|Proceeds Of Crime Bill - continued||House of Commons|
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Clause 425: Disclosure of information to Scottish Ministers and to Lord Advocate
544. Clause 425 enables information to be disclosed to the Scottish Ministers or to the Lord Advocate by a person (a 'permitted person') listed in subsection (5). The reference to a constable in subsection 5(a) will include any person with the powers of a constable, including for example the British Transport Police and the Ministry of Defence Police. Under subsection (6), the Scottish Ministers will be able to add to the list of permitted persons by order which, by virtue of clause 441(6), will be subject to approval by the Scottish Parliament. Subsection (7) narrows the designation power to specify functions; for example, when designating a Government department, the Scottish Ministers would be required to designate a relevant function within that department. Subsections (8) and (9) deal with information provided by the Commissioners of Inland Revenue and Commissioners of Customs and Excise. For information to be passed from either to the Scottish Ministers or to the Lord Advocate, the Commissioners, or a person nominated by them, must authorise the disclosure. This is to ensure that there are safeguards in place to protect sensitive personal information held by both bodies.
545. Disclosures of information that contravene the Data Protection Act 1998, or are prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000, are not permitted (subsection (3)). It is also implicit that the provisions of the Human Rights Act 1998 would need to be taken into account before any disclosure is made by a permitted person or body.
Clause 426: Further disclosure
546. Subsections (1) to (4) relate to the onward transmission from the Scottish Ministers or the Lord Advocate of information received from either the Commissioners of Inland Revenue or Commissioners of Customs and Excise (or persons to whom authority has been delegated). As with clause 425(8) and (9), these measures are an acknowledgement of the personal nature of the information. They ensure that it can only be used for purposes connected with the exercising of the functions of the Scottish Ministers or of the Lord Advocate under the Bill with the permission of the providing body.
547. Subsection (6) enables a provider of information to the Scottish Ministers or to the Lord Advocate to attach conditions relating to its further disclosure for example, where it may contain sensitive operational details.
Clause 427: Disclosure of information by Scottish Ministers and by Lord Advocate
548. Clause 427 provides that the Scottish Ministers and the Lord Advocate may disclose information to any person or body for any of the purposes set out in subsection (1)(a) to (i). Under subsection (8), the Scottish Ministers will be able to add to the list of disclosure purposes by order.
549. As with clause 425(3), exchanges of information which contravene the Data Protection Act 1998, or are prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000, are not permitted and any disclosure would be subject to the provisions of the Human Rights Act 1998.
Part 11: Co-operation
Clause 428: Enforcement in different parts of the United Kingdom
550. This clause provides for restraint, receivership and confiscation orders, including ancillary orders, and investigation orders and warrants under Part 8, made in each of three jurisdictions of the United Kingdom to be enforced in the other. The arrangements for such enforcement are to be made by Order in Council. Subsection (2) enables provision to be made so that the functions of a receiver or, in Scotland, an administrator may be recognised in the other jurisdictions.
Clause 429: external requests and orders
551. Clause 429 provides for the freezing of property in the United Kingdom which may be needed to satisfy overseas orders in relation to the recovery of criminal proceeds, and for the enforcement of such orders by the realisation of property in any part of the United Kingdom. Such provision is to be made by Order in Council, and corresponds to provisions in Parts 2, 3 & 4 or Part 5 (excluding Chapter 3). Provision in existing legislation is to be found in sections 39 and 40 of the Drug Trafficking Act 1994, section 96 and 97 of the Criminal Justice Act 1988, sections 40 and 41 of the Proceeds of Crime (Scotland) Act 1995 and Article 42 of the Proceeds of Crime (Northern Ireland) Order 1996.
552. It should also be noted that there is another scheme, in section 9 of the Criminal Justice (International Co-operation) Act 1990, for the enforcement in the United Kingdom, also by Order in Council, of forfeiture orders made overseas. However, these forfeiture orders are restricted to orders for the disposal of "instrumentalities" of crime (i.e. items used, or intended for use, in the commission of criminal offences). The Bill makes no change to section 9 and does not affect the operation of the Orders in Council made under it.
