Examination of Witnesses

Criminal Finances Bill – in a Public Bill Committee at 9:27 am on 15th November 2016.

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Donald Toon, Mick Beattie and Detective Superintendent James Harman gave evidence.

We are now sitting in public again and the proceedings are being broadcast. Before we start hearing from the witnesses, do any Members wish to make any declarations of interest?

Photo of Victoria Atkins Victoria Atkins Conservative, Louth and Horncastle

I used to practise as a criminal barrister and prosecute for many of the agencies that would use these powers.

I think there are many in this place who are guilty of the same thing. We will list that.

Photo of Byron Davies Byron Davies Conservative, Gower

I am a former Metropolitan police officer and member of the National Crime Squad.

We will now hear oral evidence from the National Crime Agency, the National Police Chiefs Council and the Metropolitan police. Before calling the first Member to ask questions, I remind Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme motion that the Committee has agreed for this section, which will end at 10.20 am. Will the witnesses please introduce themselves for the record?

Donald Toon:

Good morning, Chair. I am the prosperity director for the National Crime Agency. As part of my role I am responsible for the agency’s response to financial crime, including the operation of the UK Financial Intelligence Unit and, therefore, the suspicious activity reporting system. I am also responsible for our work on money laundering and asset recovery. As part of the agency, we have a responsibility to co-ordinate the law enforcement response to serious and organised crime, in this case in respect of money laundering and criminal finances.

Mick Beattie:

Good morning. I work for the National Police Chiefs Council, which is the governing body of chief officers for the policing forces of the UK. I report directly to Mick Creedon, the national lead for financial investigation asset recovery. I am also the subject-matter lead for the regional organised crime units, which is the serious organised crime response from UK policing.

Detective Superintendent Harman:

Good morning. I am a detective superintendent with the Metropolitan Police Service, specifically the SO15 counter-terrorism command. I head up the national terrorist financial investigation unit. Our responsibility is the investigation and prosecution of terrorist financing offences and financial investigation more generally within a counter-terrorism context.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Thanks very much for coming in today. I have an easy question first. Because you all enforce this every day, what are the current difficulties with the legislation that we have in recovering assets from individuals who are suspected of involvement in criminal activity overseasQ ?

Donald Toon:

One issue is the ability to have an effective overseas end to the investigation. A particular problem around international corruption has been the need to have evidence from overseas, often from a difficult jurisdiction if we are talking about political-level corruption, that is capable of being used in a UK court to take action to recover assets. From our perspective, the introduction of the unexplained wealth order is a particularly important step in response to that.

The other issue, perhaps, has been very much the ability to have sufficient time to be able to get evidence from overseas in standing up a law enforcement response to a suspicious activity report, where that report may be looking for a defence against money laundering, commonly known as a consent SAR. The difficulty there is that we run against a 31-day moratorium period. Essentially, if we cannot have a law enforcement case in front of a court within 31 days for restraint of the assets, there will be a deemed consent and transactions will continue. That is acutely difficult when we are looking for information from overseas. In some jurisdictions that can take an extended period.

Another piece in the Bill that is particularly useful is the extension of the moratorium period, subject to court order, of up to 186 days. In terms of references to the legislative position, it is very much that ability either to get evidence or find a mechanism by which we do not need to rely on overseas evidence, particularly when we are talking about difficult jurisdictions.

The other area that is particularly difficult for us has been very much around the ability to access beneficial ownership information overseas. Although not strictly part of this Bill, that has been a recent focus for legislative change. That is a particular issue for Crown dependencies and overseas territories. I can expand on that as necessary.

Mick Beattie:

Yes, I echo those sentiments. Over the past 13 years, operational use of the Proceeds of Crime Act 2002 has thrown up some operational challenges, many of which have been addressed in the Bill. In terms of investigative resources, an example of that would be disclosure orders. The current system operates as follows: if you have a suspect A identified as having accounts in bank B, then an investigator investigating that person for money laundering would go to the court for a production order. If the court approves the order and it is then served on a financial institution that subsequently gives over the information required that identifies yet another account at bank C, then the investigator has to go back to the court to obtain another production order, and go through the same process of serving an order on the second bank.

