assets. The order value is the lower of the two amounts, so if a defendant is deemed to have benefited by £200,000 from selling counterfeit goods but only has assets of £10,000, only £10,000 can be confiscated. It is therefore critically important to get to the bottom of what has happened to the criminal proceeds, as part of the investigation. It is not just about getting a conviction but about getting that extra resource out.”—[Official Report, House of Lords, 2 July 2014; Vol. 754, c. 1738-1742.]
As I have indicated, I do not intend to press amendment 34, but we need a discussion on how to increase the amount of assets that are recovered from perpetrators of fraud, which is something with which I am sure that everyone will agree. The idea would be to punish offenders, and—far more importantly—to compensate the victims of the offences and start to rebuild trust in the affected communities.
We live at a time when trust between neighbours and within communities might be suffering and a regrettable number of vulnerable people fall foul of fraudulent schemes. Surely it is worth considering anything that can be done to improve transparency about how Government money is spent, to reduce red tape and, crucially, to improve the experience of victims of crime. The amendment would do that, or at least go part of the way to achieving it.
Sarah Champion (Rotherham) (Lab): It is a pleasure to serve under your chairmanship, Mr Davies. I will speak in support of the right hon. Member for Dwyfor Meirionnydd on the basis of a briefing from the Local Government Association. This is about fairness, as I hear that local authorities and the police, who put all the work in, would like to receive some reinvestment.
Local authorities most commonly use incentivisation payments to fund the posts of accredited financial investigators, who make a significant contribution to the work of trading standards, enhance investigations by providing intelligence support, undertake money laundering investigations, and ensure that the proceeds of crime are recovered through confiscation and forfeiture.
As the right hon. Gentleman said, there have been many examples of when AFIs had an essential role in identifying victims, meaning that they could be compensated. A major case involving rogue traders,
Incentivisation payments are essential to enable local authorities to fund their AFI resource, without which they might be cautious about pursuing such complex and expensive litigation. The money also goes into community safety activities. The amendment is, I accept, a probing one, but I hope that the Government will build on comments made in another place and seriously consider the investment of the profits.
Jack Dromey: As I said at the beginning of today’s proceedings, reports by both the Public Accounts Committee and the National Audit Office suggest that recovery when an order is made is, to say the least, lamentable: less than £1 in every £100. Enforcement is therefore a key matter, and one element of it is incentivisation. There are problems with the working of the ARIS. One the one hand there is pressure on the various agencies that are concerned with it at regional level and, on the other hand, the incentive scheme involves 50% of the money going back to the Home Office. There is therefore a strong argument in favour of the amendment.
Two things are crucial in relation to asset recovery. First, the work should be effective, and there should be the necessary capacity, which is why, to go back to my earlier point, the reductions in the Crown Prosecution Service are unfortunate, to say the least. We think that the Government should be bolder by investing in what could be lucrative returns for the taxpayer and local communities.
That takes me on to my second point, because the right hon. Member for Dwyfor Meirionnydd was absolutely right when he argued that communities want to see the benefit of tackling crime in their communities. I pray in aid the experience of Mark Burns-Williamson, the police and crime commissioner for West Yorkshire, where that has been done very effectively. People there would argue—rightly so—that enforcement needs to be significantly better, but what they do is to hold out to the public in the West Yorkshire area the benefits of asset recovery in terms of not only policing, but funding, such as for community projects to divert people from crime and prevent crime in the first place. The right hon. Gentleman made an important point.
I know that the matter has been under active review and that the Minister chaired a meeting of the criminal finances board on 16 December. We look forward to hearing her statement to the Committee. We note that the right hon. Gentleman will not press the amendment to a Division, but we hope that the Minister will give him a constructive response.
Karen Bradley: The Committee will be aware that the use of the proceeds of crime recovered from criminals is managed under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme. ARIS is a non-statutory scheme that provides for the reinvestment of criminal assets forfeited under any provisions of the
Some £80 million was returned in the last year alone, of which around £7 million has been spent on crime reduction and community projects designed to assist those communities affected to reduce the impact of crime in their area. The community projects funded in the last financial year have included beat the loan sharks campaigns, safer city partnerships and a centre to help vulnerable women.
The remainder of the money returned to operational agencies has been used to reinvest in asset recovery work, including the provision of specialist financial investigators and asset recovery prosecutors. Reinvesting in front-line law enforcement capability to attack criminal finances and remove the proceeds of crime directly contributes to our crime reduction objective and provides greater reassurance for communities.
