Clause 324 - Failure to disclose: regulated sector

Proceeds of Crime Bill – in a Public Bill Committee at 2:30 pm on 24 January 2002.

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Amendment proposed [this day]: No. 488, in page 187, line 40, after 'and', insert 'believes'.—[Mr. Grieve.]

Question again proposed, That the amendment be made.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

This morning, I was guilty of taking the Committee off at a slight tangent. [Hon. Members: ''Hear, hear.''] The Minister might also have been guilty of that. Therefore, a few matters should perhaps be clarified.

Apart from the definition in respect of professional legal privilege in section 10 of the Police and Criminal Evidence Act 1984 that deals with the seizure of documents, clause 324 derives from section 52 of the Drug Trafficking Act 1994, which is reproduced—almost unaltered, but with a slight variation of no importance—in subsection (8). That definition of professional legal privilege is acceptable.

In the light of the widening of the obligation on the professional legal adviser, the Committee must decide whether to support the amendment's introduction of a defence for the adviser, if he ''believes'' that the information or other matter came to him in privileged circumstances.

I believe that that defence should be introduced. Under the Drug Trafficking Offences Act 1986, someone can commit the offence of failing to disclose only if they know or suspect. The way in which clause 324 is worded, they can commit the offence if they are negligent. Because of that, the legal adviser should be given the extra safeguard that he cannot be prosecuted where he has honestly made an incorrect assessment that the information came to him in privileged circumstances.

I also wish to raise a further matter, which we shall return to when we discuss some later amendments. The statutory definition that is provided is not exhaustive: a glance at ''Halsbury's Laws of England'' or ''Archbold'' illustrates that this is an evolving area of the law, where definitions are not set in stone. It concerns me that a professional legal adviser who acts honestly and responsibly with a client, but who fails to make a correct assessment, could be criminalised—if, for example, he should have made a declaration to NCIS, because the information that he received did not fall within the circumstances of professional legal privilege, although he believed that they did.

If the Minister were to come up with an alternative, even the introduction of the word ''reasonably'', I might be prepared to consider it. In its absence, however, professional legal advisers are entitled to

protection, especially given that privilege does not exist to help lawyers but is a legal obligation on them. The usual way in which that legal obligation is challenged is in court proceedings. However, the irony is that a person may commit the criminal offence without the matter having previously been discussed in a court, which would decide whether the circumstances are such that the privilege has been waived or never existed in the first place.

Photo of Vera Baird Vera Baird Labour, Redcar

I am puzzled that the hon. Gentleman thinks that the negligence knocks on to the question of privilege. The offence, which we discussed extensively yesterday, would be negligently knowing or suspecting that money laundering was occurring. That has no bearing on privilege. The information comes to the lawyer. Whether or not he knows or believes that it relates to money laundering, he ought to do so. However, the question of whether the information that comes to him is privileged is not connected with the way in which he can be guilty of non-disclosure.

I would have thought that privilege was a fairly clear concept, which is clearly set out. As the hon. Gentleman now realises that there is a proper definition of privilege in this and other legislation, I cannot understand the purpose of persisting with the matter.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am afraid that the hon. Lady does not persuade me with that argument. The problem that may confront the professional legal adviser becomes even more complicated as a result of the introduction of the possible offence committed through negligence. It is always difficult to find an example that fits exactly, but one comes to mind. A lawyer is asked to carry out a transaction for a client, and at the same time he believes that in the course of doing so he has been providing legal advice. He may not even believe that he has been given information that indicates that money laundering has taken place, but he might subsequently be convicted, first on the basis that he ought to have realised that money laundering was an issue, and secondly on the basis that he ought to have realised that his actions were not privileged, whereas he thought that they were. That seems to be a double whammy.

The hon. Lady says that the categories are well established. I am not sure that I entirely agree with her about that. As I tried to do over lunch, one simply needs to look at some of the more recent case law on the subject to see that there is still scope for the law to evolve in that area. I had not intended to explore that issue now, as it would be better to deal with it in relation to a subsequent amendment. However, certain areas continue to be explored. I hope that the hon. Lady has understood my point.

