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Lord Kingsland: Being tempted to turn a blind eye is not, in my submission, negligence. In most circumstances, it would amount to intent. Here we are talking about negligence—someone's failure to be up to the job. Perhaps the noble Lord can think of an
example, although I cannot easily think of one, in any other branch of our law where negligent conduct attracts the type of penalties that are proposed in the Bill.I suggest to the noble Lord that a better approach would be to shift the burden of the draconian remedy that the noble Lord proposes in the Bill to the employer of the negligent actor. Exhibiting negligence is often the consequence of a failure of an individual to be properly trained. Surely imposing the penalty on the employer or the institution would reduce to a wholly nugatory extent the number of occasions on which negligent acts of employees led to the consequences that the Minister outlined.
I repeat, if the Minister is worried about turning a blind eye, there are other remedies in the Bill which provide precisely what the noble Lord is looking for.
Lord Thomas of Gresford: I support the amendment. It seems to me that if a person has reasonable grounds for knowing or suspecting that another person is engaged in money laundering, it should be possible to prove that he suspects that another person is engaged in money laundering. It should be left to the common sense of juries and magistrates to determine what the truth is if, under this clause, a defendant comes forward and says, "Well, I didn't know. I didn't suspect", even though the facts are staring him in the face. To make him liable to a sentence of imprisonment in the Crown Court of up to five years for not understanding some objective ground—what is currently expressed as "negligence"—seems to me to be going too far and beyond the proper scope of these money laundering provisions.
Lord Rooker: Part of the process involves trying to change the culture. Shifting the responsibility to the employer may appear to be all right, but he would commit an offence if he did not train his employee. Under the money laundering regulations the employer already has responsibilities. We want to make employees more diligent. There are few convictions under the existing law. We want to stamp out the offences by strengthening the law in the way that we propose in this legislation. It is tough, but that is the purpose of the exercise.
Lord Donaldson of Lymington: I have listened to the Minister reiterating the need to be tough and the need to show the world that we are tough, but I am concerned that I have not heard a word from him about being fair. I agree with the noble Lord, Lord Kingsland, that it is surprising that someone should be liable to a sentence of up to five years—no doubt it would not be passed—for being careless. I venture to suggest that if the Government were to introduce an amendment to the motoring law relating to careless driving and if they were to attach a five-year imprisonment penalty, saying, "We have to be tough in order to cut down offences on the roads", there
would be an outcry because that would be unfair. The same principle should apply in relation to this legislation.
Lord Rooker: I do not believe that that analogy stands up. In terms of financial crimes, money laundering appears to be a victimless crime and so it is passed by. I do not believe that there is anything unfair about this. Legislation already exists in respect of this matter. We are not re-inventing the wheel. We are updating the existing laws on money laundering. We want to ensure that those at the forefront of the sectors that are more vulnerable to money laundering report transactions that any reasonable person would regard as suspicious. The idea is to make life difficult for those who choose to use the UK's financial sector for laundering the gains from their criminal activities. That is our intention.
We want to be fair. I was about to say that we do not want to be fair to criminals, but it could be argued that they are entitled to fairness. For too long criminals have used our weak defences in terms of the legal framework to run rings round society. At the end of the day taxpayers are the losers. The offence is limited to the regulated sector because that sector has special responsibilities and it is at the forefront of money laundering.
Lord Kingsland: I hope that the Minister will reconsider this matter. In my submission, it sets a bad precedent in our law. I recognise that we are dealing with serious matters. If I thought that introducing this offence would transform the ability of the authorities to corner the rascals, I may have been better disposed towards it. Surely the answer to the problem of negligence is better training or higher quality staff. If someone does not know what he is doing, he probably will not know what he is doing in any circumstances and perhaps ought not to be employed in that sector.
How can one change matters by putting such a person in prison? The answer is that one cannot. The target should be the employer who should ensure that the right kind of individual is in that critical position so that the surveillance that the Government require from the regulated sector is in place and operating properly. In my submission, in regard to negligence, the Government should concentrate their entire fire on the institutions and not on the individuals.
Lord Rooker: The Government do not send people to prison; the courts do. The courts, not the Government or the prosecuting authority, should decide, on the facts of a case, whether someone had reasonable grounds for being suspicious of something untoward taking place.
