Unexplained wealth orders: England and Wales and Northern Ireland

Criminal Finances Bill – in a Public Bill Committee at 11:30 am on 17th November 2016.

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Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention) 11:30 am, 17th November 2016

I beg to move amendment 1, in clause 1, page 1, line 17, after “sought” insert—

“(and the property specified may include property located outside the United Kingdom)”

This amendment would ensure that unexplained wealth ordered may be issued for property located outside the UK.

It is a pleasure to serve under your chairmanship, Sir Alan.

In summary, we welcome the Bill. The unexplained wealth orders are a good thing, but amendment 1 is an example of where we think the measures could go a little bit further and be further improved. The amendment would provide that property located outside the UK could be utilised in an unexplained wealth order brought before an individual. It is meant to be a technical rather than political amendment. We are happy to work with the Government, but I think we can all drink to this amendment regardless of political affiliation.

The amendment would facilitate information sharing across different jurisdictions and would provide the United Kingdom with vital information regarding illicit financial activity that has taken place elsewhere across the globe. Reports by both the Select Committee on Home Affairs and the Public Accounts Committee hinted at this, and there is even a line in the Government’s action plan for anti-money laundering and counter-terrorism finance from April that says we should increase

“the international reach of law enforcement agencies and international information sharing to tackle money laundering and terrorist financing threats.”

Therefore, if an individual provides false and/or misleading information in relation to an unexplained wealth order, they can be prosecuted, but we would widen the scope of the property that comes under such an order so that we can question those who might be resident in the UK regarding their suspected illicit activities regardless of where their wealth is. As we know, people travel and cross borders, so we might not be able to recover wealth from that person. That throws up issues around cross-jurisdictional co-operation, and it is one area where confiscation orders kept hitting a brick wall and coming to grief.

We can glean intelligence on behaviour abroad and share it with other states, which would act as a disincentive to come to the UK to corrupt politically exposed persons who may contaminate our economy with their illicit wealth. If criminals know that on entering the UK, there is a process and our enforcement agencies can compel them to talk about their suspect wealth or property regardless of where they have placed it, they will think twice about coming here. We want to restrict their ability to move. That would send out a powerful message that the UK is not a soft touch when it comes to dodgy financial dealings, which I think we can all agree would be a good thing.

The current threshold at which a UWO can be served under the Bill is £100,000, but what if a criminal or suspected criminal has property of £50,000 here in the UK and has moved £50,000 of property elsewhere? Our enforcement agencies have concluded that, on the balance of probability, both combined are beyond the means of the person in question. I would like to think that the Bill already covers that, but we have tabled this probing amendment to confirm it. We are talking about portable wealth, which extends to jewellery and paintings, which have ultimate portability, because someone could leg it to a foreign country with them. My conclusion is that we would be unable to issue an unexplained wealth order if property is split between two places. I suspect I am right but am happy to be proved wrong.

The scenario I mentioned raises another question. If an individual acquires property of a value that reaches the unexplained wealth order threshold of £100,000 and manages to transfer it out of the UK, it is only after they have done so that our enforcement agencies become aware of it. Does that mean that an unexplained wealth order cannot be issued to that person because the property is now outside the UK? I want some clarification from the Minister on those things. I imagine that the answer is “Yes, we cannot do that”, but if the answer is, “No, we can do it”, it would be even better, because Opposition Members want unexplained wealth orders to be a success.

Finally, the amendment would introduce an element of operational efficacy. If all our enforcement agencies were aware that they were able to factor in stuff that is located outside the UK properly from the beginning of their investigations, it could contribute to our agencies being quicker off the mark. They could sound a warning alarm bell. They would be oriented from the get-go to cast their net as widely as they can to hold criminals to account. That is largely what we seek to do through the amendment.

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

It is a pleasure to serve under your chairmanship, Sir Alan. As we begin the line-by-line scrutiny, it might be useful if I give the Committee a brief outline of how unexplained wealth orders will work.

