Previous Section Back to Table of Contents Lords Hansard Home Page

I turn to the Serious Crime Act 2007 (Amendment of the Proceeds of Crime Act 2002) Order, which makes a minor amendment to Section 280 of the

18 Mar 2008 : Column GC8

Proceeds of Crime Act 2002. It is straightforward and, we think, uncontroversial. In civil recovery cases under the 2002 Act, the organisation responsible for taking proceedings for a civil recovery order is known as the enforcement authority. Under amendments made by the Serious Crime Act 2007, the enforcement authority in England, Wales and Northern Ireland can be one of a number of authorities; for example, the Serious Organised Crime Agency or the Director of Public Prosecutions. Where a court makes a recovery order, it must appoint a trustee for civil recovery. The enforcement authority must nominate someone suitably qualified to act as a trustee, who might be someone from its own staff. The trustee acts on behalf of the enforcement authority. The trustee must secure the property that will be vested in him or her and liquidate non-cash assets for the benefit of the enforcement authority. The trustee must also get the best price for the property vested in him to maximise the amount payable to the enforcement authority.

Section 280 of the 2002 Act sets out what has to be done with the money that the trustee has collected under the recovery order. Once certain payments have been made from the moneys recovered, any remaining sum has to be paid by the trustee to the enforcement body. The enforcement authority can use the money it receives to pay the remuneration and expenses of the trustee. However, the enforcement authority is not allowed to deduct salary costs when a member of its own staff has been appointed as a trustee. On the other hand, the enforcement authority should be able to recover these costs where the trustee is an outside contractor engaged by that authority. The effect of the amendments made to the 2002 Act by the 2007 Act has been to make it unclear what the proper position of the contractors is as regard the netting off of remuneration from recovered moneys. The amendment in this order simply puts the position beyond doubt to ensure that the contractor’s salary costs can be deducted. I hope that point is clear. I beg to move.

Baroness Hanham: I am sorry we got into a bit of confusion with that. It was somewhat caused by the fact that the Explanatory Memorandum to the Proceeds of Crime Act deals with both the orders and I jumped the gun on the proceeds of crime. I shall reiterate the question that I asked because it is still relevant, despite what the Minister said. The amended code includes contractors within the definition of members of staff who take on the role of trustee, but who are contractors likely to be? It is clear that they are not members of staff of the organisations because they are outside them.

I now return to the two Proceeds of Crime Act orders. The first brings into operation a revised code for the Proceeds of Crime Act. As the Minister said, the 2002 Act was amended by the Serious Crime Act 2007 to take into account the abolition of the Assets Recovery Agency and its director, the creation of a new type of investigation to investigate the provenance or intended use of assets seized under the 2002 Act and the extension of powers under that Act to certain civilian financial investigators. We accept that there are currently no powers to investigate the provenance

18 Mar 2008 : Column GC9

or intended use of cash that has been seized and detained and that the creation of this form of investigation will mean that production orders, which allow financial investigators to obtain information about an alleged defendant's financial affairs, can be served on seized cash. However, can the Minister tell us who those financial investigators will be if they are not members of the police force or Her Majesty's Revenue and Customs? That is particularly important, given the extent of the investigations they will be able to undertake and the powers they are being given. They will, I presume, also have the right to seek a warrant from magistrates, as necessary, and to give evidence at subsequent hearings to retain the detained money—I am not sure it is necessary, but I declare an interest as a magistrate.

Can the Minister tell us how effective financial reporting orders are? They are the financial investigation tool that allows courts to order a criminal to report on his financial affairs, enabling the authorities to check he has no illicit sources of income. I understand that the Ministry of Justice has stated that there have been no financial reporting orders given as a primary disposal since they were introduced in the Serious Organised Crime and Police Act 2005. However, contrary to the Ministry of Justice, the Serious Organised Crime Agency has said in its annual report for 2006-07 that 12 financial reporting orders had been issued. Whether it is nought or 12, this power does not seem to have been used very much. Will the Minister say whether he sees any danger that these new powers will suffer the same fate? The Serious Crime Act 2007 sounded the final death knell for the Assets Recovery Agency. The chairman of the Public Accounts Committee on 7 March 2007 highlighted the weaknesses of the agency when he said:

We accept that the role of that agency might have been defunct. It is clear that it did not live up to its expectations. That is why it has been put out of business. Can the Minister say what lessons have been learnt from the fiasco of that agency and how its successor bodies will be monitored and do a better job?

