Serious Crime Bill [HL]
(9 years, 10 months ago)
Lords ChamberRead Hansard Text Read Debate Ministerial Extracts
Baroness Smith of Basildon (Lab)
I shall also speak to Clause 2 stand part and Amendment 8, which says that there should be a consultation on whether the court can require full disclosure from a suspect of his or her assets and liabilities. Amendment 13, to Clause 11, provides the court with the power when making a restraint order to require the defendant to provide specific information, particularly concerning his and any third-party interests in property. Amendment 14, also to Clause 11, has a similar intent.
As I said at Second Reading, we support many of the measures in the Bill because they address the issues that we agree should be addressed. The role of this Committee is now to examine whether the proposals brought forward in the Bill fully address the problems that have arisen and become evident, or if more can be done to tackle the specific problem of improving enforcement. As I said then, nothing brings the law into disrepute more than poor enforcement of a law. I know that the Minister agrees with me on that point.
It is relevant here to say something about the background and to set the clauses and amendments in context. In 2002, the then Labour Government introduced the Proceeds of Crime Act with new powers for the police, prosecutors and courts to freeze and confiscate the assets of criminals. It was innovative and ground-breaking, providing a wide range of civil and criminal recovery methods, but the use of the legislation and the changes over time have revealed its limitations. Improvements can be made.
The National Audit Office has issued a highly critical report on confiscation orders. It found that only 26p in every £100 of criminal profits was ever confiscated and that the total amount of outstanding debt on confiscation orders is £1.46 billion, a shocking level. In addition, the cost of recovering these ill gotten gains is very high. The estimate from the National Audit Office is that investigation, prosecution and enforcement costs 76p in every pound collected. The value to the Government is just £31 million and just 2% of offenders paid in full. The amount collected and the number of confiscation orders and restraint orders has fallen in recent years, as identified by the National Audit Office report. There is now a seriously worrying trend with the number of orders falling and the outstanding amount of debt increasing. It is clear that some criminals are running rings around the system and making a mockery of what we want to see, which is that crime does not pay.
Another factor in addressing the issue is the age of austerity, although I dislike the phrase. Police and prosecutors are finding it tough. They are having difficulties with resources and need to make greater use of the proceeds of crime as a source of income. We need to examine the reasons why the system has become so ineffective. The reasons are varied—there is no one particular reason—but it is clear that the evidential threshold for freezing a suspect’s assets is very high; criminals often move their money overseas; confiscation orders can be an afterthought; and the penalties for non-payments are not enough of a deterrent. It is also clear that there is a lack of leadership and a lack of strong incentives for the agencies involved in applying for and enforcing confiscation orders.
Are the measures proposed adequate and the best we can do to address this problem or can we be more effective? We have tabled a number of amendments to address these issues. The reason for tabling clause stand part debates—as the Minister knows, since I discussed this with him—is to allow for a slightly wider debate. We consider that there is room for improvement in the Bill and the Minister may be able to provide the reassurances we seek. This first group of amendments regards third-party claims. I stress that they are all probing amendments. As I say, although we have tabled clause stand part debates, we are clearly not opposed to Clauses 1 and 2. If the Bill goes far enough on third-party claims, will the Government go far enough to ensure early disclosure? There are three further amendments on the same theme, but slightly different. I hope that through these amendments we can probe the issue in debate and get a response from the Minister on the substance and ideas, rather than on the specific wording. We are not wedded to any particular form of words—it is the issues that we would like to discuss further.
Lord Phillips of Sudbury (LD)
My Lords, may I ask the noble Baroness whether subsection (2) of the proposed new clause will be adequate to force the person concerned to reveal assets owned by a company that they own? Today, the classic way of avoiding liabilities is to have a series of companies that own each other, and I am anxious in case the wording would not require the person who is required to give information to provide information on all the companies in a string of corporations.
Baroness Smith of Basildon
I am not sure which amendment the noble Lord is referring to.
Lord Phillips of Sudbury
I beg the noble Baroness’s pardon. I am referring to Amendment 8, which would insert the proposed new clause entitled, “Restraint order: determination of extent of defendant’s property”. I mentioned in particular proposed new subsection (2), which would require the suspect to disclose,
“the full extent and location of his or her assets and liabilities”.
I am concerned that that would require someone to disclose only the fact that they have, for example, a company in the Netherlands Antilles, but not the fact that that company is owned by another company, and so on.
Baroness Smith of Basildon
My understanding is that it would require that information, because it asks for,
“his or her assets and liabilities”.
However, if there is any deficiency in the wording I would be happy to see an amendment tabled to make that point even clearer.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)
My Lords, I was expecting that we might have a longer debate on this issue—but it is good to see that there is much agreement about the need to strengthen the effectiveness of the Proceeds of Crime Act. It is good that the noble Baroness, Lady Smith of Basildon, shares the Government’s views on that necessity, and I welcome her speech.
As we have heard, Clauses 1 and 2, and Amendments 8, 13 and 14, all deal with the determination by a court of the extent of a defendant’s interest in named property. By extension, the provisions also deal with any third-party interests in the relevant property. The Serious and Organised Crime Strategy sets out a number of proposals to strengthen the Proceeds of Crime Act by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties.
Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order from whatever assets he or she has available. A confiscation order specifies the amount to be paid; it does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. These claims also reduce the amount of money available for recovery, as the noble Baroness said. Of course, some of these claims may be perfectly legitimate but others will be spurious, designed simply to frustrate the confiscation process.
To tackle such abuses, which were clearly described by the noble Baroness, Lady Smith, and to help speed up the confiscation process, Clause 1 confers on the court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process. Clause 2 augments the provisions in Clause 1 by introducing a requirement, as part of the confiscation process, for the prosecutor and defendant to detail any known third-party interest in property associated with the defendant in their statement of information and provision of information respectively.
Amendments 8, 13 and 14, tabled by the noble Baroness, seek to bring the determination of third-party interests forward in time even further to the commencement of a criminal investigation or to the point at which a restraint order is made. The amendments also seek to impose on the defendant the obligation to disclose the extent and location of their assets and any third-party interests in those assets. Under Amendment 8, a failure fully to comply would be a criminal offence.
To protect legitimate third-party interests, the provisions in the Bill afford third parties who have, or may have, an interest in the property the right to make representations to the court about the extent of their interest. The right to make representations also extends to the defendant. This will allow the court to consider the evidence presented, assess its credibility and come to a decision.
There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes into account when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.
We do not consider that it is appropriate to bring the determination of third-party interests back to the restraint stage or, indeed, earlier, as is proposed in the noble Baroness’s amendments. Not all defendants will be made subject to a restraint order. For example, where a defendant owns only a house in the UK, it may not be cost-effective to apply for a restraint order when it can take time to sell a house. The relevant law enforcement agency would be made aware of any attempt to sell the property without the need for a restraint order.
Moreover, not all restraint orders lead to confiscation orders. If the subject of a restraint order is not convicted, the restraint order will be discharged. In such cases, it would be a wasteful use of limited judicial and prosecutorial resources to require the court to make a determination as to third-party interests in restrained property. It is for these reasons that the Bill provides for third-party claims to be considered at the confiscation hearing stage.
None the less, third parties may have an interest in restrained assets, and in such cases it would be appropriate for the court to be able to assess such claims—for example, if a third party contests a restraint order on the grounds that it is freezing property wholly owned by that person rather than by the defendant. Therefore, on the face of it Amendment 13 might be beneficial, in that it would confer a power for the court to order the defendant to provide information at any time under a restraint order.
Specifically, the court would be able to require the defendant to provide details of any third-party interests in property. However, this power is already available to the court under the existing restraint order provisions. The court can make any order it believes is appropriate to ensure that a restraint order is effective. This would include a power to order the defendant to provide information, including information concerning his or her and any third-party interest in property. It can be done at restraint order stage. Where a restraint order is not in place, a defendant can be made subject to the provisions of a disclosure order under the investigation powers that are in Part 8 of POCA. Such an order can be made at the start of a confiscation investigation and compel a defendant to answer questions or disclose information specified in the notice.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for his explanation. However, I will also say that I am disappointed. I have sat in his place, albeit in the other place, and I know that he will have a folder that contains my amendments with bold print at the bottom that says “Resist”. We have all been there. However I had hoped that with this Bill, where there is such a large amount of agreement between us on the objectives that we seek, there might be a little chink that would allow the Minister to open the door a little and say that this is something that we can look at and discuss. These amendments are not proposed in order to oppose what the Minister has said, as I have made clear. I do not doubt that the proposals before us in the Bill are better than the current situation; they improve on it. But are they the best that we can do?
I will withdraw my amendments today, but I ask the Minister to reflect further. His impact assessment refers to the delay in the process of identifying third-party claims as one of the reasons that some criminals are able to maximise, shall we say, the assets that they can hold onto. I hope that between now and Report the Minister and his officials will reflect further on the points that I have made today and understand why I proposed them, which was merely and only to seek to do things, not just better, but as best we can.
Baroness Hamwee (LD)
My Lords, I am opposing the Question that this clause stand part of the Bill simply to probe. I hope that nothing I say will take the Minister by surprise. I would like to use this opportunity to thank him and his officials for the factsheets that we have had and, in particular, for the Keeling schedules. I discovered that in my pile of copies of statutes, I had a copy of the Proceeds of Crime Act 2002. I then rapidly discovered how out of date that print was, so the material that we have been sent is very useful indeed.
This debate is closely tied to the previous one—still on third parties’ interests. Clause 4 is about receivers, and proposes an addition to the Proceeds of Crime Act involving proposed new Section 10A of that Act, which is inserted by Clause 1 on determining the extent of an interest in property. Essentially, the purpose of this stand part debate is to ask who deals with what, and when. How would all this operate? Who determines whether and when there has been no,
“reasonable opportunity to make representations”,
or whether there would be,
“a serious risk of injustice”?
I am of course quoting from proposed new Section 51(8B) —whereas proposed new Section 10A(1) in Clause 1 provides that the court, not the receiver, determines the extend of a defendant’s interest,
“if it thinks it appropriate to do so”.
My request, therefore, to the Minister is simply for him to explain the procedure.
Lord Taylor of Holbeach
My Lords, it was kind of my noble friend Lady Hamwee to thank those who are supporting me at official level in the Bill; I am supported by a very fine team, and I am grateful. I am also grateful for the fact that a number of noble Lords have taken time to talk to me about the Bill. That has helped us all to get an understanding of a complex measure. Those Keeling measures are needed in order to have the faintest idea about what is going on. Noble Lords will therefore understand the complexity of the matter and why the excellence of my officials is important to me.
Clause 4 deals with the circumstances in which an individual affected by a determination of interest may make representations to the court appointing an enforcement receiver. A court can confer certain powers on an enforcement receiver, including the power to realise property. This power is accompanied by a requirement to allow persons with an interest in the property a reasonable opportunity to make representations to the court.