In short, an unexplained wealth order is a civil investigatory tool. It is a court order that requires a person to provide information that shows they obtained identified property legitimately. If the person provides information and responds to an unexplained wealth order, the enforcement authority can then decide whether to investigate further, take recovery action under the Proceeds of Crime Act 2002 or take no further action. If the person does not comply with an unexplained wealth order, either by not responding or not responding fully to the terms of the order, the property identified in the order is presumed to be recoverable under any subsequent civil recovery proceedings. It is important to note that the unexplained wealth order does not in itself lead directly to recovery action. It is designed to be an investigatory power and a precursor to civil recovery action.

An unexplained wealth order is an order made against a person, requiring them to provide information to explain how they obtained the property. It is important for all of us to understand this crucial factor: the unexplained wealth order is made against a person, not against property, and does not itself result in the recovery of that property. That is the vital point in relation to amendment 1.

In the Proceeds of Crime Act, it is clear that, if an order is to be made against a person or a property overseas, it must be explicitly stated on the face of the legislation. For example, section 282A of POCA provides that a civil recovery order can be made against property overseas if there is a connection with the UK. Section 375A of POCA also provides that an evidential request can be made overseas in constructing a case for civil recovery.

The same is already the case with unexplained wealth orders. New section 262A(2)(b) in clause 1 of the Bill provides that the person on whom the order will be served must be named, and it expressly provides that

“the person specified may include a person outside the United Kingdom”.

The unexplained wealth order therefore has global effect. The definition of “property” in the POCA already encompasses all property, whether it is situated at home or abroad. An unexplained wealth order can therefore list any property, wherever it is in the world. The court has an associated power to make an interim freezing order in respect of that property.

Clause 3 inserts a provision into POCA that an enforcement authority can request assistance from an overseas state concerning the freezing of property overseas that is subject to an unexplained wealth order. I therefore assure the hon. Lady that unexplained wealth orders will be effective against property anywhere in the world. Accordingly, I invite her to withdraw her amendment.

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

I thank the Minister for his reassurance. It was a probing technical amendment to clear up that point, and he has sufficiently clarified it, to my mind. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

I beg to move amendment 2, in clause 1, page 2, line 31, at end insert—

“(8) Persons who are members of an enforcement authority must co-operate with other persons who are members of other enforcement authorities for the purposes of making application to the High Court for an unexplained wealth order.

(9) In particular, the duty imposed on a person by subsection (8) requires a person—

(a) to engage constructively, actively and on an ongoing basis in any process leading to an application being made for an unexplained wealth order, and

(b) to have regard to activities of a person within subsection (8) so far as they are relevant to the making of an application for an unexplained wealth order.”

This amendment would require enforcement authorities to co-operate when making applications for unexplained wealth orders.

With this it will be convenient to discuss new clause 12—Unexplained wealth orders: duty to prevent corruption—

“In Chapter 1 of Part 8 of the Proceeds of Crime Act 2002 (investigations: introduction), after section 342, insert the following—

‘342A Unexplained wealth orders: duty to prevent corruption

(1) A relevant authority must exercise its functions in relation to unexplained wealth orders in the way which it considers is best calculated to contribute to the prevention of corruption.

(2) For the purposes of this section it is immaterial whether corruption is being prevented in the United Kingdom or elsewhere.

(3) In considering under subsection (1) the way which is best calculated to contribute to the prevention of corruption a relevant authority must have regard to any guidance given to it by—

(a) in the case of the National Crime Agency, the Secretary of State,

(b) in the case of the Director of Public Prosecutions or the Director of the Serious Fraud Office, the Attorney General,

(c) in the case of Her Majesty’s Revenue and Customs or the Financial Conduct Authority, the Chancellor of the Exchequer, and

(d) in the case of the Director of Public Prosecutions for Northern Ireland, the Advocate General for Northern Ireland.’”

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

We heard in the evidence session on Tuesday from many different bodies, including Her Majesty’s Revenue and Customs, the Serious Fraud Office, the National Crime Agency. One problem with the existing confiscation orders is that the buck seems to be passed between many of them, and there is confusion about who the lead investigator is. The amendment would introduce a duty on all those agencies to co-operate, even before it got as far as the Crown Prosecution Service and Her Majesty’s Courts and Tribunals Service. Those people feel stymied, and they cannot investigate—it does not get that far because of squabbling over where the buck stops. The amendment seeks to address the lack of co-operation among UK law enforcement agencies that devolve responsibility for investigating cases.

