I beg to move amendment No. 487, in page 187, line 27, leave out from 'suspects' to end of line 28.

With this it will be convenient to take amendment No. 524, in page 187, line 28, leave out 'suspecting' and insert 'reasonably believing'.

We now come to one of the central issues of part 7. The clause provides for the serious offence of failing to disclose in the regulated sector. It states:

''(1) A person commits an offence if each of the following three conditions is satisfied.

(2) The first condition is that he—

(a) knows or suspects, or

(b) has reasonable grounds for knowing or suspecting,

that another person is engaged in money laundering.

(3) The second condition is that the information or other matter—

(a) on which his knowledge or suspicion is based, or

(b) which gives reasonable grounds for such knowledge or suspicion,

came to him in the course of a business in the regulated sector.

(4) The third condition is that he does not disclose the information or other matter to a constable, a customs officer or a nominated officer as soon as is practicable after it comes to him.''

Last week, the hon. Member for Redcar alluded to the fact that we are introducing a criminal offence that is founded on negligence. Instead of a subjective test of the state of mind of the person who commits the offence, the court's test is whether a person should have had reasonable grounds to know or suspect that another person is engaged in money laundering. Therefore, it is possible for a person to be convicted of the offence although he could satisfy the court that at no time did it cross his mind that he was dealing with money laundering that should have been reported.

It is also noteworthy that the provision is a clear departure from the previous regime that operated under the Drug Trafficking Act 1994. Section 52 of that Act states:

''A person is guilty of an offence if . . . he knows or suspects that another person is engaged in drug money laundering,''

and

''the information, or other matter, on which that knowledge or suspicion is based came to his attention in the course of his trade, profession, business or employment''.

For an offence to be committed under the Act, a defendant must know or suspect that another person is engaged in drug money laundering. That is the very test that applies to other criminal offences in part 7, but for the offence under clause 324 the Minister is happy to move to a negligence test. The only other difference between the 1994 Act and the clause is that the Act applies to trades and professions, while the clause applies to the regulated sector.

The size of the regulated sector and the nature of the crime do not make me believe that a different test

would be fair on the basis that if a person is in the regulated sector, he jolly well ought to know certain information. It is worth pointing out that, as the Bill is drafted, a person in the regulated sector may range from a partner in a senior firm of solicitors or the director of a major banking enterprise down to the most junior member of staff, who could be jailed for five years for failing to report actions that did not appear suspicious until viewed with the benefit of hindsight.

Those of us who practise in the professional sphere know all too well how easy it is, in the course of our work, to miss things. Fortunately, 99 per cent. of the time, it is without consequence. However, when there is a consequence, which sometimes happens to colleagues, I have considerable sympathy for them. The transformation of such a situation from one in which a negligence claim might be attracted into one in which a person may face five years' imprisonment, fills me with horror. The amendment would ensure a much fairer system, which would command much wider public approval and support if the test of knowing or suspecting were introduced.

That is a simple introduction to the amendment, but it is an enormous topic.

I want to hear from the Minister the administrative, legal or public policy justification for creating an offence of negligence of such seriousness. We are not talking about minor offences in administrative law. Anybody looking at this part of the Bill would consider that somebody who had breached the clause would be committing a very serious offence. We must assume that that is the case because we are not talking about a rap over the knuckles or a fine—potentially, we are talking about a long period of imprisonment.

The Committee could regard amendment No. 524 as an add-on or an alternative—I emphasise that it had not even been selected last week, and I am grateful that it has now been selected—but my preference would be for amendment No. 487, which deletes all reference to reasonable grounds for knowing or suspecting, and establishes the offence fairly and squarely on the basis of a state of guilty knowledge in respect of the person in the regulated sector who fails to make the necessary disclosure when he knows or suspects that money laundering is taking place.

We had a long debate last Thursday on the various permutations of the state of mind or mens rea element that would apply to part 7. Through tabling amendments Nos. 426 and 428, the hon. Member for Beaconsfield sought to change the mens rea element in clauses 321 and 323 from knowing or suspecting that a property was derived from criminal conduct to knowingly committing the offences. He made it clear—if he did not do so in what he said, he did so when he voted—that his objective was to remove the element of suspicion from those offences.