As we discussed in the previous debate, the basic principle is that an appeal against a Section 10A determination as to the extent of the defendant’s interest in a property will be permitted only where the person was not given an opportunity to make representation to the judge who made the determination, or there is a serious risk of injustice. In cases where there is no receiver, the Court of Appeal will hear the appeal in the normal way. In cases where the court appoints a receiver, however, it is not bound by the determination and can hear representations. It is in effect hearing an appeal.
As interested third parties will generally have had an opportunity to make representations to the court prior to it making a determination of interest in property, the changes made by Clause 4 limit to certain circumstances the right of such parties to make further representations to the court appointing the receiver. As I have explained, it is not a right of appeal at large and does not allow representations to be made that are inconsistent with a determination, except under the two circumstances I described: first, when the affected party was not given a reasonable opportunity to make representations to the Crown Court before it made its determination; and, secondly, where the court considers that the determination would result in a serious risk of injustice to the person. These two circumstances mirror those in Clause 3, which set out the grounds under which the Court of Appeal may hear an appeal against a Section 10A determination.
So that we are in no doubt as to what it means, the “serious risk of injustice” will include an instance where an innocent third party with no links to criminality has an interest in a house that is to be sold to satisfy a confiscation order against a defendant. The innocent third party may have been out of the country when the determination was made and, consequently, had not received notification of the hearing. By contrast, it would not include instances where there has been an inconvenience to a third party—for example, if they had to move out of rented accommodation that was to be sold to satisfy a confiscation order. A serious injustice is not anticipated to be such a rare instance that it would be considered to be an exceptional circumstance. It will be a matter for judicial discretion, based on the facts of the individual case.
The clause enables an interested third party to make representations where their interest in the property came to light only after the Crown Court had made its original determination. Subject to the court’s consideration of any such representations, and to the outcome of any appeal, a determination made by the court is binding on the receiver. As I have said, in cases where there is no receiver appointed, any appeal will be dealt with by the Court of Appeal. This represents an equitable balance between the effective enforcement of confiscation orders and the important rights of third parties. On that basis, I beg to move that Clause 4 stand part of the Bill.
Baroness Hamwee
My Lords, that is very helpful. I commented to my noble friend when we discussed Part 1 that flow-charts might be quite useful. As he has described the sequence of events, it occurs to me that flow charts or some sort of fairly straightforward step-by-step explanation would be particularly helpful to third parties who get caught up in these proceedings. A defendant will be likely to have legal representation and advisers who can assist with what happens at what stage. A third party may suddenly find that he or she is affected and they ought to be able to find out what steps are available to make representations and how they should be made, without necessarily having to go to the expense of instructing lawyers themselves.
The right thing to do would be to make this user-friendly to people, about whom we should not assume any degree of guilt or their being reprehensible at all. I just use this opportunity to air that thought and of course I am not going to resist Clause 4.
Baroness Hamwee
Baroness Hamwee
My Lords, the first amendment is an amendment to Clause 5, which will introduce a new Section 11 to POCA. The proposed new Section 11(8) provides for the prosecutor to have an opportunity to make representations regarding the time for payment. Clearly, the defendant must have an opportunity as well. I tabled the amendment simply to ask my noble friend whether he can explain when that opportunity would be, and whether he can say whether proposed new Section 11(8) concerns the prosecutor’s response to the defendant’s representations, which are covered elsewhere—in existing legislation if not in the Bill. I beg to move.
Baroness Williams of Trafford (Con)
My Lords, Clause 5 includes provisions designed to minimise delays in the confiscation process. This is achieved by amending Section 11 of POCA to make it crystal clear that the full amount that is ordered to be paid by the court must be paid on the day on which the order is made, unless the court is satisfied that the defendant is unable to do so, for example, because they need time to realise their property.
The maximum additional time allowed for a defendant to pay their confiscation orders has been reduced from 12 months to six. There will also be a further restriction on the length of an extension of the time to pay limiting it to more than is necessary, for example, to realise funds from a specific asset.
My noble friend has indicated that this amendment is designed to tease out whether the defendant has a right to make representations to the court about the time for payment. She has rightly pointed out the fact that the proposed new Section 11(8) expressly confers on the prosecutor the right to make representations, but no such express right is conferred on the defendant.
I can assure my noble friend that the defendant will indeed be able to make representations to the court. However, in view of the way in which the process will operate, it is not necessary to provide for this in the legislation. As I have explained, the default position is that a confiscation order will be payable on the day that it is made. This is the current position. We do not believe that it is impractical. Certainly, for lower value orders, there is no reason why the defendant cannot visit the fines officer and discharge the confiscation order before leaving the court.
The court will not be expected to allow additional time for payment on its own motion. In practice, the court will only be in the position to consider making an order under proposed new Section 11(2) of POCA to extend the time given to the defendant to pay their order if the defendant has made representations to the effect that they need more time to pay their order or part of it. This will be done as part of the confiscation hearing.
Similarly, under proposed new Section 11(4) of POCA, it will be for the defendant to make an application to the court to extend the period allowed for payment. It is implicit in making such an application that the defendant will set out his or her arguments for being afforded more time to pay the confiscation order. New Section 11(8) is intended to ensure that the prosecutor has the right to respond to the case made by the defendant. Having heard the explanation, I trust that my noble friend will agree that the amendment is unnecessary.
Baroness Hamwee
My Lords, the noble Baroness will know that I was concerned about the very tight provisions of new Section 11. She has explained that the defendant will have an opportunity to make representations at the time. That is reassuring, because it is almost never possible to realise an asset on the day that an order is made and it is often not even possible to transfer money immediately. What she has said about the processes is helpful and I am grateful to her for her explanation of proposed new Section 11(8). I beg leave to withdraw the amendment.
Lord Rosser
“(4A) In considering whether to make a compliance order the court must, in particular, consider whether any restriction or prohibition on the selling of property subject to the confiscation order and located overseas ought to be imposed for the purpose mentioned in subsection (2).
(4B) The court may attach penalties to a failure to comply with provisions made pursuant to subsection (4A).”
Lord Rosser (Lab)
The three amendments in this group are concerned with recovering money from overseas or in response to such requests from overseas jurisdictions. Many investigations into stolen assets parked in this country do not get off the ground because the Home Office routinely fails to respond, or is unable to respond, to requests for help from other countries. The Home Office has shown in Parliamentary Answers that, despite UK courts freezing more than £200 million at the request of overseas jurisdictions, not a single penny of this has been repatriated to the country asking for the money. Since 2010, it seems that only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance.
Last year, the former head of the UK financial intelligence unit—part of the National Crime Agency—indicated that when an investigation was initiated from the victim country, and moneys were suspected to be in the UK, the request went out through all the proper channels but there was no great keenness to comply, as there was a mindset that we could just be giving ourselves a headache. Assuming that is a fair analysis, such an approach does not help foster greater reciprocity at international level and cannot help us in securing co-operation when we want it from overseas jurisdictions. The Minister may well contest this analysis, since it suggests there are somewhat different reasons for the problem from those given in the Government’s impact assessment.
It would be helpful if the Minister could provide information on the number of asset recovery requests received from foreign authorities over the past three years, how many have been referred to investigative bodies and how many cases are pending. The World Bank estimates that, each year, developing nations lose between $20 billion and $40 billion through corruption. Between 1994 and 2009 only $5 billion of stolen assets were recovered globally—which is apparently less than 2% of the lowest estimate of the amount stolen, according to an analysis by the World Bank and the United Nations Office on Drugs and Crime.
Amendment 22 in this group requires the Secretary of State to set up,
“an independent review of the effectiveness”,
of our mutual legal assistance arrangements,
“with overseas jurisdictions in cases concerning the proceeds of crime”,
since the figures that are available, the comments made by people who have been on the inside and, indeed, the rather different causes of the problem that are set out in the Government’s impact assessment all strongly suggest that everything is not well. Criminals here also seek to hide their ill gotten gains overseas, and a significant proportion of unpaid Serious Fraud Office confiscation orders are thought to relate to funds located overseas. Criminals put their assets where the UK authorities find it hardest to recover them, which usually means a jurisdiction with which we have no standing mutual co-operation arrangements. Even where this is not the case, without mutual recognition of confiscation orders in the jurisdiction where the assets have been hidden, those charged with enforcing the orders effectively have to relitigate the issue abroad, which can be hard, slow and not very effective.
In Clause 7, proposed new Section 13A provides that in every confiscation case the court will be required to consider making an order to ensure that a confiscation order is paid. In particular, it will have to consider placing a “restriction or prohibition” on the defendant’s overseas travel to prevent that defendant travelling abroad to dispose of his or her assets. Perhaps we ought to consider going further. At the moment, there is nothing the courts can do about people who sell overseas property funded through proceeds of crime because it is in another jurisdiction. We consider that a court should be in a position to fine or jail someone, possibly by making it a contempt of court, if he disposes of property based overseas that is subject to a freezing or confiscation order. Amendment 2 provides for Clause 7, on compliance orders, to be amended to that effect.
We also consider that there should be a consultation on introducing a legal obligation to repatriate liquid assets that are subject to a restraining or confiscation order and which appear to have been moved overseas. Amendment 21 in this group provides for a consultation along these lines. I hope the Minister will be able to give a helpful response to the amendments in this group, since we are at one in seeking to make sure that crime does not pay.
Lord Taylor of Holbeach
My Lords, Amendment 2 relates to compliance orders. Under the provisions in Clause 7, the court will be required to consider making, in every confiscation case, any order it considers appropriate to ensure that a confiscation order is paid. Under the new order, the court will be able to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that a defendant pays a confiscation order and that the order is effective. A compliance order will normally be made at the time that a confiscation order is granted. If the court determines that a compliance order is not necessary at that confiscation hearing, the prosecutor will be able to apply for an order any time afterwards as long as the confiscation order remains unpaid. This type of order is not new to the Proceeds of Crime Act 2002, as the Act already confers on the Crown Court the power to make any,
“such order as it believes is appropriate for the purpose of ensuring that the restraint order is effective”.
Amendment 2 would require the court to consider attaching to a compliance order a restriction on selling overseas property that is the subject of a confiscation order. It is, however, already possible to impose such a restriction as part of a restraint order, as the noble Lord will understand from what I have just said. A restraint order can be obtained at a significantly earlier stage in an investigation—for example, before the defendant has been charged. Such a restriction may also be added to a compliance order where there is no restraint order in place. As such, it is not necessary to make express provision for the court to consider such restrictions or prohibitions. The court already has that discretion. It is worth adding that, once a confiscation order has been made, it may be necessary to sell property to enable the order to be paid off. In high-value cases, this may fall to a court-appointed receiver. In addition, not all defendants will have assets overseas so it would not be necessary to require the court to consider imposing such a restriction in every case.
