Proceeds of Crime Bill

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Mr. Hawkins: Is the Minister seriously suggesting that the reputable banking and legal community in places such as the City of London is not already complying with its duty to report? Last week, I urged him to use the past few days to try to get an indication of how many reports have been made on the NCIS forms. I do not know whether that research has been done. Our information shows that many reports are made but NCIS does not respond to them, which leaves transactions in limbo. He has not dealt with that point.

12 noon

Mr. Ainsworth: I did try to tell the hon. Gentleman that we must think seriously about the matter. I am not criticising current institutions at all because I know how difficult it is in a competitive world for anybody to try to raise standards, at a cost that is not borne by competitors. When we try to make effective money laundering regulations, we must decide the minimum standards. That applies to other areas, such as safety at work and employment regulations, and training provisions. It is extremely difficult for individuals to say, ''Ah well, we don't care about the requirements of the law. We're going to do something more than that, although it may cost us and give other people a competitive edge.''

Mr. Hawkins: The Minister is quite right that Parliament is doing its job. That is why this debate is important, as my hon. Friend the Member for Beaconsfield said. If the Minister says that the institutions are not complying properly with the system at present—he said in terms that he makes no criticism of that—it is difficult for him to say that we must impose greater obligations on them. The system is working well at the moment, as he freely concedes. There is no need for greater provisions.

Mr. Ainsworth: What I said does not indicate that the system is working well, or as well as we want. In our previous debate, I said that we want to raise standards considerably. When faced with the problems that exist in our modern society, sadly, we must do that. That is my view. I wish that the situation were different and that we had levels of organised crime facilitated by money laundering that were such that we need not give great consideration to these matters and could allow a laxer regime that had no consequences on society—but that is not the case. We must examine a serious problem and consider how appropriate any measures are. That is what we are discussing, is it not?

Mr. Hawkins: Yes it is, but he and I may reach a different judgment—that is what Parliament is all about.

The Minister said that the system may not be working as well as he and the Government would like. Both last week and today, I suggested that the only aspect of the system that does not work properly is NCIS's responses. The institutions send in reports but NCIS does not respond in due time, which leaves the institutions in limbo.

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Mr. Ainsworth: I do not know whether the hon. Gentleman believes that.

Mr. Hawkins: I do.

Mr. Ainsworth: If he does, I do not know whether he heard all or part of what my hon. Friend the Member for Glasgow, Pollok said the other day. As far as I am aware, the main problem in the Abacha case was not that NCIS did not act on reports that were made to it, but that there was clear evidence of money laundering, in retrospect, although no reports were made. If, despite such evidence, the hon. Gentleman says that his party considers that there is no need to examine whether the current standards and regulations are competent and effective to deal with the problem, so be it. We do not share that view. Evidence exists that the reverse is the case—there is a real need to raise standards in that area, and only Parliament can do it; individual institutions cannot.

Mr. Hawkins: I accept that Parliament must come to a view. I listened to every word that the hon. Member for Glasgow, Pollok said last Thursday afternoon—he was only delayed by a minute in joining the Committee this morning, but he missed my praise of him, so he will have to look at Hansard to see what praise I lavished on him in his absence.

The Minister will understand that the reason why my hon. Friend and I keep returning to this point is that we are told, as a matter of great importance, by the Law Society of England and Wales, and by the committee that specialises in the matter, that precisely what we are saying about transactions in limbo is happening, and not just on a one-off basis. As to whether we really believe it, we do, because we are told by experts at the sharp end that that is what is happening, not just once or twice, but repeatedly.

Mr. Ainsworth: I do not accept that. We have discussed with NCIS in detail how it deals with the current situation, how it would like the legislation to be structured, and its capacity and ability to deal with an increase in reports. It has told us—if the hon. Gentleman is prepared to ignore its advice, so be it—that it wants those reports to come in. He says that he has evidence that there are thousands upon thousands of reports.

Mr. Hawkins: I did not say thousands.

Mr. Ainsworth: Well, there are thousands. Let us admit that. I do not know whether that is considered excessive, but I am told that about 18,000 reports of suspicious transactions are made to NICS every year. I am also told that, looking back on those figures, that number has not risen for almost a decade. That may appear to be a lot of reports, but when one considers the size of the regulated sector and the scale of banking and financial activities in this country, I am not sure that the amount is as massive as he is trying to paint it.

Mr. Paul Stinchcombe (Wellingborough): I wonder whether I could move the Minister on to the negligence aspect of the provision. Those reports that have been made to NCIS can have been made only when the person reporting the incident knew or suspected. If the person did not know or suspect, even if there were reasonable grounds for such knowledge or suspicion,

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he would never be in a position to report. If he does not report, because he does not know or suspect, does that not amount to a reasonable excuse for not disclosing the information under subsection (5)?

