Clause 328 - Authorised disclosures

Proceeds of Crime Bill – in a Public Bill Committee am 3:45 pm ar 24 Ionawr 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 3:45, 24 Ionawr 2002

I beg to move amendment No. 522, in page 190, line 2, leave out from 'act' to end of line 4.

This is a probing amendment that is designed to allow us to discuss the mechanisms through which consent is provided to enable a transaction to proceed. I am the first to accept that it does not make a great deal of sense in its purest form. The deletion of that part of the line would not add anything to the Bill and would look odd in the absence of further amendments.

The Minister may recollect that when we first discussed money laundering and part 7 we talked about professionals' problems under the existing system, such as being told whether they may go ahead with a transaction. Let me give the Committee some illustrations. Before I do so, however, I shall emphasise to the Committee what the clause is about.

Clause 328 provides for a system of authorised disclosure. It therefore requires that the individual concerned should make the disclosure to a constable, Customs officer or nominated officer, that the disclosure should be made before the alleged offender does the prohibited act, and that thereafter the solicitor, banker or whoever it may be does the act with the consent of a constable, Customs officer or nominated officer, as the case may be. On paper, that looks straightforward. A solicitor who is faced with the prospect of carrying out a conveyancing operation for a client, when he has reason to suspect that the money being brought into the country might have a tainted origin, rings up NCIS and says, ''Mr. Bloggs has come in to see me. He wants to carry out a

conveyance for the purchase of a property for £2 million on Wednesday. I am tipping you off that I am concerned about the origin of these funds, which seem to come out of a Zurich bank account and to be vaguely connected with a Liechtenstein Anstalt. What do you want me to do about it?''

The anecdotal information that the Law Society and others have made available to me suggests that, when those requests are made to NCIS, they do not receive a speedy reply. Those who are involved in the transaction are therefore in a difficult situation. They do not know whether to proceed with the transaction. Moreover, because of the tipping off regulations, they cannot even tell the client why the transaction is being held up. One solicitor described to me an incident in his firm: after four days of delay, and a problem in the property chain, the client got so angry that he kicked down the office door and punched the solicitor in the face. That seems to put a burden on the solicitor that is over and above the call of duty or even that which the Bill should impose on him.

How will the system work in practice? I am worried that, as my hon. Friend the Member for Surrey Heath (Mr. Hawkins) has said on several occasions, it will lead to a huge increase in the amount of information given to NCIS. As a result, it will become even more difficult to obtain a clear answer from NCIS about whether one should proceed with a transaction.

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

Given that the hon. Gentleman has just mentioned the hon. Member for Surrey Heath, will he clarify, first, where he is, secondly, when he is coming back, and thirdly, whether he will tell us, in great detail, what he had for lunch, whom it was with, what was said—

Photo of Mr Bill O'Brien Mr Bill O'Brien Llafur, Normanton

Order. The hon. Gentleman may wish to answer that question, but the Committee should move on and stick to the agenda.

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

I shall stick to the agenda, which I was doing before the hon. Gentleman's attempt to divert me into an interesting sideline, which I would have been happy to pursue, although I cannot do so.

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

I mentioned my hon. Friend because he had previously raised the issue with the Minister. This is the correct opportunity for the Committee to discuss it.

The Minister will also recollect that my hon. Friend raised the issue of the level of disclosures. Further information has been provided, but it was predicted in the NCIS lecture that, on current trends, disclosures in the coming year would rise from 18,000—a figure mentioned by the Minister—to well in excess of 30,000. It seems likely that that may be a result of the events of 11 September. Nevertheless, there has been an exponential rise in the number of people contacting NCIS about difficult transactions.

I hope that the Minister will accept that that is a serious issue for those who are trying to discharge professional obligations. They are happy to inform NCIS if they are troubled by a transaction, but they need a rapid response as to what they should do next. The criminalisation provisions of the tipping off clause

mean that they cannot tell their client what is going on, but they are prevented from carrying out a transaction that they are contractually bound to effect as quickly and correctly as possible. That is an onerous burden. I am not satisfied, on the basis of information given to me by those in the legal profession, including solicitors and the Law Society, that the system is operating well at the moment, and I am worried that it will not operate properly in view of the far greater number of disclosures that are likely to arise.

The amendment is probing. I want to have a discussion and debate on an important issue. I do not intend to delete the clause, and I hope that I made that clear through the rather odd way in which I drafted the amendment in the first place.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

In answer to my hon. Friend the Member for Glasgow, Pollok, there is no need for the hon. Member for Beaconsfield to explain where his hon. Friend is. He will give us a version of where he has been and what he has been doing when he comes back, whether we want it or not.

Photo of Norman Baker Norman Baker Democratiaid Rhyddfrydol, Lewes

Yes, on a related point. I noticed that the hon. Member for Glasgow, Pollok was temporarily sitting on the Conservative Benches. By delaying giving way, the Minister has allowed him to return to the Government Benches.