553. Under current legislation, assistance in freezing property and enforcing overseas orders may only be granted to countries and territories which have been "designated" for the purpose. Clause 429 does not require designation. It enables such assistance to be granted to the government of any country or territory outside the United Kingdom, without any need for designation.
554. It should be noted that clause 429 will enable property in the United Kingdom to be frozen in response to a request from an overseas government from the start of an investigation, as long as there are reasonable grounds to believe that the property to be frozen may be needed to satisfy an external order which may be made.
Clause 430: External investigations
555. Clause 430 makes provision for investigative powers to be made available in respect of overseas investigations. These will be provided by Order in Council which will be subject to annulment in pursuance of a resolution of either House (clause 441(4)). The domestic investigation orders and warrants are provided in Part 8; subsection (1) allows these powers to be made available for external investigations. External investigations are defined at clause 432(3) as the overseas equivalents to domestic confiscation, money laundering and civil recovery investigations. Subsection (3) provides the equivalent provision in Part 8 that disclosure orders will not be available for external money laundering investigations. Subsection (2) allows for investigation powers corresponding to those in Part 8 to be applied, with any necessary modifications, for use in response to a request from an overseas authority.
Clause 432: Interpretation
556. Clause 432(2) makes an external order, which is made in relation to the recovery of the proceeds of crime, enforceable in the United Kingdom regardless of the form it takes. It could be an order made against a person (an "in personam" order) or an order made against property (an "in rem" order, as in civil forfeiture proceedings in the USA). It could be a forfeiture order (an order changing the title of property), an order to a person to pay a sum of money or some other kind of order.
557. The external order must have been made by an overseas court (see subsection (8)). It is immaterial what kind of court proceedings the external order is made in. It could be made in criminal proceedings, civil proceedings or some other court proceedings. However, non-court orders such as "administrative" confiscation orders made by police officers and similar authorities are excluded from the scheme.
558. An external order is defined as being for the recovery of specified property or a specified sum of money (clause 432(2)(b)). This will enable external orders to be enforced, whether they are orders for the recovery of particular tainted property or orders for specified sums of money that may be satisfied out of any property, legally or illegally obtained.
559. Clause 432 (9) defines "overseas authority". This section of the Bill refers to "overseas authority" rather than "overseas government" because it will not always be the government of a country which has responsibility for the functions outlined at clause 432(9) (a) - (c).
Part 12: Miscellaneous and General
Clause 433: Tax
560. This clause introduces Schedule 7.
Schedule 7: Tax
Part 1 - General
561. Sections 75 and 77 of the Taxes Management Act 1970 have the effect that, where the receiver is appointed by the court, certain taxes payable by the person whose property is under receivership may be recovered instead from the receiver. Whilst both the tax and the confiscation legislation is silent on the subject, there is an argument that these sections apply to receivers appointed under the confiscation legislation. Schedule 7 provides expressly that these sections do not so apply.
Part 2 - Provisions relating to Part 5
562. This part applies where property vests in the trustee for civil recovery or other person under a recovery order or foreign currency is forfeited under clause 297.
563. Without special provision, such vesting or forfeiture might count for capital gains purposes as a disposal at market value, and any resulting gains would be chargeable. A charge to income tax or corporation tax might also arise.
564. Paragraph 3 of Schedule 7 provides as a general rule that transfers by way of vesting or forfeiture should not be treated as giving rise to chargeable gains. This does not apply to the extent that a payment is made, for example under clause 272: in that case tax may be charged by reference to the payment actually made.
565. A similar issue potentially arises where a transfer is made under Part 5 with the benefit of interest accrued but not yet paid. Without special provision, a charge on the transferor would then arise under the Accrued Income Scheme, on top of the amounts recovered or forfeited. Paragraph 4 provides in effect that a transfer in civil recovery or cash forfeiture proceedings will be disregarded for purposes of the Accrued Income Scheme.
566. Paragraphs 5 to 8 cover other assets where comparable income tax or corporation tax issues arise. In each case, transfers will not be treated as giving rise to an income tax charge, except to the extent that a payment is made to the transferor for what is acquired. The assets concerned are:
567. Paragraph 9 applies the same general rule to transfers that would otherwise give rise to debits or credits taken into account under the loan relationship rules for computing a corporation tax charge.
