Economic Crime and Corporate Transparency Bill (Second sitting) Debate
Full Debate: Read Full DebateTom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Economic Crime and Corporate Transparency Bill (Second sitting)
Tom Tugendhat ExcerptsTuesday 25th October 2022
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 October 2022 - (25 Oct 2022)
The Chair
Our first witnesses, the fifth panel, are Martin Swain from Companies House and Adrian Searle from the National Economic Crime Centre.
The Minister for Security (Tom Tugendhat)
May I just declare an interest, very briefly?
The Chair
Absolutely. We will all listen with bated breath to the Minister’s declaration of interest.
Tom Tugendhat
I simply refer to my wider declaration in the Register of Members’ Financial Interests.
The Chair
Thank you. Mr Swain, would you introduce yourself briefly for the record?
Martin Swain: Good afternoon. I am Martin Swain. I am one of the executive directors of Companies House, with responsibility for—
Jackie Doyle-Price
Q
Bill Browder: People are very simple: they operate on the basis of rewards and punishments. There are big rewards for people in the City of London to launder money. Banks make money off transactions and accounts and so on. Company formation agencies make money off selling directors and forming companies. Lawyers make money setting up these structures. There is no consequence if they are involved in in dirty business—none. Nobody faces any consequence.
What we have just seen at Companies House is remarkable: thousands of companies being registered for no commercial purpose other than to launder money. These companies then set up foreign bank accounts. We know who the directors are. Some of the directors are UK citizens. The company formation agencies are UK company formation agencies. We report it to the police, and nothing happens. If nothing is going to happen, then you are not going to change the culture.
America has the Foreign Corrupt Practices Act. Most American corporate executives do not want to be prosecuted and therefore do not make bribes abroad. Austria does not, and so they do. We are in a situation where there is no consequence for doing any of this type of stuff. It does not matter what is written in this law; it does not matter what was written in the previous law. There was a great law passed called the unexplained wealth order. It is a beautiful law, which solved a huge problem, which is not having to get evidence from the bad guys in the kleptocrat countries, and just using the evidence that we have here. We have used it in four or five cases, and most of the cases have actually been on behalf of dictators going after their enemies. We have a total failure of law enforcement. It probably should be studied as a separate issue: why is law enforcement not doing its job? Why is it failing?
You can write as many great laws as you want—there is some good stuff in this law, and good stuff in the previous laws—but if no one is going to enforce it, then you are never going to change the risk-reward and people are going to carry on doing stuff. All this will continue, and I will sit here 10 years from now making the same allegations about how this is a centre of money laundering.
Oliver Bullough: I would like to agree with everything Bill just said. People are more or less rational: they act according to their incentives. We can try and change the culture in the City of London as much as we like but, essentially, if there is no prospect of being arrested, prosecuted and jailed, or at the very least given a large fine, for committing these kinds of crimes, then someone will always be available to commit them because the reward will be sufficiently large and there will be no downside.
I gave a talk to a school a couple of years ago. One of the kids had been sitting silently throughout, and he put his hand up and asked me at the end, “Yeah, Mister, if you know all this about money laundering, why don’t you just go and do it?” I still do not really know the answer to that question, because there is no real reason not to do it. It is a gimme of a crime. You are 99.9% likely to get away with it.
What is particularly frustrating is that when we have prosecuted fraud and put resources into prosecuting fraud, it not only pays for itself, but is a huge profit centre. We saw that from Lord Agnew, who ran a small anti-fraud office from the Cabinet Office during the covid pandemic. He had a small anti-fraud budget that returned tenfold the amount of money that was paid. It is a complete no-brainer to go after this money and these crimes. We would be benefiting the country in every way.
I agree with Bill; it is very frustrating to hear talk about changing culture, when what we really need to do is to change people’s incentives. The way to do that is to enforce the laws that we have.
Tom Tugendhat
Q
We will be listening for further ideas in the future, but do you agree that the Bill at least sets out the first steps to where we really do need to be going to make sure that the crimes begin to be prosecuted? Just to answer your question, Oliver, the reason you do not launder money is that you are and remain a person of integrity; sadly, you are not very rich for it, but there you go. That is the price.
Bill Browder: I have never had any trouble with the laws as they are written here. We probably do not even need this. It is a great law—congratulations; I applaud you on putting it together. It is 252 pages of mind-numbing stuff—
Tom Tugendhat
Of detail, Bill!
Bill Browder: It is great. There is no problem with the actual legislation. This is a rule-of-law country, and the laws have been written, and continue to be written, very well. There is just a huge disconnect between that and the enforcement.
I would add one little detail, if you want to get into the nitty-gritty. We have seen that UK companies are used abroad to set up accounts—this was mentioned by Dr Susan Hawley and perhaps one other—because it looks legit to have a British company with a Cypriot or Latvian bank account. Somehow, when you get a transfer from a British company with a European bank, everything then—that is how these people get away with it.
I would therefore add one small provision to this law, which is easily done. When people are setting up their companies, they should have to disclose, on an annual basis, where they have foreign bank accounts. If you were to do that, then every anti-corruption investigator could go around and start looking at that. I do not think that it is a huge additional disclosure requirement. People have to disclose their income, expenses and so on, so why not disclose where they have bank accounts?
The Chair
Q
Oliver Bullough: I think it was Samuel Johnson who said, about a dog walking on its hind legs, that
“It is not done well; but you are surprised to find it done at all.”
I am happy that the Bill exists; I was happy that there was another one earlier in the year. I would prefer it, however, if Parliament sat back and, instead of passing two fairly minor economic crime Bills in one year, put them together into one with all the other things that desperately need doing, take a long time over it and, when passed, really ensure that the law, as passed, is enforced.
Bill mentioned unexplained wealth orders. Those were a fantastic idea—perhaps hugely overhyped when they were brought in, but a great idea—and a real potential silver bullet for tackling top-end economic crime by both organised criminals and kleptocrats. Sadly, after the failure of the case against the daughter of the former President of Kazakhstan, they have not really been used at all. That is because the National Crime Agency does not have the money it needs to do the job, and that is because politicians have not sufficiently prioritised fighting economic crime. That is where the money comes from.
Yes, by all means, it is good to have another Bill, but I would far prefer to see the existing laws properly enforced by properly-resourced law enforcement agencies with continuous political support than have another Bill. I say that as someone who has been banging on about the problems with Companies House for absolutely ages.
Economic Crime and Corporate Transparency Bill (Third sitting) Debate
Full Debate: Read Full DebateDepartment: Home Office
Tom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Department Debates - View all Tom Tugendhat's debates with the Home Office
Economic Crime and Corporate Transparency Bill (Third sitting)
Tom Tugendhat ExcerptsThursday 27th October 2022
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 October 2022 - (27 Oct 2022)
The Chair
I thank Members and those giving evidence for their flexibility in moving rooms, and I inform Members and those giving evidence that we will be in this room all day today. Could the witnesses please introduce themselves for the record?
Helena Wood: Hello, my name is Helena Wood. I am a senior research fellow at the Royal United Services Institute, where I lead the economic crime programme.
Duncan Hames: Hello, I am Duncan Hames. I am the director of policy at Transparency International UK.
The Minister for Security (Tom Tugendhat)
Forgive me, Ms Wood; my hearing is not very good. Can you speak straight into a microphone?
Helena Wood: Yes.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Helena Wood: To place it in context, one of Britain’s great financial crime exports of recent years has been our joint money laundering information taskforce, which is one of the first public-private partnerships. That model has been replicated across the globe, with public-private partnerships now seen as a norm by the FATF, the international standard setter on tackling money laundering and terrorist financing. In one respect, we really have been a global leader in that regard. However, as with many British exports, we are now exporting that abroad and it is being copied and replicated at a speed and scale beyond what the UK is doing. Increasingly, we are seeing people moving from peer-to-peer information sharing towards a more collaborative data analytics model. I point to the models being set up in Holland and in Singapore as particularly groundbreaking in that regard.
Coming back to the provisions in the Bill, do they get us from where we are now on peer-to-peer information sharing, which is one thing, towards this world of collaborative data analytics, which we need to get to to really home in on financial crime? No, they do not. Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard.
What we would like in the next economic crime plan, which we hope to see this side of Christmas, is something that is much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.
Dame Margaret Hodge (Barking) (Lab)
Q
I am going to ask about another issue, just to get it on the table. People engaged in the debate over dirty money are very anxious that we should move from just freezing the assets, particularly of the Russian Government and Russian oligarchs, to seizing the money so that we can use it—particularly for the reconstruction of Ukraine, when that war comes to an end. Can I have your views on that, starting with you, Duncan?
One final thing: a big thank you to both of you for the work your organisations do in exposing a lot of the problems and for the very positive attitude you have taken to establish solutions. Thank you to both of you, individually and to your organisations.
Tom Tugendhat
Hear, hear!
Duncan Hames: Thank you. I think it is important that we should continue to respect the rule of law and have a judicial basis for asset recovery. Too often, it is tempting to have a more administrative approach, and with that comes risks. It is very important that, as well as having the clarity of purpose to designate a whole substantial raft of individuals and entities for Russia sanctions, we have the determination to make those sanctions work.
We published some research just last month that found hundreds of millions of pounds’ worth of UK real estate that we were fairly sure was owned and controlled by individual entities that have been named under Russia sanctions. However, if you check on the Land Registry, there are not any of the typical markers to say that you cannot sell or transfer or trade this property. That is partly because of some of the very clever and complicated arrangements for their ownership, including using trusts.
In the work you are doing on the Bill, there is an opportunity to ensure that really important measures for global security, such as our Russian sanctions, actually work, bite and make it impossible for those who have moved large amounts of wealth out of Russia to continue to control it in the interests of their political sponsors.
Helena Wood: I could not agree more that we need to start moving from freeze to seize, but I echo Duncan’s sentiments that we must do so in a way that protects the very things we are trying to protect and do: the rule of law, due process and democracy. We should not push towards measures that effectively put in place a ministerial decree for confiscating individual assets and run roughshod over A1P1 principles.
That said, there is further we could go in UK legislation. Even with the advent of the much vaunted unexplained wealth order, our law enforcement agencies remain on the back foot. There is more we can do within the confines of European rights compliance-tested laws of reverse burden mechanisms to put law enforcement on the front foot.
Fundamentally, though, it is not going to be an easy fight to link those assets back to the criminality from which they once derived, given the difficulties of gaining evidence across borders. However, there are models we could replicate that have been tested for ECHR compliance, such as in Italy and Switzerland—I could name others. If the Committee will forgive me for trailing some forthcoming RUSI work, a paper is coming in November or December this year that sets out some recommendations of where part 5 of the Proceeds of Crime Act 2002 could replicate some of the principles of other regimes and push forward to at least put law enforcement on the front foot.
The other issue I would point to, which has already been partly legislated for, is cost protection for our law enforcement agencies. We have legislated for cost capping in cases involving UWOs, but they are not the right tool to use in all cases; I particularly point to the oligarchs, who do not fit under the definition of PEPs in UWO legislation. There is an argument for the Bill to potentially push for full cost capping of part 5 cases to increase the risk appetite of our law enforcement agencies to take those cases on in the first place.
James Daly (Bury North) (Con)
Q
“direct sharing between two businesses in the AML regulated sector”
and
“indirect sharing through a third-party intermediary for businesses in the financial sector”.
That is what the Bill does. Putting it bluntly, what is wrong with that? What is the criticism of those aims and the things it allows businesses to do?
Helena Wood: Civil liability for confidentiality is one barrier. It is an important one, and removing it will hugely increase appetite, but it is not the only barrier. The boundaries within our data protection legislation are not explicitly clear; they are open to interpretation. We need more guidance, potentially from the Information Commissioner, to make clear what those boundaries are. We potentially need further clarification in the data protection legislation that is currently going through—
Tom Tugendhat
Q
Duncan Hames: Yes, happily. We are quite a small organisation, but this is about the power of putting information in the public domain. The report that we were describing earlier is a form of network analysis; that is the sort of thing you can do if open data is published, rather than information in PDFs, which are essentially photographs of old documents.
Whether it is organisations like ours, or investigative reporters such as the Organized Crime and Corruption Reporting Project, civil society has shown its potential to help uncover those crimes if there is information in the public domain. If we want a spirit of partnership, and if Government want the private sector to be its first line of defence, then it is really important that everyone is equipped with the tools that they need and that the company register is providing accurate information, which has been checked, that they can rely on.
Tom Tugendhat
Q
Do you agree that those reforms begin that process and that fightback? Do they make a difference by scrubbing, as it were, the inside of the whitened sepulchre to ensure that we are exposing it to sunlight, so that organisations such as yours, the media, and many others around the world, will be able to identify where that money is going and from where it has come? This is also about jurisdictions overseas who are losing money through our system, not just about us who have to control it.
Duncan Hames: Yes, I agree. The Bill is beginning that. The challenge that we have is that it is six years ago that we last made reforms to Companies House, and I do not know when you are next going to get a chance to make further progress.
Tom Tugendhat
I have only just come into post.
Duncan Hames: It is hard, as we are often told, for legislative time to be found. So please make the most of the opportunity and take it as far as you can. It was only this summer that the US Treasury issued a money laundering alert about evasion of Russia sanctions. In that, they identified UK limited liability partnerships as part of the typology of the financial logistics for evading sanctions.
Tom Tugendhat
Q
Duncan Hames: But this is the jurisdiction that Members of our Parliament are responsible for.
Tom Tugendhat
Q
Helena Wood: May I come in on that particular point around Companies House reform? The point has been made by others giving evidence here this week and I will make it again until it sticks. Companies House reforms mean nothing if we do not resource Companies House properly. Using that secondary legislation to raise formation fees to £50, at least, is absolutely essential—
Tom Tugendhat
That is absolutely true, which is why the partnership that we have to put in place alongside agencies, NGOs and journalism, to make sure the application programming interfaces are open is so important.
The Chair
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions.
I very much thank our witnesses, Helena Wood and Duncan Hames, for their time, and I thank Members for their questions. We now move on to the next session.
Examination of Witnesses
Chris Taggart and Elspeth Berry gave evidence.
Seema Malhotra
Q
Chris Taggart: On the latter question first, I have been a director for some 20 years. The first time, someone sat me down and said, “This is what’s involved in being a director.” You think, “Wow, that’s kind of scary.” You have a fiduciary duty and you have to understand the company. If you are a director of 200 companies, I fail to see how you can perform that fiduciary duty, or those companies are, in some ways, just legal entities for some conduits for something. They are not actually in business; they are just conduits. I struggle when someone is a director of 200 companies: either those are just legal entities for some purpose other than as a normal company or they are not doing their job. It seems to me obvious that there is a challenge there. Whether that is a limit or whether that is actually holding directors much more personally liable for the wrongdoing of the companies, I do not know, but I think that there is something. There seems to be a contradiction there, fundamentally.
Elspeth Berry: I agree. I would have supported a cap on the number of directorships for exactly those reasons, in that I do not think a director can fulfil their duties if they have a lot of companies. However, if you are not going to have that, that certainly has to be a red flag for Companies House. It has to be a thing they will investigate and that they have the resources to investigate, which comes back to the problems that we identified earlier.
On the addresses, if you have a company service provider giving their address, it is quite possible you will have multiples and that might be okay if that is their business, they are doing it properly, they are AML regulated and all the rest of it. The problem is that we have seen in recent years that they are not. Again, that ought to be a red flag. In the limited partnership proposals, where you are trying to establish some real connection, economic or otherwise, with a particular jurisdiction within the UK or, at least, with the UK, that is one of the problems. One of the options on the list—they are all problematic—I personally thought that the principal place of business might be quite a good one, showing an actual connection, but I have been corrected in my beliefs by my journalist colleagues who say that almost all the wrongdoers were able to tick that box. I think it is a problem if you are saying that as long as somebody will pick up the mail here, that is okay. Again, that needs to be a red flag.
Tom Tugendhat
Q
Chris Taggart: There are two issues. I watched some of the previous witnesses and the things that came across were issues to do with identification and resourcing and I back up both of those things. On identification, allowing the corporate service providers to essentially say they have done something seems both a huge vector for misuse and also unnecessary. The technology allows us to look like we are using one company when we are signing up online and so on, but it is all authenticated with another company. They could be using Companies House back ends or banks’ back ends—we could have that authority and those standardised processes—and still you would appear to be transacting with a corporate service provider.
Having corporate service providers doing the identity verification seems like we have walked away from doing it properly. Once you allow corporate service providers to play a significant role, particularly on identity, I think we have a bit of a problem. Assuming that loophole is closed, this is really good, but it is still state of the art two, three or four years ago, and I think we need to start using digital identities. We need to make sure that, with somebody’s identity, they are not saying one thing on this hand and not saying another thing on that hand. Again, the unique identifiers—
Tom Tugendhat
Q
Chris Taggart: Absolutely, but I think there are technical ways of doing that. It does not have to be one ID that everyone can see—
The Chair
Order. I am very sorry. That brings us to the end of the time allotted for the Committee to ask questions. I am very grateful to our witnesses for giving evidence.
Examination of Witness
Graham Barrow gave evidence.
Tom Tugendhat
Q
Graham Barrow: That is kind. You must understand that I am a private citizen, so I do not have access to huge swathes of information that I would love to be able to get hold of to give a much rounder view of that. Companies House, of course, does, so there are some interesting things that it will have, such as email addresses, IP addresses and credit card details.
There are some important provisos there. Do not allow people to pay for their enrolment through a pre-paid credit card. That would be a bad thing. Do not allow people to apply through a virtual private network—a VPN. That would be a bad thing. Do not allow people to apply through something like Proton Mail or an encrypted mail account. That would be a bad thing. What we need is transparency in all those things so that we can aggregate that data with, for example, data from His Majesty’s Revenue and Customs, voter roll data and other data, to get a much more rounded picture of people who are applying for company directorships.
Now, that only works here in the UK. It is worth bearing in mind that about 150,000 company incorporations every year emanate from outside the UK. That adds further difficulty. There were 50,000 applications from China last year, so that is clearly a problem. Incidentally, those numbers soared after China banned cryptocurrency at the end of September last year. There was an extremely easy to observe uptick in UK corporate registrations from Chinese individuals.
The Bill will start to address such a range of issues. I think it will be the first of many if we are really going to make our corporate environment safe and secure, and start tackling economic crime and the abuse.
Tom Tugendhat
Q
Graham Barrow: No. I am saying that for the purpose of registering a company in the UK, you should not be afforded that benefit.
Tom Tugendhat
I understand the distinction. I just wanted to make the point. As you can understand, it would raise other difficulties.
Graham Barrow: Absolutely.
Tom Tugendhat
Q
Graham Barrow: They are good friends.
Tom Tugendhat
They are brilliant. These people are quite literally on the frontline of our democracy, defending our freedom by defending our corporate integrities. Their work is extraordinary important. I would be grateful if you would say a little bit more about shell companies.
Graham Barrow: I count all those people as friends. Oliver and I exchange daily emails. We work very closely together. The last time we met was on a bus.
Dame Margaret Hodge
Of lots of us around the table.
Graham Barrow: Shell companies are containers. Effectively, it is a container for assets. They are used in a whole variety of ways. They are used, clearly, as conduits for corrupt and criminal funds to be moved around the world. They are also used just as a container to access banking and do as I have just described—a one-off hit to get a bank account open and get an overdraft.
I have seen physical evidence of a company being incorporated to an address of somebody in Cardiff who knows nothing about it; on the same day, they open a bank account with one of our high street banks, and on the same day, they remove the automatic £8,000 overdraft that came with that bank account. Then they disappear, and of course it turns out that they were untraceable because none of the details they provided were real. That is a shell company, because that is not doing any normal commercial activity.
The Committee mentioned addresses earlier. I am sure some members of the Committee will know that there are addresses in central London that are home to 100,000 companies. That is clearly a matter of concern, particularly with the proportion of those companies that are registered from some of the more remote parts of the world—places you would struggle to find on a map—that concentrate at those addresses.
We need to be quite clear about the legitimate use of corporate service provider addresses. Some of our banks now provide that as a service. That is fine. There is one firm that offers this thing called a non-resident package, which should immediately make your ears prick up. Somebody from outside the country can register a business and be given the business bank account for a fixed fee. That bothers me hugely, because it makes me ask why.
The thing about shell companies is that they are not always easy to identify at the point of incorporation. We are getting very good at it, but it is still not an exact science. It is about lifetime analysis of a company’s behaviour, as well as some of the red flags that are raised at the point of incorporation.
Tom Tugendhat
Q
Graham Barrow: It probably does not assist me an awful lot, because I do not have access to a lot of the other data that particularly members of JMLIT, and other law enforcement and Government organisations, have access to. As a private citizen, I will not have access to that much more information. That is probably a good thing, because I am already drowning in information. For a man who is going to be 70 next birthday, it is not exactly the retirement that I had planned. In a way, I think the best thing I can do is help to inform and educate others so that as the Bill starts to generate that information, some of which I will not be privy to, I can at least help people to understand better how to analyse and aggregate that information to extract signals.
Ultimately, there will be too much information to do everything with, so it is about how we organise ourselves, particularly at the point of incorporation, so that instead of waiting for a problem and going back to see how it happened, we identify that problem in the process of being set up, and start proactively managing the people who are part of organised crime or corruption and are using or abusing Companies House to do that. We have never done that before, to the best of my knowledge, but we are now in a situation where we can start doing it.
Dame Margaret Hodge
Q
Graham Barrow: Dame Margaret, you ask me a tricky question because I worked at Deutsche Bank, and some of what I know is privileged and I cannot talk about it. In fact, my work in Deutsche Bank is what has led me to be sitting here, because it was while I was there working on the Russian mirror trades that I realised that two completely different firms had filed exactly the same set of accounts—identical accounts—signed by the same person. My rather naive reaction then was, “How on earth did this happen?” I know better now. That person’s name is in the public domain: it is Ali Moulaye. He is a dentist who currently lives in Belgium and has been written about frequently. I kind of discovered him, in a way. He has signed more than 10,000 sets of accounts on Companies House on behalf of at least 2,500 limited liability partnerships, a significant proportion of which have, sadly, been named as being involved in various laundromats.
One issue was that all those accounts were filed on paper and were then scanned in as an image, not as a machine-readable document. That is a really big disadvantage, because it prevents people such as me, or those with access to clever technology, from reading those documents into artificial intelligence engines and performing deeper analysis on them. It is a very difficult problem. It would be a wonderful thing—although I suspect quite labour intensive—to retrospectively digitise all those old PDFs, because there is a huge wealth of intelligence still residing in them that we truly do not understand. That is also very much true of limited partnerships, which still can only file on paper. The only way to incorporate a limited partnership is on a paper application. That makes reading the data on those registration forms extremely difficult, which is why lots of it has remained hidden for so long.
Economic Crime and Corporate Transparency Bill (Fourth sitting) Debate
Full Debate: Read Full DebateTom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Economic Crime and Corporate Transparency Bill (Fourth sitting)
Tom Tugendhat ExcerptsThursday 27th October 2022
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 27 October 2022 - (27 Oct 2022)
The Chair
I am going to have to curb this and move on very briefly to Tom because we have to finish.
The Minister for Security (Tom Tugendhat)
Q
Angela Foyle: Neither of us is part of the Law Society so we cannot speak for them, but clearly, that was something that was thought to be necessary as a deterrent. Although I expect most of them are likely to be regulated by the Solicitors Regulation Authority for money laundering, rather than the Law Society. However, it must have been a gap that was thought to be necessary to fill. I really do not know, otherwise; I am speculating.
The Chair
Thank you very much. That brings us to the end of the time allotted for the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence.
Liam Byrne
Q
Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.
Tom Tugendhat
Q
Peter Swabey: The Bill deals with some very specific issues, which are not necessarily those. I think that the Bill would need to be broadened significantly were it going to get into things like sustainability, corporate social responsibility and so on.
Tom Tugendhat
Q
Peter Swabey: No, I think that is very important for governance. What I was saying was that you were then talking about some of the other issues, such as corporate social responsibility, which are probably outwith the scope of the Bill as it stands.
Tom Tugendhat
Q
Peter Swabey: Absolutely, yes.
Tom Tugendhat
Q
Peter Swabey: Yes, you are right. I had not thought of that aspect of it—I was thinking in terms of the reporting that companies do—but yes, in terms of tracking down defaulting companies, I think it will help you.
Tom Tugendhat
Q
Peter Swabey: Yes, absolutely. Removing the ability for companies to go bust one day and reappear the next with a very similar name and very similar directors, but without all those tedious debts that they used to have, is one of the really important issues.
Tom Tugendhat
Q
I also wondered if you could talk a little bit about whether you think it is going to help with economic crime. Clearly, although I am not a BEIS Minister, one of my responsibilities is fraud. The presence and disappearance of corporate entities is, I am afraid, something that has caused more than its fair share of fraud. How do you think the Bill might be able to help with that?
Peter Swabey: I think the Bill will help with that by making it possible to have greater confidence in the directors who are responsible for those companies actually being real people. We were talking a little while ago about the ease with which you can set up a company, and the limited verification of directors that goes on. We have a verification process in the Bill that will help to ensure that those people are actually the people you believe them to be, and that there is an address where you can get hold of them and, particularly, where the forces of law enforcement can get hold of them should they need to. That is a real strength.
Tom Tugendhat
I am very grateful, not only for your evidence today, but for the work you do and the oversight you bring. It does make a huge difference, and I am very grateful indeed for it. Thank you.
The Chair
Thank you very much. If there are no further questions from Members, we will thank the witness for his evidence and move on to the next panel. Peter, thank you very much for your time; we greatly appreciate it.
I am going to suspend the sitting, because we have a little bit of time before the next evidence session, and the witness is not in the waiting room yet because she is giving evidence via Zoom.
Seema Malhotra
Q
Catherine Belton: In July, the MOJ forwarded anti-SLAPP legislation. Unfortunately, because of the chaos of the last couple of months, that has not really gone anywhere. That legislation could be attached, as is, to the Economic Crime and Corporate Transparency Bill. The Bill as drafted slightly toughens the criteria for claimants; they have to prove that there is a significant likelihood that they have a real claim. You should speak to the FPC to weigh whether it is worth pursuing their draft laws as a better model, or whether it is enough to use the one already drafted by the MOJ. They had extensive consultations on that, but now it looks like all the momentum has gone. It is astonishing to me that this is not being pursued as a priority, given the situation we are in. It is absolutely vital that we shine light on individuals who may be operating on behalf of Putin to undermine western support for Ukraine, and to undermine our resolve this winter as we face enormous cost of living hikes. It is really important.
Tom Tugendhat
Q
Catherine Belton: You say that this is my 20th or 30th time giving evidence, but unfortunately, it is not. I have only spoken on SLAPPs before. I will leave the realm of Companies House reforms to people who are more expert on it than me.
The Chair
If there are no further questions from Members, thank you very much, Catherine, for taking the time to speak to us.
Examination of Witness
Professor Jason Sharman gave evidence.
Tom Tugendhat
Q
Professor Jason Sharman: Yes and yes. I think this is a modest positive step, but, given the track record of legislation, I would say that it has to be implemented. That is where the problem has been heretofore, and I can possibly anticipate that it may be the problem here, too. If you say, “You have to identify yourself as the owner of a company,” and you have entries in Companies House saying, “My name is XXX XXX,” and that does not get challenged, then more information is not necessarily better if that information is junk.
Tom Tugendhat
Q
Professor Jason Sharman: I mentioned briefly that some of my research, together with Mike Findley and Dan Nielson, has been to impersonate would-be money launderers and look to set up companies in various jurisdictions. It is much harder to set up companies, and the standards are much more rigorous, in the Cayman Islands, the British Virgin Islands and the Crown dependencies than in the UK. Of the UK jurisdictions, the UK is the easiest place to set one up, so I think the UK could learn a lot from its overseas territories and Crown dependencies. I noticed with interest that a couple of the other witnesses here said the same.
Tom Tugendhat
Q
Professor Jason Sharman: No, I do not think Companies House will be able to do it. Its main function is passive and archival; it is a library mainly. I think it is just not in its DNA to be otherwise. I think most of the solution for this is in the private sector. I am talking about properly regulated, supervised and audited corporate service providers. I co-authored a report 10 years ago with the World Bank called “The Puppet Masters”, and that was overwhelmingly the conclusion that we came to.
Tom Tugendhat
Q
Professor Jason Sharman: I completely agree. I think, even more, that HMRC, as the regulator for corporate service providers, those enablers, has been completely missing in action. If there were one bit of the public sector that I would change, repurpose or fund, it would be to get HMRC to take its duty to regulate and penalise corporate service providers seriously. It has just been completely missing in action so far.
The Chair
If there are no further questions from Members, I want to thank the witness for his evidence. Professor Sharman, thank you very much for taking the time to come and speak to us.
Ordered, That further consideration be now adjourned. —(Nigel Huddleston.)
Economic Crime and Corporate Transparency Bill (Fifteenth sitting) Debate
Full Debate: Read Full DebateDepartment: Home Office
Tom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Department Debates - View all Tom Tugendhat's debates with the Home Office
Economic Crime and Corporate Transparency Bill (Fifteenth sitting)
Tom Tugendhat ExcerptsTuesday 22nd November 2022
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 November 2022 - (22 Nov 2022)
The Chair
With this it will be convenient to discuss that schedule 6 be the Sixth schedule to the Bill.
The Minister for Security (Tom Tugendhat)
It is a great privilege, as always, to be with you this morning, Mr Paisley, and to enjoy the possibility of conversing about the Proceeds of Crime Act 2002.
The clause introduces schedule 6 to the Bill, which amends the criminal confiscation powers contained in parts 2, 3 and 4 of the Proceeds of Crime Act 2002—known as POCA, not to me, but to some presumably—to make it easier for law enforcement agencies to seize, detain and recover cryptoassets in more circumstances than at present. Schedule 6 will amend the provisions in each of the three existing confiscation regimes that extend to England and Wales, Scotland, and Northern Ireland so that the measures apply in all parts of the United Kingdom. That is reflected in the three parts of schedule 6.
Key definitions in schedule 6, such as those of “cryptoasset” and “cryptoasset exchange provider”, are consistent with those used elsewhere in the Proceeds of Crime Act. The schedule includes powers to update those defined terms to ensure that the measures in the Bill can keep pace with the constantly evolving criminal use of cryptoassets, the rapidly changing nature of crypto technology as well as stay aligned with other legislation dealing with similar threats.
Stephen Kinnock (Aberavon) (Lab)
It is a great pleasure to serve under your chairship today, Mr Paisley. I take the opportunity to welcome the Minister to his place; I do not think that I have done so formally, although I might well have done informally. It is good to see him in his place.
I want to make some general comments about cryptocurrencies and about the clause and schedule 6. Broadly speaking, they have some positive aspects, but we also have some questions for the Minister, and I am sure that he will explain the position with his customary lucidity once I have sat down.
Cryptocurrencies and other digital assets are not new, but how they should be regulated is still very much an open question in the UK and internationally. The Government’s decision to expand the legal framework for asset recovery under the Proceeds of Crime Act is a positive development. For that to work, however, we need to be clear about what the legislation intends to achieve.
It is fair to say that the Government have sent mixed messages about their approach to regulating cryptoassets. On the one hand, they have acknowledged the need to tackle the use of cryptoassets for criminal purposes, hence the decision to extend the money laundering regulations to cryptoasset businesses, which has been under the supervision of the Financial Conduct Authority since January 2020. In the factsheet published alongside the Bill, the Government set out their view:
“Cryptoassets are now increasingly being used by criminals to move and launder the profits of various crimes including drugs, fraud, and money laundering. There is also an increased risk that cryptoassets are being exploited to raise and move funds for terrorist activities.”
On the other hand, earlier this year, the then Chancellor of the Exchequer, who is now the Prime Minister, said that it was his
“ambition to make the UK a global hub for cryptoasset technology”.
The then Economic Secretary to the Treasury echoed that, saying in a speech at the Innovate Finance global summit in April:
“If there is one message I want you to leave here today with, it is that the UK is open for business—open for crypto-businesses”;
and
“Because we want this country to be a global hub—the very best place in the world to start and scale crypto-companies.”
It concerns me that the Government do not seem to have made up their mind whether as a country we should value crypto firms and want to entice them to the UK, or whether we should recognise the ease with, and scale at which, criminal activity within crypto markets is allowed to happen and therefore should prioritise tightening regulation and enforcement by cracking down on the widespread use of such assets to defraud individuals and undermine our national security. Perhaps the Minister will shed some light on that strategic dilemma or ambiguity and on how the Government plan to reconcile those two apparently competing aims.
I do not want to pre-empt what the Minister will say, but I imagine that he will claim that it is possible to do both.
Stephen Kinnock
But is it not simply the case that we are not putting enough resources into the enforcement of laws and the policing of such markets? That is fundamental to achieving the regulatory aim of that side of the equation.
Crypto-expert Aidan Larkin recently told me how the US Government’s money laundering and asset recovery section brings in around $800 million a year in crypto-recovery alone, while the UK brings in close to nothing, because the UK Government fail to employ the handful of experts required simply to study the blockchains via things such as bitcoin analytics and to follow the illicit finance—“to follow the money”, as the saying goes. I cannot pretend to be an expert on the technical aspects of that, but it feels like a missed opportunity to go after illegal activity. We have surely reached a point in time when that could be self-funding, if we did it properly.
I am simply not convinced that the system for regulating cryptoassets is working as well as intended. Indeed, it is pretty telling that in response to written questions 86505 and 86504, which I tabled last week, the Minister admitted that none of the 200-plus crypto businesses operating without commission had been subject to any criminal or civil penalties.
