Clause 32 - Customer information
Crime (International Co-operation) Bill [Lords]
9:10 am

Mr Nick Hawkins (Surrey Heath, Conservative)

I beg to move amendment No. 146, in

clause 32, page 19, line 8, after 'him', insert 'on reasonable grounds'.

Mr Alan Hurst (Braintree, Labour)

With this it will be convenient to discuss the following:

Amendment No. 147, in

clause 32, page 19, line 25, at end insert

'subject to being given reasonable notice of the order by the applicant'.

Amendment No. 87A, in

clause 32, page 19, line 22, at end insert—

'( ) No customer information order shall be issued unless—

(a) the authority referred to in subsection (2) has included in its application a full explanation of its reasons behind the application, and

(b) the Secretary of State is satisfied that those reasons are sufficient to justify the issuing of the customer information order.'.

Mr Nick Hawkins (Surrey Heath, Conservative)

I welcome you back to the Chair, Mr. Hurst. May I give a particularly warm welcome to the new Minister, without wishing to leave out the long-serving Minister, the Under-Secretary of State for Transport, who is sitting next to her? I have personal knowledge that the newly appointed Minister, whom I congratulate warmly, is tactful and diplomatic. I am sure that all Committee members will benefit from her wisdom. She could show that by accepting Opposition amendments Nos. 146, 147 and 87A. [Hon. Members: Oh.] Well, it is always worth trying, Mr. Hurst.

We are seeking, in three different ways, to introduce a reasonableness test. Amendment No. 146 would introduce the requirement of such a test on the Secretary of State. Although I am not casting aspersions on any particular Secretary of State, they sometimes behave unreasonably. Some might say that the present Home Secretary has been unreasonable about judges. No doubt that was one of the things that led to the chaos of the reshuffle that was and was not, and which abolished the Lord Chancellor and then did not. It would be helpful if there were a requirement in the Bill for the Secretary of State to act reasonably. It surely cannot be unreasonable for a reasonableness test to be introduced into this chapter.

Amendment No. 147 would introduce a different sort of reasonableness test. The financial institution that may be affected would need reasonable notice that an order had been made. Amendment No. 87A accompanies Nos. 146 and 147 and backs up the

requirement for the reasonableness, appropriateness and, in this instance, sufficiency, that should be included in the Bill. There is a need for a full explanation of the reasons for the application and for the Secretary of State to be satisfied that those reasons are sufficient to justify the order being made. In summary, the three amendments together will make clause 32 more reasonable and balanced.

Committee members will be aware, although perhaps the new Minister may not, that I was a banking lawyer before I entered the House of Commons. It is important to balance the needs of privacy in relation to customer information and those of the state. We will deal later with some of the more draconian measures that the Government are putting forward. The Minister will talk about the overriding need to tackle crime, which the Opposition Benches accept. However, a balance must be struck between the interests of financial institutions and their customers, the need for traditional confidentiality and privacy and the state's need to tackle crime. Our amendments will strike that balance more clearly and appropriately.

Mr David Heath (Somerton and Frome, Liberal Democrat)

I welcome you to the Committee this morning, Mr. Hurst, and I extend a warm welcome to the new Minister. She has new responsibilities, and I hope that she will have the opportunity to read back over the previous sittings of this Committee because important questions were put to her predecessor that we were hoping for replies to: I hope that they will not get lost in the change-over, as they are crucial to the Bill's proceedings on Report. I ask her—through you, Mr. Hurst—that particular note be taken of the assurances that were given by the hon. Member for Coventry, North-East (Mr. Ainsworth), who is now Deputy Chief Whip and Treasurer of Her Majesty's Household, to consider particular aspects of what we have been discussing in the previous two sittings.

I return to the group of amendments that we are addressing. It is important that we establish what the procedure will be, because it is intrusive as it stands. I am sure that the tests of reasonableness are correct. The hon. Member for Surrey Heath (Mr. Hawkins) has not entirely persuaded me about amendment No. 146, which may be otiose in establishing whether the Secretary of State has acted reasonably in believing somebody to be subject to an investigation.

Amendment No. 87A is far more important because what is crucial is whether the authority that is issuing the request has given a full explanation for the reasons behind the application so that the Secretary of State can apply discretion properly. That was part of the framework agreement: it was expressly required as part of the procedures, but it is not in the Bill. The Minister may say that that is implicit in making a proper request: I disagree. The amendment of the hon. Member for Surrey Heath makes it much clearer what must accompany the request in terms of accessory information. The Minister might not be conducive to accepting amendment No. 146, but I hope that she will seriously consider amendment No. 87A and the form in which a request should be received under the framework in order to make it a legitimate request for

an investigation that has civil rights implications and should only be done on clear authority and with clear justification.