Photo of Vera Baird Vera Baird Labour, Redcar

I must say that I do not understand. I cannot see a connection in relation to the circumstances in which information comes to a solicitor, whether it is privileged or not—the definition of what is privileged has survived since 1984, and is the same as it was under the previous legislation. The hon. Gentleman has not suggested ways in which it has hitherto caused difficulty. This compartment of law is fairly watertight—I do not accept what he says about its continuously evolving—

and I cannot identify a link with the question of negligently not disclosing such information. How does the material come into the person's possession? Does it come in a privileged way or not? The test of negligence is not applied to that question because the material is either privileged or it is not.

There was, perhaps, a tangential move by the Minister and others earlier. If a lawyer came across material that might be in a grey area of privilege, surely he would take that to his professional conduct body anonymously without disclosing the client's identity. He could set out a theoretical proposition and satisfy himself one way or the other.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The hon. Lady may have misunderstood me—that is probably my fault. A professional legal adviser faces a potential double problem. The first question that he must ask himself is, ''Do I know or suspect that money laundering is taking place from the specific information that I have been given?'' If he considers, knows or suspects that money laundering is occurring and that he is being used for the purpose of furthering criminal conduct, no issue of privilege arises, and he tells NCIS.

The second problem arises if the adviser does not know or suspect, but subsequent examination with the benefit of hindsight suggests that he should have had reasonable grounds to know or suspect. That subject troubled the hon. Lady and me, and it was the subject of an extensive debate. In such a case, the adviser may be sent to prison and criminalised. The question of privilege arises when considering that case. It is possible that the adviser considers that the information that came to him was privileged, and not to do with money laundering. It could be held subsequently that the information was not privileged and that the adviser should have had reasonable grounds for knowing or suspecting.

I stand by the fact that a professional legal adviser faces a potential double problem. We will leave one issue aside because the Committee appears to have reached a decision on keeping the negligence offence that a person ought to have known or suspected. However, it would be sensible and desirable not to criminalise and prosecute the adviser if it could be shown that he believed that information came to him in privileged circumstances, even though a subsequent examination, with the benefit of hindsight, showed that the information was not subject to legal professional privilege.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

Would that not give a criminally minded professional legal adviser a complete get-out for any time that he acted criminally? He could claim subsequently, ''I thought I was covered, although it was patently obvious that I wasn't, but I didn't realise.''

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I do not think so. As we discussed on Tuesday, a court or jury is able to find that a person knew something, although he denies that he did. An examination of surrounding circumstances ought to make it perfectly possible for a court that is faced with a solicitor who says, ''Oh well, I accept, now I look at

it, that the information was not privileged, but at the time I considered that it was,'' to decide whether that was the case after examining the surrounding circumstances. If the court decided that it would be impossible to reach the solicitor's conclusion, it would be sure that he knew that the information was not privileged, and the solicitor would be convicted. Courts have to do that all the time when considering offences. I accept that it might make the hurdle of conviction more difficult, but I do not believe that it makes it impossible.

Photo of Vera Baird Vera Baird Labour, Redcar 2:45, 24 January 2002

Is the hon. Gentleman suggesting that the clause creates a separate offence: that of negligently thinking that something is privileged when it is not? It does not do that at all. Is not he mixing up two bits of the clause?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am always prepared to listen carefully to what the hon. Lady says, but I do not think that I am mixing them up. I am trying to follow her argument. I accept that, as matters stand, a professional legal adviser does not commit an offence if the

''Information or other matter comes to a professional legal adviser in privileged circumstances''.

If a court were to conclude that the information did not come to him in privileged circumstances, and if he does not communicate it, he lays himself open to prosecution and conviction, even if he could show the court that he did not disclose it because he genuinely believed that he had received it in privileged circumstances. Such a person could be negligent or make a mistake and still not be able to avail himself of the Bill's protection.

Photo of Vera Baird Vera Baird Labour, Redcar

Does that go beyond the position for the generality of cases? Perhaps the hon. Gentleman countenances circumstances in which the information is not privileged. I cannot think how a solicitor could mistakenly think that information was privileged unless the information fell under the provisions of subsection (9)—that is, it was always intended to further a criminal purpose. I cannot countenance a case in which a solicitor would be mixed up about what was privileged.

The basis on which information is privileged is fairly clear—let us not get into the argument about whether the law is still evolving—so it is hard to imagine a solicitor being muddled about it. It might transpire that, unknown to the solicitor, information was given to him to further a criminal purpose and he was used, although he did not appreciate it, as a pawn in a money launderer's hands. Is that any different from the generality of ways in which a solicitor can be used for all sorts of criminal purposes without realising it? The issue will be whether the police accept that he did not realise. I am not sure that the disclosure element makes the position any different from the usual one. That is why I think that the hon. Gentleman is barking up the wrong tree.