Photo of Mr Bill O'Brien Mr Bill O'Brien Llafur, Normanton

Order. That is not helpful to the Committee.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

On disclosures, I am informed that this year they rose to the kind of levels to which the hon. Member for Beaconsfield referred. NCIS tells us that, contrary to what the hon. Member for Surrey Heath said earlier, that was entirely due to the incidents of 11 September, the raised public awareness of such matters and the concern and alarm that followed. We cannot rely on that continuing in the future. I hope that there will not be further incidents of that kind, and that people can return to the way of life or the level of alertness and alarm—or lack of it—that they had previously.

NCIS has been described previously as a dreadful Big Brother organisation, garnering information for no good purpose. I accept that we are not discussing terrorist measures—a separate Bill was introduced, which contained equivalent measures, in many instances, and applied them to terrorism—but the Committee is aware of the connections of organised crime to terrorism and so on. I therefore hope that it will be aware of the need for organisations such as NCIS. In an ideal world, not only would such organisations be nothing like the size of NCIS, they would not exist at all. However, none of us is naive enough to think that we live in an ideal world, and sadly there is a need for the kind of powers that we have given NCIS, and for the kind of resources that we have had to give it.

Hon. Members may find it helpful if I explain how the provisions in subsections (2) and (3) will work in

practice. We have not made any changes to the practice that currently operates by virtue of existing legislation, and the provisions closely follow our obligations under the European Community money laundering directive of 1991.

Clause 328 is directly linked to the prohibited acts in clauses 321 to 323. In essence, it provides a defence to the offence if someone's knowledge or suspicion about criminal property is reported to a constable, a Customs officer or their nominated officer. It requires a person to obtain the necessary consent before the transaction is processed. However, the provisions recognise that the person who is faced with a transaction, or who acquires or possesses criminal property, may not always have an opportunity to obtain prior consent before a transaction is processed or property acquired, and in that situation the person may proceed, but is required to report his knowledge or suspicion as soon as practicable to the relevant person.

When a person informs a nominated officer about his suspicions, the onus will lie on the nominated officer to decide whether to give consent to the transaction being continued or to report the matter to NCIS. If an employee reports his suspicions to a nominated officer, and that person fails to pass on those suspicions to NCIS, either before or after the transaction is processed, the nominated officer might find himself liable for the offence of being concerned in an arrangement that facilitates money laundering—or of failing to report the offence, if he is in the regulated sector.

The amendment would make the reporting of a transaction, prior to carrying out the prohibited act under clauses 321 to 323, rather pointless. All someone would need to do is to pick up the telephone and ring NCIS, and immediately afterwards process the transaction.

The provisions are meant to be an investigative tool and are designed, in the more serious cases, to give law enforcement an opportunity to take action against laundering before funds are dissipated. The amendment would mean that law enforcement would not have an opportunity to put a hold on an account pending further inquiries, or to obtain a restraint order against the funds. There are many instances in which there is no urgency to the case and suspicious transactions can be properly investigated before they are processed. When there is some urgency, the provisions allow for the transaction to be continued, and for a report to be made swiftly following that, as I have explained.

It has been claimed that a huge paper burden might be imposed on NCIS because of the expansion of the provisions. However, only 5 per cent. of reports are made prior to transactions. It is unsurprising that the hon. Gentleman has heard anecdotal evidence to the contrary. I am not saying that people are never inconvenienced—that cannot be completely avoided. I can only report to him what I have been told by NCIS. When a transaction is being held up, it is looked at within 24 hours; if it is reported early in the day, it is

looked at on the same day, with a view to assessing its priority. If it is judged not to be urgent, it might not be cleared on the same day. However, NCIS attempts to respond to the needs of people and believes that it is relatively successful in doing so and that this will continue when the Bill is enacted.

When a report is made before a transaction is conducted, law enforcement agencies need to make further inquiries. In most cases it is possible for the person making the report and the law enforcement agencies to reach an agreement on what may be said to the owner of the account or funds so that the reporting officer does not commit a tipping off offence.

The hon. Gentleman said that the amendment was probing, to tease out what the situation is, and I have tried to respond appropriately. The only point that I have not covered is the one about whether it is desirable for solicitors to be thumped. I hope that we do not put that to the vote, because I will happily vote with him on that occasion, but I am not sure that he will achieve unanimity from the Committee.

Photo of David Wilshire David Wilshire Ceidwadwyr, Spelthorne 4:00, 24 Ionawr 2002

I thought that I understood all this, and the amendment made a great deal of sense. I then thought that we could vote rapidly on it while the hon. Member for Glasgow, Pollok was on this side, so that we might get a few more votes than we usually do—but he did not stay long enough, and the moment has passed. However, the more I have listened and thought about it, the more confused I have become, so I would be grateful if either the Minister or my hon. Friend could sort me out.

Subsection (2) says:

''The first condition is that—

(a) the disclosure is made before the alleged offender does the prohibited act,''.

