House of Commons - Explanatory Note
Proceeds Of Crime Bill - continued          House of Commons

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Terrorism Act 2000 (c.11)

600.     The Bill makes certain amendments to Schedule 8 to the Terrorism Act 2000, which is concerned with the rights of persons detained under section 41 of, or Schedule 7 to, that Act (i.e. persons arrested or detained as suspected terrorists under anti-terrorism powers). The amendments in question run in parallel with those made to sections 56 and 58 of the Police and Criminal Evidence Act 1984, as described above. Their basic effect, like the amendments of the 1984 Act, is to enable the exercise of an arrested or detained person's rights to be delayed in certain circumstances where this might result in the dissipation of a person's benefit from crime.

Criminal Justice and Police Act 2001 (c.16)

601.     The amendments of the Criminal Justice and Police Act 2001 are consequential on the new seizure powers created by the Bill, and are designed to bring those powers within the ambit of the 2001 Act. The 2001 Act lays down new procedures for the handling of material seized by the enforcement authorities which is or includes excluded or special procedure material, as originally defined by the Police and Criminal Evidence Act 1994. Special procedure material means material maintained in confidence, such as banking records.

602.     The amendment of section 55 of the 2001 Act makes it clear that the obligation to return excluded or special procedure material envisaged by that section does not include special material seized under the Bill (because the Bill creates a specific power to seize special procedure material). Similarly, the amendment of section 60 of the 2001 Act makes it clear that the duty to secure seized property which is or includes excluded or special procedure material, as provided for in that section, does not apply to special procedure material seized under the Bill. Again, the reason for the amendment is that the Bill contains a specific power to seize special procedure material.

603.     The amendments of Part 1 of Schedule 1 to the 2001 Act bring the new seizure power in the Bill within the ambit of section 50 of the 2001 Act, which provides primarily that persons with seizure powers may seize property which may include property which they are not entitled to seize, so that the latter element may be separated out. The amendment of Part 3 of Schedule 1 brings the new seizure power in the Bill within the ambit of section 55 of the 2001 Act (subject to the amendment of section 55 mentioned above).

Clause 440: Commencement

604.     This clause provides that all substantive provisions of the Bill will be brought into force by means of commencement orders. These orders will be made by the Secretary of State for those Parts applying wholly or in part to England & Wales and Northern Ireland, and by the Scottish Ministers for Part 3 and the necessary provisions of Part 12 as they apply to Scotland. Parts 5, 8 and 10 contain provisions that are limited to Scotland. The Secretary of State must therefore consult with Scottish Ministers when commencing these provisions.

General

Clause 441: Orders and regulations

605.     This clause provides that subordinate legislation is to be made by statutory instrument and makes provision as to the procedure which should apply to each power under the Bill (including where the power is to be exercised by the Scottish Ministers). It allows subordinate legislation to make different provision for different purposes and to include ancillary provision.

Clause 443: Extent

606.     Clause 443 delineates the geographical extent of the various parts of the Bill.

FINANCIAL EFFECTS OF THE BILL

607.     The costs and savings set out below depend on a range of assumptions, many of which cannot be easily quantified. For these reasons, the figures given are estimates only. All figures are full year figures at current year prices unless otherwise indicated.

608.     The estimated costs, which provide for the establishment of the Assets Recovery Agency (ARA) and the rollout of training for practitioners in the Bill's provisions will be met by the allocation from the Spending Review 2000 exercise of a total of £49 million over three years.

Part 1: Assets Recovery Agency

609.     The total costs to establish ARA are estimated at approximately £3 million. This includes costs for the establishment of the Centre of Excellence for Financial Investigation, accommodation, IT support and the training and recruitment of the Agency's staff. Once the Agency has been established, annual running costs are estimated to be around £13 million. These estimates are all subject to revision.

610.     These estimates, which relate to the operation of the Agency in England, Wales and Northern Ireland, are based on the following working assumptions:

  • that by 2003/04 ARA will have some 100 staff;

  • that ARA will take forward all civil recovery cases;

  • that ARA will take forward criminal confiscation work (exact parameters to be agreed), some of which would formerly have been carried out by the CPS and Customs;

  • that ARA's caseload will be in the region of 15-20 civil recovery and 250 criminal confiscation cases in a full year.

611.     The figures do not take into account the possibility, currently under discussion, that the Agency should assume a major role in the enforcement of confiscation orders other than those that it has itself obtained.