There is an example that people may know about. It is the quite famous case of Sergei Magnitsky, the Russian who was murdered, and who uncovered what had been going on at Hermitage Capital Management. Bill Browder, an American, has spoken to an all-party parliamentary group here and is quite vocal on these issues. The murdered chap blew the whistle on $230 million in Russian Government frauds. Hermitage Capital Management discovered that, and there is a timeline on which it sought every possible avenue to open a money laundering investigation in the UK. Every single UK enforcement agency refused to open an investigation, stating that it was not its responsibility to investigate.

In 2010, Hermitage filed a complaint with the Metropolitan Police Service, highlighting the UK nexus of criminal activity. The MPS replied that the responsibility for investigating the fraud did not lie with the MPS. Hermitage then attempted to take legal action through the Serious Organised Crime Agency, requesting that an investigation begin in connection with the $230 million in fraud. SOCA replied that it was not the appropriate body for the job. In 2012, Hermitage filed another complaint with the Serious Fraud Office, which gave evidence to us on Tuesday, to highlight those financial crimes, which occurred in a UK jurisdiction. The SFO refused to do anything. In its words,

“matters do not fall within the offences that the SFO is permitted to investigate.”

In 2013, Hermitage filed a complaint with HMRC seeking a review of the company formation agent that facilitated the money laundering in the UK. HMRC answered that confidentiality precluded an investigation. In 2015, Hermitage filed a complaint with the NCA, which also gave evidence to us on Tuesday, outlining the flow of money—the fraudulent $230 million—to the UK. The NCA replied that it was a domestic criminal investigation relating to money laundering in the UK and therefore that the NCA was not the most effective way forward.

The amendment would create a duty for UK authorities to co-operate and take constructive action. We used to talk about joined-up thinking. That is essentially what the amendment is with regard to unexplained wealth orders. It would strengthen the Bill and ensure that provisions are not rendered ineffective because everyone says, “It is not my responsibility.”

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central 11:45 am, 17th November 2016

New clause 12 seeks to add to amendment 2 and put a duty to prevent corruption in the Bill, to strengthen the hand of the Minister and the agencies involved. As we have heard, the UK is still considered a global haven for money laundering.

According to a Home Affairs Committee report on the proceeds of crime, it is estimated that more than £100 billion is laundered through London’s financial systems every year. Despite more than 380,000 suspicious activity reports being filed each year, the National Crime Agency currently has only 27 investigations open, with approximately £170 million frozen. By contrast, in Switzerland, some £5 billion-worth of Swiss francs are currently frozen.

The new clause seeks to ramp up the responsibilities on the National Crime Agency, public prosecutions and HMRC to make it a duty to prevent corruption, to ensure that we protect London’s reputation and that our financial, legal and accountancy services remain among the best in the world.

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

We are all in agreement that law enforcement agencies should do more to co-operate and talk to each other before embarking on action against a person or property, and that they should ensure that they are acting to combat corruption in all its forms. In that sense, the implication of the amendments is entirely sensible.

As the hon. Lady set out, amendment 2 would impose a duty on operational agencies to co-operate prior to applying an unexplained wealth order. Such co-operation would have several benefits. Most obviously, it would avoid duplication of the same effort against an individual and their property. It would avoid one agency trampling over another that had embarked on a similar line of inquiry. Indeed, another agency may well have an explanation of the wealth. An obvious example is that HMRC can be aware of complex legal tax arrangements that an individual may have.

I am entirely supportive of the spirit of the hon. Lady’s amendment. I would go further and say that liaison should not be limited to those bodies that can apply for unexplained wealth orders and take civil recovery action; it should happen between all law enforcement agencies and prosecution authorities. I am pleased to reassure her that that already happens. Law enforcement agencies, as a matter of course, check various law enforcement databases to see whether there is a flag against a particular person or property that is of interest to them. They can then liaise accordingly. In addition, unexplained wealth orders will be subject to the Proceeds of Crime Act investigation code of practice, which will be amended and subject to debate in both Houses before coming into force. I can assure the Committee that this issue will be addressed in that code.

