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7 Apr 2010 : Column 1566

Amendment 3

Moved by Lord Marlesford

3: After Clause 56, insert the following new Clause-

"Databases: scrutiny of entries

(1) No suspicious activity report (SAR) on a person (P) may be retained on a database operated by a law enforcement agency without having been subject to independent scrutiny under subsection (2).

(2) The Secretary of State shall by regulations establish a system for the independent scrutiny of SARs with a view to ensuring-

(a) the accuracy and reliability of information contained in SARs, and

(b) the protection of P's rights under the European Convention of Human Rights and other relevant international Conventions."

Lord Marlesford: This amendment derives from the report into money laundering and the financing of terrorism that was made by Sub-Committee F and published last year. I was privileged to spend three years as a member of that committee. I must explain, very briefly, of course, what it is all about because we discovered it only when we made the study. The Minister and I have corresponded and talked about it frequently, and I have had answers to a number of Written Questions that have elucidated the case for it.

In order to monitor and prevent money laundering, if the regulated sector, which basically means banks, lawyers, building societies, accountants, finance companies and so on-there is a whole list of them-believes that somebody has been engaged in money laundering, it is required to make a suspicious activity report, commonly known as an SAR. This report is made to the Serious Organised Crime Agency, commonly known as SOCA, which was previously headed by Sir Stephen Lander, the former director-general of the Security Service MI5. It is there to deal with serious and organised crime.

In our inquiries, we discovered that this process of suspicious activity reports has no de minimis condition. A very large number of reports are made. In March last year, there were already 1.5 million reports, and there are now getting on to 2 million. Those who are the subject of such a report are put on to a database known as ELMER. We inquired into it, and found that that is not an acronym. We never discovered what it is, and if the Minister were able to tell us that would advance our knowledge. You get put on this database of suspects. You are not told you are on it, and you will be on it for up to 12 years. It is particularly disturbing that it is not only the regulated sector as it is at present that can put somebody on it, but an anonymous denunciation can result in somebody being put on it. That is quite astonishing and has pretty nasty Stasi overtones.

In our report, we made two recommendations:

"The FATF Recommendations do not require information on the ELMER database to be made available other than in connection with serious crimes. Access for other purposes should be on request to SOCA".

In fact, there is widespread, direct access to this database. The noble Lord, Lord West, has been kind enough to answer questions giving examples of the sort of people

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who have access. It even goes down to the Neath Port Talbot County Borough Council, which apparently uses the database to check on consumer behaviour. In my view, this is something of an outrage. The database should be secret. People should be assessed before they are put on to it. My amendment would ensure that that happened. It says:

"(1) No suspicious activity report ... on a person ... may be retained on a database operated by a law enforcement agency without having been subject to independent scrutiny under subsection (2).

(2) The Secretary of State shall by regulations establish a system for the independent scrutiny of SARs with a view to ensuring-

(a) the accuracy and reliability of information contained in SARs, and

(b) the protection of",


The second recommendation of the Select Committee report from July last year to which I wish to refer was:

"The Information Commissioner should review and report on the operation and use of the ELMER database, and should consider in particular whether the rules for the retention of data are compatible with the jurisprudence of the European Court of Human Rights".

As far as I am aware, the Whitehall process is grinding on and nothing has emerged. In my view and, I think, the view of some of my colleagues on the committee, this is a serious situation, which needs much more action than appears to have taken place. Therefore, I should like to see in this Bill, in which it fits perfectly well, an appropriate protection to make sure that we do not have a secret database of suspects about which people know all too little. I beg to move.

