Clause 322 - Arrangements

Proceeds of Crime Bill – in a Public Bill Committee am 3:45 pm ar 17 Ionawr 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath 3:45, 17 Ionawr 2002

I beg to move amendment No. 518, in page 186, line 39, at end add—

'(d) the amount of money involved in the arrangement or the value of the property does not exceed £1,000'.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

With this it will be convenient to take the following amendments: No. 519, in clause 323, page 187, line 14, at end insert—

'(e) the value of the property involved does not exceed £1,000'.

No. 520, in clause 324, page 187, line 41, at end insert—

'(c) the amount of money involved does not exceed £1,000'.

No. 521, in clause 325, page 188, line 40, at end insert—

'(d) the disclosure relates to money or property not exceeding the value of £1,000'.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I showed some prescience, although not to the extent of guessing how long we would take, in saying that I thought that although each amendment would have added only one word, there would be detailed arguments of principle on the previous group of amendments. I am reminded of one of my few personal contributions to criminal law. In my first Parliament, Mr. Peter Butler, the then Member for Milton Keynes, North-East, and I tabled an amendment to what in 1993 was the Criminal Justice and Public Order Bill. After the word ''coat'', it inserted the word ''hat'', so that police officers could search under people's hats—and they can do so now, because the Bill, including that amendment, was made law. That was especially relevant in terms of drug searches of those of a Rastafarian persuasion.

I hope that the hon. Member for Glasgow, Pollok will bear that in mind when he accuses me and many of my hon. Friends of constantly wanting to water down the law down on drugs: one of the few amendments that I can claim to have made to the law in nearly 10 years in the House toughened up a previous Bill on the subject.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

Presumably the hon. Gentleman wants to be tough on Rastafarians and tough on the causes of Rastafarians.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Not on the causes of Rastafarians—but I have always claimed to be tough on crime and tough on the causes of crime, as my record during the past nearly 10 years shows. That is a side issue that I must not pursue further, Mr. McWilliam, or you will rule me out of order.

We are now on to the de minimis provisions, which I touched on with a few words before we voted. My hon. Friend the Member for Beaconsfield and I have had extensive discussions with experts on the subject, especially members of the anti-money-laundering committee of the Law Society. Despite the views of some Labour Members, many people engaged professionally in the City of London—lawyers, accountants, tax advisers and others—are as opposed to money laundering as the hon. Member for Glasgow, Pollok. They would agree with nearly everything that he said in the serious part of his speech on the previous group of amendments.

Those people want the Bill to be effective. As recently as Monday lunchtime, they specifically told my hon. Friend and me that they did not want provisions so ridiculously onerous that huge amounts of time would be wasted on reports to organisations such as the National Criminal Intelligence Service on the tiniest matters. That is the only reason why we want to insert a de minimis provision.

I shall not fall out with the Government if the Minister claims that £1,000 is too high, and that NCIS says that a de minimis provision of no more than £500 would be sensible. My hon. Friend and I had to consider the figure carefully, and that was the decision at which we arrived. I hope that the Minister and Labour Members do us the honour of accepting that we have not tabled the amendment to seek to water down the legislation. We want organisations that are professionally involved in finance in places such as the City of London to concentrate on what is effective against serious and organised crime.

I do not believe that the Minister will be able to tell the Committee that NCIS will have the resources to cope daily with huge numbers of reports from every financial institution in the City of London about what they might think is dodgy, when the sums involved are tiny. It was suggested to us that if the Bill were enacted unamended, firms of solicitors in the City of London would think that the only way to protect themselves from allegations would be to have vast departments that reported almost everything. The same would

apply to tax advisers and those in financial services and banking, where I used to work as a corporate in-house counsel.

That is not to say that everything is riddled with crime but, using 20:20 hindsight, a legitimate firm that carries out legitimate business might be worried that if it had not made a report to make itself safe, someone might come along later and say, ''This turned out to be dodgy even though the amounts were tidy. You should have reported it.'' In the late 1980s, I saw the growth within financial services of a whole new industry called ''compliance''. As a result of various scandals, the previous Conservative Government rightly introduced regulatory provisions, although they were very complex. All the reputable institutions set up vast compliance departments.

I shall anticipate the hon. Member for Glasgow, Pollok by making the criticism that the legislation and regulations that my party introduced in government—but before I was a Member of Parliament—were over-complex. At one stage, the plc for which I worked dealt with five different regulatory bodies with competing rule books. We used to have something called regulatory arbitrage, when we would decide whose overly draconian rule book to row about. The whole process eventually ground to a halt, and all the arrangements were changed during my first term in Parliament—under the Conservative Government—and during this Government's first term.

I was fascinated, as other hon. Members may have been, to see a half-inch thick book in my parliamentary post this morning. It introduced the latest update from the Financial Services Authority. I have not yet had time to read it, because the Committee started as 8.55 am, but it completely reverses a doctrine called polarisation. I shall not bore members of the Committee with all the implications of polarisation, but it may be familiar to some of them. However, the change represents a complete reversal. When the Government came to power in 1997, various Ministers made statements about how they would carry on with the polarisation regime. I have always taken an interest in the issue—and I know from our time together on the all-party group on insurance and financial services that you have, too, Mr. McWilliam. There has been a major change.