If that bank again identifies another account at another bank, then the process is repeated. When awarded, a disclosure order, or something like it, lasts for the lifetime of the investigation, and can be served on anybody with an interest in or information relating to the matter. The resource implications could be massively improved from something like a disclosure order.

As far as items of portable wealth are concerned, legislation exists that refers to cash seizure. We have civil legislation that caters for anything over £1,000 that is deemed to be identified as resulting from criminal conduct or being used in criminal activity, but criminals are adaptive. They can transfer that cash into items of wealth such as watches and jewellery, which are easy to transport. The new legislation relating to that gives us more opportunities to search and seize those kinds of items.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Q In relation to what you said about portable wealth, do you think the £100,000 limit is about right, or can people convert money into things worth £95,000 by buying paintings up to that value?

Mick Beattie:

They can, and obviously they can collaborate among themselves to do that. Getting through that is an operational challenge for us. We have to try and investigate that as part of the investigation, and we have to look for those kinds of things. Anybody who facilitates that is potentially committing money laundering offences themselves, and can be brought into the investigative chain.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Q Is £100,000 a good figure or is it an arbitrary figure plucked from the air?

Mick Beattie:

I do not know how the figure came about. It is a high figure, but we are talking about serious and organised crime and criminals here, and they operate in those kinds of areas of value. I would not know the origin of the £100,000 figure.

Detective Superintendent Harman:

There are a great deal of positives around international co-operation in the counter-terrorism area, as you might expect. There are strong relationships across the world for the purposes of sharing intelligence, and doing so quickly. As with our colleagues, what can slow us down is when we are looking for evidence that we can use in a court during a criminal prosecution. That can take a bit more time, so the first challenge is the time that it can take.

There is also the issue of the visibility of what money is used for. We may very well be able to show that money was sent out to Syria, for example, and we may have a strong case for believing that that money was used for terrorist purposes in theatre, but to follow that money into the hands of a terrorist and show what is was actually used for is and probably always will be a challenge for us. Where this Bill may help us is in the fact that the more that banks—they often have an international visibility and reach—can tell us about transactions, the more they can share information with each other and build up that picture. That will help us in our international anti-terrorism efforts.

The other point I would make is that in terrorism we are often talking about smaller amounts of money. Sadly, it does not cost a great deal of money to commit a terrorist attack, depending on its scale. Spotting those smaller amounts within the financial system and dealing with those smaller amounts moving overseas is again more challenging, although not impossible.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Q The Public Accounts Committee did a report on confiscation orders. It said that there was a tension between whether the point is to disrupt crime or recover criminal assets—sometimes they are facing in two different directions. Would you three agree with that? If we enact all the clauses in the Bill, will the new version improve the mismatch between those two limbs?

Donald Toon:

I am not sure I would necessarily feel that there was a tension overall. The issue from our perspective is around the roles and responsibilities of the agencies involved that are using the legislation. The statutory duty of the National Crime Agency is to secure an effective response to the threat from serious and organised crime. One aspect of that is to make use of the powers in the Proceeds of Crime Act 2002 for the disruption of criminality. From our perspective, that is the responsibility of the agency. It is about the relentless disruption of serious and organised crime, where we are able to do so, using whatever tools are available to us, rather than purely focusing on the recovery of assets. That said, to be effective in using financial disruption we will very often use either the criminal confiscation process or civil recovery, which ultimately recover assets.

One of the points to cover is that, from our perspective, it is very much about asset denial. If we are talking about overseas, large-scale corruption, the point is about denying the criminal, the corrupt individual or their representatives access to the funds. If that means the funds are ultimately dissipated, for example, through legislation, we have still denied the criminal that access. Our focus is fundamentally around the vulnerability within the system, rather than purely about getting money and assets back for the Government and the taxpayer. That is a particular point when talking about overseas criminality.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Q Do you think £100,000 is about right as a threshold or should it be lower for the unexplained wealth order?

Donald Toon:

I think it is a perfectly reasonable value. The vast majority of property involved is of high value. If we are talking about property in the UK linked, for example, to non-European economic area politically exposed persons, it is almost certainly going to be of significant value. A small case from our perspective would be somewhere a little under £1 million. The majority of the casework in that space will be multiple millions, if not much higher.