Amendment 21 seeks to confer on the court, when making a restraint or confiscation order, a power to require the defendant to repatriate liquid assets held abroad back to the UK. The Proceeds of Crime Act already allows the court to make any order that,
“it believes is appropriate for the purpose of ensuring that the restraint order is effective”,
as I have already said. That could include, for example, a requirement for liquid assets to be returned to the UK. Breach of the terms of a restraint order, including selling property that is frozen under the terms of the order, will be a contempt of court and, as such, punishable by a term of imprisonment of up to two years.
Finally, Amendment 22 calls for a review of mutual legal assistance. The movement of money and assets quickly across borders means that it is essential that the UK seeks the assistance of its international counterparts so that it can quickly freeze and recover the proceeds of crime, and it can likewise assist jurisdictions that ask the UK for assistance. Historically, international co-operation on asset recovery has been poor, as the noble Lord, Lord Rosser, said. We depend on other countries to enforce our orders on our behalf, but these orders may not be given priority. Some countries are witting or unwitting safe havens for criminal assets.
Lord Rosser
I thank the Minister for his reply on this group of amendments. As I understand it, the Minister was saying that, as far as Amendments 2 and 21 are concerned, the current legislation already gives the power to do what is set out in those amendments—at least, I think that was the thrust of the Minister’s reply. Obviously, at least if I have understood the essence of his reply, I just wish to leave the matter in the context that clearly I will wish to read in Hansard the details of the Minister’s response.
On his response to the last issue, on mutual legal assistance, I am sure that the Minister will understand if I say that I will want to read it, since he gave some statistics and information on the current situation. I shall read that with interest when Hansard appears.
Lord Taylor of Holbeach
The noble Lord asked me some questions about numbers, which I did not have to hand in my papers. I am willing to see whether I can find further information which I can give him, because I agree that it is an area where a modest improvement in performance could lead to considerable improvement in the amount of money that we recover.
Lord Rosser
I am grateful to the Minister for those comments. I suppose that part of the reason for my saying that I would want to see the detail of the figures that he gave was to see whether he had in fact responded to the questions that I asked, but if he, too, is going to look at that, and if there are parts to which he did not respond on which he will write to me, I will be grateful. In view of that, I beg leave to withdraw the amendment.
Lord Harris of Haringey
“13C Application of assets arising from the proceeds of crime to investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be applied equally to the investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”
Lord Harris of Haringey (Lab)
My Lords, aren’t we doing well? When was the last time that we got through the first seven clauses of a Home Office Bill within an hour of starting Committee stage? The Minister must be doing something right on this occasion.
However, I will try to improve our batting average now. At Second Reading, I declared my interest as chair of the National Trading Standards Board. In that capacity, I was invited four months ago by Yeading Junior School to attend an assembly that was based around lesson plans which had been funded by the Proceeds of Crime Act. The lesson plans were produced by the Illegal Money Lending Team for England, based in Birmingham, which my board funds. They were designed to teach junior school children how to use their money, how to save, how they should avoid debt and, above all, how they and their families should avoid loan sharks.
The Minister’s right honourable friend the Secretary of State for Education, with whom I know his department has a continuing feud, would no doubt be delighted to discover that those nine and 10 year-olds put on a play that included a section on avoiding loan sharks conducted entirely in Latin—which is not something that I thought many children in the London Borough of Hillingdon were used to speaking. None the less, it was an interesting performance; it was not, I hasten to add, a core part of the lesson plans produced by the Illegal Money Lending Team.
The point about the initiative was that it inspired young children to learn about the dangers of them and their families being ensnared by loan sharks. The funding for it had been provided by POCA moneys taken from loan sharks who had been convicted in the courts. It is an example of some of the community work that the Illegal Money Lending Team supports through funds confiscated from loan sharks, but it also demonstrates the value that can be gained from the Proceeds of Crime Act 2002.
It is clearly a valuable and important mechanism, and I think that all noble Lords who have spoken in Committee today share a desire to see it strengthened. It is good, because it hits criminals where it hurts most: in their pocket. They are often less concerned about the formal penalties that they might incur than the fact that their ill gotten gains will be taken from them.
The Minister has told us how the Bill will make it more difficult for criminals to evade confiscation. That is all to the good and welcome—although, as we have heard, there are possibilities for making the provisions stronger and no doubt we will continue to pursue them as the Bill proceeds. This amendment would ensure that a greater share of the assets recovered from offenders was reinvested in the communities and neighbourhoods affected by their criminal activities and that those funds should be put towards preventing crime and addressing its consequences.
At Second Reading the Minister said that there would be a review of ARIS, which on this occasion is the asset recovery incentive scheme rather than a foreign terrorist organisation with a similar name,
“to ensure that it works to support front-line agencies”.—[Official Report, 16/6/14; col. 697.]
When the Minister responds, I hope that we will have some clarification from the Government about the terms of the review and whether they will consider placing ARIS on a formal legislative basis and allow local authorities in particular—although the same arguments apply to the police—in their role both as investigating authorities but also as prosecuting authorities to receive a greater share of the proceeds of crime. The most likely use of these funds is that they would be applied within local government to funding accredited financial investigators in trading standards and community crime prevention projects. They could also support community crime prevention projects that had proved very successful.
The amendment would place ARIS on a formal legislative basis and would allow local authorities in their roles as both investigating and often prosecuting authorities to receive potentially more than 50% in the division of the proceeds of crime, which could then be applied to crime prevention. The most common use of the incentive payments that local authorities receive is to fund the posts of accredited financial investigators. The reason that these are important is that they make a very significant contribution to the work of trading standards. They enhance investigations by providing intelligence support. They undertake the money-laundering investigations and ensure that the proceeds of crime are recovered through confiscation and cash forfeiture.
There are a number of examples of the positive work that accredited financial investigators do. This includes dealing with landlords who have illegally converted properties into houses of multiple occupancy and then rented them to vulnerable members of the community. I believe that the London Borough of Hounslow prosecuted a case such as this in 2010, which resulted in a confiscation order of £180,000. There are also examples where one of these accredited financial investigators has had an essential role in identifying the victims, resulting in them being compensated. What often happens in these cases is that a lot of material is seized but it requires detailed financial investigation to track down where the moneys have come from and who has actually been defrauded by the fraudsters concerned. A major case was undertaken by Cambridgeshire County Council involving rogue traders, which resulted in the successful prosecution of 15 defendants, who between them received combined prison sentences of 40 years and were served with a £250,000 compensation order—all of which was then paid to the victims who had been defrauded of their life savings.
The reason why the incentivisation scheme is so important—here I am talking about local authorities but exactly the same arguments apply to the police—is that it enables them to fund the specialist resource to pursue some of the financial aspects. It means that the financial investigation can be integrated into the rest of the investigation right at the beginning. That is much more cost-effective than pursuing it at the end of the investigation to see whether assets can be saved. It also means that there is much more depth in the investigation that takes place. It is important to see if the provisions can be strengthened in that way.
The London Borough of Enfield has used the money that it has obtained from the Prevention of Crime Act scheme since 2011 to fund a specific post. That has had a series of impacts: it has allowed it to undertake the first prosecution nationally for money laundering against an illegal poker den, where the defendant was sentenced to 15 months, and to provide financial evidence in a case against a trader convicted of operating a fraudulent HGV training school, resulting in a 44-month conviction following a month-long trial. There is a series of examples of where the presence right at the beginning of an accredited financial investigator has enabled the local authority to pursue the case in much more depth and enable it to go forward.
Lord Deben (Con)
My Lords, I will insert a single sentence here, although it may be rather a long one. I am afraid that my noble friend may have great difficulty in doing what the noble Lord suggests because he will come into conflict with a deep and entirely erroneous Treasury view about hypothecation. For all my political life, I have fought the battle for hypothecation, which is the only way we will get people to accept a whole range of things in future.
It was extremely successfully done on the landfill tax, but the money was then stolen by the incoming Government, who did not understand. The Treasury had hated it in the first place; it had been forced through by the then Chancellor of the Exchequer, my right honourable friend Kenneth Clarke. Immediately after he went, the Treasury mandarins got the money back again because they do not like someone else deciding how the money shall be spent. I beg my noble friend to stand firm against that wholly unacceptable attitude.
The Pope was right, in the 1920s, when he talked about subsidiarity being the basis of democracy. He was, of course, attacking fascism and communism. I am afraid that bureaucratism is just as damaging in always trying to concentrate decisions about how money shall be spent in the hands of the Treasury. I think that the more people who make decisions about how it shall be spent, the more we will be able to make democracy work. Obviously, there have to be restrictions and some overall view, but I hope that my noble friend will take this opportunity to fight like a tiger for an essential part of any sensible democracy: hypothecation. Hypothecation should be a tick rather than a cross when something such as this is put forward.
Baroness Hamwee
My Lords, I wonder whether Hansard will be able to resist its usual refusal to let us put lots of “ands” and “buts” in very long sentences.
I have been trying to think of something to say in Latin to the noble Lord, but my A-level Latin is too long ago for me to be able to do it. However, he is probably asking your Lordships the sort of question to which we should answer yes. I remember that from the very early days of my Latin education.
I am certainly on the yes part of the spectrum of answers to this, in principle. I think a large part of the problem is what I unkindly call “turf wars” between the MoJ and the Home Office about who should have the money when the proceeds are recovered. I realise it is more complicated than that.
On the wording of the amendment, I wonder whether it is possible to identify the communities and neighbourhoods affected in an effective and straightforward manner, if at all. For instance, on the proceeds of crime of someone high up in an organised crime organisation dealing with drugs, can you pin down the communities and neighbourhoods affected in the way suggested? I am very attracted to money going towards crime prevention and assisting those who are affected by crime, but I am just not quite sure about this provision. However, the questions the noble Lord asked the Minister about ARIS and the wider questions about how the proceeds of crime when recovered are applied are very important.
Lord Phillips of Sudbury
My Lords, on the face of it, this is a beguiling amendment, not least because of the way the noble Lord, Lord Harris of Haringey, moved it by giving an example of helping a primary school understand a bit more about the way our complicated world works. There is no one in this House who defers more than me to the need for this country and this Parliament to help our citizens have a better idea of what it is to be a citizen in our barbarically complicated society.
I concur with my noble friend Lady Hamwee, and I think there is perhaps another problem with the wording of the amendment in that it simply talks about,
“reinvestment in the communities and neighbourhoods affected”,
which seems as wide as the Atlantic Ocean and gives no reinvestment guidance about what, why or wherefore.
I have a deeper problem with the amendment. We heard the noble Lord, Lord Rosser, give the example of $20 billion to $40 billion that should be recovered from frauds in developing countries and is not. We heard other examples from my noble friend Lord Taylor of Holbeach of the abject failure of our current laws to achieve their purpose. I am not in favour of doing anything to diminish the resources available to the prosecutorial authorities for seeking to make more as regards compliance with the manifold laws we already have. It is a sort of scandal that we go on passing law after law with the most perfect of purposes, but then fail utterly to give those charged with implementing those laws the wherewithal to do that.
