Clause 95 - Money laundering: threshold amounts

Serious Organised Crime and Police Bill – in a Public Bill Committee at 4:30 pm on 13th January 2005.

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Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 4:30 pm, 13th January 2005

I beg to move amendment No. 241, in clause 95, page 61, line 34, leave out '£100' and insert '£500'.

Photo of Mrs Marion Roe Mrs Marion Roe Conservative, Broxbourne

With this it will be convenient to consider the following amendments: No. 242, in clause 95, page 61, line 34, leave out '£100' and insert '£1,000'.

No. 243, in clause 95, page 61, line 34, leave out '£100' and insert '£250'

No 244, in clause 95, page 61, line 34, leave out '£100' and insert '£5,000'.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

This part of clause 95 concerns threshold amounts. Sensibly, the Government have taken the view that there should be a de minimis provision in respect of the duty to make a disclosure. In those circumstances, we are told:

''The threshold amount for acts done by a deposit-taking body in operating an account is £100 unless a higher amount is specified under the following provisions of this section (in which event it is that higher amount).''

The Committee will see that the amendments offer some alternatives to £100—£500, £1,000, £250 and £5,000. While there is a probing aspect to those   alternatives, £100 is a small amount, and I am bound to say that if the provision is going to be that low, that might be a compelling reason to say that every penny has to be accounted for and disclosed by the accounting bank. However, if we are going to have a real de minimis provision, accepting that some transactions will slip through, but aiming to lessen the burden on deposit-taking bodies and, I suspect, on those to whom the reports are to be made, £500 or £1,000 might be more appropriate, even if 5,000 is probably too high.

I hope that the Minister will also take the opportunity to explain what is meant by the

''higher amount . . . specified under the following provisions of this section'' and the circumstances in which higher amounts will be deemed appropriate.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Home Affairs)

I support my hon. Friend's argument—£100 seems an extremely low figure. My thought process led me to think that perhaps a criminal might have lots of £100 accounts and, therefore, that £100 is the right amount. However, I do not think that that is right, because if he had a lot of accounts, that would create a bad smell that would lead banks to suspect money laundering. That takes me back to the thought that £100 is too low, so I support the amendment.

Photo of Andrew Mitchell Andrew Mitchell Shadow Minister (Home Affairs) 4:45 pm, 13th January 2005

I, too, wish to say a few words on the three amendments, particularly about the figures. Two important points need to be made.

I was able to raise the first on Second Reading of some money laundering legislation some years ago. I pointed out that it was right to impose such low limits if it met a particular difficulty that could at least be defined in some credible way. Clearly, however, those low limits are a burden not only to the financial community and for those engaged in retail financial services; they are also a considerable burden to those opening accounts, who have to produce the necessary documentation and so forth. Parliament should impose such burdens only if it is really necessary.

That brings me to my second point. I asked Ministers on that Second Reading whether they could give the House some idea of their perception of how bad money laundering was in Britain. I wanted to know whether it was an enormous problem or a minor one. I wanted to know whether the Government could quantify the scale of money laundering to which they believed Britain was being subjected. Was London the money laundering capital of the world? What satisfaction could Ministers give Parliament that we were justified in imposing those substantial burdens, given the effects that I have described? Was the problem extremely severe? I did not receive an answer on that occasion, nor on any other occasion since.

In supporting the amendments, I want to probe the Minister a little further. I hope that she will be able to demonstrate to the frustrated public who have to meet those low thresholds when opening accounts, and to the financial community, that they really are necessary.  

Photo of Caroline Flint Caroline Flint Parliamentary Under-Secretary (Home Office)

As I said earlier, we understand the difficulties caused by the present arrangements. Based on a strict interpretation of the law, a bank would need to make a separate disclosure to NCIS, or seek consent from it, before processing any transaction in such cases. I believe that the provisions in clause 95 take us some steps forward by recognising what is necessary in those different circumstances.

As I understand it, the £100 threshold was based on advice from NCIS, which is obviously the service that deals with organised crime. The financial crime unit is part of that organisation, which will transfer to SOCA once it is established.

Photo of Andrew Mitchell Andrew Mitchell Shadow Minister (Home Affairs)

I want to pin the Minister down very precisely, not least because the words ''we are advised by the Security Service''—or by the Secret Intelligence Service or whomever—will, I suspect, be used in other debates next Tuesday. Will she tell us not that she is advised, but that NCIS—or whichever service she is referring to—has specifically given that advice about that amount of money?

Photo of Caroline Flint Caroline Flint Parliamentary Under-Secretary (Home Office)

My understanding, based on consultation, is that that is the case. I shall verify that. Alongside that, the Bill makes provision to ensure, on a case-by-case basis, that NICS has the power to vary the amounts within organisations or institutions. That would apply to mortgage payments, allowing a higher threshold to be set, for example.

Clause 95 gives the Secretary of State the ability to vary the £100 threshold. We are monitoring the situation, but the clause gives us the flexibility to adjust the £100 threshold if we feel that it is appropriate in the light of experience. As I said, the provision already allows NCIS or other law enforcement agencies to set a higher threshold in particular cases. Alternatively, banks can ask for a higher threshold, and the threshold amount can subsequently be varied. The threshold can therefore be different for different transactions—for instance, it can allow for the fact that mortgage payments are usually considerably higher than the other payments that people usually have to make.

Clause 95 allows us to take a few steps forward in an area that everyone agrees is important. We must get the balance right, making sure on the one hand that we do not lose out on important information but on the other hand that we do not end up tying people down too tightly. There are opportunities for variations within the clause. We will continue to review the situation and take advice from all sides about how this is operated and whether it produces the evidence and intelligence that we need to deal with particular activities that may involve crime.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I am slightly tempted to put one of the amendments to the vote, but I will restrain myself. I accept that it is a hit and miss operation, but I have a feeling that £100 is too little. If the Government really want £100, I do not know why they have a de minimis figure at all. I would have been more comfortable had the Minister accepted £500 or even £1,000 as being a reasonable figure. I have listened carefully to what she said. I am pleased that the figures will be kept under review. There may be further opportunities to discuss   this later in the Bill. I do not think that the Minister's reply is wholly satisfactory but I hope that she succeeds in finding a minimum figure that works. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 95 ordered to stand part of the Bill.

Clauses 96 and 97 ordered to stand part of the Bill.