The Proceeds of Crime Act is not the only legislation where a conflict between law enforcement agencies could occur relating to the same person or property. Several police forces may have an interest in the same criminal. Those conflicts can be resolved without the need for primary legislation. This is a matter for internal discussion on tasking and co-ordinating, which the code of practice will achieve.

New clause 12 would impose a duty on agencies to prevent corruption when considering the use of unexplained wealth orders. It is my hope that the mere existence of these orders in UK law will in itself create a deterrent to those who seek to place their corrupt wealth in the UK.

We continue our efforts to tackle corruption in all its forms. This year, we hosted the London anti-corruption summit, bringing together world leaders, business and civil society to agree a historic package of actions to expose, punish and drive out corruption in all walks of life. We will continue to implement UK commitments from the summit and encourage others to do likewise.

Indeed, the limb of unexplained wealth orders that allows their application to non-EEA foreign officials and politicians reflects the real concerns about those involved in corruption overseas who then launder the proceeds of their criminality in the UK. I hope the hon. Member for Stoke-on-Trent Central can see that the power will be used to tackle corruption, but unexplained wealth orders go further: they will also apply to cases in which there is a suspicion of involvement in serious crime, not necessarily corruption. The proposed duty could risk the deprioritisation of other crime types, which we agree that the NCA, the Crown Prosecution Service, HMRC and the Financial Conduct Authority could be tackling. They will of course pursue those guilty of corruption, but I hope we agree that our law enforcement agencies are best placed to prioritise their resources to pursue a whole range of criminals.

The Secretary of State and Attorney General already issue statutory guidance on the use of powers under POCA, including the use of civil recovery powers. That guidance will be extended to the new bodies granted civil recovery powers in the Bill. HMRC and the FCA intend to reissue the guidance next year, when we will be able to address both issues. I hope that the hon. Members for Ealing Central and Acton and for Stoke-on-Trent Central are reassured that the issues are already accounted for. I invite her to withdraw the amendment.

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central

I am happy for the amendment to be withdrawn, but it would be nice to hear something more on Report. I take the point about the precision of focusing on corruption when other serious criminal activities are involved, but some language on a duty to prevent corruption would be good. The important element is the duty; I hope that the wording on corruption and other serious criminal activity might be added to that.

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

If I understood correctly, the Minister said that no primary legislation is required to do what the amendment would do, and that there are already flags and a joined-up process. Are we confident that something like the Magnitsky case, with all the stuff that happened—everyone closing the door to Bill Browder, year upon year—would not happen again with unexplained wealth orders?

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

On the Magnitsky case, it would be inappropriate to comment on a case that could be under continuing investigation. The main point is that our law enforcement agencies have operational independence. It is for them to decide the priorities for how they spend their resource and work together. We do an awful lot, without primary legislation, to ensure that they work together. They liaise through regional bodies such as the regional organised crime units, and through the national co-ordinators and everything else.

Our view is that primary legislation is unnecessary because, whether it is through the code of practice, which will be published alongside the Bill, or in the operational day-to-day running of the organisations, joint working is part of their remit and, effectively, their duty. We do not think it is necessary to put anything in the Bill because we fear that that could pervert their priorities and interfere with their operational independence.

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

I thank the Minister for that explanation. We will leave it where it is. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central

I beg to move amendment 59, in clause 1, page 3, leave out line 28.

This amendment would allow unexplained wealth orders to be issued to politically exposed persons in the United Kingdom and EEA States.

With this it will be convenient to discuss amendment 60, in clause 4, page 15, leave out line 25.

This amendment has the same effect as amendment 59 but applies to unexplained wealth orders issued in Scotland.

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central

The amendment is explained by the explanatory statement. You will know, Sir Alan, that in 2014 Slovenia’s former Prime Minister, Janez Janša, was found guilty of taking bribes during the course of a €278 million arms deal with a Finnish state-owned contractor. Politically exposed persons were also among the 12 people referred to a criminal court in Cyprus earlier this year to stand trial for corruption and bribery charges in connection with a waste overcharging scam that is thought to have involved more than €30 million.