During that debate, my hon. Friend the Member for Redcar pointed out that the wording of clause 321 would narrow the existing offence of concealing the proceeds of crime, because the mens rea element was

one of having reasonable grounds to suspect, rather than of suspecting. In passing, I should note that she was correct, and I agreed with her that that was the case, so she was right to draw it to the Committee's attention. The activities in that offence must also be shown to have been committed for the purpose of avoiding prosecution or the making of a confiscation order. The present offence is not as wide as we might at first think, even though the objective test of having reasonable grounds to suspect applies. After a long debate, I am sure that the Committee is now clear that the principal money laundering offences under clauses 321 to 323 apply to everyone, not only the regulated sector. The failure to disclose offence under clause 324, which has been mentioned during our discussions, applies only to the regulated sector.

I return now to the amendments, and particularly the negligence test in the failure to disclose offence under the clause. As drafted, the failure to disclose offence would be committed when a person knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering, and the information came to him in the course of conducting his business in the regulated financial sector, but he did not disclose it to a constable, a Customs officer or a nominated officer. There are several options that one may choose in respect of a mens rea element that might be applied to such an offence. Obviously, the top of the range is actual knowledge, which is the stiffest test that may be applied. That is followed by certain other subjective tests, such as believing or suspecting, after which there may be objective tests, such as having reasonable grounds to know or believe, or reasonable grounds to know or suspect.

The amendment would retain the subjective test of knowledge or suspicion of the offence. Where the Opposition part company from the Government's position is that they want the test of having reasonable grounds to suspect to be either deleted or at least raised so that the offence can be committed only under the second limb where there are reasonable grounds for knowing or reasonably believing. The test of suspicion would be removed from that limb. That represents yet another attempt to water down the effect of part 7 and our ability to apprehend those who assist others to launder the proceeds of crime.

In response to amendment No. 487, we consider that an objective test is necessary because we want the financial industry at large to be much more diligent in identifying and reporting instances of money laundering. It is already the test for the requirement to disclose information on transactions relating to terrorism. The relevant provision can be found in the provisions inserted into the Terrorism Act 2000 under schedule 2 to the Anti-terrorism, Crime and Security Act 2001.

The test of reasonable grounds or suspicion will apply only to the regulated sector. It will not apply to the public at large. It is right that such a test should be imposed on the regulated sector because the public have a right to expect that that sector, which is best placed to identify money laundering, should be placed under a greater duty of diligence in detecting it. It is

important that measures are in place to deal with wilful blindness. The amendment would remove that.

Is the Minister seriously suggesting that the reputable banking and legal community in places such as the City of London is not already complying with its duty to report? Last week, I urged him to use the past few days to try to get an indication of how many reports have been made on the NCIS forms. I do not know whether that research has been done. Our information shows that many reports are made but NCIS does not respond to them, which leaves transactions in limbo. He has not dealt with that point.

I did try to tell the hon. Gentleman that we must think seriously about the matter. I am not criticising current institutions at all because I know how difficult it is in a competitive world for anybody to try to raise standards, at a cost that is not borne by competitors. When we try to make effective money laundering regulations, we must decide the minimum standards. That applies to other areas, such as safety at work and employment regulations, and training provisions. It is extremely difficult for individuals to say, ''Ah well, we don't care about the requirements of the law. We're going to do something more than that, although it may cost us and give other people a competitive edge.''

The Minister is quite right that Parliament is doing its job. That is why this debate is important, as my hon. Friend the Member for Beaconsfield said. If the Minister says that the institutions are not complying properly with the system at present—he said in terms that he makes no criticism of that—it is difficult for him to say that we must impose greater obligations on them. The system is working well at the moment, as he freely concedes. There is no need for greater provisions.

What I said does not indicate that the system is working well, or as well as we want. In our previous debate, I said that we want to raise standards considerably. When faced with the problems that exist in our modern society, sadly, we must do that. That is my view. I wish that the situation were different and that we had levels of organised crime facilitated by money laundering that were such that we need not give great consideration to these matters and could allow a laxer regime that had no consequences on society—but that is not the case. We must examine a serious problem and consider how appropriate any measures are. That is what we are discussing, is it not?

Yes it is, but he and I may reach a different judgment—that is what Parliament is all about.

The Minister said that the system may not be working as well as he and the Government would like. Both last week and today, I suggested that the only aspect of the system that does not work properly is NCIS's responses. The institutions send in reports but NCIS does not respond in due time, which leaves the institutions in limbo.

I do not know whether the hon. Gentleman believes that.

I do.

If he does, I do not know whether he heard all or part of what my hon. Friend the Member for Glasgow, Pollok said the other day. As far as I am aware, the main problem in the Abacha case was not that NCIS did not act on reports that were made to it, but that there was clear evidence of money laundering, in retrospect, although no reports were made. If, despite such evidence, the hon. Gentleman says that his party considers that there is no need to examine whether the current standards and regulations are competent and effective to deal with the problem, so be it. We do not share that view. Evidence exists that the reverse is the case—there is a real need to raise standards in that area, and only Parliament can do it; individual institutions cannot.