Mr Bill Wiggin (Leominster, Conservative)

I also welcome the Minister to her new post. It is sad that the brilliance of her appointment has been overshadowed by the negative headlines about others.

The addition of ''on reasonable grounds'' is not significantly different from the ambition of the Government when they added

''subject to an investigation by a participating country into serious criminal conduct.''

However, having worked in the banking environment, I am aware of the great pressure on people in that industry to produce information on customers. Such a competitive edge is required to compete in that industry that, unless the request for information was reasonable, it would be wrong to ignore this amendment. The information that is often asked of people in the banking sector can be trivial and it can be presented in such a way that it would appear to be used as evidence against the employee of the bank. Therefore, we must do everything that we can to avoid the pointless wasting of time that, unless the requests were reasonable, this could lead to.

There is also the issue of privacy and data protection. In this country, where data is carefully protected, it would not be so worrying to release information of a sensitive nature, particularly if it was constructive, in the way that I believe the Government would wish it to be, as that is written in the Bill. However, in countries that are less careful with their data, the problem would be worrying. It undermines the privacy of our banking sector. We need to approach the problem with great caution. There are many other reasons why ''reasonable'' would be a helpful, sensitive and sensible addition to the Bill.

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

I welcome you to the Chair, Mr. Hurst. I hope that you treat me kindly. I thank Opposition Members for their kind words. Having served recently as a Back Bencher on the Committee that considered the Anti-social Behaviour Bill, I realise what a hard time some of us gave my predecessor. My hon. Friend the Member for Nottingham, East (Mr. Heppell) was the Whip in that Committee. I note that a few members of this Committee were members of that Committee, and I look forward to working with them during the next few sittings.

I wish to reassure members of the Committee, especially the hon. Member for Somerset and Frome (Mr. Heath), that more information will be forthcoming, as my predecessor said. The Bill is very much about tackling crime, how technology has advanced, and how crime can go beyond the boundaries of nations and continents. I understand that there is general agreement that those who pursue criminals must have access to information that will, we hope, lead to the conviction of those criminals.

I shall deal first with amendments Nos. 146 and 87A, as they both relate to the Secretary of State's discretion to act on a request. Amendment No. 146 is unnecessary. Subsection (1) relates only to the initial decision whether the request is valid. By that, I mean that it is from an appropriate body, it is for customer information in relation to a person subject to an investigation of serious criminal conduct and it is from a participating country. It is the starting point. The clause applies only if those initial tests are met. If any of them are not met, the rest of the clause does not apply.

The grounds on which the Secretary of State will base his decision will be the content of the request itself. If that provides adequate grounds, the clause will apply and he will then use his discretion under subsection (3) about whether to assist in a particular case. If the request does not contain sufficient information for it to seem to him that there is such an investigation concerning the person, he will decline assistance. There is no added value in including ''on reasonable grounds'' under subsection (1). The grounds are simply that the request must meet the basic requirements that I have already explained.

Amendment No. 87A deals with the next step in the proceedings and would introduce an extra hurdle to subsection (4). By requiring a ''full explanation'' of the reasons behind the request, the amendment refers in general terms to the conditions in article 1(4) of the protocol. We are worried about the effect of the amendment and consider that the clause, as drafted, provides proper safeguards against inappropriate requests or fishing expeditions, while still enabling us to meet our international obligations.

When considering whether to accede to a request, the Secretary of State must initially be satisfied that the precondition in subsection (1) is met, as I explained when speaking to the previous amendment. If that condition is not met, subsection (4) does not apply; thus subsection (1) works as an enabling provision, the starting point in considering a request for customer information. At the next step, the Secretary of State has a general discretion whether to act in a particular case. The use of ''may'' in subsection (3) reinforces that point. Furthermore, a judge must be satisfied about all the matters set out in clause 33(1) before exercising his or her discretion to make an order. Those requirements are that the person specified in the application is subject to an investigation, that the investigation concerns serious criminal conduct, that it would constitute an offence here, and that the order is sought for the purposes of the investigation. The grounds on which an investigation for information will take place must be clearly stated.

The Secretary of State's discretion to act on a request from a European Union country will be exercised with the protocol requirements in mind. Our obligation to respond to requests for banking information extends only to requests from countries that have implemented the protocol themselves. That is yet another safeguard to ensure a level playing field for the standards that we expect for the protocol to be implemented. To be valid, requests must therefore comply with all of article 1 of the protocol. If the

request is invalid, the Secretary of State will not act on it. We consider that the general discretion conferred on the Secretary of State in subsection (3) is preferable to a clause that explicitly states how the Secretary of State must act when a request is received in a particular form. It enables us to apply the article 1 conditions and to exercise a general discretion.