The share of the moneys retained by the Home Office forms part of the Department’s core budget line and, as such, contributes to the £8.2 billion of police funding as well as the £54 million provided by the Department to tackle serious and organised crime. The Department’s spend on serious and organised crime includes provisions to pursue organised criminals, as well as work under the other strand of the serious and organised crime strategy, which is to prevent people engaging in, to increase protection against and to reduce the impact of serious and organised crime. It is not therefore money which simply disappears into a black hole with no benefit accruing to the front line. In addition, one of the key objectives of the criminal finances improvement plan is to ensure that ARIS works effectively. To this end, we have undertaken a review of ARIS which has sought the views of all operational agencies that use the powers under the Proceeds of Crime Act.
The points made by right hon. and hon. Members demonstrate the difficulties here. I want to see as much of the money confiscated from criminals as possible being used to compensate victims. If compensation orders go up, the amount of money available for ARIS is reduced. That is a contradiction. I do not want there to be any incentive or anything in the system that means that anybody is under the illusion that it is not right to compensate victims as a first priority.
There is also the issue of which agency benefits. The hon. Member for Rotherham made the point about the Trading Standards Institute, but it is the Crown Prosecution Service that actually recovers the money. How is the money appropriately split under the incentivisation scheme? These are the challenges and questions that we are faced with in reviewing this scheme, and we need to get them right. The most commonly voiced suggestion for change
It also has to be said that the corresponding reduction would have a direct impact on Home Office-funded capabilities, such as the regional organised crime units and regional asset recovery teams. We would in effect be robbing Peter to pay Paul, with no corresponding increase in overall capacity to fight serious and organised crime. It is also worth saying that some forces investigate criminals who have more criminal assets. A straight allocation directly to the agency that, for example, carried out the investigation or carried out the prosecution could see a skewing. Certain forces would end up with a significantly increased capability, while other forces and agencies in this field that are currently working extraordinarily hard would suffer, through no fault of their own, simply because they do not have access to those criminals with large sums of criminal finance and criminal assets.
A number of respondents suggested that we allocate increased funds directly to regional capabilities as a way to support front-line activity to recover assets. This could further encourage a joined-up approach to targeting regional, serious and organised crime priorities through criminal finances activity and incentivising partnership working. Others proposed that funds are allocated on the basis of planned activity rather than on the basis of receipts. Providing funds on the basis of a proposal to invest in activity that builds capacity and capability, therefore resulting in an increase in recovered assets, could demonstrate a concrete link between ARIS and criminal finances performance.
The various proposals have been examined by the Criminal Finances Board, which I chair and which was referred to by the hon. Member for Birmingham, Erdington. As he said, the board considered a final report in December. The board’s recommendations will now be considered by my right hon. Friend the Home Secretary and other relevant Ministers. I hope to be able to announce the outcome of the review before the Bill completes its passage through this House and, at that stage, I undertake to write to members of the Committee. I hope that the knowledge that ARIS funds are already being invested in activity that directly supports communities and neighbourhoods affected by crime, as well as the current review of the scheme, will provide some reassurance to the right hon. Member for Dwyfor Meirionnydd—I thank the Solicitor-General for his advice on the pronunciation—and I hope that, on that basis, he will be content to withdraw his amendment.
Mr Llwyd: I thank the Minister for the detail of her response, but it is a little bit disappointing because it seems to be business as usual. I do not want to anticipate that the statement she will make in the coming weeks will vary the situation. That said, I think this amendment was worth discussing, not least because of what the hon. Member for Birmingham, Erdington said about the need to ensure that local people feel part of this
‘(1) The Secretary of State shall commission a study of the effectiveness of the methods used by UK authorities and agencies to recover the proceeds of crime from overseas.
(2) The study mentioned in subsection (1) shall consider—
(a) the legal, financial and economic relationships, with particular reference to existing treaties and agreements, between the UK and those countries in which assets identified for recovery are located, and
(b) the statutory powers, and levels of resources available to UK authorities and agencies to enable an assessment of the degree to which such asset recovery is efficient, effective and economic.
(3) The Secretary of State shall require this study to report within 12 months of Royal Assent to this Act and shall lay a copy of any report arising before each House of Parliament.”.