I accept that Parliament must come to a view. I listened to every word that the hon. Member for Glasgow, Pollok said last Thursday afternoon—he was only delayed by a minute in joining the Committee this morning, but he missed my praise of him, so he will have to look at Hansard to see what praise I lavished on him in his absence.

The Minister will understand that the reason why my hon. Friend and I keep returning to this point is that we are told, as a matter of great importance, by the Law Society of England and Wales, and by the committee that specialises in the matter, that precisely what we are saying about transactions in limbo is happening, and not just on a one-off basis. As to whether we really believe it, we do, because we are told by experts at the sharp end that that is what is happening, not just once or twice, but repeatedly.

I do not accept that. We have discussed with NCIS in detail how it deals with the current situation, how it would like the legislation to be structured, and its capacity and ability to deal with an increase in reports. It has told us—if the hon. Gentleman is prepared to ignore its advice, so be it—that it wants those reports to come in. He says that he has evidence that there are thousands upon thousands of reports.

I did not say thousands.

Well, there are thousands. Let us admit that. I do not know whether that is considered excessive, but I am told that about 18,000 reports of suspicious transactions are made to NICS every year. I am also told that, looking back on those figures, that number has not risen for almost a decade. That may appear to be a lot of reports, but when one considers the size of the regulated sector and the scale of banking and financial activities in this country, I am not sure that the amount is as massive as he is trying to paint it.

I wonder whether I could move the Minister on to the negligence aspect of the provision. Those reports that have been made to NCIS can have been made only when the person reporting the incident knew or suspected. If the person did not know or suspect, even if there were reasonable grounds for such knowledge or suspicion,

he would never be in a position to report. If he does not report, because he does not know or suspect, does that not amount to a reasonable excuse for not disclosing the information under subsection (5)?

Let me move on through the issues and establish whether we have covered all the points to the Committee's satisfaction.

Before the hon. Member for Surrey Heath intervened, I was saying that the Government believe that measures must be in place to deal with the issue of wilful blindness of employees when the Bill applies only to the regulated sector.

This is the second time that the Minister has used the expression ''wilful blindness''. Of course, such matters are of fact or degree. However, if somebody is wilfully blind, I would expect him to be guilty of the offence, even if the amendment was made. The court would conclude, on the evidence, that the person did suspect that money laundering was taking place, because he exercised his will in blinding himself to it. It is an unfortunate expression, as I would regard someone who is wilfully blind as being more than negligent.

That may be so. We are talking about the burden of proof that is required, and the ability to prove the case. The hon. Gentleman probably understands the subject better than I do.

It is relevant that, since 1993, regulations have been in place that require all bodies that carry out financial business to be particularly alert to money laundering. The regulations require them to appoint dedicated money laundering reporting officers, and to have in place systems of training to teach employees that enable them to be aware of, and to report instances of, money laundering.

For several years, the industry has produced its own guidelines to aid employees to recognise suspicious transactions. The Bill builds on that: after it is enacted, the court will need to have regard to whether an employee followed any relevant guidance. Such guidance will need to be approved by the Treasury before it can be taken into account, and we intend that it should include information and examples with regard to what may constitute reasonable grounds for suspecting that someone is engaged in money laundering.

One of the key criticisms about the offence has been that it will bite not only on senior professional people and experienced staff, but on junior employees, and possibly on persons who are untrained or who are short-contract agency staff. It has also been put to us that such personnel are often hard-pressed, on low salaries and subject to internal financial targets. It has been argued that banks, rather than employees, should be penalised, and that employees should be penalised through internal disciplinary measures, rather than be allowed—potentially—to fall foul of the criminal law.

Those are serious issues and we have not skirted around them. We have addressed them carefully. We have received representations about them from a range

of organisations such as financial institutions and trade unions. However, money laundering is a very serious matter, and we must not lower our defences or limit our capability of identifying incidences of it: on the contrary, we must strengthen our defences, and clause 324 is intended to achieve that.

All personnel who are placed in situations where there is a risk that they will come into contact with money that is being laundered should not be placed in such a position until they have been properly trained. The 1993 regulations already require that; it is a criminal offence for financial institutions to fail to train their staff. However, we do not believe that the Crown Prosecution Service will want to pursue cases against junior employees when it is clear that the more senior staff in a financial institution are at fault. Much will depend on the circumstances of each case, both in respect of decisions that are made about whether to prosecute and, if prosecution is taken forward, the extent to which a person is liable, taking into account any guidelines which might have been issued.