Mick Beattie:

For me, anyone who enters the criminal justice system should not be leaving it with their criminal assets intact. It is all about removing those criminal assets. First, they provide the symbolism of wealth and status that money or assets can provide. Secondly, removing those assets is a good mechanism for reinforcing the compensation programme—we can compensate victims as a result of confiscation, with the enforcement capability behind it. It also stops reinvestment into crime, as mentioned by Donald. Commodity purchase is required to perpetuate the continuing criminality.

For me, it is all about removing those assets and everything associated with it and the image that is portrayed by the retention of those assets. It is well documented by some that serious and organised criminals are quite happy or quite prepared to do the time relevant to a prison custodial sentence. What really hurts them and their associates and family members is the denial and removal of the assets and the image that portrays to the public. It gets a lot of positive reception when we carry that out. From a public perception point of view, we know how much they appreciate the removal of assets.

Detective Superintendent Harman:

Counter-terrorism is quite a different context for asset recovery, as you will appreciate. The people we are interested in are not looking to make a profit, and they are not looking to embark on an enterprise that is going to last for a long period of time and create a huge amount of wealth. They are looking to get money to achieve an objective. Our absolute priority is keeping the public safe and stopping a terrorist attack. Our absolute priority is therefore getting hold of that money and controlling it before it can be used. It is not much good to us to be retrospective after the fact: we are looking at stopping the attack. For us, it is about seizing assets before they can be smuggled overseas, seizing assets while they are sitting in a bank account, and interrupting and intercepting transactions that banks have hopefully reported to us as being suspicious.

Yes, of course, some of our terrorists do use crime to make money to commit terrorism, but really, we are not so much in the business of seizing huge amounts of assets. We are looking at stopping the cash before it can be used to hurt the public.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

Q What do you think of the £100,000 figure?

Detective Superintendent Harman:

It sounds a reasonable figure to me when we are dealing with a higher end, it certainly does, but we operate less in that realm. We are more about the slightly smaller amounts causing a great deal of harm.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

I want to clarify the point: the seizure threshold is £1,000 and the unexplained wealth order threshold is £100,000. I did not want members of the Committee to get confused about the two. If we are talking about taking money out of a bank account, it is at the £1,000 level; if we are talking about confiscating assets on an unexplained wealth order, it is £100,000.

Order. Can I just say to the witnesses that we have only a very short period of time and there are at least five other members who want to ask questions? The Minister may also do so at the end. Your replies are very informative and welcome, but could you make them more succinct? Similarly, could Members confine themselves to instant questions that people want immediate replies to and that can be given?

Photo of Flick Drummond Flick Drummond Conservative, Portsmouth South

Are you confident that the enforcement agencies will have sufficient resources to make full use of the new powers in the BillQ ?

Detective Superintendent Harman:

Yes I am. In fact, the Bill is very helpful for counter-terrorism in that one of its sections allows us to make more of the resources we have. To be brief, about 40% of our financial investigators are police staff, or “civilians”, as they used to be called. Under current legislation, you have to be a warranted police constable to conduct a lot of the financial inquiries that we need to do. The Bill offers those civilians investigators new powers similar to those of a constable, allowing us to make the most of the resources we have. We are very pleased to see that in the Bill and confident we will make good use of it.

Mick Beattie:

Likewise, I gave an example of the attendance at court which can be reduced by the disclosure orders. Obviously the policing bill has been cut, as is well documented and, yes, that has been challenging, but there have been some positives. The Government have recently provided additional funding for ACE teams—asset confiscation enforcement teams—which allows us to go chasing confiscation. They have provided additional funding for section 22 where you can revisit outstanding orders—it is a little technical—and, only recently, they have announced additional funding for the regional asset recovery teams, all of which will benefit from the improvements identified in the Bill.

Donald Toon:

You have already heard about the disclosure orders but I also think the power to require information for the Financial Intelligence Unit and the information sharing provisions are important in making us more efficient. The one thing I would bring out is that it is not just about resources in law enforcement. We are talking about the ability to harness resources and capability from across the regulated sector, in particular financial institutions. From that perspective, I think it is a huge strengthening of capability.