Photo of Howard Stoate Howard Stoate Labour, Dartford

Not for the first time.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I heard that, and I am the first to accept that in the course of the Committee I may have barked up the wrong tree on many occasions.

I am not wholly persuaded by the hon. Lady's argument, because the provision is linked to an offence that, as we discussed on Tuesday, can be committed negligently in any event. Solicitors who carry cases are not under the obligation to run off to NCIS to declare what their clients have told them unless they know or suspect or have reasonable grounds for knowing or suspecting that another person is laundering money. If they have had the wool pulled over their eyes and are exploited by a client, as she suggests, they lose the protection of legal professional privilege and can be convicted for negligently not realising that they had reasonable grounds for knowing or suspecting.

Photo of Ian Lucas Ian Lucas Labour, Wrexham

If someone does not realise that they know or suspect that a criminal offence has been committed by the person giving instructions, they do not lose the protection of legal professional privilege. It is still there. That is correct, is it not?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I apologise to the hon. Gentleman, but I am not sure that I follow his argument. If the professional adviser is given information and something alerts him about it, he would say, ''Goodness, that's information that makes me know or suspect that that person might have committed a criminal offence.'' However, he would then consider that the circumstances in which the information was divulged to him were such that it was covered by legal professional privilege. Although the professional may take other steps such as telling the person to go elsewhere or saying that he will not continue to act for him, he cannot and must not declare the information to NCIS. A professional legal adviser must follow such a train of thought.

The alternative approach is that the adviser never cottons on to the fact that the information is such that he should know or suspect that money laundering is taking place. However, a court could show that he ought to have realised that, even though he honestly did not. At that stage, the professional might say, ''Well, in those circumstances, all I can say is that I also believed that I was covered by legal professional privilege.'' That is a fallback defence. I would not have pursued the amendment if we had not introduced the offence of negligence that could fall on a legal practitioner by virtue of the decision taken by the Committee on Tuesday.

I apologise for my lack of clarity. Perhaps too many weeks in Committee have fuddled my mind. I must accept that I would not have got into the muddle this morning if I had bothered to read the note in front of me, which said, ''Read out subsection (8)''. However, what I have described is a fallback position to protect a legal professional adviser in such circumstances. If it had not been for what happened on Tuesday, I would not be asking the Committee to agree to the amendment. It would provide a measure of protection for the legal professional adviser in those limited circumstances. I am worried about the burden that will be placed on him, including criminalising him. Surely, if he were able to pass those two tests, a reasonable person would say that he was blameless.

Photo of Mr Paul Stinchcombe Mr Paul Stinchcombe Labour, Wellingborough

I do not know whether I understand the hon. Gentleman's point. If the lawyer does not know or suspect that the information is of a particular quality, it will never cross his mind to question whether he received it in privileged circumstances, because he had never contemplated disclosing it. I do not think that ''believes'' would add anything to the clause.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I understand exactly what the hon. Gentleman has said, but I disagree with him. We have spent much time compartmentalising those two matters, but in reality, when a legal professional adviser is dealing with a client, I wonder whether that compartmentalisation will take place with the clarity that the hon. Gentleman would wish. Circumstances are likely to arise in which the mere fact that the legal adviser believes that legal professional privilege applies would make it far less likely that he would then consider the earlier issue of, ''Do I know or suspect something or could someone subsequently, with the benefit of hindsight, say that I might have had reasonable grounds for knowing or suspecting?''

Photo of Mr Paul Stinchcombe Mr Paul Stinchcombe Labour, Wellingborough

The question whether such information came to that professional in privileged circumstances will be addressed only if he is already suspicious that it is of a quality that should be disclosed. Otherwise, he would not be taking such action. If he already knows or suspects, that means that the offence cannot be committed through negligence on the objective standard, so the hon. Gentleman's circuitous argument must be wrong.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I disagree with the hon. Gentleman on that, because of subsection (9). One of the difficult tests to which a professional legal adviser may be subject is to ask himself what the information was given to him for. Was it given for the furthering of a criminal purpose, which would vitiate the defence of privilege? Alternatively, was it given as part of a package of information in relation to seeking legal advice, in respect of which he has an absolute duty to protect the client?