As I mentioned, since January 2020 there has been a requirement for new businesses carrying on cryptoasset activity in the UK to register with the FCA. The requirement was extended to existing businesses the following year. The implementation of the register, however, has been beset by problems, not least of which is the fact that a very large number of the firms required to register have not done so. The FCA seems to have been unable to do much about that.
Only a couple of weeks ago, the Financial Times reported that only 16% of applications for registration have been approved by the FCA. The FCA has said that a large number of firms that failed to meet the conditions for registration have withdrawn their applications and that many of those appear to have carried on doing business without the requisite permission. Indeed, the FCA maintains a list of unauthorised cryptoasset businesses operating in the UK. As of last week, 245 firms were on that list. Will the Minister explain what is being done to prevent those 245 firms that operate outside the money laundering rules from scamming members of the public, facilitating money laundering or assisting the evasion of economic sanctions?
The Government have been aware for some time of problems involving the use of cryptoassets to defraud members of the public. In October 2018, the Government’s own Cryptoassets Taskforce published a report that identified advertising that misleads people deliberately, by overstating the potential gains from investing in such assets and downplaying the risks involved, as a significant problem for the Government to address. Only now, after four years, are new rules being introduced to expand the FCA’s remit to include consumer protection in relation to misleading financial promotions.
Despite that, however, a clear gap remains between the scale of criminal activity in the sector and the ability of the FCA and police forces to respond. In recent evidence provided to the Treasury Committee, Ian Taylor of the crypto trade body, CryptoUK, said that the recent collapse of high-profile crypto exchanges such as FTX could have been prevented had a stronger regulatory system been in place. Multiple witnesses testified to the Committee that, without additional staff with the right expertise, the FCA was unlikely to be able to regulate the crypto sector effectively.
Let me turn to the substance of the clause and schedule 6. It is clearly necessary for the law to be brought up to date to reflect the use of digital assets for criminal purposes. The clause and schedule amend the Proceeds of Crime Act 2002, to extend to intangible assets the same confiscation powers that are already used to recover physical assets like cash. That is an important first step, but in many ways the Bill leaves open more questions than it answers.
For instance, the Bill provides new powers to seize cryptoasset-related items, but the definition of those items is incredibly vague, encompassing any item of property that may provide access to some kind of information that could be relevant to an effort to seize a cryptoasset. Given the broad scope of the powers, alongside the related provisions on the destruction of confiscated property, we need more information from the Minister about how the powers are likely to be used in practice.
Alison Thewliss (Glasgow Central) (SNP)
I agree very much with what has been said from the Labour Front Bench. I ask the Minister about the interaction between this Bill and all the other Bills that are considering crypto at the moment, including the Online Safety Bill, which addresses some aspects of people being exposed online to financial crime. The Treasury Committee report on economic crime pushed quite strongly on having an aspect on economic crime in the Online Safety Bill, because it is important that people are not scammed online. To me and to many others, crypto seems very much a place where people do get scammed and lose all their money.
I draw the Committee’s attention to an interview by Henry Mance in the Financial Times yesterday with Stephen Diehl, who is very cynical about the crypto industry and its ability to rip people off. We have to be incredibly careful about the areas we are getting into; we are legislating for something that is moving very quickly. Given the number of Government amendment that will be made to the schedules in this part of the Bill, we need to think carefully about what we are putting in and whether it is suitable for seizing assets and for protecting people against crypto-related fraud more widely.
My other point is about expertise. I have talked an awful lot about the Government having expertise in various areas on the enforcement side, because if there is no expertise in enforcement, the laws that we are considering will just not be enforced. In our evidence session, Andy Gould said:
“We have been investigating cryptocurrency since 2015 or 2016. One of my sergeants has just been offered 200 grand to go to the private sector. We cannot compete with that. That is probably the biggest risk that we face within this area at the moment.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 24, Q37.]
If the money is not there in policing to retain the expertise to prosecute crypto crimes and to make sure that the legislation works in practice, rather than just on paper, the Government will be very much behind the curve.
I add my hesitation on the messages the Government are giving out on regulating and encouraging and on cracking down on a sector that has the potential, as we have seen with the collapse last week, of losing an awful lot of people their money and of making some people an awful lot of money out of those who have lost it.
Tom Tugendhat
If I may, I will just give a quick explanation of what crypto is because there seems to be some misunderstanding. Crypto is both a technology and a financial instrument. The financial instrument element is only part of it. Allowing for crypto technology is basically allowing for mathematics. Passing laws against crypto is like passing laws against mathematics—we can try, but it is not going to work.
What the now Prime Minister was talking about was encouraging the mathematics, the algorithms and the technology to develop in this country to create the kind of industry and the kind of infrastructure that would allow the technological use of algorithms for the transfer, sometimes of wealth, sometimes of knowledge, sometimes of contractual obligations. That is what blockchain fundamentally is.
On top of the blockchain, there are various forms of currency. There are bitcoins, which are proof of work, and then there is ethereum, which is proof of stake. These are different kinds of technologies and different ways in which cryptoassets use the blockchains and the technology that has underwritten them.
Having regulation for the currency is not the same as having regulation for the underlying mathematics. We would not say that we have regulation for the economist in the same way that we have regulation for the bank—they are different things. The Government are doing the right thing. We recognise that there is technology, and supporting it; we recognise that there are financial instruments, and are looking to work with others to make sure that those financial instruments are regulated in a sensible way. Now, that is difficult: I will be honest. It is difficult because the technology and its use are changing remarkably. The hon. Member for Aberavon spoke about FTX. As he may know, other companies such as Celsius and Gemini have stopped trading in various different ways, as well. It is not just about one instrument. It is certainly arguable that FTX got into difficulties for reasons other than lack of regulation.
The hon. Member’s point about advertising is extremely valid. There is a real challenge. That is different—it does not quite relate to this element of the Bill. We are seeing increasing amounts of financial advertising online in different ways. I do not know how many members of the Committee have Instagram accounts, but the number of Instagram messages I get advertising foreign exchange trading is frankly bizarre.
Tom Tugendhat
I do not want to know what they advertise to the right hon. Gentleman. They don’t do it by pigeon.
The reality is that there are different ways in which people are trying to hack and attack, to steal from individuals in our country and around the world. That is why the work we are doing on the Joint Fraud Taskforce, which met yesterday, and on many other aspects of regulation, such as the Online Safety Bill, which the hon. Member for Glasgow Central quite rightly spoke about, is so important. The FCA has moved forward on many of those areas, in a sensible way, to balance the need of the technology to advance with the protection of society. It is certainly true that many people have lost a lot in recent weeks and months. I do not think anybody was under any great illusion, though, that cryptocurrencies were not a high-risk item, to put it politely. Anything worth about $1 10 years ago and $60,000 a few years later is probably not a stable currency. It may be many things, but it is probably not stable. It is now worth about $10,000 or so—
Tom Tugendhat
So, $13,000. That certainly speaks to the level of volatility. It has been up and down like a yo-yo in between times, so it is not exactly as though anybody would have been recommended it as an investment vehicle. I understand the hon. Lady’s points about online safety and fraud, and she is completely correct, but that is being addressed in different aspects of Government policy. What the Bill does is make sure that those assets that are held in cryptocurrency can be seized, as other assets can. It is certainly true that they are held in different ways, as the gentleman who is going through the waste dump in Wales is discovering. That means that seizing the assets needs a certain ambiguity in the legislation in order to keep it updated for the future. The Government have made a sensible series of suggestions to balance that need for advancing the technology and protecting consumers.
Stephen Kinnock
The Minister is being very generous. On that point about seizing the assets, will the Minister comment on the feedback that Aidan Larkin, an expert in this area, gave me, which is that in the United States money laundering and asset recovery measures bring in about $800 million per year? He says that we do not employ enough people doing block chain analytics. We are missing a big opportunity to generate revenue for the Exchequer.
Tom Tugendhat
I am delighted that the hon. Gentleman will now be supporting this element of the Bill, because that is exactly what it is for.
Stephen Kinnock
I thank the Minister for sitting down even before I had intervened.
Stephen Kinnock
It seems that this is an issue around resourcing and having the people in place—the handful of experts that we need to study the blockchains. Will the Minister assure the Committee that that resourcing will be provided?
Tom Tugendhat
I can assure the hon. Gentleman that the National Crime Agency, working alongside partners in places such as GCHQ, has enormous amounts of technology to look at cryptoassets in various different ways. The Bill—which I am delighted to hear the hon. Gentleman supports so enthusiastically—will indeed give the powers that he looks for.
Question put and agreed to.
Clause 141 accordingly ordered to stand part of the Bill.
Schedule 6 agreed to.
Clause 142
Cryptoassets: civil recovery
Tom Tugendhat
I beg to move amendment 121, in clause 142, page 125, line 18, at end insert—
“(2) It also contains related amendments.”.
This amendment provides for Schedule 7 (cryptoassets: civil recovery) to contain related amendments.
The Chair
With this it will be convenient to discuss Government amendments 51 to 64, 156, 157, 65 to 67 and 158 to 161.
Tom Tugendhat
This is a series of small wording and technical amendments that make no substantial changes to schedule 7, but simply ensure clarity and maintain consistency in the Bill’s drafting.
Stephen Kinnock
The use of enhanced powers to seize and detain digital assets, as set out in schedule 6, will be subject to a court order. Clause 142 and schedule 7 and the related Government amendments extend civil recovery powers, which may be used in the absence of a criminal conviction, to a range of organisations including the National Crime Agency, His Majesty’s Revenue and Customs and the Serious Fraud Office, in addition to police forces. It would be helpful if the Minister could explain how the Government will ensure that these enforcement powers will be used effectively in a way that avoids duplication of effort and ensures that there is a clear division of responsibilities of the different agencies. As I have said before, numerous additional powers are provided for in the Bill that require further clarification.
Stephen Kinnock
I have no substantial comment on the Government amendments. I should have made that clear. As the Minister says, these are technical amendments that do not have a huge amount of consequence.
I return to the issue of powers provided for in the Bill that require further clarification. I would be particularly grateful if the Minister could explain how the provisions enabling a digital asset to be converted into its equivalent value in cash might be used in practice.
In my view, there are other important issues in this area, which the Bill fails to address. I would be grateful if the Minister could set out what plans, if any, the Government have to update the asset confiscation powers we have been discussing and to extend the scope of the money laundering regulations to reflect technological developments such as non-fungible tokens and the use of digital works of art as a means of disguising illicit financial transactions.
Tom Tugendhat
I was rather under the impression that we had not voted on the amendment.
The Chair
We are not voting yet—we will be coming to a vote in a moment. It is for you to now conclude the debate.
The Chair
We have been doing it for thousands of years. Don’t worry—you will get used to it.
Tom Tugendhat
I have nothing further to add on that.
Amendment 121 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 7 be the Seventh schedule to the Bill.
Government new clause 23—Cryptoassets: terrorism.
Government new schedule 1—Cryptoassets: terrorism.
I call the Minister to speak to clause 142 stand part, although that might seem a bit déjà vu for some folk now.
Tom Tugendhat
It is unusual to have the Opposition argument before the ministerial one—
Stephen Kinnock
I apologise for jumping the gun, but I thought we had already debated the group.
Tom Tugendhat
I am delighted to have had the position set out so clearly.
Perhaps it would be helpful if I answered some of the hon. Gentleman’s questions. The reality is that this part of the Bill is to allow law enforcement agencies to search for physical items linked to cryptoassets. As I said in answer to an earlier point, many of the assets are held in different ways. Therefore, seizing physical assets in order to link to cryptoassets is often necessary.
To use the proposed powers, officers will need reasonable grounds to suspect that the cryptoassets have been obtained through unlawful conduct or are intended for use in unlawful conduct. The powers to search for and detain assets are supplemented by powers to ultimately forfeit the cryptoassets where a magistrates court, or a sheriff court in Scotland, can be satisfied that they have been obtained through, or are intended for use in, unlawful conduct. The powers to seize or freeze and ultimately recover cryptoassets may be used irrespective of whether the asset holder has been convicted of a criminal offence. They are, therefore, an important tool for disrupting criminal activity.
Government new clause 23 and new schedule 1—which we have just heard the Opposition debate—mirror in counter-terrorist legislation the civil recovery powers in schedule 7 to the Bill by introducing new provisions into the Anti-terrorism, Crime and Security Act 2001 and the Terrorism Act 2000. That addresses a gap in existing counter-terrorism legislation and ensures that the UK’s world-leading counter-terrorism framework keeps pace with modern technology.
The creation of cryptoasset-specific civil forfeiture powers in both the Proceeds of Crime Act and counter-terrorism legislation will, importantly, mitigate the risk posed by those who cannot be prosecuted under the criminal system, but who use their proceeds stored as cryptoassets to perpetrate further criminality. Key definitions in the measures inserted by schedule 7 and new schedule 1 are in line with existing legislation and with schedule 6 to the Bill. Similarly, they include powers to update the defined terms and adapt the process for forfeiture of frozen cryptoassets, if needed. With that, I believe I have answered the Opposition’s questions before they were even asked.
Stephen Kinnock
The Opposition are concerned about enforcement. As the Minister and I have agreed throughout the debate, and as his ministerial colleague has frequently said, legislation without implementation is not worth the paper it is written on. There is little point in us passing a law that cannot or will not be enforced effectively. I am, and the Opposition are, genuinely concerned about the real risk in the proposals, partly because so much detail has yet to be made clear, but mostly because of the huge gap between what we expect of law enforcement and what resources the Government are prepared to put in.
As I said about the FCA, even the most basic requirement for cryptoasset firms to register is starting to appear unworkable. Will the Minister explain, if we cannot even get such businesses to register, how on earth will we ever be able to identify which ones are breaking the law, much less impose any penalties? I look forward to his clarification.
Tom Tugendhat
I am pleased that the hon. Gentleman is so supportive of the work of the NCA, because it, GCHQ and others have been working extremely hard on identifying the movement of cryptoassets around not just the UK, but wider areas and jurisdictions. That is enormously important for the element of seizure to which he is referring.
It is also important that the conversion powers that the hon. Gentleman spoke about are understood for what they are. A few moments ago, the hon. Member for Glasgow Central asked about market volatility. That is true at any point, including at moments of seizure. Therefore, in order to avoid market volatility at moments of seizure—particularly when assets have been taken, converted to crypto in order to be moved abroad and then seized—having control of those assets means that one needs to put them into cash in order to have a recoverable asset, so this provision is extremely sensible.
The new powers are modelled on existing powers that many law enforcement agencies use to disrupt criminal and terrorist networks. They exercise proportionality and investigatory powers that are absolutely necessary, and no more.
Question put and agreed to.
Clause 142, as amended, accordingly ordered to stand part of the Bill.
Schedule 7
Cryptoassets: civil recovery
Amendments made: 51, in schedule 7, page 206, line 42, leave out “Chapter” and insert “Part”.
This amendment makes a minor technical correction to inserted section 303Z42 of the Proceeds of Crime Act 2002, which relates to the procedure for applying for the forfeiture of cryptoassets.
Amendment 52, in schedule 7, page 206, leave out lines 45 to 47 and insert—
“(3) Where an application is made under section 303Z41 in relation to cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order—
(a) subsections (4) and (5) apply, and
(b) the crypto wallet freezing order is to continue to have effect until the time referred to in subsection (4)(b) or (5).”
This amendment amends inserted section 303Z42 of the Proceeds of Crime Act 2002 to provide that a crypto wallet freezing order continues to have effect until the end of any forfeiture proceedings started in respect of cryptoassets held in a crypto wallet that is subject to such a freezing order.
Amendment 53, in schedule 7, page 207, line 12, leave out “(4)” and insert “(4)(b)”.
This amendment is consequential on Amendment 52.
Amendment 54, in schedule 7, page 211, line 24, leave out from “applies” to end of line 28 and insert “—
(a) the magistrates’ court or sheriff decides—
(i) to make an order under section 303Z41(4) in relation to some but not all of the cryptoassets to which the application related, or
(ii) not to make an order under section 303Z41(4), or
(b) if the application is transferred in accordance with section 303Z45(1), the High Court or Court of Session decides—
(i) to make an order under section 303Z45(3) in relation to some but not all of the cryptoassets to which the application related, or
(ii) not to make an order under section 303Z45(3).”
This amendment provides that an application under inserted section 303Z46 of the Proceeds of Crime Act 2002 (continuation of crypto wallet freezing order pending appeal) may be made in circumstances where a forfeiture application under section 303Z41 of that Act is transferred in accordance with section 303Z45 of that Act to be heard by the High Court or the Court of Session.
Amendment 55, in schedule 7, page 211, line 31, leave out “(1)(a) or (b)” and insert “(1)”.
This amendment is consequential on Amendment 54.
Amendment 56, in schedule 7, page 211, line 37, leave out “under section 303Z47” and insert
“(whether under section 303Z47 or otherwise)”.
This amendment is consequential on Amendment 54.
Amendment 57, in schedule 7, page 211, line 39, leave out “(1)(a) or (b)” and insert “(1)”.
This amendment is consequential on Amendment 54.
Amendment 58, in schedule 7, page 213, line 2, leave out “with the approval of” and insert
“if the officer is a senior officer or is authorised to do so by”.
This amendment amends inserted section 303Z48 of the Proceeds of Crime Act 2002 to provide that an enforcement officer may destroy forfeited cryptoassets only if the officer is a senior officer or is authorised to do so by a senior officer.
Amendment 59, in schedule 7, page 214, line 44, after “may” insert “, subject to subsection (7A),”.
This amendment and Amendments 60 and 62 amend inserted section 303Z51 of the Proceeds of Crime Act 2002 to provide that cryptoassets may not be released under that section while forfeiture proceedings are ongoing in respect of those cryptoassets.
Amendment 60, in schedule 7, page 215, line 8, after “may” insert “, subject to subsection (7A),”.
See Amendment 59.
Amendment 61, in schedule 7, page 215, line 24, at end insert “or”.
This amendment makes a minor technical correction to the release condition in inserted section 303Z51(7) of the Proceeds of Crime Act 2002.
Amendment 62, in schedule 7, page 215, line 29, at end insert—
“(7A) If an application under section 303Z41 is made for the forfeiture of the cryptoassets, the cryptoassets are not to be released under this section until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.”
See Amendment 59.
Amendment 63, in schedule 7, page 226, line 18, after “cryptoassets” insert—
“, or of property which they represent,”.
This amendment amends inserted section 303Z63 of the Proceeds of Crime Act 2002 (converted cryptoassets: victims and other owners) to provide that the condition in subsection (5)(a) of that section is met where the applicant was deprived of cryptoassets or of property which those cryptoassets represent.
Amendment 64, in schedule 7, page 227, leave out lines 1 to 5 and insert—
“(a) if the conditions in this Chapter for the detention of the converted cryptoassets are no longer met, or”.
This amendment amends the release condition in inserted section 303Z63(8) of the Proceeds of Crime Act 2002 (converted cryptoassets: victims and other owners) to provide that the release condition is met where the court is satisfied that the conditions in Chapter 3F of Part 5 of that Act for detention of the converted cryptoassets are no longer met.
Amendment 156, in schedule 7, page 230, line 22, at end insert—
“Amendments to the Proceeds of Crime Act 2002
1A In section 2C(3A) of the Proceeds of Crime Act 2002 (prosecuting authorities), for ‘or 303Z19’ substitute ‘, 303Z19, 303Z53 or 303Z65’.
1B (1) Part 2 of the Proceeds of Crime Act 2002 (confiscation: England and Wales) is amended as follows.
(2) In section 7 (recoverable amount)—
(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.
(3) In section 82 (free property)—
(a) in subsection (2)—
(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;
(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (3)—
(i) after paragraph (b) insert—
(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;
(iii) after paragraph (e) insert—
(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.
1C (1) Part 3 of the Proceeds of Crime Act 2002 (confiscation: Scotland) is amended as follows.
(2) In section 93 (recoverable amount)—
(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.
(3) In section 148 (free property)—
(a) in subsection (2)—
(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;
(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (3)—
(i) after paragraph (b) insert—
(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;
(iii) after paragraph (e) insert—
(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.
1D (1) Part 4 of the Proceeds of Crime Act 2002 (confiscation: Northern Ireland) is amended as follows.
(2) In section 157 (recoverable amount)—
(a) in subsection (4)(c), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (4)(d), after ‘303Q(1)’ insert ‘or 303Z44(1)’.
(3) In section 230 (free property)—
(a) in subsection (2)—
(i) in paragraph (ea), for ‘or 10Z2(3)’ substitute ‘, 10Z2(3), 10Z7AG(1), 10Z7BB(2), 10Z7CA(3), 10Z7CE(3) or 10Z7DG(3)’;
(ii) in paragraph (f), for ‘or 303Z14(4)’ substitute ‘, 303Z14(4), 303Z32(1), 303Z37(2), 303Z41(4), 303Z45(3) or 303Z60(4)’;
(b) in subsection (3)—
(i) after paragraph (b) insert—
(ii) in paragraph (c), after ‘303Q(1)’ insert ‘or 303Z44(1)’;
(iii) after paragraph (e) insert—
(iv) in paragraph (f), after ‘10I(1)’ insert ‘or 10Z7CD(1)’.”
This amendment contains consequential and other amendments to Parts 1 to 4 of the Proceeds of Crime Act 2002 in relation to the civil recovery of cryptoassets.
Amendment 157, in schedule 7, page 230, line 24, at end insert—
“(1A) In section 278 (limit on recovery)—
(a) in subsection (7)(a), for ‘or 303Z14’ substitute ‘, 303Z14, 303Z41, 303Z45 or 303Z60’;
(b) after subsection (7A) insert—
‘(7B) If—
(a) an order is made under section 303Z44 instead of an order being made under section 303Z41 for the forfeiture of recoverable property, and
(b) the enforcement authority subsequently seeks a recovery order in respect of related property,
the order under section 303Z44 is to be treated for the purposes of this section as if it were a recovery order obtained by the enforcement authority in respect of the property that was the forfeitable property in relation to the order under section 303Z44.’”
This amendment contains a consequential amendment to section 278 of the Proceeds of Crime Act 2002 in relation to forfeited cryptoassets.
Amendment 65, in schedule 7, page 231, line 3, after “may” insert “, subject to subsection (7A),”.
This amendment and Amendments 66 and 67 amend inserted section 303Z17A of the Proceeds of Crime Act 2002 to provide that money may not be released under that section while forfeiture proceedings are ongoing in respect of the money.
Amendment 66, in schedule 7, page 231, line 13, after “may” insert “, subject to subsection (7A),”.
See Amendment 65.
Amendment 67, in schedule 7, page 231, leave out lines 25 to 36 and insert—
“(7) The release condition is met—
(a) in relation to money held in a frozen account, if the conditions for making an order under section 303Z3 in relation to the money are no longer met, or
(b) in relation to money held in a frozen account which is subject to an application for forfeiture under section 303Z14, if the court or sheriff decides not to make an order under that section in relation to the money.
(7A) Money is not to be released under this section—
(a) if an account forfeiture notice under section 303Z9 is given in respect of the money, until any proceedings in pursuance of the notice (including any proceedings on appeal) are concluded;
(b) if an application for its forfeiture under section 303Z14 is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.”
See Amendment 65. This amendment also replaces the release condition in inserted section 303Z17A(7) of the Proceeds of Crime Act 2002 to include changes for consistency with equivalent provisions in Part 5 of that Act.
Amendment 158, in schedule 7, page 235, line 5, at end insert—
“(20A) In section 386 (production orders: supplementary), in subsection (3)(b), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.”
This amendment contains a consequential amendment to section 386 of the Proceeds of Crime Act 2002 in relation to production orders and cryptoasset investigations.
Amendment 159, in schedule 7, page 236, line 11, at end insert—
“(30) In section 416 (other interpretative provisions), in subsection (1), after the entry for ‘confiscation investigation’ insert—
‘cryptoasset investigation: section 341(3D)’.”
This amendment contains a consequential amendment to section 416 of the Proceeds of Crime Act 2002 in relation to the meaning of “cryptoasset investigation” in Part 8 of that Act.
Amendment 160, in schedule 7, page 236, line 11, at end insert—
“3A In section 438 of the Proceeds of Crime Act 2002 (disclosure of information by certain authorities), in subsection (1)(f), for ‘or 3B’ substitute ‘, 3B, 3C, 3D, 3E or 3F’.
3B In section 441 of the Proceeds of Crime Act 2002 (disclosure of information by Lord Advocate and by Scottish Ministers)—
(a) in subsection (1), for ‘or 3A’ substitute ‘, 3A, 3C or 3F’;
(b) in subsection (2)(g), for ‘or 3B’ substitute ‘, 3B, 3C, 3D, 3E or 3F’.
3C In section 450 of the Proceeds of Crime Act 2002 (pseudonyms: Scotland), in subsection (1)(a), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.
3D In section 453A of the Proceeds of Crime Act 2002 (certain offences in relation to financial investigators), in subsection (5), at the end of paragraph (dc) (before the ‘or’) insert—
‘(dd) section 303Z21 (powers to search for cryptoasset-related items);
(de) section 303Z26 (powers to seize cryptoasset-related items);
(df) section 303Z27 (powers to detain cryptoasset-related items);’.”
This amendment contains consequential amendments to Parts 10 and 12 of the Proceeds of Crime Act 2002. The amendments relate to the disclosure of information obtained during cryptoasset investigations, the use of pseudonyms during such investigations and offences against accredited financial investigators exercising powers in connection with such investigations.
Amendment 161, in schedule 7, page 236, line 21, at end insert—
“Amendments to the Civil Jurisdiction and Judgments Act 1982
5 (1) Section 18 of the Civil Jurisdiction and Judgments Act 1982 (enforcement of UK judgments in other parts of UK) is amended as follows.
(2) In subsection (2)(g), for ‘or a frozen funds investigation’ substitute ‘, a frozen funds investigation or a cryptoasset investigation’.
(3) In subsection (4ZB)—
(a) after paragraph (b) insert—
‘(ba) a crypto wallet freezing order made under section 303Z37 of that Act;
(bb) an order for the forfeiture of cryptoassets made under section 303Z41 or 303Z45 of that Act;’;
(b) after paragraph (d) insert—
‘(da) a crypto wallet freezing order made under paragraph 10Z7BB of that Schedule;
(db) an order for the forfeiture of cryptoassets made under paragraph 10Z7CA or 10Z7CE of that Schedule.’
(4) In subsection (5)(d)(i)—
(a) after ‘(a)’ insert ‘, (ba)’;
(b) for ‘or (c)’ substitute ‘, (c) or (da)’.”—(Tom Tugendhat.)
This amendment amends the Civil Jurisdiction and Judgments Act 1982 to include provision about the enforcement of certain cryptoasset-related orders in different parts of the UK.
Schedule 7, as amended, agreed to.
Clause 143
Money laundering: exiting and paying away exemptions
Question proposed, That the clause stand part of the Bill.
Tom Tugendhat
In a most unusual role, I shall start this time. Clauses 143 and 144 expand the types of case in which businesses can deal with clients’ property without first having to submit a defence against money laundering suspicious activity report—a so-called DAML. The changes will reduce nugatory regulatory burdens on businesses and help focus private sector and law enforcement resources on proactive, high-value activity, while removing disproportionate delays to businesses and customers.
A DAML effectively freezes a transaction until the UK Financial Intelligence Unit in the National Crime Agency—the UKFIU—decides to provide consent for the transaction to go ahead. Alternatively, the UKFIU could refuse it and pursue further investigation. If the UKFIU does not respond within seven working days, the business can assume that they have consent and proceed with the transaction. That means businesses regularly waiting seven working days before being able to proceed with a transaction. Businesses cannot inform customers that the delay is due to a DAML, as doing so may amount to a criminal offence.
The volume of DAMLs submitted by businesses to the UKFIU rose by 80% to 62,341 in the last year that data was available, which is creating a disproportionate burden on staff in the regulated sector, as well as in the NCA and wider law enforcement. The clauses will ensure that we are taking action to handle those rising volumes and that the DAML reporting system is used proportionally.
The exemption created by clause 143 will apply when a business in the anti-money laundering regulated sector ends a relationship with a customer and pays away any money or property suspected to be the proceeds of criminal conduct. The clause enables the business to pay back money or property under the value of £1,000 without first submitting a defence against money laundering suspicious activity report to the UKFIU and without committing a money laundering offence.
DAMLs below £1,000 are of limited value to law enforcement. That is because £1,000 is the minimum amount for law enforcement to pursue an account freezing order under the civil recovery provisions, and because of the need to prioritise higher volume cases. As a result, DAMLs below £1,000 are rarely refused consent by the UKFIU, but they place a burden on reporters to submit.
The exemption created by clause 144 will apply when a person carrying out business in the anti-money laundering regulated sector suspects that only part of their customer’s property is the proceeds of criminal conduct. The clause enables the business to allow the customer access to their property without the business committing one of the principal money laundering offences or first submitting a defence against money laundering suspicious activity report. This is provided that the conditions of the exemption are met, including the condition that, as a minimum, the value of the suspected criminal property in the account is withheld when allowing a customer access to their funds.
Stephen Kinnock
According to the Government’s impact assessment, the purpose of clauses 143 and 144, which expand the scope of exemptions from money laundering offences, is to reduce the number of ineffective defence against money laundering reports submitted to the NCA’s financial intelligence unit. It is worth bearing in mind that the purpose of the reporting system is to enable regulated firms to notify the FIU when they are asked by a client to make a financial transaction that may amount to a money laundering offence. The FIU has seven days to review the report, and if it turns out that there is a connection to money laundering, it can ensure that appropriate enforcement action is taken.
The reports can, and often do, serve as a valuable means of identifying criminal activity. The Government’s wish to reduce the number of DAML reports is understandable, but we must not throw the baby out with the bathwater. It is important for the Minister to explain to the Committee how those measures are sufficiently targeted that they reduce the number of unnecessary or unhelpful reports without causing a similar reduction in reports that might help to identify serious crime.
Clauses 143 and 144 provide exemptions from money laundering offences for certain transactions involving property worth less than £1,000, and in cases where some but not all of a client’s assets may involve criminal funds. I would be grateful if the Minister would explain the Government’s reasoning in setting the relevant thresholds at the specific levels provided for in those clauses.
I want to touch on a couple of broader points. The Government are right that the SARs process is in need of considerable reform. There are many steps the Government could take to improve the quality of reporting in addition to the measures set out in those clauses. For instance, the Solicitors Regulation Authority published a report last month in which it noted that, in two thirds of the reports it reviewed, the firms making the report did not include the glossary codes that enable the NCA to triage reports effectively and ensure an appropriate enforcement response. Additionally, the SRA found that as many as a quarter of the DAML reports it reviewed failed even to describe the criminal conduct that was suspected. Those findings are clear evidence that many law firms do not have an adequate level of understanding of the laws they are expected to help enforce. The same may well be true in other regulated sectors.
Will the Minister set out what steps the Government are taking to ensure that regulated firms have a better understanding of their obligations under the law, and how official guidance might be improved to help firms to submit better quality reports? I point out that significant improvements could be made to the speed and efficiency of the SARs process by making use of new and emerging technologies. If the FIU could use more cutting-edge software applications and algorithms to help identify the most serious crimes, it would go a long way towards addressing the problems that the Government seek to tackle. Perhaps the Minister might comment on the Government’s work in that area.
Tom Tugendhat
I am delighted to respond to that. The rising volume of DAMLs being submitted has already had an impact on effectiveness. That is welcome, in that businesses are taking their responsibilities extremely seriously, and the UKFIU is responding appropriately when it receives them. Although, as the hon. Member quite rightly says, technology can help, the reality is that there is still an awful lot of work to be done. That is why these provisions are so reasonable.
The provisions are reasonable because property or criminal funds worth less than £1,000 are already exempt from asset seizures in different circumstances. It makes absolute sense to have a restriction on that in the Bill and apply the same threshold to allow the UKFIU to target, as much as possible, those serious money laundering accusations and investigations appropriately—and, indeed, to arrest more criminals.
Stephen Kinnock
I thank the Minister for that response. Would he care to comment on the feedback from the Solicitors Regulation Authority, which points particularly at the fact that many of the firms doing the reports were not including key information such as glossary codes and sometimes did not even describe the criminal conduct that they suspected? Is there something more that could be done so that the information at source was in a better state? Does he think that the feedback from the SRA could be a good basis on which to achieve that?
Tom Tugendhat
I am sure that having data at source in as clean and fluent a fashion as possible, so that it is complete and allows investigation, is absolutely essential. I am sure that solicitors will feel the responsibility to do that. I am grateful to the hon. Gentleman for raising that point.
Question put and agreed to.
Clause 143 accordingly ordered to stand part of the Bill.
Clause 144 ordered to stand part of the Bill.
Clause 145
Information orders: money laundering
Question proposed, That the clause stand part of the Bill.
Tom Tugendhat
Clause 145 amends the existing information order power in the Proceeds of Crime Act 2002 to bolster the UKFIU intelligence-gathering powers. Clause 146 addresses a gap in counter-terrorism legislation by mirroring those in the Terrorism Act 2000. The clauses will align the UKFIU more closely with the international standards of the Financial Action Task Force, known as FATF—including to me, actually—and enable greater collaboration with international financial intelligence units. That aids public safety in the UK and overseas, and furthers the UK’s efforts to combat illicit financial flows entering the UK economy.