Jack Dromey: Recent United States estimates have put the worldwide cross-border flow of proceeds of crime, including corruption, at $1.6 trillion. In 2011 the United Nations Office on Drugs and Crime estimated that globally only 1% of illicit money flows are detected. Additionally, a freedom of information request to the Serious Fraud Office that was tabled by the former shadow Attorney-General revealed that £37 million of unpaid confiscation orders is thought to be located overseas. Such is the sophistication of many criminals that they seek to disseminate their ill-gotten gains to countries in which there is limited or no collaboration between asset recovery agencies. While the Bill was in the other place, Lord Bates conceded on behalf of the Government that
We note that the Government have made some positive steps forward in trying to increase success in repatriating ill-gotten gains that are now located abroad, including the appointment of specialist CPS asset recovery advisers in Spain, the United Arab Emirates, the Caribbean and Europe. However, several issues lead the Opposition to
When I recently tabled a parliamentary question asking the Minister about the value of assets recovered from overseas confiscation orders, she responded that it was impossible for the Home Office to supply such information. It strikes me as strange that, while the Government seek to highlight their recent efforts in strengthening their bilateral recovery regime, they do not have the ability to measure the success of that. Our very strong view is that serious thought should be given to drawing up a more radical approach to mutual recognition arrangements, building on the existing arrangements in the European Union and further afield—in fact, globally. This would mean that orders made in the UK could be enforced in another jurisdiction without the need for those charged with enforcing them to re-litigate the matter, saving time and money, and potentially significantly improving results. It is regrettable that the UK has not signed up fully to the mutual recognition arrangements in the European Union and we believe that it needs to do so sooner rather than later. That should then be the starting point for negotiations with jurisdictions further afield.
In turn, it seems that the Government have not done enough to act upon mutual legal assistance requests to us. Last year, the former head of the UK Financial Intelligence Unit—part of the National Crime Agency—indicated that, when an investigation was initiated from the victim country and moneys were suspected to be in the UK, the request went through all the proper channels but there was limited motivation to comply. The assessment was that there was a mind-set that we could just be giving ourselves a headache. If we seek to recover, in Europe or globally, moneys accrued through illicit activity in the UK and which have been moved overseas, should we not also be serious in our approach to investigating moneys stolen in other countries that are now within the UK? Such an approach would clearly help to foster greater working relationships with other countries.
Furthermore, it is disappointing that as part of the 2014 decision, the UK Government have decided to exercise their right to opt out of a number of European Court of Justice and European Commission measures and rejoin only 35. Of those selected to be rejoined on 1 February 2014, MLA features only on the police elements of the 1985 Schengen agreement to do with the provision of cross-border assistance, surveillance and cooperation on tracking narcotic drugs. Clearly, there remains a problem with asset recovery within Europe, let alone outside of it. All of that taken together leads us to believe that the Government can and should do far more to thwart the efforts of those Costa del Sol or Caribbean bank robbers who are living a life of luxury abroad due to exploiting loopholes in our legislation. That is why we ask for the consultation to take place.
Karen Bradley: New clause 12 seeks a formal study on the effectiveness of international co-operation in the recovery of proceeds of crime from overseas. As we emphasised in the serious and organised crime strategy,
I will come on to the other points in more detail, but the hon. Gentleman raised the issue of the countries with which we are doing excellent work. Spain is one such, and I want to tell the Committee about the visit I made there early last year. The CPS, together with its Spanish equivalents, hosted an asset recovery workshop where it went through real life case studies. Much of the difficulty is in understanding the different legal systems. A prosecutor in the UK will say, “This is what we need to do to recover the asset here in the UK. These are the legal steps we take,” but if we do not understand what legal steps are required in Spain where those assets are located, we cannot effectively get those assets back. It was an incredibly useful, two-day workshop with senior prosecutors from both the UK and Spain, law enforcement bodies and other officials. It went through how the process works in detail and is leading to real and genuine results.
The hon. Gentleman also mentioned the UAE, but I want to mention the Arab spring in relation to asset recovery, but on a different side of things—moneys in the UK that we have frozen, which belong, quite rightly, to the people who live in those countries that went through the Arab spring; Tunisia and Egypt, for example. The difficulty we have is that we have frozen their money, but, under our legal system, we need evidence of local criminal activity to release it and return it, quite properly, to the people who it has been stolen from; the people of Egypt and Tunisia.
We are working incredibly hard to ensure that happens, but I am sure the hon. Gentleman and the Committee will understand that there are difficulties during a regime change—and post-regime change—in trying to get the criminal evidence that is required under our courts’ rules to ensure that moneys can be recovered. I assure the Committee that the Government are committed to doing all we can on criminal finances. Whether we are dealing with UK criminals who have hidden their money overseas or foreign criminals who have hidden their money in the UK, it is incumbent on all of us to ensure that that money is taken from the criminals and given back to the people it was stolen from. In the case of the Arab spring, that is the general population of those countries.