I make that point to convince sceptical Labour Back Benchers—as I seek to all the time—that we genuinely want the Bill to work. We have never said that the Government are completely wrong to introduce their provisions—not on Second Reading, not when we responded to the drafts before the Bill saw the light of day, and not in Committee. We are trying to end up with a workable Bill because that is the point of the Committee system. I hope that the Minister will respond constructively to the introduction of de minimis provisions so that we can at least discuss whether it is sensible to have a limit below which reporting should not take place.

Mr. Davidson: If the minimum sum that must be notified is £1,000, is there anything in the amendments to prevent someone from coming along with £999.99 on several different occasions?

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath 4:00, 17 Ionawr 2002

That, I understand, is a problem. The hon. Gentleman is right, which is why I said that I was not going nap on a particular figure. If he suggested a figure of £500, that would be fine. It would be perfectly acceptable for the Minister to table a Government amendment to deal with the issue. Before I tabled my amendments, I wondered whether one could deal with the sequential problem, because I do not want to open the floodgates either.

The spirit of the amendment is clear. We do not want organisations such as NCIS to be flooded, or entirely reputable organisations to have to set up vast and expensive departments and pass the cost on to customers, because huge amounts of business would probably flow out of the UK. In his remarks on the previous amendments, the hon. Gentleman attacked one offshore jurisdiction and said that all sorts of dodgy things happened there. I am sure that he does not want a huge number of jobs to be exported elsewhere. This is not an anti-foreign thing, because whatever part of the country we represent, our job as Members of Parliament is to help the UK to remain a successful financial centre. That is important, and jobs in the hon. Gentleman's constituency may well depend on us doing that, just as they do in mine.

I have said enough. Again, there are wide implications. I wonder whether the nearly four hours of debate on the two words of the previous amendment would qualify us for a place in the ''Guinness Book of Records''. That is all I need to say.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. It does not qualify. I had to sit through the debate on the John Golding amendment, which lasted for 12 hours.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

My colleagues and I think that it is about time that I emerged from my slough of indolence to help my hon. Friend. He has done a sterling and tremendous job in dealing with amendments today, and also earlier in the week, when I was away.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. I hope that my good friend Mrs. Foulkes has not been writing to the other members of the Committee.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

That is an interesting proposition, but I shall not go into too much detail.

Like the hon. Member for Surrey, East—

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I am sorry, I meant to say Surrey Heath.

When I arrived, bright-eyed and bushy-tailed at 8.55 am, little did I know that it would be after 4 pm before we would reach the amendments now before us. However, like the hon. Member for Surrey Heath, I agree that the previous debate was worth hearing, and

I was here for almost all of it. I hope that this debate will not be as long—we do not want a competition—but I hope that it will be as useful and constructive.

I am sorry to disappoint the hon. Gentleman by saying that his is a watering down amendment. My hon. Friend the Member for Glasgow, Pollok and others will agree that yet another Conservative amendment would make life easier for money launderers. I remind the Committee of what my hon. Friend the Under-Secretary said earlier. We are dealing with a huge problem—the Financial Action Task Force reckons that money laundering accounts for between 2 and 5 per cent. of gross domestic product. It is a huge amount of money, and the nit-picking of Opposition Members, their detailed questions and their legal points suggest that they do not fully understand and appreciate its extent.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I do not have access to the intelligence, so I have to take the Minister's word for it that the problem is as large as he says. One of the difficulties is that despite the size of the problem, the number of prosecutions brought under the old legislation seems not to be so dramatically different from under the new, and there has been a remarkable paucity of such prosecutions. The Minister should understand that it is not necessarily a question of watering down, but of how to make the best use of the available resources. One of the questions is whether, by insisting on the disclosure of multiple minute sums, we would be helping in that important process.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I shall come to that, as the hon. Gentleman would expect. Sometimes, as during the previous debate, there are too many interventions, and although they make the debates lively they do not allow a Minister—or the Opposition spokesmen—to argue in a sustained and reasoned way. I shall answer that point and the point made by the hon. Member for Surrey Heath

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

What I am about to say is of particular interest to my hon. Friend the Member for Glasgow, Pollock and the other Scottish Members on both sides of the Committee. My hon. Friend the Under-Secretary said that provisional figures for 2000 showed 118 prosecutions in England and Wales for alleged money laundering offences, but that in Scotland there had been none to date, which is why there have been no convictions. That may be why those who represent Scottish constituencies feel strongly that the Bill needs strengthening to be more powerful and effective.