Part 2: Confiscation: England and Wales

612.     It is anticipated that the numbers of confiscation cases will increase significantly as a result both of the establishment of ARA and of the increased emphasis on asset recovery arising from the higher profile which this work is receiving. The additional costs of such work are included in the figures for the running of ARA set out under Part 1 above. In addition increased public expenditure is expected to arise from clause 32. The power for prosecutors or the Director of ARA to appeal the decision of the Crown Court not to make a confiscation order, as set out in this clause, is expected to be used around 50 times each year. The exercise of this power would incur costs for the prosecutor/Director, the Court Service and (potentially) the Legal Services Commission of around £1680 per case, or a total of £84,000 per annum.

Part 3: Confiscation: Scotland

613.     The number of criminal confiscation cases is likely to increase significantly. Additional staffing, court and other costs will amount to around £500,000 per annum; this figure is additional to the figures given under Part 1, as ARA will not operate confiscation powers in Scotland. Otherwise, the only clause of Part 3 that is expected to give rise to significant additional public expenditure is the power at clause 117 for the Lord Advocate to appeal either the decision of the sheriff as to the value of the confiscation order or the failure to make an order. That power is likely to be used on around five occasions per annum and the cost per case is unlikely to be significantly greater than in England and Wales, giving a maximum cost of around £8400 per year.

Part 4: Confiscation: Northern Ireland

614.     The establishment of ARA and the increased emphasis on asset recovery is likely to have an effect on resources required by the main prosecuting authority in Northern Ireland, namely the Director of Public Prosecutions for Northern Ireland. There would not appear to be any significant additional public expenditure as a direct result of Part 4. It is difficult to estimate the likely cost in Northern Ireland of the power at clause 184 for prosecutors or the Director to appeal either the decision of the Crown Court as to the value of the confiscation order or the failure to make an order. That power is likely to be used only once or twice a year and the cost per case is unlikely to be significantly greater than in England and Wales.

Part 5: Recovery of the Proceeds etc. of Unlawful Conduct

615.     The new scheme contained in Part 5 sets out the procedure to apply to the High Court for a recovery order. It is expected that ARA will deal with 15 such cases in its first year of operations, building to around 20 such applications per year across England & Wales and Northern Ireland. The cost to ARA, the Court Service and the Legal Services Commission in court and legal fees and legal aid payments (including the additional costs involved where an application is made by the Director for an interim receiving order) would be approximately £7,600 per case, rising to £10,300 for the most complex cases where Queen's Counsel is instructed. The total cost would be around £393,500 per annum, in addition to the running costs of ARA set out under Part 1 above.

616.     For Scotland, where the Scottish Ministers rather than the Director of ARA will exercise civil recovery powers, there will be an additional cost not accounted for under Part 1 above for staffing and other resources, estimated to be around £500,000 per annum. In addition, it is anticipated that around 5 civil recovery cases per annum will be launched in Scotland, giving an approximate annual cost in legal and court fees of £100,000.

617.     The cash forfeiture scheme in Chapter 3 of Part 5 builds upon that contained in Part II of the Drug Trafficking Act 1994 (DTA). Based upon the costs incurred under the DTA scheme, it is anticipated that the current levels of 400 cases per annum will double to 800 cases. This additional caseload for England, Wales & Northern Ireland would give rise to investigation costs (police and Customs) of £1,840,000, additional litigation costs (police and Customs) of £311,000, hearing costs (Magistrates' Courts Committees and the Court Service) of £81,000 and legal aid costs (Legal Services Commission & NI Legal Aid Fund) of £400,000, giving a total additional cost of £2,632,000. The equivalent costs in Scotland will total around £250,000. In addition, costs of around £50,000 per annum will be spent on the remuneration and expenses of the person(s) appointed under clause 289(8) to oversee the exercise of the search power in cases not judicially authorised in advance.

Part 6: Revenue Functions

618.     Given the entirely novel approach of the provisions of Part 6, it is difficult to estimate the cost to the Exchequer of this Part. However, an assumption is being used that 5 senior (Grade 7) members of ARA may be employed full-time on taxation-related work at a total cost of £60,000 per capita per annum, giving a total cost of £300,000 per year. This cost is included in that set out above for Part 1, i.e. the total the running costs of ARA.

Part 7: Money laundering

619.     No new money laundering offences are created by Part 7; the Bill reforms and clarifies the existing offences. Clause 324 extends the scope of the offence of failure to report suspicion of drug money laundering to cover the proceeds of all crime, but narrows its coverage to those persons covered by the Money Laundering Regulations 1993.

Part 8: Investigations

620.     The new powers contained in Part 8 will strengthen investigation of criminal proceeds and will therefore increase such investigative activity. The creation of the account monitoring order will replace the need for multiple applications of production orders in the same investigation. The resultant decrease in court time, with 9150 monitoring orders costing £300 each replacing 25,000 production orders costing £150 each, will represent a saving of around £1,005,000 per annum. The provisions on search and seizure are essentially unchanged from existing legislation, and no financial effect is therefore anticipated.