FATF is the international body devoted to developing and promoting policies to combat money laundering and terrorist financing. As a member, the UK agrees to promote FATF’s anti-money laundering standards, which are expressed in the form of recommendations. FATF, the global money laundering and terrorist financing watchdog, evaluated the UK in 2018 and rated it only “partially compliant”. That rating was affected by the UKFIU’s limited ability to conduct operational strategic analysis in cases where a business has not already submitted a suspicious activity report.
Clause 145 amends the existing information order power by removing the requirement for a preceding suspicious activity report, or SAR, before an application can be made to a magistrates or sheriff court. Clause 146 mirrors that for counter-terrorism legislation. The information order will compel business in the anti-money laundering regulated and terrorist financing regulated sectors to provide information about a customer or client. That information will enable the UKFIU to conduct its operational strategic analysis functions by proactively gathering financial intelligence rather than relying on the reporting sector to have submitted information already. Further, the clauses will enable the UKFIU to better assist international counterparts to gather information, for example, relating to sanctions evasion and maximising the effort to prevent terrorist finances from entering the UK’s economy.
The information sought under an information order is designed for intelligence purposes only. To ensure the power is used appropriately, a code of practice must be made by the Secretary of State. The person making the application must have had regard to the code of practice when applying to the court for an information order. The measure has been developed collaboratively with the UKFIU.
Stephen Kinnock
I thank the Minister for including the provisions in the Bill, which should make it easier for the NCA to access the information that it needs to gather intelligence and conduct analysis of the range of threats that we face from money laundering and terrorist financing. The provisions in the clauses should also help to ensure that the UK is able to provide more effective assistance to law enforcement bodies in other countries in response to requests for information.
Given that so much economic crime is inherently an issue that cuts across international borders, it is absolutely right for the Government to do all that they can to enforce the law within our own borders and to help Governments in our partner countries overseas to do the same.
Question put and agreed to.
Clause 145 accordingly ordered to stand part of the Bill.
Clause 146 ordered to stand part of the Bill.
Clause 147
Enhanced due diligence: designation of high-risk countries
Question proposed, That the clause stand part of the Bill.
Tom Tugendhat
The clause amends the Sanctions and Anti-Money Laundering Act 2018 to allow the Treasury to directly publish and amend the UK’s high-risk third countries list on gov.uk.
Under the 2017 money laundering regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. High-risk third countries are those identified by the Financial Action Task Force as having poor controls and significant shortcomings in their anti-money laundering and counter-terrorist financing regimes.
Currently, a statutory instrument needs to be laid several times a year to update the UK’s list each time the FATF’s own list is amended. The clause will allow for more rapid updates to the list, helping the UK to be even more responsive to evolving money laundering threats by ensuring that risks are communicated and mitigated by the regulated sector as soon as possible. By removing the need to introduce legislation for each update, the change will also ease pressures on ministerial and parliamentary time, thereby responding to Parliament’s call to streamline the process—very much like this Committee.
Stephen Kinnock
Clause 147 raises a number of concerns for us, which I hope the Minister will be able to address. It aims to change the procedure for updating the Treasury’s list of countries designated as high risk due to serious deficiencies in their anti-money laundering and counter-terrorist financing systems, which was established by the Sanctions and Anti-Money Laundering Act 2018. The clause will enable the Treasury to update the list directly, without the need for regulations, in effect removing the opportunity for Parliament to scrutinise any changes to the list.
During the passage of the 2018 Act, there was cross-party consensus on the need for any UK list of designated high-risk countries to reflect international standards, primarily by mirroring the lists maintained by the Financial Action Task Force. The problem with clause 147 is that it appears to enable the Treasury to make any future updates to the UK list, even in ways that diverge from the FATF lists, without any opportunity for Parliament to scrutinise or debate the proposals. Given the zeal for deregulation that we have often seen from the current Government, it takes no great stretch of the imagination to foresee a situation in which the Treasury determines that the FATF lists are unduly stringent and that certain countries and territories should be removed from the UK’s list of high-risk countries, even in cases where issues identified by the FATF remain unresolved.
Looking at the relevant impact assessment, it seems that the intention is to enable Ministers to update the list “more swiftly” when needed, thus making the UK’s list more “responsive” to emerging developments than is possible under the current system. But even if the aim is reasonable, the methods are questionable. For one thing, the 2018 Act stipulates that regulations updating the list of high-risk countries are subject to the affirmative procedure, under which Parliament is given the opportunity to retrospectively review changes that have already been made by the time the regulations are published. Together with the fact that updates are generally needed no more frequently than once every three months, this does not seem to place an undue burden on Ministers.
The changes made by clause 147 do not seem proportionate to any identifiable problem with the current system. The Opposition therefore strongly encourage the Minister and his colleagues to revisit the clause, on the basis that a convincing case for the need to remove Parliament’s oversight of this process has not been made.
Tom Tugendhat
The idea of a kleptocrats list is an interesting one. It is not one I have heard before. If the right hon. Lady will forgive me, I will look into it and respond to her in writing; I have not thought about the matter, so I will have to give it some thought.
The list of high-risk third countries is based on the FATF list, which, as the hon. Member for Aberavon knows, has provided the basis for all the statutory instruments that have passed with no objection or issue. This measure will not save much ministerial time, if any at all, but it will save parliamentary time. Given how hard-pressed Parliament is to debate so many issues, I think it is a reasonable provision. Given the alignment between the UK regime and the international FATF standards, that seems to be a pretty standard change.
On the question of debating other areas, there is often cause to debate other countries’ inclusion or exclusion from such lists, and the Treasury, the Foreign Office and other Departments and organisations often have views. I am not sure this is the Bill in which to do that; this Bill is simply about correcting a slight bump in the road and speeding up the process.
The Chair
I call Neil Kinnock—I beg your pardon, Stephen. People used to do that to me and they always got it wrong.
Stephen Kinnock
Don’t worry, Mr Paisley—we could probably exchange notes on that at great length.
I thank the Minister for those points. I recall his time as chair of the Foreign Affairs Committee, when he pushed relentlessly and convincingly for parliamentary scrutiny of a whole range of key issues and decisions. Given that parliamentary scrutiny was built into the 2018 Act, it seems difficult to justify its deliberate removal from the process by this Bill. It seems like it would be good to have those guard rails in place to avoid the risk of somebody in the Treasury deciding at some point that big decisions should be made without any parliamentary scrutiny at all. Does he not agree that this is a real missed opportunity?
Tom Tugendhat
No, I do not. I always found that when I wanted to get parliamentary scrutiny as Chair of a Committee, I managed to find ways to do that—often through debates, in which the hon. Gentleman was a wonderful speaker—and to change Government policy by using not only Parliament, but the media and other forms of pressure. There is a difference between seeking to change Government policy on various aspects of areas that should really be considered as wider policy, and seeking to implement these changes, which are, let us be honest, rather technical and not issues of major parliamentary debate.
Question put and agreed to.
Clause 147 accordingly ordered to stand part of the Bill.
Clause 148
Direct disclosures of information: no breach of obligation of confidence
Tom Tugendhat
I beg to move amendment 122, in clause 148, page 136, leave out lines 22 and 23 and insert—
“(1) The protections set out in subsection (1A) apply in relation to a disclosure made by a person (‘A’) to another person (‘B’) if—”.
This amendment and Amendments 125 and 135 provide that disclosures mentioned in clause 148(1) do not give rise to any civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.
The Chair
With this it will be convenient to discuss the following:
Government amendments 123 to 135.
Clause stand part.
Government amendments 136 to 142.
Amendment 167, in clause 149, page 138, line 8, at end insert—
“(vi) a firm or individual carrying on statutory audit work or local audit work,
(vii) an individual appointed to act as an insolvency practitioner,
(viii) a firm or sole practitioner providing to other persons accountancy services, or providing material aid, or assistance or advice, in connection with the tax affairs of other persons, or
(ix) an auditor, external accountant or insolvency practitioner as defined in Section 11 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.”
This amendment includes accountants in various roles in the indirect information sharing provisions set out in clause 149, allowing them to pass on information regarding suspicious activity.
Government amendments 143 to 152.
Clauses 149 to 152 stand part.
Government amendments 153 to 155.
Clause 153 stand part.
That schedule 8 be the Eighth schedule to the Bill.
Tom Tugendhat
Large amounts of financial data flow through the United Kingdom every hour. The majority relate to entirely legitimate and proper activity; however, a small proportion involve criminal activity. As hon. Members heard from several witnesses to the Committee, the sharing of information regarding criminal activity between businesses is currently constrained by duties of confidentiality. These clauses and the associated Government amendments address that constraint.
Clause 148 enables direct disclosure of information between two businesses in the anti-money laundering regulated sector for the purposes of preventing, investigating and detecting economic crime, without a breach of their obligation of confidence to their customers.
Tom Tugendhat
I am glad to have support from further down the Treasury Bench.
To request information, a business must have reason to believe that the other business holds information that will, or may, assist in carrying out its relevant actions. Relevant actions include deciding whether further customer due diligence is needed, restricting access to products, or terminating a business relationship with the customer as a result of the additional information obtained.
Amendments 122 to 135 amend clause 148 to expand the provisions to offer protection from civil liability owed by the person sharing information to the person to whom the disclosure relates. As the Committee heard when UK Finance gave evidence, the banking sector maintains that without greater protection, information is unlikely to be shared, as doing so creates limited benefit in comparison with the risk of potential protracted and expensive litigation from customers. Greater use of the provisions will make it harder for criminals to exploit UK businesses. We have listened to the sector and tabled these amendments.
Clause 149 enables indirect information sharing by certain businesses via a third-party intermediary, on a similar basis to elements of clause 148. A business may share information about a current or former customer whom they have already decided to take action against due to an economic crime risk—or who would have been subject to that decision were they still a customer—either by terminating a business relationship or by refusing or restricting access to a product or service. The business must be satisfied that sharing the customer’s information will assist other businesses in carrying out their relevant actions. As with clause 148, the Government have tabled amendments 136 to 141 and 143 to 151 to disapply civil liability for a person who discloses such information.
Government amendments 142, 152 and 155 extend the scope of the indirect information-sharing provisions to cover large and very large accountancy and legal businesses. The benefit of bringing those businesses within the scope of the provision is that those firms have experience of dealing with high-risk clients. Criminals are known to exploit the information gaps that currently exist between businesses in these sectors, and encouraging further information sharing creates greater opportunities to prevent economic crime.
Clauses 148 and 149 do not disapply any liabilities arising under data protection legislation. The hon. Member for Feltham and Heston tabled amendment 167, which would expand clause 148 to include the accountancy sector. I hope that she is reassured that the Government amendments that I have just described achieve that objective.
Government amendments 153 and 154 make express provision for aiding, abetting, counselling and procuring in the definition of economic crime. Schedule 8 sets out the offences that are included in the definition of economic crime for the purposes of direct and indirect disclosures of information, the Law Society’s fining powers, and the objectives of regulators of legal services. The schedule is divided into common-law and statutory offences. No new offences are created by the Bill; the schedule has been included because there is no existing relevant definition of economic crime. The schedule is essential to provide clarity and certainty about the meaning of economic crime, in order for individuals, regulators and businesses to use the disclosure of information provisions effectively and to properly apply the new measures relating to legal services.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mr Paisley, and to speak to this rather large group. I thank the Minister for his comments, which I find reassuring. I will deliver my own remarks for the record, but his comments, particularly on our amendment 167, were helpful.
This important group of clauses and amendments relates to supporting disclosures to prevent, detect or investigate economic crime. The Minister is absolutely right about the concerns—raised by UK Finance specifically—that the clauses go a considerable way to addressing.
Clause 148 concerns direct disclosure of information and, as the Minister outlined, disapplies the duty of confidentiality owed by a business where the business making the disclosure knows the identity of the recipient and certain conditions—broadly outlined in subsection (1)—are met. The explanatory notes contain the example of a bank that identifies a transaction that it believes is irregular and wants further information from another party—perhaps more information on the identity of the payer or more clarity on the source of the funds. We understand why such information might be wanted and the importance of being able to get such clarity. In effect, clause 148, along with clause 149, about which I will say a few words separately, removes the civil liability for an institution in sharing that information with another entity for the purposes of detecting and preventing economic crime.
Given the concerns about the difficulties with information sharing, and the resistance that there has been to sharing information because of lack of clarity about the law or about where liability lies under data protection rules, these measures are welcome. They have perhaps taken longer to be introduced than we would have liked, but they are certainly welcome, and we hope that they will increase the detection of economic crime and reduce moves by those involved in it to seek to use our institutions to launder and hide money.
Although I welcome the removal of barriers to information sharing, I wonder whether the clauses give regulated sectors or actors so-called safe harbour as comprehensively as they might. Helena Wood of the Royal United Services Institute said in her evidence to the Committee:
“Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard. What we would like in the next economic crime plan”—
I think we are all hoping to see that soon; shortly is the word used in this Committee—
“is something much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.” ––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 27 October 2022; c. 90, Q170.]
Tom Tugendhat
I am sorry to hear that the hon. Lady was considered a risk to public safety, a danger or a threat to the nation in any way. She is none of those things; she is a highly valued Member of this House and a friend to many of us. I can only imagine the unwisdom of whoever it was who decided to terminate a relationship with her. I hope that the decision is being reviewed and that the person is now enjoying a holiday on the Falkland Islands.
It is worth pointing out that the comparisons that this has with other jurisdictions should be looked at carefully. Not every jurisdiction has the same application of the ECHR, GDPR or various other constraints on sharing information and protecting privacy that the UK has. In the Netherlands, the transaction monitoring scheme has so far involved only the sharing of business data, so there are various different ways in which these applications are not exactly applicable. It is worth pointing out that, under the provisions, an individual’s right to a basic bank account, as established by the Payment Accounts Regulations 2015, is unaffected.
That means that affected individuals will be able to continue to access basic accounts, providing their account is not being used or has not been used for criminal activity, or that maintaining the account would breach any other legal obligations under the money laundering regulations. Moreover, the clause stipulates that before information is shared about a customer, the sharer must have taken action against the customer, or would have if they were still a customer. As a result, no one will have information shared unless the bank has already decided to take action against them or would have decided to do so.
We do not foresee a significant increase in the number of new individuals being denied access to services. Certainly, the hon. Lady’s comments about her constituent should be viewed in that context. However, if there are individual cases that she feels that I—or, indeed, my hon. Friend the Member for Thirsk and Malton—can help with, I would be very happy to look at them, as I am sure my hon. Friend would be as well.
The forms of redress that the hon. Lady raises are important. That is where going through the Information Commissioner’s Office or the Financial Ombudsman Service, depending on the nature of the complaint, is important. She raised many other questions, and although I will not be able to get to them right now, I will be happy to write to her on some of those individual items.
Seema Malhotra
I thank the Minister for his comments. If he is happy to write to me, I would be grateful for that. Can I clarify whether that will also cover some of the questions I raised about the expected timing of sharing information and the procedures for those who may have been caught up inadvertently? Procedurally, we need to understand how they can be dealt with. Rather than Ministers having to deal with individual cases, we want a mechanism that will make the system work fairly.
Tom Tugendhat
The hon. Member is making a perfectly reasonable point. I agree, and I will write to her about those timings so they are clearly on the record and we understand what is being asked and what the expected timeframes are.
It is also worth saying that the warning condition is more active because a business has already taken or would have taken a decision where a person is a customer. That is different from the request condition, where it is sharing in response to a specific request. The two are not quite identical, but I hope that answers the hon. Lady’s questions. I will write to her shortly.
Amendment 122 agreed to.
Amendments made: 123, in clause 148, page 136, line 24, leave out ‘to which’ and substitute ‘in circumstances where’.
This amendment and Amendments 124, 126, 127, 128 and 130 extend the power to expand the kinds of business in relation to which the provision can apply, so that it can describe attributes of the person as well as the business.
Amendment 124, in clause 148, page 136, line 25, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 123.
Amendment 125, in clause 148, page 136, line 31, at end insert—
‘(1A) The protections are that, subject to subsection (9), the disclosure does not—
(a) give rise to a breach of any obligation of confidence owed by A, or
(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’
See Member’s explanatory statement for Amendment 122.
Amendment 126, in clause 148, page 136, line 32, leave out ‘to’.
See Member’s explanatory statement for Amendment 123.
Amendment 127, in clause 148, page 136, line 33, after ‘(a)’ insert ‘where the business carried on is’.
See Member’s explanatory statement for Amendment 123.
Amendment 128, in clause 148, page 136, line 34, leave out ‘business of a description prescribed’ and insert ‘in circumstances prescribed, in relation to the business or the person carrying it on,’.
See Member’s explanatory statement for Amendment 123.
Amendment 129, in clause 148, page 137, line 12, leave out ‘A’ and insert ‘The protections set out in subsection (7A) apply in relation to a’.
This amendment and Amendments 131, 133 and 135 provide that the disclosures mentioned in clause 148(7) do not give rise to any civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.
Amendment 130, in clause 148, page 137, line 12, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 123.
Amendment 131, in clause 148, page 137, line 14, leave out from ‘request’ to ‘R’ in line 15 and insert ‘if’.
See Member’s explanatory statement for Amendment 129.
Amendment 132, in clause 148, page 137, line 16, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 123.
Amendment 133, in clause 148, page 137, line 19, at end insert—
‘(7A) The protections are that, subject to subsection (9), the disclosure does not—
(a) give rise to a breach of any obligation of confidence owed by R, or
(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’
See Member’s explanatory statement for Amendment 129.
Amendment 134, in clause 148, page 137, line 22, leave out from ‘applies,’ to the end of line 23 and insert ‘does not—
(a) give rise to a breach of any obligation of confidence owed by them, or
(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.
This is subject to subsection (9).’
This amendment and Amendment 135 provide that use of information disclosed under clause 148(7) to enable a clause 148(1) disclosure to be made does not give rise to any a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.
Amendment 135, in clause 148, page 137, line 25, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.—(Tom Tugendhat.)
See Member’s explanatory statement for Amendments 122, 129 and 134.
Clause 148, as amended, ordered to stand part of the Bill.
Clause 149
Indirect disclosure of information: no breach of obligation of confidence
Amendments made: 136, in clause 149, page 137, leave out lines 27 to 29 and insert—
‘(1) The protections set out in subsection (2A) apply in relation to a disclosure made by a person (“A”) to another person (“B”) if—’.
This amendment and Amendments 139 and 151 provide that the disclosures mentioned in clause 149(1) do not give rise to a civil liability on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.
Amendment 137, in clause 149, page 137, line 30, leave out ‘to which’ and substitute ‘in circumstances where’.
This amendment and Amendments 138, 140, 141, 142, 144 and 147 extend clause 149 disclosures so they apply in relation to persons with a large or very large UK revenue who carry on legal or accountancy services in the regulated sector.
Amendment 138, in clause 149, page 137, line 39, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 137.
Amendment 139, in clause 149, page 138, line 1, at end insert—
‘(2A) The protections are that, subject to subsection (9), the disclosure does not—
(a) give rise to a breach of any obligation of confidence owed by A, or
(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’
See Member’s explanatory statement for Amendment 136.
Amendment 140, in clause 149, page 138, line 2, leave out ‘to’.
See Member’s explanatory statement for Amendment 137.
Amendment 141, in clause 149, page 138, line 3, after ‘(a)’ insert ‘where the business carried on is’.
See Member’s explanatory statement for Amendment 137.
Amendment 142, in clause 149, page 138, line 8, leave out from ‘provider,’ to ‘by regulations’ in line 9 and insert—
‘(aa) where—
(i) the business carried on is business in the regulated sector within paragraph 1(1)(l) or (n) of Schedule 9 to the Proceeds of Crime Act 2002 (accountancy or legal services), and
(ii) the UK revenue of the person carrying on the business is large or very large for the relevant financial year (see subsection (10)), and
(b) in circumstances prescribed, in relation to the business or the person carrying it on,’.
See Member’s explanatory statement for Amendment 137.
Amendment 143, in clause 149, page 138, line 11, leave out from ‘to B,’ to end of line 14 and insert
‘the protections set out in subsection (5A) apply in relation to a further disclosure of that information made by B to another person (“C”) if—’.
This amendment and Amendments 145 and 151 provide that the disclosures mentioned in clause 149(4) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relate. There is an exception for liabilities under the data protection legislation.
Amendment 144, in clause 149, page 138, line 15, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 137.
Amendment 145, in clause 149, page 138, line 18, at end insert—
‘(5A) The protections are that, subject to subsection (9), the disclosure does not—
(a) give rise to a breach of any obligation of confidence owed by B, or
(b) give rise to any civil liability, on the part of B, to the person to whom the disclosed information relates.’
See Member’s explanatory statement for Amendment 143.
Amendment 146, in clause 149, page 138, line 22, leave out ‘A’ and insert
‘The protections set out in subsection (7A) apply in relation to a’.
This amendment and Amendments 148, 149 and 151 provide that the disclosures mentioned in clause 149(7) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.
Amendment 147, in clause 149, page 138, line 22, leave out ‘to which’ and substitute ‘in circumstances where’.
See Member’s explanatory statement for Amendment 137.
Amendment 148, in clause 149, page 138, line 24, leave out from ‘person’ to ‘at’ in line 25 and insert ‘if’.
See Member’s explanatory statement for Amendment 146.
Amendment 149, in clause 149, page 138, line 28, at end insert—
‘(7A) The protections are that, subject to subsection (9), the disclosure does not—
(a) give rise to a breach of any obligation of confidence owed by R, or
(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’
See Member’s explanatory statement for Amendment 146.
Amendment 150, in clause 149, page 138, line 31, leave out from ‘applies,’ to end of line 32 and insert ‘does not—
(a) give rise to a breach of any obligation of confidence owed by them, or
(b) give rise to any civil liability, on their part, to the person to whom the disclosed information relates.
This is subject to subsection (9).’
This amendment and Amendment 151 provide that the use of information disclosure under clause 149(7) for the purposes of making a disclosure under clause 149(1) does not give rise to a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.
Amendment 151, in clause 149, page 138, line 34, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.
See Member’s explanatory statements for Amendments 136, 143, 146 and 150.
Amendment 152, in clause 149, page 138, line 34, at end insert—
‘(10) In subsection (3)(aa) “relevant financial year”—
(a) for the purposes of subsection (1)(a), means the financial year immediately preceding that in which the disclosure by A is made;
(b) for the purposes of subsection (4)(a), means the financial year immediately preceding that in which the disclosure to C is made.
And, for the purposes of subsection (3)(aa), the question of whether a person’s UK revenue is large or very large for a particular financial year is to be determined in accordance with sections 55 to 57 of the Finance Act 2022 (calculation of UK revenue for the economic crime (anti-money laundering) levy).’—(Tom Tugendhat.)
This amendment include a definition of “relevant financial year” and explains how to determine if a person’s UK revenue is large or very large for the purposes of the new provision added by Amendment 142.
Clause 149, as amended, ordered to stand part of the Bill.
Clauses 150 to 152 ordered to stand part of the Bill.
Clause 153
Other defined terms in sections 148 to 151
Amendments made: 153, in clause 153, page 140, line 19, at end insert—
“(ba) constitutes aiding, abetting, counselling or procuring the commission of a listed offence, or”.
The amendment makes express provision about aiding, abetting, counselling and procuring in the definition of economic crime.
Amendment 154, in clause 153, page 140, line 21, after “(b)” insert “or (ba)”.
This amendment is consequential on Amendment 153.
Amendment 155, in clause 153, page 140, line 34, at end insert—
““financial year” means a period of 12 months ending with 31 March;”.—(Tom Tugendhat.)
This amendment adds a definition of “financial year” and is consequential on Amendment 152.
Clause 153, as amended, ordered to stand part of the Bill.
Schedule 8 agreed to.
Clause 154
Law Society: powers to fine in cases relating to economic crime
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 155 stand part.
Government new clause 47—Scottish Solicitors’ Discipline Tribunal: powers to fine in cases relating to economic crime.
Tom Tugendhat
His Majesty’s Government’s national risk assessment for 2020 assessed the legal services sector as being at high risk of exposure to money laundering. The crisis in Ukraine has highlighted that the sector is exposed to further-reaching risks, such as sanctions breaches. The Bill therefore contains measures that strengthen the legal sector’s response to economic crime.
Clause 154 removes the statutory limit on the Solicitors Regulation Authority’s financial penalty powers for disciplinary matters related to economic crime, as delegated by the Law Society. Currently, the SRA can direct a solicitor or traditional law firm to pay a penalty up to £25,000. The limit is set out in primary legislation and can be amended only by an order made by the Lord Chancellor. This measure will remove the need for the Lord Chancellor to make an order, thereby ensuring greater flexibility to, if required, amend penalty limits for disciplinary matters relating to economic crime.
New clause 47 gives the Scottish Solicitors’ Discipline Tribunal parity with England and Wales in respect of the fining powers available to it for economic crime-related solicitor misconduct. Currently, the SSDT may impose a maximum fine of £10,000. In comparison, the equivalent tribunal in England and Wales—the Solicitors Disciplinary Tribunal—has the power to impose an unlimited financial penalty. This change will provide the SSDT with fining powers that act as a proportionate deterrent against breaches of the rules and legislation related to economic crime, including offences linked to money laundering, terrorist financing and sanctions. The exercise of this power will be subject to the oversight of the Court of Session to ensure that the SSDT acts in an effective and proportionate way. The changes sought in clause 154 and new clause 47 are needed to ensure that the SRA and the SSDT have the enforcement tools required in the context of economic crime compliance.
Clause 155 enshrines in legislation the duty of legal services regulators to promote the prevention and detection of economic crime. Our legal sector is internationally renowned for its high standards of excellence and professional conduct. The vast majority of the sector is compliant with its economic crime duties. However, it is crucial that regulators have the right tools to effectively promote and monitor compliance. The clause puts it beyond doubt that it is the duty of legal services regulators to take appropriate action to ensure that their regulated communities comply with economic crime rules. It will give frontline regulators a clear basis for any supervision or enforcement action they may carry out to uphold the economic crime regime.
Alison Thewliss
My understanding is that the Law Society of Scotland has no particular objections to the amendments.
Tom Tugendhat
The hon. Member is asking about various of the different fining elements. Clearly, the fines discussion is a matter for the individual cases, and would be determined on a case-by-case basis, but I think that removing the cap, which, in modern terms, is actually relatively low—certainly, when compared with financial abuses and other forms of regulation—is entirely reasonable.
The Solicitors Regulation Authority does not, in any way, have any power to strike off a suspended solicitor, so the SDT remains an extremely important part of the disciplinary process. There are various different aspects at play here, but the proposals make good sense and are reasonable. I will happily write to the hon. Member on the issue he raised separately and come back to him about it later.
Stephen Kinnock
I thank the Minister for that clarification, and I am grateful for his offer to write with further details. On the point about using the Bill to prevent economic crime with respect to providers of legal services, but not for any other sector covered by the money laundering regulation, would he care to shed more light on the rationale for that decision?
Tom Tugendhat
The other sectors are already covered by the money laundering regulation. That element is focusing on legal services because that was a lacuna in the law.
Stephen Kinnock
I thank the Minister for that clarification. There is a broader scope to economic crime, not just a specific focus on money laundering, and that covers a wider range of aspects of economic crime, although there is an explicit objective in the Bill that it is limited to providers of legal services. I wonder why that broader scope will not be applied beyond the money laundering concerns.
Tom Tugendhat
The changes are being made and the new clause is important for exactly the reasons the hon. Gentleman has highlighted. The new clause will remove an obstacle with respect to the SRA exercising its judgment and punishing appropriately those who might be committing any number of different crimes, which I hope they will not be doing. The measure will give us a provision to enable us to deal with that. The reality is that much of the money laundering regulation has already been covered, along with different aspects of financial services. The proposals specifically address legal services and particular aspects. They are an important addition, and I am happy to support them.
Question put and agreed to.
Clause 154 accordingly ordered to stand part of the Bill.
Clauses 155 to 157 ordered to stand part of the Bill.
Clause 158
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
Tom Tugendhat
Indeed, and I am delighted to be called to speak to it.
The clause provides the Secretary of State with the power to make consequential amendments that arise from the Bill. The power is necessary to ensure that other provisions on the statute book properly reflect and refer to the provisions in the Bill once it is enacted and to ensure that there are no legislative inconsistencies. If regulations are made under the clause that do not amend primary legislation, they will be subject to the negative resolution procedure. If regulations are made under the clause that amend primary legislation, they will be subject to the affirmative resolution procedure. This, I hope, will provide the appropriate parliamentary scrutiny.
Seema Malhotra
I thank the Minister for his comments. May I clarify the process, Mr Paisley? In previous sittings, during each clause stand part debate the Minister has been called followed by the Opposition spokesperson. Perhaps that has had some variation, but it would be helpful to understand whether we need to do anything differently.
Dame Margaret Hodge
We have raised a number of amendments to the Bill during the course of consideration in Committee, many of which I consider to be technical and things that would improve the processes. All those amendments so far have been rejected. I wonder whether, rather than bringing us back at a later stage as the clause proposes, the Minister would undertake, together with his ministerial colleague, to look again at some of those amendments, which are really just practical, pragmatic amendments, with a view to bringing them back. Would he bring them back on Report?
Tom Tugendhat
I will answer the second question first, if I may. I am absolutely certain that my hon. Friend the Member for Thirsk and Malton and I will look with great interest at the suggestions that the right hon. Lady has made. As she knows, we share many similar ambitions. We will have a look at those suggestions with officials. Certainly, there are some that we think could improve the Bill—I do not think there is any great debate about that—and I will make sure that we keep her informed. Her contribution and help, not just today and on the Bill, have been enormous, and I pay enormous tribute to the work that she has done over many years in fighting money laundering and different forms of economic crime.
On this specific power, the hon. Member for Feltham and Heston raises a very important point, which is that the clause does give large consequential provision to the Government to change aspects of the Bill. I understand the concerns that she raises. The nature of the Bill, however, is that it has quite a consequential impact on other elements of legislation, as she herself has highlighted. Therefore there are knock-on elements that will no doubt require minor redrafting and changes at various different points as the Bill goes into law. I am afraid that is slightly the nature of these operations, as she understands extremely well. That is what this power is for.
It is worth saying that any significant or substantial changes that really do change the intent of the Bill should be brought back in primary legislation, because this is clearly a provision in order to enable the Bill to operate, not to change the intent that this House gives it.
Seema Malhotra
I thank the Minister for his comment, which puts that clarification on the record for successive generations of those who will sit in his seat—perhaps he will be promoted to higher office. It is important that that comment is on record, because we have to create legislation for not just today but tomorrow.
Tom Tugendhat
I beg to move amendment 43, in clause 159, page 144, line 21, at end insert—
“(ba) regulations under section (registration of qualifying Scottish partnerships), unless they are regulations under that section that only make provision that corresponds or is similar to provision made or capable of being made by a statutory instrument that is itself subject to annulment in pursuance of a resolution of either House of Parliament;”.
This provides for regulations under NC22 to be subject to the affirmative procedure unless they only make provision corresponding or similar to provision make by a statutory instrument that is itself subject to the negative procedure.
The Chair
With this it will be convenient to discuss Government new clause 22—Registration of qualifying Scottish partnerships.
Tom Tugendhat
Clause 159 provides that regulations made under the Bill are to be made by statutory instrument. The clause also sets outs the parliamentary procedure for how regulations under the Bill should be made, including situations in which legislation must be subject to the affirmative resolution procedure or the negative resolution procedure. The clause is a standard provision to enable regulations to give the intended effect to the measures in the Bill. It is necessary to ensure appropriate parliamentary scrutiny of such regulations.
Seema Malhotra
Clause 159 provides that regulations under the Bill are to be made by statutory instrument. To a large extent, we have had clarification that any subsequent changes will be made through the affirmative procedure in Parliament, enabling greater scrutiny and transparency over the Bill’s implementation. I am not sure if there is a list anywhere of all the regulation-making powers that have been specified in the Bill. I feel like there is probably a summary somewhere of all of those powers, and whether any are subject to the negative procedure. I think that would be a helpful review for the Committee to have.
New clause 22 allows regulations to be made about the registration of certain Scottish partnerships, and to apply law related to companies or limited partnerships. It will allow the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 to be amended or replaced in relation to those partnerships. We welcome the inclusion of amendment 43 alongside the new clause, which provides for regulations under new clause 22 to be subject to the affirmative procedure, unless they make provisions corresponding to provisions made by statutory instruments that are subject to the negative procedure. In light of my previous comments, I think it is healthy for us to clarify and have a clear summary of which are affirmative and which are negative, and the safeguards around them. That would ensure the transparency of regulation making subsequent to the passing of the Bill.
Alison Thewliss
I am glad to see any loopholes getting closed, even if the amendment is sneaking in at the end of the Bill. It is good to see it. As I have said at many points in Committee, enforcement needs to be laid down on all these things, because at the moment all things to do with Scottish partnerships are not being enforced. People are not being fined for not complying with the regulations. I hope that it will result in some tightening up and some fines being issued—and, if required, in some people being jailed for not complying with the regulations as set out.
Tom Tugendhat
My hon. Friend the Under-Secretary has spoken to a lot of the issues, so I will just list clauses covered by the affirmative resolutions briefly—the others will be negative. That will include regulations under clauses 33, 35, 140(1), 141 and schedule 6, on powers to amend certain definitions relating to cryptoassets, clause 142 and schedule 7, on powers to amend certain definitions relating to cryptoassets and then clauses 143, 148, 149, 153 and 158. I am happy to write to the hon. Lady so that she has those details.
Amendment 43 agreed to.
