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Lord Kingsland: I am most grateful to the noble Lord for his response to my amendment. As he rightly said, the amendment of my noble friends Lord Freeman and Lady Noakes are very much in the same direction as my own. I am sure that all three of us will reflect on what the noble Lord has said. I should be surprised if we did not return to the matter on Report. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 259A to 260 not moved.]
Lord Rooker moved Amendment No. 260A:
- Page 192, line 38, leave out from "not" to "comes" in line 40 and insert "make the required disclosure as soon as is practicable after the information or other matter"
On Question, amendment agreed to.
Lord Rooker moved Amendment No. 260B:
- Page 192, line 40, at end insert—
On Question, amendment agreed to.
Lord Kingsland moved Amendment No. 260BA:
The noble Lord said: As currently drafted, the Bill would make it a money laundering offence when a solicitor was unable to make a report because he had formed the view that legal professional privilege applied but that view was later determined as incorrect.
Accordingly, we have proposed an amendment about solicitors' mistaken belief as to whether or not legal professional privilege applies in a particular set of circumstances.
The Police and Criminal Evidence Act defines legal privilege as covering communications between professional legal advisers and their clients, or any person representing the client, made in connection with the giving of legal advice to the client, or in contemplation of legal proceedings and for the purposes of such proceedings when the communications are in the possession of a person who is entitled to them.
However, items held with the intention of furthering a criminal purpose are not items subject to legal privilege. The criminal purposes exception can be confusing for lawyers. The case law is clear that the exception applies; legal professional privilege does not bite whenever the client intends to commit a crime. But the case law requires a solicitor to have concluded that there is a strong prima facie case that such items are being used for a criminal purpose.
I know that the Law Society is able to provide solicitors with broad guidance as to what could constitute legal privilege, and as to when it might, or might not, apply. But, as I understand it, the society is unable to provide detailed legal advice about specific documents, or information, and would normally suggest that solicitors who need advice in a difficult situation should themselves seek expert legal advice.
This can be straightforward; but it is sometimes not so. For example, when mortgage fraud was a common problem in the early 1990s, solicitors would often be visited by the police who would say that they were investigating the solicitor's client as a potential mortgage fraudster and ask to see the file. I am informed that, at the time, the Law Society's advice to solicitors was that the fact that a client was under investigation by the police is not, in itself, strong prima facie evidence. In those circumstances, the police
The police were able to produce sufficient evidence in some cases; but there would often be grey areas where the solicitor had to rely on his or her own professional judgment. If a solicitor exercises that judgment, and concludes that there is insufficient evidence to show a prima facie case but it is later established that the client was a fraudster, it seems wrong that the solicitor can be guilty of a criminal offence. I beg to move.
Lord Thomas of Gresford: The amendment now before the Committee is coupled with Amendment No. 260C, which is tabled in my name and that of my noble friend Lord Goodhart. The noble Lord, Lord Kingsland, referred to one circumstance in which there may not be privilege; namely, where information is passed for the purpose of committing a crime in the future. Another possibility is when a client discloses to his legal advisers that a third person has property in his hands and is engaged in money laundering. The Bill, as currently drafted, would require the solicitor to give that information to the authorities.
In those circumstances, it is possible that a solicitor would not realise that such a duty fell upon him. Our amendment is slightly different from the one moved by the noble Lord, Lord Kingsland. Our amendment seeks to make it a defence for the solicitor to establish that there are circumstances,
Lord Rooker: As presently drafted, Clause 330 assumes that a professional legal adviser, acting on information given to him by his client, would know whether or not that information came to him in privileged circumstances. Frankly, we believe that that is the correct position. Professional legal advisers can be expected to know the scope of professional privilege, and, if they have a problem, can seek advice from their own professional bodies.