I accept that the hon. Gentleman has a good point, but one of the problems is breaking down into narrow compartments a process that is by no means clear-cut, in terms of the way in which information is communicated to the professional legal adviser, what he has to do with it, or the circumstances in which he receives it. Other questions are whether it is being given to him for the purpose of general legal advice, or whether it might have been given to him in circumstances such that he might subsequently ask himself whether information was being sought from him that he should not have given. Some of those circumstances might be difficult, which is why the Committee should consider the extra layer of the defence of reasonably believing—or believing—that the information was privileged.

I appreciate the hon. Gentleman's point. In a perfect world, in which everyone carries out a perfect analysis, such problems might not occur. However, when one considers the diversity of circumstances in which professional legal advisers are called on to provide advice—which often may appear to be a million miles from money laundering—I wonder

whether there is a not a risk that we are exposing them unwittingly, when they are morally blameless, to serious penalties and criticism when they have acted with integrity throughout. The amendment has been tabled because the Committee did not remove the negligence offence on Tuesday.

I stand by the view that this is a complicated question. The surrounding circumstances are likely to be such that it would be easy for a professional legal adviser to be lulled into a sense that the matter that he was considering did not fall anywhere near money laundering. With hindsight, however, it might turn out that it did.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

The hon. Gentleman may recall from an earlier debate that the Minister made the point, with which the Committee agreed, that part of the reason for this part of the Bill was to force the regulated sector to get its act together in terms of regulation. If that is right, and a laudable thing to do, it would be incumbent on a firm employing a legal adviser, knowing that the legislation had been passed, to ensure, in every case, that it knew the circumstances under which professional legal privilege was or was not being operated. It would not just be a question of sitting in a turret somewhere with a half-baked notion that one had legal professional privilege—one would be under a duty to inform oneself properly.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 3:00, 24 January 2002

I take the hon. Gentleman's point, and I do not disagree with him. I hope that those who provide legal advice will, after the passing of this legislation—as I hope they were doing before—try to consider, on every occasion, whether they have duties. However, one must distinguish between the professional legal adviser and other people caught under the clause. It is true that all sorts of people have a duty of confidence to clients, but the professional legal adviser has a duty, enshrined in legal professional privilege, that extends further than that. That became clear this morning when the Minister effectively said, ''If in doubt, tell NCIS.'' That might be a good rule for an accountant, but it cannot be followed by a professional legal adviser, because if he were to tell NCIS something that was covered by privilege, he would be guilty of serious professional misconduct. That is why the extra protection would be helpful to him.

Photo of Vera Baird Vera Baird Labour, Redcar

Does the hon. Gentleman agree that the protection for the lawyer that is contained in clause 327 does not cover the mischief that might be caused? A client's information might be wrongly given out. In that case, the innocent client has been done an injustice that cannot be rectified. Although the lawyer is protected under clause 327, the injustice cannot be undone.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I agree with that.

I do not wish to trot out platitudes, but the legal professional privilege exists for what have for centuries—which is a very long time—been considered sound public policy reasons, so it is particularly important that those who operate under

its constraints should have adequate protection from legislation that might criminalise them when they are morally blameless. That is why I commend the amendment to the Committee.

If, at a later stage of our scrutiny of the Bill, the Minister were to table an amendment that went some way towards meeting my concerns, I would be the happiest person in the world. However, at present, I wish to press my amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 14.

Division number 30 Adults Abused in Childhood — Clause 324 - Failure to disclose: regulated sector

Aye: 5 MPs

No: 14 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I beg to move amendment No. 489, in page 187, line 41, at end insert—

'(c) he is a tax adviser and the information or other matter came to him in relevant circumstances.'.

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

With this it will be convenient to take the following amendments: No. 496, in page 188, line 18, at end insert—

'(8A) Information or other matter comes to a tax adviser in relevant circumstances if it is communicated or given to him—

(a) by a person to whom he is giving, or may be asked to give, advice on any matter relating to tax, or

(b) by a representative of such a person.'.

No. 497, in page 188, line 19, leave out 'subsection (8) does' and insert 'subsections (8) and (8A) do'.

No. 498, in clause 325, page 188, line 39, after 'adviser', insert 'or tax adviser'.

No. 499, in page 188, line 45, at end insert—

'(c) to (or to a representative of) a client of the tax adviser in connection with the giving by the adviser of tax advice to the client.'.