The Government have not approached this new test in a cavalier manner. On the contrary, I assure Committee members that we have given careful consideration to the inclusion of the new test of reasonable grounds to know or suspect, and we think that is it is fully justified, given the climate in which we are living.

We have also looked at whether it is practical to limit the categories of people within financial institutions to whom it can apply. It is front-line staff who will have the relevant information. They are the people who are interfacing with the accounts, and they will notice suspicious transactions. I would be comfortable if we could define categories of staff, but we would have to be able to do so without punching a hole in the effectiveness of the provision.

Amendment No. 524 has been tabled as an alternative to amendment No. 487. I cannot recommend that the Committee accept it. Under Amendment No. 524, a person would commit an offence if he had reasonable grounds for knowing or reasonably believing that another person was engaged in money laundering. As I have already said, we think that the financial sector should be vigilant. We want to catch not only those who should have known that money laundering was going on but those who should have suspected it.

As far as ''reasonably believing'' is concerned, leaving aside the drafting oddity of having the test of reasonableness appear twice in a sentence, it would be hard for a person or a court to judge what constituted a reasonable belief. Amendment No. 524 would have two negative effects: it would place an additional burden on those in the regulated sector who have to make reports, and it would make it more difficult for the courts to secure convictions.

We have brought together the level of proof required for those offences that apply to everyone, both in the financial sector and beyond. After much reflection, we still believe that the public are entitled to expect greater vigilance from those in the regulated

financial sector—I know that it is not a narrow sector, and that many people are involved in it—and it is therefore appropriate to have a different test. That is the basic case for why we have structured the Bill that way and why I cannot accept amendment No. 524.

Will the Minister answer the question that I asked him earlier: how could someone disclose information if he did not know or suspect it to exist? If he cannot disclose information, as he has no knowledge or suspicion of it, why is it not reasonable for him not to disclose it?

If that person does not know anything, he cannot disclose anything. However, what if someone has guidance on how he should do his job and on the vigilance that he should apply, but he ignores that guidance and so fails to notice and report a suspicious transaction? Are we saying that we should accept that he has a defence, and that under no circumstances can he be prosecuted? I should think that, as guidance had been issued, a level of conduct is to be reasonably expected of him because he works in the financial sector. It should be no defence that he did not follow the guidance and failed to report money laundering when he should reasonably have suspected that it was occurring. The authorities should be able to consider whether to prosecute such a person.

I am obliged to the Minister for that helpful answer. I appreciate the force of his arguments in favour of creating an offence of negligence. I am worried about creating two offences within a single clause: one of knowledge and suspicion and one of negligence. Both offences require that three conditions are satisfied, but under the second offence, the third condition can never be satisfied.

I am not sure of the point that my hon. Friend is making, but if he is worried, let us continue with the debate. We are saying that people working in that sector should potentially be subject to prosecution if they should have had reasonable grounds to suspect a suspicious transaction and fail to report it. If an employer fails to provide proper notice to employees of the guidance under which they were reporting, that employer is guilty. In such a case, the standards of the employer would need to be raised. However, when it is clear that an employee operated outwith that guidance, the prosecution should be able to bring a case against him.

If a person can show that he neither knew nor suspected that a transaction involved money laundering and that he was operating within his understanding of the guidance, that would be a defence. In all probability, that would deter the prosecution from making a case against that person, and instead the person who was responsible for that front-line employee's lack of knowledge might be pursued. My hon. Friend is saying that that is unreasonable, and that we should not expect people to apply themselves in that way.

I am not saying that. The Minister may have a good case for creating an offence of negligence. My point is that two separate offences should be created under two separate provisions: that of knowledge or suspicion and that

of negligence. Including the offence of negligence under the same provision requires satisfying a third condition that can never be satisfied.

Is this to do with the way that the Bill is drafted?

It is a drafting point.

Right. I understand that my hon. Friend believes that the provision could be made clearer if it was drafted in another way.

The third condition deals with a person who has not disclosed information. A person can never disclose that information if he does not know of, or suspect, its existence. The provision makes sense only if a person's lack of knowledge or suspicion does not amount a reasonable excuse under subsection (5)(a). It strikes me that, ordinarily, such lack of knowledge or suspicion would be a reasonable excuse not to say something.

I am more than happy to look at whether the provision can be drafted in a way that makes it clearer, and I give my hon. Friend a commitment that I will look into that matter.