The requirement for

''a full explanation of its reasons''

could be interpreted as going beyond what we are entitled to demand from the requesting authority under article 1(4), and be considered a breach of our obligations under the protocol. Article 1(4) only lists certain requirements, and makes no requirement for a full explanation. We do not consider that explicitly listing article 1(4) conditions is appropriate. I am happy to stress that the Secretary of State's discretion will be exercised with the protocol requirements in mind when he is considering requests made by another EU country.

Amendment No. 147 would require a financial institution to provide information under a customer information order, subject to being given reasonable notice of the order. That is unnecessary. The financial institution is obliged to provide the information specified, in the manner and within the time required. Under clause 34(1), it is guilty of a penalty if it fails to comply without reasonable excuse. If an attempt was made to instigate proceedings against an institution that failed to comply with an order within a time scale that it considered unreasonable, it could cite that unreasonable deadline as a reasonable excuse for its non-compliance.

The time limit for compliance will vary from case to case. The person applying the order will take into account all relevant factors, such as the urgency of the request—for example, if a trial date has been set and the information constitutes key evidence—and the complexity of the order. It would also be open to them to take into account the size of the financial institution, if it considered that relevant to the case. Some financial institutions might be of a size that allows them to comply more quickly than others.

We do not consider that the amendment adds anything of substance to clause 32. We are satisfied that financial institutions are adequately protected against unreasonable demands. Finally, the drafting of subsection (5) is consistent with the approach in section 363(6) of the Proceeds of Crime Act 2002.

Mr Nick Hawkins (Surrey Heath, Conservative)

Even though it is obvious that the Government will resist our amendments, I am grateful to the Minister for her comments.

I agree with the hon. Member for Somerton and Frome that one of the amendments in this group of three is more important than the other two. I am grateful to my hon. Friend the Member for Leominster (Mr. Wiggin) for his support, because he, like me, has worked at the sharp end of the banking industry and knows that such matters are important. It is important from the Government's point of view not to place any unreasonable demands on financial institutions, because, of course, the Government need financial institutions to co-operate with them—I see the

Minister nod in acknowledgement—so that they can work together to defeat international crime.

I was tempted to press at least one of the amendments to the vote, just to reinforce the point that Conservative Members feel strongly about these matters, but we shall reach some equally important matters later, when I can press the Minister again.

Mr Bill Wiggin (Leominster, Conservative)

Before my hon. Friend draws his comments to a conclusion, may I ask whether he feels, as I do, that the Minister's reply gave no consideration to the business side of evidence gathering? The whole Committee would agree on wanting a reduction in international crime and everyone to play their part. However, a request has a financial implication for an institution—it is not something about which someone will simply say, ''Ah! This is easy. I shall provide the information without any trouble.'' We are talking about a lot of work for a lot of people who are also trying to earn a living and pay their taxes.

Mr Nick Hawkins (Surrey Heath, Conservative)

My hon. Friend is right. He, like me, has seen the consequences and the amount of work that the requests used to cause, even under existing law. I was on the main compliance board and was group legal adviser for the last PLC for which I worked, so I saw at particularly close quarters the implications of checking the work so that any response requested by Government could be provided fully and accurately.

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

We have consulted widely in the banking industry on all the provisions. The Government—as much as any Committee member—do not want the provision to be used inappropriately, thereby leading to undue cost and time spent. The requirements in clause 32 mean that frivolous requests will not be acted on. All EU member states are bound by data protection regulations and data protection law does and will apply.

Mr Nick Hawkins (Surrey Heath, Conservative)

I am grateful for the Minister's reassurances. It is helpful that those are on the record, so that senior executives in financial institutions may refer to the Hansard report of the proceedings. If a Minister says something on the record, that can be relied on later if any relevant matters ever have to be discussed in court. However, when she talks about data protection, she must be aware of clause 32(7), which states:

''A customer information order has effect in spite of any restriction on the disclosure of information (however imposed).''

I shall not press the new Minister too hard on that point some 72 hours into her job, but will she reflect on the phraseology of that subsection in the light of what she has just said about data protection? I understand that the subsection would override any data protection restrictions. Perhaps she will discuss that with officials and write to me and other Committee members. I do not know whether the hon. Member for Somerton and Frome interprets the subsection in the same way, but it can only have that meaning—I see the hon. Gentleman nodding. Perhaps the Minister will reflect further on that matter with officials.