Photo of Roger Mullin Roger Mullin Shadow SNP Spokesperson (Treasury)

I would like to take a slightly different tack and ask about the existing powers that you have that this Bill seeks to build upon. I am concerned that the National Crime Agency has declined to deal with the Hermitage case, which has been discussed, and which involves about $30 million laundered in London. Although the evidence provided to the National Crime Agency has been sufficient in other jurisdictions to take action, there has been a refusal to take action here. Why is that the case? Is it a lack of resources or a lack of willQ ?

Donald Toon:

Frankly, it is neither. In the Hermitage case, the overwhelming majority of the actual criminality took place outside the UK. One of the key issues in terms of where we focus our attention has got to be the prospects of actually being able to bring the major criminality in front of a court, and hopefully achieve a conviction. The fact is that a number of overseas jurisdictions are investigating criminality that took place in their jurisdiction. The vast majority of the criminality did not take place in the UK, and those responsible are not in the UK. We have supported, we are supporting and we will continue to support inquiries in the UK that are designed to help to bring those people to justice in the jurisdictions where they can actually be targeted.

Photo of Roger Mullin Roger Mullin Shadow SNP Spokesperson (Treasury)

Q With all due respect, what I quoted was $30 million that was laundered in London. I am not talking about the other money laundered through Hermitage in other jurisdictions. My understanding is that they have been buying up different types of assets in London—they are not merely property assets—and that the individuals involved regularly visit London, which would seem to bring it entirely within the remit of the UK to do something about it.

Donald Toon:

We have a remit in the UK to do something, as you say, but from our perspective, we have a remit to do something in support of those who are better placed to target the main criminals. My understanding of the position is that I am not at liberty at the moment to go into the detail to which you refer.

Photo of Scott Mann Scott Mann Conservative, North Cornwall

I have three questions for you, Mr Toon, if I may. What have been the most significant challenges for the NCA in tackling economic crime? How will the measures in the Bill help the NCA to tackle economic crime? The third question is a small supplementary on the seizure orders and unexplained wealth orders. A small number of people make money from online gambling. Could you tell me how the Bill might affect them?Q

Donald Toon:

I outlined earlier a couple of the biggest problems. Essentially, at the top end of money laundering, asset hiding and asset tracing, we are talking about something that is fundamentally international in scope and often involves us dealing with difficult jurisdictions. That has been an ongoing problem, notably around our ability to access sufficient information to track asset movements and identify ultimate beneficial owners. The fact that we have provision in the Bill for information sharing with the private sector is from our perspective hugely valuable. We have been working with the banks in a joint money laundering intelligence taskforce for about the past 16 or 17 months. This legislation essentially gives more cover for the banks to be able to share information effectively. Currently, they can do that only through us, through our gateway.

It is important to bring out that, with the capability that we have had so far, 58 arrests have flowed from the ability to share information with the banks. We have identified more than 2,100 suspicious accounts. Most importantly—there is something here about the shared intervention response—we have also had 730 bank-led internal investigations into customers and the use of particular accounts, which is hugely valuable to us. We are often dealing with large multinational financial institutions. They are in a very strong position to track the movement of money and see transfers between particular accounts, which enables us to identify the routes that we need to go down to track beneficial ownership. That information sharing provision, together with the work that has been done around improving transparency on beneficial ownership, is hugely valuable.

I have already mentioned the value of the unexplained wealth orders. Equally, there is the power to require provision of further information. We have an issue with suspicious activity reporting. Yes, we get a very large number of reports and that number continues to rise, but it is overwhelmingly from the banks. We have significant concerns about the quality and number of reports that we get from other parts of the regulated sector. Often, banks report suspicious transactions involving other parts of the regulated sector. It is very unusual for us to be able to see and track those transactions as they have gone through, say, the legal profession, accountants or company service providers. We should see better quality reporting in that space. The power in the Bill will give us the ability to seek additional information, either where we have a report and it lacks quality or where we have a report that leads us to want to start asking questions of other parts of the regulated sector that have been involved in the transaction. That is hugely valuable from our perspective.

The Bill as a package is really valuable, but not just because of that. I have mentioned the SARs moratorium period. That moratorium period has been so difficult, not just from our perspective, but from the perspective of law enforcement’s ability in the round to make effective use of SARs. With a seven-day turnaround and a 31-day limit, as soon as we go international, even with supportive jurisdictions, it is very hard to get information within that 31-day limit to be in a position to get a restraint order. That we can now see that go up to a maximum of just over six months—186 days—and that there is court oversight to give safety, is a hugely valuable step forward. Those are the major advantages of the Bill.