Dare I say that the hon. Member for Wellingborough (Mr. Stinchcombe) has hit the nail on the head? That shows the draconian nature of the provisions. I presume that the Government's intention under subsection (5) is that a person who has no knowledge or suspicion about a particular case of money laundering, but who could reasonably be expected to know about it, would be perceived as not having a reasonable excuse for not making the disclosure. That is absolute nonsense in any normal use of the English language. However, it is evident that the Government intend that not knowing will not be accepted as a reasonable excuse for not disclosing.

I am not trying to be obscure, and I do not believe that the hon. Gentleman is making the same point as my hon. Friend. If he is, no doubt he will clarify that matter. Let me explain the provision, and I am sorry if the hon. Gentleman thinks it draconian.

We are not advancing the proposition that not suspecting is a reasonable defence. A negligence test should be applied to the regulated sector. It would be possible for a prosecution to be brought against someone whereby it was said that it was reasonable to suspect money laundering and that the particular individual should have known. He should not have an automatic defence of saying, ''But I didn't suspect.'' We do not accept that such a statement should be a defence. There should be a negligence test that requires people to be trained in the appropriate measures and to be mindful of the guidance in how they undertake their job. When there are reasonable grounds to suspect that a particular transaction involves criminality, they are potentially at risk of breaking the law if they do not disclose it.

I am anxious to receive some information so that I can fully understand the clause. The Minister has accepted that there will not be a defence under subsection (2)(b) that the person did not know. Those involved might not know or suspect, but

they would still be guilty. It would not be a reasonable excuse that they did not know. It was almost suggested that the defence under subsection (5) could be used if a person followed the guidance referred to under subsection (6). However, a person may have followed the guidance but, because of carelessness or a preoccupation, still failed to see what was happening. Following guidance is not a defence: it is only practice to be taken into account.

It is not an absolute defence—that is right—but the factor to be taken into account in the defence is if the person said that, in doing his job, he was mindful of the guidance and applied it. I accept that it would not defend the person in all circumstances. The provision is worded as it is intentionally.

With respect to my hon. Friend the Member for Wellingborough, I think that he has misunderstood subsection (4). He said that the third condition could not be satisfied if the person did not know about the money laundering. The person will have the physical information, but the fact that he did not realise that such information conveyed something in particular is not relevant. He should have realised what it meant, so he will have the information that he should have disclosed. It is not as though the person would never have had the information, but he may not have realised that he had it, so he will be prosecuted for that failing.

Potentially, I am in trouble. Lawyers are at every corner. They are about to start arguing.

Will the Minister give way?

No, I will not give way. I am not so sure that my hon. Friend the Member for Wirral, West (Stephen Hesford) can dismiss the argument of my hon. Friend the Member for Wellingborough. Of course, the person will have a lot of information in front of him. It will mainly be about financial transactions that are about to happen. The matter is about whether he should have identified and reported a suspicious transaction.

The infelicity of my argument was when I said, ''can never be satisfied.'' I meant, ''will inevitably be satisfied.'' The person can never disclose the information because he does not realise its importance or significance. That is my point, but I used the wrong word.

The person obviously has the information passing through him. The question is whether he identifies that information and reports it as suspicious in the way in which we expect.

I hope that the Minister will not be too soft on this matter and will not be tempted to make unnecessary concessions. I hope that he will remember that enormous sums may be involved in these crimes, and many ingenious minds will look for loopholes in order to avoid prosecution and punishment. I hope that he will not accommodate

some members of the Committee by making concessions that would make criminals with white collars more likely to avoid prosecution.

I do not disagree with my hon. Friend. That is the precise dilemma with which the Committee must wrestle and with which I have wrestled for the past few months. Not only lawyers—I do not say that because of my hon. Friend's huge prejudice against lawyers as a breed—have made representations about the matter. All financial institutions have raised concerns, as have some trade unions that represent the institutions' staff. We should think seriously before we put people in these potential situations, but we have little choice but to do that if we want standards to be raised to the level that we want. As I said, companies are already under an obligation to train their staff and bring them up to requirements. Some companies have done that admirably, while others have not.

Should we be happy to stay broadly as we are and hope that other measures will be effective in reducing the problems of money laundering and associated organised crime? Alternatively, do we need a real change in the standards that apply? We must wrestle with that problem and consider whether the powers will be justified.

Let me make two points to the Minister. First, will he consider the position if the amendment were accepted? Sometimes, I get the impression that he thinks that that would mean that no prosecution could ever succeed. I think the contrary. Every day of the week, juries must decide whether a person knew or suspected something. It is unreal to suggest that securing a conviction would be an insurmountable obstacle, especially given the guidance rules that the Minister intends to introduce. I think that people would be convicted.