Mr. Ainsworth: Let me move on through the issues and establish whether we have covered all the points to the Committee's satisfaction.

Before the hon. Member for Surrey Heath intervened, I was saying that the Government believe that measures must be in place to deal with the issue of wilful blindness of employees when the Bill applies only to the regulated sector.

Mr. Grieve: This is the second time that the Minister has used the expression ''wilful blindness''. Of course, such matters are of fact or degree. However, if somebody is wilfully blind, I would expect him to be guilty of the offence, even if the amendment was made. The court would conclude, on the evidence, that the person did suspect that money laundering was taking place, because he exercised his will in blinding himself to it. It is an unfortunate expression, as I would regard someone who is wilfully blind as being more than negligent.

Mr. Ainsworth: That may be so. We are talking about the burden of proof that is required, and the ability to prove the case. The hon. Gentleman probably understands the subject better than I do.

It is relevant that, since 1993, regulations have been in place that require all bodies that carry out financial business to be particularly alert to money laundering. The regulations require them to appoint dedicated money laundering reporting officers, and to have in place systems of training to teach employees that enable them to be aware of, and to report instances of, money laundering.

For several years, the industry has produced its own guidelines to aid employees to recognise suspicious transactions. The Bill builds on that: after it is enacted, the court will need to have regard to whether an employee followed any relevant guidance. Such guidance will need to be approved by the Treasury before it can be taken into account, and we intend that it should include information and examples with regard to what may constitute reasonable grounds for suspecting that someone is engaged in money laundering.

One of the key criticisms about the offence has been that it will bite not only on senior professional people and experienced staff, but on junior employees, and possibly on persons who are untrained or who are short-contract agency staff. It has also been put to us that such personnel are often hard-pressed, on low salaries and subject to internal financial targets. It has been argued that banks, rather than employees, should be penalised, and that employees should be penalised through internal disciplinary measures, rather than be allowed—potentially—to fall foul of the criminal law.

Those are serious issues and we have not skirted around them. We have addressed them carefully. We have received representations about them from a range

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of organisations such as financial institutions and trade unions. However, money laundering is a very serious matter, and we must not lower our defences or limit our capability of identifying incidences of it: on the contrary, we must strengthen our defences, and clause 324 is intended to achieve that.

All personnel who are placed in situations where there is a risk that they will come into contact with money that is being laundered should not be placed in such a position until they have been properly trained. The 1993 regulations already require that; it is a criminal offence for financial institutions to fail to train their staff. However, we do not believe that the Crown Prosecution Service will want to pursue cases against junior employees when it is clear that the more senior staff in a financial institution are at fault. Much will depend on the circumstances of each case, both in respect of decisions that are made about whether to prosecute and, if prosecution is taken forward, the extent to which a person is liable, taking into account any guidelines which might have been issued.

The Government have not approached this new test in a cavalier manner. On the contrary, I assure Committee members that we have given careful consideration to the inclusion of the new test of reasonable grounds to know or suspect, and we think that is it is fully justified, given the climate in which we are living.

We have also looked at whether it is practical to limit the categories of people within financial institutions to whom it can apply. It is front-line staff who will have the relevant information. They are the people who are interfacing with the accounts, and they will notice suspicious transactions. I would be comfortable if we could define categories of staff, but we would have to be able to do so without punching a hole in the effectiveness of the provision.

12.15 pm

Amendment No. 524 has been tabled as an alternative to amendment No. 487. I cannot recommend that the Committee accept it. Under Amendment No. 524, a person would commit an offence if he had reasonable grounds for knowing or reasonably believing that another person was engaged in money laundering. As I have already said, we think that the financial sector should be vigilant. We want to catch not only those who should have known that money laundering was going on but those who should have suspected it.

As far as ''reasonably believing'' is concerned, leaving aside the drafting oddity of having the test of reasonableness appear twice in a sentence, it would be hard for a person or a court to judge what constituted a reasonable belief. Amendment No. 524 would have two negative effects: it would place an additional burden on those in the regulated sector who have to make reports, and it would make it more difficult for the courts to secure convictions.

We have brought together the level of proof required for those offences that apply to everyone, both in the financial sector and beyond. After much reflection, we still believe that the public are entitled to expect greater vigilance from those in the regulated

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financial sector—I know that it is not a narrow sector, and that many people are involved in it—and it is therefore appropriate to have a different test. That is the basic case for why we have structured the Bill that way and why I cannot accept amendment No. 524.

 
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