Although it may be reasonable to expect that European economic area countries would be able to undertake criminal investigations against politically exposed persons in their countries if there were sufficient evidence to suggest that they had been involved in corruption, that might not necessarily be the case. For example, there is still blanket immunity from criminal prosecution for parliamentarians in Hungary, despite it being an EEA country. The amendment would extend the Government’s welcome reform of unexplained wealth orders for those outside EEA states to include those within EEA states. We know that what we are dealing with does not simply stop at the continent of Europe or the EEA states. The amendment seeks to apply some degree of equality of this legislation to the EEA states.

Amendment 60 would have the same effect as amendment 59, but would apply to unexplained wealth orders issued in Scotland as well.

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

I thank the hon. Gentleman for his comments. We had a useful meeting yesterday about some of these issues. He will know that we welcome these amendments as they give us the opportunity to discuss why we have effectively a different regime between politically exposed persons outside the EEA and ourselves. The amendment would cover us sitting in this room—all PEPs in the EEA. That is important because, if any of us were to face an unexplained wealth order, we would want to know that it had been issued on the basis of evidence linking us to serious crime; we would not want to give our authorities the ability just to slap one on without any evidential threshold.

We have confidence that, within the EEA—the hon. Gentleman used the example of a country prosecuting its own former Prime Minister—there are the tools to find the evidence and the ability to work with fellow law enforcement agencies around Europe to meet the evidential threshold. We cannot discriminate within the EEA; we cannot say, “This applies to Slovenia but it doesn’t apply to France”. Once we go into that area, we cannot discriminate between the different states. He picked out Hungary, where there is immunity for parliamentarians. I think there are other countries—even Italy; I do not know. If I remember my Berlusconi history, I think there were lots of issues about immunity in that country. That is the real issue. We have confidence in our neighbours and friends in Europe that they have the capacity to build the evidence and therefore to build a case for an unexplained wealth order.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

My hon. Friend is making a powerful argument. Is he aware how many Members of Parliament have problems just opening a bank account because of over-eager regulators using the PEPs regulations? With this amendment, would there not be a risk that over-eager agencies would be interested in issuing these things to MPs, which is not an ideal situation? We ought to have the evidential threshold set out in clause 1(4)(b).

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

I am grateful to my hon. Friend for his intervention. He makes the clear point that we want to be confident that, when we are held to account, it is based on evidence gathered by our resourced law enforcement agencies. The decision on PEPs outside the EEA reflects real operational challenges that we and organisations such as the National Crime Agency have had in gathering evidence against people in some countries where there may be no properly functioning Government or, indeed, where the Government are entirely corrupt and it is very difficult to gather that evidence.

That is the reason we have had to plug that gap in that way. I hope that the hon. Member for Stoke-on-Trent Central understands that that is why we have a different approach. I urge him not to push his amendment to a vote.

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central

I thank the Minister for his comprehensive response, including on the evidential threshold, and the hon. Member for Dover for his point concerning the energy with which some financial institutions in the UK have approached PEPs, even—dare I say it?—on car insurance.

On the basis of the Minister’s argument, I am willing to withdraw the amendment, but I fear that this may be returned to in the aftermath of our exiting the European Union.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

With this, it will be convenient to discuss the following:

New Clause 11—Unexplained wealth orders: reporting requirements—

“In Chapter 2 of Part 8 of the Proceeds of Crime Act 2002, after section 362H insert—

‘362HA Unexplained wealth orders: reporting requirements

(1) The Secretary of State must make an annual report to Parliament setting out the number of unexplained wealth orders applied for by enforcement agencies under section 362A of this Act (and by Scottish Ministers under section 396A of this Act) during the previous 12 month period.

(2) The report must also provide information in respect of each unexplained wealth order about—

(a) the value of property subject to the order,

(b) whether the respondent was—

(i) a politically exposed person,

(ii) a person involved in serious crime (whether in a part of the United Kingdom or elsewhere)

(c) whether the order was granted,

(d) the value of the property reclaimed as a result of the order.

(3) For the purposes of this section “enforcement agencies” has the same meaning as in subsection 362A(7).’”

This new clause would require the Secretary of State to make an annual report to Parliament about the number of unexplained wealth orders made each year.