Improving our performance overseas is a key objective in the criminal finances improvement plan. Progress against that plan is monitored at the quarterly Criminal Finances Board. We accept that, historically, international co-operation on asset recovery has been poor, with some countries being willing—or unwilling—safe havens for criminal assets. The usual way that international asset recovery works is that the country that recovers the assets retains them unless there is a formal asset-sharing mechanism in place that allows for moneys to be returned. Countries may agree to share assets on a case-by-case basis, or there may be an existing multilateral or bilateral agreement for asset recovery and sharing in place.
The UK is already party to a number of multilateral international agreements that contain asset recovery provisions. We have 37 bilateral mutual legal assistance agreements with other countries including such provisions. We continue to work with the Foreign and Commonwealth Office to identify further priority countries for asset recovery and to negotiate and sign further bilateral agreements where appropriate. As of 2 December last year, the UK has rejoined the EU framework decisions on the mutual recognition of freezing and confiscation orders, as part of the 2014 block opt-in decision. Those instruments include asset-sharing provisions and should facilitate the enforcement of UK confiscation orders.
Furthermore, we recently signed the Council of Europe convention on laundering, search, seizure and confiscation of the proceeds from crime and on the financing of terrorism 2005—the so-called Warsaw convention. That should help the UK to obtain asset-sharing agreements and encourage other jurisdictions to recognise the concept of UK civil recovery.
Therefore, we now have in place tools for successful co-operation, but it is true that historically they have been underused both here and overseas. We have seen improvements over the past few years, but we can do more to encourage their use. That is why, as I said earlier, we are engaging with a number of our priority countries, including Spain and the United Arab Emirates.
Importantly, we have seen the first repatriation of assets from the UAE of some £300,000 and we hope that more will follow shortly. Furthermore, the Crown Prosecution Service has posted dedicated asset recovery advisers overseas and the UK will provide targeted assistance to international counterparts, including through our network of overseas advisers where asset recovery advisers are not currently deployed.
We are already working to improve our performance on international asset recovery and reviewing processes and we are committed to making further improvements where necessary. We already see some improvement on recovering assets from overseas. It is therefore unnecessary to mandate a formal statutory study, because that would serve no good purpose. I hope that, having heard about the progress that we have made in this area, the hon. Gentleman will be content to withdraw his new clause.
“(3A) The Secretary of State shall, within 18 months of this Act receiving Royal Assent, commission a study of—
(a) the effectiveness and impact of the ending of early release for fine defaulters owing in excess of £10 million, and
(b) the potential costs and benefits of extending the policy to those who owe less.
(3B) The Secretary of State shall require this study to report within 12 months and shall lay a copy of any report arising before each House of Parliament.”.
A report released by the Public Accounts Committee in March 2014 said that too many criminals were choosing to go to jail rather than pay their confiscation orders. It found that £490 million was owed by criminals who had served or were serving more time in prisons for non-payment, which suggests that existing policies on sentences and early release provide little deterrence.
While we welcome the Government’s increase in the duration of default sentences in the Bill as a step in the right direction, the amendment would require the Secretary of State to commission a review on the effectiveness of ending early release for those who have orders in excess of £10 million, with a view to lowering that threshold if it would be an effective deterrent.
Labour peers tabled an amendment in the other place that would have brought about an immediate lowering of that order value. They believe that it is not just those who steal multiple millions of pounds who should serve their full sentences, but criminals more generally who feel it is a viable option to live off wealth accrued through illicit and nefarious means. We want to send a strong message to criminals, whether international or local, that crime does not pay. However, the Government objected to that amendment. Not happy with having provided merely one rebuttal, they issued several subsequent rebuttals and statements, all of which said different things.
It was claimed that the policy it would cost £19 million by 2019. That was on a Monday morning; by the time we got to Monday evening, the Home Secretary was saying something completely different. In the Chamber, on the very evening the dossier was released, there was an about turn, as she said:
“We will review the impact of that change on offender behaviour and, if, as we expect, it leads to a greater proportion of higher-value orders being settled on time, we will consider using the order-making powers in the Bill to strengthen the default sentences for other lower-value confiscation orders.”
