Proceeds of Crime Bill

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Mr. Ainsworth: I want to explore whether the hon. Gentleman and I agree in principle. I am not saying—and I do not think that he is asking me to say—that mixed funds must be dealt with in the same way in every circumstance. Everything depends on the circumstances. A mixed fund might be able to be

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unravelled simply; it might be possible to identify clearly the part of it that is the proceeds of crime, and the associated profits that arose from that, and the part of it that is not. However, funds might have been sunk into a business or an investment, in which case the matter would become more complex and detailed.

I do not think that the hon. Gentleman would want us not to be able to take the profits that arose from a business that was clearly put in an advantageous position as a result of the investment of criminal moneys. It would be for the court to decide what was or was not the proceeds of crime, and money associated with the proceeds of crime, and we should not lay down a firm methodology with regard to how it disentangles mixed funds.

If the hon. Gentleman wishes us to make the provision narrower, by backing away from that capability, a matter of principle is at stake. If he is merely seeking to make the Bill clear, we could perhaps look at other forms of words that do not make the provision narrower but make the clause more readable.

Mr. Grieve: I am very conscious of what the Minister said. I accept fully that there may be circumstances when it is inevitable that funds that could have come from outside would have to be confiscated because disentanglement could not take place. However, I note a contradiction between subsections (4) and (6). Subsection (4) clearly states:

    ''A person benefits from conduct if he obtains property as a result of or in connection with the conduct.''

We agree with the unequivocal statement under subsection (4), yet subsection (6) suddenly starts to muddy the waters and introduces a new element, which means every asset that the person has. If judicial discretion were not introduced, that could be anything.

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Mr. Ainsworth: It is not our intention to deprive the court of its ability to consider the issue. I accept what the hon. Gentleman says. I shall try to satisfy him. There is scope for confusion. I shall see whether others can wrap a towel round their heads and unravel it. We do not want to narrow the court's ability to confiscate the proceeds of crime. If all he wants is to make the provision clearer, I shall look into whether that can be done. I give him that assurance.

Mr. Grieve: I am grateful to the Minister for his reassurance. Having clarified such matters, however, he may find himself less in agreement with me. He will have been advised by his officials about how the system has worked in the past in that it is the practice of the High Court to deal with mixed property. The Crown court may well not have the training or be so well versed in such practices. That makes it all the more important that there should be clarity about what is intended. Although I fully accept that he is not intending to confiscate all property, I read subsection (6) as allowing for that to happen.

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I presume that that was not intended originally under the old legislation, because we would have heard about it. There would have been complaints. The matter would have been flagged up. There would have been court cases and judicial interpretation. I assume that the measures have worked all right, but from a straight reading of subsection (6), especially juxtaposed with subsection (4), there is a contradiction. I worry that subsection (6) could open up much more than the Minister intends, although I am mindful of the fact that subsection (6) may have to be so worded to make sure that mixed property can be properly considered and judicial discretion applied. I hope that I have made myself clear.

Mr. Ainsworth: There is no intention on my part to hide the policy. If the hon. Gentleman is right and there is something more profound between us, I want to expose that so that we can discuss it on Report.

Mr. Grieve: In fairness to the Minister, I suppose that it could be argued that if the phrase were to cover any property, it would have to read

    ''in that connection and any other connection''.

The word ''some'' had significance to the original draftsman, but it is opaque and the absence of the final ''connection'' does not help clarity.

I am grateful to the Minister for agreeing to reconsider the matter, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 76 ordered to stand part of the Bill.

Clause 77 ordered to stand part of the Bill.

Clause 78

Gifts and their recipients

Mr. Grieve: I beg to move amendment No. 274, in page 49, line 14, leave out 'obtained' and insert 'transferred'.

The Chairman: With this we may discuss the following: Amendment No. 275, in page 49, line 14, at end insert

    ', unless such a person can establish on the balance of probabilities that he is a bona fide purchaser of such property without notice that the property was obtained by the defendant as a result of or in connection with his criminal conduct.'.

Clause stand part

Amendment No. 276, in clause 81, page 50, line 22, leave out 'the greater of'.