Photo of John Robertson John Robertson Llafur, Glasgow Anniesland

May I give my hon. Friend some information, again from Strathclyde police? They have tried to prosecute people but they consistently come up against brick walls in trying to get those people into court. I am greatly looking forward to the enactment of this Bill, so that they can at last address some of the problems in Scotland.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

My hon. Friend is right. He and I attended a presentation by the Scottish Office of NCIS with the Scottish Drug Enforcement Agency. We

heard about their plans for setting up a new money laundering unit in their offices in Paisley and we were very encouraged. We received a very positive response to the Government's proposals.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith

May I put it to my hon. Friend that there may be another explanation for the fact that there has been no necessity to use the money-laundering legislation in Scotland? Perhaps the standards of probity in the Scottish financial sector, much of which is located in my constituency, are much higher than those that, unfortunately, we have come to associate with some elements of the City of London.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

If I represented Edinburgh, North and Leith I would put forward that argument too, and I can understand why my hon. Friend is doing so. As a Scotsman, I would like to think that it was true. However, there is no evidence that we can adduce for it. It would be naive and complacent of us to assume that there are not cases in Scotland that need to be pursued, as there are south of the border.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

May I ask the Minister to reflect on the point that he made when he mentioned that the Conservatives have yet again voted to weaken the legislation? Is he aware that of the three Liberals, only one is present, and with both his minds he, too, voted to weaken the legislation? That makes it even more unfortunate that the nationalists did not ask for a place on this Committee. We should have been able to see whether they would vote to weaken the legislation or to toughen it up.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. Before I call the Minister again, could we perhaps think about getting back to the amendment, because we seem to have moved rather a long way from it?

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

That is exactly what I am going to do, Mr. McWilliam. My hon. Friend's point was powerful, but he has made it and I do not need to reinforce it.

I can tell the hon. Member for Surrey Heath that we oppose the minimum threshold, and I can give him three reasons. I hope that they will convince, if not the hon. Member for Surrey Heath, at least other Committee members. First, there are no such thresholds in the existing money laundering offences, or in the existing offence of failing to report laundering of drug money. My hon. Friend the Under-Secretary and I have seen no evidence that the absence of monetary thresholds has resulted in unfair or oppressive prosecution of trivial cases. If Opposition Members have any evidence, I should like to hear it.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I said in opening that my hon. Friend the Member for Beaconsfield and I have had powerful submissions made to us to the effect that if this new Bill, which the Minister obviously hopes will soon become an Act, goes through without de minimis provisions, the consequences that I spoke of will flow. Those are not made lightly. A formal meeting was

convened with us involving, as I mentioned, both leading representatives of the Law Society of England and Wales and leading practitioners in the field.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I accept that, and I know that those meetings have taken place. That does not answer my question. Did any of the people at those meetings give any evidence whatever that the absence of monetary thresholds in the existing legislation has resulted in unfair or oppressive prosecution in trivial cases?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I think that the answer is yes. I touched on that earlier in the debate. The amount of disclosure to NCIS that may have to be made in relation to trivial matters is causing particular difficulties, especially because there is not an adequate response from that organisation as to what solicitors should do next.

Let us suppose that a solicitor is carrying out a property transaction and he notifies NCIS that he has suspicions about it. The value of that transaction may be above the £1,000 threshold—it may be a huge transaction—but the solicitor is unable to take the matter any further because he is not told what to do. He cannot tell his client what is going on because to do so would be tipping off. He is left in limbo. From the solicitor's point of view, if there is no de minimis provision, the situation will be much more difficult because the problem could apply to a huge number of transactions and activities. If the Minister can reassure us that telephone guidance as to the next step will always be available from NCIS, some aspects of the provision would cease to be such a problem. Otherwise, a de minimis rule would help to alleviate that difficulty. If—

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon 4:15, 17 Ionawr 2002

Order. I shall introduce a de minimis rule on interventions.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I was thinking that myself, Mr. McWilliam. You read my mind. Even though the hon. Gentleman's answer was long, it did not deal with the issue.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

No, it did not. The hon. Gentleman dealt with the extra burden, concern and uncertainty for solicitors. However, my question was whether the absence of monetary thresholds had resulted in unfair or oppressive prosecution in trivial cases. We do not think that it has.

I want to deal with the particular point about the difficulties and volume of reporting. We accept that there is a compliance cost to the industry, but that can be exaggerated. A report could be sent electronically—by e-mail, for example— under systems that NCIS has developed in partnership with the industry. NCIS is very co-operative and collaborates with the industry to make reporting easier.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The issue is not only about the cost of notification. There may well be e-mails and other methods of sending reports. However, there is also an economic cost, and ultimately a professional cost. Once that situation has arisen, the transaction or

activity is sterilised until such time as a go-ahead is given, and the evidence that we were presented with was that those go-aheads are not given. The ball is thrown back into the court of the legal adviser or representative, who is told, ''It's your problem—you decide what to do.''