New Clause 13—Unexplained wealth orders: award of costs—

“In Chapter 2 of Part 8 of the Proceeds of Crime Act 2002, after section 362H insert—

‘362HB Unexplained wealth orders: award of cost

(1) Part 44 of the Civil Procedure Rules (General Rules about Costs) shall not apply to applications made by enforcement authorities for—

(a) unexplained wealth orders under section 362A of this Act,

(b) interim freezing orders under section 262I of this Act.

(2) The High Court shall not have power to make awards for costs against enforcement authorities who bring an unsuccessful application for—

(a) unexplained wealth orders under section 362A of this Act,

(b) interim freezing orders under section 262I of this Act.

(3) For the purposes of this section ‘enforcement agencies’ has the same meaning as in subsection 362A(7).’”

This new clause would prevent the courts from awarding costs against enforcement agencies where they have brought unsuccessful applications for unexplained wealth orders or interim freezing orders.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security) 12:00 pm, 17th November 2016

The previous debates have given us the opportunity to begin considering clause 1, which provides for the creation of unexplained wealth orders. Those are powerful new tools, and I welcome the cross-party support for them as well as the strong endorsement of those in civil society from whom we heard earlier this week.

The London anti-corruption summit in May galvanised the international response to corruption. Domestically, we must tackle grand corruption and protect the integrity of the UK’s financial sector. Unexplained wealth orders will help us to do that. As we have discussed, unexplained wealth orders are essentially an investigatory tool that will help to enable civil recovery of the proceeds of crime under existing powers in the Proceeds of Crime Act 2002. Civil recovery is a powerful tool, because it can be used where criminal prosecution followed by a confiscation order is impossible, perhaps because a person is abroad and cannot be extradited or there is not specific evidence linking an individual to a crime, but there is enough evidence to show that property is linked to the wealth generated from a crime.

Between April 2015 and March 2016, £6.5 million was recovered under those powers, but there is still a gap where law enforcement agencies cannot satisfy the necessary evidential burden. Unexplained wealth orders will flush out evidence to enable enforcement agencies to take forward recovery action under POCA. Such an order will require a person to provide information that shows that they obtained identified property legitimately. If they do so, agencies can then decide whether to investigate further, take civil recovery action or take no further action. If the person does not comply with the order, the property identified in the order is presumed to be recoverable under any subsequent civil recovery proceedings.

I stress that the unexplained wealth order is designed to be an investigative power and a precursor to civil action, not an end in itself. I accept that there is significant interest in the way that such orders will operate, because they involve the reversal of the burden of proof. That is why they are subject to stringent safeguards. The value of the property subject to an unexplained wealth order must be greater than £100,000, a much higher threshold than for normal civil recovery, where action cannot be taken against property worth less than £10,000.

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

I thank the Minister for being so complete in his arguments. Can he explain why £100,000 was chosen? I note from the evidence that we have received that no one had any objection to that figure, but I am interested in why it was chosen.

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

The hon. Gentleman poses an interesting question. Unexplained wealth orders are linked to serious and organised crime. Although, inevitably, some serious criminals make below £100,000, that was thought to be a useful threshold, and that is where we should look as a starting point. There will be concerns among Members that Aunt Bessie’s £25,000 appearing in someone’s bank account may trigger something like an unexplained wealth order, and we wanted the wealth threshold to be significant enough to ensure that there was a link between serious crime and the recovery of assets being triggered. I know that some people wanted that threshold to be higher than £100,000 and some people wanted it to be lower. As the Minister, my job is to try to get it in the right place, but I would welcome his suggestions on whether it should be, say, £59,000 or £105,000. It could be like “Bullseye”.

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

It is a pleasure to serve under your chairmanship, Sir Alan. Is there a mechanism for recognising regular, ongoing transactions that are close to but always under £100,000? Will that trigger any red flashing warning lights that there may be illegal activity?

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

The cumulative wealth would of course build up. I am happy to be persuaded by the Committee about the threshold. The reality is that, given the vast number of people involved with organised crime groups across the threat picture and the staggering wealth of some of them, we will be lucky to get to £100,000. We will be going for people worth £20 million, £30 million or £40 million and all the way down. It would chill people’s bones to realise how some of the people who live among us make their money out of crime and launder that money. The bottom line is the number of those individuals. That is why we chose £100,000, but hon. Member may want to make a persuasive argument otherwise. Cumulative wealth is certainly an issue. I was in the north-east of England the other day and met an individual who is unemployed but has well over £400,000 in their bank account. I am looking forward to knocking on that person’s door.