Clause 159, as amended, ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.—(Scott Mann.)
Economic Crime and Corporate Transparency Bill (Sixteenth sitting) Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Tom Tugendhat
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Economic Crime and Corporate Transparency Bill (Sixteenth sitting)
Tom Tugendhat ExcerptsTuesday 22nd November 2022
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 November 2022 - (22 Nov 2022)
The Minister for Security (Tom Tugendhat)
It is nice to see you this afternoon, Ms Elliott. I look forward to proceeding in order for some parts of this afternoon sitting.
Clause 160 details the Bill’s territorial extent. In preparing the Bill, both Ministers and officials have engaged extensively with their counterparts in the devolved Administrations to ensure that we tackle economic crime and strengthen corporate transparency across all of the United Kingdom. The measures in the Bill extend to England and Wales, Scotland, and Northern Ireland. Some of its provisions have a lesser extent, where they amend existing legislation that extends only to one or two different parts of the UK. In the opinion of the UK Government, the Bill makes some provision for areas within the devolved competence of Wales, Scotland and Northern Ireland. However, the Bill respects the devolution settlements and, where relevant, legislative consent motions are being sought from the devolved Administrations.
Clause 161 sets out procedural detail for the commencement of the Bill’s provisions. It stipulates the various dates when, and conditions under which, the various sections and subsections will come into force. The Secretary of State can make regulations that set the date for certain provisions to come into force. Different days may be appointed for different purposes. The Secretary of State can also make transitional or savings provisions for regulations made under certain clauses, as set out in the Bill. Any regulations made under the clause are to be made by statutory instrument.
Clause 162 establishes that the title of the Bill once it becomes an Act will be the Economic Crime and Corporate Transparency Act. The short title is a standard clause in any Bill.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Ms Elliott.
I have a few limited remarks to make as we approach the end of clause-by-clause consideration and before we move on to new clauses. As the Minister said, clause 160 extends the Bill to England and Wales, Scotland, and Northern Ireland. I was grateful for his comments about liaison with the Scottish Parliament and the Welsh Senedd. There are obviously current challenges in respect of the Northern Ireland Executive. I would be grateful for some clarity about how the engagement with the devolved Administrations is going, because it has been a theme, certainly during the earlier debates. It is important that we can have confidence that all the issues that are being raised in our deliberations are coming into the Bill.
Clause 161 sets out when the Bill’s provisions will come into force. I am sure the Minister will want to give assurances that that will be no later than is absolutely necessary, bearing in mind the urgency of the measures. Clause 162 establishes the short title and we welcome it.
Tom Tugendhat
Different devolved Administrations have been contacted in different ways. Some of them have been written to, and I have sought conversations with some, although that has not always been achieved because of other people’s diaries as well as my own. The conversation is ongoing and, although I hope the Bill will be passed soon, it will have to continue because many things are going to change over the coming years.
Question put and agreed to.
Clause 160 accordingly ordered to stand part of the Bill.
Clauses 161 and 162 ordered to stand part of the Bill.
New Clause 1
Change of addresses of officers of overseas companies by registrar
“In section 1046 of the Companies Act 2006 (overseas companies: registration of particulars), after subsection (6) insert—
‘(6A) Where regulations under this section require an overseas company to deliver to the registrar for registration—
(a) a service address for an officer of the company, or
(b) the address of the principal office of an officer of the company,
the regulations may make provision corresponding or similar to any provision made by section 1097B or 1097C (rectification of register relating to service addresses or principal office addresses) or to provision that may be made by regulations made under that section.’”.—(Kevin Hollinrake.)
Where an overseas company is required to provide a service address or principal office address for a director or secretary, this new clause enables regulations to be made conferring power on the registrar to change the address if it does not meet the statutory requirements or is inaccurate.
Brought up, and read the First time.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)
I beg to move, That the clause be read a Second time.
Economic Crime and Corporate Transparency Bill (Seventeenth sitting) Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Tom Tugendhat
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Economic Crime and Corporate Transparency Bill (Seventeenth sitting)
Tom Tugendhat ExcerptsThursday 24th November 2022
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 24 November 2022 - (24 Nov 2022)
Alison Thewliss
I support the new clauses. The anti-money laundering supervisory duties are incredibly important, as they are part of firmly closing the door on economic crime. It is important that we use this opportunity to strengthen the powers in the Bill. Frankly, if we do not do it now, when will we get round to it again?
New clause 44 asks HMRC to prioritise its AML supervisory function. That seems sensible. I would note that some additional resources will be needed; the Treasury Committee’s economic crime report points to the fact that some 30,000 businesses fall into this bracket.
I note the ongoing review of OPBAS. I do not want the Minister to get ahead of the review, but it might be useful to get a perspective on the direction of travel. At the most extreme end of that review—the Committee heard evidence on this point recently—the Government could propose that OPBAS loses its AML supervisory function. It would be interesting to hear the Minister’s perspective on where he thinks the review will end up. It is quite awkward that the review does not tie in with the Bill’s timetable: the review is ongoing, we are legislating here and we do not quite know where it will end up.
I wonder whether the Minister could clarify a point that the FCA’s chief executive, Nikhil Rathi, could not clarify when he came to the Committee. The most recent report about the performance of OPBAS is dated September 2021. It feels to me that we are overdue a report on the effectiveness of OPBAS. Is the delay a result of the ongoing review or is there some other reason for it? The September 2021 report stated that:
“The vast majority (just over 80%) of PBSs had not implemented an effective risk-based approach. Only a third of PBSs were effective in developing and recording in writing adequate risk profiles for their sector”.
The report also raised various other points about the effectiveness of OPBAS. It has been operating for several years now, but we still do not feel that it is doing what it should to supervise and ensure that the anti-money laundering responsibilities of those it supervises are carried out. If the Minister does not have information on the status of that report today, I would be perfectly content for him to write to me.
Maybe OPBAS has upped its game incredibly since the last report came out—we just do not know. That also hinders our approach to the Bill, because we do not know whether these functions are being adequately carried out. While the FCA chief executive was able to say that there has been improvement, he was not able to say what that improvement looks like. Have 100% of PBSs now implemented an “effective risk-based approach” or is it 50%, or somewhere in between? We just do not know.
It is important that we use all the opportunities we have in the Bill to up the resources for the FCA, OPBAS and HMRC to carry out their functions. As I say, anti-money laundering supervision is the key to ensuring we close the door on money laundering. Those bodies are meant to stop it, and if we do not tighten the legislation and provide the resource there is very little point having the Bill.
The Minister for Security (Tom Tugendhat)
I thank the right hon. Member for Birmingham, Hodge Hill and for Barking for their amendments, and I welcome the effort and energy they put into the oversight mechanisms that are so important in ensuring that the Bill is effective. That is the nice bit. They know what is coming next.
I do agree enormously on the importance of supervision, which has been emphasised, but I am afraid I cannot support new clause 44. Despite what the right hon. Member for Barking says, HMRC already has an anti-money laundering supervisory function and it does take its responsibilities extremely seriously. It supervises nine sectors and is the default supervisor for trust and company service providers where they are not already subject to supervision by the FCA or one of the 22 professional bodies.
Dame Margaret Hodge
I wish I had brought some of my previous notes with me. What evidence does the Minister have of that, apart from HMRC telling us that?
Dame Margaret Hodge
I am amazed that it did. Is there evidence of the number of visits or assessments carried out? I can remember a quote from the previous permanent secretary, who said, “It is not our core business.”
Tom Tugendhat
The core business of HMRC is raising money and ensuring that that money is clean. That is absolutely essential. Until HMRC works out whether or not the money is clean, it is hard to raise money. I would be hard pressed to describe my hon. Friend the Under-Secretary as a dodgy individual, but if he is going through these AML checks I think it is a good indication that HMRC is taking such matters very seriously. As I say, the checks are already being done and the responsibilities are held by branches of the Government, including HMRC and other professional bodies.
The amendments are therefore a duplication. The reality is that HMRC carried out 3,500 formal compliance inspections with businesses last year and issued over £2.5 million of penalties in 2021-22. That demonstrates that the business checks are not symbolic. They are not minor. They are extremely serious. HMRC takes them very seriously. I think the Government is entirely in agreement with the right hon. Lady that these checks need to happen, but the scale and type of reform to improve effectiveness and solve these problems is not yet clear. The Treasury will no doubt have many views when its formal consultation on the possible options opens. The consultation will ensure that the risks and implications of each option are fully understood before the Government commit to any particular model. The right hon. Lady knows very well that we need to get this right, not just to be quick.
On new clause 72, I welcome the desire to strengthen the UK’s anti-money laundering regime. I also share the support for the work OPBAS does. However, it is not yet the right time for the proposed changes, and I cannot support the suggested amendment. In June of this year, the Treasury published a review of the UK’s anti-money laundering regime, which considered the performance of the supervisory regime, including the work of OPBAS. It concluded that although there have been significant improvements in recent years, further reform is necessary to ensure effective supervision across the regulated sector. The review set out four options for reform, ranging from strengthening OPBAS to structural reform to establish a new statutory supervisor. Further policy work to develop these options is already under way, and the Treasury has committed to publishing a consultation before a decision on the direction for reform is made. It would be wrong to preclude the ongoing policy analysis and public consultation by making the changes proposed by the amendment.
Dame Margaret Hodge
I heard the Minister’s words with gloom. Initially, the Government put out a consultation with four options, and to speed it up, we decided to go with the weakest of the options—the one to which there would be the least objections. What I think I just heard him say, which is so gloomy, is that the Government will now publish a further consultation. All this stuff in the Bill will come into being and we will have absolutely no assurance that proper checking, regulation and supervision will be carried out on company service providers.
Tom Tugendhat
As I say, this is really a matter for the Treasury, and it has committed to publishing a consultation before the decision is made. It would be wrong of me to preclude the ongoing policy analysis and public consultation by making—
Seema Malhotra
May I clarify whether the Minister has had any discussions with Treasury colleagues about the matter and raised his concerns? Have they acknowledged the need to act much faster?
Tom Tugendhat
I have had many conversations with Treasury colleagues in recent weeks and months on various aspects of the challenges that economic crime poses to the UK. Many of us are committed—in fact, the Treasury is very committed—to ensuring that economic crime is reduced in this country. The support that the Treasury has given in various different ways has resulted in many things, including a very successful operation conducted this morning by the Metropolitan police that resulted in the arrest of many people connected to economic crime. That may sound tangential on the grounds that it is about fraud, but the reality is that all of it is connected. We see a very strong overlap between money laundering, fraud and various other different forms of economic crime. The Treasury, unsurprisingly, is extremely committed to making sure that economic crime in this country reduces. The Home Office and the Department for Business, Energy and Industrial Strategy are absolutely committed to making sure that we considerably reduce the level of fraud in this country.
What is important now is to ensure that we make OPBAS as effective as possible, and that we look for some of the reforms that we have started to highlight, because that means that the changes required by the amendment will be unnecessary. I hope that we can focus on that aim.
I have just been given a statistic that records that in October 2022, HMRC named 68 estate agents that had breached anti-money laundering regulations, and fined them a collective total of £519,000. We can see that the supervision of estate agents is not just conducted by my hon. Friend the Under-Secretary but by many others around the country and is taken extremely seriously.
Dame Margaret Hodge
I hear what the Minister says, but I think we will just be setting up another duff register unless we get the regulation of those company service providers toughened up at the same time as we introduce the Bill. I want to press new clause 72 to a vote.
Economic Crime and Corporate Transparency Bill (Eighteenth sitting) Debate
Full Debate: Read Full DebateTom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Economic Crime and Corporate Transparency Bill (Eighteenth sitting)
Tom Tugendhat ExcerptsThursday 24th November 2022
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 24 November 2022 - (24 Nov 2022)
The Minister for Security (Tom Tugendhat)
I am sympathetic to the intent of new clause 60, but I cannot agree to it. It remains vital to maintain a robust supervisory regime for cryptoasset firms, but that is something the FCA already does.
The FCA’s approach to assessing firms in the initial stages through registration removes poor-quality firms and bad actors from the UK system, reducing the risk of domestic firms being used to launder the proceeds of illicit activity. That robust gateway has already prevented over 200 firms that were unable to manage anti-money laundering and counter-terrorist financing risks from being registered.
Cryptoasset firms approved to operate in the UK are subject to ongoing supervision by the FCA to make sure they continue to meet those standards. The regime also provides the FCA with a number of powers in relation to those who do not meet the UK’s standards. For example, the FCA can direct a firm to make disclosures, implement additional controls and oversights, and issue injunctions to prevent potentially illicit cryptoasset activity. Furthermore, the FCA is already subject to oversight by His Majesty’s Treasury, the lead Department for anti-money laundering regulations, and, as a statutory regulator, it is also directly accountable to Parliament.
I turn to new clause 61. Again, I am sympathetic but do not support it. As we have discussed, FATF sets international standards on anti-money laundering and counter-terrorist financing, including in relation to the regulation of cryptoasset businesses, or “virtual asset service providers”, as the taskforce calls them.
FATF and its regional bodies are responsible for assessing their members against international standards. That includes assessments of the Crown dependencies and overseas territories on their regulation of cryptoasset businesses. A UK review of the Crown dependencies and overseas territories would not add value to that. The Crown dependencies and overseas territories co-operate with the UK and are committed to meeting international standards on fighting financial crime and countering terrorist finance. I therefore ask the hon. Member for Aberavon to withdraw the proposed new clauses.
Stephen Kinnock
I thank the Minister for that feedback. We want to ensure there is a mechanism to check and verify that the FCA is able and resourced to do what we want it to do. Our worry is that if we take a hands-off approach and leave it to its own devices without looking at whether it is achieving what we want it to achieve, in this fast-moving world, we could potentially lose control of the situation. I am sure that that would be a matter of regret to the Minister and the Committee.
New clause 61 is about ensuring that UK authorities can keep a close watch on developments in the overseas territories and take any necessary steps to ensure that we avoid the same kind of race to the bottom that has turned some of those territories into a magnet for a host of dodgy—and often outright criminal—financial transactions in recent decades. There are already reports of rapidly growing cottage industries springing up in places such as the Cayman Islands, aiming to facilitate the incorporation of cryptoasset businesses with, we can only assume, minimal regulatory oversight.
I thank the Minister for his comments, but will he say a bit more about how we are ensuring and building robust approaches to regulating crypto-related risks in our overseas territories, as well as the Crown dependencies, in the light of those growing cottage industries, the increasing risk, and our responsibility for what is happening there? Does he feel that there is anything more that could or should be done?
Tom Tugendhat
The hon. Member raises some important points. I do not in any way wish to disabuse him of the view that there is a risk with this industry; crypto has posed challenges to many areas. It is worth pointing out that the FCA has a budget of £600 million and co-operates extremely closely with the overseas territories and their regulatory bodies. It provides not just an oversight function here, but an education function for many others, and it sets an example that many other jurisdictions seek to emulate.
I urge the hon. Member to look at the way in which the FCA actually works, and at the way in which the overseas territories and Crown dependencies already co-operate. That is not to say that there are not problems—there are often problems in such regulatory environments, which we need to address—but the correct thing to do is to work with the FCA, as it is already doing an excellent job, and ensure that it is properly resourced. As I said, £0.6 billion seems like quite a lot, and there are various ways in which we are supporting further improvements via co-operation.
Stephen Kinnock
I thank the Minister for those points. We feel that it is a bit of a leap of faith but, on the basis of the assurances that he has given, I am happy to withdraw the clauses. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 64
Disclosure of information in the public interest likely to be relevant to the investigation of economic crime
“(1) It is a defence to an action based on the disclosure or publication of information for the defendant to show that—
(a) the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, and
(b) the defendant reasonably believed that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime.
(2) Subject to subsection (3), in determining whether the defendant has shown the matters mentioned in subsection (1), the court must have regard to all the circumstances of the case.
(3) In determining whether it was reasonable for the defendant to believe that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, the court must make such allowance for editorial judgement as it considers appropriate.
(4) For the avoidance of doubt, the defence under this section may be relied upon irrespective of whether the statement complained of is a statement of fact or a statement of opinion.”—(Liam Byrne.)
Brought up, and read the First time.
Tom Tugendhat
It is a huge pleasure to speak on this new clause. None of what I am going to say to begin with will particularly surprise the right hon. Member for Birmingham, Hodge Hill, because—
Tom Tugendhat
He knows very well that I am not going to accept it. The way in which the new clause is set out cuts across many other aspects of law, and it would quite severely affect jurisprudence in this country. However, he is absolutely right to point out the issue, and it is worth taking a bit of time to explain how we intend to address it.
The right hon. Gentleman is correct that the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton, and I are extremely clear that this is an important aspect of legal reform that we need to see in the United Kingdom. It is important because it affects freedom of speech in this country, as the right hon. Gentleman rightly says, and because it has a certain negative influence on the legal environment in which, sadly, people have to operate. He rightly spoke about Catherine Belton, whose work in exposing many of the crimes of the Putin regime has been frankly exemplary and heroic.
It is important that we address this. The way to do that is not to treat it simply as an economic crime, which it is not. It is not just a crime that affects the economy of our country or the movement of dirty money. It is a crime that is about freedom of speech and the access to justice that many people in our county need. We should look at it more as an offence against a fundamental democratic value than as an economic crime. That is why the work is being done with the Ministry of Justice, for rather obvious reasons. We are ensuring that we have a piece of anti-SLAPPs legislation, as the right hon. Gentleman correctly calls it, that addresses the whole problem.
The UK is still leading the way on the issue at national level. We are not yet where we wish to be, but we are doing better than many others. It is worth remembering that many different groups are working on this. The Solicitors Regulation Authority is already doing a lot of work to review the 20 firms suspected of involvement in SLAPP activity. The SRA is shortly to issue its regulated professionals with another warning notice, which will provide guidance on conduct in such disputes. It has already outlined guidance on certain oppressive behaviours, and has expressly linked those to the growing focus on the use of SLAPPs in England and Wales.
As the right hon. Member for Birmingham, Hodge Hill knows, there are many different tactics—aggressive letters, labelling correspondence and seeking to run up bills, as he rightly identified—that challenge people’s access to justice. They are exactly what the SRA is looking at and will be communicating with the MOJ about.
Dame Margaret Hodge
First, will the Minister describe the action that, according to him, the Government are taking? I do not understand what action they are taking.
Secondly, the new clauses that my right hon. Friend the Member for Birmingham, Hodge Hill tabled were written by a group of lawyers who support the UK Anti-SLAPP Coalition. They are not like the new clauses that we put together—they have been given considerable consideration—so I do not quite see how they could be bad law. They have thought this through.
Thirdly, there is a real tendency—I say this with the greatest respect and affection for the Minister’s work—for Ministers to shift a bit a paper to the left or right and do nothing with it. It is the easiest thing to do. We have described this as a once-in-a-lifetime opportunity to change the world; I plead with the Minister to grasp it and accept the new clauses. Let us move forward, rather than shifting the paper aside.
Tom Tugendhat
I am surprised to hear the right hon. Lady speak so negatively about her other amendments and new clauses. New clause 64 is not the only one that is well drafted; others have been as well. New clause 64 focuses, quite rightly, on getting anti-SLAPP provisions into the Bill, but it would extend the reach a bit further than we could take. I am happy to look further at the issue. I am happy to listen carefully to the opinions not only of the right hon. Lady, but of the people who advised the right hon. Member for Birmingham, Hodge Hill, on different approaches to the question. I am extremely happy to listen, but I am afraid we will not accept the new clause.
Seema Malhotra
When the Minister talks about looking more closely at this new clause, does he mean in the proceedings on the Bill?
Tom Tugendhat
I will be looking closer at the new clause in the proceedings on the Bill, but whether it makes it through will not necessarily be my final decision, as she knows very well. I would be interested to hear the arguments of the people to whom the hon. Lady has spoken.
Liam Byrne
I am grateful for the chance to intervene, because I sense that the Minister has almost reached the conclusion of his remarks without giving the Committee the date on which a more comprehensive proposal, which is what he argues for, will be presented to the House. We know that the Ministry of Justice has already conducted its consultation, and that the consultation responses have been analysed, but we have not had a hard date from either the Leader of the House or the Justice Secretary. If the Minister is in reassuring mode, he could perhaps furnish us with that date now.
Tom Tugendhat
I am afraid I will have to ask the Ministry of Justice for that information, but I am happy to write to the right hon. Gentleman. With that, I rest.
Liam Byrne
The truth is that people will be appalled by this debate. We gathered an enormous number of campaign groups and journalists together in the House on Tuesday evening, at a function that I had the privilege to co-sponsor with the right hon. Member for Haltemprice and Howden. The kinetic energy behind reform is significant. The law will change—we will get there—but the question is whether this Government want to be the authors of that change or continue to oppose it.
Every single day that the law does not change, bad people and bad lawyers will be racking up millions of pounds in legal costs in order to intimidate and stop publication by journalists who are hunting the truth. I am afraid that is not a good place for this Government to be in.
Seema Malhotra
It is a pleasure to speak briefly in support of new clause 66, tabled by my right hon. Friend the Member for Birmingham, Hodge Hill. He laid out clearly his reasons for doing so, and I think we all share his concern.
The new clause concerns the introduction of a default supervisory authority for independent legal professionals, and includes provisions such that when an independent legal professional is not a member of any of the professional bodies listed in schedule 1 to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, but undertakes regulated business within the scope of regulation 12 of them, the Solicitors Regulation Authority should be the default body for that independent legal professional.
As my right hon. Friend outlined, it is concerning that legal professionals who are not members of any professional legal bodies are still undertaking activities and taking cases. It is effectively a loophole that can enable rogue actors to act as legal professionals without the supervision or membership of a professional body, thereby avoiding scrutiny of their actions, which could facilitate economic crime and money laundering. Clearly, we need a solution. My right hon. Friend suggested that it is a problem that the Government need to fix; we would be keen to work with them on how that will happen. I think we all want to find a solution, and to do so before the Bill goes much further through the House.
Tom Tugendhat
I thank the right hon. Member for Birmingham, Hodge Hill for tabling the new clause and the hon. Member for Feltham and Heston for her comments on how it is designed to elucidate answers for procedure rather than to push for a change in the law. There is a lot that really does need further investigation, but the reality is that although we should all seek to prevent legal professionals from undertaking activity connected to money laundering, the new clause would not quite do that.
As the hon. Member for Feltham and Heston will know, there are currently nine UK professional body supervisors—known as PBSs—that supervise legal professionals for anti-money laundering purposes. Of course, the SRA is one of them. They cover different professions and the different jurisdictions: England and Wales, Scotland, and Northern Ireland. Supervisors already work closely with the Office for Professional Body Anti-Money Laundering Supervision—OPBAS—which we spoke about earlier, to ensure full compliance.
The vast majority of legal professionals are already carefully conducting strong anti-money laundering work. However, the Government’s review of the UK’s AML regime, published in June, identified concerns in the legal sector that a small number of professionals may be unsupervised. The examples are limited to some specific and small subsectors, such as specialist wills and estate planners and one or two unregistered barristers.
The review concluded that further reform of the supervisory regime is necessary to improve its effectiveness and proposed four options for reform, which could include giving the SRA, or other legal sector supervisors, a greater role. The review committed to taking forward a public consultation to develop the options further, which is necessary given the potential scale of the reform and the need to ensure that we fully understand the risks and impact of our final decision. I reassure Members that the Government are focused on ensuring that the reform addresses the problems identified in the review, including that of supervisory gaps.
The new clause would require the SRA to supervise independent legal professionals in Scotland and Northern Ireland who are not regulated by any of the professional bodies listed in the money laundering regulations. Additionally, each AML supervisor currently represents different legal professions with diverging practices and processes. In the absence of broader AML reforms and appropriate resourcing, it would be difficult for the SRA to supervise those who are not currently members of its own regulated community, as the new clause would require.
I share the desire of the right hon. Member for Birmingham, Hodge Hill to strengthen our supervision regime; however, given the ongoing reforms to AML supervision that would be interrupted by the new clause, and its likely impact on the SRA, it would not be appropriate to accept it at this moment. I therefore urge the right hon. Gentleman to withdraw the motion.
Liam Byrne
The Minister made the case for the new clause rather well. I am grateful for his confession that significant numbers of businesses are in effect not covered by a default supervisor. If anything, he will have alarmed those listening from the other place who will, no doubt, want to pick up the new clause and build on it, especially given the Minister’s intention—sotto voce, I think—to try to move in the direction of reform.
The point I want to underline is that the challenge we are presenting is not about firms that are covered by a supervisory regime; our worry is about firms that are not covered. The Minister wisely began his remarks by talking about the nine different sets of legal sector supervisors. He may know that almost a quarter of legal firms visited by these nine supervisors were assessed as being non-compliant with AML rules, and 71% of the firms visited by the biggest legal sector supervisor—the SRA—have not put in place an independent audit function to gauge the effectiveness of their AML policies, controls and procedures. He may also know that 60% of the firms that were subject to a full on-site inspection by the SRA were not fully compliant with requirements to have in place adequate AML policies, controls and procedures. This is a significant problem.
I think the Minister is indicating that the Government are open to reform. It was not clear to me precisely which aspects of the new clause were being opposed, but we think that the place to really get this done in a thorough way may be the other place, safe in the knowledge that the Bill will come back to the Commons in a much healthier state. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 67
Civil asset recovery in cases of economic crime
“The Secretary of State must by regulations make provision for costs in civil recovery proceedings involving economic crime to be awarded against the enforcement authority only where the respondent can show that the enforcement authority has acted unreasonably, dishonestly or improperly.”—(Liam Byrne.)
Brought up, and read the First time.
Stephen Kinnock
I wish briefly to concur with my right hon. Friend’s every word. He has made a powerful case about unexplained wealth orders. That was something of a false dawn for the reasons he set out. Similar to what we said about SLAPPs, we are concerned about the chilling effect—the vast disparity between the financial firepower of the people that the UWOs seek to go after and that of the NCA and, frankly, the British state.
My right hon. Friend’s new clause would absolutely push the Bill in the right direction. It provides a means for us to level the playing field. On the basis of that common-sense proposal, we can start to have serious conversations about how to crack down on some of the kleptocrats. I thank my right hon. Friend for his clause and the manner in which he has proposed it. I hope that the Minister will seek to champion it rather than oppose it.
Tom Tugendhat
I am grateful for the intent behind new clause tabled by the right hon. Member for Birmingham, Hodge Hill. He has an absolutely valid point—we need to equalise the firepower between some of the organisations. We have a fundamental challenge, because we cannot assume that arising from the actions of a UWO, which is not a human rights action but to do with civil litigation, costs should fall on the losing party. We must look at how to balance the different elements.
My own inclination would be look more at how we fund our agencies to do this work. Some members may have heard that I once was in the Army. The way the armed forces does such things is by having two different forms of budget—the ongoing budget and the war reserve. I am much more inclined, and much more persuadable, towards the argument that we should be making sure that the agencies that take on such claims have a war reserve to ensure that they can meet the costs without that affecting their ongoing work, rather than changing the law in a way that would affect civil liabilities in many different areas.
Dame Margaret Hodge
To be honest, I do not think that would prevent the impact that the fear of incurring costs would have on how any of the agencies operate. Everyone in the House has great respect for Bill Browder, and I am sure that the Minister will have talked to him about the issue, and I know that the Under-Secretary has, too. Bill Browder is completely shocked and astounded by the fact that we allow any costs at all to be claimed by successful litigants when they challenge Government action.
I do not know whether either Minister had the chance to meet Judge Mark Wolf, who is over here campaigning for an international anti-corruption court. I do not know whether they have come across him. He was here last week and, when we talked about such litigation, he expressed absolute astonishment that defendants in any of these cases, have the right to any of their costs being met. In America, looking at those figures, great success comes from that hugely important lack of ability to claim costs.
Tom Tugendhat
It is worth pointing out that the Americans do not use unexplained wealth orders, which, after all, are civil litigation, because they do not have them. Therefore, the question of costs does not apply in the same way.
Dame Margaret Hodge
I would not use the example of unexplained wealth orders. They have not worked in the way that we had all hoped and intended. On the failure to prevent bribery, if we think of the acts that the Serious Fraud Office has been engaged in—I think it is with Serco, where they face a couple of million pounds in claims and costs. It goes right across the panoply of tools that we have to fight economic crime.
Tom Tugendhat
This new clause clearly focuses on the Proceeds of Crime Act 2002 and the different ways in which it would be affected. I will not accept it, for the reasons that I have given; I believe it expands far too far into other areas of civil litigation. I do, however, take the right hon. Lady’s point entirely. The ways in which our agencies can defend themselves has already been on my plate for many, many weeks.
Liam Byrne
The Minister has had quite an education since becoming a Minister and joining the ranks of the Government, because, of course, it was in the Foreign Affairs Committee report on tackling illicit finance in which he authored a number of quite strong words about the need to reform and improve the regime for unexplained wealth orders, which are an important legal innovation. They are looked up to by enforcement agencies from around the world, and it is a national embarrassment that they are not working. It could well be, as the Minister argues, that the right answer is to create a war-fighting fund for our enforcement agencies, but that would have been possible if the Government had not opposed all the amendments that we suggested to create and restock the war chest that might be needed.
I appreciate that in this business a politician’s first instinct is to want to have their cake and to eat it, but unfortunately the Minister voted against putting us in that position at an earlier stage in the Bill. It is therefore important to send a clear signal to the other place that this is an important set of reforms for the Government to focus on and get right. I will therefore press the new clause to a vote.
Question put, That the clause be read a Second time.
Economic Crime and Corporate Transparency Bill (Nineteenth sitting) Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Tom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Department Debates - View all Tom Tugendhat's debates with the Department for Business, Energy and Industrial Strategy
Economic Crime and Corporate Transparency Bill (Nineteenth sitting)
Tom Tugendhat ExcerptsTuesday 29th November 2022
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 29 November 2022 - (29 Nov 2022)
Seema Malhotra
It is a pleasure to speak briefly in support of the new clause tabled by my right hon. Friend the Member for Barking. It would amend the Proceeds of Crime Act 2002 such that any disclosure made as part of the suspicious activity reporting regime must include a risk rating. My right hon. Friend outlined very effectively the reasons why the new clause is important. Much of the evidence in our meetings at the outset of the Bill, which set out the context and stakeholder views, it was clear that the SARs regime was failing. The databases of referrals were going unreviewed and unlooked at, because the resources were not there. There was no effective means that we could see of prioritising SARs fed into the NCA.
SARs is an essential tool in our defence against money laundering, but if the system is not working, something needs to happen. Having an extra step in the process to help with prioritisation, look at risks and deal with those identified as higher risk would help, as my right hon. Friend outlined, to bring in quality, at a time when we know that quantity is the new battle. She said that the current estimate is three quarters of a million referrals, which is extraordinary. Given the scale and types of economic crime, the number of referrals is likely to get worse, not better. That is a good thing if we are starting to highlight and refer more cases as we start to clean up our systems. However, we then need to deliver on that; otherwise, the downside is that we will reduce confidence among those doing the referrals that anything will actually happen.
Nigel Kirby of Lloyds Bank said in his evidence to the Committee:
“I think the SARs regime and the Proceeds of Crime Act 2002 itself actually need—well, not necessarily to be turned upside down, but to be looked at as a whole.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 19, Q26.]
I think we have some agreement that the system itself is important, essential and necessary but that it needs wholesale reform to make it more efficient and effective and to ensure that it does what we ask of it.
The Minister for Security (Tom Tugendhat)
I thank the right hon. Member for Barking for the new clause. I will slightly gloss over one element and focus on something she mentioned several times—I always listen carefully to what she says—about the comparison between the FBI and the NCA. I take the comparison, but the NCA is not a direct comparator for the FBI. After all, the FBI includes the equivalent to MI5. It also includes counter-terrorism police and a lot of what we call regional organised crime units. It includes a lot of other areas of policing that simply do not come under the NCA’s budget, so the comparison of budgets is not apples and oranges; it is more like apples and cider—the bulk of one and the punch of the other are not quite the same. I hope the right hon. Lady will forgive me for saying that that is not entirely a fair comparison.
That said, the NCA does an enormous amount of good work and uses SARs in many different ways. I have the figure here: the UKFIU received and processed nearly 600,000 SARs in 2019-20. That has increased significantly every year. The action taken has resulted in about £192 million being denied to criminals in 2019-20, up 46% on the previous year. So this is something that we are already using heavily.
Dame Margaret Hodge
We all think that SARs is a helpful regime. I wonder whether the Minister has been given the information by the NCA. It got more than half a million SARs, but how much of that data did it use to get the millions that it got in? That is a heck of a lot of data, which should yield a huge amount of valuable information.
Tom Tugendhat
First, not every SAR leads to an actionable offence. Many of them are simply, and quite rightly, reports. They are reports because there are suspicions, but suspicion does not necessarily mean guilt. Many times these are companies that are taking on clients or that have clients who are suspicious, and they want to be sure they are doing the right thing so, responsibly, they report in. We should not confuse the absolute number of reports with a level of criminality. That would not be fair on the British population, those doing the reporting or the NCA, which is looking into these things.
Alison Thewliss (Glasgow Central) (SNP)
I did not mean to stop the Minister in mid-flow. He says that the number does not necessarily correlate to criminality. Is he concerned to hear that trust and company service providers have provided only 31 SARs, according to Graeme Biggar when he gave evidence to the Treasury Committee? A total of 31 seems impossibly low for the number of trust and company service providers, compared with what comes in from others.