My noble friend Lord Taylor of Holbeach talked with some satisfaction of six advisers. I have to tell him that when you are up against the big, bad guys, a team of six will look rather small, and he is talking about six to cover the whole landscape. Therefore my reservation about the amendment is simply that if its effect is to reduce at all the current grotesquely inadequate resources that go toward compliance, I am afraid that I am not for it.
Lord Bourne of Aberystwyth (Con)
My Lords, I, too, will speak, albeit briefly, with some words of caution about this amendment. I do not think anybody could resist the seductive arguments put forward by the noble Lord, Lord Harris of Haringey, on the need to fund programmes. However, at present the asset recovery incentivisation scheme allows agencies to get back 50% of what they recover from the Home Office. That scheme is flexible in its application, and allows the money to be spent to drive up asset recovery and, where appropriate—those words are important—to fund local crime-fighting priorities for the benefit of the community. I know that the intention of the noble Lord was entirely benevolent and helpful; his example of Latin-teaching in Hillingdon as a sort of cheerleader for the Secretary of State for Education demonstrated that. However, the words “where appropriate” are extremely important.
If one looks at the wording of the noble Lord’s amendment, it is prescriptive. It provides for a three-way split of the proceeds for reinvestment in the communities and neighbourhoods affected by the relevant criminal action. There are no ifs, no buts, and no discretion. Sometimes that would work, and sometimes not. My noble friend Lady Hamwee referred to a situation relating to drugs where it would not. However, that is also true, in spades, of something like insider dealing. That is and should be a crime, but there is no classic victim in the personal sense. The victim, if anything, is the Stock Exchange or the City of London. Under this amendment, we might find that the noble Lord is funding the livery companies or Mansion House. I am sure that he does not intend that, but there is a danger with the way in which the amendment is phrased.
Therefore I have great sympathy with what he seeks to do. However, given that a review is being conducted at the moment, the appropriate thing is to wait to see what that review throws up. I also look forward to hearing what the Minister says about that review. Then would be the time to look at this to see how we can get more money used in crime-fighting rather than by means of something as prescriptive as is the wording of this amendment, which has no discretion at all.
Baroness Smith of Basildon
My Lords, I have noticed, in debates on Home Office legislation, that my noble friend Lord Harris of Haringey seems to attract adjectives. In the previous Bill we looked at he was described by the Minister as being “mischievous”, and today the noble Lord, Lord Phillips, described him as “beguiling” and the noble Lord, Lord Bourne, described him as “seductive”. I dread to think where we will go as the debate continues.
The issues the noble Lord raises are interesting and go to the heart of transparency on this issue, which is about how we want to engage the public and for them to understand what happens to money brought in by the Government. The noble Lord, Lord Deben, made an interesting point on hypothecation, which comes down to trust. The public want to know not just where their taxes go but what happens to money that is brought into the Government.
I was struck by my noble friend Lord Harris’s examples from the education sector. I was not aware of those examples; I do not know whether the Minister was aware before taking the Bill forward. If neither he nor I were aware, were his officials aware? Who does know what happens? This amendment does us a great service, serving to remind us that we have a duty to make this clear to the public. If we are trying to engage them in support of legislation that involves confiscation, fines, et cetera, there is an obligation on Governments and on Parliament to ensure that the public are aware of where that money goes. I hope that the Minister will take some of those comments on board and that it is something that we can return to, in terms of a wider public understanding of what happens to the money and how it is used for the public benefit. That comes to the heart of the points made by the noble Lord, Lord Deben, and by the amendment of my noble friend Lord Harris of Haringey.
Lord Taylor of Holbeach
I have been trying to think of a nice adjective to describe the noble Lord, Lord Harris of Haringey. I know that he did not really like me calling him mischievous. However, this amendment has been very worth while because it has enabled the House to discuss this matter. The noble Baroness is absolutely right; along with other noble Lords, I was not particularly aware of the working of this mechanism, so it has been useful to have this debate. The description the noble Lord, Lord Harris, gave of how the system works is absolutely right; it is dealt with under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme.
The objective of the scheme is to provide law enforcement agencies with incentives to boost asset recovery as a contribution to reducing crime and delivering justice by giving them a direct stake in the proceeds they generate from that work. The speech by the noble Lord, Lord Deben, was very useful; I do not care whether his sentences are short or long, they are of high value. It was an extremely interesting contribution, as were the contributions of all noble Lords, including that of my noble friend Lord Phillips of Sudbury. They were very much to the point, because making the most of the potential of this money is really important. The scheme is a non-statutory mechanism which has advantages for returning to law enforcement, prosecution agencies and the courts a proportion of the assets they recover. Public bodies with the functions of an investigator, a prosecutor or an enforcement authority can use the powers within POCA to recover criminal assets and can become part of the scheme thereby.
It is also important to remember that the scheme does not just apply to money recovered under confiscation orders but also, as the noble Lord demonstrated, to assets recovered through the other routes to recover assets provided for in the Proceeds of Crime Act, such as the seizure and forfeiture of cash, the civil recovery scheme and the taxation of criminal proceeds. Under the existing scheme, for assets recovered by means of a confiscation order, the Home Office retains 50% of the recovery receipts and returns the remainder to investigation agencies, which receive an 18.75% share of the receipts, prosecution agencies, which also receive an 18.75% share of the receipts, and enforcement agencies—in most cases this is the Courts Service—which receive a 12.5% share of the receipts. For cases where cash has been forfeited under the cash seizure powers in the Proceeds of Crime Act, the Home Office retains 50% of the receipts and the investigative agency—in the majority of cases this is the police, but it is not always so—retains the other 50%.
The use to which each agency decides to put the money received under the scheme is a matter for that agency. Because amounts received through asset recovery are unpredictable, and given that it depends on the nature of the cases dealt with by each agency each year, we have not laid down any specific guidance on the use of such money. However, we have previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance. I sense that noble Lords would feel that that is the right thing to do. The noble Baroness, Lady Smith, made clear her support for the needs for resources to drive up performance. My noble friend Lord Phillips of Sudbury felt that that was a primary objective for this money. But also, when appropriate, it can fund local crime-fighting priorities on behalf of the benefit of the community.
The Home Office has monitored the scheme annually since its inception. The results of that monitoring show that more than 90% of money distributed through the scheme is reinvested in asset recovery work, such as the recruitment of financial investigators. If we get more money, we will be able to have more investigators—and I think that everybody can see that this vicious circle could be a virtuous circle, if we implement it correctly. As the noble Lord, Lord Harris, said, these investigators carry out the recovery work, and there is a balance that can be spent on police operations and community projects. Some examples of the community work that has been paid for include alcohol awareness and crime reduction projects, mentoring programmes and assistance for elderly and vulnerable people. The noble Lord, Lord Harris, gave a classic example of community work in the confiscation of money. His own field case, which he also mentioned, is a very good example.
Over the past three years, more than £238 million has been returned to front-line agencies. However, we believe that the proposed changes that are being made in the Bill will ensure that agencies are able to apply for and enforce more orders more successfully. This in turn should lead to more funds being received by front-line agencies through the scheme. The share of the money that is retained by the Home Office forms part of the department’s core budget line and, as such, is put towards the delivery of front-line services through mechanisms such as police grant.
One key objective of the Government’s criminal finances improvement plan, which was published on 19 June, is to ensure that the Asset Recovery Incentivisation Scheme works effectively for front-line agencies. It is with that in mind that the review has been set up, and we intend to complete it by the end of the year. I hope that it will please noble Lords to note that the emerging findings from the review will be presented to the board in September, so if this Bill takes its normal course we should be able to update the House on Report on how that review is going.
The noble Lord asked about the terms of the review. The whole purpose is to investigate the process and see how we can make it better. It is being developed with the aim of ensuring that the scheme works effectively for all agencies charged with asset recovery responsibilities. All will be involved. For example, the Local Government Association will be a consultee within the process, with anyone else who is currently involved in the asset recovery process.
I was asked—or rather, challenged, “Is it appropriate to leave an organisation for distributing money on this non-statutory basis, or should we consider a statutory alternative?.” I think that the debate has shown that there are ways of making the process work well without a statutory basis. But of course, that is the sort of thing that any review should properly consider.
I hope that the noble Lord, Lord Harris, will be generous and withdraw his amendment. We in our turn are grateful to him for giving us the opportunity of describing the working of ARIS, and the review that we have in mind.
Lord Harris of Haringey
I am grateful to the Minister for that response. I am also grateful to the other noble Lords who have contributed to this short debate, especially the noble Lord, Lord Deben, for his comments on hypothecation. I have always appreciated—although this may be a difficult thing for someone with his religious commitment to hear—that he is something of a heretic in such matters. His is a heresy that I share, in terms of making things happen, and in the belief that a bit of hypothecation can sometimes mean that we achieve results all over the place.
Some of the points that have been made require a moment’s clarification. I do not think that the identification of neighbourhoods, which the noble Baroness, Lady Hamwee, mentioned, is necessarily a problem. As the Minister has made clear, 90% of the money distributed through the incentivisation scheme is ploughed back into financial investigators; the noble Lord, Lord Phillips, also made that point. Only a small proportion goes beyond there, and the authorities concerned, whether they are local authorities or the police, make good use of it. I was involved with the board of the Safer London Foundation, which made very good use of the Proceeds of Crime Act moneys that the police received, in connection with local community projects around London. The authorities concerned spend a great deal of time in deciding what is and is not an appropriate use of those resources.
The important point behind the amendment is the need to think carefully about how we maximise the money recovered, and I hope the review will do that. I know that the Minister is part of a wing of the Government that is committed to the reduction of taxes, but in this context there is, essentially, a 50% tax, because the money goes into either the Home Office or the Treasury, depending on the precise route—although I rather suspect that the Home Office does not “feel” the money that comes back to it, because it all disappears into the Treasury and goes through into the main funding of the Home Office.
If 50% of the money is retained by the Home Office or the Treasury, there may be little incentive for the agencies concerned to pursue complicated financial investigations that are not essential to achieving a conviction but are additional to achieving a conviction. If the proportion distributed through the incentivisation scheme were higher, substantially more money might be recovered, because people would be incentivised, and would say, “This really is worth investing those resources in”. The Home Office and the Treasury might then find that they got more resources rather than less. I hope that the review will consider these issues, and I look forward to hearing—perhaps by Report—about its developing findings. On that basis I am happy to beg leave to withdraw the amendment.
“Confiscation orders: consultation
(1) The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders.
(2) A consultation under subsection (1) must, in particular, seek views on the following matters—
(a) whether the court, when making a confiscation order, should be able to compel a suspect to return to the United Kingdom any realisable liquid assets overseas;(b) whether to provide the court with the power to fine or imprison a defendant who sells property subject to a confiscation;(c) whether to provide the court with the power, when making an order, to require the defendant to disclose any interests, including third party interests, in realisable property.(3) The Secretary of State must report to both Houses of Parliament on the outcome of the consultation under subsection (1) no later than 31 December 2014.”