9.15 pm

Lord Hodgson of Astley Abbotts: My Lords, I was a member of Sub-Committee F with the noble Lord, Lord Marlesford, whose amendment I support. I first came across the issue of money laundering and SARs when I was a non-executive director of a small blue-collar building society in the West Midlands-we were about 23rd or 24th on the list in size. I was head of the audit and compliance committee. We used to make 400 or 500 SARs a year. To my knowledge, not one was ever for more than £500; they were mostly for sums of about £150. It seemed to me that an awful lot of time and effort was being used up in making these reports and there was never any response from NCIS, the predecessor of SOCA, about what was happening. When I had the temerity to write and ask what was happening to the reports, I was told very firmly to mind my own business. I then wrote to ask what had happened to the reports. I was again told to mind my own business. I think that things have improved now, but that was the attitude and approach then.

I want to underline what my noble friend has said. The scale is truly staggering. There are 210,000 reports a year. Nearly every month there are 15,000 and, in a big month, there are 30,000. The issue is not just the number of reports; the list of people to whom the information is made available is quite extraordinary. Why should the Post Office and Royal Mail be able to get hold of it? Why should the National Ports Analysis Centre need this information? It beats me, I am afraid.

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This information is contained in the SOCA annual report, which does not attempt to conceal any of this. However, a vast amount of information is being circulated about citizens, most of whom will not know that they are on the database and will have no chance of having the database corrected. They may just have been going about their business when they were the victim of an anonymous, vindictive tip-off, as my noble friend said.

Just to make it absolutely clear, the report said:

"On receipt of a SAR no steps are taken to confirm whether or not the suspicion on which it was based is well founded, and SOCA believes it would not be practicable or useful to do so".

Well, that surprises me. Secondly, it states:

"An individual who wishes to see whether the ELMER databases includes entries relating to him, or to transactions or activities in which he has been involved, is unlikely to succeed. SOCA is not subject to the Freedom of Information Act ... Information may be sought under section 7 of the Data Protection Act 1998, but it is likely that the exemptions relating to national security and crime will apply".

I think that we have a black hole into which information goes, is stored and is used for reasons we know not and by agencies we know not. My noble friend is doing a valuable service by proposing this amendment.

Baroness Neville-Jones: I agree with the comments made by my noble friend. The points he raised are valuable and important. Suspicious activity reports are based on the suspicions of those operating in the regulated sector. The question that has been asked is what happens once those reports are received. As has just been mentioned, the Government, in various replies, have said that SOCA does not take steps to establish whether an unknown or anonymous reporter's suspicions are unfounded before the information is recorded on this famous ELMER database. However, they also said that if a SAR had been submitted maliciously, this fact would become apparent in the course of an investigation when the information was cross-checked with other forms of intelligence. One has to ask whether that is a foolproof way of discovering whether such information has any reality in it. Each SAR, whether or not confirmed as having any real base, is assigned a deletion date of 10 years after receipt and is automatically deleted unless it has been amended or updated. The deletion date thereafter is set to a further six years.

The views of the EU Select Committee have been mentioned. The Information Commissioner has also interested himself in this matter. He has said that if there are SARs meeting a particular threshold level rather than based on hard evidence of criminal activity, the prolonged retention of those records would in his view be inappropriate and disproportionate. The EU committee said:

"Although SARs are not kept indefinitely, the fact that they are routinely retained for ten years on a database to which there is wide access is a matter of concern to us, especially in those cases where it can be shown that the initial suspicion was unfounded"

Both speakers have referred to the widespread access that can be had to this information. It is extraordinarily important that, if people are to have access, some effort should be undertaken to establish whether the suspicion is founded or not, which is quite apart from the issue of how widespread that access should be.

I understand that there is,

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In responding, it would be helpful if the Minister could expand on this and say whether it includes removing SARs if subsequent investigation shows that they were unfounded. That is a key point.

I also understand that the Information Commissioner will review the handling of SARs, which is extremely welcome. Will the Minister say when this review will start and when it will be completed? If this information is known to him, it would be helpful for the House to have this information. This independent scrutiny certainly is welcome. This serious issue deserves much more consideration than we will be able to give it tonight, given the constraints of time. It probably makes sense to wait until the outcome of the Information Commissioner's review is known, although it is important to know the timescale. If a Conservative Government are returned to office, these are issues to which they will return.