No. 511, in Clause 329, page 191, line 33, at end add—

'(12) ''Tax adviser'' means a professional who mainly and independently gives tax advice.

(13) ''Tax advice'' means the preparation and submission of tax returns, advice on tax planning, representation and defence of taxpayers before authorities and courts and the provision of overall advice in the area of taxation and complementary accounting and legal services.

(14) ''Tax'' means any form of taxation imposed by the laws of the United Kingdom or of another territory outside the United Kingdom.'.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

This is a probing amendment. I will not seek to press it to a Division, but I wish to hear the Minister's views about a problem that was raised by those who provide tax advice.

The amendments would extend professional legal privilege to a category of individual that has not hitherto enjoyed it. As a lawyer, it is perhaps my duty to try to do that—and it certainly appears to be my duty to ask the Committee to consider the matter.

The issue is simple. Members of the Chartered Institute of Taxation have serious concerns about aspects of the legislation. In particular, they are concerned that it will make it difficult for them to provide tax advice to clients, because it will be incumbent on them to notify NCIS if any information is communicated to them that might give rise to a suspicion that money laundering has taken place.

In a sense, that ties in with our earlier amendment about Hansard agreements. In the process of obtaining the Hansard agreement, the tax adviser may receive information that may lead him to think that NSIS should be notified. That is the same issue, but approached from a different angle. Let us suppose that a person is a tax adviser and the information or other matter comes to him in relevant circumstances and is communicated to him to obtain advice on a tax-related matter. Under the amendment, he would not commit an offence if he had not made a disclosure, albeit that the purpose of a disclosure would be such that he could notify the Inland Revenue to clear up his client's tax problems. I should be interested to hear the Minister's views so that the Committee will know the Government's attitude to the representations that they have received and why they consider that our proposals are not acceptable.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The Bill is drafted in line with the precedent set under existing legislation. There is a legal privilege exemption under the clause whereby a professional legal adviser is not required to report his knowledge or suspicions that another person is engaged in money laundering if the information on which such knowledge or suspicion is based comes to him in privileged circumstances. That is set out more extensively under subsection (8).

The amendments are not desirable. Legal privilege is a well-established concept, the purpose of which is to protect the integrity of the legal system and the rights of individuals involved in legal proceedings. Legal privilege is therefore a special case and we are not persuaded of the case for an extension favoured by the hon. Gentleman. The usual functions of tax advisers will not fall within the regulated sector until after the implementation of the second European Community money laundering directive into United Kingdom law. Such advisers are not therefore currently subject to the money laundering regime under the Bill, except to the extent that they engage in regulated activities.

However, when the new directive is adopted, we intend that an order will be made under part 3 of schedule 6 to extend the definition of regulated activities under part 1 of the schedule, so that accountants and tax advisers will be caught by the clause. We expect the directive to be adopted early this year; it must then be implemented under United Kingdom law within 18 months. We are aware that the current draft of the directive contains a discretionary

provision that allows member states to extend legal privilege to accountants and tax advisers, giving advice to clients on their legal position under tax law. As the recital to the directive makes clear, that exemption is available only for directly comparable services. It was introduced because, in some European Union countries, accountants can represent their clients in a court of law and it was felt that, in those circumstances, they should be placed on the same basis and on the same footing as the legal profession.

We have considered the issue, but our thinking is not to take advantage of the discretionary provision. It would weaken the current requirements on UK professionals. We must bear in mind that tax advisers are among the front-line detectors of money laundering, and we do not want to do anything that would impact adversely on their responsibilities for that.

That is the Government's position. As the hon. Gentleman said, we have received representations and given thought to the provision. We do not think that the situation applies to our legal system in the way that it does in some European Union countries. We maintain our position, and I ask him to reconsider the amendment.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I thank the Minister for his comments.

There is the slightest irony that at the time when successive Governments have, perhaps rightly, eroded the legal profession's monopoly on representation—we do not know quite where that will end up—we should keep legal professional privilege tied so closely to solicitors and barristers. I would not be doing my job properly if I did not indicate that I foresee circumstances in which one might end up with representation occurring before tribunals, which are not conducted by solicitors or barristers. That might happen sooner rather than later, and my profession might not welcome it. However, the Government should keep the matter under review.