Tom Tugendhat
The hon. Lady makes a fair point, but as she knows well that is not the point of the new clause, which is about the supervision of SARs and the ways in which they are checked and verified. That said, I have listened carefully to her and will have a look at that, because I do appreciate the point she makes. That said, I think these codes already enable the NCA to triage effectively, although if she has better ideas I am happy to listen and look at them further. However, I am to be convinced, because I think the Bill already addresses the areas she indicates. I get the point she is trying to make, but I am not sure that her suggestions would lead to a significant improvement on what is already there.
Alison Thewliss
I suspect that if it goes to a vote, he will vote against the new clause, so he does not even need to argue against it. If it goes to a vote, he and his colleagues will vote against something that he has consistently and repeatedly supported in this House. He knows in his heart of hearts that this is the right thing to do. I am very interested to know whether, if the Government will not support the new clause—whether it goes to a vote or not—they will introduce something similar on Report. Both Ministers know that this is the right thing to do. The opportunity is here in the Bill. If the opportunity is there and the will is not, that leaves huge questions for the credibility of the entire Bill.
Tom Tugendhat
I am delighted to speak on the new clause. As the right hon. Member for Barking correctly identifies, it touches on many areas that my hon. Friend the Under-Secretary and I have spoken about on numerous occasions, and we are not alone in having done so. Section 172(1)(b) and (d) of the Companies Act 2006 speaks about the interests of employees and of the community being the responsibility of directors as well, so having an emphasis on directors’ responsibility in corporate legislation is not new. My hon. Friend the Under-Secretary has also spoken about it in building safety legislation, which the right hon. Lady cited.
There are many different examples of our recognition that the interests of the whole of society and of the whole United Kingdom are better protected when directors understand that they are there not simply to advance shareholder value, but to further the interests of the whole community of their employees and wider society in actions and responsibilities they undertake. Although I see all of the responsibility laid out and I take very seriously the point the right hon. Lady made, we still need to do a little bit of work on how this can be made to work. There are arguments, some of which hold water, about whether the 2017 money laundering regulations include elements that already cover some of these areas, and there are arguments about whether the Law Commission will want to look at different bits of this. I can assure the right hon. Lady that I will look at this extremely seriously, because she is absolutely right that the Bill offers an opportunity to introduce different reforms. I will look to make sure that any opportunity is fulfilled as quickly as possible.
Dame Margaret Hodge
I am grateful for that. The hon. Gentleman referred to the Companies Act 2006—I cannot remember which section. In the days when Tony Blair changed our jobs every year, I was lumbered with taking through the biggest Act in Parliament. We deliberately put that section in, in the face of massive opposition. At the time there was a front page story in the FT that said, “How dare you talk about any interest but shareholder interest?” But the provision has stood the test of time, I am pleased to say, and I am glad to hear him cite it.
I do not want to embarrass Ministers today by putting the issue to a vote. I know that they feel strongly about this, but so do we—really strongly. The Bill will not pass any litmus test of its potency if the new clause is not included. I know there will be resistance because the professions that would be subject to the new potential criminal liability are very strong in lobbying. They are probably strongly lobbying the Department for Business, Energy and Industrial Strategy, as well as the Treasury and other Government Departments. I say to Ministers that they have to resist that lobbying with every bone in their bodies, because this is not an attack on any profession. There ought to be a new offence that cleans up the profession, and we will pursue this issue right through every phase and stage of the Bill’s passage.
I want to say one final thing to the Minister. Of course we need to make the new clause work, but for goodness’ sake, we have the same offence in the Bribery Act and the tax evasion legislation, and it works perfectly well.
Alison Thewliss
I wholeheartedly agree with the new clause. When the Treasury Committee looked at this issue, what struck me was that economic crime was nobody’s priority. Our report said:
“Economic crime seems not to be a priority for law enforcement. The number of agencies responsible for fighting economic crime and fraud is bewildering.”
If it is bewildering in that sense, it is bewildering to Parliament, too. This is a BEIS and Home Office Bill, yet it has huge Treasury implications and huge security implications, and that gets to the heart of why this new clause is so important. There needs to be a body in Parliament that holds all these agencies to account in one place. If BEIS does a little bit, and the Home Office does a little bit, and security does a little bit, and the Treasury does a little bit, there will not be the cohesive scrutiny of all those agencies that is needed. Committees could well be palmed off with different responses by different agencies, with nobody consistently holding them to account.
The work of the Treasury Committee is very wide ranging. We have two meetings a week, and that is not enough to cover all the issues we need to cover. Setting up a bespoke Committee that could build up expertise on this issue would allow for that accountability. It could meet in private if it needed to, although it would ideally meet in public. The point is that it would keep an eye on all the things that we have agreed to in the Bill, and we would be holding all these agencies and Ministers to account in a consistent way. The reports of the ECC would also, we hope, be taken seriously, and its recommendations implemented.
It is not really enough that the Treasury Committee or another Committee looks at economic crime every once in a while and sees how things are going. The Treasury Committee has done that previously, looking back at previous reports and asking, “How are things going now?” but there is not that week in, week out consistent scrutiny of what is happening. Without scrutiny and consistency, it is difficult to see how the Government will get this right. We are legislating here, but legislation cannot be put on a shelf and left; it has to be living legislation that is scrutinised on a regular basis. A committee of sort proposed in the new clause really would give Parliament a lot of power to ensure that these measures are implemented correctly and that the agencies responsible for economic crime, which affects all of our constituents, continue to be held to account.
Tom Tugendhat
The right hon. Member for Barking will not be surprised to hear that I am a huge fan of parliamentary scrutiny, not just of Government but of various issues that others have sometimes felt are not in the immediate remit of the scrutinising Committee. As she will be aware, I received some criticism when the Foreign Affairs Committee, which I was fortunate to chair, focused so clearly on economic crime in 2017-18—in fact, it was some of the first work that we did—because of the national security threat that it poses to the United Kingdom. Its importance in foreign policy is very clear.
The Treasury Committee has done an awful lot of extremely good work on this issue; over the years, it has done some excellent reports on economic crime. The Public Accounts Committee, the Justice Committee and others have also focused on economic crime at various points. However, while I completely understand the right hon. Lady’s argument, I cannot support the new clause, because it is simply not up to a Secretary of State to set up a Committee of the House. As she knows very well, that is a decision for the House; it would therefore not be appropriate to have that provision in the Bill.
I would add that there are various other elements that already scrutinise quite a lot of the agencies referred to. There is the Economic Crime Strategic Board, co-chaired by the Chancellor and the Home Secretary—I know it is within Government, but it is still a challenging body because it supervises the agencies of Government. Various other levels of scrutiny appear at different points, which help to oversee the function of the agencies and different elements that the Government are trying to deliver—that the ministerial element of the Government is trying to get the bureaucratic element of the Government to deliver. It is really important that we keep those intentions.
Dame Margaret Hodge
What we are seeking is scrutiny by the legislature. I take what he said, and will reflect on it. There is cross-party support for this concept; whether we have got it quite right is open to debate, and we will have to find another means of getting it debated in the House. On that basis, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 76
Whistleblowing: economic crime
“(1) Whistleblowing is defined for the purposes of this section as any disclosure of information suggesting that, in the reasonable opinion of the whistleblower, an economic crime—
(a) has occurred,
(b) is occurring, or
(c) is likely to occur.
(2) The Secretary of State must, within twelve months of the date of Royal Assent to this Act, set up an office to receive reports of whistleblowing as defined in subsection (1) to be known as the Office for Whistleblowers.
(3) The Office for Whistleblowers must—
(a) protect whistleblowers from detriment resulting from their whistleblowing,
(b) ensure that disclosures by whistleblowers are investigated, and
(c) escalate information and evidence of wrongdoing outside of its remit to another appropriate authority.
(4) The objectives of the Office for Whistleblowers are—
(a) to encourage and support whistleblowers to make whistleblowing reports,
(b) to provide an independent, confidential and safe environment for making and receiving whistleblowing information,
(c) to provide information and advice on whistleblowing, and
(d) to act on evidence of detriment to the whistleblower in line with guidance set out by the Secretary of State in regulations.
(5) The Office for Whistleblowers must report annually to Parliament on the exercise of its duties, objectives and functions.” —(Dame Margaret Hodge.)
Brought up, and read the First time.
Stephen Kinnock
We fully welcome the new clause, which we think is very important to ensure that all perpetrators of economic crime are caught and dealt with.
Tom Tugendhat
I merely point out that, while the new clause addresses many of the points that the right hon. Member for Barking has raised before, it also raises many of the same challenges. For that reason, I will object to it.
Dame Margaret Hodge
I will not at this point press the new clause to a vote, so I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 80
Forfeiture of recoverable property obtained through economic crime
“(1) Where the conditions in paragraph(2) are fulfilled, a notice may be served in accordance with subsection(4) by the Director of Public Prosecutions, the Director of Serious Fraud Office, or the Director General of the National Crime Agency (hereafter, ‘the Director’) upon the holder of an account held at a bank in the United Kingdom.
(2) The conditions mentioned in paragraph(1) are that—
(a) the Director has reasonable grounds to believe that property held in the bank account is recoverable property obtained as a result of an economic crime offence;
(b) in relation to the bank account or any property in the bank account, a consent request has been made to an authorized officer under Section 335 of the Proceeds of Crime Act;
(c) an authorized officer refused the consent requested;
(d) a court has granted an extension of a moratorium period for 186 days under section 336A of the Proceeds of Crime Act 2002; and
(e) a court has granted approval to the Director to serve the notice.
(3) A notice under this section shall be a notice by way of representation and shall—
(a) state the name of the holder of the bank account to whom it is addressed;
(b) specify the details of the bank account and of the property or part of the property in the bank account which in the opinion of the Director is recoverable property;
(c) state a date on which, and a place and time at which, the holder of the bank account is required to attend a hearing of the Court to show cause why the property so specified is not recoverable property and should not be forfeited; and
(d) be served on—
(i) the holder of the bank account, and
(ii) the bank at which the account in question is held,
and if an address for service on the holder of the bank account is not known, service on the bank only shall be taken as sufficient for the purposes of this paragraph.
(4) In this section and section [ Forfeiture of recoverable property obtained through economic crime: summary procedure ]—
(a) ‘economic crime offence’ means an offence listed in Schedule 8 of this Act; and
(b) ‘recoverable property’ has the meaning given in section 304 of the Proceeds of Crime Act 2002.”—(Dame Margaret Hodge.)
Brought up, and read the First time.
Stephen Kinnock
We welcome these new clauses, which would give effect to the Government’s stated intention to unlock the proceeds of crime held in bank accounts to fund law enforcement efforts to tackle economic crime. Their adoption would also optimise the potential of the defence against money laundering regime and streamline the process of UK law enforcement identifying tainted wealth and being able to seek its forfeiture.
Tom Tugendhat
I thank the right hon. Member for Barking. While I agree with the intent behind her new clauses, I argue that they narrow slightly the scope in which the state can already recover much of the proceeds of crime. While they attempt to simplify, the reality is that we are already recovering large sums. I am not saying that we could not do more—we certainly could—but I am not convinced that the new clauses would add significantly to existing legislation. Last year, for example, a record £115 million of proceeds of crime were recovered under existing powers.
Dame Margaret Hodge
That is not a brilliant argument, but I will pursue this issue on Report, as we are doing with other issues around seizing and freezing assets. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 84
Compensation for Victims of Economic Crime
‘(1) The Secretary of State must, no later than 90 days from the date on which this Act comes into force, publish and lay before Parliament a strategy for the potential establishment of a fund for the compensation of victims of economic crime.
(2) The strategy may include provisions on the management and disposal of any assets realised by the government, or any body with law enforcement responsibilities in relation to economic crime, under relevant UK legislation.’—(Stephen Kinnock.)
This new clause would require the Secretary of State to prepare and publish a strategy on the potential establishment of a fund to provide compensation to victims of economic crime.
Brought up, and read the First time.
Alison Thewliss
If this is indeed the last opportunity I have to speak in the Committee, I thank the Ministers. I hope they have been listening closely to what we recommend and will bring back amendments on Report. I also thank my hon. Friend the Member for Paisley and Renfrewshire North for being so patient and helpful in supporting me throughout the passage of the Bill.
The new clause gets to the heart of the matter. Victims of economic crime often receive very little compensation but suffer greatly from the impact of the crime. It can be devastating for people, both financially and personally, and they are deeply affected by it for the rest of their lives, so anything that will go towards helping to compensate those victims seems like a sensible prospect.
Tom Tugendhat
As this is probably the last time I will speak in the Committee, I thank you, Mr Robertson. I also thank the right hon. Member for Barking for her input into the Bill not just today, but over many years and as Chair of the Public Accounts Committee. The way in which she has championed tackling economic crime, drawn the House’s attention to it, and focused the country on the real threats that we have faced has been impressive to us all, and I am personally enormously grateful to her. She certainly helped my work enormously when I chaired the Foreign Affairs Committee, and she has now helped to focus my work as a Minister. I am very grateful that I have had the privilege of working with her.
Dame Margaret Hodge
I forgot to thank you, Mr Robertson, for chairing the Committee and for showing such an interest in what we are doing. I also thank the Ministers and Members of all parties who have spoken and participated. I look forward to working further to get even more into the Bill.
Tom Tugendhat
If anybody thinks that I was trying to soft-soap the right hon. Lady in order to shut her up in future sittings, they do not know her very well. It would have not worked, and I have not tried it. All I have done is to pay credit to somebody who has definitely earned it. I also thank my fellow Minister and the Whips, who have got us through at lightning speed.
On the new clause, the powers in part 4 already increase the focus on victims. The compensation principles of the Serious Fraud Office, CPS, the National Crime Agency and others have committed law enforcement bodies to ensuring that compensation for economic crime is considered in every relevant case, including where there are overseas victims, so I believe that the Bill already focuses on many of the aspects that we have discussed. That said, we are coming to Report. As always, I will be listening, but I have yet to be convinced about the new clause, because I believe that it has largely been covered.
Stephen Kinnock
Has the Minister any thoughts on the international forums that have been set up—for example, the Russian Elites, Proxies, and Oligarchs Taskforce and the European Commission’s Freeze and Seize Taskforce. What contribution are the UK Government planning to make to those processes?
Tom Tugendhat
I can speak directly to that, because I have recently had a meeting about it with other Governments and other jurisdictions. So far, many people have come up with ways to freeze assets. That is not a particular challenge; the UK does so very actively. Seizing and forfeiting in totality is a different challenge, because it depends on ownership and on many aspects of common law jurisdiction that we would not want to understate. I assure the hon. Gentleman honestly that I have not given up on this, because compensation for the victims in Ukraine is the very least that we should expect, as he correctly identified. Ukraine’s inevitable victory, which is absolutely assured, leads us to start thinking about how we reconstruct that extraordinary country. It is clear that Russian state assets held abroad—some, sadly, are held in the UK—should go some way to contributing to that.
That said, how do we construct the legal arguments to ensure that that is possible? They need to be in keeping with British common law, for obvious reasons. We do not want a jurisdiction of forfeiture; we want a jurisdiction of law. There is more work to be done, therefore. We are working very closely with other common law jurisdictions, such as Australia, Canada and, indeed, the United States. There is an ongoing discussion, but it is not quite as straightforward as I would have hoped.
Stephen Kinnock
I have no further comments, and I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Schedule 1
Cryptoassets: terrorism
“Part 1
Amendments to the Anti-terrorism, Crime and Security Act 2001
1 Schedule 1 to the Anti-terrorism, Crime and Security Act 2001 (forfeiture of terrorist property) is amended as follows.
2 After Part 4B insert—
‘Part 4BA
Seizure and detention of terrorist cryptoassets
Interpretation
10Z7A (1) In this Schedule—
“cryptoasset” means a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically;
“crypto wallet” means—
(a) software,
(b) hardware,
(c) a physical item, or
(d) any combination of the things mentioned in paragraphs (a) to (c),
which is used to store the cryptographic private key that allows cryptoassets to be accessed.
“terrorist cryptoasset” means a cryptoasset which—
(a) is within subsection (1)(a) or (b) of section 1, or
(b) is earmarked as terrorist property.
(2) The Secretary of State may by regulations made by statutory instrument amend the definitions of “cryptoasset” and “crypto wallet” in sub-paragraph (1).
(3) Regulations under sub-paragraph (2)—
(a) may make different provision for different purposes;
(b) may make consequential, supplementary, incidental, transitional, transitory or saving provision.
(4) A statutory instrument containing regulations under sub-paragraph (2) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(5) In this Part—
“cryptoasset-related item” means an item of property that is, or that contains or gives access to information that is, likely to assist in the seizure under this Part of terrorist cryptoassets;
“senior officer” means—
(a) a senior police officer;
(b) an officer of Revenue and Customs of a rank designated by the Commissioners for His Majesty’s Revenue and Customs as equivalent to that of a senior police officer;
(c) an immigration officer of a rank designated by the Secretary of State as equivalent to that of a senior police officer;
“senior police officer” means a police officer of at least the rank of superintendent.
Seizure of cryptoasset-related items
10Z7AA (1) An authorised officer may seize any item of property if the authorised officer has reasonable grounds for suspecting that the item is a cryptoasset-related item.
(2) If an authorised officer is lawfully on any premises, the officer may, for the purpose of—
(a) determining whether any property is a cryptoasset-related item, or
(b) enabling or facilitating the seizure under this Part of any terrorist cryptoasset,
require any information which is stored in any electronic form and accessible from the premises to be produced in a form in which it can be taken away and in which it is visible and legible, or from which it can readily be produced in a visible and legible form.
(3) But sub-paragraph (2) does not authorise an authorised officer to require a person to produce privileged information.
(4) In this paragraph “privileged information” means information which a person would be entitled to refuse to provide—
(a) in England and Wales and Northern Ireland, on grounds of legal professional privilege in proceedings in the High Court;
(b) in Scotland, on grounds of confidentiality of communications in proceedings in the Court of Session.
(5) Where an authorised officer has seized a cryptoasset-related item under sub-paragraph (1), the officer may use any information obtained from the item for the purpose of—
(a) identifying or gaining access to a crypto wallet, and
(b) by doing so, enabling or facilitating the seizure under this Part of any cryptoassets.
Initial detention of cryptoasset-related items
10Z7AB (1) Property seized under paragraph 10Z7AA may be detained for an initial period of 48 hours.
(2) Sub-paragraph (1) authorises the detention of property only for so long as an authorised officer continues to have reasonable grounds for suspicion in relation to that property as described in paragraph 10Z7AA(1).
(3) In calculating a period of 48 hours for the purposes of this paragraph, no account is to be taken of—
(a) any Saturday or Sunday,
(b) Christmas Day,
(c) Good Friday,
(d) any day that is a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom within which the property is seized, or
(e) any day prescribed by virtue of section 8(2) of the Criminal Procedure (Scotland) Act 1995 as a court holiday in a sheriff court in the sheriff court district within which the property is seized.
Further detention of cryptoasset-related items
10Z7AC (1) The period for which property seized under paragraph 10Z7AA may be detained may be extended by an order made—
(a) in England and Wales or Northern Ireland, by a magistrates’ court;
(b) in Scotland, by the sheriff.
(2) An order under sub-paragraph (1) may not authorise the detention of any property—
(a) beyond the end of the period of 6 months beginning with the date of the order, and
(b) in the case of any further order under this paragraph, beyond the end of the period of 2 years beginning with the date of the first order; but this is subject to sub-paragraph (4).
(3) A justice of the peace may also exercise the power of a magistrates’ court to make the first order under sub-paragraph (1).
(4) The court or sheriff may make an order for the period of 2 years in sub-paragraph (2)(b) to be extended to a period of up to 3 years beginning with the date of the first order.
(5) An application to a magistrates’ court, a justice of the peace or the sheriff to make the first order under sub-paragraph (1) extending a particular period of detention—
(a) may be made and heard without notice of the application or hearing having been given to any of the persons affected by the application or to the legal representatives of such a person, and
(b) may be heard and determined in private in the absence of persons so affected and of their legal representatives.
(6) An application for an order under sub-paragraph (1) or (4) may be made—
(a) in relation to England and Wales and Northern Ireland, by the Commissioners for His Majesty’s Revenue and Customs or an authorised officer;
(b) in relation to Scotland, by a procurator fiscal.
(7) The court, sheriff or justice may make an order under sub-paragraph (1) if satisfied, in relation to the item of property to be further detained, that—
(a) there are reasonable grounds for suspecting that it is a cryptoasset-related item, and
(b) its continuing detention is justified.
(8) The court or sheriff may make an order under sub-paragraph (4) if satisfied that a request for assistance is outstanding in relation to the item of property to be further detained.
(9) A “request for assistance” in sub-paragraph (8) means a request for assistance in obtaining evidence (including information in any form or article) in connection with the property to be further detained, made —
(a) by a judicial authority in the United Kingdom under section 7 of the Crime (International Co-operation) Act 2003, or
(b) by an authorised officer, to an authority exercising equivalent functions in a foreign country.
(10) An order under sub-paragraph (1) must provide for notice to be given to persons affected by the order.
Seizure of cryptoassets
10Z7AD (1) An authorised officer may seize cryptoassets if the authorised officer has reasonable grounds for suspecting that the cryptoassets are terrorist cryptoassets.
(2) The circumstances in which a cryptoasset is “seized” for the purposes of sub-paragraph (1) include circumstances in which it is transferred into a crypto wallet controlled by the authorised officer.
Prior authorisation for detention of cryptoassets
10Z7AE (1) Where an order is made under paragraph 10Z7AC in respect of a cryptoasset-related item, the court, sheriff or justice making the order may, at the same time, make an order to authorise the detention of any cryptoassets that may be seized as a result of information obtained from that item.
(2) An application for an order under this paragraph may be made, by a person mentioned in paragraph 10Z7AC(6), at the same time as an application for an order under paragraph 10Z7AC is made by that person.
(3) The court, sheriff or justice may make an order under this paragraph if satisfied that there are reasonable grounds for suspecting that the cryptoassets that may be seized are terrorist cryptoassets.
(4) An order under this paragraph authorises detention of the cryptoassets for the same period of time as the order under paragraph 10Z7AC authorises detention in respect of the cryptoasset-related item to which those cryptoassets relate.
Initial detention of cryptoassets
10Z7AF (1) Cryptoassets seized under paragraph 10Z7AD may be detained for an initial period of 48 hours.
(2) Sub-paragraph (1) authorises the detention of cryptoassets only for so long as an authorised officer continues to have reasonable grounds for suspicion in relation to those cryptoassets as described in paragraph 10Z7AD(1).
(3) In calculating a period of 48 hours for the purposes of this paragraph, no account is to be taken of—
(a) any Saturday or Sunday,
(b) Christmas Day,
(c) Good Friday,
(d) any day that is a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom within which the property is seized, or
(e) any day prescribed by virtue of section 8(2) of the Criminal Procedure (Scotland) Act 1995 as a court holiday in a sheriff court in the sheriff court district within which the property is seized.
(4) This paragraph is subject to paragraph 10Z7AE.
Further detention of cryptoassets
10Z7AG (1) The period for which cryptoassets seized under paragraph 10Z7AD may be detained may be extended by an order made—
(a) in England and Wales or Northern Ireland, by a magistrates’ court;
(b) in Scotland, by the sheriff.
(2) An order under sub-paragraph (1) may not authorise the detention of any cryptoassets—
(a) beyond the end of the period of 6 months beginning with the date of the order, and
(b) in the case of any further order under this paragraph, beyond the end of the period of 2 years beginning with the date of the first order; but this is subject to sub-paragraph (4).
(3) A justice of the peace may also exercise the power of a magistrates’ court to make the first order under sub-paragraph (1).
(4) The court or sheriff may make an order for the period of 2 years in sub-paragraph (2)(b) to be extended to a period of up to 3 years beginning with the date of the first order.
(5) An application to a magistrates’ court, a justice of the peace or the sheriff to make the first order under sub-paragraph (1) extending a particular period of detention—
(a) may be made and heard without notice of the application or hearing having been given to any of the persons affected by the application or to the legal representatives of such a person, and
(b) may be heard and determined in private in the absence of persons so affected and of their legal representatives.
(6) An application for an order under sub-paragraph (1) or (4) may be made—
(a) in relation to England and Wales and Northern Ireland, by the Commissioners for His Majesty’s Revenue and Customs or an authorised officer;
(b) in relation to Scotland, by a procurator fiscal.
(7) The court, sheriff or justice may make an order under sub-paragraph (1) if satisfied, in relation to the cryptoassets to be further detained, that condition 1, condition 2 or condition 3 is met.
(8) Condition 1 is that there are reasonable grounds for suspecting that the cryptoassets are intended to be used for the purposes of terrorism and that either—
(a) their continued detention is justified while their intended use is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cryptoassets are connected, or
(b) proceedings against any person for an offence with which the cryptoassets are connected have been started and have not been concluded.
(9) Condition 2 is that there are reasonable grounds for suspecting that the cryptoassets consist of resources of an organisation which is a proscribed organisation and that either—
(a) their continued detention is justified while investigation is made into whether or not they consist of such resources or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cryptoassets are connected, or
(b) proceedings against any person for an offence with which the cryptoassets are connected have been started and have not been concluded.
(10) Condition 3 is that there are reasonable grounds for suspecting that the cryptoassets are property earmarked as terrorist property and that either—
(a) their continued detention is justified while their derivation is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cryptoassets are connected, or
(b) proceedings against any person for an offence with which the cryptoassets are connected have been started and have not been concluded.
(11) The court or sheriff may make an order under sub-paragraph (4) if satisfied that a request for assistance is outstanding in relation to the cryptoassets to be further detained.
(12) A “request for assistance” in sub-paragraph (11) means a request for assistance in obtaining evidence (including information in any form or article) in connection with the property to be further detained, made —
(a) by a judicial authority in the United Kingdom under section 7 of the Crime (International Co-operation) Act 2003, or
(b) by an authorised officer, to an authority exercising equivalent functions in a foreign country.
(13) An order under sub-paragraph (1) must provide for notice to be given to persons affected by the order.
Safekeeping of cryptoasset-related items and cryptoassets
10Z7AH (1) An authorised officer must arrange for any item of property seized under paragraph 10Z7AA to be safely stored throughout the period during which it is detained under this Part.
(2) An authorised officer must arrange for any cryptoassets seized under paragraph 10Z7AD to be safely stored throughout the period during which they are detained under this Part.
Release of cryptoasset-related items and cryptoassets
10Z7AI (1) This paragraph applies while any cryptoasset or other item of property is detained under this Part.
(2) A magistrates’ court or (in Scotland) the sheriff may, subject to sub-paragraph (9), direct the release of the whole or any part of the property if the following condition is met.
(3) The condition is that the court or sheriff is satisfied, on an application by the person from whom the property was seized, that the conditions for the detention of the property in this Part are no longer met in relation to the property to be released.
(4) A person within sub-paragraph (5) may, subject to sub-paragraph (9) and after notifying the magistrates’ court, sheriff or justice under whose order property is being detained, release the whole or any part of the property if satisfied that the detention of the property to be released is no longer justified.
(5) The following persons are within this sub-paragraph—
(a) in relation to England and Wales and Northern Ireland, an authorised officer;
(b) in relation to Scotland, a procurator fiscal.
(6) If any cryptoasset-related item which has been released is not claimed within the period of a year beginning with the date on which it was released, an authorised officer may—
(a) retain the item and deal with it as they see fit,
(b) dispose of the item, or
(c) destroy the item.
(7) The powers in sub-paragraph (6) may be exercised only—
(a) where the authorised officer has taken reasonable steps to notify—
(i) the person from whom the item was seized, and
(ii) any other persons who the authorised officer has reasonable grounds to believe have an interest in the item,
that the item has been released, and
(b) with the approval of a senior officer.
(8) Any proceeds of a disposal of the item are to be paid—
(a) into the Consolidated Fund if—
(i) the item was directed to be released by a magistrates’ court, or
(ii) a magistrates’ court or justice was notified under sub-paragraph (4) of the release;
(b) into the Scottish Consolidated Fund if—
(i) the item was directed to be released by the sheriff, or
(ii) the sheriff was notified under sub-paragraph (4) of the release.
(9) If (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the property is connected, the property is not to be released under this paragraph (and so is to continue to be detained) until the proceedings are concluded.
Part 4BB
Terrorist cryptoassets: crypto wallet freezing orders
Interpretation
10Z7B (1) In this Part—
(a) “cryptoasset exchange provider” means a firm or sole practitioner who by way of business provides one or more of the following services, including where the firm or sole practitioner does so as creator or issuer of any of the cryptoassets involved—
(i) exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets,
(ii) exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
(iii) operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets;
(b) “custodian wallet provider” means a firm or sole practitioner who by way of business provides services to safeguard, or to safeguard and administer—
(i) cryptoassets on behalf of its customers, or
(ii) private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets;
(c) “cryptoasset service provider” includes cryptoasset exchange provider and custodian wallet provider.
(2) In the definition of “cryptoasset exchange provider” in sub-paragraph (1)—
(a) “cryptoasset” includes a right to, or interest in, a cryptoasset;
(b) “money” means—
(i) money in sterling,
(ii) money in any other currency, or
(iii) money in any other medium of exchange,
but does not include a cryptoasset.
(3) The Secretary of State may by regulations made by statutory instrument amend the definitions in sub-paragraphs (1) and (2).
(4) Regulations under sub-paragraph (3)—
(a) may make different provision for different purposes;
(b) may make consequential, supplementary, incidental, transitional, transitory or saving provision.
(5) A statutory instrument containing regulations under sub-paragraph (3) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(6) For the purposes of this Part—
(a) a crypto wallet freezing order is an order that, subject to any exclusions (see paragraph 10Z7BD), prohibits each person by or for whom the crypto wallet to which the order applies is administered from—
(i) making withdrawals or payments from the crypto wallet, or
(ii) using the crypto wallet in any other way;
(b) a crypto wallet is administered by or for a person if the person is the person to whom services are being provided by a cryptoasset service provider in relation to that crypto wallet.
(7) In this Part—
“enforcement officer” means—
(a) a constable, or
(b) a counter-terrorism financial investigator;
“relevant court” means—
(a) in England and Wales and Northern Ireland, a magistrates’ court, and
(b) in Scotland, the sheriff;
“senior officer” means a police officer of at least the rank of superintendent;
“UK-connected cryptoasset service provider” means a cryptoasset service provider which—
(a) is acting in the course of business carried on by it in the United Kingdom,
(b) has terms and conditions with the persons to whom it provides services which provide for a legal dispute to be litigated in the courts of a part of the United Kingdom,
(c) holds, in the United Kingdom, any data relating to the persons to whom it provides services, or
(d) meets the condition in sub-paragraph (8).
(8) The condition in this sub-paragraph is that—
(a) the cryptoasset service provider has its registered office, or if it does not have one, its head office in the United Kingdom, and
(b) the day-to-day management of the provider’s business is the responsibility of that office or another establishment maintained by it in the United Kingdom.
Application for crypto wallet freezing order
10Z7BA (1) This paragraph applies if an enforcement officer has reasonable grounds for suspecting that cryptoassets held in a crypto wallet administered by a UK-connected cryptoasset service provider are terrorist cryptoassets.
(2) Where this paragraph applies the enforcement officer may apply to the relevant court for a crypto wallet freezing order in relation to the crypto wallet in which the cryptoassets are held.
(3) But—
(a) an enforcement officer may not apply for a crypto wallet freezing order unless the officer is a senior officer or is authorised to do so by a senior officer, and
(b) the senior officer must consult the Treasury before making the application for the order or (as the case may be) authorising the application to be made, unless in the circumstances it is not reasonably practicable to do so.
(4) An application for a crypto wallet freezing order may be made without notice if the circumstances of the case are such that notice of the application would prejudice the taking of any steps under this Schedule to forfeit cryptoassets that are terrorist cryptoassets.
(5) An application for a crypto wallet freezing order under this paragraph may be combined with an application for an account freezing order under paragraph 10Q where a single entity—
(a) is both a relevant financial institution for the purposes of paragraph 10Q and a cryptoasset service provider for the purposes of this Part, and
(b) operates or administers, for the same person, both an account holding money and a crypto wallet.
Making of crypto wallet freezing order
10Z7BB (1) This paragraph applies where an application for a crypto wallet freezing order is made under paragraph 10Z7BA in relation to a crypto wallet.
(2) The relevant court may make the order if satisfied that there are reasonable grounds for suspecting that some or all of the cryptoassets held in the crypto wallet are terrorist cryptoassets.
(3) A crypto wallet freezing order ceases to have effect at the end of the period specified in the order (which may be varied under paragraph 10Z7BC) unless it ceases to have effect at an earlier or later time in accordance with this Part or Part 4BC or 4BD.
(4) The period specified by the relevant court for the purposes of sub-paragraph (3) (whether when the order is first made or on a variation under paragraph 10Z7BC) may not exceed the period of 2 years, beginning with the day on which the crypto wallet freezing order is (or was) made; but this is subject to sub-paragraph (5).
(5) The relevant court may make an order for the period of 2 years in sub-paragraph (4) to be extended to a period of up to 3 years beginning with the day on which the crypto wallet freezing order is (or was) made.
(6) The relevant court may make an order under sub-paragraph (5) if satisfied that a request for assistance is outstanding in relation to some or all of the cryptoassets held in the crypto wallet.
(7) A “request for assistance” in sub-paragraph (6) means a request for assistance in obtaining evidence (including information in any form or article) in connection with some or all of the cryptoassets held in the crypto wallet, made—
(a) by a judicial authority in the United Kingdom under section 7 of the Crime (International Co-operation) Act 2003, or
(b) by an enforcement officer, to an authority exercising equivalent functions in a foreign country.