On the point about internet gambling, I confess I have not focused on that area. I would expect that, when we are in a position to be able to track those who are making particular profits, they could be targeted using the same provisions. The interesting thing is that while the information-sharing provision starts with the banks and the financial sector, the intention is to broaden that out and share information with the wider regulated sector. That would take us into things such as the gambling operators.

Order. Before we proceed, I will say to the witnesses that this is your time. You have asked to appear and you have come to give evidence. This section will end at 10.20 am, no doubt whatsoever, so you are using your own time. You need to be more succinct to get more questions asked of you and replies given.

Photo of Scott Mann Scott Mann Conservative, North Cornwall

Q Just quickly to pick up on what Mr Toon said, could you give me the timeframe for the 58 arrests?

Donald Toon:

Those 58 arrests would be over a 15-month period.

Photo of Peter Dowd Peter Dowd Shadow Financial Secretary (Treasury)

I want to come back to the issue of resources and capabilities. You all gave an answer but I did not get the sense that you were convinced that you have adequate resource. You told us that the capabilities in the Bill would give you just that—capability. You also said that additional resource was being put in and that other agencies, such as banks themselves, would do a lot of the investigation but you did not tell us that you believed that you were going to get sufficient resources for the proposals in the Bill and what you were being asked to do. I will ask a second time: do you believe that you will get sufficient resources to do the job that you are being asked in the BillQ ?

Donald Toon:

From our perspective, the vast majority of our resource is not specific to criminal finances. We operate on the basis that we deploy resource against the particular problem we are dealing with at the time. We have got approximately 4,500 resources. We are capable of flexing that. Could we do more with more? That is always the case in any organisation but the Bill will make us more capable and efficient in terms of delivering results. We think we deliver decent results now and will be better at it.

Mick Beattie:

Again, it is a case of competing demands. Obviously, in policing we have to refocus now with this emphasis on child exploitation and the emergence of cybercrime in recent years. That has really impacted on the limited resources that we have. There are approximately 1,800 financial investigators in and around the policing community. We could all do with more but, in terms of the balance around the competing demands, we have a very strong and productive capability.

Detective Superintendent Harman:

Yes, I do think that we have sufficient resources to take advantage of what is in the Bill, a specific example being the seizing of portable items. We are expanding our teams at the ports who intercept illicit cash and goods; we are not reducing them. That is one example. As I touched on, an area of the Bill would enable us to make better use of the resources that we do have. To answer your question directly: I am content.

Photo of Peter Dowd Peter Dowd Shadow Financial Secretary (Treasury)

Q So it is reasonable to assume that you will not be coming back to us within, say, the length of this Parliament to ask for any more resources, all things being equal?

Detective Superintendent Harman:

I would like to talk about financial investigation and that area of counter-terrorism. Obviously, counter-terrorism is a huge national issue and I would not like to speak for the assistant commissioner for national counter-terrorism. In relation to whether I can take advantages of the powers and measures in the Bill, yes, we have resources in place to do that.

Mick Beattie:

I echo that. In terms of financing investigation, the Bill gives a lot of opportunities for improved efficiencies. I reiterate that only recently we have had notification of another financial injection to policing’s financial investigation capability.

Photo of Peter Dowd Peter Dowd Shadow Financial Secretary (Treasury)

Q That is not the question I asked. I am getting quite exercised about the response to this question. You have told us that you have the current resources, and therefore it is reasonable for me to say, on the basis of your projections of the level of crime out there and in the future, that you do not believe you will be coming back to us with any significant additional asks for at least the length of this Parliament—both in terms of legislation and, more importantly, in terms of finance.

Mick Beattie:

I do not think I am in a position to answer that question.