621.     Ex parte applications for the new disclosure order will be limited to the Director of ARA. Such applications will incur costs for the Director and the Court Service of around £150 per application; it is expected that there will be 200 applications for disclosure orders each year, incurring a total cost of £30,000. Applications for customer information orders would incur costs for law enforcement/the Director and the Court Service of around £150 per case, or a total of £150,000 per annum for the expected 1000 ex parte applications for domestic and international cases.

Part 9: Insolvency

622.     The provisions set out in Part 9 are not expected to have any impact on public spending.

Part 10: Information

623.     The information disclosure provisions contained in Part 10 will entail some additional expenditure by ARA as it makes and responds to requests for information. The total annual cost is difficult to estimate but most likely to be between £50,000 and £100,000. The costs will be absorbed within the budgets of ARA and the agencies with which it will exchange information, subject to any agreements reached as to payments by recipients of information.

Part 11: Miscellaneous and General

624.     The only provision of Part 11 that is expected to give rise to significant additional public expenditure is clause 429. It is difficult to gauge the level of external requests for the exercise of the restraint powers in Parts 2-4, as this is dependent on the approach of international partners to this new provision. As an indication of current levels of activity, during 2000 there were only 15 applications from overseas for assistance in restraint and confiscation cases.

EFFECTS OF THE BILL ON PUBLIC SERVICE STAFFING

625.     Part 1 of the Bill would create the Assets Recovery Agency, which is anticipated to have an initial staffing of approximately 100 staff. While it is anticipated that a significant number of the staff of the Agency are expected to transfer from existing public sector bodies, this figure is still likely to represent the total increase in staffing, as the transferees will be replaced in their parent organisations. In addition, new Scottish structures will be created to mirror the work of the Agency, which will comprise approximately 10 additional staff.

SUMMARY OF THE REGULATORY APPRAISAL

626.     The provisions of the Bill that are expected to have an impact on businesses are as follows:

  • the change in procedures to make restraint available earlier in an investigation, as set out in clauses 41-43, 121-123 and 192-194;

  • the new power to make interim receiving orders in connection with the recovery of property by means of civil proceedings, as set out in clause 251, and their Scottish equivalents, interim administration orders, as set out in clause 259);

  • use of the tax system to target the proceeds of crime, contained in Part 6;

  • in money laundering (Part 7), the extension of the "failure to report" offence to all crime, as set out in clause 324.

  • the additional investigatory powers, contained in Part 8;

627.     No direct impact on charities or voluntary bodies has been identified. While not exempted from the scope of civil recovery, such bodies will be included in the protection provided under clause 267 in certain circumstances for persons who obtain recoverable property in good faith.

628.     The measures in the Bill are designed to prevent criminals from profiting from their crimes by giving law enforcement agencies new powers and by establishing a new specialist agency, focused on depriving criminals of their illegally obtained assets. These measures are designed to implement the recommendations set out in the Report "Recovering the Proceeds of Crime" published by the Performance & Innovation Unit of the Cabinet Office in June 2000.

629.     Owing to the nature of criminal work and the difficulty of quantifying objectively the benefits of certain techniques (whether on a standalone basis or in comparison with other techniques), this section is necessarily lacking in objective valuations for the various measures. The Department has conducted separate consultation exercises on a partial Regulatory Impact Assessment (RIA) and also included a draft final RIA in the draft Bill. All responses received have been considered fully and RIA amended as necessary in the light of them to reflect those concerns. Nonetheless, the Government considers that there is sufficient benefit in each of the measures set out in above to justify introducing them.

630.     The total cost of the package of measures contained in the Bill is estimated at between £53.3m and £54.3m. However, the introduction of the new monitoring order will mean a significant reduction in the number of production orders sought, bringing the net cost down to between £48.3m and £49.3m.

631.     A full Regulatory Impact Assessment for the Bill is available on the Home Office Website, www.homeoffice.gov.uk or from the Library of the House.

EUROPEAN CONVENTION OF HUMAN RIGHTS

632.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Rt. Hon David Blunkett MP, Secretary of State for the Home Department, has made the following statement:

"In my view the provisions of the Proceeds of Crime Bill are compatible with the Convention rights."

COMMENCEMENT

633.     All substantive provisions of the Bill are to come into force by commencement orders. These orders will be made by the Secretary of State, for those Parts of the Bill applying wholly or in part to England & Wales and Northern Ireland, and by the Scottish Ministers for Part 3 and the necessary sections of Part 12 as they apply to Scotland. Parts 5, 8 and 10 contain provisions that are limited to Scotland; the Secretary of State must therefore consult with Scottish Ministers when commencing these provisions.

 
 
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Prepared: 18 October 2001