(8) A crypto wallet freezing order must provide for notice to be given to persons affected by the order.
Variation and setting aside of crypto wallet freezing order
10Z7BC (1) The relevant court may at any time vary or set aside a crypto wallet freezing order on an application made by—
(a) an enforcement officer, or
(b) any person affected by the order.
(2) But an enforcement officer may not make an application under sub-paragraph (1) unless the officer is a senior officer or is authorised to do so by a senior officer.
(3) Before varying or setting aside a crypto wallet freezing order the court must (as well as giving the parties to the proceedings an opportunity to be heard) give such an opportunity to any person who may be affected by its decision.
(4) In relation to Scotland, the references in this paragraph to setting aside an order are to be read as references to recalling it.
Exclusions
10Z7BD (1) The power to vary a crypto wallet freezing order includes (amongst other things) power to make exclusions from the prohibition on making withdrawals or payments from the crypto wallet to which the order applies.
(2) Exclusions from the prohibition may also be made when the order is made.
(3) An exclusion may (amongst other things) make provision for the purpose of enabling a person by or for whom the crypto wallet is administered—
(a) to meet the person’s reasonable living expenses, or
(b) to carry on any trade, business, profession or occupation.
(4) An exclusion may be made subject to conditions.
(5) Where a magistrates’ court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that the person has incurred, or may incur, in respect of proceedings under this Schedule, it must ensure that the exclusion—
(a) is limited to reasonable legal expenses that the person has reasonably incurred or that the person reasonably incurs,
(b) specifies the total amount that may be released for legal expenses in pursuance of the exclusion, and
(c) is made subject to the same conditions as would be the required conditions (see section 286A of the Proceeds of Crime Act 2002) if the order had been made under section 245A of that Act (in addition to any conditions imposed under sub-paragraph (4)).
(6) A magistrates’ court, in deciding whether to make an exclusion for the purpose of enabling a person to meet legal expenses in respect of proceedings under this Schedule—
(a) must have regard to the desirability of the person being represented in any proceedings under this Schedule in which the person is a participant, and
(b) must disregard the possibility that legal representation of the person in any such proceedings might, were an exclusion not made—
(i) be made available under arrangements made for the purposes of Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, or
(ii) be funded by the Department of Justice in Northern Ireland.
(7) The sheriff’s power to make exclusions may not be exercised for the purpose of enabling any person to meet any legal expenses in respect of proceedings under this Schedule.
(8) The power to make exclusions must, subject to sub-paragraph (6), be exercised with a view to ensuring, so far as practicable, that there is not undue prejudice to the taking of any steps under this Schedule to forfeit cryptoassets that are terrorist cryptoassets.
Restriction on proceedings and remedies
10Z7BE (1) If a court in which proceedings are pending in respect of a crypto wallet administered by a UK-connected cryptoasset service provider is satisfied that a crypto wallet freezing order has been applied for or made in respect of the crypto wallet, it may either stay the proceedings or allow them to continue on any terms it thinks fit.
(2) Before exercising the power conferred by sub-paragraph (1), the court must (as well as giving the parties to any of the proceedings concerned an opportunity to be heard) give such an opportunity to any person who may be affected by the court’s decision.
(3) In relation to Scotland, the reference in sub-paragraph (1) to staying the proceedings is to be read as a reference to sisting the proceedings.
Part 4BC
Forfeiture of terrorist cryptoassets
Interpretation
10Z7C (1) In this Part—
“cryptoasset service provider” has the same meaning as in Part 4BB (see paragraph 10Z7B(1));
“crypto wallet freezing order” has the same meaning as in Part 4BB (see paragraph 10Z7B(6));
“senior officer” means—
(a) a senior police officer;
(b) an officer of Revenue and Customs of a rank designated by the Commissioners for His Majesty’s Revenue and Customs as equivalent to that of a senior police officer;
(c) an immigration officer of a rank designated by the Secretary of State as equivalent to that of a senior police officer;
“senior police officer” means a police officer of at least the rank of superintendent.
(2) Paragraph 10Z7B(6)(b) (administration of crypto wallets) applies in relation to this Part as it applies in relation to Part 4BB.
Forfeiture
10Z7CA (1) This paragraph applies—
(a) while any cryptoassets are detained in pursuance of an order under paragraph 10Z7AE or 10Z7AG, or
(b) while a crypto wallet freezing order made under paragraph 10Z7BB has effect.
(2) An application for the forfeiture of some or all of the cryptoassets that are detained or held in the crypto wallet that is subject to the crypto wallet freezing order may be made—
(a) to a magistrates’ court by the Commissioners for His Majesty’s Revenue and Customs or an authorised officer, or
(b) to the sheriff by the Scottish Ministers.
(3) The court or sheriff may order the forfeiture of some or all of the cryptoassets if satisfied that the cryptoassets are terrorist cryptoassets.
(4) An order under sub-paragraph (3) made by a magistrates’ court may provide for payment under paragraph 10Z7CJ of reasonable legal expenses that a person has reasonably incurred, or may reasonably incur, in respect of—
(a) the proceedings in which the order is made, or
(b) any related proceedings under this Part.
(5) A sum in respect of a relevant item of expenditure is not payable under paragraph 10Z7CJ in pursuance of provision under sub-paragraph (4) unless—
(a) the person who applied for the order under sub-paragraph (3) agrees to its payment, or
(b) the court has assessed the amount allowed in respect of that item and the sum is paid in respect of the assessed amount.
(6) For the purposes of sub-paragraph (5)—
(a) a “relevant item of expenditure” is an item of expenditure to which regulations under section 286B of the Proceeds of Crime Act 2002 would apply if the order under sub-paragraph (3) had instead been a recovery order made under section 266 of that Act;
(b) an amount is “allowed” in respect of a relevant item of expenditure if it would have been allowed by those regulations;
(c) if the person who applied for the order under sub-paragraph (3) was an authorised officer, that person may not agree to the payment of a sum unless the person is a senior officer or is authorised to do so by a senior officer.
(7) Sub-paragraph (3) ceases to apply on the transfer of an application made under this paragraph in accordance with paragraph 10Z7CE.
Forfeiture: supplementary
10Z7CB (1) Sub-paragraph (2) applies where an application is made under paragraph 10Z7CA for the forfeiture of any cryptoassets detained in pursuance of an order under paragraph 10Z7AE or 10Z7AG.
(2) The cryptoassets are to continue to be detained in pursuance of the order (and may not be released under any power conferred by this Schedule) until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.
This is subject to Part 4BD (conversion to money)
(3) Where an application is made under paragraph 10Z7CA in relation to cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order—
(a) sub-paragraphs (4) and (5) apply, and
(b) the crypto wallet freezing order is to continue to have effect until the time referred to in sub-paragraph (4)(b) or (5).
(4) Where the cryptoassets are ordered to be forfeited under paragraph 10Z7CA(3) or 10Z7CE(3)—
(a) the cryptoasset service provider that administers the crypto wallet must transfer the cryptoassets into a crypto wallet nominated by an authorised officer, and
(b) immediately after the transfer has been made, the freezing order ceases to have effect.
(5) Where the application is determined or otherwise disposed of other than by the making of an order under paragraph 10Z7CA(3) or 10Z7CE(3), the crypto wallet freezing order ceases to have effect immediately after that determination or other disposal.
(6) Sub-paragraphs (4)(b) and (5) are subject to paragraph 10Z7CF and Part 4BD.
(7) The Secretary of State may by regulations made by statutory instrument amend this paragraph to make provision about the forfeiture of cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order.
(8) Regulations under sub-paragraph (7) may in particular make provision about—
(a) the process for the forfeiture of cryptoassets;
(b) the realisation of forfeited cryptoassets;
(c) the application of the proceeds of such realisation.
(9) Regulations under sub-paragraph (7) may—
(a) make different provision for different purposes;
(b) make consequential, supplementary, incidental, transitional, transitory or saving provision, including provision which makes consequential amendments to this Part.
(10) A statutory instrument containing regulations under sub-paragraph (7) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
Associated and joint property
10Z7CC (1) Paragraphs 10Z7CD and 10Z7CE apply if—
(a) an application is made under paragraph 10Z7CA in respect of cryptoassets,
(b) the court or sheriff is satisfied that some or all of the cryptoassets are terrorist cryptoassets, and
(c) there exists property that is associated with the cryptoassets in relation to which the court or sheriff is satisfied as mentioned in paragraph (b).
(2) Paragraphs 10Z7CD and 10Z7CE also apply in England and Wales and Northern Ireland if—
(a) an application is made under paragraph 10Z7CA in respect of cryptoassets,
(b) the court is satisfied that some or all of the cryptoassets are earmarked as terrorist property, and
(c) the cryptoassets in relation to which the court is satisfied as mentioned in paragraph (b) belong to joint tenants and one of the tenants is an excepted joint owner.
(3) In this paragraph and paragraphs 10Z7CD and 10Z7CE, “associated property” means property of any of the following descriptions that is not itself the forfeitable property—
(a) any interest in the forfeitable property;
(b) any other interest in the property in which the forfeitable property subsists;
(c) if the forfeitable property is part of a larger property, but not a separate part, the remainder of that property.
References to property being associated with forfeitable property are to be read accordingly.
(4) In this paragraph and paragraphs 10Z7CD and 10Z7CE, the “forfeitable property” means the cryptoassets in relation to which the court or sheriff is satisfied as mentioned in sub-paragraph (1)(b) or (2)(b) (as the case may be).
(5) For the purposes of this paragraph and paragraphs 10Z7CD and 10Z7CE—
(a) an excepted joint owner is a joint tenant who obtained the property in circumstances in which it would not (as against them) be earmarked, and
(b) references to the excepted joint owner’s share of property are to so much of the property as would have been theirs if the joint tenancy had been severed.
Agreements about associated and joint property
10Z7CD (1) Where—
(a) this paragraph applies, and
(b) the person who applied for the order under paragraph 10Z7CA (on the one hand) and the person who holds the associated property or who is the excepted joint owner (on the other hand) agree,
the magistrates’ court or sheriff may, instead of making an order under paragraph 10Z7CA(3), make an order requiring the person who holds the associated property or who is the excepted joint owner to make a payment to a person identified in the order.
(2) The amount of the payment is (subject to sub-paragraph (3)) to be the amount which the persons referred to in sub-paragraph (1)(b) agree represents—
(a) in a case where this paragraph applies by virtue of paragraph 10Z7CC(1), the value of the forfeitable property;
(b) in a case where this paragraph applies by virtue of paragraph 10Z7CC(2), the value of the forfeitable property less the value of the excepted joint owner’s share.
(3) The amount of the payment may be reduced if the person who applied for the order under paragraph 10Z7CA agrees that the other party to the agreement has suffered loss as a result of—
(a) the seizure of the forfeitable property under paragraph 10Z7AD and its subsequent detention, or
(b) the making of a crypto wallet freezing order under paragraph 10Z7BB.
(4) The reduction that is permissible by virtue of sub-paragraph (3) is such amount as the parties to the agreement agree is reasonable, having regard to the loss suffered and any other relevant circumstances.
(5) An order under sub-paragraph (1) may, so far as required for giving effect to the agreement, include provision for vesting, creating or extinguishing any interest in property.
(6) An order under sub-paragraph (1) made by a magistrates’ court may provide for payment under sub-paragraph (11) of reasonable legal expenses that a person has reasonably incurred, or may reasonably incur, in respect of—
(a) the proceedings in which the order is made, or
(b) any related proceedings under this Part.
(7) A sum in respect of a relevant item of expenditure is not payable under sub-paragraph (11) in pursuance of provision under sub-paragraph (6) unless—
(a) the person who applied for the order under paragraph 10Z7CA agrees to its payment, or
(b) the court has assessed the amount allowed in respect of that item and the sum is paid in respect of the assessed amount.
(8) For the purposes of sub-paragraph (7)—
(a) a “relevant item of expenditure” is an item of expenditure to which regulations under section 286B of the Proceeds of Crime Act 2002 would apply if the order under sub-paragraph (1) had instead been a recovery order made under section 266 of that Act;
(b) an amount is “allowed” in respect of a relevant item of expenditure if it would have been allowed by those regulations.
(9) If there is more than one item of associated property or more than one excepted joint owner, the total amount to be paid under sub-paragraph (1), and the part of that amount which is to be provided by each person who holds any such associated property or who is an excepted joint owner, is to be agreed between both (or all) of them and the person who applied for the order under paragraph 10Z7CA.
(10) If the person who applied for the order under paragraph 10Z7CA was an authorised officer, that person may enter into an agreement for the purposes of any provision of this paragraph only if the person is a senior officer or is authorised to do so by a senior officer.
(11) An amount received under an order under sub-paragraph (1) must be applied as follows—
(a) first, it must be applied in making any payment of legal expenses which, after giving effect to sub-paragraph (7), are payable under this sub-paragraph in pursuance of provision under sub-paragraph (6);
(b) second, it must be applied in payment or reimbursement of any reasonable costs incurred in storing or insuring the forfeitable property and any associated property whilst detained under this Schedule;
(c) third, it must be paid—
(i) if the order was made by a magistrates’ court, into the Consolidated Fund;
(ii) if the order was made by the sheriff, into the Scottish Consolidated Fund.
Associated and joint property: default of agreement
10Z7CE (1) Where this paragraph applies and there is no agreement under paragraph 10Z7CD, the magistrates’ court or sheriff may transfer the application made under paragraph 10Z7CA to the appropriate court.
(2) The “appropriate court” is—
(a) the High Court, where the application under paragraph 10Z7CA was made to a magistrates’ court;
(b) the Court of Session, where the application under paragraph 10Z7CA was made to the sheriff.
(3) Where (under sub-paragraph (1)) an application made under paragraph 10Z7CA is transferred to the appropriate court, the appropriate court may order the forfeiture of the property to which the application relates, or any part of that property, if satisfied that what is to be forfeited—
(a) is within subsection (1)(a) or (b) of section 1, or
(b) is property earmarked as terrorist property.
(4) An order under sub-paragraph (3) made by the High Court may include provision of the type that may be included in an order under paragraph 10Z7CA(3) made by a magistrates’ court by virtue of paragraph 10Z7CA(4).
(5) If provision is included in an order of the High Court by virtue of sub-paragraph (4) of this paragraph, paragraph 10Z7CA(5) and (6) apply with the necessary modifications.
(6) The appropriate court may, as well as making an order under sub-paragraph (3), make an order—
(a) providing for the forfeiture of the associated property or (as the case may be) for the excepted joint owner‘s interest to be extinguished, or
(b) providing for the excepted joint owner‘s interest to be severed.
(7) Where (under sub-paragraph (1)) the magistrates’ court or sheriff decides not to transfer an application made under paragraph 10Z7CA to the appropriate court, the magistrates’ court or sheriff may, as well as making an order under paragraph 10Z7CA(3), make an order—
(a) providing for the forfeiture of the associated property or (as the case may be) for the excepted joint owner‘s interest to be extinguished, or
(b) providing for the excepted joint owner‘s interest to be severed.
(8) An order under sub-paragraph (6) or (7) may be made only if the appropriate court, the magistrates’ court or the sheriff (as the case may be) thinks it just and equitable to do so.
(9) An order under sub-paragraph (6) or (7) must provide for the payment of an amount to the person who holds the associated property or who is an excepted joint owner.
(10) In making an order under sub-paragraph (6) or (7), and including provision in it by virtue of sub-paragraph (9), the appropriate court, the magistrates’ court or the sheriff (as the case may be) must have regard to—
(a) the rights of any person who holds the associated property or who is an excepted joint owner and the value to that person of that property or (as the case may be) of that person’s share (including any value that cannot be assessed in terms of money), and
(b) the interest of the person who applied for the order under paragraph 10Z7CA in realising the value of the forfeitable property.
(11) If the appropriate court, the magistrates’ court or the sheriff (as the case may be) is satisfied that—
(a) the person who holds the associated property or who is an excepted joint owner has suffered loss as a result of—
(i) the seizure of the forfeitable property under paragraph 10Z7AD and its subsequent detention, or
(ii) the making of the crypto wallet freezing order under paragraph 10Z7BB, and
(b) the circumstances are exceptional,
an order under sub-paragraph (6) or (7) may require the payment of compensation to that person.
(12) The amount of compensation to be paid by virtue of sub-paragraph (11) is the amount the appropriate court, the magistrates’ court or the sheriff (as the case may be) thinks reasonable, having regard to the loss suffered and any other relevant circumstances.
(13) Compensation to be paid by virtue of sub-paragraph (11) is to be paid in the same way that compensation is to be paid under paragraph 10Z7CM.
Continuation of crypto wallet freezing order pending appeal
10Z7CF (1) This paragraph applies where, on an application under paragraph 10Z7CA in relation to a crypto wallet to which a crypto wallet freezing order applies—
(a) the magistrates’ court or sheriff decides—
(i) to make an order under paragraph 10Z7CA(3) in relation to some but not all of the cryptoassets to which the application related, or
(ii) not to make an order under paragraph 10Z7CA(3), or
(b) if the application is transferred in accordance with paragraph 10Z7CE(1), the High Court or Court of Session decides—
(i) to make an order under paragraph 10Z7CE(3) in relation to some but not all of the cryptoassets to which the application related, or
(ii) not to make an order under paragraph 10Z7CE(3).
(2) The person who made the application under paragraph 10Z7CA may apply without notice to the court or sheriff that made the decision referred to in sub-paragraph (1) for an order that the crypto wallet freezing order is to continue to have effect.
(3) Where the court or sheriff makes an order under sub-paragraph (2) the crypto wallet freezing order is to continue to have effect until—
(a) the end of the period of 48 hours starting with the making of the order under sub-paragraph (2), or
(b) if within that period of 48 hours an appeal is brought (whether under paragraph 10Z7CG or otherwise) against the decision referred to in sub-paragraph (1), the time when the appeal is determined or otherwise disposed of.
(4) Sub-paragraph (3) of paragraph 10Z7AF applies for the purposes of sub-paragraph (3) as it applies for the purposes of that paragraph.
Paragraphs 10Z7CA to 10Z7CE: appeals
10Z7CG (1) Any party to proceedings for an order for the forfeiture of cryptoassets under paragraph 10Z7CA may appeal against—
(a) the making of an order under paragraph 10Z7CA;
(b) the making of an order under paragraph 10Z7CE(7);
(c) a decision not to make an order under paragraph 10Z7CA unless the reason that no order was made is that an order was instead made under paragraph 10Z7CD;
(d) a decision not to make an order under paragraph 10Z7CE(7).
Paragraphs (c) and (d) do not apply if the application for the order under paragraph 10Z7CA was transferred in accordance with paragraph 10Z7CE(1).
(2) Where an order under paragraph 10Z7CD is made by a magistrates’ court, any party to the proceedings for the order (including any party to the proceedings under paragraph 10Z7CA that preceded the making of the order) may appeal against a decision to include, or not to include, provision in the order under paragraph 10Z7CD(6).
(3) An appeal under this paragraph lies—
(a) in relation to England and Wales, to the Crown Court;
(b) in relation to Scotland, to the Sheriff Appeal Court;
(c) in relation to Northern Ireland, to a county court.
(4) An appeal under this paragraph must be made before the end of the period of 30 days starting with the day on which the court or sheriff makes the order or decision.
(5) Sub-paragraph (4) is subject to paragraph 10Z7CH.
(6) The court hearing the appeal may make any order it thinks appropriate.
(7) If the court upholds an appeal against an order forfeiting any cryptoasset or other item of property, it may, subject to sub-paragraph (8), order the release of the whole or any part of the property.
(8) If (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the property is connected, the property is not to be released under this paragraph (and so is to continue to be detained) until the proceedings are concluded.
Extended time for appealing in certain cases where deproscription order made
10Z7CH (1) This paragraph applies where—
(a) a successful application for an order under paragraph 10Z7CA relies (wholly or partly) on the fact that an organisation is proscribed,
(b) an application under section 4 of the Terrorism Act 2000 for a deproscription order in respect of the organisation is refused by the Secretary of State,
(c) the property forfeited by the order under paragraph 10Z7CA was seized under this Schedule on or after the date of the refusal of that application,
(d) an appeal against that refusal is allowed under section 5 of the Terrorism Act 2000,
(e) a deproscription order is made accordingly, and
(f) if the order is made in reliance on section 123(5) of the Terrorism Act 2000, a resolution is passed by each House of Parliament under section 123(5)(b) of that Act.
(2) Where this paragraph applies, an appeal under paragraph 10Z7CG against the making of an order under paragraph 10Z7CA, and against the making (in addition) of any order under paragraph 10Z7CE(7), may be brought at any time before the end of the period of 30 days beginning with the date on which the deproscription order comes into force.
(3) In this paragraph a “deproscription order” means an order under section 3(3)(b) or (8) of the Terrorism Act 2000.
Realisation or destruction of forfeited cryptoassets etc
10Z7CI (1) This paragraph applies where any cryptoasset or other item of property is forfeited under this Part.
(2) An authorised officer must—
(a) realise the property, or
(b) make arrangements for its realisation.
This is subject to sub-paragraphs (3) to (5).
(3) The property is not to be realised—
(a) before the end of the period within which an appeal may be made (whether under paragraph 10Z7CG or otherwise), or
(b) if an appeal is made within that period, before the appeal is determined or otherwise disposed of.
(4) The realisation of property under sub-paragraph (2) must be carried out, so far as practicable, in the manner best calculated to maximise the amount obtained for the property.
(5) Where an authorised officer is satisfied that—
(a) it is not reasonably practicable to realise any cryptoasset, or
(b) there are reasonable grounds to believe that the realisation of any cryptoasset would be contrary to the public interest,
the authorised officer may destroy the cryptoasset.
(6) But—
(a) the authorised officer may destroy the cryptoasset only if the officer is a senior officer or is authorised to do so by a senior officer, and
(b) the cryptoasset is not to be destroyed—
(i) before the end of the period within which an appeal may be made (whether under paragraph 10Z7CG or otherwise), or
(ii) if an appeal is made within that period, before the appeal is determined or otherwise disposed of.
(7) The question of whether the realisation of the cryptoasset would be contrary to the public interest is to be determined with particular reference to how likely it is that the entry of the cryptoasset into general circulation would facilitate criminal conduct by any person.
Proceeds of realisation
10Z7CJ (1) This paragraph applies where any cryptoasset or other item of property is realised under paragraph 10Z7CI.
(2) The proceeds of the realisation must be applied as follows—
(a) first, they must be applied in making any payment required to be made by virtue of paragraph 10Z7CE(9);
(b) second, they must be applied in making any payment of legal expenses which, after giving effect to paragraph 10Z7CA(5) (including as applied by paragraph 10Z7CE(5)), are payable under this sub-paragraph in pursuance of provision under paragraph 10Z7CA(4) or, as the case may be, 10Z7CE(4);
(c) third, they must be applied in payment or reimbursement of any reasonable costs incurred in storing or insuring the property whilst detained under this Schedule and in realising the property;
(d) fourth, they must be paid—
(i) if the property was forfeited by a magistrates’ court or the High Court, into the Consolidated Fund;
(ii) if the property was forfeited by the sheriff or the Court of Session, into the Scottish Consolidated Fund.
(3) If what is realised under paragraph 10Z7CI represents part only of an item of property, the reference in sub-paragraph (2)(c) to costs incurred in storing or insuring the property is to be read as a reference to costs incurred in storing or insuring the whole of the property.
Victims etc: detained cryptoassets
10Z7CK (1) A person who claims that any cryptoassets detained under this Schedule belong to the person may apply for some or all of the cryptoassets to be released.
(2) An application under sub-paragraph (1) is to be made—
(a) in England and Wales or Northern Ireland, to a magistrates’ court;
(b) in Scotland, to the sheriff.
(3) The application may be made in the course of proceedings under paragraph 10Z7AG or 10Z7CA or at any other time.
(4) The court or sheriff may, subject to sub-paragraph (8), order the cryptoassets to which the application relates to be released to the applicant if it appears to the court or sheriff that—
(a) the applicant was deprived of the cryptoassets to which the application relates, or of property which they represent, by criminal conduct,
(b) the cryptoassets the applicant was deprived of were not, immediately before the applicant was deprived of them, property obtained by or in return for criminal conduct and nor did they then represent such property, and
(c) the cryptoassets belong to the applicant.
(5) If sub-paragraph (6) applies, the court or sheriff may, subject to sub-paragraph (8), order the cryptoassets to which the application relates to be released to the applicant or to the person from whom they were seized.
(6) This sub-paragraph applies where—
(a) the applicant is not the person from whom the cryptoassets to which the application relates were seized,
(b) it appears to the court or sheriff that those cryptoassets belong to the applicant,
(c) the court or sheriff is satisfied that the release condition is met in relation to those cryptoassets, and
(d) no objection to the making of an order under sub-paragraph (5) has been made by the person from whom those cryptoassets were seized.
(7) The release condition is met—
(a) if the conditions in Part 4BA for the detention of the cryptoassets are no longer met, or
(b) in relation to cryptoassets which are subject to an application for forfeiture under paragraph 10Z7CA, if the court or sheriff decides not to make an order under that paragraph in relation to the cryptoassets.
(8) If (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the cryptoassets are connected, the cryptoassets are not to be released under this paragraph (and so are to continue to be detained) until the proceedings are concluded.
Victims etc: crypto wallet freezing orders
10Z7CL (1) A person who claims that any cryptoassets held in a crypto wallet in respect of which a crypto wallet freezing order has been made belong to the person may apply for some or all of the cryptoassets to be released.
(2) An application under sub-paragraph (1) is to be made—
(a) in England and Wales or Northern Ireland, to a magistrates’ court;
(b) in Scotland, to the sheriff.
(3) The application may be made in the course of proceedings under paragraph 10Z7BB or 10Z7CA or at any other time.
(4) The court or sheriff may, subject to sub-paragraph (8), order the cryptoassets to which the application relates to be released to the applicant if it appears to the court or sheriff that—
(a) the applicant was deprived of the cryptoassets to which the application relates, or of property which they represent, by criminal conduct,
(b) the cryptoassets the applicant was deprived of were not, immediately before the applicant was deprived of them, property obtained by or in return for criminal conduct and nor did they then represent such property, and
(c) the cryptoassets belong to the applicant.
(5) If sub-paragraph (6) applies, the court or sheriff may, subject to sub-paragraph (8), order the cryptoassets to which the application relates to be released to the applicant.
(6) This sub-paragraph applies where—
(a) the applicant is not the person from whom the cryptoassets to which the application relates were seized,
(b) it appears to the court or sheriff that those cryptoassets belong to the applicant,
(c) the court or sheriff is satisfied that the release condition is met in relation to those cryptoassets, and
(d) no objection to the making of an order under sub-paragraph (5) has been made by the person from whom those cryptoassets were seized.
(7) The release condition is met—
(a) if the conditions for the making of the crypto wallet freezing order are no longer met in relation to the cryptoassets to which the application relates, or
(b) in relation to cryptoassets held in a crypto wallet subject to a crypto wallet freezing order which are subject to an application for forfeiture under paragraph 10Z7CA, if the court or sheriff decides not to make an order under that paragraph in relation to the cryptoassets.
(8) Cryptoassets are not to be released under this paragraph—
(a) if an application for their forfeiture under paragraph 10Z7CA is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded;
(b) if (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the cryptoassets are connected, until the proceedings are concluded.
(9) In relation to cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order, references in this paragraph to a person from whom cryptoassets were seized include a reference to a person by or for whom the crypto wallet was administered immediately before the crypto wallet freezing order was made.
Compensation
10Z7CM (1) This paragraph applies if no order is made under paragraph 10Z7CA, 10Z7CD or 10Z7CE in respect of cryptoassets detained under this Schedule or held in a crypto wallet that is subject to a crypto wallet freezing order under paragraph 10Z7BB.
(2) Where this paragraph applies, the following may make an application to the relevant court for compensation—
(a) a person to whom the cryptoassets belong or from whom they were seized;
(b) a person by or for whom a crypto wallet to which the crypto wallet freezing order applies is administered.
(3) If the relevant court is satisfied that the applicant has suffered loss as a result of the detention of the cryptoassets or the making of the crypto wallet freezing order and that the circumstances are exceptional, the relevant court may order compensation to be paid to the applicant.
(4) The amount of compensation to be paid is the amount the relevant court thinks reasonable, having regard to the loss suffered and any other relevant circumstances.
(5) If the cryptoassets were seized, or the crypto wallet freezing order was applied for, by an officer of Revenue and Customs, the compensation is to be paid by the Commissioners for His Majesty’s Revenue and Customs.
(6) If the cryptoassets were seized, or the crypto wallet freezing order was applied for, by a constable, the compensation is to be paid as follows—
(a) in the case of a constable of a police force in England and Wales, it is to be paid out of the police fund from which the expenses of the police force are met;
(b) in the case of a constable of the Police Service of Scotland, it is to be paid by the Scottish Police Authority;
(c) in the case of a police officer within the meaning of the Police (Northern Ireland) Act 2000, it is to be paid out of money provided by the Chief Constable of the Police Service of Northern Ireland.
(7) If the cryptoassets were seized, or the crypto wallet freezing order was applied for, by a counter-terrorism financial investigator, the compensation is to be paid as follows—
(a) in the case of a counter-terrorism financial investigator who was—
(i) a member of the civilian staff of a police force (including the metropolitan police force), within the meaning of Part 1 of the Police Reform and Social Responsibility Act 2011, or
(ii) a member of staff of the City of London police force,
it is to be paid out of the police fund from which the expenses of the police force are met;
(b) in the case of a counter-terrorism financial investigator who was a member of staff of the Police Service of Northern Ireland, it is to be paid out of money provided by the Chief Constable of the Police Service of Northern Ireland.
(8) If the cryptoassets were seized, or the crypto wallet freezing order was applied for, by an immigration officer, the compensation is to be paid by the Secretary of State.
(9) If an order under paragraph 10Z7BB, 10Z7CA, 10Z7CD or 10Z7CE is made in respect of some of the cryptoassets detained or held, this paragraph has effect in relation to the remainder.
(10) This paragraph does not apply if the relevant court makes an order under paragraph 10Z7CK or 10Z7CL.
(11) In this paragraph “relevant court” means—
(a) in England and Wales and Northern Ireland, a magistrates’ court;
(b) in Scotland, the sheriff.
Part 4BD
Conversion of cryptoassets
Interpretation
10Z7D (1) In this Part—
“converted cryptoassets” is to be read in accordance with paragraphs 10Z7DC and 10Z7DD;
“crypto wallet freezing order” has the same meaning as in Part 4BB (see paragraph 10Z7B(6));
“relevant court” means—
(a) in England and Wales and Northern Ireland, a magistrates’ court;
(b) in Scotland, the sheriff;
“relevant financial institution” has the same meaning as in Part 4B (see paragraph 10Q);
“UK-connected cryptoasset service provider” has the same meaning as in Part 4BB (see paragraph 10Z7B(7)).
(2) Paragraph 10Z7B(6)(b) (administration of crypto wallets) applies in relation to this Part as it applies in relation to Part 4BB.
(3) In this Part references to the conversion of cryptoassets into money are references to the conversion of cryptoassets into—
(a) cash, or
(b) money held in an account maintained with a relevant financial institution.
(4) For the purposes of Parts 2 to 4, converted cryptoassets detained under this Part are not to be treated as cash detained under this Schedule.
Detained cryptoassets: conversion
10Z7DA (1) Sub-paragraph (2) applies while any cryptoassets are detained in pursuance of an order under paragraph 10Z7AE or 10Z7AG (including where cryptoassets are subject to forfeiture proceedings).
(2) A person within sub-paragraph (3) may apply to the relevant court for an order requiring all of the cryptoassets detained pursuant to the order to be converted into money.
(3) The following persons are within this sub-paragraph—
(a) an authorised officer;
(b) a person from whom the cryptoassets were seized.
(4) In deciding whether to make an order under this paragraph, the court must have regard to whether the cryptoassets (as a whole) are likely to suffer a significant loss in value during the period before they are released or forfeited (including the period during which an appeal against an order for forfeiture may be made).
(5) Before making an order under this paragraph the court must give an opportunity to be heard to—
(a) the parties to the proceedings, and
(b) any other person who may be affected by its decision.
(6) As soon as practicable after an order is made under this paragraph, an authorised officer must convert the cryptoassets, or arrange for the cryptoassets to be converted, into money.
(7) The conversion of cryptoassets under sub-paragraph (6) must be carried out, so far as practicable, in the manner best calculated to maximise the amount of money obtained for the cryptoassets.
(8) At the first opportunity after the cryptoassets are converted, the authorised officer must arrange for the amount of money obtained for the cryptoassets to be paid into an interest-bearing account and held there.
(9) Interest accruing on the amount is to be added to it on its forfeiture or release.
(10) Where cryptoassets are converted into money in accordance with an order made under this paragraph—
(a) the cryptoassets are no longer to be treated as being detained in pursuance of an order under paragraph 10Z7AE or 10Z7AG, and
(b) any application made under paragraph 10Z7CA(2) in relation to the cryptoassets which has not yet been determined or otherwise disposed of (including under paragraph 10Z7CD or 10Z7CE) is to be treated as if it were an application made under paragraph 10Z7DG(2) in relation to the converted cryptoassets.
(11) An order made under this paragraph must provide for notice to be given to persons affected by the order.
(12) No appeal may be made against an order made under this paragraph.