568. Paragraph 10 covers analogous issues where the property transferred is trading stock of a business. The normal rule is that stock disposed of not by way of trade, or valued on the discontinuance of the trade, is taken into account for tax purposes at market value. These rules are disapplied so that transfers of stock give rise to no profit or loss.
Clause 434: Customs and Excise prosecutions
569. Clause 434 provides that the Commissioners of Customs and Excise may bring proceedings for an offence under Part 7 of the Bill (money laundering), an offence under clause 331 (prejudicing an investigation) and certain inchoate offences in relation to these offences. The provision reflects that in existing legislation, except that the range of offences covered has been slightly increased. It should be noted that this section does not apply to proceedings on indictment in Scotland.
Clause 435: Crown servants and regulators
570. Clause 435 provides that the money laundering offences in Part 7 of the Bill and the offence of prejudicing an investigation under clause 331 can be applied, by regulations made by the Secretary of State, to persons in the public service of the Crown. The provision is required because Crown Servants are not subject to criminal offences in the exercise of their duties as Crown Servants, but areas of Crown business may potentially be vulnerable to money laundering. The provision closely follows the existing legislation, under which regulations have been made applying the offences to the Director of National Savings and his staff.
571. Clause 435 also enables the offence of failing to disclose that another is engaged in money laundering (in clause 324) to be disapplied, by regulations made by the Secretary of State where supervisors (for example, the Bank of England) and investigators (such as those employed by the Bank of England) are concerned. The principle underlying the provision in respect of supervisors is that there is a separate requirement under regulation 16 of the Money Laundering Regulations 1993 for them to make disclosures to a constable. In the case of investigators who are also constables or are persons undertaking money laundering investigations on behalf of authorised bodies, such as the Financial Services Authority, it is also not necessary to subject them to the reporting requirement. Again, regulations have been made under similar provision in existing legislation (see, for example, SI 1994 No 1757).
Clause 436: References to financial investigators
572. This clause enables the Secretary of State to specify by order a description of the type of accredited financial investigators who may exercise restraint powers under Part 2 or investigation powers under Part 8. The order is subject to annulment in pursuance of a resolution of either House (clause 441(4)). A system for the accreditation of financial investigators is provided under clause 3 and the purpose of the order-making power is to enable the Secretary of State to limit the use of restraint and investigation powers to those financial investigators who are employed or engaged by law enforcement authorities or are employed or engaged in a law enforcement capacity by Government departments. It will be possible to describe in an order investigators working in specified organisations or Government departments, or investigators who are not below a specified grade. It would thus be possible to designate under the order investigators who may act as senior appropriate officers for the purposes of making an application for a customer information order (clause 352).
Schedule 8: Amendments
573. Schedule 8 is introduced by clause 438. This Schedule contains amendments that need to be made to other legislation as a result of the Bill. In some cases, these substantially replicate consequential amendments made in the existing legislation. This applies to the amendments to the Rehabilitation of Offenders Act 1974, the Rehabilitation of Offenders (Northern Ireland) Order 1978, the Criminal Justice Act 1982, the Insolvency Act 1986, the Insolvency (Northern Ireland) Order 1989, the Criminal Justice (International Co-operation) Act 1990 and the Crime (Sentences) Act 1997.
574. In other instances, it has been necessary to make new consequential provision as a result of new material in the Bill. These amendments are discussed below, in chronological order of the legislation amended.
Parliamentary Commissioner Act 1967 (c.13)
575. Paragraph 2(3) of this schedule brings the taxation functions of the Director of ARA within the remit of the Parliamentary Commissioner for Administration in respect of his consideration of complaints. This places consideration of such matters by the Commissioner on an equal footing with other matters to do with taxation, which remain under the responsibility of the Inland Revenue.
Criminal Appeal Act 1968 (c.19)
576. The consequential amendment in current legislation of the Criminal Appeal Act 1968 has been expanded to include a new provision in sub-paragraph (2). This is needed because the Director of the ARA may be involved in certain appeals to the House of Lords under the 1968 Act.
Misuse of Drugs Act 1971 (c.38)
577. The amendment of the Misuse of Drugs Act 1971 is one of a number occasioned by the new approach to money laundering adopted in the Bill. Part 7 of the Bill establishes a number of new money laundering offences, applicable to benefit from all criminal conduct. The new offences replace the separate drug money laundering and non-drug money laundering offences in the existing legislation.