That state of affairs is unsatisfactory. By introducing a de minimis provision, at least the burden on NCIS would be alleviated, which may enable it to respond adequately to the problems with which it is presented.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

A de minimis provision may alleviate the burden on solicitors, but it will not help NCIS when it gathers information. I will talk in a moment about the importance of information gathering in criminal intelligence work. It is vital in pursuing such matters.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Just before the Minister responded to the intervention by my hon. Friend the Member for Beaconsfield, he claimed that NCIS has already developed systems that work with the industry. We are being told, as a matter of fact, that reputable firms that make those reports are left in limbo because NCIS does not respond. Clearly the Minister's brief tells him something else, but we are telling him that that is the experience of City firms. They make a report to NCIS and answer comes there none. The firm is left in limbo and transactions are frozen in aspic. Will he talk to his officials and find out why that is happening?

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

It is not unknown for there to be two interpretations of what is happening. A solicitor may have a different interpretation about the speed of response and the way in which it is made from that of NCIS. When I visited the NCIS office in Scotland, I was impressed by the operation. My hon. Friend the Under-Secretary and his officials have been in very close contact with NCIS in relation to those procedures—but I will pick up the point that the hon. Gentleman has made.

It has also been argued that existing money laundering offences have a threshold of seriousness that the Bill would remove, and that a financial threshold is required to replace that. However, the fact remains that it is already an offence to launder the proceeds of minor offences such as shoplifting. The proceeds of such offences, and even of more serious offences such as drug trafficking, are sometimes very small amounts. Although the offences may be serious, the financial amounts involved may be relatively small. I therefore do not accept that the inclusion of the proceeds of additional summary offences within the scope of money laundering creates new circumstances that demand a financial threshold.

Secondly, the advice that the Government have consistently received from the law enforcement community is that criminals will inevitably exploit minimum thresholds, as my hon. Friend the Member for Glasgow, Pollok perceived in an earlier intervention. The inconvenience to such criminals of breaking down a sum of £20,000 or even £50,000 into slightly more than 20 or 50 packets that fall below the threshold is far outweighed by the benefit that they

derive in terms of immunity from prosecution. [Interruption.] The Conservatives are chattering among themselves, not paying attention.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

On a point of order, Mr. McWilliam. Unlike a former President of the United States, I can walk and chew gum at the same time. I can have one ear listening to the Minister while having a brief but urgent discussion with one of my hon. Friends.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I accept that, but I warn the hon. Gentleman against trying any pretzels, because that can be dangerous.

Photo of John Robertson John Robertson Llafur, Glasgow Anniesland

I do not know what my hon. Friend thinks about walking and chewing gum, but perhaps he opens his mouth only to change feet.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

At least that has given the Opposition spokesmen some time in which to sort out their problem so that they can consider an important point that relates to how criminals could break up such sums in order to secure immunity from prosecution. A de minimis provision would give criminals the opportunity, especially if the level were £1,000, to secure that immunity from prosecution and reduce the likelihood of being reported on by those who handle their money for them.

Mr. Hawkins rose—

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

In a moment. It is better to give way at a logical point, such as the end of a sentence or paragraph. That makes what is said more understandable, and easier for Hansard, too—I like to look after the interests of the workers. The form of evasion that my hon. Friend the Member for Glasgow, Pollok and I describe is a genuine phenomenon known internationally as smurfing. I am sure that that will add to his knowledge. I have now finished my sentence.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I am grateful to the Minister. I believe that he had finished a different sentence from the one on which I intervened. The fact that after having said that he would not take my intervention he moved on to an entirely different subject in order to pass information on to the hon. Member for Glasgow, Pollok perhaps proves my point that he had paused for breath at the end of what I understood to be a phrase. I, too, want to look after the workers, especially at Hansard, to whom we all pay tribute.

The Minister said, ''Especially if the level were £1,000.'' I said in moving the amendment that we shall not go nap on a particular level: the Minister could introduce a Government amendment to make it £500 or £250. We simply want to establish the point that no one should be subject to huge burdens for an amount that is not regarded as serious. Worryingly, the Minister referred earlier to laundering in relation to minor offences such as shoplifting. Surely that is not what the Bill is targeted at.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I gave way to the hon. Gentleman at the right time, because his intervention brings me to my third point on why we reject the amendment.

There is no doubt in our mind that even small—very small, in some cases—transactions can provide vital leads on money laundering. The National Criminal Intelligence Service has the necessary systems and analytical tools to make use of all the reports that it receives. The hon. Gentleman was worried about wasting the time of NCIS through the volume of reports that it receives. Our officials have discussed extensively with NCIS the possible increase in work load, and we are assured that it can cope with the increase. It considers that it would be far better for it to have the opportunity to dismiss a report as relating only to a minor crime than to risk losing an important money laundering lead. I hope that my argument has convinced Opposition Members.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

It would be a convincing argument if we were being told by the industry that NCIS was, even given its current much lower work load than that envisaged by the Bill, responding to dismiss minor reports. The clear information that we received—I cannot stress how strongly it was put to us—is that NCIS is not responding. It is leaving the professionals in limbo.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

That is the third time that the hon. Gentleman has raised that matter. When he referred to it the second time, I said that we would take it on board and consider it. I hope that he will not raise the matter a fourth time. If transactions or assets are suspect, it is right that they should be reported. More reporting does not mean that all reports will lead to a prosecution. The usual public interest considerations that we have discussed and the limitations on the resources of law enforcement and prosecution agencies will, of course, continue to guide decisions about when to initiate criminal proceedings. Nevertheless, reporting is vital.