“why the Government have decided to remove early release provisions only for those with £10 million confiscation orders, and not for those with lower levels.”—[Official Report, 5 January 2015; Vol. 590, c. 58-97.]
Is it not strange that on the very day that the Conservative party stood in front of the media and sought to ridicule Labour’s spending commitments, it proceeded that evening to ridicule its ridiculing of Labour’s proposals? If all that was not bad enough, the Conservatives said that they arrived at the costings in the spending dossier, which differ from the costings in the initial response from Lord Taylor of Holbeach, based on
“data from a financial database; it is not linked to sentencing information so we do not have information on the actual number of sentences for default imposed...Therefore we have assumed that, where a confiscation order is not paid, the offender receives a prison sentence for non-payment.”
That assumption is completely wrong. A response to a freedom of information request to the Ministry of Justice shows that, in reality, only 5% of those who refuse to pay back profits from crime receive a default sentence, not 100%, as assumed in the previous statement. Frankly, the Government are confusing themselves and the public.
We hope that the Minister will clear up the fog surrounding the issue. We are not pushing for an immediate reduction in the benchmark for the ending of early release, but instead asking for a review of the Bill’s provisions so that if and when it is fully proven that such measures will act as a deterrent—we believe they will—we can apply the sanctions to more of those benefiting from their ill-gotten gains beneath the £10 million trigger. We hope that, as the sun comes out, the fog will lift and the Minister will agree, on behalf of the Home Secretary, that she should agree with what was said last Monday night and consent to the proposed review.
Karen Bradley: Under this Government, around £746 million of criminal assets have been seized under the Proceeds of Crime Act, which is more than ever before. Some 60% of confiscation orders for sums up to £500,000 are discharged within six months. We recognise, however, that more needs to be done to ensure that confiscation orders, especially higher-value orders, are effectively enforced.
One of the ways in which the Proceeds of Crime Act incentivises the prompt settlement of confiscation orders is to provide for default prison sentences when someone fails to pay. Nearly 90% of confiscation orders under £1,000 are discharged, which suggests that, at least for lower-value orders, the availability of default sentences is a deterrent. However, payment rates decline as the value of confiscation orders increase. For orders over £1 million, only around one in five are settled in full. Indeed, there is some evidence, albeit anecdotal, that serious offenders would rather spend longer in prison if it meant that they still had their ill-gotten gains at the end of their sentence. We therefore need to toughen up default sentences to provide further encouragement to career criminals to pay up, and clause 10 does just that—it increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years. For orders over £1 million, the maximum sentence will increase from 10 to 14 years.
As well as increasing the maximum default sentences for higher-value orders, we are changing the early release arrangements to which amendment 30 relates. At present, those serving a default sentence are automatically released at the halfway point in their sentence. Such early release
We want to keep the impact of the changes under close review. We expect them to lead to a change in offender behaviour, but it is right that we proceed in a prudent and measured way on the basis of clear evidence about the effectiveness of the provisions. We should be wary of falling into a trap whereby the state not only fails to enforce a greater proportion of confiscation orders, but bears the cost of offenders spending longer periods in custody. If the increases in maximum sentences and the ending of early release for the highest-value orders prove effective, however, clause 10 provides a mechanism to increase sentence lengths—including by introducing minimum default sentences—and time served for lower-value orders. The two order-making powers in the clause will be subject to the affirmative procedure because it is right that any changes to the sentencing framework are subject to close scrutiny. Given that we have included those order-making powers in the Bill, it follows, as I have said, that we want to keep the effect of the changes to the default sentencing regime under review. To that extent, I agree with the spirit of amendment 30, although we clearly do not need to place a requirement to undertake such a review on a statutory footing.
As a Government who are committed to reducing the deficit, however, we need to proceed with appropriate caution. We have costed the provision—and, indeed, all the others in the Bill. As we set out in the explanatory notes, the changes to default sentences for which clause 10 provides will, we estimate, require an additional 60 prison places by 2033 at a cost of £1.78 million a year. Ten of those places relate to the ending of early release for confiscation orders of more than £10 million. In contrast, the Opposition’s policy, which the hon. Gentleman described, is to end early release across the board. If there was no change in offender behaviour, the Government estimate that that policy would require an additional 900 prison places at a cost of some £25 million a year by 2033. If the hon. Gentleman wants to know the potential cost of extending the policy, it is that, and we do not need a review to tell us.