I return to the extension of powers to accredited financial investigators. For the first time, the power to execute search-and-seizure warrants in confiscation and money-laundering investigations is going to be extended from police and Customs officers to AFIs. Since 30 December 2002, a Customs officer or a constable may seize cash at the borders or inland if he has reasonable grounds for suspecting that the cash is recoverable property or intended for use in unlawful conduct, and if the sum seized exceeds a minimum amount. I am cautious whenever I see a proposal that powers of seizure should be entrusted to someone other than a police officer or Revenue official. Unfortunately, the draft codes of practice do not provide clarification on what is happening and what safeguards will exist.

18 Mar 2008 : Column GC10

What troubles me are two questions, neither of which are addressed by the codes of practice. First, who will be the accredited financial investigators? To whom are these powers going to be given? As far as I am aware, there is no definitive list of who may become one. Could the Minister ensure that if a list is not available, one is produced and put in the Library? It seems inappropriate that we are discussing altering codes of practice without actually knowing who is going to be using them.

The National Audit Office report into the Assets Recovery Agency, published in February last year, said that the data on the details of financial investigators held on the support system were unreliable. The NAO found that more than a quarter of the registered users were unknown to the Assets Recovery Agency, 2 per cent had retired and 31 per cent had left their organisations and were no longer involved in financial investigations. Could the Minister confirm that any list that is produced is accurate and kept up to date? If the Government allow this situation to continue, we will be in the chaotic position of having granted serious and intrusive powers to execute search-and-seizure orders without actually having knowledge of who is authorised to do so.

Then there is a second question: what is the precise role that these accredited financial investigators are now expected to fulfil? The codes of practice say:

Does the Minister believe that it is appropriate that search-and-seizure warrants should be executed by those simply with an appropriate accreditation? We are extending the powers to detain someone, to conduct a search and to allow them to search a house. It is a significant step to go from allowing sworn officers to exercise these powers to allowing civilians who are simply accredited to do so. Apart from asking the Minister to be kind enough to address those questions, we do not oppose the instruments.

Baroness Miller of Chilthorne Domer: From these Benches we sometimes accuse the Home Office of bringing forward too much legislation, but we supported the Proceeds of Crime Act in principle as it went through. We welcome orders which update such Acts and their codes of practice. Sometimes these are not updated often enough and inappropriate procedures can develop as a result.

However, having given a broad welcome to the principles, I echo the misgivings expressed from the Conservative Front Bench by the noble Baroness, Lady Hanham. We are being asked to approve these orders without having an exact list of people and I would like more detail about what training such people will receive. Obviously, the police receive one level of training and absorb exactly the procedures they should follow, whereas someone working perhaps for the Department for Work and Pensions will receive a quite different level of training. That is a worry. I shall not rehearse the comments about the

18 Mar 2008 : Column GC11

Assets Recovery Agency. The noble Baroness, quite rightly, has quoted the figures and it is right to move on.

On the final order of the three, I have two questions about the contractor list mentioned by the Minister. First, what would cause a contractor's removal from the list? I presume there is a select list of contractors who are able to tender for this work, but what kind of misdemeanour or inappropriate behaviour would result in a contractor being removed?

Can the Minister clarify the position of trustees in this respect? The Minister referred to codes of conduct in relation to the previous order; presumably there is a similar code of conduct that trustees should follow. I would be grateful for answers to these questions.

Lord Lyell: I apologise to the noble Lord but my curiosity has been aroused this afternoon. I am very grateful to my noble friend who has just spoken. Introductory paragraph (2) of the Proceeds of Crime Act 2002 (Cash Searches: Code of Practice) Order 2008, in relation to the powers of the Secretary of State, refers to,

and so on. Introductory paragraph (1) deals with the exercise of the code of practice in England, Wales and Northern Ireland by constables and accredited financial investigators. My question is similar to that put forward by my noble friend Lady Hanham: can the Minister inform me, or write to me, about the draft revised code of practice by Scottish Ministers or other persons? I am interested in whether accredited financial investigators on both sides of the border will have similar powers.

The second part of the order deals with cash searches. Is the object of the search cash or records? I am sure that the Minister will be aware that the records may be outwith Scotland or even the United Kingdom.

Introductory paragraph (1) refers to constables, and that is fine. I had an experience in my office out in the boondocks in Scotland when two gentlemen in plain clothes turned up and said that they had powers to do this and that. They were not accompanied by the police but they produced warrants or cards that I had never seen before. They had, in fact, come from the local authority. I do not know whether I was supposed to recognise these gentlemen’s authority but, had I objected, I wonder what would have happened. That is why I hope the Minister will reassure me that when the searches take place for cash or records of cash, their subject will at least have some idea of why they are taking place.