Photo of Tristram Hunt Tristram Hunt Labour, Stoke-on-Trent Central

I had a terrible fear about the rule of law for a minute there.

We tabled new clause 11 to help the Minister. It would require the Secretary of State to make an annual report to Parliament about the number of unexplained wealth orders made each year. It is really about helping to drive culture change through the Government, the Departments and the agencies involved in this excellent set of reforms, and ensuring that Parliament is kept up to date with how the agencies and Ministers are approaching it. There is nothing quite like a presentation to Parliament —a ministerial statement, written or oral—to concentrate attention in Departments on the importance and significance of a particular piece of legislation. The new clause would ensure that the Bill had the bureaucracy and political support behind it.

Similarly, new clause 13 would help to get the wheels in motion for unexplained wealth orders and investigatory powers under the Proceeds of Crime Act 2002. It seeks to prevent the courts from awarding costs against enforcement agencies if their applications for unexplained wealth orders or interim freezing orders are unsuccessful. It is about ensuring that a culture of risk-aversion does not develop in our agencies. They are often fearful, in these straitened budgetary circumstances and under the full glare of the press, about pursuing the kind of individuals the Minister spoke about, for fear of the financial implications if they are unsuccessful and taken to court. Colleagues will remember that the Serious Fraud Office’s botched case against the entrepreneur Vincent Tchenguiz will settle for £3 million plus costs, which is a fraction of what his lawyer originally demanded, so these can be quite costly enterprises.

We would not want to hand down these new powers in statute to those who direct our investigatory agencies, only for a culture of not pursuing those individuals to develop in those organisations. New clause 11 would ensure that Parliament had a voice and oversight over the process, and new clause 13 would ensure that a culture of risk-aversion does not develop in the agencies that are to be granted these new powers.

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

I will start with the good news: I support the spirit of new clause 11, which I discussed with the hon. Gentleman yesterday. It is important that we have a measure to ensure the transparency of the operation of unexplained wealth orders. In my recent responses to the reports of the Public Accounts Committee and the Home Affairs Committee on asset recovery—both reports were excellent, I have to say—I committed to publishing annual statistics on annual recovery performance. After our meeting, I instructed my officials to ensure that those statistics include unexplained wealth orders. I therefore hope there is no need for the hon. Gentleman’s new clause—which would create a statutory duty in primary legislation to report—as those figures will be contained in an annual bulletin.

New clause 13 relates to the risk that potential financial liability may make law enforcement agencies reluctant to apply for unexplained wealth orders. It seeks to ensure that the authorities are not liable following an unsuccessful unexplained wealth order application. I was pleased to be able to discuss that issue with the hon. Gentleman yesterday, and I am advised that the existing civil procedure rules, which would extend to cover unexplained wealth orders, mean that by default an application for such an order would take place in private. I am happy to share those civil procedure rules with the hon. Gentleman to see whether he thinks that is enough. That is also the case for any subsequent legal stages. On that basis, if an application is unsuccessful, or if the individual was latterly able to provide the court with an acceptable explanation of their wealth, it would not generally be public knowledge. There would therefore be no undue reputational damage to the individual concerned.

More generally, whatever the peculiarities relating to unexplained wealth orders, it remains our view that any awards of costs should follow the same rules that apply in other, similar matters. The general principle that the loser pays is a well established position. Changing it could lead to unfortunate unintended consequences in relation to other powers and procedures. In any case, the judge has a general discretion to award costs that are proportionate. It is not a matter of one side producing a figure and the judge awarding that without any consideration of the case; we should maintain a consistent approach.

On that basis, although I share the concern about impinging on our agencies’ ability to pursue crimes, it is not appropriate to indemnify them in this context. If they have made a mistake and applied for an unexplained wealth order against the wrong person, risking someone’s reputation, it is in my view appropriate for them to take responsibility. If we indemnify them, a mistake will be confused with normal investigative procedure. I do not think it is the best thing to indemnify them, given that hearings can be held in private, in court procedure. I hope that hon. Members will be satisfied with that.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2