The Government remain unconvinced by the calls for minimum thresholds, even if they are set at £1,000. It is difficult to justify introducing artificial limits to such offences. Such a provision would work against the policy that we are trying to achieve under the Bill. Moreover, it would make it easier for criminals to launder the proceeds of crime, a matter that my hon. Friends and I are worried about. It looks again as though the Opposition are trying to make it easier for criminals.

Amendment No. 521 is especially unpersuasive. It would introduce a minimum threshold into the tipping off offence under clause 325 with which we shall deal next week—or perhaps the week after. [Laughter.] I just remembered clause 324. The tipping off offence applies only if a person has found it necessary to report a suspect transaction. It cannot be right that anyone should jeopardise an investigation that may follow that disclosure. The tipping off offence already contains safeguards. It applies only to disclosures that are likely to prejudice an investigation and there is a defence if the person in question did not know or suspect that the disclosure would be prejudicial. In

light of what I hope have been convincing arguments, I urge Opposition Members not to press the amendment.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I agree with what the Minister said about amendment No. 521. It was an attempt to look across the board of part 7 at those areas where minimum provision should be provided, but he advanced a cogent argument why such matters should not apply in the case of the amendment. We shall not press it to a Division.

I turn now to the response to amendment No. 518. We want money laundering to be suppressed, but we are concerned about the administrative burden that may be placed on those who have to carry out the reporting system, which is backed up by a major criminal sanction of 14 years imprisonment on indictment. To that extent, it places a burden on individuals and organisations. While, I accept—well, the Minister made the point so I suppose that I must accept it—that he is looking at the Bill in the context of financial organisations, solicitors' firms and other ''City'' activities, the net has been cast wide and it applies beyond such organisations and the regulated financial sector.

At what point should an individual start to worry about the provenance of money that he is given? Clearly, in that context, the amount is relevant. If the Minister of State offers me £25,000 in cash as payment for an item, I might be alerted to something unusual, because as we have discussed, most people do not carry £25,000 in cash. If he offers me a £5 note for an item that is worth £5, that cash transaction is unlikely to excite any anxiety or suspicion.

I simply say to the Minister that if we do not have a de minimis provision, a considerable burden will be placed on individuals in small-value transactions. Many such transactions are likely to be outside the regulated financial sector and may involve individuals who would not have read the part 7 or be aware of how to ring up NCIS. What publicity do the Government plan to give to the Bill to inform the wider public that they would be subject to severe criminal sanctions if they were not constantly on alert for these problems during transactions?

One of two things seems likely. In reality, notwithstanding the Minister's arguments about minimum provisions, NCIS will have neither the time nor the desire to lay its hands on the information, or certainly to bring criminal sanctions on those involved who did not comply in transactions that involved minuscule sums. That is the most likely outcome. The alternative outcome is that many people will be in serious jeopardy of criminal prosecution because they had not made declarations for transactions that may have seemed a little odd but were forgotten about because the sum was so trivial. Such triviality and the small quantity of the sum are clearly legitimate and compelling reasons why a person may dismiss suspicions.

Mr. Paul Stinchcombe (Wellingborough): I appreciate the eloquent point that the hon. Gentleman makes. However, he is aware that the principal vice of the amendment is that it could be evaded so easily. The hon. Member for Surrey Heath acknowledged that Conservative spokesmen were aware of that when the amendment was tabled. Has the hon. Member for Beaconsfield thought of a solution to that problem? If he has, what is it, and if he has not and cannot, will he still support the amendment?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 4:30, 17 Ionawr 2002

There are several ways in which that could be addressed. The amount could be reduced, and I am bound to say that there is a point at which the Minister's objection ceases to be valid. If the minimum amount were £250, the evasion would have to be convoluted if it were to be realised.

A further alternative would be to draft an amendment that provided for a de minimis provision but provided that if transactions were linked and their aggregate total was more than £1,000, they should be declared.

I am prepared to accept such ideas, but I continue to be concerned about a blanket legal requirement that starts at a halfpenny. That is what we are talking about, because that is the smallest monetary consideration available in our currency—and it might be even smaller than that in some foreign currencies. The Minister must address that. He is aware of my anxiety about discretion. He has repeatedly told the Committee that provisions will be enforced with discretion, so nobody needs to worry.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

Did the hon. Gentleman not hear me say that there are other constraints? There are public interest considerations, and there are considerations with regard to the resources of the prosecution authority. Nobody will pursue a halfpenny—although I think that the sum would now have to be a penny before it was legally possible to do that.