Frozen crypto wallet: conversion
10Z7DB (1) This paragraph applies while a crypto wallet freezing order under paragraph 10Z7BB has effect (including where cryptoassets held in a crypto wallet that is subject to a crypto wallet freezing order are subject to forfeiture proceedings).
(2) A person within sub-paragraph (3) may apply to the relevant court for an order requiring all of the cryptoassets held in the crypto wallet to be converted into money.
(3) The following persons are within this sub-paragraph—
(a) an authorised officer;
(b) a person by or for whom the crypto wallet is administered.
(4) In deciding whether to make an order under this paragraph, the court must have regard to whether the cryptoassets (as a whole) are likely to suffer a significant loss in value during the period before—
(a) the crypto wallet freezing order ceases to have effect, or
(b) the cryptoassets are forfeited (including the period during which an appeal against an order for forfeiture may be made).
(5) Before making an order under this paragraph the court must give an opportunity to be heard to—
(a) the parties to the proceedings, and
(b) any other person who may be affected by its decision.
(6) As soon as practicable after an order is made under this paragraph, the UK-connected cryptoasset service provider that administers the crypto wallet must convert the cryptoassets, or arrange for the cryptoassets to be converted, into money.
(7) The conversion of cryptoassets under sub-paragraph (6) must be carried out, so far as practicable, in the manner best calculated to maximise the amount of money obtained for the cryptoassets.
(8) At the first opportunity after the cryptoassets are converted, the UK-connected cryptoasset service provider must arrange for the amount of money obtained for the cryptoassets to be paid into an interest-bearing account nominated by an authorised officer and held there.
(9) But—
(a) the UK-connected cryptoasset service provider may deduct any reasonable expenses incurred by the provider in connection with the conversion of the cryptoassets, and
(b) the amount to be treated as the proceeds of the conversion of the cryptoassets is to be reduced accordingly.
(10) Interest accruing on the amount obtained for the cryptoassets is to be added to it on its forfeiture or release.
(11) Where cryptoassets are converted in accordance with an order made under this paragraph—
(a) the crypto wallet freezing order ceases to have effect,
(b) any application made under paragraph 10Z7CA(2) in relation to the cryptoassets which has not yet been determined or otherwise disposed of (including under paragraph 10Z7CD or 10Z7CE) is to be treated as if it were an application made under paragraph 10Z7DG(2) in relation to the converted cryptoassets, and
(c) any application made under paragraph 10Z7CF(2) in relation to the crypto wallet which has not yet been determined or otherwise disposed of may not be proceeded with.
(12) An order made under this paragraph must provide for notice to be given to persons affected by the order.
(13) No appeal may be made against an order made under this paragraph.
Conversion: existing forfeiture proceedings
10Z7DC (1) Where—
(a) cryptoassets are forfeited under paragraph 10Z7CA or 10Z7CE, and
(b) before the cryptoassets are realised or destroyed in accordance with paragraph 10Z7CI, an order is made under paragraph 10Z7DA requiring the cryptoassets to be converted into money,
paragraph 10Z7DJ(1) applies in relation to the converted cryptoassets as if they had been detained under paragraph 10Z7DD and forfeited under paragraph 10Z7DG (and accordingly paragraph 10Z7CI ceases to apply).
(2) Where—
(a) cryptoassets are forfeited under paragraph 10Z7CA or 10Z7CE, and
(b) before the cryptoassets are realised or destroyed in accordance with paragraph 10Z7CI, an order is made under paragraph 10Z7DB requiring the cryptoassets to be converted into money,
paragraph 10Z7DJ(2) applies in relation to the converted cryptoassets as if they had been detained under paragraph 10Z7DE and forfeited under paragraph 10Z7DG (and accordingly paragraph 10Z7CI ceases to apply).
(3) Where—
(a) an appeal may be made under paragraph 10Z7CG(1) or (2) in relation to the determination of an application under paragraph 10Z7CA(2) for the forfeiture of cryptoassets (including where paragraph 10Z7CD or 10Z7CE applies), and
(b) an order is made under paragraph 10Z7DA or 10Z7DB requiring the cryptoassets to be converted into money,
the appeal may instead be made under paragraph 10Z7DH (within the time allowed by paragraph 10Z7CG(4)) as if it were an appeal against the determination of an application under paragraph 10Z7DG.
(4) Where—
(a) an appeal is made under paragraph 10Z7CG(1) or (2) in relation to the determination of an application under paragraph 10Z7CA(2) for the forfeiture of cryptoassets (including where paragraph 10Z7CD or 10Z7CE applies), and
(b) before the appeal is determined or otherwise disposed of, an order is made under paragraph 10Z7DA or 10Z7DB requiring the cryptoassets to be converted into money,
the appeal is to be treated as if it had been made under paragraph 10Z7DH(1) in relation to the determination of an application under paragraph 10Z7DG for the forfeiture of the converted cryptoassets.
Detained cryptoassets: detention of proceeds of conversion
10Z7DD (1) This paragraph applies where cryptoassets are converted into money in accordance with an order under paragraph 10Z7DA.
(2) The proceeds of the conversion (the “converted cryptoassets”) may be detained initially until the end of the period that the cryptoassets could, immediately before the conversion, have been detained under Part 4BA (ignoring the possibility of any extension of that period).
(3) The period for which the converted cryptoassets may be detained may be extended by an order made by the relevant court.
(4) An order under sub-paragraph (3) may not authorise the detention of the converted cryptoassets beyond the end of the period of 2 years beginning with the relevant date; but this is subject to sub-paragraph (5).
(5) The relevant court may make an order for the period of 2 years in sub-paragraph (4) to be extended to a period of up to 3 years beginning with the relevant date.
(6) In sub-paragraphs (4) and (5) “the relevant date” means the date on which the first order under paragraph 10Z7AE or 10Z7AG (as the case may be) was made in relation to the cryptoassets.
(7) An application for an order under sub-paragraph (3) or (5) may be made—
(a) in relation to England and Wales and Northern Ireland, by the Commissioners for His Majesty’s Revenue and Customs or an authorised officer;
(b) in relation to Scotland, by a procurator fiscal.
(8) The relevant court may make an order under sub-paragraph (3) only if satisfied that there are reasonable grounds for suspecting that the converted cryptoassets to be further detained—
(a) are within subsection (1)(a) or (b) of section 1, or
(b) are property earmarked as terrorist property.
(9) The relevant court may make an order under sub-paragraph (5) only if satisfied that a request for assistance is outstanding in relation to the cryptoassets mentioned in sub-paragraph (1).
(10) A “request for assistance” in sub-paragraph (9) means a request for assistance in obtaining evidence (including information in any form or article) in connection with the cryptoassets, made—
(a) by a judicial authority in the United Kingdom under section 7 of the Crime (International Co-operation) Act 2003, or
(b) by an authorised officer, to an authority exercising equivalent functions in a foreign country.
Frozen crypto wallets: detention of proceeds of conversion
10Z7DE (1) This paragraph applies where cryptoassets held in a crypto wallet subject to a crypto wallet freezing order are converted into money in accordance with an order under paragraph 10Z7DB.
(2) The proceeds of the conversion (the “converted cryptoassets”) may be detained initially until the end of the period that the crypto wallet freezing order was, immediately before the conversion, due to have effect under Part 4BB (ignoring the possibility of any extension of that period).
(3) The period for which the converted cryptoassets may be detained may be extended by an order made by the relevant court.
(4) An order under sub-paragraph (3) may not authorise the detention of the converted cryptoassets beyond the end of the period of 2 years beginning with the day on which the crypto wallet freezing order was made; but this is subject to sub-paragraph (5).
(5) The relevant court may make an order for the period of 2 years in sub-paragraph (4) to be extended to a period of up to 3 years beginning with the day on which the crypto wallet freezing order was made.
(6) An application for an order under sub-paragraph (3) or (5) may be made—
(a) in relation to England and Wales and Northern Ireland, by the Commissioners for His Majesty’s Revenue and Customs or an authorised officer;
(b) in relation to Scotland, by a procurator fiscal.
(7) The relevant court may make an order under sub-paragraph (3) only if satisfied that there are reasonable grounds for suspecting that the converted cryptoassets to be further detained—
(a) are within subsection (1)(a) or (b) of section 1, or
(b) are property earmarked as terrorist property.
(8) The relevant court may make an order under sub-paragraph (5) only if satisfied that a request for assistance is outstanding in relation to the cryptoassets mentioned in sub-paragraph (1).
(9) A “request for assistance” in sub-paragraph (8) means a request for assistance in obtaining evidence (including information in any form or article) in connection with the cryptoassets, made—
(a) by a judicial authority in the United Kingdom under section 7 of the Crime (International Co-operation) Act 2003, or
(b) by an authorised officer, to an authority exercising equivalent functions in a foreign country.
Release of detained converted cryptoassets
10Z7DF (1) This paragraph applies while any converted cryptoassets are detained under paragraph 10Z7DD or 10Z7DE.
(2) The relevant court may, subject to sub-paragraph (7), direct the release of the whole or any part of the converted cryptoassets if the following condition is met.
(3) The condition is that, on an application by the relevant person, the court is not satisfied that there are reasonable grounds for suspecting that the converted cryptoassets to be released—
(a) are within subsection (1)(a) or (b) of section 1, or
(b) are property earmarked as terrorist property.
(4) In sub-paragraph (3) “the relevant person” means—
(a) in the case of converted cryptoassets detained under paragraph 10Z7DD, the person from whom the cryptoassets mentioned in sub-paragraph (1) of that paragraph were seized, and
(b) in the case of converted cryptoassets detained under paragraph 10Z7DE, any person affected by the crypto wallet freezing order mentioned in sub-paragraph (1) of that paragraph.
(5) A person within sub-paragraph (6) may, subject to sub-paragraph (7) and after notifying the magistrates’ court or sheriff under whose order converted cryptoassets are being detained, release the whole or any part of the converted cryptoassets if satisfied that the detention is no longer justified.
(6) The following persons are within this sub-paragraph—
(a) in relation to England and Wales or Northern Ireland, an authorised officer;
(b) in relation to Scotland, a procurator fiscal.
(7) Converted cryptoassets are not to be released under this paragraph (and so are to continue to be detained)—
(a) if an application for their forfeiture under paragraph 10Z7DG is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded;
(b) if (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the converted cryptoassets are connected, until the proceedings are concluded.
Forfeiture
10Z7DG (1) This paragraph applies while any converted cryptoassets are detained under paragraph 10Z7DD or 10Z7DE.
(2) An application for the forfeiture of some or all of the converted cryptoassets may be made—
(a) to a magistrates’ court by, the Commissioners for His Majesty’s Revenue and Customs or an authorised officer;
(b) to the sheriff, by the Scottish Ministers.
(3) The court or sheriff may order the forfeiture of some or all of the converted cryptoassets if satisfied that the converted cryptoassets to be forfeited—
(a) are within subsection (1)(a) or (b) of section 1, or
(b) are property earmarked as terrorist property.
(4) But in the case of property which belongs to joint tenants, one of whom is an excepted joint owner, the order may not apply to so much of it as the court thinks is attributable to the excepted joint owner’s share.
(5) Where an application for forfeiture is made under this paragraph, the converted cryptoassets are to continue to be detained under paragraph 10Z7DD or 10Z7DE (and may not be released under any power conferred by this Part) until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.
(6) For the purposes of this paragraph—
(a) an excepted joint owner is a joint tenant who obtained the property in circumstances in which it would not (as against them) be earmarked, and
(b) references to the excepted joint owner’s share of property are to so much of the property as would have been theirs if the joint tenancy had been severed.
Forfeiture: appeals
10Z7DH (1) Any party to proceedings for an order for the forfeiture of converted cryptoassets under paragraph 10Z7DG who is aggrieved by an order under that paragraph or by the decision of the court not to make such an order may appeal—
(a) from an order or decision of a magistrates’ court in England and Wales, to the Crown Court;
(b) from an order or decision of the sheriff, to the Sheriff Appeal Court;
(c) from an order or decision of a magistrates’ court in Northern Ireland, to a county court.
(2) An appeal under sub-paragraph (1) must be made before the end of the period of 30 days starting with the day on which the court makes the order or decision.
(3) The court hearing the appeal may make any order it thinks appropriate.
(4) If the court upholds an appeal against an order forfeiting the converted cryptoassets, it may, subject to sub-paragraph (5), order the release of some or all of the converted cryptoassets.
(5) If (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the converted cryptoassets are connected, the converted cryptoassets are not to be released under this paragraph (and so are to continue to be detained) until the proceedings are concluded.
Extended time for appealing in certain cases where deproscription order made
10Z7DI (1) This paragraph applies where—
(a) a successful application for an order under paragraph 10Z7DG relies (wholly or partly) on the fact that an organisation is proscribed,
(b) an application under section 4 of the Terrorism Act 2000 for a deproscription order in respect of the organisation is refused by the Secretary of State,
(c) the converted cryptoassets forfeited by the order under paragraph 10Z7DG were converted from cryptoassets which were seized under this Schedule on or after the date of the refusal of that application,
(d) an appeal against that refusal is allowed under section 5 of the Terrorism Act 2000,
(e) a deproscription order is made accordingly, and
(f) if the order is made in reliance on section 123(5) of the Terrorism Act 2000, a resolution is passed by each House of Parliament under section 123(5)(b) of that Act.
(2) Where this paragraph applies, an appeal under paragraph 10Z7DH against the making of an order under paragraph 10Z7DG may be brought at any time before the end of the period of 30 days beginning with the date on which the deproscription order comes into force.
(3) In this paragraph a “deproscription order” means an order under section 3(3)(b) or (8) of the Terrorism Act 2000.
Application of forfeited converted cryptoassets
10Z7DJ (1) Converted cryptoassets detained under paragraph 10Z7DD and forfeited under paragraph 10Z7DG, and any accrued interest on them, must be applied as follows—
(a) first, they must be applied in making any payment of reasonable expenses incurred by an authorised officer in connection with the safe storage of the cryptoassets mentioned in paragraph 10Z7DD(1) during the period the cryptoassets were detained under Part 4BA;
(b) second, they must be applied in making any payment of reasonable expenses incurred by an authorised officer in connection with the conversion of those cryptoassets under paragraph 10Z7DA(6);
(c) third, they must be applied in making any payment of reasonable expenses incurred by an authorised officer in connection with the detention of the converted cryptoassets under this Part;
(d) fourth, they must be paid—
(i) if forfeited by a magistrates’ court in England and Wales or Northern Ireland, into the Consolidated Fund, and
(ii) if forfeited by the sheriff, into the Scottish Consolidated Fund.
(2) Converted cryptoassets detained under paragraph 10Z7DE and forfeited under paragraph 10Z7DG, and any accrued interest on them, must be applied as follows—
(a) first, they must be applied in making any payment of reasonable expenses incurred by an authorised officer in connection with the detention of the converted cryptoassets under this Part;
(b) second, they must be paid—
(i) if forfeited by a magistrates’ court in England and Wales or Northern Ireland, into the Consolidated Fund, and
(ii) if forfeited by the sheriff, into the Scottish Consolidated Fund.
(3) But converted cryptoassets are not to be applied or paid under sub-paragraph (1) or (2)—
(a) before the end of the period within which an appeal under paragraph 10Z7DH may be made, or
(b) if a person appeals under that paragraph, before the appeal is determined or otherwise disposed of.
Victims etc
10Z7DK (1) This paragraph applies where converted cryptoassets are detained under this Part.
(2) Where this paragraph applies, a person (“P”) who claims that the relevant cryptoassets belonged to P immediately before—
(a) the relevant cryptoassets were seized, or
(b) the crypto wallet freezing order was made in relation to the crypto wallet in which the relevant cryptoassets were held,
may apply to the relevant court for some or all of the converted cryptoassets to be released to P.
(3) The application may be made in the course of proceedings under paragraph 10Z7DD, 10Z7DE or 10Z7DG or at any other time.
(4) The relevant court may, subject to sub-paragraph (9), order the converted cryptoassets to which the application relates to be released to the applicant if it appears to the relevant court that the condition in sub-paragraph (5) is met.
(5) The condition in this sub-paragraph is that—
(a) the applicant was deprived of the relevant cryptoassets, or of property which they represent, by criminal conduct,
(b) the relevant cryptoassets the applicant was deprived of were not, immediately before the applicant was deprived of them, property obtained by or in return for criminal conduct and nor did they then represent such property, and
(c) the relevant cryptoassets belonged to the applicant immediately before—
(i) the relevant cryptoassets were seized, or
(ii) the crypto wallet freezing order was made in relation to the crypto wallet in which the relevant cryptoassets were held.
(6) If sub-paragraph (7) applies, the relevant court may, subject to sub-paragraph (9), order the converted cryptoassets to which the application relates to be released to the applicant or to the person from whom the relevant cryptoassets were seized.
(7) This sub-paragraph applies where—
(a) the applicant is not the person from whom the relevant cryptoassets were seized,
(b) it appears to the relevant court that the relevant cryptoassets belonged to the applicant immediately before—
(i) the relevant cryptoassets were seized, or
(ii) the crypto wallet freezing order was made in relation to the crypto wallet in which the relevant cryptoassets were held,
(c) the relevant court is satisfied that the release condition is met in relation to the converted cryptoassets, and
(d) no objection to the making of an order under sub-paragraph (6) has been made by the person from whom the relevant cryptoassets were seized.
(8) The release condition is met—
(a) if the conditions in this Part for the detention of the converted cryptoassets are no longer met, or
(b) in relation to converted cryptoassets which are subject to an application for forfeiture under paragraph 10Z7DG, if the court or sheriff decides not to make an order under that paragraph in relation to the converted cryptoassets.
(9) If (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the converted cryptoassets are connected, the converted cryptoassets are not to be released under this paragraph (and so are to continue to be detained) until the proceedings are concluded.
(10) Where sub-paragraph (2)(b) applies, references in this paragraph to a person from whom relevant cryptoassets were seized include a reference to a person by or for whom the crypto wallet mentioned in that provision was administered immediately before the crypto wallet freezing order was made in relation to the crypto wallet.
(11) In this paragraph “the relevant cryptoassets” means—
(a) in relation to converted cryptoassets detained under paragraph 10Z7DD, some or all of the cryptoassets mentioned in sub-paragraph (1) of that paragraph, and
(b) in relation to converted cryptoassets detained under paragraph 10Z7DE, some or all of the cryptoassets mentioned in sub-paragraph (1) of that paragraph.
Compensation
10Z7DL (1) This paragraph applies if no order is made under paragraph 10Z7DG in respect of converted cryptoassets detained under this Part.
(2) Where this paragraph applies, the following may make an application to the relevant court for compensation—
(a) a person to whom the relevant cryptoassets belonged immediately before they were seized;
(b) a person from whom the relevant cryptoassets were seized;
(c) a person by or for whom the crypto wallet mentioned in paragraph 10Z7DE(1) was administered immediately before the crypto wallet freezing order was made in relation to the crypto wallet.
(3) If the relevant court is satisfied that—
(a) the applicant has suffered loss as a result of—
(i) the conversion of the relevant cryptoassets into money, or
(ii) the detention of the converted cryptoassets, and
(b) the circumstances are exceptional,
the relevant court may order compensation to be paid to the applicant.
(4) The amount of compensation to be paid is the amount the relevant court thinks reasonable, having regard to the loss suffered and any other relevant circumstances.
(5) If the relevant cryptoassets were seized, or the relevant crypto wallet freezing order was applied for, by an officer of Revenue and Customs, the compensation is to be paid by the Commissioners for His Majesty’s Revenue and Customs.
(6) If the relevant cryptoassets were seized, or the relevant crypto wallet freezing order was applied for, by a constable, the compensation is to be paid as follows—
(a) in the case of a constable of a police force in England and Wales, it is to be paid out of the police fund from which the expenses of the police force are met;
(b) in the case of a constable of the Police Service of Scotland, it is to be paid by the Scottish Police Authority;
(c) in the case of a police officer within the meaning of the Police (Northern Ireland) Act 2000, it is to be paid out of money provided by the Chief Constable of the Police Service of Northern Ireland.
(7) If the relevant cryptoassets were seized, or the relevant crypto wallet freezing order was applied for, by a counter-terrorism financial investigator, the compensation is to be paid as follows—
(a) in the case of a counter-terrorism financial investigator who was—
(i) a member of the civilian staff of a police force (including the metropolitan police force), within the meaning of Part 1 of the Police Reform and Social Responsibility Act 2011, or
(ii) a member of staff of the City of London police force,
it is to be paid out of the police fund from which the expenses of the police force are met;
(b) in the case of a counter-terrorism financial investigator who was a member of staff of the Police Service of Northern Ireland, it is to be paid out of money provided by the Chief Constable of the Police Service of Northern Ireland.
(8) If the relevant cryptoassets were seized, or the relevant crypto wallet freezing order was applied for, by an immigration officer, the compensation is to be paid by the Secretary of State.
(9) This paragraph does not apply if the relevant court makes an order under paragraph 10Z7DK.
(10) In this paragraph—
“the relevant cryptoassets” means—
(a) in relation to converted cryptoassets detained under paragraph 10Z7DD, the cryptoassets mentioned in sub-paragraph (1) of that paragraph;
(b) in relation to converted cryptoassets detained under paragraph 10Z7DE, the cryptoassets mentioned in sub-paragraph (1) of that paragraph;
“the relevant crypto wallet freezing order”, in relation to converted cryptoassets detained under paragraph 10Z7DE, means the crypto wallet freezing order mentioned in sub-paragraph (1) of that paragraph.”
3 In Part 1, in paragraph 1(1) (terrorist cash), for “and 4B” substitute “to 4BD”.
4 In Part 4B (forfeiture of terrorist money held in bank and building society accounts), after paragraph 10Z6 insert—
“Victims etc
10Z6A (1) A person who claims that money in respect of which an account freezing order has been made belongs to them may apply to the relevant court for the money to be released.
(2) The application may be made in the course of proceedings under paragraph 10S or 10Z2 or at any other time.
(3) The court may, subject to sub-paragraph (7), order the money to which the application relates to be released to the applicant if it appears to the court that—
(a) the applicant was deprived of the money to which the application relates, or of property which it represents, by criminal conduct,
(b) the money the applicant was deprived of was not, immediately before the applicant was deprived of it, property obtained by or in return for criminal conduct and nor did it then represent such property, and
(c) the money belongs to the applicant.
(4) If sub-paragraph (5) applies, the court may, subject to sub-paragraph (7), order the money to which the application relates to be released to the applicant.
(5) This sub-paragraph applies where—
(a) the applicant is not the person from whom the money to which the application relates was seized,
(b) it appears to the court that the money belongs to the applicant,
(c) the court is satisfied that the release condition is met in relation to the money, and
(d) no objection to the making of an order under sub-paragraph (4) has been made by the person from whom the money was seized.
(6) The release condition is met—
(a) in relation to money held in a frozen account, if the conditions for making an order under paragraph 10S in relation to the money are no longer met, or
(b) in relation to money held in a frozen account which is subject to an application for forfeiture under paragraph 10Z2, if the court or sheriff decides not to make an order under that paragraph in relation to the money.
(7) Money is not to be released under this paragraph—
(a) if an account forfeiture notice under paragraph 10W is given in respect of the money, until any proceedings in pursuance of the notice (including any proceedings on appeal) are concluded;
(b) if an application for its forfeiture under paragraph 10Z2, is made, until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded;
(c) if (in the United Kingdom or elsewhere) proceedings are started against any person for an offence with which the cash is connected, until the proceedings are concluded.
(8) In relation to money held in an account that is subject to an account freezing order, references in this paragraph to a person from whom money was seized include a reference to a person by or for whom the account was operated immediately before the account freezing order was made.”
5 In Part 6, in paragraph 19(1), at the appropriate places insert—
““cryptoasset” has the meaning given by paragraph 10Z7A(1);”;
““crypto wallet” has the meaning given by paragraph 10Z7A(1);”;
““justice of the peace”, in relation to Northern Ireland, means lay magistrate;”;
““terrorist cryptoasset” has the meaning given by paragraph 10Z7A(1);”.
Part 2
Amendments to the Terrorism Act 2000
6 The Terrorism Act 2000 is amended as follows.
7 In Schedule 6 (financial information)—
(a) in paragraph 6(1) (meaning of financial institution)—
(i) omit the “and” after paragraph (ha), and
(ii) after paragraph (i) insert—
(b) after sub-paragraph (1AA) insert—
“(1AB) For the purposes of sub-paragraph (1)(j), “cryptoasset exchange provider” means a firm or sole practitioner who by way of business provides one or more of the following services, including where the firm or sole practitioner does so as creator or issuer of any of the cryptoassets involved—
(a) exchanging or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets,
(b) exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
(c) operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets.
(1AC) For the purposes of sub-paragraph (1)(k), “custodian wallet provider” means a firm or sole practitioner who by way of business provides services to safeguard, or to safeguard and administer—
(a) cryptoassets on behalf of its customers, or
(b) private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets.
(1AD) For the purposes of sub-paragraphs (1AB) and (1AC), “cryptoasset” means a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically.
(1AE) For the purposes of sub-paragraph (1AB)—
(a) “cryptoasset” includes a right to, or interest in, the cryptoasset;
(b) “money” means—
(i) money in sterling,
(ii) money in any other currency, or
(iii) money in any other medium of exchange,
but does not include a cryptoasset.
(1AF) The Secretary of State may by regulations amend the definitions in sub-paragraphs (1AB) to (1AE).”
8 In section 123 (orders and regulations), after subsection (6ZE) insert—
“(6ZF) Regulations under paragraph 6(1AF) of Schedule 6 may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”’—(Tom Tugendhat.)
Part 1 of this Schedule amends the Anti-terrorism, Crime and Security Act 2001 to make provision for a civil recovery regime in relation to terrorist cryptoassets. Part 2 of this Schedule amends the Terrorism Act 2000 to make provision about financial institutions and cryptoassets.
Brought up, read the First and Second time, and added to the Bill.
Bill, as amended, to be reported.
Economic Crime and Corporate Transparency Bill Debate
Full Debate: Read Full DebateDepartment: Home Office
Tom Tugendhat
Main Page: Tom Tugendhat (Conservative - Tonbridge and Malling)Department Debates - View all Tom Tugendhat's debates with the Home Office
Economic Crime and Corporate Transparency Bill
Tom Tugendhat ExcerptsWednesday 25th January 2023
(1 year, 3 months ago)
Commons ChamberRead Full debate Economic Crime and Corporate Transparency Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 25 January 2023 - large print - (25 Jan 2023)
The Minister for Security (Tom Tugendhat)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Sir Roger Gale)
With this it will be convenient to discuss the following:
New clause 1—Disclosure of information in the public interest likely to be relevant to the investigation of economic crime—
‘(1) It is a defence to an action based on the disclosure or publication of information for the defendant to show that—
(a) the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, and
(b) the defendant reasonably believed that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime.
(2) Subject to subsection (3), in determining whether the defendant has shown the matters mentioned in subsection (1), the court must have regard to all the circumstances of the case.
(3) In determining whether it was reasonable for the defendant to believe that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, the court must make such allowance for editorial judgement as it considers appropriate.
(4) For the avoidance of doubt, the defence under this section may be relied upon irrespective of whether the statement complained of is a statement of fact or a statement of opinion.”
New clause 2—Economic crime: power to strike out statement of case for abuse of process—
The court may strike out the whole or part of any statement of case which can be reasonably understood as having the purpose of concealing, or preventing disclosure or publication of, any information likely to be relevant to the investigation of an economic crime.”
New clause 3—Home Office review of the Tier 1 (Investor) visa scheme: publication—
Within a day of the passage of this Act, the Secretary of State must publish in full the findings of the Home Office review of the Tier 1 (Investor) visa scheme which relate to economic crime.”
New clause 4—Offence of failure to prevent fraud, false accounting or money laundering—
‘(1) A relevant commercial organisation (“C”) is guilty of an offence under this section where—
(a) a person (“A”) associated with C commits a fraud, false accounting or an act of money laundering, or aids and abets a fraud, false accounting or act of money laundering, intending—
(i) to confer a business advantage on C, or
(ii) to confer a benefit on a person to whom A provides services on behalf of C, and
(b) fails to prevent the activity set out in paragraph (a).
(2) C does not commit an offence where C can prove that the conduct detailed in subsection (1)(a) was intended to cause harm to C.
(3) It is a defence for C to prove that, at the relevant time, C had in place procedures that were reasonable in all the circumstances and which were designed to prevent persons associated with C from undertaking the conduct detailed in subsection (1)(a).
(4) For the purposes of this section “relevant commercial organisation” means—
(a) for the offence as it relates to false accounting and fraud, “relevant commercial organisations” are defined as—
(i) a body which is incorporated under the law of any part of the United Kingdom and which carries on a business (whether there or elsewhere),
(ii) any other body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the United Kingdom,
(iii) a partnership which is formed under the law of any part of the United Kingdom and which carries on a business (whether there or elsewhere), or
(iv) any other partnership (wherever formed) which carries on a business, or part of a business, in any part of the United Kingdom, and
(v) for the purposes of this section, a trade or profession is a business;
(b) for the offence as it relates to money laundering, “relevant commercial organisations” are defined as—
(i) credit institutions;
(ii) financial institutions;
(iii) auditors, insolvency practitioners, external accountants and tax advisers;
(iv) independent legal professionals;
(v) trust or company service providers;
(vi) estate agents and letting agents;
(vii) high value dealers;
(viii) casinos;
(ix) art market participants;
(x) cryptoasset exchange providers;
(xi) custodian wallet providers.”
This new clause introduces a new criminal corporate offence for failure to prevent fraud, false accounting and money laundering, by aligning it with other corporate criminal offences.
New clause 5—Identification doctrine—
‘(1) A body corporate commits an offence of fraud, money laundering, false accounting, bribery and tax evasion where the offence is committed with the consent, connivance or neglect of a senior manager.
(2) An individual is a “senior manager” of an entity if the individual—
(a) plays a significant role in—
(i) the making of decisions about how the entity’s relevant activities are to be managed or organised, or
(ii) the managing or organising of the entity’s relevant activities, or
(b) is the Chief Executive or Chief Financial Officer of the body corporate.
(3) A body corporate also commits an offence if, acting within the scope of their authority—
(a) one or more senior managers engage in conduct, whether by act or omission, such that, if it had been the conduct of only one representative, that representative would have been a party to the offence; and
(b) the senior manager who is responsible for the aspect of the organization’s activities that is relevant to the offence — or the senior managers collectively — fail to take all reasonable steps to prevent that offence being committed.”
This new clause reforms the “identification doctrine”, so that a body corporate commits an economic crime offence where the offence is committed with the consent, connivance or neglect of a senior manager or senior managers.
New clause 6—Failure to prevent fraud, false accounting or money laundering: individual liability—
‘(1) A person (“S”) commits an offence if—
(a) at a time when S is a senior manager or corporate officer of a corporate body (“C”), S—
(i) takes, or agrees to the taking of, a decision by or on behalf of the corporate body as to the way in which the business of the corporate body is conducted, and
(ii) fails to take any steps that S could take to prevent such a decision being taken;
(b) at the time of the decision, S is aware of a risk that the implementation of the decision may lead to the commission of an offence of money laundering, fraud, false accounting, bribery or tax evasion; and
(c) the implementation of the decision causes C to commit such an offence.
(2) For the purposes of this section—
(a) an individual is a “senior manager” of a corporate body if the individual plays a significant role in—
(i) the making of decisions about how the entity’s relevant activities are to be managed or organised, or
(ii) the actual managing or organising of the entity’s relevant activities;
(b) “officer”, in relation to a body corporate, means—
(i) a director, manager, associate, secretary or other similar officer, or
(ii) a person purporting to act in any such capacity;
(c) in paragraph (b)(i) “director”, in relation to a body corporate whose affairs are managed by its members, means a member of the body corporate.
(3) A person guilty of an offence under this section is liable—
(a) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding 12 months (or 6 months, if the offence was committed before the commencement of section 154(1) of the Criminal Justice Act 2003) or a fine, or both;
(ii) in Scotland, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum, or both;
(iii) in Northern Ireland, to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum, or both;
(b) on conviction on indictment, to imprisonment for a term not exceeding 7 years or a fine, or both.”
This new clause introduces direct criminal liability for corporate officers who take a decision, or fail to take a decision, that knowingly results in an offence being committed.
New clause 7—Whistleblowing: economic crime—
‘(1) Whistleblowing is defined for the purposes of this section as any disclosure of information suggesting that, in the reasonable opinion of the whistleblower, an economic crime—
(a) has occurred,
(b) is occurring, or
(c) is likely to occur.
(2) The Secretary of State must, within twelve months of the date of Royal Assent to this Act, set up an office to receive reports of whistleblowing as defined in subsection (1) to be known as the Office for Whistleblowers.
(3) The Office for Whistleblowers must—
(a) protect whistleblowers from detriment resulting from their whistleblowing,
(b) ensure that disclosures by whistleblowers are investigated, and
(c) escalate information and evidence of wrongdoing outside of its remit to another appropriate authority.
(4) The objectives of the Office for Whistleblowers are—
(a) to encourage and support whistleblowers to make whistleblowing reports,
(b) to provide an independent, confidential and safe environment for making and receiving whistleblowing information,
(c) to provide information and advice on whistleblowing, and
(d) to act on evidence of detriment to the whistleblower in line with guidance set out by the Secretary of State in regulations.
(5) The Office for Whistleblowers must report annually to Parliament on the exercise of its duties, objectives and functions.”