Baroness Smith of Basildon
My Lords, in moving Amendment 4, I wish to speak also to Amendments 9, 11 and 12. Amendments 4 and 9 are similar: both require a consultation on ways to strengthen confiscation orders and restraint orders respectively. Amendment 11 addresses the disposal of assets. At present, one of the conditions of obtaining a restraint order is for the prosecution to show that there is a real risk that the defendant will dissipate his or her assets. These amendments would remove this requirement. As regards Amendment 12, although restraint orders are ex parte, many defendants then appeal against the orders and incur significant defence costs. If they win the appeal, their costs are reimbursed by the state. However, these can be high and can act as a disincentive for prosecutors to get a restraint order in the first place. Our amendments propose that any costs recoverable by the defendant would have to be capped at legal aid rates. These amendments seek to strengthen the confiscation and restraint orders. All these issues are linked. Indeed, I think that all the issues we are debating today around the proceeds of crime are linked, but this matter is at the very core of the process.
In its report, the National Audit Office said that the confiscation of criminal assets is “just not working at the moment”. Amyas Morse, the head of the National Audit Office, also said that,
“The use of confiscation orders to deny criminals the proceeds of their crimes is not proving to be value for money … nor … a credible deterrent to crime”.
That is a pretty sorry state of affairs and one which this Bill and the debates we are having in your Lordships’ House should seek to address. Whatever the reasons for that situation, those criticisms place a duty on your Lordships’ House to address the problem, to see whether legislative changes are needed and to question whether the law as it stands is being effectively and properly enforced, as the noble Lord, Lord Phillips, who is no longer in his place, said a moment ago. When criminals get to keep £99.74 in every £100, there is clearly a significant problem and it is right that this should be addressed and we support the Government on that.
In 2012-13, 6,392 confiscation orders were made, seeking the return of £318 million from a total pot, as it were, of £1.6 billion that had been illegally acquired. Eventually, only about £133 million was recovered and, although there are still some outstanding debts, the amount recovered will not rise significantly above that figure. I am curious and concerned about that issue. I hope that the Minister will comment on that and give an assurance that this issue has not been deprioritised by the Government. I hope that the Minister will also comment on the reasons why we have seen a slight reduction in the number of confiscation orders, which compounds the problem of getting money off the criminals once the orders have been issued. As I said, in 2012-13, only 6,392 orders were made, down slightly from 6,431, whereas we might have expected to see an increase in that figure.
However, this is not about just the number of orders; the most crucial point is compliance with the orders. I welcome the fact that there are now moves afoot to remedy this situation, close some of the loopholes and strengthen compliance with confiscation orders. However, I made a similar point in the earlier debate on third-party claims—namely, given the scale of the problem we are facing, can we not think bigger about this and try to do better? In our previous debate, the Minister said that the situation had improved. However, I put it to him that, if we are looking to improve matters, we should do the best we can, seek to be as strong as we can and close any loopholes.
I wish to address a number of issues. The first is the time limits for payments. The Proceeds of Crime Act currently provides that a confiscation order is payable immediately upon the making of the order unless a defendant can show that there are exceptional circumstances why this should not be the case, in which case they are given up to 12 months to pay, as we heard earlier. We recently highlighted the problems with this blanket approach. Some assets—this was referred to in an earlier debate and the Minister reaffirmed this—for example, money in bank accounts, are much easier to realise than other assets, which simply increases the likelihood of the defendant distributing or hiding their assets.
We are grateful to the Government for taking those points on board and for proposing action on this matter. Clause 5 now makes it clear that the full amount ordered to be paid must be paid on the day on which the order is made unless the court is satisfied that the defendant is unable to do so and includes a restriction on the circumstances under which an extension can be granted. That is welcome and there was a helpful explanation on that earlier. We also welcome the fact that Clause 7 requires the court to consider making an order that it considers appropriate to ensure that the confiscation order is paid. As discussed earlier, this includes placing a ban on overseas travel.
However, we want to probe other ways in which confiscation orders can be strengthened. Our amendment calls for a consultation on this. I hope that the noble Lord will be more sympathetic towards our proposals, given that we are proposing consultation. The areas that we would like to look at concern whether the court should be able to compel a suspect to return to the UK any realisable asset that is located overseas, to jail or fine someone who sells property that is subject to a confiscation order or to require a defendant to disclose any interests in property. Of course some of this touches on issues that have already been discussed. We would also welcome discussions on other ways to improve the orders; the noble Lord, Lord Phillips, earlier raised the issue of an individual’s assets being owned by a company that owns a company that owns a company, so that they are hidden in a labyrinth of financial dealings.
One way of strengthening the system generally is to strengthen restraint orders. The effect of a restraint or freezing order is to freeze the assets of a defendant, so preventing them from dissipating all or some of their assets before a confiscation order is made. Investigators and prosecutors agree that this is the most critical stage of the process. Early freezing of assets, at the outset of an investigation, minimises the risk that assets will be dissipated or disposed of. However, according to the National Audit Office, the number of restraint orders secured by prosecutors is falling sharply. I quote from the NAO report:
“Only 1,368 restraint orders were imposed in 2012-13, down 27 per cent from 1,878 in 2010-11. Many stakeholders believe opportunities for successful restraints are being missed and that the Crown Prosecution Service is too cautious in applying for restraint orders”.
The report also outlines that:
“Throughout the criminal justice system there is insufficient awareness of proceeds of crime and its potential impact. Within law enforcement and prosecution agencies, few officers and staff have good understanding about proceeds of crime legislation. In many cases effective powers, such as restraint orders, are applied late or not used at all, and specialist financial investigators are introduced to cases when audit trails have already run cold”.
Given that such orders can be applied for as soon as a criminal investigation is started, that would seem to address the problem. However, the current test is too high, because it must be shown that there is reasonable cause to believe that a defendant has benefited from his or her criminal conduct and that there is a risk that assets may be dissipated. Earlier this year, we called for the threshold needed to gain a restraint order to be lowered, with the onus to be placed on the suspect to show why assets should not be restrained, rather than on the investigating agency.
We therefore welcome the fact that Clause 11 reduces the test from “reasonable cause to believe” to “reasonable grounds to suspect” that a defendant has benefited from their criminality, which aligns it with the test for an arrest under the Police and Criminal Evidence Act 1984. The Bill also provides that a restraint order can be kept in place against a defendant for a reasonable period between the quashing of a conviction and the start of the proceedings for a retrial, and it closes the loophole that the restraint order is removed while the retrial proceedings are commenced, during which time the defendant’s assets are at risk of being dissipated.
However, the amendment that we have tabled today goes further than this, as we think that it should be up to the defendant, not the prosecution, to establish that there is no risk of dissipation. Alison Saunders from the CPS referred to this in her evidence to the Public Accounts Committee, saying that it was,
“quite a high test to look at”.
Another issue, of course, is the cost to the CPS. One of the key things raised to us by practitioners is that when an application is unsuccessful—particularly on appeal, as the original is often ex parte—the prosecution is liable for the legal costs of the defendant. Given that the CPS is undergoing cuts of 27% to its budget during the course of this Parliament, prosecutors understandably want to minimise the risk of expensive failure. Alison Saunders alluded to this also in her evidence. We have therefore tabled other amendments that do the same thing. Because they are probing amendments, we are not wedded to the wording but the intent is to try to tackle the disincentive. We are suggesting that a defendant should be able to recover costs only at a legal aid rate. It may be that that is covered by the LASPO Act but we wanted to raise this issue because it has often been raised with us. We are aware that there is a problem, and there is a way of dealing with this. Of course, there is unfairness in requiring an individual who has succeeded in setting aside a restraint order to pay his or her costs, but the alternative is to put all the cost risk on to the prosecutor. Capping costs at legal aid levels, as happens in other cases, could help lessen the disincentive to tackling large-scale restraint orders.
It would be helpful if the Minister could give a view on that. I hope that he will not just refer to his notes and resist the amendments because the whole purpose of Committee—I hope he understands the tone with which we have approached this—is not just to do better but to do the best we can. If he cannot accept these amendments, I hope that he will take them away and perhaps discuss this issue further with us, so we do not continue a situation in which we are unable to get at assets because they have been taken out of the country or removed and defendants do not come forward to say what their assets are. There is a way to deal with this and I hope the Minister can respond positively to these amendments. I beg to move.
Lord Dear (CB)
My Lords, I rise to re-emphasise the wording of subsection (1) of the amendment:
“The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders”.
For many years, and bearing in mind my previous service in the police and my contact with it since, I have been concerned that the prosecution authorities generally do not pursue property that is the subject of crime nearly as rigorously as they should. That has gone on for years, although all the agencies concerned will deny it. It is a fact, however. I could produce evidence from recent personal experience but will not weary the Committee with that, other than to say that the police have always been, and still are, judged on reducing crime and gaining convictions. The CPS is also judged on its ability to gain convictions. It is not judged, by and large, on its ability to chase back money and other property.
I simply endorse the main thrust of subsection (1) of the amendment. There must be ways in which the efficiency of those two organisations can be enhanced, not by rewarding them—although rewards are involved, I suppose, particularly in the reapplication of assets that we have been discussing—but simply by recognising that efficiency is not just detecting crime or getting convictions but also recovering property and money. When all is said and done, in the upper echelons of crime, in particular, the criminals are in it for the money. If the money is not chased, it is eventually there for them to use later when they come out of prison, or when they have paid off the fine or whatever else. This is a plea to underline the wording of subsection (1) of the amendment, which I endorse.
Lord Taylor of Holbeach
My Lords, this has been a short but very useful debate. I am pleased that the noble Baroness has reiterated that her objective in tabling these amendments has been to seek ways in which we can improve the effectiveness of recovery and confiscation of money. The noble Lord, Lord Dear, graphically described how important that is. It is perhaps true that there has been little focus by those who should be undertaking this task. There are two reasons why this mission is important: first, because money has frequently been taken from society and should be returned to it; and, secondly, if this money remains in the hands of criminals they will have every incentive to carry on with criminality as a way of life, and all the costs that it brings. That lies behind where we are on this. All these amendments are concerned with improving effectiveness, and I think that the whole Committee would support that notion. In dealing with these amendments I hope to show that the measures proposed in the Bill will address the issues that the noble Baroness raised. I am grateful to her for bringing them forward. Indeed, it is quite proper that we should consider their effectiveness.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for taking the time to address, in order, the points I made—and perhaps some that I did not make. I think I was very clear that the initial restraint order hearing is ex parte. That is not what I was suggesting in terms of costs; it was the appeal, which can involve significant costs. Again, with regard to the test for restraint orders—“reasonable grounds to suspect” rather than “reasonable cause to believe”—I suggested that we were quite happy and supportive of the Minister in that. That is a later amendment, in the name of the noble Baroness, Lady Hamwee.