Baroness Hamwee: My Lords, I say simply from these Benches that we have considerable sympathy with the concerns that underlie the amendment and I look forward to having an opportunity to look at this matter in more detail and at greater length than we will be able to do tonight. I recall the report that has given rise to this amendment, but addressing those concerns is perhaps more complex than an eight-line amendment might suggest.

Lord West of Spithead: My Lords, the noble Lord, Lord Marlesford, referred to acronyms such as ELMER. I seem to have been haunted by acronyms all my life. Some 44 years ago in my first ship, I recall reading a menu that had on it RBG, which I discovered was "rich brown gravy", and TYC, which was "thick yellow custard". I was thrown by HITS, which was "herrings in tomato sauce". I am afraid that I do not know what ELMER stands for, but I will do my best to find out.

The noble Lord has raised an important issue. We recognise the need for appropriate scrutiny of the SARs database. It is already independently scrutinised by the SARs regime committee, which includes private sector and government representatives, and in a sense by Parliament in the form of regular Parliamentary Questions. The noble Lord and I have been in almost continuous dialogue on this issue. We do not think that it would be practical to scrutinise individually every single suspicious activity report before it can be placed on the database, because that would create a huge layer of bureaucracy and a vast administrative burden. As the noble Lord, Lord Hodgson, said, over 200,000 SARs a year are processed.

The noble Baroness, Lady Neville-Jones, touched on the recommendation of the European Union Committee of this House that the Information Commissioner should review the operation and use of the SARs database. I am not sure when the review will start, but it has to be completed by December of this year. It would be precipitous to amend legislation before the Information Commissioner's report is published, as I am sure that he will look at all the aspects, including removal and how long material should be kept on the database.

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On the basis that independent scrutiny of each and every SAR would be impractical and in anticipation of the Information Commissioner's report, I ask the noble Lord to withdraw his amendment.

Lord Marlesford: I thank the Minister for that reply. I think that I have at least stimulated a little interest in the matter. Recently there has been a further development. HMRC has decided that all bookkeepers of a small business or even a sports club, however small a scale they operate on, should become part of the regulated sector and register with HMRC with a view to it being able to make SARs. The danger is that this is a form of sweeping in any sort of information simply for the purpose of having it. Let me just give an idea of the scale of this: it could involve some 1.7 million small businesses employing fewer than five people and the 2 million businesses that employ fewer than 10. It has been made clear in Parliamentary Answers that there is no de minimis exemption, but in practice, although the requirement to register has been in place for two years, small business bookkeepers have not done so. Only 12,000 of those who might have had to do so have actually put themselves on the database, presumably because one deterrent is that any wretched bookkeeper, however small scale, has to pay £95 a year for the pleasure of having registered.

I raised this issue with the noble Lord, Lord Mandelson, the Secretary of State for Business and everything else. He assured me that he thought that this sounded like a good candidate for the Better Regulation Task Force. I hope that he has referred the issue to that unit so that at least this nonsense will not be taken any further. In the meanwhile, I am grateful to noble Lords for listening at this late hour and I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

Clauses 57 to 60 agreed.

Schedules 1 and 2 agreed.

House resumed.

Bill reported without amendments. Report and Third Reading agreed without debate.

Lord West of Spithead: My Lords, I want to put on record my thanks to all the Members of the House who have taken part in the debates today. I am aware of the pressures of wash-up, but I have no doubt that the Bill will help to protect the public and provide justice for the victims of crime.

Bill passed and returned to the Commons.



9.31 pm

Lord Bassam of Brighton: My Lords, this may be a convenient point for me to respond to the debate earlier today in the House on the Business of the House Motion, particularly on the Constitutional Reform and Governance Bill.