Mick Beattie:

For me, it is about financial investigation. In terms of policing plc, financial investigation is one capability. There are competing demands across the policing —or any law enforcement—landscape. By comparison and proportionately, I believe that we have a strong capability. Yes, we would like more financial investigators; yes, as the regime becomes more aware of the capacity and capability of financial investigation and what it can bring, there will always be requests within my organisation for more capabilities. In terms of an overall policing budget, though, that is not for me to respond to.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

To pick up on that last matter, is it not correct to say that proceeds of crime seizures in effect go to central funds and can be used, and there is part that is returned to the agency bringing the prosecution? To a certain extent, therefore, it is self-financing.Q

Mick Beattie:

Of the money confiscated, 50% goes back to the Treasury and the remaining 50% is split three ways between the prosecuting element, the law enforcement agency and the court services. It is called the incentivisation fund. So yes, it goes back directly into law enforcement.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Q So strengthening and broadening your powers will enable you potentially to seize more assets. Clearly, therefore, the aim of these measures is to deal with money laundering. How does the new criminal offence preventing the facilitation of tax evasion link in with that money laundering aspect of your investigations?

Mick Beattie:

I am not a tax expert and do not represent Her Majesty’s Revenue and Customs. In terms of investigative capacity, as a senior investigating officer presented with an investigation, in determining your strategy you will look at what outcome you hope to achieve. It could be a criminal justice outcome, a disruption option or along those lines. You will look at all measures to achieve that. In some cases, the information, intelligence or evidence is such that a tax investigation may be more effective than a criminal investigation. We work with the National Crime Agency and HMRC colleagues in determining who should lead the investigation. In terms of legislation strengthening HMRC’s capability, it is clearly going to be advantageous to us in decision-making around the best strategy for a financial investigation.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Q One criticism often levelled at law enforcement agencies is that they do not take enough steps nationally to recover assets that are the proceeds of crime. Apart from the disclosure orders and the aspect of portable goods—for example, jewellery—that you have already spoken about, what particular powers will help you with that asset recovery, and is there anything that is not in the Bill that you think should be?

Mick Beattie:

The Bill contains technical amendments that, though they are not specific in themselves, tighten things up. Some of the legislation was restrictive and stopped upon a conviction; money laundering investigation powers would often stop. The Bill will nudge some of those on, to allow those powers to remain while there is a confiscation investigation. The powers in previous Bills have strengthened the investigative capability into the confiscation process, where there was a gap before in terms of what we could and could not do in serving production orders on accounts, for example. That has definitely helped.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Q Is that the same, for example, with regard to extending the powers to revisiting orders under the Proceeds of Crime Act 2002, which was a gap that was not there previously?

Mick Beattie:

The power to revisit the disparity between a benefit amount and a realisable amount is primarily the current role of the asset confiscation enforcement teams I mentioned earlier, which have been funded additionally by the Home Office directly from ARIS. The asset recovery incentivisation scheme has been top-sliced and a portion of that has been given to the three agencies to proactively do section 22 revisits.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Q Are you therefore satisfied that the current procedures in the Bill tackle the major challenges you face in your aspect of the investigations?

Mick Beattie:

It definitely improves some of the operational difficulties we have highlighted. We have been privy to the formation of the Bill, we have been invited, we have been allowed to comment and we have contributed to the drafting of the Bill. You always want more. There is more we would have liked around information sharing. But there are definitely advantages to the Bill that will help criminal investigations.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Thank you for your evidence. You seem to be saying there is more that perhaps could be done, Mr Beattie. What additional things should we take the opportunity to look at in the Bill, to make sure you have the powers you need to do your job?Q

Mick Beattie:

A lot of what we would have liked, we have got. Information sharing between the private and public sectors is done through the NCA UK Financial Intelligence Unit, which is under a lot of pressure. It is a unit that services the whole of UK law enforcement. The Bill allows communication between the banking sector and the UKFIU, which would then release that information to policing. If we had a particular interest, we may have to go back through the UKFIU back into that institution. We would have liked a little bit more direct access, but it is not a problem. It is something we can overcome.

In the early stages, I can understand the reticence from the banking sector. This is a new area of business for them, piloted through the joint money laundering taskforce very successfully. I can understand the small-steps mindset in relation to that—get some understanding, some evidence and some culture. So we are very supportive of what we have got in the Bill.

Donald Toon:

From our perspective, the Bill takes us forward on a range of difficult issues, but it does that in a balanced and thought-through way. From law enforcement’s perspective it is always easy to want more power, but that has got to be balanced against the fact that, for example, the financial services sector has to continue to do business.