I will read Hansard carefully and look again at what the Minister said. I am disappointed that he seemed to be saying that he will not consider our amendments, other than the final one on capping, not because they are not worthwhile and not worth pursuing but because the Government are making improvements to the legislation. As the noble Lord, Lord Dear, said—I hope he will forgive me for saying that he speaks from experience on these matters; from the right end of the law, not the wrong end of the law, I hasten to add—there are cases where the law has not been enforced as effectively as we would like. The consultation the Minister spoke of—he rejected our suggestion of having further consultation on this issue—would help draw out some of the issues that the noble Lord, Lord Dear, and I addressed.
I repeat that we are not suggesting for one second that what the Government are proposing in the Bill does not improve the position. We are just saying that we think consideration should be given to improving it further—we could do better. We should do the best we can, not just aim for an improvement. It would be disappointing if the Minister was to leave this debate without thinking that he could reflect on the points we had made, to make the Bill as tight as it can be and ensure that those who gain from criminal activities are not allowed to keep as much of their ill gotten gains as they are at present.
I listened carefully to what the Minister said. I did not quite understand how some of it addressed the points I had raised. I will read Hansard carefully and make a decision on whether or not we wish to bring some of these matters back on Report for further consideration by your Lordships’ House. For now, I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this is a short point because it is just a short question. Amendment 5 is to Clause 8 and Amendment 26 is to Clause 28—the equivalent Northern Ireland provision. Amendment 5 seeks to leave out new Section 25A(2)(a) of POCA, which allows the court to discharge an order in the case of a deceased defendant where,
“it is not possible to recover anything from the estate”.
My question is: is this not covered by new Section 25A(2)(b), which says that a discharge could be made where it is not,
“reasonable to make any attempt … to recover anything”?
It seems to me that if it is not possible to make an attempt, it certainly would not be reasonable. That is my question. I beg to move.
Baroness Williams of Trafford
My Lords, Clause 8 deals with the discharge of certain unpaid confiscation orders and applications to vary unpaid orders down in value. Despite the best efforts of law enforcement agencies, some confiscation orders are uncollectable and sit on the books of Her Majesty’s Courts and Tribunals Service, accruing interest at 8% a year.
Clause 8 provides that the court will be able to write off unpaid confiscation orders where the defendant has died and it is not possible or reasonable to seek payment of the order from the defendant’s estate: where, for example, there are no assets remaining in the estate. Clause 28 makes the same provision for Northern Ireland.
In Clauses 8 and 28 there are two cases where orders may be written off: first, where it is impossible to get any money out of the estate; and, secondly, where it is not reasonable to make any attempt or further attempt to get money out of the estate.
These amendments suggest removing the case for discharging orders where it is impossible to get any money at all out of the estate. My noble friend has indicated these amendments are essentially designed to probe what would be covered by a first set of circumstances for discharging an order that is not covered by a second set of circumstances.
My noble friend is correct to say that there is certainly a significant degree of overlap between the two. If there are no assets of any note in the estate, it would not be reasonable to make an attempt to recover moneys owing to discharge a confiscation order. Equally, it would not be possible to recover anything from the estate.
That said, I believe it is helpful to retain both cases. The first case where it is impossible to get any money at all out of the estate could be said to be a subset of the second case, where it is not reasonable to make any attempt or further attempt. However, there may be circumstances not covered by the second case. It is important that this clause should encompass all possible scenarios to ensure uncollectible orders may be discharged.
I hope that, in light of that explanation, my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am not sure that I do understand that it would ever be reasonable to make an attempt to recover something where it is not possible to recover it. I am not going to make a fuss about it. However, when I hear about 8% a year, I think I need to review my investment strategy. I beg leave to withdraw the amendment.
Lord Rosser
Lord Rosser
Under the Proceeds of Crime Act 2002, a default sentence of imprisonment can be imposed against a defendant if a confiscation order remains unpaid past its due date. Of course, as we know, this Bill increases the maximum default sentences where the confiscation order is for more than £500,000. Those increases are from five years to seven years for orders of more than £500,000 but no more than £1 million, and from 10 years to 14 years for orders of more than £1 million. The Bill also ends the automatic release at the halfway point of a default sentence for confiscation orders of more than £10 million.
These changes are being put forward by the Government because of the significant number of higher-value confiscation orders that go unpaid. Some would say that that is putting it far too mildly, because the amount collected by the police and the volume of the confiscation orders have fallen, yet there are still some £1.5 billion of outstanding orders because assets have been hidden. They have been moved away overseas, or they have been reduced by third-party claims. Only 18% of confiscation orders worth more than £1 million are recovered. A National Audit Office report has indicated that just 26p of every £100 of profit a criminal makes is confiscated. On top of this, the costs of recovering proceeds of crime are high, since investigation, prosecution and enforcement costs come to 76p out of every £1 collected.
In light of this, it is not clear why the Government are proposing only that automatic release at the halfway point of a default sentence should cease in respect of confiscation orders of more than £10 million. The Government’s own fact sheet on the Bill says that it is the higher-value orders that go unpaid. It is the Government who are proposing that orders in excess of £1 million should potentially attract the new maximum default sentence of 14 years. Having said that, since 1987 confiscation orders of £1 million or more have constituted well under 1% of such orders imposed by the courts.
The Government clearly believe that more time in prison for non-payment of a confiscation order is justified and will have some impact, since it is proposing, as I said, that the default sentences should be increased from five years to seven years for orders of more than £500,000 and up to £1 million and from 10 years to 14 years for orders of more than £1 million.
The current maximum default sentence is 10 years, which in practice means release on a tag at three years and without a tag at five years. Increasing the maximum for orders of more than £1 million from 10 years to 14 years will probably have some impact. It seems unlikely, however, that less than another 18 months at maximum in prison before being released on a tag will produce a significant shift in the attitude toward payment of a confiscation order of criminals with just under £10 million hidden away.
The National Audit Office found that in 2012 only 2% of offenders paid in full once the default sentence was imposed. The NAO also found that there are currently 11 criminals who still have not paid their confiscation orders, which remain due to the Serious Fraud Office after they have served their default sentence. Criminals should not be able to gain by not paying back money obtained through their criminal activities by choosing to go to prison in the knowledge that the time they spend in prison will be cut short.
The National Audit Office report pointed out that the current system does not work when it said:
“The main sanctions for not paying orders, default prison sentences of up to 10 years and additional 8% interest on the amount owed, do not work”.
The Bill itself suggests a degree of uncertainty over the £10 million threshold for the ending of automatic release at the halfway point of a default sentence, since there is provision for a power to lower this £10 million threshold through secondary legislation. A further order-making power also allows for minimum default sentences to be introduced in the future—a point on which I will comment later.
So what is the Government’s argument for saying that £10 million is the right figure rather than either of the figures of £1 million or £500,000 in our two amendments—or, indeed, any other figure? The £1 million is in effect the figure at which the Government are proposing that a maximum default sentence of 14 years rather than 10 years should apply.
The Government’s impact assessment indicates that no longer having release at the halfway point of a default sentence for confiscation orders of more than £10 million would result in an increase in the prison population that would be minimal. I think the figure is 20, but it is minimal. What the impact assessment does not tell us is the projected increase in the size of the prison population if the figure were £1 million or £500,000 rather than the £10 million provided for in these two amendments. Indeed, it does not give us the figures for any other amount or what the impact would be on the prison population if early release in this situation were ended altogether.
No doubt the Minister will provide this figure in his reply or subsequently, particularly if a reason for the Government not wanting to see the figure lowered to £1 million or less is the impact this might have on the size of the prison population. I make two points on that issue. First, the Government have told us that their reforms of probation and the probation service will result in a reduction in reoffending, particularly among those serving sentences of 12 months or less, and thus a reduction in the prison population. Will the Minister say if this Government’s anticipated reduction would offset any increase arising from ending automatic release at the halfway point of a default sentence for confiscation orders of £500,000 or more, or £1 million or more?
Secondly, I ask the Minister if he believes that the prospect, with no automatic release at the halfway point, of having to serve up to 14 years in prison for not paying more than £500,000 or more than £1 million ordered by a court under a confiscation order of ill gotten criminal gains secured at someone else’s expense or at the expense of large numbers of people would in fact greatly enhance the likelihood of co-operation being forthcoming to secure the necessary assets. If he believes that, would that not only reduce the number of criminals preferring to serve their prison sentence rather than hand over their ill gotten gains but provide some additional income from which the cost of any resultant increase in the size of the prison population could be paid if that should prove to be the outcome?
Our view is that criminals who do not meet the requirements of a default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. In these two probing amendments, however, we suggest only the lowering of the threshold to £1 million or £500,000, because we want to find out at this stage why the Government believe that a threshold of £10 million is appropriate for the ending of automatic release at the halfway point of a default sentence.
Lord Taylor of Holbeach
My Lords, as we have already said today, under this Government around £746 million of criminal assets have been seized under POCA, which is more than ever before. Around 60% of confiscation orders for sums up to £500,000 are discharged within six months, but it is clear that we need to do more to ensure that confiscation orders, particularly the higher-value orders, are robustly enforced. That is what lies behind the measure that the amendments seek to address.
A key mechanism in POCA for incentivising prompt payment of confiscation orders is the availability of default prison sentences where somebody fails to pay. It is clear that for lower-value orders default sentences have the desired effect, with nearly 90% of orders under £1,000 being discharged. But at the other end of the spectrum, just over 18% of orders over £1 million are settled in full. There is anecdotal evidence that serious and organised criminals would rather spend a few extra years in prison in the knowledge that they can enjoy the fruits of their crimes when they come out. It is clear that we need to provide further incentives to persuade these hardened offenders to pay up. It is with that in mind that we are legislating. Clause 10 accordingly increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years, while for orders over £1 million the maximum sentence will increase from 10 to 14 years.
In addition to increasing the maximum default sentences for higher-value orders, we have looked again at the early release arrangements. Current provisions allow for automatic release at the halfway point of a default sentence. Early release reinforces the view of certain offenders that a default sentence is worth serving in order to retain criminally acquired assets—I think that the noble Lord, Lord Rosser, made the same assessment when introducing his amendments. Unconditionally releasing offenders at the halfway point of their default sentence seriously impairs the intended deterrent effect of the default sentence, particularly for the highest-value orders. So this clause will also end automatic early release for those serving a default sentence for failing to pay an order valued at over £10 million. The combined effect of these changes will mean that, in such a case, an offender will serve up to 14 years in prison rather than five years, as now. This is a significant increase which will make offenders think long and hard about serving the time rather than paying their confiscation order.