The hon. Gentleman's argument is making a mockery of the situation. It is a reductio ad absurdum. [Hon. Members: ''Oh.''] I hope that I got that right.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. The Minister is all right. So long as the Chair understands what he is saying, it is in order.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister cannot have it both ways. On the one hand, we are given the impression that NCIS is saying that it might want to know about even the smallest transaction about which there are suspicions—which expresses the Big Brother attitude of wanting to know everything. On the other hand, he is saying that NCIS would not bother to prosecute if it discovered that someone had suspicions about a minor transaction but did not report them. I am unsure whether that would be the case. If it is so important for NCIS to hear about a £5 transaction, and someone does not tell them about it, that person might be in jeopardy. I find his argument difficult to follow.

My hon. Friends and I have been guided by representations that we have received about the administrative burdens and problems that will be placed on legitimate organisations, companies and

individuals, and about the stress and anxiety that people could experience if they have to think, ''What should I do in this situation?''

The Minister must bear it in mind that, in a legitimate business environment, the clients are entitled to confidentiality. [Hon. Members: ''Oh.''] That is an important point. Human relationships are dependent on the ability to maintain confidentiality. We have to do that all the time, in a family setting, and in others—although I hope that such a setting would never involve the commission of crime.

Clients normally assume that they are entitled to confidentiality when they are dealing with professional advisers. The point has been made that some companies are putting up notices saying, ''Clients must understand that if we receive information that indicates that they might be committing a criminal offence, or that money laundering may be going on, we will tell the authorities.'' I accept that that is a proper step to take, but it is a departure from the normal practices of commercial confidence—and in particular from the usual practice when clients are dealing with people from whom they would normally have a commercial right to expect that confidence.

At what point should that be departed from? With regard to tiny transactions, it is difficult to see how it could be departed from. Professional people would bear a heavy burden in such circumstances. The small size of the transaction would tend to dispel any suspicion that it might be illegitimate.

It should be possible to decide on a cut-off point, where one can say, ''If we are concerning ourselves with this, the system is getting out of control,'' because otherwise we would be demanding of people the constant revelation to the state authority of information that goes beyond the bounds of what is reasonable or proper for the prevention of crime.

Therefore, a philosophical issue is at stake, even though the principle of the requirement to give such information is a departure from the practice that existed prior to the passing of the earlier legislation. I can see the reasons behind that departure, although I do not welcome the fact that our society has got to such a pass that we have had to do that. It is a necessity. I am not saying that it is an unmitigated good—it is not. When it is extended to any transaction of any size, including minute ones—if the Minister thinks that £1,000 is too much, I am happy to consider a lesser figure—it approaches the borders of unreasonableness. At that point, I begin to think that the amendment has force, subject to what the hon. Member for Wellingborough said about a series of linked transactions. I accept that that could be a major loophole, which would have to be plugged.

Photo of Vera Baird Vera Baird Llafur, Redcar

I appreciate why the hon. Member for Beaconsfield is concentrating on clause 324, in relation to which his argument may have more force, although not as much as he thinks. I am very worried that, under amendments Nos. 518 and 519, somebody who knows that they are dealing with criminal property would not be committing a crime if its value is £999.99. However, if its value was a penny more, a crime would be committed. Whatever the figure, that is a ludicrous

basis on which to allocate criminality. I defy him to point to another example of that in English law—or Scots law.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

We have had a long debate on the matter, and I fully appreciate the concerns of the Minister and other Labour Members that we would be turning a blind eye to criminality by implementing such an amendment. However, the arguments made by both my hon. Friends have a certain amount of force. Dare I say that, in part, the Minister implicitly accepts that a blind eye will not be turned to such very small sums, but that the full weight of the investigative body will not be exerted on individuals in relation to relatively small sums.

To draw an analogy, it would be interesting to know how many prosecutions have taken place in relation to sums of up to £1,000. It would be useful to have such statistics ready when the Minister sums up. We have already espoused our concern—which we shall no doubt reiterate at length on Tuesday, when we consider other aspects of part 7—that there is a real risk that an enormous regulatory and compliance burden would be imposed on financial institutions in the City of London. That would worry me, especially if firms of solicitors and accountants were required to account for every last transaction. The whole process might collapse if we are not careful. The real risk would then be that the money laundering provisions, which are important, would come into disrepute.

The Minister has already said, in part, that small sums would not be investigated. Would the level be fixed at below, say, £1,000, or £500, or indeed £5,000? If we are to tackle the real Mr. Bigs effectively, it would be a crying shame if the entire process were to be strangled by bureaucratic paperwork, which would be imposed on the regulated sector, and to an extent the unregulated sector. I would be grateful for guidance from the Minister, as a de minimis provision would be sensible.

Another alternative might be not to include such a provision in the Bill but to ensure that it is understood through a nod and a wink, or through annual or bi-annual guidance notes from the agency to the regulated sector. Hon. Members of all parties would think it a crying shame if a massive burden of regulation were so to drown the compliance and regulation officers that the real criminals that we are trying to bring to book escaped.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok 4:45, 17 Ionawr 2002

It is interesting that the initial argument advanced in favour of the amendment concerned reducing the burden of work involved, yet when we moved on in the discussion, the hon. Member for Beaconsfield—not for the first time—let the cat out of the bag and started to raise issues of Big Brother and confidentiality. He was almost arguing that it is an Englishman's right and privilege to fiddle his taxes by keeping his accounts secret.