My noble friend the Leader of the House gave an assurance earlier that she would consult the Lord Chancellor. I am pleased to be able to report that my

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noble friend Lord Bach and my right honourable friend the Lord Chancellor have held constructive discussions with a number of Members of the House. I believe that the Government are now able to proceed with the Bill in a form that will find favour with your Lordships' House and will accord with the general tenor of the debate earlier today.

A note from my noble friend Lord Bach is now available in the Printed Paper Office and the Government Whips Office. It sets out those parts of the Bill that the Government now intend to withdraw.

Finance Bill

First Reading

9.32 pm

The Bill was brought from the Commons and read a first time.

Energy Bill

Order of Commitment Discharged (and remaining stages)

9.33 pm

Moved By Lord Hunt of Kings Heath

Motion agreed.

House in Committee.

Clauses 1 to 9 agreed.

Clause 10 : Schemes for reducing fuel poverty: supplementary

Amendment 1

Moved by Lord Hunt of Kings Heath

1: Clause 10, page 9, line 36, leave out "the Secretary of State may determine," and insert "may be specified in the scheme, the Secretary of State may determine that"

The Minister of State, Department of Energy and Climate Change (Lord Hunt of Kings Heath): I shall speak also to the other eight amendments in this group. I acknowledge the consensual way in which agreement has been reached between the various parties concerned on the way forward for the Bill. I thank the noble Lord, Lord Jenkin, for withdrawing his amendments; it is much appreciated.

In its eighth report in this parliamentary Session, the Delegated Powers and Regulatory Reform Committee recommended several changes be made to the Energy Bill. It highlighted two areas in Part 2 where the level of parliamentary scrutiny could be increased: Clause 10(6) in relation to the power to disapply or apply with modification any requirement of a scheme to reduce fuel poverty; and Clause 15(2) in relation to changes to the fuel poverty definition. Amendments 1 to 8 address these areas.

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The committee expressed concern about the breadth of the powers in Clause 10(6), which allow the Secretary of State to disapply or modify any requirement of a scheme. In response to this, Amendments 1 and 2 will constrain the circumstances under which this power may be used. This is done by requiring the circumstances in which the Secretary of State can use the power in Clause 10(6) to be detailed in the scheme regulations made under Clause 9. Regulations made under Clause 9 are subject to the affirmative procedure. Through Amendment 3, the Secretary of State would also be required to inform Parliament of any changes made under the power in Clause 10(6). This will be done by laying a memorandum before Parliament detailing any such modifications.

The committee also recommended that any regulations that seek to redefine or determine the scope of fuel poverty or its extent for the purposes of the Bill should be subject to the affirmative procedure. In order to meet this recommendation, we propose several amendments. First, where the existing Bill points back to the definition of fuel poverty in the Warm Homes and Energy Conservation Act 2000, Amendments 5 and 6 propose replicating the definition in that Act in this Energy Bill. Amendments 7 and 8 then make any regulations that seek to change the definition of fuel poverty or its extent in this part of the Bill subject to the affirmative procedure, as recommended by the committee. Amendment 4 ensures that any change to the definition of fuel poverty or its extent are subject to consultation in the same way that the schemes for reducing fuel poverty are subject to consultation.

The committee also recommended a change to Part 4 of the Bill, which covers general provisions. Amendment 9 is tabled to remove the discretion contained within Clause 31(4) that the Secretary of State has in certain cases to choose the parliamentary procedure to which a statutory instrument is subject. We now consider that we no longer require this discretion and therefore we are happy to accept the committee's recommendation in full.

We have accepted and taken action on all the recommendations made by the committee. The amendments are a valuable addition to the Bill. They increase the level of parliamentary scrutiny and I hope that the House will support them. I beg to move.

Lord Jenkin of Roding: My Lords, the Minister has explained the amendments extremely clearly and I have no quarrel with them. I thank him for the letter that he wrote to me on 1 April following the discussion that we had at Second Reading about why there is a difference between the data-sharing arrangements and powers that will apply to the rebate schemes under this Bill and those that otherwise applied to the carbon emissions targets scheme under other legislation.

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