The noble Lord quite rightly asked why we set the threshold for ending early release at £10 million and not, let us say, at £1 million or £500,000, as Amendments 6 and 7 propose, or indeed at any other level. What is the rationale behind the Government’s decision? As I have said, evidence suggests—I have given figures earlier—that the existing default sentences do not have sufficient deterrent effect for the highest-value orders. We have therefore focused the changes made by Clause 10 on the upper end of the scale.
As a responsible Government, and as the noble Lord will know, we are committed to eradicating the deficit which we inherited from the previous Administration. We naturally took into account the potential cost of changes to the default sentencing arrangements. As we have set out in the financial effects section of the Explanatory Notes, the combined cost of the changes made by Clause 10, all other things being equal, is £1.78 million, or 60 prison places, by 2033. Ten of those extra prison places are attributable to the ending of early release for default sentences for confiscation orders of more than £10 million. The cost of these provisions should not be viewed in isolation. Elsewhere in the Bill, the new participation offence will cost some £6.6 million, including some 45 additional prison places.
I was intrigued by the arguments put forward by the noble Lord, Lord Rosser. He seems to have reined in the Opposition’s ambitions, because the proposals put forward by the shadow Home Secretary and shadow Attorney-General as recently as May stated:
“Labour would end early release for criminals serving default sentences who refuse to pay”.
I wonder whether the noble Lord can tell us what the cost of such a proposal would be. If not, I can tell him. Again, if there was no change in offender behaviour, such a policy would require an additional 900 prison places, at a cost of some £25 million per annum by 2033, although the great majority of those costs would kick in by 2020. This of course assumes that the capacity will be available within current prison facilities. However, given the impact of this proposal, it is likely that further facilities will need to be provided, which will result in a considerably higher total cost. It is therefore reasonable to ask the noble Lord where the money would be found to fund the proposals as set down in his amendments.
We have made a judgment. Our view is that the changes made by Clause 10 represent a well judged package. It is our expectation that the increases in default sentences and the ending of early release will lead to a change in offender behaviour. Faced with 14 years in prison, rather than five as now, we believe that an offender with a confiscation order of more than £10 million will not be so ready to serve the time rather than pay up. Fourteen years is a long time in prison.
However, it would be prudent to test that proposition before we go further. That is why the clause contains two order-making powers. The first will enable us to change the structure of default sentences, including by further increasing maximum sentences and introducing minimum sentences. The second delegated power will enable us to lower the £10 million threshold for ending early release. We will keep the changes made by Clause 10 under close review, and if they are having the desired effect then we will not hesitate to exercise these order-making powers.
The noble Lord, Lord Rosser, asked whether the Government had considered alternatives to the £10 million threshold. The answer to that is yes. I do not propose to get into a debate about whether we considered this threshold or that. Suffice it to say that Ministers considered a range of options and came down in favour of the proposition in Clause 10. I can tell the noble Lord that we estimate that the cost of ending early release for orders of £500,000 and over would be approximately 180 prison places, costing an estimated £5 million per annum by 2033. Ending early release for orders worth £1 million and over would lead to an increase in the prison population of approximately 70 places by 2033, costing an estimated £2 million.
The Government have considered this carefully and concluded that it would not be appropriate to lower the threshold for ending automatic early release until it was proven that it resulted in improved payment and was an effective deterrent, and that it was affordable to do so. We therefore believe that the provisions in Clause 10 are the appropriate way forward, while building in flexibility for the future.
The noble Lord, Lord Rosser, asked about the Government’s attitude to the conclusion of the Delegated Powers Committee that it would be inappropriate to introduce minimum default sentences through secondary legislation. We are considering carefully the points made by the committee about this order-making power, and in doing so we will want to take into account the points that the noble Lord made in today’s debate. Accordingly, I cannot take up the noble Lord’s suggestion that I respond to the report today, but I can undertake to reply to the Delegated Powers Committee report in advance of the Bill’s Report stage in the autumn.
In view of that commitment and the fact that I have valued the opportunity to explain the way in which the Government arrived at our judgment to introduce the measures in Clause 10, I hope that the noble Lord will withdraw his amendment.
Lord Rosser
I thank the Minister for his reply and for giving the information about the projected increase in the size of the prison population if the figure were £1 million or £500,000, and indeed what the increase would be if there were no threshold figure at all.
If the Minister thinks there has been a change in our policy, I shall put his mind at rest. I shall requote to him what I said in my contribution: our view is that criminals who do not meet the requirements of the default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. That is our approach. I said it in my contribution. I also made it clear that our two amendments are probing amendments to find out why the Government believe that the threshold of £10 million is appropriate.
We shall consider what the Minister has said, but I think that with regard to the £1 million threshold he said that the figure was 70 additional places at a cost of £2 million; I think he said that for the £500,000 threshold the figure was 180 additional places at a cost of £5 million; and for no threshold the figure was 900 prison places at, I think he said, the cost of £25 million. I just want to ensure that I have understood correctly what he said.
Lord Taylor of Holbeach
I would like to reassure the noble Lord. I emphasise that I said that 10 of these extra places would be attributable to the ending of early release from default sentences for confiscation orders over £10 million. I actually said that as part of my presentation to the noble Lord.
Lord Rosser
But I think I am right in saying that the impact assessment assumes no change in the behaviour of the criminals concerned. I think, and perhaps the Minister will confirm this, that the figures he has given of an increase of, respectively, 70, 180 or 900 places and increased costs as a result also assume no change in criminal behaviour, and therefore no more money coming back in as a result of the ending of automatic release at the halfway point of a default sentence. A lot of people would find that an extremely unlikely assumption on which to base the impact assessment and the Minister’s figures.
However, I will leave it at that. I thank the Minister for the information and for his comment that we will have the Government’s response to the Delegated Powers Committee before Report. I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this amendment is to Clause 11, while Amendment 27 is an equivalent amendment to the equivalent Northern Ireland provision, Clause 13(1). The Minister has already referred to the change from “reasonable cause to believe” to “reasonable grounds to suspect” in the context of the exercise of restraint order powers. The question, obviously, is designed to explore why there is a lower hurdle when we are talking about investigation only, not proceedings.
I appreciate that the later part of Clause 11 requires reporting by the court, although the court can decide not to require it, and that proceedings have to be started within a reasonable time. I am assuming, but perhaps the Minister can confirm this, that a defendant can apply for the restraint to be lifted on the basis that reasonable time has passed and there are no proceedings, and that “reasonable time” is assessed on a case-by-case basis and is not a fixed period. However, it occurs to me that the provision might be giving rise to additional litigation because there are uncertainties around this.
Temporary asset freezing—which is what this is, essentially—could be for quite a long time. We are talking about someone who is not a convicted criminal and may not yet even be a defendant. There could be an impact on that person’s dependants and their business. It is, therefore, a serious matter and I look forward to an explanation of why the Government have chosen to lower the hurdle and the protections that will be in place. I beg to move.
Lord Taylor of Holbeach
My Lords, I am pleased that my noble friend Lady Hamwee has raised these issues. We do not take the impact of restraint orders lightly and we fully understand her points. However, these orders effectively freeze property to prevent it being dissipated before a confiscation order is made. This is important in effective use of the Proceeds of Crime Act. The property is then available to sell, which helps to satisfy a confiscation order which may subsequently be made.
The intention of the Proceeds of Crime Act was to introduce the ability to obtain a restraint order as early as possible in the investigation to remove any possibility that a criminal will become aware, as a result of the investigation, that their assets are at risk and so move or hide them. We have been discussing this for much of the afternoon. Restraint orders are, therefore, available from the earliest stages of a criminal investigation. As I have already said, and as my noble friend is aware, the current test for obtaining a restraint order in all circumstances is that there is a “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct. This is a proportionate test in circumstances where a defendant has been charged and is being prosecuted. In this case there will be available evidence to meet the test of “belief”.
However, the operational experience of our criminal justice colleagues in relation to this issue has shown that, at the early stage of an investigation, it is very hard to prove belief. The reality is that at that stage of an investigation there may be limited evidence, simply because the investigation has not yet had time to gather it. It is notable—as the noble Baroness, Lady Smith, has said—that the number of restraint orders has fallen since 2010-11, despite the Government’s push for more asset recovery action. The number of restraint orders obtained had been increasing and reached a peak of nearly 2,000 in 2010-11 but has dropped every year since then, with fewer than 1,400 restraint orders being made last year.
Delaying the obtaining of a restraint order until there is sufficient evidence to meet the “reasonable cause to believe” test can provide suspected offenders with an opportunity to dissipate or hide their assets to protect them from seizure. The amendment we are making to POCA in the Bill therefore revises the test for restraint in the earliest stages to “reasonable grounds to suspect”—I emphasise “suspect”—that the alleged offender has benefited from his criminal conduct. It is also of note that the amendments include a requirement for the judge making the restraint order to set a date for the matter to be returned to the court so that it can consider whether sufficient progress has been made with the investigation or give reasons for not arranging such a hearing. This reflects current practice of the court when it makes a restraint order in the absence of the person who will be the subject of the order. Making the practice mandatory will ensure appropriate judicial oversight of restraint orders made during a criminal investigation.
It is important that the Committee understands that Clauses 11 and 31 are not breaking new legal ground. “Suspicion”, as opposed to ‘belief’, is a test in other similar matters. Within POCA itself, a judge has to be satisfied that there are reasonable grounds for suspecting that a defendant has benefited from their criminality in order to issue a production order. Also, under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he or she has “reasonable grounds for suspecting” has committed an offence. So, at the early stages of a criminal investigation, it is appropriate that the court uses the threshold of suspicion, rather than belief. We think that this is a direct parallel supporting the amendment we are seeking to make in Clause 11.
This was one of the issues considered by the Joint Committee which undertook pre-legislative scrutiny of the Modern Slavery Bill. In its report, the Joint Committee made the following comment:
“It is imperative that law enforcement authorities should be able to freeze relevant assets at the earliest possible stage in an investigation, and rarely, if ever, more than 24 hours after arrest. We therefore strongly recommend that the test for obtaining a restraint order be amended to make it less stringent. We note that the Government has already committed to reducing the test from ‘reasonable cause to believe’ to ‘reasonable suspicion’. We approve of this formulation.”
I hope the Committee will do so too.
My noble friend Lady Hamwee asked what would happen if a defendant were able to make an application to a court to lift a restraint order. A court may discharge a restraint order, on application, where the investigation has not progressed to its satisfaction. That freedom is available to a defendant, who may also apply to the court to vary a restraint order. It must do so if the investigation has not progressed satisfactorily. I hope that noble Lords will be happy with my explanation and that my noble friend will be content to withdraw her amendment, in the light of my comments.
Baroness Hamwee
My Lords, I am glad to hear about the judicial discretion which might be applied. I would like to think that the reduction in the number of restraint orders or applications for them is because of a problem with the legislation and not something inherent in the new arrangements with, for instance, those concerned not directing their minds to the lower test. That can always be an issue and changing the test does not change it. I am, of course, happy to beg leave to withdraw the amendment.