I should remind the Committee that the existing offence of failure to disclose suspicion of drug money laundering, which is to be found in Section 52 of the Drug Trafficking Act 1994, contains the same definition of "legal privilege" that is included in Clause 330. To my knowledge, although I have no material to this effect, that definition has not given rise to any difficulties. We are not inventing the wheel here; the definition is already on the statute book.
Legal professional privilege is an established concept. As a non-lawyer, I accept that it is a complicated issue. However, it is clear that professional legal advisers ought to know whether legal privilege applies; indeed, if they do not, there are people whom they can consult.
If we started to rewrite this aspect of law at present, I suspect that we would be doing so in a wholly different way. However, as I said, the definition of "legal privilege" in Clause 330 is already to be found in existing legislation. There is no evidence available to us to show that it is not working satisfactorily.
Lord Kingsland: The Minister said that a similar definition appears in other legislation. Perhaps the noble Lord would like to take advantage of our more refined approach to the issue to try to improve the quality of legislation for the future. As the definition has provided no difficulty before, why should the Government have any difficulty in adopting this further protection for solicitors? I shall leave the Minister to reflect on that point. In turn, I shall reflect upon whether or not to return to the issue on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 260C not moved.]
Baroness Noakes moved Amendment No. 260D:
The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 260H to 260J and 261A to 261C, which are tabled in my name and that of my noble friend Lord Freeman. Subsection (5)(b) of Clause 330 contains the familiar exemption of legal professional privilege, which we have just discussed. Amendment No. 260D seeks to introduce a similar, but not identical, exemption for auditors, external accountants, and tax advisers.
The preamble to the second European directive on money laundering refers to "legal professional privilege", and says that,
There is a good reason for extending the protections beyond the legal profession. In some areas, lawyers offer essentially the same services as those provided by
Amendments Nos. 260D, 260H and 260J introduce limited exemptions for auditors, external accountants and tax advisers where information comes to a person acting in the course of his profession for the purposes of ascertaining the legal position of the client. That is considerably narrower than the exemption afforded to lawyers under existing political privilege provision, but it should be sufficient to relieve accountants and others from the disadvantage that they would otherwise suffer. The amendments use the terms,
Amendments Nos. 261A, 261B and 261C appear to be intended to achieve a similar effect for accountants, auditors and tax advisers under Clause 331, which deals with tipping off. Auditors, in particular, need to be able to have full and frank discussions with their clients. Any provision that operates against the free flow of information to auditors will operate against the public interest. Without my amendments, directors and other company employees may be reticent about discussing matters openly. Audit is very much in the spotlight in the wake of Enron and other causes célèbres and it needs to be built up rather than, as in the Bill, made more difficult. I beg to move.
"(4A) The required disclosure is a disclosure of the information or other matter—
(a) to a nominated officer or a person authorised for the purposes of this Part by the Director General of the National Criminal Intelligence Service;
(b) in the form and manner (if any) prescribed for the purposes of this subsection by order under section (Form and manner of disclosures)."
Page 193, line 1, after "and" insert "believes that"
"which he reasonably believed to be privileged",
in which the information was passed to him. That is the purpose of our amendment, which, although phrased slightly differently, very much follows the spirit of the amendment moved by the noble Lord, Lord Kingsland.
Page 193, line 2, at end insert—
"(ba) he is an auditor, external accountant or tax adviser and the information comes to him in the circumstances set out in subsection (9A);"
"directly comparable services need to be treated in the same manner when covered by any of the professionals covered by the Directive".
Article 1(5) says:
"Members States shall not be obliged to apply the obligations [in the Directive] to notaries, independent legal professionals, auditors, external accountants and tax advisers with regard to the information they receive from or obtain on one of their clients in the course of ascertaining the legal position for their client".
My amendments fall squarely within the terms of the directive.
"auditor, external accountant or tax adviser",
which are the terms found in the directive, without further definition. If the Government consider that the terms should be defined more clearly, it would not be difficult to devise an amendment to cover those bodies whose members provide the relevant services.
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