It is all very well for the hon. Gentleman to say that there will be a change in offender behaviour. That may well be the case; indeed, we hope and expect that it will be. However, we do not know that for certain, so it is right that we test the proposition by starting with high-end confiscation orders. If the increase in default sentences and the ending of automatic early release lead to more offenders paying their confiscation orders on time and increased receipts, I will be the first to cheer. We cannot, however, make policy on a wing and a prayer. As I have said, we need to test the proposition and exercise the
Jack Dromey: First, there is common ground on the need to strengthen the arrangements on default. Secondly, we note the current proposal in respect of the £10 million threshold. I think that the general public—I often refer, in the context of policing, to Joe and Josephine Soap in the Dog and Duck in Erdington—would struggle to understand why orders of £5 million, £2 million or £1 million would not be likewise caught. That said, the Minister makes the point about the order-making powers and says that the matter should be kept under review at the next stages, and it is welcome that she agrees with the spirit of our amendment.
All I would say in conclusion is that Joe and Josephine Soap in the Dog and Duck in Erdington would not expect us to play party political games on this issue. They want us to be serious, to go after serious and organised criminals and to recover their ill-gotten gains so that they can be reinvested in our society. They would not expect us to come out with statements in the morning that we then change in the evening. Having said that, I am sure that that is now behind us and that we can move on to a more intelligent debate as the review proceeds. I beg to ask leave to withdraw the amendment.
Karen Bradley: In the serious organised crime strategy, we highlighted the need to strengthen partnership working with a wide range of sectors of society. We have, for example, been working with the financial sector to prevent the use of financial systems for criminal ends, including, in particular, to launder the proceeds of crime.
To counter the risk of money laundering, part 7 of the Proceeds of Crime Act 2002 places obligations on the regulated sector, such as banks and other financial institutions, to submit suspicious activity reports—SARs—to the National Crime Agency. The intention behind those reports is to alert law enforcement agencies that certain client activity is in some way suspicious and
Part 7 of POCA provides for a particular category of SARs—so-called consent SARs—when a person or business has reasonable grounds to suspect that a transaction might be related to money laundering. In such cases, the person or business may seek the NCA’s consent to proceed with the transaction to avail themselves of a defence against a money laundering charge. Some 14,000 consent SARs are submitted each year.
The NCA has seven working days to respond to a consent SAR. If consent is refused, it has a further 31 calendar days to investigate the transaction. While the reporter awaits the NCA’s decision on consent, the activity or transaction must not proceed. The process can therefore necessarily hold up the financial transaction in question.
The consequences for a customer whose request or transaction is so delayed may go beyond mere inconvenience and lead to financial loss. A customer who has suffered such loss may seek to take legal action against a bank or other institution to recover any losses or otherwise to make a claim for damages. We recognise the concerns of customers, but institutions that have suspicions regarding a transaction and report them to law enforcement authorities in good faith, as the law requires them to, should not be liable for civil claims for damages.
We are, in fact, obliged under article 26 of the EU third anti-money laundering directive to protect those who report suspicions of money laundering in good faith from incurring civil liability for doing so. The common law currently affords such protection. The Court of Appeal held in the case of Shah that although customers can require institutions to prove that the suspicion that gave rise to the SAR was reasonable, the institution cannot, provided the suspicion is so proved, be held liable for loss suffered by the customer as a consequence of the institution’s failure promptly to carry out the customer’s instructions. Following consultation with the British Bankers Association, regulators and others, we have concluded that there would be an advantage in placing that civil immunity on a statutory footing to provide for greater legal certainty. New clause 7 is directed to that end.
I stress that, as now, immunity from civil proceedings will apply only when a SAR is submitted in good faith. Financial institutions and others submitting SARs will continue to be liable for any negligent or malicious conduct. We do not expect those in the regulated sector to use this change as a justification for submitting defensive SARs simply to cover themselves against possible action. We expect banks and other institutions to take all appropriate steps to identify transactions that they believe to be suspicious, and to report only those about which they have genuine concerns.
We will work with the NCA and the Financial Conduct Authority to ensure that the change to the law does not lead to an abuse of the process. We believe that this amendment to the Proceeds of Crime Act will strengthen the UK’s compliance with the EU’s third anti-money
Jack Dromey: We support the Government introducing this provision. We spoke earlier about the rapidly growing threat posed by serious and organised crime, and at the heart of that is money laundering. Elsewhere in the Bill, we will be talking about a mandatory duty to report. Here, we are not talking about that in quite the same way. However, following, we think, correct representations from the British Bankers Association that its members