I was interested to hear that accountants may represent their clients before certain courts in other European countries. I am not sure who is entitled to appear in a representative capacity before Inland Revenue commissioners. The Minister may know the answer, but I do not. I know that accountants may prepare cases for presentation before the Inland Revenue commissioners, but do they have any right to appear in front of them? Can the Minister answer that before the conclusion of our proceedings?

Photo of Norman Baker Norman Baker Liberal Democrat, Lewes

I am following the hon. Gentleman's comments with interest. Does he agree that the legislation would be best framed to ensure that it deals with the functions and individual discharges that are covered on any particular occasion, rather than the normal description that is applied to an individual?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The hon. Gentleman makes a good point. Of course, over the past 15 years, the barriers between solicitors and barristers have broken down considerably. On the whole, that commended itself to Labour Members and to some Conservative Members, if not to members of my own profession.

It has become apparent that is possible to see a solicitor or accountant for legal advice on tax matters. Indeed, some might argue that one would be better off getting legal advice on specialist tax matters directly from an accountant. There are issues of direct professional access to the tax Bar, which need not be done through solicitors.

However, there is little doubt that a consequence of the Bill is that any person who wants legal advice on a tax matter will be well advised to see solicitors and barristers, rather than discussing the matter with their accountant. That is especially the case if the person thinks that they might fall foul of the law if they did not follow the advice. Unfortunately, that situation is not unknown.

The Minister explained the Government's view. Oddly enough, that might have the unintended consequence of helping people in my profession, especially specialist tax barristers—there are not many of them—and solicitors at the expense of accountants and tax advisers in this discrete area. That is contrary to some of the long-term trends that have developed in this country, which, apparently, have been welcomed.

In light of that, I wonder whether the Minister will think about the issue. As I have said, this is a probing amendment. I am offering, on behalf of my profession, to give something away—that is something that we are usually accused of being unwilling to do. I believe that the issue should be considered.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok 3:15, 24 January 2002

Can we clarify whether the hon. Gentleman is speaking on behalf of his profession or the Opposition? Was he elected to Parliament on behalf of his profession or his party?

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

Order. We do not want to enter into that subject.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I take the hon. Gentleman's question as an indication of his complete failure to understand what I was saying. I serve on the Committee to argue points on behalf of the public and my constituents and according to my conscience. I also bring my experiences to bear, just as he and all Members of the House do.

I am certainly not arguing on behalf of my profession. For all I know, the Bar Council might be horrified to hear my argument. I do not know what the Law Society would think about it. The issue was raised by the Chartered Institute of Taxation, who are linked to neither the Law Society nor the Criminal Bar Association of England and Wales—or the Scottish branches of the profession, for that matter. It is not an argument that favours the legal profession commercially. If the amendment were accepted, one might see a further removal of specialist tax work away from the legal profession towards specialist accountants.

The hon. Member for Glasgow, Pollok (Mr. Davidson) has got the wrong end of the stick. I am making the argument because I could see that the

Chartered Institute of Taxation has a point. It will be more difficult for it to provide specialist tax advice under the new regime, because although it does an effectively identical job to that done by a solicitor, who provides the same advice, a solicitor will be subject to legal professional privilege protection, whereas the Chartered Institution of Taxation will not enjoy it. For that reason, the Minister may wish to consider whether that aspect should be reviewed. I shall not take up any more of the Committee's time. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 520, in page 187, line 41, at end insert—

'(c) the amount of money involved does not exceed £1,000'.—[Mr. Grieve.]

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 13.

Division number 31 Adults Abused in Childhood — Clause 324 - Failure to disclose: regulated sector

Aye: 5 MPs

No: 13 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I beg to move amendment No. 490, in page 187, line 42, leave out subsection (6).

I need not trouble the Committee with the amendment, but the Minister may wish to amplify some of his previous remarks. The amendment was designed to be probing. It was intended to elicit details from the Minister about the guidance that might be provided by the supervisory authority for the benefit of practitioners. I am the first to accept that, during a debate on Tuesday, the Minister provided relevant details. However, I would be much happier if the Committee could have as much detail as possible. If the Minister has additional information, which will help the Committee to understand how the guidance mechanism will work, I should be grateful to hear it. However, I do not want to trouble the Committee further. The amendment is probing, and, subject to hearing the Minister's comments, I shall withdraw it. It was never my purpose or intention to lose the advantage that comes from having guidance published.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

That was a helpful contribution. I shall therefore try to satisfy the hon. Gentleman.