I am sure that the Minister will explain that crime has tentacles and that huge sums of money may be involved, spread perhaps outwith Scotland—or firth, as we say in Scotland. I would be grateful if the Minister will inform me about the draft of the revised code in Scotland. These searches can certainly cause great worry to small concerns, as I have explained.

Will the Minister enlighten me as to the powers of the investigators when a visit is paid under

18 Mar 2008 : Column GC12

introductory paragraphs (1) or (2) of the order? Does the person the subject of the searches have any rights? I seem to recall that in the period of the previous Government there were some particularly difficult situations concerning orders which had to be signed by Ministers. At least two Ministers were unable to make any contact and were virtually kept in purdah. I am curious to know what rights an individual has when someone turns up and says, “We believe there has been a crime; we believe there is cash; we believe there are records available here”. There may be good reasons for the search but what happens if someone turns up in plain clothes saying, “We have this particular reference, this particular authority”, and there is no reason why you should recognise it? If it was a constable, the mind of the retail subject of the investigation would be put at rest.

I am afraid my cynical mind goes abroad. Thirty years ago we spent three weeks in an Italian resort where we found a bunch of armed gentlemen—the tax police. They apparently had powers to go armed into one’s office and demand to see one’s records. I do not believe that that will be the case, certainly not in Scotland and certainly not in my case. Perhaps the powers might be needed but I would be grateful if the Minister could reassure me, particularly about introductory paragraph (2), because Scotland is where I live and it might affect me.

I have no hesitation in saying that I am member of the Chartered Accountants of Scotland. That is worth more even than the reputation of your Lordships’ House. I would certainly wish to be onside, but who is the referee? We do not want gentlemen turning up and saying, “Cough up those papers. I have a bit of paper here; I have a reference”. The House of Lords identity pass that I have in my pocket has caused considerable panic in some areas. But if the Minister could reassure me about introductory paragraph (2), I would be very grateful. I apologise to my noble friend.

Lord Bassam of Brighton: The noble Lord should not feel that he has to apologise. It is quite proper to use these proceedings to raise issues of concern. Noble Lords have done exactly that today, and quite rightly so.

The noble Baroness, Lady Hanham, raised the issue of who might be a “contractor”. A contractor might be an insolvency practitioner or another kind of expert. These cases are quite complex and different forms of expertise need to be brought to bear. Given the strange nature of some of these cases, it might have to be someone who has a knowledge or an expertise in the selling or disposal of assets such as horses or stables or something like that. The contractors will vary.

The noble Baroness made points about financial reporting orders. There has been some misunderstanding in relation to this issue and the allegation has been that they have been ineffective. We do not agree with that. However, I understand that David Davis asked a PQ of the Ministry of Justice about how many financial reporting orders had been issued by courts. The Parliamentary Written Answer from my right honourable friend Jack Straw, the Secretary of State, simply said

18 Mar 2008 : Column GC13

that no financial reporting orders had been recorded as a primary disposal by the courts, and that that indeed was the case. But financial reporting orders are secondary or ancillary orders made by the courts at the point of sentence following the principal disposal, which could be a period of imprisonment. More than 40 financial reporting orders have been made since they were introduced in 2006 as secondary and ancillary orders. The Ministry of Justice had not originally included this in its Answer. It has now clarified the situation and I understand that the Secretary of State is contacting David Davis MP directly on that point. SOCA and law enforcement agencies are already making good and effective use of these new powers to keep track of the financial affairs of serious criminals.

Concern was raised about the powers of search and seizure and it is important that we keep a careful check on these issues. It is understandable that noble Lords are concerned about them. But, so far as training and preparation for this role is concerned, the National Policing Improvement Agency will train, accredit and, importantly, monitor the exercise of search-and-seizure powers, and it will have the power to withdraw accreditation from an investigator. An accredited financial investigator will have to be a member of staff of a public body listed in a statutory instrument which is to be laid before the House in due course.

The question was raised about who accredited financial investigators might be and what they will be able to do. They will have the ability to recover cash—that will be their principal power—and they will be listed in the order which is to be laid. So far, those to be considered have all been from public bodies. Accredited investigators are all members currently of the Serious Fraud Office, the Department for Work and Pensions the Immigration Service and the fraud unit of the National Health Service; sadly, we need such an organisation. It is likely that they will come from similar bodies. But, as I said earlier, noble Lords will have the opportunity to object to any of those listed bodies when the order is brought before the House.