The point that was made about confidentiality seems absurd. It is not for a moment being suggested that every disclosure would be published in the equivalent of the Evening Times to be seen by all and sundry. Disclosures would be kept within a strictly regulated, confidential crime-fighting mechanism. Breach of confidentiality would therefore be minimal. Emotive terms such as Big Brother smack of the ''sneaking'' defence, which was advanced by the hon. Member for Henley before he had to go off and sell his papers.

I draw to the Minister's attention the letter from the Law Society of England and Wales to which I referred earlier. It suggests a standard phrase to be included in a client care letter. I quoted it earlier, but it is also relevant now:

''For the protection of our clients we operate a money-laundering reporting procedure. In certain circumstances, information will be revealed by us to the appropriate authorities in relation to any suspicion of money laundering.''

I cannot understand why any honest person dealing with a respectable legal practice would have any reservations about that sub-policy.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

Gosh. Is the hon. Gentleman better informed than me?

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I hope for the hon. Gentleman's sake that I am being prescient again, but I suspect that it is the time of the afternoon.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. There cannot be an intervention on an intervention.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Nothing would give me greater pleasure than if the hon. Member for Glasgow, Pollok were made a Minister, although I hope that his Government's tenure will be limited.

Is the hon. Gentleman criticising what the Law Society of England and Wales put on their website or, as I think, is he beginning to recognise that the Law Society of England and Wales is behaving perfectly properly? That would stand slightly at odds with his usual wholesale criticism of all lawyers as crooks and shysters.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

I do not think that all lawyers are crooks and shysters, and not just because some of them are good lawyers. Some of them have standards of probity. [Interruption.] Shall I wait until the hon. Gentleman has finished his conversation?

Mr. Hawkins indicated dissent.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

I think that what the Law Society is advancing as good practice is exactly that. If lawyers operated to the standards to which the Law Society pretends and suggests that they do, many of our problems would be overcome. However, many lawyers are seduced by the prospects of the rich pickings to be made through dealing with criminals and being

prepared to co-operate in laundering money on their behalf. I hope that that is sufficiently unsubtle for the hon. Gentleman to comprehend.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

It is certainly unsubtle. I can accuse the hon. Gentleman of many things, but rarely of subtlety. The Under-Secretary accused me of being—or correctly described me as—blunt. I hope that I can be as blunt as the hon. Gentleman. I think that he is relating his experiences north of the border, and in particular his experience of his area, as he often does. I wonder whether he means to praise the Law Society of England and Wales but attack the solicitors who operate under the Law Society of Scotland. I am not sure that he does.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

That is disingenuous. The hon. Gentleman knows full well that I am saying that the guidelines of the Law Society, if operated in practice, would overcome many of the problems. The reality is that the Law Society of England and Wales and the Law Society of Scotland are either unable or unwilling to police their members to an appropriate standard, so the legal authorities have to do it for them.

Does the Minister accept that resources must be considered? I have spoken, along with several colleagues, to Strathclyde police and to representatives of other authorities. They are worried about resources. There are several individuals who they are well aware that they would wish to target and pursue, but they are worried that they will not have the resources to undertake such action adequately. I hope that my hon. Friend will give me assurances further to those that he has given in writing already that such matters will be considered as a priority.

I also draw the Minister's attention to the press release of the Serious Fraud Office, which I am unable to lay my hands on at the moment. The gist of it was that one of the major difficulties faced by the SFO was precisely the practice of smurfing to which he referred. With modern electronic technology, it is possible for people to move small sums around the world in different ways—the payments being made from funny banks to respectable banks to circulate the money—and once money gets into the system, modern technology can make it much easier for it to be dispersed.

The issues of smurfing and small amounts are essential. We cannot allow, as my hon. Friend the Member for Redcar said, offences to be committed for £1,000 but not for £999.99. While there is some merit in the Conservative Members' argument, yet again the effective result of their proposal would be to act as the criminals' friend—the launderers' friend—and allow people to get away with practices that would otherwise be tort. I do want to be unduly critical of hon. Gentlemen, but only when they deserve it.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Accepting as I did the argument of the hon. Member for Redcar about a particular level, would the hon. Gentleman be less unhappy if we discussed a de minimis limit of £250 or £200? I am being serious.

Mr. Davidson: I understand the hon. Gentleman's point, but the principle of an offence being committed for £250, but not for £249.99, in multiple doses, as it were, would not deal with smurfing. Like him, I want the provision to work. I recognise the problem of bureaucracy and burdens on business. I referred to a list of banks earlier, but because such people cannot be trusted to police themselves, we must adopt an unfortunate mechanism. If banks, lawyers and accountants operated informal systems that were so rigorous that virtually all criminals were deterred, the number of cases that required to be reported would be minimal. Few occasions would arise when efforts were made to get money into the system.