578. In the existing legislation, drug money laundering offences are defined as "drug trafficking offences". The classification of a particular offence as a drug trafficking offence has a number of practical consequences. For example, a confiscation hearing must be held where a person appears for sentence in the Crown Court for a drug trafficking offence. Because there is no longer such a thing, following the changes made by the Bill, as a drug money laundering offence, the definition of a drug trafficking offence no longer includes drug money laundering offences.
579. The expression "drug trafficking offence" does not only appear in the confiscation legislation. It also appears, for example, in section 27 of the Misuse of Drugs Act 1971, which empowers the courts to make a forfeiture order following a conviction for "a drug trafficking offence". Because the definition of a drug trafficking offence, as amended by the Bill, will no longer include drug money laundering offences (which will no longer exist), section 27 of the 1971 Act will no longer apply to drug money laundering offences. The consequential amendment of section 27 makes this clear. However, the change is not expected to have any practical effect, as there is other legislation in place which achieves a similar effect to section 27.
Rehabilitation of Offenders Act 1974 (c.53)
580. The amendment of the Rehabilitation of Offenders Act 1974 provides that failure to pay a confiscation order prevents a person from being rehabilitated under the 1974 Act. Similar amendment is made to the equivalent Northern Ireland legislation (the Rehabilitation of Offenders (Northern Ireland) Order 1978).
Criminal Appeal (Northern Ireland) Act 1980 (c.47)
581. As in England and Wales the Director of the ARA may be involved in appeals to the House of Lords and current Northern Ireland confiscation legislation amends the Criminal Appeal (NI) Act so that confiscation orders attract a right of appeal as if they were part of a sentence. Accordingly similar amendment is made to the Criminal Appeal (Northern Ireland) Act as to the Criminal Appeal Act 1968.
Civil Jurisdiction and Judgments Act 1982 (c. 27)
582. The amendment of the Civil Jurisdiction and Judgments Act 1982 provides that orders in relation to confiscation made in one part of the UK are not enforced in another part of the UK under the 1982 Act (which establishes a scheme for the mutual enforcement of civil judgments between the three UK jurisdictions). Instead, they are enforced under powers particular to the confiscation legislation (see clause 428).
Criminal Justice Act 1982 (c.48)
583. The amendment of the Criminal Justice Act 1982 provides that persons convicted of the principal money laundering offences in Part 7 of the Bill are not liable to early release under the 1982 Act.
Police and Criminal Evidence Act 1984 (c.60)
584. The amendments of sections 56 and 58 of the Police and Criminal Evidence Act 1984 enable the exercise of an arrested person's rights to be delayed under certain circumstances where this might result in the dissipation of a person's benefit from crime. These consequential amendments of the 1984 Act are similar to those made by existing legislation.
585. By virtue of the amendment of section 116 of the 1984 Act, a drug trafficking offence as defined in the Bill is always a "serious arrestable offence" for the purposes of the 1984 Act. The classification of an offence as a serious arrestable offence makes certain powers available in relation to it which are not available in relation to other offences. Again, the position here is similar to that in the current legislation.
586. In addition, however, the new principal "all crime" money laundering offences created by the Bill are defined as offences which are always serious arrestable offences. At present, the principal drug money laundering offences are always serious arrestable offences but not the principal laundering offences applicable to the proceeds of other crimes.
Insolvency Act 1986 (c. 45)
587. The amendment of the Insolvency Act 1986 makes it clear that the discharge of a bankrupt does not release the bankrupt from the liability to pay a confiscation order.
Criminal Justice Act 1988 (c.33)
588. The main amendment of the Criminal Justice Act 1988 is also a consequence of the replacement of drug and non-drug money laundering offences with new all crime money laundering offences. Under section 151 of the 1988 Act, HM Customs have certain powers to arrest bail absconders. The amendment of section 151 gives Customs the power to arrest bail absconders in connection with a wider range of money laundering activity.
Extradition Act 1989 (c.33)
589. The amendment of the Extradition Act 1989 makes it clear that, in future, the new all-crime money laundering offences created by the Bill will implement the United Kingdom's obligations in relation to drug money laundering under the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.