Secondly, the Minister mentioned that 18,000 disclosures a year occur at present. However, only 100 prosecutions a year arise from those disclosures. There is not a paucity of disclosure in respect of enforcement proceedings that are taken at present. It has also been suggested to me that the current rate of disclosure is higher than 18,000 a year. Can he confirm the current rate before the end of the sitting?

If the hon. Gentleman has information that counters mine, he had better tell us where it comes from. My information is that the disclosure rate was running at 18,000 a year up to 2000, which is when the last viable figures were published. Those figures run back to 1993.

The Minister challenges us to say where our information comes from. He will realise that experts at the sharp end are following carefully our proceedings from beyond the Bar. I do not wish to be disrespectful to him, but it has been put to us that the position that he has set out in his initial remarks is ''absolute nonsense''. He suggested that the incidence of reports had remained static for decades. In fact, the graph shows a dramatic rise since 1993; roughly 30,000 last year; a huge rise since 11 September; and probably 40,000 next year, even if the law does not change. The real problem is the disparity between the number of

reports and the number of prosecutions—of which there have, perhaps, been under 100. That clearly demonstrates that the current situation does not justify the Minister's position.

When someone wants to say something really derogatory, they always begin by remarking, ''I do not want to insult the Minister in any way.''

The hon. Gentleman is saying that there has been a big increase in reports of money laundering since 11 September, and that that punches a hole in my argument. Well, my, my. If his case rests on that, it will not stand up to scrutiny, and there is no need to address it in detail.

People have been made ultra-alert about money laundering by the massive press coverage of the links between terrorism and organised crime since the events of 11 September. The general public, as well as people who work in the financial sector, have learned about it, and that has led to a substantial increase in reports of money laundering. If that had not been the case I would have been very surprised, and so would the hon. Gentleman.

However, if the hon. Gentleman is saying that there has been a steady increase in reports throughout the 1990s, that does not tally with the information that I have received, which indicates that the numbers were steady until 2000 but that, as one would expect, there has been a substantial rise in the past year.

I made it clear that I was quoting the Law Society of England and Wales, because it represents the experts who operate at the sharp end. It states that since 1993 there has been not merely a steady rise, but a dramatic rise in reports of money laundering. It describes the Minister's suggestion that the figure had remained static for decades as absolute nonsense, because it is not borne out by the facts. To point that out is to criticise the content of the Minister's speech, rather than to criticise him personally.

The people at the sharp end tell us of a dramatic rise since 1993, and an even more dramatic rise—for the reasons given by the Minister—since 11 September 2001. I suggest that the Minister should get his officials to check his facts, because he is plainly wrong.

I will do that—but if the hon. Gentleman does not mind, I will not bother to check whether there has been a dramatic increase since 11 September, because it is clear that there has.

I am not disputing that.

I am being told that there was a steady rise from 1994 to 2000. However, it is questionable whether the figures in such reports are all that should be examined. Those reports come from relatively few organisations, which perform that responsibility with diligence, but there are many other institutions that report very little—if at all—under the current regulations, and there is reasonable suspicion to believe that money is laundered through some of them.

In effect, the hon. Member for Beaconsfield is asking us to accept that if we agree to the amendment

and raise the test, it will still be possible to secure prosecutions. He is right about that. However, he cannot argue that his amendment would have no effect. He openly and honestly admitted that it would remove the suspicion test from people working within the regulated sector. Therefore, the prosecution would be obliged to show that someone had suspicion.

I know what the Minister is saying, but he has not got it right. The test would still be ''knows or suspects''; it would not just be a question of knowledge. I am prepared to make the concession, about which I had anxieties earlier, of leaving the word ''suspects'' in the Bill.

You lost that one.

I do not know whether I lost it. I lost it in terms of putting the matter to the vote, but whether I lost the argument is another matter. I am prepared to concede that the word ''suspects'' should be in the Bill, precisely because I appreciate the Minister's point that it will still be incumbent on the court to show that the person did suspect, not that he ought to have suspected, which is how the Minister wishes the legislation to be drawn. The purpose of the amendment is to prevent injustice—to prevent somebody from being sent to prison for an omission when he did not have a guilty mind.

I think that the matter is clear. I may be using different language from that used by the hon. Gentleman, but it is clear that he wants to raise the threshold in relation to the test of ''knows or suspects'', whereas we are saying that if the person knows or suspects, or had reasonable grounds to suspect, he should be liable. There is not a lot of point in my continuing—

Lost the will to live.