The fact is that that is not happening. Solicitors and others have got themselves into the position of creating so much public mistrust that we are required to take action that, regrettably, will place a heavy burden on them. I do not think that hon. Gentlemen have responded adequately to the point, as a result of which I shall be forced to support the Government, even though I recognise that their argument is a difficult and almost undesirable approach to take.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I do not know whether I understand what the hon. Gentleman says. Would he be persuaded if I conjured up out of the ether clear evidence for him before our next sitting—I suspect that I would be able to do that if I had to—of how many reputable organisations produce such reports under the current legislation? Would he be persuaded that the system results in many reports from many reputable institutions? He suggests that the bodies cannot police themselves and that that never happens. Would he be convinced if I gave him evidence that it does happen and that the unamended provision would make the burden 10 times worse?

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

By all means, the hon. Gentleman can produce the information. If I think that it is helpful and I am shown that the resourcing that is provided now and in the future would be unable to cope, that would influence my view. I am interested in anything that he can produce in the context of how the Minister tells us that we will deal with the pressures.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I hope to be able to deal with the debate tonight. I can be brief and comprehensive at the same time, although I do not know about anyone else.

I can assure my hon. Friend that we are examining the resources both north and south of the border and we bear in mind the worries that he and others expressed. It is right and proper that the Law Society publishes guidelines, and such guidelines have been published by many organisations that contain members that encounter money laundering during their work. However, we expect all members of such organisations to pay close attention to the guidelines and to adhere to them.

The hon. Member for Surrey Heath made a point on three occasions. Ninety-eight per cent. of cases that are received are reactive rather than proactive. In other words, consent is sought in only very few cases. NCIS responds as promptly as possible to cases in which consent is sought. However, NCIS has assured us that

it is willing to discuss any problems that arise with the organisations concerned. I hope that such meetings will follow on from the points that the hon. Gentleman helpfully raised.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I am grateful to the Minister for that. Following further inquiries of NCIS by his officials, it would be helpful if he could tell us by next Thursday—we will not deal with all of part 7 tonight—how many outstanding reports led to delays that were greater than 72 hours before NCIS reported back.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

We shall have other opportunities to discuss many aspects of part 7. My hon. Friend the Under-Secretary and I heard the hon. Gentleman's point and we will examine it.

I turn to smurfing. Lowering the threshold would always allow smurfing unless the threshold was so low as to be meaningless. The hon. Member for Beaconsfield almost invited me to enter a Dutch auction about the level of the de minimis threshold. That is not a productive exercise. Linked transactions can be apparent to NCIS, which receives all the information, but they are rarely apparent to the person who reports.

Confidentiality issues have nothing to do with thresholds. We are discussing a point of principle. Do we wish to create loopholes through which launderers may avoid prosecution?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister may have misunderstood my point. I said that an adviser who acts properly and receives information must put several things through his mind, one of which is, ''Is this suspicious, or am I making a mistake, and in doing so breaching the normal client confidentiality that I should try to maintain.'' Of course, he must not try to maintain confidentiality if there is suspicion or knowledge that the transaction is criminally connected, but he must bear the issue in mind. It would be unfortunate if he disclosed a completely innocent transaction and

breached client confidentiality. A person who thinks logically, honestly and properly must take that factor into account.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

The hon. Gentleman must take into account what my hon. Friend the Under-Secretary said. The reporting occurs within a restricted, confined and privileged area.

I listened carefully to the hon. Gentleman, and I have two main points. The introduction of a de minimis threshold would deprive law enforcement agencies of valuable intelligence and would have a harmful effect on the overall fight against crime. We are not just dealing with serious crime and organised crime. There is a perception, which has been reflected in the comments of various hon. Members, that serious crime always involves large sums of money. However, in very serious crime, it is often the small amounts that allow detection to take place. I could give many examples, but there is not enough time tonight to give all of them.

In people smuggling, exchanges of money can be relatively small, but their detection can allow us to tackle the problem. In the drugs trade, youngsters are hooked on drugs through the payment of small amounts, which results in much serious crime in the longer term. In relation to terrorism—thinking back to 11 September—the transfer of small amounts can allow the planning of major offences to be detected. Tax evasion, pornography and paedophilia are other examples of serious crimes in which the amounts involved can be relatively small.

I hope that I am beginning to convince Opposition Members that we should not enter a Dutch auction. The smallness of the sum does not necessarily represent the seriousness of the crime. In 2000, 10 per cent. of all suspicious transactions made known to the NCIS were of less than £500 in value. I hope that that figure is persuasive. We recognise the Opposition's argument that we should accept a de minimis provision, but a very strong contrary argument exists. I hope that that convinces the Committee.

Debate adjourned.—[Mrs. McGuire.]

Adjourned accordingly at two minutes past Five o'clock till Tuesday 22 January at half-past Ten o'clock.