Police & Criminal Evidence (Northern Ireland) Order 1989 (SI 1989/1341 (NI 12))
590. The Police and Criminal Evidence (Northern Ireland) Order 1989 provides the police in Northern Ireland with the same powers and duties as those provided in the Police and Criminal Evidence Act 1984. These amendments replicate for Northern Ireland the amendments set out earlier (paragraphs 585-587).
Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (NI 19))
591. The amendment set out at paragraph 588 to the Insolvency Act 1986 is replicated for the equivalent Northern Ireland legislation.
Criminal Justice (International Co-operation) Act 1990 (c. 5)
592. Section 13 of the Criminal Justice (International Co-operation) Act 1990 enables regulations to be made relating to substances useful for the production of controlled drugs. The amendment of section 13(6) of the 1990 Act enables information gained from such regulations to be made available in confiscation proceedings.
Drug Trafficking Act 1994 (c.37)
593. The effect of the amendments of the Drug Trafficking Act 1994 is to keep in force sections 55 and 56 of the 1994 Act, together with their ancillary provisions, which permit the police and HM Customs to obtain production orders and search warrants for the purpose of an investigation into drug trafficking. These powers are used to conduct investigations into drug trafficking offences, with a view to a prosecution, as well as the proceeds of drug trafficking. Under the Bill, there is a new power for the enforcement authorities to obtain a production order and a search warrant for the purposes of an investigation into the proceeds of any criminal conduct, which would include drug trafficking proceeds, but the new power does not cover investigations into drug trafficking offences. It has therefore been decided to keep the existing powers in force.
Proceeds of Crime (Northern Ireland) Order 1996 (SI 1996/1299 (NI 9))
594. The Proceeds of Crime (Northern Ireland) Order 1996 updated and restated the law relating to the confiscation of the proceeds of drug trafficking and other serious crime. Part 4 of the Bill largely replaces the existing provisions in Part II and III of the 1996 Order. Article 49 of the 1996 Order, as amended by the Financial Investigations (Northern Ireland) Order 2001, introduced additional investigation powers through the appointment by a county court judge of a financial investigator to assist the police or customs in investigations into the proceeds of crime. While retaining those financial investigation powers for criminal confiscation investigations applications will be made to a Crown Court judge, consistent with the process set out at Part 8 of the Bill. Financial investigators will be required to be accredited within the meaning given by clause 4(2) of the Bill. Criminal confiscation investigations are defined by reference to clause 330 of the Bill.
595. The powers of a financial investigator are found at Schedule 2 to the 1996 Order. The Schedule 2 paragraph 3 power, commonly referred to as the "General Bank Circular" shall cease to have effect as it is largely duplicated by the customer information order introduced at clause 352 of the Bill. The Schedule 2 paragraph 3A power is amended to reflect the terminology used elsewhere in the Bill to ensure that the question of whether a person has benefited from criminal conduct is decided in accordance with Part 4 of the Bill. The amendments ensure that the Director of ARA will have the same powers for criminal confiscation investigations as the other law enforcement authorities in Northern Ireland.
596. Articles 50 and 51 of the 1996 Order are amended to retain, as in England and Wales, the powers for police and customs to obtain production orders and search warrants for the purpose of an investigation into drug trafficking offences. Drug trafficking offence is defined to reflect the new approach to money laundering adopted in the Bill.
Crime (Sentences) Act 1997 (c. 43)
597. Confiscation orders like fines attract imprisonment in default if they are not paid. Sections 35 and 40 of the Crime (Sentences) Act 1997 enable magistrates' courts to replace imprisonment in default of payment of a fine with certain non-custodial measures. This power is specifically disapplied where confiscation order enforcement is concerned.
Access to Justice Act 1999 (c.22)
598. These amendments make it clear that Community Legal Service funding is available for cash forfeiture proceedings under Part 5.
Powers of Criminal Courts (Sentencing) Act 2000 (c.6)
599. By virtue of the amendment of section 110(5) of the Powers of Criminal Courts (Sentencing) Act 2000, those convicted of drug trafficking offences (but not drug money laundering offences, which cease to exist as separate offences following the Bill) will continue to be subject to mandatory sentences.
|© Parliamentary copyright 2001||Prepared: 18 October 2001|