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Lord Freeman: I support my noble friend Lady Noakes in her Amendment No. 259A, and also my noble friend Lord Kingsland, who was making a slightly different point on Amendment No. 259. I declare an interest as a former partner and as an employee of a large firm of chartered accountants.

I have said before, and it is worth repeating, that the accountancy profession welcomes the general thrust of these provisions. Accountants should be reporting more events of money laundering, and they will. But a degree of common sense is needed in the legislation we write and its application.

My noble friend Lady Noakes gave a clear example of an unreasonable event caught by the Bill as presently drafted. Perhaps I may give another example, which will be fresh in the minds of accountants, particularly articled clerks who in the past had responsibility for doing the most humble task in an audit—counting the petty cash. I can recall, as I am sure can other Members of the Committee involved in the profession, discovering a situation where a cashier had pinched some of the petty cash. The theft is reported to the employer and the employer says, "I know. I understand the background. I am not going to take any action. There is trouble at home. It is a trusted employee". The Bill requires that act to be reported to the police; no ifs and buts; no exemptions for de minimis events.

I hope that the Minister, either at this stage by giving an indication that the Government will think again about representations already made, or in the future, will at least be sensitive to the practical consequences of the legislation as drafted.

Lord Rooker: I respect the professional competencies of the two Members of the Committee who have spoken. But I say at the outset that we want to "up" the game from the accountancy profession. Basically they are not reporting enough.

That is not an open invitation to swamp the system with trivial complaints. Perhaps I may share with the Committee the suspicious transaction reports received by the National Criminal Intelligence Service by sector for the year 2001. Accountants provided only 0.35 per cent of the reports. More than 1 per cent were received from solicitors. Insurance companies provided 2.83 per cent. Accountants are very low; in fact, they provided only twice as many as credit unions. We received 0.16 per cent of the reports from credit unions, so accountants, at 0.35 per cent, do not score highly.

Baroness Noakes: I thank the noble Lord for giving way. Does he have any evidence that accountants should have disclosed more?

Lord Rooker: Not that I can share with the Committee. The point is that it is surprising. We received 0.1 per cent of transaction complaints from

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bookmakers. When we see the scale of the accountancy profession reports and find that it is providing only 0.35 per cent of the reports, we feel that it should be encouraged to make more.

It may be that accountants have been holding back, not wanting to swamp the system or believing that some of the events are trivial. We should like to examine a few of those they have not sent in. I do not possess a sackload of evidence of the ones they have not sent in. The fact is that the percentage is very low and we are clear that we should like them to produce more reports. I am sure that in a professional, sensible way, if the legislation reaches the statute book, they will consider that. I am sure that no professional body would send in complaints that it thought were trivial.

I accept the position. I do not know what discussions took place between my ministerial colleagues and the accountancy profession as the Bill progressed. I know that discussions took place a year ago when I first arrived at the Home Office. I do not know whether or not the position has been put to them. I am not complaining that they are not sending in reports; I am inviting them to send in more. We would like to hear more from the accountancy profession.

I have several pages of notes but feel it would be superfluous to go through them. The points made by the two Members of the Committee are legitimate. But the bold point we want to make is that we are not on a fishing expedition; we would simply like to hear more from the accountancy profession. That is partly the reason the Bill was drafted in this way, and partly the reason it would not be a good idea for me to accept the amendments.

Baroness Noakes: Can the noble Lord explain why a de minimis exemption would not therefore work? We are talking about when the second directive relating to money laundering is brought in and over 200,000 accountants in the UK come within it. The noble Lord might want to hear more from those accountants. But, having considerably widened the definition of the money laundering offence and having brought them within a draconian failure to disclose regime, accountants will respond by reporting everything. That is their only real alternative.

The noble Lord suggested that accountants would not want to disclose trivial amounts. No, they do not. But they do not wish to expose themselves to any possible future prosecution because that would be fatal to their professional reputation and ability to carry on in that profession. That is why it is so important that some way is found to remove small transactions from the scope of these provisions. Accountants welcome the provisions. They welcome playing a full part in their money laundering obligations, but they wish the provisions to recognise the practical realities of their working circumstances.