We are satisfied that this makes the changes and we have been able to set out a clear, operational, evidenced case for the change. Do we think this will stop and it will be the panacea for the future? No, because we are involved in an arms race here. There are people on the other side—whether professionals involved in providing money laundering services or serious criminals—who will always be looking for another opportunity. That is why the Proceeds of Crime Act 2002 has had to be amended so many times since it was first introduced.

Do we think this will stop further amendment? No. Does it actually address the issues we can evidence now? Yes.

Detective Superintendent Harman:

I echo that. The answer for us now lies not in more legislation. The Home Office consulted very closely with us. We are seeing the legislation in here that we asked for. The answer now for us is about co-operation with the financial sector, about sharing information. Just like we asked the public for information to help us to fight terrorism, now we are asking the regulated sector, and I think the Bill will help with that.

Photo of Richard Arkless Richard Arkless Scottish National Party, Dumfries and Galloway

For the most part, my questions have been dealt with by colleagues previously asking about additional powers, but I will come back to one point. There is a huge array of regulatory bodies that cover money laundering in the UK. Do you think that consolidating these would make life easier for you in the pursuit of money laundering activity?Q

Donald Toon:

The Treasury has been doing work on this space now. From our perspective, all those regulated bodies are covered by anti-money laundering regulations and are required to submit SARs. We need to see clear, consistent standards across all parts of the regulated sector. I do not care whether that is achieved through one supervisory body or a number, provided they are all operating to the same set of standards and the same commitment to ensure that SARs are produced—and produced to the necessary quality—and they are prepared to take action against those parts of the regulated sector that they supervise when they do not live up to those standards.

Mick Beattie:

I support that. The police get nearly 400,000 suspicious activity reports a year. There are definitely gold nuggets in there, but some of those reports are of such a poor standard, or they are defensive reporting or a means for the bank—really, their own regulators could have a role around the quality of the SARs submitted.

Detective Superintendent Harman:

I do not have anything to add to what Mr Toon said.

Photo of Richard Arkless Richard Arkless Scottish National Party, Dumfries and Galloway

Q You make it clear that there is an urge for law enforcement to have additional powers, but a balance needs to be struck. It is for Parliament to strike that balance, so take that out of your contemplation. You are not responsible for striking that balance, so what extra powers would you like to see in the Bill?

Donald Toon:

As I have said, what we have in the Bill is what we are able to stand up a sensible evidential case for. We are conscious that we will see the opposition try to adapt. How they adapt, and in particular how some of the powers bed in, is what is going to inform the next stage. It is not something we feel that we are crying out for at this point.

Mick Beattie:

I would like to see the courts given the power to defer Crown ownership on assets. I can understand the reasons—third-party ownership and the issues clogging up the courts—why that was not accepted, but that would have been a bonus.

Detective Superintendent Harman:

As has been said, we see the powers in the Bill that we feel we need. I do not think we are looking for more powers; we are looking to ensure that we are using the powers well and we are co-operating with all partners in delivering our aims.

We have eight minutes left before we must wind up this session, and a number of Members still want to ask questions. You will have to be brief on both sides. I call Mr Davies, briefly.

Photo of Byron Davies Byron Davies Conservative, Gower

Q My question is simply this, with respect to unexplained wealth orders and politically exposed persons. It is perhaps more to you, Mr Harman, than anyone. The measures reflect the concerns about those involved in corruption overseas and laundering of the proceeds of crime. How operationally viable do you think those are from an investigation point of view, particularly with some of the more difficult countries that we have to deal with?

Detective Superintendent Harman:

I think there will be challenges, as you have highlighted. The unexplained wealth orders will help us to deal with the higher end, if I can call it that, of terrorist financing, where there are perhaps sham companies or charities being exploited and it is far more complicated. Such a power will ensure that people account for the money that they have. It will be challenging. To be honest with you, it will be a small part of our casework in the terrorism financing context, but it will be helpful.

Donald Toon:

From our perspective—we run the international corruption unit for the UK—we see this as a hugely valuable step forward. We have a real problem at the moment in a number of jurisdictions where we cannot get usable evidence yet we have assets that are of deeply questionable probity. We do not expect the numbers to be huge, because the cases are large and complex, but we do think this is a very useful step.