Amendment No. 277, in clause 81, page 50, line 25, at end insert 'or'.

New clause 5—Value of tainted gifts: variation—

    'If the value of a tainted gift is found to be greater at the date the property was given than at the date the value of the property was found, the difference in such value shall be recoverable from the defendant but not from the recipient of the gift.'.

Mr. Grieve: A series of questions arises under clause 78, and I drafted several amendments to highlight an issue that the Committee needs to consider. Let me start by considering the clause generally. It covers gifts

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and their recipients, and of course the intention is that tainted gifts should be confiscated. There is no problem with that. If someone gives someone else a tainted gift, it is right and proper that it should be confiscated.

I am, however, anxious about subsection (1), to which amendment No. 274 relates. That subsection states:

    ''If the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time the defendant obtained it, he is to be treated as making a gift.''

This is about the circumstances in which a transfer has taken place for value. Let us suppose that a person obtains an asset illegally—it is the proceeds of crime—and at a subsequent date he sells it to a third party. For the moment, I ask the Minister to assume that the third party is an innocent third party, because that is important. If he were not an innocent third party, I would not be very concerned, and the stuff could be confiscated. However, as I read the impact of subsection (1), the valuation of the asset is the value at the time when the defendant obtained it, not the value at the time when he transferred it for value to the third party.

Once we have that in mind, it is not difficult to appreciate that the innocent third party may legitimately buy an item, say a chattel, that was worth £5,000 when it was obtained as the proceeds of crime by the defendant, but was worth only £2,500 according to market value—values do go down—when he transferred it for value. However, its value as a tainted gift in the hands of the recipient will be the value at the time when the defendant obtained it.

Moreover—this leads to the subsequent amendments—for the purposes of confiscation from the third party, the value that is attached to the item is the original valuation. Therefore, the third party will have to hand back not only £2,500, but an extra £2,500 out of his own pocket, even though he was completely innocent of any wrongdoing. That is unfair and completely barmy. I cannot believe that that is what the Government intend. We shall have numerous examples of individuals who obtain from defendants for perfectly straightforward and correct value items whose value is lower than it was at the time when the defendant originally obtained them. I tackled that first in amendment No. 274, by seeking to replace ''obtained'' with ''transferred''. The intention is that the valuation for purpose of recovery from a third party should be carried out as of the date of transfer, not the date of obtaining. Amendment No. 275 would qualify the clause, if accepted—it is an alternative—and highlights the fact that we are concerned only with an innocent third party.

I suggested that new clause 5 could be tagged on. I am mindful that the Government wish to recover the proceeds of crime and do not want to let the defendant off the hook. If that is what the Minister is worried about, I am perfectly prepared to allow the director to recover the balance between the value of the item obtained and its value at the date that it was

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transferred from the defendant, but I am not happy about the Government recovering it from the innocent third party to whom the transfer was made.

Mr. Paul Stinchcombe (Wellingborough): Can the hon. Gentleman clarify one matter for me in respect of amendment No. 275? I recognise the phraseology from certain equity and land law books. Normally, the third party is referred to as the bona fide purchaser for value. What relevance is there in his refusal to include the words ''for value'' in his formulation?

Mr. Grieve: Subsection (1) says:

    ''If the defendant transfers property to another person for a consideration''.

As ''consideration'' was referred to earlier, there seemed to be no point in using ''for value'' later; it is as simple as that. I agree with the hon. Gentleman about what normally appears; I did not intend to remove the concept of its being for value. If it is thought that the words ''for value'' ought to appear, I would be the last person to stand in the Minister's way. Indeed, he could reject the amendments and the new clause and redraft the clause; it might be better to do so. I claim no great drafting expertise, particularly with respect to equitable concepts.

The amendment's aim is simple: a reduction in value between the date property is obtained and the date it is transferred for value to an innocent third party should not be recovered from the third party. Clause 78 allows that—or can the Minister persuade me otherwise? I fully accept that it would be perfectly proper to recover the difference in value from the defendant if funds are available over and above the confiscated assets. However, an innocent third party should not suffer. The best thing that I can do now is listen to Minister's comments on the matter; we may be able to prolong the debate, if necessary.

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