It is helpful that what the Minister said is on the record. The debate, too, has been helpful. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Nick Hawkins (Surrey Heath, Conservative)

I beg to move amendment No. 56, in

clause 32, page 19, line 14, after 'or', insert 'to'.

Mr Alan Hurst (Braintree, Labour)

With this it will be convenient to discuss the following:

Amendment No. 57, in

clause 32, page 19, line 16, after 'or', insert 'to'.

Mr Nick Hawkins (Surrey Heath, Conservative)

The amendments are brief. At first sight, it might appear that we are simply going for grammatical correctness by inserting the word ''to'' in a couple of places. However, as you, Mr. Hurst, the Minister and the Committee may have appreciated, the amendments are more significant than that. They would mean that under the Bill only senior police officers, rather than the Secretary of State, could direct constables. I shall listen with interest to the Minister's response. I shall not take up any more of the Committee's time except to say that rather than the Secretary of State telling constables directly that they should be taking action, there should be a police management decision.

Mr David Heath (Somerton and Frome, Liberal Democrat)

The Minister can ingratiate herself with me in two ways. First, she should pronounce my constituency correctly. I have to say that no Minister has yet managed to do that within three months of taking office, so I shall give her a little leeway.

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

Would the hon. Gentleman say the name of his constituency out loud, so I can hear it correctly and ensure that I say it correctly in future?

Mr David Heath (Somerton and Frome, Liberal Democrat)

I am happy to oblige: ''Somertun'', not Somerset, and ''Frume''.

Secondly, the Minister should accept self-evidently correct amendments tabled by Opposition parties when they improve both the syntax and intelligibility of a clause. The hon. Member for Surrey Heath is right in saying that there is an ambiguity that can be corrected by getting the syntax right.

I have a serious question to ask. May I assume that there is nothing in the clause that would prevent a request going through the National Criminal Intelligence Service? It is not mentioned by name, but is obviously a major conduit for a lot of the requests. Is that encompassed in the terms ''senior police officer'' and ''constable''?

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

I shall try to explain why we consider it appropriate for constables and Customs officers to apply for customer information orders under the direction of a senior officer. I should make it clear that it would not be the Secretary of State who instructed constables; the instructions would come from senior officers.

The constable or Customs officer may apply for a customer information order only on the instruction of a senior officer. He cannot make an application off his own bat. The senior officer will always be accountable for the decision to seek the order, but we think that he

will not have the time to go to court to make the application in person. Requiring applications for CIOs to be made always by a senior officer would impose a disproportionate burden.

Mr David Heath (Somerton and Frome, Liberal Democrat)

The Minister is misdirecting her comments; no one is arguing that it should always be a senior officer who has to make the application. My point is that, because of the wording of the clause, the subject of the verb ''arrange'' may be taken to be the Secretary of State, and no one wants the Secretary of State to have to arrange for a constable to apply for the order. We want a senior police officer to do that. That, I think, was the argument made by the hon. Member for Surrey Heath.

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

I can assure the hon. Gentleman that what he says is the case; we would not require the Secretary of State to direct a constable. That would be up to a senior officer.

Mr Nick Hawkins (Surrey Heath, Conservative)

The Minister has supported the hon. Member for Somerton and Frome and me. If that is what she seeks to achieve, it would be wise for the Government to accept the amendment. The matter would then be absolutely clear and the grammar and syntax would be correct. I hope that she will reflect on that with officials. I shall not waste the Committee's time by pursuing the matter now, because it is only a small point. However, I am sure that the Minister, diligent as I know she will be in carrying out her duties, will chat to officials about the grammar and syntax. If at a later stage she tables a small Government amendment to the same effect as ours, she will have achieved what she says she wants. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Nick Hawkins (Surrey Heath, Conservative)

I beg to move amendment No. 88A, in

clause 32, page 19, line 33, at end insert—.

'(9) A ''participating country'' for the purposes of this section shall be defined as a European Union member state which has incorporated similar provisions in domestic law.'.

The amendment makes a slightly more substantial point, in terms of the effectiveness of the Bill, than the previous one, which dealt with a small point. What we are saying through amendment No. 88A is that reciprocity is crucial. As my hon. Friend the Member for Leominster and I have made clear, the provisions of this part of the Bill will be quite onerous on financial institutions in this country. That onerous burden should only come into operation once we have reciprocity with other EU member states: when other EU countries have adopted similar provisions, it will be appropriate for the provisions that apply to UK financial institutions to come into force.