New clause 21—Civil recovery: costs of proceedings—
After section 313 of the Proceeds of Crime Act 2002 insert—
“313A Costs orders
(1) This section applies to proceedings brought by an enforcement authority under part 5 of the Proceeds of Crime Act 2002 where the property in respect of which the proceedings have been brought has been obtained through economic crime.
(2) The court may not make an order that any costs of proceedings relating to a case to which this section applies (including appeal proceedings) are payable by an enforcement authority to a respondent or a specified responsible officer in respect of the involvement of the respondent or the officer in those proceedings, unless—
(a) the authority acted unreasonably in making or opposing the application to which the proceedings relate, or in supporting or opposing the making of the order to which the proceedings relate, or
(b) the authority acted dishonestly or improperly in the course of the proceedings.”
This new clause extends the cap on adverse costs introduced by the first Economic Crime Act (Transparency and Enforcement) 2022 for Unexplained Wealth Orders, to all civil recovery orders.
New clause 23—Review of measures to prevent proceeds of economic crime entering the UK economy—
Within six months of the passage of this Act, the Secretary of State must lay before Parliament the report of a review of what further regulatory measures could be taken to prevent the circulation in the UK economy of the proceeds of economic crime controlled by individuals or entities subject to sanctions.”
This new clause creates an obligation for the Secretary of State to report to Parliament on the merits of further regulatory measures for preventing the circulation in the economy of the proceeds of economic crime controlled by individuals or entities subject to sanctions.
New clause 25—Report into effectiveness of Act in addressing economic crime involving sanctioned individuals—
‘(1) The Secretary of State must, within six months of this Act being passed, lay before Parliament a report of a review into the effectiveness of the measures in this Act in addressing economic crime involving designated persons.
(2) The report must consider the case for further legislation to make provision for the seizing of assets of a designated person where there is evidence that the designated person has been involved in economic crime.
(3) In this section, “designated persons” has the meaning given in section 9 of the Sanctions and Anti-Money Laundering Act 2018.”
New clause 27—Compensation for Victims of Economic Crime—
‘(1) The Secretary of State must, no later than 90 days from the date on which this Act comes into force, publish and lay before Parliament a strategy for the potential establishment of a fund for the compensation of victims of economic crime.
(2) The strategy may include provisions on the management and disposal of any assets realised by the government, or any body with law enforcement responsibilities in relation to economic crime, under relevant UK legislation.”
This new clause would require the Secretary of State to prepare and publish a strategy on the potential establishment of a fund to provide compensation to victims of economic crime.
New clause 30—Assets of Iranian officials obtained through economic crime—
Within six months of the passage of this Act, the Secretary of State must lay before Parliament the report of a review of regulatory measures to prevent the circulation in the UK economy of assets of Iranian officials which have been obtained through economic crime.”
New clause 31—Fund for the purposes of tackling economic crime—
In the Companies Act 2006, after Part 29 insert—
Part 29A
Economic Crime
993A Fund for the purposes of tackling economic crime
‘(1) The Secretary of State must by regulations establish a fund for the purposes of tackling economic crime.
(2) The regulations must specify the purposes for which the fund may be used, including funding the activities of law enforcement agencies in tackling economic crime.””
New clause 32—Review of definition of cryptoassets—
Within 18 months of the passage of this Act, the Secretary of State must lay before Parliament the report of a review of the adequacy of the definitions of cryptoassets contained in this Act.”
New clause 33—Economic Crime Committee of Parliament—
‘(1) The Secretary of State must by regulations establish a body to be known as the Economic Crime Committee of Parliament (in this section referred to as “the ECC”).
(2) The ECC will consist of nine members who are to be drawn both from the members of the House of Commons and from the members of the House of Lords.
(3) Each member of the ECC is to be appointed by the House of Parliament from which the member is to be drawn.
(4) The ECC will have the power to meet confidentially.
(5) The ECC may examine or otherwise oversee any regulatory, enforcement or supervision agencies involved in work related, but not limited to—
(a) tax avoidance and evasion by corporations;
(b) illicit finance;
(c) anti-money laundering supervision;
(d) tackling fraud;
(e) kleptocracy and corruption; and
(f) whistleblower protection.”
This new clause would oblige the Secretary of State to establish an Economic Crime Committee of parliament to examine and oversee regulatory, enforcement and supervisory action against economic crime.
New clause 39—Duty to report on economic crime resourcing and performance—
‘(1) The Director General of the National Crime Agency must—
(a) prepare a report on the resourcing and staffing of its work to counter economic crime, and its performance tackling economic crime, and
(b) send it to the Secretary of State as soon as practicable after this section comes into force.
(2) The Director General must prepare and send to the Secretary of State further reports on these topics annually.
(3) Each report must include, in particular—
(a) a report of the total annual budget and number of staff allocated to economic crime for each unit within the National Crime Agency,
(b) a report of the number of investigations, arrests, prosecutions and convictions relating to economic crime for each unit within the National Crime Agency, and
(c) a report of other relevant data including, but not limited to, cases per year broken down by both type and outcome; number of restraint or confiscation orders obtained; and value of assets confiscated.
(4) Reporting under subsection (3) must provide a breakdown between domestic economic crime and international economic crime. Reporting on international economic crime under subsections (3)(b) and (3)(c) must provide a breakdown by the income classification of the countries affected.
(5) The Director General must publish every report under this section—
(a) as soon as practicable after they send it to the Secretary of State, and
(b) in such manner as they consider appropriate.”
Section 6 of the Crime and Courts Act 2006 currently places a duty on the Director General of the National Crime Agency to make arrangements for publishing information about the exercise of NCA functions and other matters relating to the NCA, and publish information in accordance with those arrangements. This new clause inserts a new section that places a specific duty on the Director General to prepare an annual report on the NCA’s resourcing and performance relating to economic crime. The section stipulates the minimum information that the Director General must include in the report.
New clause 40—Report into options for corporate liability for economic crime—
‘(1) The Secretary of State must produce a report on corporate criminal liability for economic crime offences.
(2) The report must consider the merits of different models for corporate liability in respect of economic crime, including but not limited to—
(a) the respondeat superior model; and
(b) the failure to prevent model, insofar as it has not already been introduced by the enactment of this Act.
(3) The report must be laid before Parliament within six months of this Act being passed.
(4) In this section—
“the respondeat superior model” means a model for corporate criminal liability in which an entity is guilty of an offence if an employee or agent commits an economic crime offence—
(a) in the course of their employment or agency, or
(b) with an intent to benefit that entity;
“the failure to prevent model” means a model for corporate criminal liability in which an entity is guilty of an offence if a person associated with that entity commits an economic crime offence, intending—
(a) to confer a business advantage on that entity, or
(b) to confer a benefit on a person or other entity to whom the associated person provides services on behalf of the entity with which it is associated, except that the entity shall not be liable where the conduct was intended to cause harm to that entity,
unless the entity can prove that it had in place such prevention procedures as were reasonable in the circumstances, or that it was reasonable not to have any such procedures in place;
a person is “associated with” an entity if they are a person who performs services for or on behalf of that entity, including in, but not limited to, the capacity of an employee, agent or subsidiary.”
Government amendments 44 to 49, 57 and 58 to 100.
Tom Tugendhat
It is a pleasure to see you in your place, Mr Deputy Speaker, and it is the first time I have had the privilege of speaking under your chairmanship on these matters. It is also a pleasure to see so many of the usual faces on this matter. Many of us have gone over these questions in Committee and, actually, in the many years beforehand in various different ways, so it is an enormous privilege to be here. It is particularly a privilege to be speaking after the Minister my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) did such a brilliant job yesterday. I am only picking up where he left off, so I am afraid the second act will not be nearly as compelling as the first.
All those who participated in the Bill Committee gave enormous insights into various different perceptions of how we should be thinking about economic crime and corporate transparency. We have had many interesting debates, and I thank enormously those who have taken part in the various different ways. The fact that we have a two-day debate on Report speaks pretty clearly about the significant size and complexity of this Bill.
Yesterday, we debated parts 1 to 3, which cover Companies House reform and corporate transparency. Today, we turn our attention to parts 4 to 6. The clauses in part 4 create new powers that allow law enforcement to more quickly and easily seize and recover cryptoassets. The creation of the civil forfeiture power for cryptoassets will mitigate the risk posed by those who cannot be criminally prosecuted, but who use their funds to further criminality or for terrorist purposes. This did not prove to be particularly contentious in Committee.
In part 5 of the Bill, we are making it easier for businesses to share information more effectively with each other and with law enforcement to prevent and detect economic crime. We are also creating new exemptions to reduce unnecessary reporting by businesses carrying out transactions on behalf of their customers. We are also giving frontline legal services regulators enhanced enforcement powers to support them as they uphold the economic crime agenda within their regulated community.
I will briefly summarise the amendments we have tabled relating to parts 4, 5 and 6 of the Bill. Many of them address the debate that took place in Committee and will ensure that the Bill works as intended. I should acknowledge that the amendments are perhaps slightly greater in number than we would have liked. The vast majority—amendments 51 and 57 to 100—are minor technical or consequential amendments to ensure that the detail of the cryptoasset measures will work effectively and can be used as soon as possible. That reflects the technical detail of the subject area and the need to make the changes work for each of the jurisdictions of England and Wales, Scotland and Northern Ireland that are covered by the Proceeds of Crime Act 2002.
I now turn to the more substantive Government amendments. New clause 14 allows the Solicitors Regulation Authority to proactively request information from its regulated community for the purpose of monitoring compliance with the economic crime regime. It will enable the SRA to monitor and detect breaches of the rules and legislation related to economic crime, including offences related to money laundering, terrorist financing and sanctions.
Government amendments 44 to 47 to clauses 171 and 172 concern information orders. They seek to clarify the cases in which the information order power can be used and to provide clarity to operational partners about how they should be used. They will ensure that the power can be used only for the criminal intelligence functions of the National Crime Agency, and that when assessing a request for information from a foreign intelligence unit, the NCA must be satisfied that the information would support the FIU’s intelligence function.
Bob Seely (Isle of Wight) (Con)
On the SRA, will the Bill address the strategic lawsuits against public participation that we have been discussing for the last couple of days, or does it purely concern money laundering and other offences unrelated to SLAPPs?
Tom Tugendhat
The Bill is concerned only with economic crime and corporate transparency, and the regulations will cover only that. Many Ministers, including the Lord Chancellor, have spoken about SLAPPs—I will touch on them later—but the reality is that they require a separate jurisdiction and a separate Bill.
Government amendments 48 and 49 concern information sharing. In Committee, Opposition Members rightly pointed out that our proposed definition of large accountancy firms did not include insolvency practitioners, auditors and tax advisers. I thank them for that. These amendments will rectify that omission by expanding the scope of the indirect information sharing clauses to include those sectors.
In addition to the Government amendments, several other amendments on a broad range of topics will be debated today. As in Committee, I look forward to what I anticipate will be a lively but extremely well-considered debate. The contributions of all hon. Members who participated in earlier debates have helped to shape the Bill into an effective tool to tackle illicit finance and ensure that the UK is a great place to do legitimate business.
I know that there are places where hon. Members would like the Bill to go further and do more. Indeed, I am as keen as many of them to solve some of the outstanding problems that we all wish to address, but we need to ensure that those ambitions are delivered in the most effective way and that we use the appropriate legislative vehicles to ensure that they have the desired outcome. Limiting the scope to just economic crime can, in several cases, create more problems than it solves, and I assure right hon. and hon. Members that I have strenuously tested what can be effectively delivered within the scope of the Bill.
Dame Margaret Hodge (Barking) (Lab)
Will the Minister expand on that interesting point? How would any of the amendments on SLAPPs, a duty to prevent or seizing assets limit what could be done in future?
Tom Tugendhat
The question is at what stage do we bring a Bill forward—do we wait for it to be perfect or do we bring forward what we can get at a certain point? The right hon. Lady raises some interesting points. She knows my views on SLAPPS; indeed, in a former incarnation, I may have expressed them extremely clearly. She knows that we share views on asset seizures too. I should point out, however, that no common law jurisdiction has successfully solved the question of asset seizures, although many of us have tried and, indeed, some of us are in conversation with others to try to work out ways of doing it—forfeiture and seizure are not quite the same thing.
Mr Jonathan Djanogly (Huntingdon) (Con)
Will my right hon. Friend give way?
Mr Djanogly
Yes, because my right hon. Friend touched on asset seizures and tempted me. Of course, Canada has enacted an Act of Parliament that provides for freezing orders to be translated into seizing orders at the request of the Attorney General of Canada.
Tom Tugendhat
My hon. Friend is absolutely right, but he is also no doubt aware that there is much discussion in the Canadian legal community about whether those orders will be challenged in different ways and how exactly they will work. There is still a serious debate about the nature of translating from forfeiture to seizure.
Mr Djanogly
My right hon. Friend is generous in giving way again. All this law is new: our unexplained wealth orders were new, and they have been questioned in the courts, so that is not the question. The question is whether we have the guts to stand up and move on this issue, as the whole western world wants to see.
Tom Tugendhat
My hon. Friend is absolutely right, but I note that some hon. Members cheering would also cheer the provisions of the European convention on human rights that guarantee the right to private property and many of the areas that cause the difficulties that the UK has and Canada does not.
I do not deny that there is an enormous question for debate here and that many hon. Members would like to move quickly to seizure on many areas, but sadly, that may take a bit longer. One thing on which we all agree is that the UK’s place as a rule-of-law jurisdiction and as a home for justice, not just to ourselves but to many others around the world, is essential to our prosperity and to liberties around the world. It is therefore important to ensure that we correctly transfer from forfeiture to seizure, and recognise the rights and limits that we should respect.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
I salute the Minister’s leadership on much of this agenda when he was a brilliant Chair of the Foreign Affairs Committee. He will not, however, want to go down in history as the Minister for mañana. In his responses to the hon. Member for Huntingdon (Mr Djanogly), he has said that the timing is not right and we must wait for future Bills. Can he put our minds at rest and give us a sense of when we might expect a Bill to come forward to address the concerns of the hon. Member for Huntingdon?
Tom Tugendhat
The right hon. Gentleman is extremely kind about my former work and, typically, slightly less so about my current employ. He can be assured that, no doubt, it will be temporary, as it is for all occupants.
That matter has seized my attention and has been of some interest to me in further discussions in different areas. I will not put a time on it, because it is not my ministerial responsibility; the right hon. Gentleman will know from his time in Government that talking across other Ministers’ briefs does not always help to advance the case. I assure him, however, that it has come up frequently in conversation with an intent to bring something forward. As I said, the Lord Chancellor has spoken about it to highlight that it is an area where various elements of change are necessary, so I look forward to hearing the proposals as they come forward. I certainly do not think that the matter can wait. We have sadly seen SLAPPs used against such inspiring examples as Eliot Higgins and Catherine Belton, who have stood up for justice in this country and around the world.
Tom Tugendhat
I will not, because I am going to close.
Despite all the areas that we could have gone into, and would like to go into at a different time, the Bill is closely focused on economic crime and corporate transparency for the purpose of passing a series of measures that are essential to ensure that we keep our country safe and our economic jurisdictions clean.
Stephen Kinnock (Aberavon) (Lab)
We on the Opposition Benches have been clear that the Bill is long overdue. It has been painful to witness London becoming the world’s laundromat for dirty money with the National Crime Agency calculating that £100 billion of illicit finance flows through the UK every single year. Add to that the Government’s abject failure to properly scrutinise the issuing of golden visas to Russian oligarchs—seven now-sanctioned Russians were awarded such visas even after the invasion of Crimea in 2014—and we see a pattern emerging of Ministers failing to treat economic crime with the seriousness it deserves.
This legislation, which is finally wending its way towards the statute book five years after it was promised—and, let us face it, was only brought forward in response to Putin’s invasion—is a step in the right direction that we on these Benches support. However, it still falls short in a number of areas, as I will cover in my remarks.
Sir Robert Buckland
I was going to spare the blushes of the Minister for Security, my right hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) and the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), but my hon. Friend has said it for me, and he is right. They know that what I am saying does not just have force, but that they agree with it. That will no doubt carry great weight—
Tom Tugendhat
What I am enormously enjoying in this Session is the way in which Bills are being picked up and put down by different Ministers. When they are on the Front Bench, they do one thing; when they are on the Back Benches, they say another—sadly, that is the nature of our current political system. It is taking a little while, I admit, for many of us to realise quite how long it can take to get things through in government. Those who have been in government for many years are sharing their knowledge very generously.
Sir Robert Buckland
Well, my right hon. Friend must speak for himself. I will tell the House a story: I remember when the present Secretary of State for Defence, my right hon. Friend the Member for Wyre and Preston North (Mr Wallace), held the office of Minister for Security, which my right hon. Friend the Member for Tonbridge and Malling now enjoys. We used to have cross-governmental committee meetings—this was during the Government of my right hon. Friend the Member for Maidenhead (Mrs May)—and I remember having a very fierce argument with a very senior permanent secretary at the Treasury about this very issue. I will not name them, because that would be wrong, but they told me that there was concern about the proliferation of criminal offences in this area because somehow it would add more of a regulatory burden to business. I disagreed hotly with that civil servant then, and I disagree hotly now.
The Minister for Security now has a great opportunity. It is a great privilege as a Minister to get on with a job that others would have wished to finish. We have passed the parcel to him, and he can open it and enjoy the gifts within.
Alison Thewliss
One Minister is on his phone and the other—the hon. Member for Thirsk and Malton—is sitting at the back of the Chamber having a gab. This is not ideal, but perhaps the Minister has already heard what I have to say and does not want to hear it again.
“O, wad some Power the giftie gie us
To see oursels as others see us!”
Alison Thewliss
It is not, and it certainly will not be the last. It could be if the Minister accepted the amendments, but he is not going to do that, and he will keep hearing this speech until he does: that is the truth of the matter.
As other Members have said, there is a precedent for a “failure to prevent” measure. It is in the Health and Safety at Work etc. Act 1974 and the Bribery Act 2010, so the concept already exists, and there is no reason why it cannot be applied today. Even if the Government are saying, “We want to extend it to other areas”, that should not limit us today, when the Bill gives us the opportunity.
I also support new clauses 4, 5 and 6. The right hon. and learned Member for South Swindon made an important point about what senior managers have to do, which is also relevant to the Online Safety Bill. I rather like the definition of an offence committed with
“the consent, connivance or neglect of a senior manager.”
All those things contribute to economic crime. This is, if you will, a sin of omission, and we should take the opportunity to tighten up these loopholes. It is one thing to know about something that is happening, it is another thing to look the other way, and it is another thing not to do your job properly and allow that something to happen. This would cover all those eventualities.
New clause 7, in the name of the hon. Member for Cheadle (Mary Robinson) deals with whistleblowing. It is an excellent new clause which would enhance the Bill and offer protection to the very people who flag up these economic crimes. Whenever I think about whistleblowing, I remember a little cartoon that I saw many years ago showing a man sitting at a computer terminal in an office with a sign above his head saying, “Congratulations Frank, whistleblower of the month.” I understand that the cartoonist was Bill Proud. Every time I think about that, I think about the lack of protection offered to whistleblowers, and how much more the Government could be doing to ensure that those who do speak up are protected.
The organisation Protect says that it has offered advice on whistleblowing to 2,500 people a year, and that of those who have contacted it about their experiences, 65% have suffered some kind of detriment as a result of their whistleblowing. There is no incentive for many people to speak out when they see something wrong. They feel that they will lose their job or their promotion and will have to work somewhere else, and also that this might follow them around if they are seeking references for a new job. There is a real problem here, and the Government could, if they wished, deal with it in the Bill: it would make sense for them to do so.
I also support the cost cap suggested in new clause 21. Bill Browder spoke about this issue very powerfully during the Public Bill Committee evidence sessions. The balance is completely skewed to the side of the criminals and away from the Government, and away from the prosecutors and the agencies who want to take on these crimes but simply cannot afford to do so. Bill Browder said:
“What I have learned is that the law enforcement agencies effectively refuse to open criminal cases unless they are 100% sure that they can win without any tough fight on the other side.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 65.]
And what we have learned, even just this week, is that the other side can afford anything that allows them to support their case. Indeed, that was made clear in the exchanges on the urgent question on the Wagner Group earlier today. The other side are very well set up financially: they can afford the very best lawyers, while the prosecutors sit there with nothing in their armoury to take on these oligarchs and kleptocrats. That is not acceptable, and a cost cap such as the one suggested in new clause 21 would go some way to addressing it.
Bill Browder has also talked powerfully about the Magnitsky case. He produced a load of evidence about money that been stolen and laundered, being put through various accounts. He had traced all the money, some of which had ended up in the United Kingdom. When he presented the case to prosecutors, to the National Crime Agency and to various other agencies, they all refused to take it on. A crime has been committed, and we know who committed it and where the money ended up, but prosecutors here do nothing about it because it would cost them money that they might never see again. As a result, crimes go unprosecuted in the United Kingdom. It is unacceptable that, by failing to take on new clause 21 and other such measures that would cap costs, the Government are allowing this to continue.
I would support further measures on sanctions. Further to the urgent question, monitoring of sanctions and their effectiveness needs to be a lot tighter. Any sensible sanctions scheme would not have waivers for warlords.
I very much support the new clauses on the proceeds of crime and compensation for victims, for the people of Ukraine and indeed for the people of Iran, as has been suggested by the hon. Member for Oxford West and Abingdon (Layla Moran). Those measures are important. There are schemes such as the financial services compensation scheme, but in many cases that does not fully compensate, or compensate at all, those victims of economic crime. Appropriate compensation should be given, given the real and devastating effect that financial crime can have on our constituents. People who feel that they have been duped will carry that around for a long time, so compensation is important, and there is real need for finance both to fight the war in Ukraine and to rebuild that country thereafter.
Dame Margaret Hodge
I shall be very brief, because I took a lot of time in the House yesterday. I strongly support many of the new clauses being moved by Back Benchers across the Chamber today. If I can just say something about politics, this heartens me and shows that there are ways in which we can work together to pursue the national interest across the political divide. It breathes a bit of confidence and life back into the political process that we have all chosen to join in our careers, so I commend those individual Back Benchers who have put themselves forward and who are speaking today.
The proposals from the hon. Member for Cheadle (Mary Robinson) on strengthening the support for whistleblowing are hugely important. Whistleblowers are an essential part of our armoury in the fight against money laundering and fraud, and we know that, despite all the legal rights, they are not protected. People lose their jobs, their families get destroyed and they are left penniless. Therefore, the establishment of a capability that will do nothing other than protect and promote whistleblowers in the crucial work they do is really important, and I hope that it will be adopted.
The importance of legislating to tackle the abuse of our legal system by oligarchs and others, which the right hon. Member for Haltemprice and Howden (Mr Davis) has just talked about so eloquently, is also really important. I want to be blunt about this and say to those on the Government Front Bench that, if they do not accept this new clause, they will not get a Bill during this Parliament. I bet that is right, so for heaven’s sake let us use this opportunity to get this bit of legislation in. It does not cover everything we would like it to cover, but it will have an impact. It will also give us the experience to see whether we have got the legislation right. I am sure that all the lawyers who helped to draft these new clauses put their best brains into them, but if they have not got them right, we will be able to learn those lessons when we come to extend these measures beyond economic crime.
The right hon. and learned Member for South Swindon (Sir Robert Buckland) made an excellent contribution on the reform of criminal corporate liability, and I want to say something about that. It is not that we want to suddenly bang up a whole load of lawyers, accountants, companies, service providers and all those people who we know are the ones that facilitate or collude with much of the economic crime that takes place. Only the best preventive mechanism that we can think of will force a change of behaviour, and we are not doing that on the back of hope; we are doing it on the back of reality. We know from the Bribery Act 2010 and from the regulations on tax evasion and on health and safety at work that putting this sort of liability on individuals and corporations is the only way to transform behaviour. Last week’s amendment to the Online Safety Bill by the Conservative rebels showed the mood of the House, and I would urge Ministers to think about that. The mood of the House is to use this effective tool to try to transform behaviour in all spheres of life, whether in relation to online harms or to economic crime.
I hope that we will hear from the hon. Member for Huntingdon (Mr Djanogly) soon on the issue of “freeze not seize”. I know he is going to make a number of propositions, and I hope he will not mind if I say something about this. We have been working with an extensive group of lawyers to see whether we can move to a position where we do not just freeze the assets but seize them in order to repurpose them and, particularly in the current context, use them to support the reconstruction of Ukraine. We have finally got a chink in the armour in that regard, but let me say something else first. The lawyers we have talked to work with non-governmental organisations in this field, and the advice they give is always going to be slightly different from the advice that comes from the lawyers working in the Government service. I think we bring a new perspective, and I urge Ministers to listen to what we have to say. The chink is worth examining at this stage, even if we do not go for the further propositions, to show that we mean it when we say that we want to seize this money.
Tom Tugendhat
If the right hon. Lady can come up with a way to seize assets and use them for the purposes we have been discussing—notably for the reconstruction of Ukraine, but for other purposes, too—I am all ears. I have had long conversations with the representatives of Governments around the world, and I am yet to hear an idea that works. If she has one, I am happy to hear it.
Dame Margaret Hodge
This is not our idea. It comes from a recent seminar we held with lawyers who support the Royal United Services Institute and Spotlight on Corruption. I will leave it to the hon. Member for Huntingdon to expand on it, but I think it is a very interesting chink that we can exploit, although it is not the total answer.
A draft Bill is being prepared by another group of lawyers, but I do not think we can add it to this Economic Crime and Corporate Transparency Bill. I am sceptical that we will find a chance to introduce the draft Bill in this Parliament, but I assure the Minister that we will pursue it after this Bill has passed. I just hope the Government examine the chink we have identified and run with it.
New clause 21 on cost caps, which stands in my name, is part of the way in which we could better fund the enforcement agencies in their fight against economic crime while also preventing economic criminals from exploiting our legal system. At the moment, we have a “loser pays” law, which has two consequences. First, when our enforcement agencies embark on litigation and lose, there is a massive cost to the public purse. We saw that with the unexplained wealth order against Kazakhstan’s Nazarbayeva family. Subsequent investigative journalism suggested that the family told mistruths to the court, but that has never been rectified. Nevertheless, the costs vary from £1.5 million to £2 million.
The SFO took a similar case against Serco involving prisoners who were—I have forgotten the word.
Dame Margaret Hodge
I thank the Minister. I am having a senior moment.
The SFO had clearly prepared the case badly, but there was a discovery point that got the litigation thrown out of court, and a huge sum was claimed in costs. The cost to the public purse is enormous.
Tom Tugendhat
My apologies, Madam Deputy Speaker. For some reason I was under the impression that the hon. Member for Aberavon (Stephen Kinnock) would be speaking first.
Madam Deputy Speaker
Order. I think I should explain, for the benefit of Hansard, that the shadow Minister will be coming back on Third Reading. It is customary to go straight to the Minister, given that he moved the motion for the lead new clause.
Tom Tugendhat
I thought that we were to have the joy and the privilege of hearing from the hon. Member for Aberavon, who can never say too much in this Chamber, or indeed anywhere else—which is lucky, because he very rarely says too little.
It is a huge pleasure to have been here this afternoon. Members in all parts of the House have made extremely powerful points, but I will touch on just a few of them, because many have been covered at length and in detail on numerous other occasions. If Members will forgive me, I will deal straight away with a few of the matters that I think require immediate attention.
I thank my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) for tabling new clause 6 and for the way in which he has approached the area of corporate criminal liability, in which he and I agree that reform is required. That is why the Government commissioned a review by the Law Commission, which my right hon. and learned Friend cited and which showed a definite need to clamp down on economic crime conducted by commercial organisations. We have been working closely across Government and with prosecutors in carefully considering its recommendations and how improvements can best be made. It is vital that any reform can be used by law enforcement agencies, does not duplicate what already exists and avoids placing unnecessary burdens on legitimate businesses, but we must also operate within the constraints of the Bill.
I share my right hon. and learned Friend’s passion for change. I am immensely grateful for his thoughtful input, and I greatly value my engagement with him, and with other Members, on this issue. I can assure him that the Government intend to address the need for a “failure to prevent” offence in the other place, and I would welcome further discussion with him about the most effective way in which that can be done.
Sir Robert Buckland
I am extremely grateful for what my right hon. Friend has said, but may I gently press him on the issues of “failure to prevent”, fraud, money laundering and false accounting offences—I accept that they may well have to be separate—and a further discussion on the identification doctrine? If so, I will not need to press my new clauses to a vote.
Tom Tugendhat
My right hon. and learned Friend is certainly more learned than me, and I will certainly be listening to his views. There are a number of areas that I am sure we will be able to discuss, and I am sure we will reach a conclusion that is acceptable to all sides.
Dame Margaret Hodge
I am grateful for the assurance that an amendment will be introduced in another place, but may I also have an assurance that it will cover both corporations and individual directors?
Tom Tugendhat
The right hon. Lady knows very well that I would find it impossible not to listen to her. I look forward to seeing how we can return to this issue. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), will no doubt wish to have a strong input as well, so I shall say no more at this stage.
Let me now touch on the question of whistleblowers, and pay enormous tribute to my hon. Friend the Member for Cheadle (Mary Robinson), who has been a friend of many of us for a number of years since she was first elected and who has championed, consistently and clearly, the need for an office for whistleblowers. She is absolutely right: what the country needs is an office for whistleblowers, and what we need to do is ensure that we have the updates to the legislation that she so correctly highlighted. The establishment of such an office would, however, be a significant undertaking. It would have major financial applications owing to its size, it would require significant staffing, and, as matters stand, it might duplicate the role of regulators without the same level of sector expertise. I know that my hon. Friend had the opportunity to meet my hon. Friend the Under-Secretary of State earlier this week to discuss her new clause and plans for the review, which I understand will be set out soon, I hope that the meeting was constructive.
Mary Robinson
I have indeed had a meeting with the Under-Secretary to discuss this. There is a long way to go on it and I am steadfast about setting up the office for whistleblowers. However, the conversations have been constructive, I am grateful to Ministers and I will not be pressing my new clause to a vote.
Tom Tugendhat
I am grateful to my hon. Friend for that and to the Under-Secretary for having had those conversations. He knows my support for her interest in this important matter.
Clearly, many amendments have been tabled today. The last point I wish to make before we move on to Third Reading is that the Government listened an awful lot on this Bill. Many of us, including myself and the Under-Secretary, who have been taking it through this place, have been listening extremely carefully, for many reasons. One of those reasons is that we picked this up, as many people do, a long way down its process of drafting and through its progress through this House. No doubt there are areas where all of us could tweak, adjust, test and push, but we think that the Bill offers major progress on the situation where we began; I am delighted that that point was shared across this House. So although there are areas where we could have further discussion—I am sure the other place will have criticisms and comment, and we will have improvements and additions—we feel that this Bill, as it stands, is a vast improvement on where we are. Although there is progress to be made, and there always will be, we believe that the Bill marks a useful point of progress for our country in fighting economic crime.
Question put and agreed to.
New clause 14 accordingly read a Second time, and added to the Bill.
New Clause 3
Home Office review of the Tier 1 (Investor) visa scheme: publication
“Home Office review of the Tier 1 (Investor) visa scheme: publication
Within a day of the passage of this Act, the Secretary of State must publish in full the findings of the Home Office review of the Tier 1 (Investor) visa scheme which relate to economic crime.” —(Layla Moran.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Tom Tugendhat
I beg to move, That the Bill be now read the Third time.
I will briefly thank a few people on my behalf and on behalf of the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). I must thank my noble friend Lord Callanan, the Minister for Business, Energy and Corporate Responsibility, who continues to do so much to support the Bill and has been a great help. I also thank the Home Office Minister, Lord Sharpe of Epsom, who is a fantastic asset to our Department.
I thank my right hon. Friend the Member for East Hampshire (Damian Hinds) and my hon. Friend the Member for Sutton and Cheam (Paul Scully), who helped so much to prepare the Bill. Furthermore, I thank my hon. Friend the Member for Watford (Dean Russell), who ably shepherded the Bill through its early parliamentary stages, and the Lord Commissioner of His Majesty’s Treasury, my hon. Friend the Member for North Cornwall (Scott Mann), and his team for their excellent assistance, particularly when he courageously stood in and answered on behalf of the Department in a brief moment of surprise—mostly to him. I also thank the Home Secretary and the Secretary of State for Business, Energy and Industrial Strategy for their contributions.
Sir Robert Neill (Bromley and Chislehurst) (Con)
I thank the Minister for his positive response to the amendments tabled by my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) and others in relation to the reform of corporate criminal responsibility. That is welcome. Will he take on board the importance of including in that the reform of the identification principle, which is a major bar to corporate prosecutions? The Justice Committee has called for that more than once in its recent reports, and it is supported by the current and previous Directors of Public Prosecutions and the current and previous Directors of the Serious Fraud Office.
Tom Tugendhat
I thank my hon. Friend the Chair of the Justice Committee. As he knows, this is an area of great interest and for further discussion, which we are indeed looking at taking forward.
I finish by saying an enormous thank you to the Bill team, who are in the Box today—Tom Ball and the rest of the clan—who have done a fantastic job on Burns night, of all times. Because it is a time for us to find that we are no longer wee and tim’rous beasties, but are instead going to look for that fair trojan of the human race, the “puddin’-race”—forgive me—I look forward very much to being freed of the Dispatch Box and skipping off to the whisky and the haggis. On that, Mr Deputy Speaker, thank you.
Mr Deputy Speaker (Mr Nigel Evans)
Lucky Minister. I call the shadow Minister.