Mick Beattie:

We support that. Most of our international investigations go through the NCA anyway, so we agree with that.

Photo of Carolyn Harris Carolyn Harris Shadow Minister (Home Affairs)

I have one observation and one concern. The observation is that one of my colleagues mentioned that you would need to come back for more money, and another colleague said you would be self-funding. That means you will have to bring in far more than you cost to run, so just be aware of that.Q

I am really concerned that you are not concerned about money laundering in the gambling industry. You seem to have little or no evidence that that is an issue. I am very concerned that high street bookies are able to launder, and if they are not actually reporting any excessive or unusual activity, that is a great concern.

Donald Toon:

Can I correct the position? The specific question I was asked was about the application of these powers to online gambling. Do we see the gambling industry as a potential risk for money laundering? Yes. Traditionally, it has been an area where money laundering has been relatively straightforward, in the sense of being able to demonstrate the source of funds. Actually, we have seen quite a lot of improvement in the way the gambling industry has targeted that, particularly through the casino structure. We work with the industry and the main industry bodies, and we work very closely with the Gambling Commission on the regulation of that, and we do see some very good reporting. Is it still an abused area? Yes. It is an ongoing risk; we do seek to target that risk. It was a specific question I was responding to.

Photo of Carolyn Harris Carolyn Harris Shadow Minister (Home Affairs)

Q Is there a benchmark to which you would expect bookmakers to report high or excessive use in a high street bookmakers?

Donald Toon:

We would expect them to apply an objective test for suspicion and report. That is the point where we work with the Gambling Commission on making sure that that test is right.

Photo of Carolyn Harris Carolyn Harris Shadow Minister (Home Affairs)

Q But you leave it them to decide at what level they report?

Donald Toon:

It is an important point. It is absolutely the decision of any part of the regulated sector, including gambling operators. It is their decision when they should report. Should they fail to report when they should have done so, there are consequences. If they could be shown to be facilitating money laundering when we had gone into a major investigation and tracked back, then there would be potential consequences. Either we would seek to take action ourselves, or we would refer them—it does not matter which part of the regulated sector we are talking about—to their supervising regulator for action.

Photo of Carolyn Harris Carolyn Harris Shadow Minister (Home Affairs)

Q Would it be helpful if it was a mandatory reporting level? For excessive use of a fixed odds betting terminal, for example, if we set a level and said, “Anything in excess of £1,000 a day,” from someone who would not normally spend that money?

Donald Toon:

Frankly, no, I do not think it would. Every time you set a level, all you do is encourage people to create a level of complexity that always keeps below the level.

Mick Beattie:

It is about the suspicion. It is all relevant to that individual, that money laundering reporting officer, their level of suspicion and the circumstances or action that determines that suspicion.

This will have to be the last question. You only have two minutes.

Photo of Nusrat Ghani Nusrat Ghani Conservative, Wealden

I apologise for being late this morning; I was at another Committee meeting. My question is to Detective Harman. I think you have already tackled funding of terrorism this morning but, as we know, terrorism has no borders nor does the funding, and with technology it becomes increasingly difficult for you to follow the flow of these funds. The Bill proposes more information sharing between the public and private sectors, which you have said will be incredibly helpful. Could you share whether there will be pushback from the banking sector and, as we seize the assets of terrorists, what might they do? What will be their next steps, so we can be ahead of the curve? Can you give us some advice on where they might end up putting their funds, so we can be a position to start seizing those funds once they come out of the mainstreamQ ?

Detective Superintendent Harman:

It is a big topic. Briefly, our relationship with the financial sector—the banks and the MSBs—is fantastic. We have a very positive relationship. There are some official mechanisms for that such as the JMLT that has been mentioned. So, I do not expect any pushback, quite the opposite really. The banking sector wants to work with us, obviously respecting their client confidentiality and the rules around that, but they do want to work with us, and they do work with us. This really gives a legal gateway for the goodwill, if you like, that already exists. We look forward to working with them as the way people bank changes—becomes more digital and so forth. We will evolve with that; that is our intention.

That brings us to the end of the allotted time for the Committee to ask questions. I thank the witnesses on behalf of the Committee for their excellent presentations and the queries that they have answered. We will now move on to the next panel.