Indeed. Our reasons are that we believe that there ought to be an obligation for the institutions and for people who work within the financial sector to operate at a higher level than many of them work at the moment. By introducing such a threshold, we will require them to do so. I am sad that the Opposition do not share our objective.

I hesitate to become embroiled in an argument among Labour lawyers, but I commend to the Minister the argument of the hon. Member for Wellingborough about the effect of the third condition on an offence of negligence. As he said, that third condition can never, by definition, be satisfied. He was making a drafting point, rather than one of substance about the offence of negligence. It seems to me that it is a good point, and should be given further consideration.

As the hon. Members for Wellingborough, for Wirral, West and for Redcar tried to intervene on the Minister, I was reminded of the old adage that when one is up to one's elbows in alligators, it is difficult to remember that one came to drain the swamp. I fear that we are in danger of losing sight of the purpose of the provision. This part of the Bill will be pivotal to its effectiveness. Although I am attracted by the general thrust of the arguments advanced by the hon. Member

for Beaconsfield, I am not persuaded by them. That is for one special reason—we are dealing not with the general public or the man on the Clapham omnibus, but the regulated sector.

We may be dealing with the regulated sector, but the Bill would also cover the cleaning lady who hears something in the lift. She would be working in the regulated sector because of the nature of her employment.

I would be very surprised if that were the case. My understanding is that to be considered as working in the regulated sector, one would have to be carrying on a job, occupation or profession directly related to it, which would require some kind of professional accreditation. With respect, but not with all due respect—he is not yet in that much trouble—I have to say that the hon. Gentleman does his arguments a disservice by introducing ideas of that sort.

I may be wrong, but the clause mentions

''a business in the regulated sector.''

If I were to work in such a business in an ancillary capacity, although I might be cleaning or catering, I would still be working in that business. If I am wrong about that, the hon. Gentleman or the Minister could put me right. My impressions from reading the clause were that it applies to businesses and not to people, and that the provisions cover anyone working in a business in the regulated sector.

Order. We seem to be straying from the point. The issues to which the hon. Gentleman refers seem more relevant to amendment No. 97 than to amendment No. 487. We have gone round this circuit many times.

I am obliged to you for saying that, Mr. O'Brien. The Minister can address those points later.

Under the clause, Parliament grants the regulated sector many special rights. Every right, as all students of jurisprudence will remember, has a correlative obligation. If the regulated sector is given special rights, it must have special obligations. The hon. Member for Beaconsfield referred to the vast size of the sector and said, quite reasonably, that people will miss things. Both those points are right, and as we need effective legislation to control the regulated sector, both can be used as arguments in favour of including an offence of negligence, as can amendments Nos. 487 and 524.

I am no more persuaded about amendment No. 524, which would leave out the word ''suspecting'' and insert the words ''reasonably believing'', than I am about amendment No. 487. The wording of amendment No. 524 is exceptionally inelegant, and I do not understand its effect or what practical difference it would make. Amendments should at the very least be meaningful. If we were to delete the words that amendment No. 487 suggests that we

should, we would create immense difficulties concerning proof. That would be a retrograde step away from the meaningful enforcement of the Bill.

We are dealing with a sector that will be pivotal to the Bill, and with a part of the Bill that could really make a difference. This is one occasion on which I am prepared to put aside my liberal instincts for the moment. In this case—and in this case only—the Minister may have got it right.

I support my hon. Friend the Member for Beaconsfield for having tabled the amendment, and I have grave concerns about the contribution of the hon. Member for Orkney and Shetland (Mr. Carmichael). I fully accept the Minister's accusation, and believe that the provision should be watered down. I accept the Government's underlying desire that stricter rules should apply to the regulated sector, but I am much concerned about the concept of wilful blindness, because suspicion would be part and parcel of the provision even if our amendment were accepted. We are worried about ''reasonable grounds'' and the objective sense of suspicion.

As for what is a regulated sector, I accept that my hon. Friend the Member for Beaconsfield was making an extreme point when he referred to cleaning and catering staff. However, I sensed from the Minister a simplistic idea of how the City works. Much as the grinning hon. Member for Glasgow, Pollok would not accept my view, the City is a club no more. It is now much more difficult to analyse it as a small inward-looking club that plays by its own rules. It is a far more regulated sector than it has been in the past.