Too often in the past we have handicapped our own businesses. Albeit in pursuit of worthwhile aims—the tackling of international financial crime is undoubtedly worth while—we have loaded burden after burden on our institutions in a variety of fields, not just banking. However, many other EU countries have not imposed the same burdens on their industries; there has been an absence of reciprocity.

One could give a range of examples, but the one that I tend to use and that springs most easily to mind is the onerous burdens that were placed on our fishing industry. Those burdens helped the Spanish fishing industry, as at the time there were only half a dozen fishery protection officers and they were all based in Madrid, not in the fishing ports. That caused enormous angst among the fishermen of this country, because they felt that they were being held to every dot and comma of all kinds of EU regulations that had been gold-plated in Whitehall and imposed on UK law with criminal penalties attached. They were being inspected every minute of the day when they were in harbour, whereas their Spanish counterparts were carrying on ignoring all the agreements that their Government had signed up to but did not impose on Spanish fishermen.

Without overstating the case, I am anxious to ensure that a minor version of that does not happen in this respect. There is a genuine international mutual interest in tackling international financial crime, and Opposition Members want to aid that work, but we do not want the UK to be the only country that has these burdens imposed on its financial institutions. Given that the basis of the Bill is mutual legal assistance, it would be logical to say that this sort of provision is fine but there is no point in imposing it on our financial institutions until we can be certain that the same impositions will be put on institutions in other EU countries. That is an important point.

Ms Caroline Flint (Parliamentary Under-Secretary (reducing organised and international crime, anti drugs co-ordination and international and European issues), Home Office; Don Valley, Labour)

I take on board the hon. Gentleman's comments that if we are to be part of a reciprocal procedure, we want to ensure that other people abide by the same rules. That is fair and just. The Bill and the protocol from which it has come will ensure that that happens.

The purpose of the amendment is to restrict the application of the provisions on customer information orders to countries which have implemented the protocol, but that is unnecessary because to make requests under the protocol, a country must have completed the necessary implementation procedures and notified the Council of the European Union accordingly. Until that time, they cannot make requests citing the protocol's provisions, nor do we have to assist them. The protocol creates the obligation to comply with requests and the arrangements are reciprocal, so the amendment is redundant. However, this debate allows us to discuss how important it is that all countries participate and apply equal standards.

Let me offer a little more detail. Clause 51(2) allows countries to be defined as participating countries. That mechanism allows different countries to be designated as participating countries for the purposes of different provisions of the Bill. A country participating in one provision will not automatically be a participating country for all the relevant provisions in part 1. That means that we can restrict the applications of some provisions of the Bill.

The provisions of chapter 4, to which the amendments relate, enable us to request and provide assistance in identifying and monitoring bank accounts. These forms of assistance are regulated for

the first time in the protocol to the MLA convention. We are under an obligation to provide those forms of assistance only to countries that are party to the protocol, and we have chosen as a matter of policy to restrict the application of chapter 4 to designated countries, rather than to give it general application. That restriction contrasts with our policy more generally on the provision of mutual legal assistance, whereby we do not require the existence of reciprocal arrangements as a condition for assisting. However, these new types of assistance are new and specialised and the amount of work that will be involved in executing such requests will be fairly substantial. We did not consider it appropriate to give the provisions general application when many countries will not be in a position to reciprocate.

Although we will initially apply the provisions only in respect of EU member states that have implemented the protocol, it is possible that in future the provisions could be extended to cover countries beyond the EU. A definition restricting applications to EU member states only would not be appropriate. We have previously given Norway and Iceland as examples, as we are aware that they are interested in fully participating in the protocol and we would be able to extend the provisions to them on the basis of their participation in Schengen. It is possible that there might in future be benefit in extending other mutual legal assistance agreements to cover such matters, but participation of countries outside the EU would be achieved only following consideration of an order by both Houses once such an agreement had been reached.

I hope that that reassures the hon. Member for Surrey Heath that we feel that the protocol has sufficient weight to ensure that we would have the right to turn down requests for information from anybody who did not meet the full scope of its requirements.

Mr Nick Hawkins (Surrey Heath, Conservative)

I am pleased that we moved this amendment, because it has been helpful to hear what the Minister has said, and to have that on the record. I am not entirely reassured by her opening up the prospect of extending the categories beyond the EU, but I understand what she says about needing to help countries such as Norway and Iceland. I am sure that, in the light of the Minister's reassurances that are now on the record, great care will be taken before this operation is extended more widely—I certainly hope that that will be the case. It is helpful to have an explanation—stated by the Minister on the record—that there is some protection in the protocol. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.