As I explained, since 1990, guidance notes on money laundering have been issued to the regulated institutions by the industry's joint money laundering steering group, which includes representatives from all the leading trade associations of the UK financial industry. Clause 324 recognises the potential value of that guidance. The guidance that the court will consider must be issued by the supervisory authority

or another appropriate body, approved by the Treasury and published in the appropriate manner, so that it can be brought to the attention of the people affected by it. A list of the supervisory authorities will be found in part 2 of schedule 6. The appropriate body is defined in subsection (11). The Treasury will approve the guidance in its capacity as the Government Department with overall lead responsibility for money laundering policy in the regulated sector. It is important to note that the guidance provided for in subsection (6) is intended to be a comprehensive document, which should explain the new responsibilities in full.

All practitioners should be familiar with the guidance notes, which are expected to include a definition of the term ''reasonable grounds'' and examples of situations in which it would be appropriate to report. The existence of guidance notes will provide additional security for those working in the regulated sector. It would be reasonable to expect that if employees had followed the guidance, and did not know or suspect that money laundering was taking place, they would not be convicted of a failure to report such an offence. The guidance will be approved formally by Ministers so that it has the necessary status for use in court proceedings.

However, industry input will be vital in ensuring that practical concerns are effectively met. The notes will therefore be written, as before, by the body set up by the industry. The guidance will then be submitted to the new money laundering advisory committee, which, it is anticipated, will meet for the first time in April this year. That committee will offer recommendations to Ministers before final approval. I hope that that amplifies my earlier comments.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am grateful to the Minister for his comments, which are helpful. I note that he said that if somebody had followed the guidance, and did not know or suspect, he would not be prosecuted. That may provide a measure of reassurance, although, as the Minister will realise, it does not persuade me on the main issue in relation to negligence and clause 324. However, I am grateful to the Minister for having placed his comments on the record, which amplify slightly some of the remarks that he made on Tuesday. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I beg to move amendment No. 491, in page 188, line 6, leave out 'employer' and insert—

'place of work'.

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

With this it will be convenient to take the following: Amendment No. 100, in page 188, line 6, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation.'.

Amendment No. 492, in page 188, line 8, leave out 'employment' and insert—

'work'.

Amendment No. 493, in page 188, line 8, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 494, in page 188, line 9, leave out 'employer' and insert—

'place of work'.

Amendment No. 495, in page 188, line 9, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 501, in clause 327, page 189, line 29, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 502, in page 189, line 31, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 503, in page 189, line 32, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 506, in clause 328, page 190, line 15, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 507, in page 190, line 17, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 508, in page 190, line 18, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Government amendments Nos. 512 to 514.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

This group of amendments deals with an issue not of principle, but of good practice. I hope therefore that the Opposition amendments will commend themselves to the Government. Under the clause, a person is protected if he makes a disclosure to a nominated officer as soon as possible after the information comes to him. It states:

''A disclosure to a nominated officer is a disclosure which—

(a) is made to a person nominated by the alleged offender's employer to receive disclosures under this section, and

(b) is made in the course of the alleged offender's employment and in accordance with the procedure established by the employer for the purpose.''

Both those paragraphs presuppose that a person is an employee within an organisation. However, there are several types of organisation that may have a nominated officer, without there necessarily being a relationship of employer to employee within that organisation. That is why I have tabled the amendments.

Amendments Nos. 491 and 100 are the most important, because the others are consequential. Amendment No. 491 would leave out the word ''employer'' and replace it with the phrase ''place of work''. Under amendment No. 100, after ''employer'' would be inserted:

''or, as the case may be, his firm, company or voluntary organisation.''

Photo of Mr Paul Stinchcombe Mr Paul Stinchcombe Labour, Wellingborough

Is the hon. Gentleman's concern met by Government amendment No. 514?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

Yes, that would go some way to meeting my worry—although I would have been interested to see the Government's amendment earlier. My amendment was tabled before the Minister's amendment, so I do not see why I should not move mine and speak to it. There may be common ground between us. We must deal with voluntary organisations and partnerships, because they have not been adequately covered. Mindful of the fact that, as I said, my amendment was tabled before his, I await the Minister's response.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I suspect that there will be a blossoming of consensus on this matter—if not on my hon. Friend's amendment, perhaps on the Government's amendment.