Lord Kingsland: With respect, I believe that the Minister is being a trifle disingenuous. The courts interpret the law, but the law is laid down by Parliament, in this case a Parliament which has a Government with a large majority. I hope that the Government will not try to escape from the
responsibilities that will flow from the passage of the Bill through your Lordships' House and another place.
Lord Rooker: Far from it. I did not intend my remarks to be taken in the way that the noble Lord has taken them. It will be up to the courts to work out whether, on the facts of any individual case, the person concerned should have had an iota of a suspicion that something is wrong. The court will decide on the facts whether a person, who has received proper training—the employer commits an offence if the training is not up to scratch—should have had an iota of a suspicion that something was a bit dodgy. I am not hiding behind parliamentary majorities but, at the end of the day, the court would make such a decision. That is the purpose of the negligence test. It is an advantage.
Lord Kingsland: In brief, my submission is that this clause is both unfair and futile. I hope that the Minister will reflect on it before Report stage. Meanwhile I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland moved Amendment No. 259:
- Page 192, line 33, leave out "is engaged in" and insert "has carried out or intends to carry out one or more transactions for the purposes of"
The noble Lord said: Clause 329 makes it a money laundering offence simply to possess criminal property. We appreciate that it may be helpful for the authorities to prosecute persons in possession of criminal property, especially as, presumably, such a conviction could be helpful evidence in any subsequent confiscation proceedings. Therefore, we do not propose any amendment in this connection.
However, we feel that this offence should be aimed at failure to report activities which are more generally regarded as money laundering. It is inappropriate for a person to be found guilty of the failure to report an offence because they fail to report their knowledge or suspicion that someone is in possession of criminal property.
The existing failure to report offences introduced the concept of criminal liability for non-performance; but we feel that to extend this concept even further by making it an offence to report simple possession of criminal property is wrong. I beg to move.
Baroness Noakes: I rise to speak to Amendment No. 259A standing in my name and that of my noble friend Lord Freeman. It is grouped with Amendment No. 259 moved by my noble friend Lord Kingsland. I speak with the benefit of briefing from the Institute of Chartered Accountants in England and Wales of which I am a member, a former president and for two more weeks a council member. Clause 330 is important to the institute because its members will be included within the ambit of the Bill once the second money laundering directive is adopted, thus drawing the work of accountants within the ambit of the Bill.
As my noble friend Lord Kingsland has outlined, the money laundering offence can in future include simple possession of criminal property. My amendment which is slightly different from that of my noble friend is to remove, from the definition of a failure to disclose, those cases where a money laundering offence is committed but there has been no concealment transaction.
That might sound like a sweeping exemption from the failure to disclose, but it is directed primarily at avoiding the need for trivial disclosures under the Bill. I understand that the Home Office resisted a de minimis provision in the Bill. Amendment No. 259A attempts to provide a different way of getting at the substance of seeking trivial disclosures.
This issue is particularly important to accountants because their activities inevitably take them into detailed consideration of the minutiae of the transactions that their clients undertake. They may be drawing up sets of accounts or auditing them. Either way they will come across all kinds of circumstances which suggest that an offence may have been committed.
Perhaps I may give the Committee an example. In the retail sector shoplifting is a common offence and few retail businesses manage to avoid any pilferage at all. With the widened definition of "money laundering", we would see that shoplifting would be brought into play. An accountant or auditor, almost by definition in any retail business, will know or suspect that shoplifting has taken place and with today's modern point-of-sale equipment could probably even pinpoint the type of goods. There are thousands of retail businesses. Do the Government want accountants and auditors to report suspicions in every retail business where shoplifting has taken place?
Similar instances would arise on a much broader scale for virtually all businesses in this country—perhaps 3 million or so—where minor staff thefts take place; for example, theft of stationery, minor expense claim manipulation and telephone calls. Many minor offences may technically need to be reported under this Bill.
We assume that the Government do not want massive disclosures. I understand that Home Office officials have been attempting to convince the Institute of Chartered Accountants that accountants are unlikely to be prosecuted for failure to report trivial money-laundering offences. But however unlikely it is that prosecution will take place, the possibility would remain. That is unacceptable to a professional accountant who is governed by strict ethical requirements. The institute can fine or exclude from membership those accountants who bring the institute into disrepute, and that includes those who are convicted of a criminal offence. The Home Office is asking chartered and other professional accountants to choose between swamping NCIS with trivial suspicions or gambling with their professional careers.
I hope that the Government will consider some way of alleviating that burden and preserving the integrity of professional accountants.
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