Lord Rooker: I have no note about a de minimus exemption. I suspect that this issue was raised in the

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other place. We are seeking to ensure that the legislation is drafted, particularly with regard to Clause 330, so that reports of knowledge or suspicion of all three principal money laundering offences are made. If Clause 330 is successfully to achieve its aims of combating money laundering within the regulated sector, it is also important that reports are made not just where a concealing offence has taken place under Clause 327, as sought by Amendment No. 259A, but where there is a suspicion or grounds for suspicion that either of the other two principal money laundering offences in Clauses 328 and 329 have or may be taking place.

The noble Baroness mentioned 200,000 accountants. That is a good many accountants. If they are all individuals and all in their little boxes and compartments servicing their individual clients, there is no way that they can see the big picture. Some of them might send in a complaint to the enforcement authorities. The accountant might think, "This looks dodgy. To protect myself I will send this in". If information has come in from other accountants to the authorities and they see a jigsaw starting to fit together, that is the whole purpose of the exercise. So the accountants will not necessarily see the big picture. They will not know whether their little part is part of a bigger problem which is taking place, or they will not see a pattern. That is for the enforcement authorities.

So I accept that at one level one can make a good case for saying, "Well, small numbers, small amounts of money" or "I thought they were up to no good, but it was only a few thousand pounds—chicken feed in the scale of things. It was a one-off". But if the other 199,000 accountants start to send other bits in and a pattern emerges, it is important that we know about it for the purpose of the Bill. Therefore, people cannot dispose of proceeds of crime by playing off one part of the system against another. Indeed, if the system is divided up into 200,000 accountants, I should have thought that it would be open season for the money launderers to exploit that fact.

4.45 p.m.

Baroness Noakes: I do not want to be accused of labouring the point, but accountants are involved in every business in this country—possibly three million or more. All those businesses will, under the definitions in the Bill, have some money laundering offences happening in and around them. They are not those that the noble Lord referred to—money launderers infiltrating their way around the economy, and where pictures can be built up. They are everyday, if theft can be ever be called everyday, minor offences.

I gave some examples; my noble friend Lord Freeman gave another. I can assure the noble Lord that shoplifting and minor staff theft happen all the time. Whether we like it or not, that is the case.

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There is nothing in the Bill that would forgive an accountant for not swamping—I use that word again—NCIS with these reports. Accountants must have regard to their own reputations.

I ask the noble Lord whether NCIS is being geared up to handle large volumes of reporting, because that is the likely result if the Bill is passed in its current form.

Lord Rooker: I regret that I did not return to that point when I responded earlier. It would be inefficient and unprofessional of the Home Office, even for government, to ask this House and the other place to approve legislation without making the resources available to make it practical and workable. I think that that is a fair point.

The Home Office has made an extra £0.25 million available to the National Criminal Intelligence Service for the financial year 2000-01 specifically to fund additional staff in the economic crime branch which handles suspicious transaction reports. The extra funding was increased to £1.8 million last year and indeed it will continue this year.

The National Criminal Intelligence Service increased the staffing of the branch from 24 people in August 2000 to 66 in December 2001. A further increase of up to 20 staff is planned for the financial year 2002-03.

Obviously, the Home Office and the National Criminal Intelligence Service must keep the service's capacity to deal with transaction reports based on suspicion under review following the commencement of new offences under this legislation. So there is evidence that there are extra resources. They may look like chicken feed on the grand scale of things, but, on the other hand, as I said at Second Reading, we were planning to pull back only £60 million in the year 2004-05 from the proceeds of crime. That seems chicken feed anyway. But that will be double what we are doing at the present time. There seems to be a good deal more fertile ground out there.

It is a beginning. The resources are commensurate with what we reckon will be the workload, but we shall keep them under review.

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