“( ) In section 47B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.”
Baroness Williams of Trafford
My Lords, Clause 13 deals with the search and seizure powers available to appropriate officers under Sections 47A to 47S of the Proceeds of Crime Act. Sections 47A to 47S, which were inserted into POCA by the Policing and Crime Act 2009, provide for search and seizure powers, in England and Wales, to prevent the dissipation of realisable property that may be used to satisfy a confiscation order. These powers will, once commenced later this year, be available to law enforcement officers, such as the police and National Crime Agency officers. The power to seize property is currently subject to the same test as for the making of a restraint order. The existing test is that there is reasonable cause to believe that the person has benefited from conduct constituting the offence.
As we have already debated, Clause 11 is designed to enable assets to be restrained more quickly and earlier in investigations. It does this by lowering the test for the grant of a restraint order from the court having “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct to the court having “reasonable grounds to suspect” that the alleged offender has benefited from his criminal conduct.
To exercise certain powers and investigative tools at the early stages of an investigation, the officer and the court have to be satisfied only to the threshold of suspicion, rather than of belief. For example, in order to obtain a production order under POCA, reasonable grounds for suspecting have to be shown, and under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he has reasonable grounds for suspecting of committing an offence.
It therefore follows that the legal test for exercising search and seizure powers, which will enable law enforcement agencies to identify and protect assets through search and seizure for a future confiscation order, should complement that of a restraint order. Indeed, it is already the case that the reasonable grounds for suspecting test applies to certain of the powers in Sections 47A to 47S. For example, this lower test already applies to the power to search premises in Section 47D of POCA.
Amendment 17 therefore brings the test for the seizure of property in Section 47B into line with the change we are making in relation to restraint orders; namely, reducing the legal test to “reasonable grounds to suspect”. Amendments 25 and 28 insert a new clause into Chapters 2 and 3 of Part 1. These new clauses simply replicate for Scotland and Northern Ireland the provisions in Clause 13, as amended by Amendment 16. I beg to move.
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 10A, and(b) must have regard to that determination in deciding what is the appropriate order to make.””
Baroness Williams of Trafford
My Lords, as we have debated, Clauses 1 to 4 include provisions designed to ensure that criminal assets cannot be hidden with spouses, associates or other third parties. This is achieved under Clause 1 by enabling a court to make a determination as to the extent of the defendant’s interest in property. Any such determination will be made by the court at a confiscation hearing. This determination may include money held in a bank or building society account.
Section 67 of POCA currently enables a magistrates’ court to order a bank or building society to pay over money to satisfy a confiscation order. This provision needs to be able to work in conjunction with Clauses 1 to 4 when the court makes a determination that the defendant has an interest in a bank account that is, for example, held by a third party, such as a company owned by the defendant.
Amendment 18 accordingly amends Section 67 of POCA so as to reflect the court’s new power to make a determination as to a defendant’s interest in property. The amendment provides for a magistrates’ court to order payment of funds held in a bank account that is not in the name of the defendant towards the satisfaction of the defendant’s confiscation order, in accordance with the court’s determination of the defendant’s interest in that account. This will enable funds held in a bank account to be confiscated rapidly where the account is not held in the name of the defendant. Any third parties affected would have the opportunity to make representations before such a determination was made. Only accounts subject to a determination by the court at the confiscation hearing will be affected by this amendment.
Amendment 29 makes a similar change to the Northern Ireland provision in Clause 33. I aim to bring forward on Report a new clause which will replicate for Scotland Clause 14 in its amended form. I beg to move.
Baroness Hamwee
Baroness Hamwee
Amendment 19 would remove paragraph (b) of new subsection (7A) in Section 67 of POCA. Amendment 20 would make an order under this new subsection (7B) an affirmative order. Having had the benefit of a discussion with the Minister, I know what is meant by the phrases,
“money that is represented by”,
and “may be obtained from” as distinct from money actually obtained from. It was an interesting discussion, but it would useful to have the information on the record.
On the order which is required, what is proposed by the Government is quite significant, and it seems to me that an affirmative order would be more appropriate in this case. I beg to move.
Lord Taylor of Holbeach
My Lords, Clause 14 amends Section 67 of the Proceeds of Crime Act with a view to speeding up the confiscation of funds held in bank accounts. In addition, the clause enables, through secondary legislation, the powers in Section 67 to be updated to include other realisable cash-like financial products, such as share accounts and pension accounts that may be held by banks or other financial institutions.
Currently, seizure powers under Section 67 of POCA apply only to money in its traditional form held in an account with a bank or building society. Money can also take the form of, or be represented by, innovative financial products. This includes digital currencies whereby the user obtains goods or services by virtual means rather than a physical or electronic exchange of funds.
Currently, it is not possible to realise such instruments for the purposes of seizure under Section 67 of POCA. The extension of powers to encompass other financial products may require modifications to Section 67 to provide for such financial instruments or products to be converted into cash. The new subsection (7B) of Section 67, inserted by Clause 14(3), provides the power to make such modifications.
Clause 14(3) also applies to money that may be obtained from a financial product that is something other than a standard current or savings account. I shall give examples of this, and I am grateful to my noble friend for giving us the chance to put this on the record. An example of such a product would be a pension plan that has yet to mature but will pay an annuity and a lump sum on retirement. Other examples could include a share account or a virtual currency such as Bitcoin. Essentially, therefore, the clause provides for the capture and realisation of instruments with an economic value. I hope that that explains to my noble friend the use of the term “represented by” a financial instrument or product in Clause 14(3).
By virtue of Clause 14(5) an order made under new Section 67(7A) of POCA will be subject to the affirmative procedure. New Section 67(7B) simply amplifies the scope of the order-making power in new Section 67(7A)—it is not a second free-standing order-making power. I hope that I have made that clear. Accordingly, it is not necessary to refer to new Section 67(7B) in Clause 14(5). That being the case, I hope that my noble friend will agree that her amendment is, strictly speaking, unnecessary. However, it has served a useful purpose in that I have been able to explain the purpose of the provisions in Clause 14. In the light of that explanation, I hope that my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am afraid that it occurred to me only while I listened to my noble friend’s explanation that I have not pursued the issue, where it is digital currency or an annuity under a pension plan, of how that will be assessed in cash terms at the point when the cash needs to be calculated. I assume that that must be somewhere else in the legislation—probably in existing legislation. However, that is an issue. We heard recently about how bitcoins are fluctuating in value. Therefore the point at which the calculation is made is very important. Also, we all know that there are issues around the value of an annuity. Therefore I realise, listening to my noble friend, that there is a lot more to this to be thought about than I am afraid I had thought about. Of course, I will beg leave to withdraw the amendment at this point, but—
Lord Taylor of Holbeach
I will willingly write to my noble friend. I am not in a position to be able to tell her the process of valuation of those things from the Dispatch Box today, but I am sure that it would be of interest to the House to know how those valuations occur. I do not suppose that that is the only circumstance in which those things have to be valued.
Baroness Hamwee
My Lords, I am grateful for that; I did not seek to put my noble friend on the spot today. However, as I said, there is a lot more to that than might appear in the Bill. I beg leave to withdraw the amendment.
“Restitution order and victim surcharge
(1) In section 97 of the Proceeds of Crime Act 2002 (effect of order on court’s other powers), in subsection (3)(a), at the end insert “, a restitution order or a victim surcharge under section 253F(2) of the Procedure Act”.
(2) After that section insert—
“97A Application of receipts: restitution order and victim surcharge
(1) Subsection (2) applies if—
(a) a court makes a confiscation order and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy both orders in full.(2) In such a case the court must direct that so much of the amount payable under the relevant order as it specifies is to be paid out of any sums recovered under the confiscation order.
(3) Subsection (4) applies if—
(a) a court makes a confiscation order, a compensation order under section 249 of the Procedure Act and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy all the orders in full. (4) In such a case the court must direct that so much of the compensation, and so much of the amount payable under the relevant order, as it specifies is to be paid out of any sums recovered under the confiscation order.
(5) The amount a court specifies under subsection (2) or (4) must be the amount the court believes will not be recoverable because of the insufficiency of the person’s means.
(6) Where the amount a court specifies in a direction under subsection (4) is sufficient to satisfy in full the compensation, the direction must provide for the compensation to be so satisfied before payment of the amount payable under the relevant order.
(7) Where the amount a court specifies in a direction under subsection (4) is not sufficient to satisfy in full the compensation, the direction must provide for the compensation to be satisfied to the extent of the amount specified in the direction.
(8) In this section, “relevant order” means—
(a) a restitution order, or(b) a victim surcharge under section 253F(2) of the Procedure Act.(9) In this Part, “restitution order” is to be construed in accordance with section 253A(2) of the Procedure Act.””
Baroness Williams of Trafford
My Lords, the new clause proposed by Amendment 23 makes equivalent provision for Scotland to that contained in Clause 6 as regards England and Wales. It provides for the money collected under a confiscation order to be diverted to pay other financial penalties imposed by the court where the accused has insufficient means to meet all the financial penalties imposed on him or her.
The proposed new clause ensures that where the court imposes a confiscation order alongside a compensatory financial penalty, those compensatory penalties can be paid from money collected under the confiscation order where the accused does not have sufficient means to satisfy all the orders in full. The new clause caters for the situation where the court has imposed a confiscation order alongside either the victim surcharge or a restitution order. It also caters for the situation where a confiscation order is imposed alongside a compensation order and either the victim surcharge or a restitution order. The victim surcharge and restitution orders are financial penalties which can be imposed by the court under the Criminal Procedure (Scotland) Act 1995.
Baroness Williams of Trafford
My Lords, the intention behind Clause 15 is to provide that the serving of a default sentence in Scotland for failure to pay a confiscation order does not discharge the outstanding debt. In making such provision, the clause brings the position in Scotland into line with that in England and Wales. Paragraph (a) of the clause achieves this intended outcome by amending Section 118 of POCA to disapply the relevant provision in the Criminal Procedure (Scotland) Act 1995, which relates to fine enforcement.
Paragraph (b) of Clause 15 makes a consequential amendment to POCA to modify the application of Section 224 of the Criminal Procedure (Scotland) Act 1995. That section requires warrants of imprisonment for non-payment of a fine to specify the date for the discharge of the liability to pay the fine—in practice once the default sentence has been served—notwithstanding the fact that it has not been paid. The effect of paragraph (b) is that that requirement will no longer operate where an administrator is appointed in relation to the confiscation order in respect of which the default sentence was served.
However, on further examination, the Scottish Government have concluded that Section 224 should be disapplied entirely. As currently drafted, the clause would result in some individuals still having their confiscation order discharged once they have served a default sentence, which is not the outcome the Scottish Government are seeking to achieve. I beg to move.
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 127B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 127G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 195B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 195G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 160A, and(b) must have regard to that determination in deciding what is the appropriate order to make.”