One fact that we must bear firmly in mind, particularly with the fast growing array of independent financial advisors, is that many of them are either self-employed or employed in a network consultancy arrangement. Therefore, it is important to find the right form of words with regard to nominated officers. I suspect that when the Bill is enacted, and the full implications of the money-laundering provisions are made clear to the financial services profession, some sort of network will have to be put in place to accommodate new and complex forms of employment.

We must be more imaginative, so that we can address more modern work environments than those of traditionally organised firms and partnerships. The world of employment is changing fast, and it is clear that networks will be put in place to ensure that nominated officers can be appointed, even if they are not employees or employers—or have no direct working relationship at all with individuals who might fall foul of the provisions.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department 3:30, 24 January 2002

In principle, I agree that the legislation could be improved by allowing for internal reporting to a nominated officer by employers as well as employees, and by providing for immunity from any legal or other proceedings relating to disclosure where a report is made voluntarily. We have met several organisations that have expressed concerns about Part 7, and we have also received representations. I have already indicated that I would table amendments to deal with those concerns—and in response to the little comment by the hon. Member for Beaconsfield, may I add that although he may have tabled his amendment first, we may have thought of ours first?

The Opposition's amendments are commendable, but they fail to achieve what the industry is looking for. With regard to reports to a nominated officer, it appears that the amendments that relate to a firm, company or voluntary organisation might exclude some of the sort of bodies that we want to include, and

on the immunity point, further adjustments would be necessary to clause 327 to cast the immunity wider than the regulated sector. Therefore, the Government have tabled three amendments that offer a more effective means of answering the industry's concerns.

Amendments Nos. 512 and 513 provide protection from charges of breach of confidence if a person outside the regulated sector reports suspicions of money laundering. Amendment No. 514 addresses internal reporting, and will allow employers as well as employees to report to a nominated officer within a firm, company or voluntary organisation.

Amendments Nos. 512 and 513 remove the references to the regulated sector in clause 327, so that the protected disclosure provision would no longer apply only to those conducting a business in the regulated sector. Instead, the amendments extend it to cover information that came to someone in the course of their

''trade, profession, business or employment.''

That is intended to cover those who exercise their profession in a voluntary capacity, such as solicitors working in law centres, or accountants giving free advice for organisations such as TaxAid. However, it would not catch professionals who were doing voluntary work unrelated to their profession.

Amendment No. 514, which inserts new subsection (10A) into clause 329, has the effect of applying the protected disclosures provision to people who are not technically employees, but who exercise functions for an organisation in which there is some sort of nominated officer scheme in place. That means that directors, volunteers, partners in traditional firms and members of limited liability partnerships will all be able to make a report to a nominated officer, if their organisation has one.

Because amendment No. 514 applies to the whole of part 7, and clarifies what is meant by references to employers and employment, non-employees can report to a nominated officer in all three of the situations envisaged under part 7 in order to avoid committing one of the principal money laundering offences, in order to avoid committing the failure to disclose offence and voluntarily with the protection offered under the clause.

When such a report is made to a nominated officer, the onus will fall on him to make the report to a constable, if he thinks it appropriate. Therefore, if the transaction is in the regulated sector, the liability for the failure to report an offence under the clause will be transferred to the nominated officer. If the transaction is outside the regulated sector and a report is made voluntarily or in order to avoid committing one of the principal money-laundering offences, under clause 322, the nominated officer could be guilty of becoming concerned in an arrangement that facilitates money laundering if he does not take appropriate action.

We consider that we have dealt in a wider way with part 7 and with the worries that have been expressed by the industry—the same worries that the hon. Member for Beaconsfield (Mr. Grieve) has mentioned. I commend the Government's

amendments to the Committee, and ask the hon. Gentleman to reconsider his amendments.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I am grateful to the Minister for what he has said. He has made this clear, but will he confirm that the change from the regulated sector to any trade or profession does not place a greater burden in terms of failure to disclose on individuals outside the regulated sector? I see his officials nodding. He will be aware that, under the Drug Trafficking Offences Act 1986, the duty to disclose extends precisely to that category of people who can make a protected disclosure.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I suppose that, for the sake of the Hansard report, I had better confirm those nods.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

In that case, the Minister will not be surprised to know that we do not intend to oppose the Government amendments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 324 ordered to stand part of the Bill.