I take this to mean that one picks up the telephone and says to a policeman or Customs officer, ''Hi, I'm going to break the law''. Well, some people may or may not do that, but what then concerns me is paragraph (b), and I believe that it makes sense to leave it out. Is anybody going to pick up the telephone and say, ''Excuse me, I'm about to break the law and please may I have your permission?''—because that is what I take it to mean. I cannot see a good reason why anyone would announce their intention to break the law and then say to the law enforcement agencies, ''That's alright with you, isn't it?''

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Will the hon. Gentleman please read the title of the clause—''Authorised Disclosures''?

Photo of David Wilshire David Wilshire Ceidwadwyr, Spelthorne

I understand what the Minister is saying, but that does not help me. Whether or not it is an ''authorised disclosure'', or whatever other title one may wish to give it, I am still left mystified as to why it is suggested in legislation that would-be criminals announce their intention of breaking the law and then say, ''Is it alright with you, guv?''. If the title means what I think it does, having called to ask permission somehow or other authorises the action. That is an extraordinary suggestion.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I do not think that the hon. Gentleman is quite as obtuse as he is trying to make

out. He knows that by picking up the telephone he is avoiding breaking the law.

Photo of David Wilshire David Wilshire Ceidwadwyr, Spelthorne

That is even better. I am even more confused. The longer this goes on, the worse it gets. If every time I pick up the telephone and say that I am about to do something that I should not, I am not breaking the law. That is a novel suggestion, and I think it lucky that the hon. Member for Glasgow, Pollok is not here or he would blow a fuse about the way in which this Government Bill seems to be relaxing its attempt to catch criminals by saying that they can pick up the telephone and suddenly become innocent. If the Minister cannot help me out, perhaps my hon. Friend can.

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

Underlying the whole issue of disclosure, and authorised disclosures in particular, is a very regrettable development, and I do not think there are any easy answers if we need to enact this money laundering legislation. It is regrettable that the whole ethos of a professional relationship will be entirely undermined. There will always be a suspicion in the back of any client's mind in a professional relationship, be it with a lawyer—notwithstanding the legal privilege—with accountants or with other financial services individuals. It will put professional advisers into an impossible position. They can pass on to the police any suspicions that they may have if a client suddenly appears with a spanking new car and wants to ensure that new accounts are opened, but they will not be able to tell the client, with whom they may have a long-standing relationship. I appreciate that, for the legislation to be workable, there must be some way in which professionals are made accountable.

I hope that I have recognised in my various contributions to the debate on part 7 at least that there is a distinction between the everyday person in the street and those in the regulated sector. There must be a higher burden in the regulated sector for professionals, who cannot simply turn a blind eye to these matters. However, that will undermine the ethos of the professional relationship. There are many ex-lawyers, as I am, and ex-professionals in the Committee, at a time when there is an increasing questioning of professionals. As the vestiges of the professional relationship break down, the reputation of professionals will be diminished further as the years go by, which is regrettable. The amendment at least goes some way towards trying to rectify that, and I hope that the Minister will give it serious thought.

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

I listened carefully to the Minister. I am glad that he accepted the point, but I am not entirely reassured that the system will get much better as a result of the vast number of authorised disclosures that he hopes will take place. If the Government's proposal is to work and disclosures are made before transactions take place, it is essential that the response is very quick. It is in NCIS's interest that that should be the case. The sort of transaction that will be of particular concern to it is the one in which a solicitor says that his client wishes to transfer £2 million to a bank in a country that has a reputation for being a haven for tainted money.

That is an example of a transaction that escapes out of the jurisdiction and cannot be recovered. Obviously, the problem does not arise with the same force where a disclosure can be made subsequently. However, solicitors have a peculiar problem. Some of the stories that I was told had a humorous side, but there is a serious side, in that professional reputations are on the line, with a client who is metaphorically beating on the door and asking why his transaction is not going ahead. The solicitor is waiting to hear from NCIS whether he should say that he is not going ahead with the transaction without giving an explanation, or whether he should go ahead with it so that NCIS can follow it. The solicitor should not be left in limbo.

I hope that as a result of our discussions the Minister will take the opportunity to tell NCIS that the issue has caused concern. A delegation raised it with me, not just an individual solicitor. I therefore assume that unless it had been causing concern in the profession, it would have been dismissed as an isolated incident. I did not get that impression, although I may be mistaken, which is always possible. However, I got a clear impression that the profession at an official level regarded it as a potentially serious problem that had manifested itself on several occasions. I hope that NCIS and the Government can provide some reassurance that there will be rapid responses when disclosures are made.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department 4:15, 24 Ionawr 2002

I am told that that happens already. I do not know whether I said so earlier, but I am aware that NCIS officials met representatives of the Law Society recently and agreed to make a contribution to its training programme to ensure that this regulation is more fully understood. There is a framework for the Law Society and NCIS to work closely together to overcome the potential problems rightly raised by the hon. Gentleman.

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

I am grateful to the Minister for that comment, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 328 ordered to stand part of the Bill.