The noble Baroness made a point about the work of the Assets Recovery Agency. I do not accept that the agency has been a failure. It has achieved a great deal and has recovered its base budget for the financial year 2006-07. With the merger of the Assets Recovery Agency and the Serious Organised Crime Agency, the skills and the expertise of both agencies will be brought together and we believe that that will enable them to maximise their efficiency and effectiveness. I have not heard it argued that this is not an important initiative in attacking those who seek to profit massively from crime, because this is where our policy is directed. SOCA will report on asset-recovery performance annually, as did the Assets Recovery Agency.

Much cash has been seized in the past few years. I was asked how many searches have been conducted under the powers that have been used in the past. The answer is that there have been 23 in the past year and, in the five years of its operation, some 973. It is worth noting that in the past financial year some £53 million

18 Mar 2008 : Column GC14

and in the five years of ARA’s operation some £211 million have been seized. In the past year, £31.5 million and in the five years of the ARA’s operation £103 million cash has been forfeited. There are necessarily continuing cases where cash has been detained but is yet to be forfeited, so one will see those numbers go up over time. Therefore, I think that it has been a very successful exercise. Big criminals know that they cannot expect to get away indefinitely with profiting from some of the appalling crimes that they commit.

The noble Baroness, Lady Miller, expressed general support for the measures but asked about the removal of contractors. We have not yet had a situation where contractors have had to be removed from an operation but if, for example, there was unsatisfactory performance or a failure to get value for money in liquidating assets, we would expect contractors to be stood down. Obviously, we want them to perform well but, if they are not doing so, clearly it is not appropriate for them to continue in that role

The noble Lord, Lord Lyell, asked a number of questions relating to his unease about the extent of the search powers. In general terms, the amended code before us follows the precedence of the previous code and the updated Police and Criminal Evidence Act 1984 codes—in particular, code A, which relates to stop and search, and code B, which relates to the searching of premises and the seizure of property. These codes are tried and tested. They have well over 20 years of history to them and generally one can reasonably argue that they have operated very well. Therefore, this code very much mirrors the others.

The search powers operate in a precise way. The power to search premises is exercisable only on premises where the relevant officer is lawfully present under other powers or where he is there at the invitation of the owner. The power does not confer any right to force entry. The search powers also include powers to search a person and any article with a person. However, they do not extend to requiring a person to undergo an intimate or strip-search.

There are safeguards. Search powers may be exercised only where prior judicial authority has been obtained or, if that is not practicable, with the approval of a senior officer. The Act also recognises that there may be circumstances where it is not practical to obtain the approval of a senior officer but, if judicial approval is not obtained prior to a search and cash is either not seized or is released before 48 hours, the officer concerned must prepare a written report and submit it to the independent person who, in relation to searches in England, Wales and Northern Ireland, has been properly appointed by the Secretary of State. That report will detail why the officer considered that he had the power to carry out the search and why it was not practicable to obtain judicial approval prior to it.

I can provide some more examples of safeguards within the code, particularly at paragraph 62, which allows a person to call their own witness to a search, and paragraphs 53 and 64, which require that all searches be fully recorded and kept on a search

18 Mar 2008 : Column GC15

register. Many other safeguards will ensure the proportionate use of the power.

We are not aware that the powers have caused great difficulty in the past, and their use has been proportionate. We feel that they are of great benefit because those subject to them know that they are properly carried out and that they have a real effect in terms of recovering assets. To our knowledge, we have had no complaints in the past five years on the use of the search powers as currently exercised.

I think that the noble Lord, Lord Lyell, was asking about accredited financial investigators in Scotland. Accredited financial investigators do not operate in Scotland. In general terms, that is a matter for the devolved Administration. As I understand it, only the police and Her Majesty’s Revenue and Customs officers in Scotland operate in that regard. As the noble Lord rightly spotted, it is a different system in Scotland, and the powers are not exercised in the same way north of the border.

I think that I have covered most of the points raised. If I have not, I am sure that Members of the Committee will remind me and I shall return to their points.

Lord Lyell: I thank the noble Lord. I am fascinated by his mention of strip-searches—

Lord Bassam of Brighton: Only in giving reassurance that officers do not have the power to exercise them.

Lord Lyell: I am sure that when people arrive at our estate office it will have ladies—can I say that?—duly authorised, I hope, to carry out the searches, since I can foresee interesting reports in the Dundee Courier and Advertiser of raids on particular areas. I take the Minister’s point—it is pretty serious—but I would be grateful if he could tighten it up, because he said that he was not too sure about accredited financial investigators north of the border. Could he write to me? Otherwise, I am more than grateful to him and to the rest of the Committee.

Next Section Back to Table of Contents Lords Hansard Home Page