The Minister referred to front-line staff. Let us imagine an average department of an investment bank, although my argument could apply to law firms and accountants, too. It will have front-line staff, who are freshly qualified and are likely to have taken professional examinations. I do not dispute that those individuals should be caught by the stricter regulation that would apply to the regulated sector. However, there are also middle-office and back-office staff. For example, let us consider the collapse of Barings in late 1994 and early 1995. Nick Leeson and others, who were clearly culpable, were middle-office and back-office staff. In a small operation, they had a high level of day-to-day knowledge and responsibility. That may not apply in a larger department, and to have strict rules for the regulated sector—as opposed to those outside it—will be difficult.

When I referred to front-line staff, I was pointing out that at times it is not necessarily senior staff who have access to relevant information. If staff are dealing with financial transactions, they ought to be covered by the same code and standards. If the hon. Gentleman believes, as the hon. Member for Beaconsfield appeared to, that the cleaner will be covered by the measure, I must tell him that that is not the case. He should table a separate amendment and read schedule 6, the first sub-heading of which is ''Business in the regulated sector'', alongside the clause to see the extent that it engages in such activities. People who work in the personnel or maintenance department, or who are cleaners, will not be covered by the provision.

Yes, but I am sure the Minister accepts that people who work in the back office deal with settlements, for example.

Why should I not?

I have no objection to that, but the matter is one of degree. I have cited the Singaporean example of Barings. It was a small operation, with half a dozen staff. Clearly, someone in the back office who may not have had professional qualifications would have had an understanding that money would be flowing in, and may have had direct contact with clients. However, at Canary Wharf where departments are staffed by 300 or 400 people, an individual in the back office may not have as much day-to-day involvement with such matters.

I have much sympathy with the level at which the Government are trying to pitch the clause. They want to ensure that there is a proper regulated sector. I am not sure whether I have the answer. I am just worried about the problems that I can envisage. It is clearly for the Minister and his civil servants to formulate an acceptable idea of a regulated sector. A large investment bank will have an enormous department. It will be a highly pressurised, stressful environment. Often, training will have been done on the job, and it probably was not that good. I am not making excuses for large financial services operations, but the Minister's comments about how front-line staff in the regulated sector should have direct responsibilities is a simplistic analysis.

My worry, looking at the matter from the Government's point of view, is that if we make a hard and fast rule that only people in the City with professional qualifications would be caught, unscrupulous banks would ensure that many of their back-office staff would not have the qualifications, so that they would not be caught by the provision.

Will the hon. Gentleman clarify his point about training? He said that training would not be all that good in some back offices. I understand why that would be a defence for the individual, but it is not a defence for the company. In such circumstances, surely we should not make law on the basis of accepting that back-office training will be poor.

I fully accept that. I want protection for the individual rather than the bank. It would be quite wrong if a financial organisation tried to use lack of training and a pressurised environment as a defence.

Surely, if the back-room individual were so lacking in training and expertise, the court must examine those factors when establishing whether there are reasonable grounds for suspicion or knowing.

That may be the case, although the Minister will not be happy to learn it. It may apply to individuals, but not to organisations.

The hon. Gentleman is suggesting that the industry is ignoring the guidance that it receives, and that its current legal obligation to train staff is not adhered to. Does that not justify the need for the steps that we are taking?

I am not suggesting that. Strict rules are in place, and the Minister rightly said that it is more difficult for large financial institutions to ensure that day-to-day training occurs, because of the increasing flexibility of the work force, which includes more and more temporary staff who go in and out for a handful of days at a time.

It is simplistic to refer to people as simply front-line staff. In the changed world of work, the Minister must appreciate the great pressures that might be on junior individuals who may not have professional qualifications. Such individuals could be ruined by the hint of going to court, let alone by being convicted on the objective suspicion test rather than on their knowledge or genuine suspicion.

The Minister rightly emphasised that businesses to which the provision will apply should have trained their staff. It is a problem for the business if it is run with a turnover of staff who come in every other day. If a temporary member of staff were in the unfortunate position of being caught by the provision, would subsections (5)(a) and (6) not come to that person's rescue?

The hon. Member for Wellingborough talked about subsection (5)(a). We may discuss that later.

But is the answer not yes?

The answer is maybe, as in many of these matters—or yes and no, as the hon. Gentleman, as a lawyer, knows.

The offence is highly serious, and until now, the prosecution had to prove beyond reasonable doubt that an individual knew or suspected something. The phrase ''reasonable grounds'' represents a high hurdle for a professional to traverse. My worry about the thinking behind this clause, and others, is that there must be analysis after the event. People will piece together things after money laundering and criminality has come to light. A great burden will be placed on individuals. Indeed, the burden of proof will be almost reversed.

The objective test for suspicion represents more than the Government's desire for a greater duty of diligence. It is understandable for those in the professional sector—

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.