PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES Public Bill Committee CRIMINAL FINANCES BILL Sixth Sitting Tuesday 22 November 2016 (Afternoon) CONTENTS New clauses considered. CLAUSE 45 agreed to. SCHEDULE 5 agreed to, with amendments. CLAUSES 46 to 51 agreed to, some with amendments. Bill, as amended, to be reported. Written evidence reported to the House. PBC (Bill 075) 2016 - 2017 No proofs can be supplied. Corrections that Members suggest for the final version of the report should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons, not later than Saturday 26 November 2016 © Parliamentary Copyright House of Commons 2016 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 175 Public Bill Committee 22 NOVEMBER 2016 Criminal Finances Bill 176 The Committee consisted of the following Members: Chairs: †MRS ANNE MAIN,SIR ALAN MEALE † Arkless, Richard (Dumfries and Galloway) (SNP) † Hunt, Tristram (Stoke-on-Trent Central) (Lab) † Atkins, Victoria (Louth and Horncastle) (Con) † Huq, Dr Rupa (Ealing Central and Acton) (Lab) † Dakin, Nic (Scunthorpe) (Lab) † Mann, Scott (North Cornwall) (Con) † Davies, Byron (Gower) (Con) † Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP) † Dowd, Peter (Bootle) (Lab) † Sandbach, Antoinette (Eddisbury) (Con) Vaz, Keith (Leicester East) (Lab) † Drummond, Mrs Flick (Portsmouth South) (Con) † Wallace, Mr Ben (Minister for Security) † Elphicke, Charlie (Dover) (Con) † Wood, Mike (Dudley South) (Con) Ghani, Nusrat (Wealden) (Con) † Griffiths, Andrew (Lord Commissioner of Her Colin Lee, Ben Williams, Committee Clerks Majesty’s Treasury) † Harris, Carolyn (Swansea East) (Lab) † attended the Committee 177 Public Bill Committee HOUSE OF COMMONS Criminal Finances Bill 178 The failure to include such measures in the Bill will Public Bill Committee lead to many of our partners accusing us of hypocrisy and double standards; it will severely damage our prestige Tuesday 22 November 2016 abroad, or will have the potential to damage our prestige abroad; and it will undermine our reputation. I find it perplexing, as do many others, that not a single bank (Afternoon) has yet been criminally prosecuted for handling the proceeds of corruption, despite the fact that they may have been fined for doing so. This is not just about [MRS ANNE MAIN in the Chair] banks, but about some of the people in the banks—that is the important thing to take away. My constituency is Criminal Finances Bill similar to those of other Members, in that as well as having lots of local branches, Santander has 2,000 people based there. I am certainly not in the business of New Clause 6 pointing the finger at everybody in the banking sector—it is important to make that point. FAILURE TO PREVENT FINANCIAL CRIME In March 2012, Coutts was fined £8.75 million by the ‘(1) A relevant body (B) is guilty of an offence if a person Financial Conduct Authority for serious systemic failings commits a criminal financial offence when acting in the capacity of a person associated with (B). that resulted in “an unacceptable risk” that Coutts had handled the proceeds of crime, yet despite that fine, in (2) It is a defence for B to prove that, when the criminal financial offence was committed— April 2016 Swiss authorities investigated whether money from the 1Malaysia Development Berhad scandal had (a) B had in place such prevention procedures as it was ended up in Coutts’ bank accounts, which suggests that reasonable in all the circumstances to expect B to have in place, or regulatory action alone is an insufficient deterrent against laundering corrupt proceeds. From that instance, it is (b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place. clear that an extension of a failure to prevent money laundering offence would significantly enhance the scope (3) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person for criminal sanctions. associated with B from committing criminal financial offences. We should not forget that the cost of fraud and (4) For the purposes of this clause— money laundering greatly exceeds the cost of tax evasion. “criminal financial offence” means one of the following In 2016, Her Majesty’s Revenue and Customs estimated offences— the tax gap to be £36 billion, of which tax evasion (a) an offence under section 1, 6 or 7 of the Fraud accounted for £5.2 billion. Some witnesses last week Act 2006; believed it to be higher. In May 2016 the annual fraud (b) an offence under section 17 of the Theft Act 1968; indicator put the cost of fraud to the UK economy at (c) an offence under section 327, 328 and 329 of £193 billion. The cost to the public sector is £37.5 billion, the Proceeds of Crime Act 2002; with procurement fraud costing as much as £10.5 billion a year. We are talking about significant figures, which is (d) a common law offence of conspiracy to defraud; why we need significant action. I am pleased that the “relevant body” has the same meaning as in section 36. Government are taking significant action but we want (5) A relevant body guilty of an offence under this section is to push them further. The National Crime Agency liable— estimates that billions of pounds of suspected proceeds (a) on conviction on indictment, to a fine, of crime are laundered through the UK every year. (b) on summary conviction in England and Wales, to a That money,if accounted for,would be more than enough fine, to help fund a whole range of services in the country. (c) on summary conviction in Scotland or Northern Ireland, The Crime and Courts Act 2013 specifies that certain to a fine not exceeding the statutory maximum. economic crimes, which include fraud, money laundering (6) It is immaterial for the purposes of this section whether— and false accounting, as well as bribery and tax evasion, (a) any relevant conduct of a relevant body, or can be dealt with by way of a deferred prosecution (b) any conduct which constitutes part of a relevant agreement. The absence of an extension to a failure-to- criminal financial offence prevent offence to the other economic crime offences takes place in the United Kingdom or elsewhere.”—(Peter listed in the Act results in a disparity in how different Dowd.) economic crimes, which all cause significant damage to This new clause would create a corporate offence of failing to prevent the taxpayer, can be dealt with by prosecutors. financial crime. New clause 6 would also improve corporate governance. Brought up, read the First time, and motion made (this Companies are already subject to criminal law for all day), That the clause be read a Second time. the additional offences listed in the amendment, although currently on the basis of the “directing mind” test. In 2 pm addition, companies are required under FCA regulations Peter Dowd (Bootle) (Lab): This morning I was indicating to have effective systems and controls in place to prevent that the Government also need to tackle the facilitators themselves being used to further financial crime, including of corruption—by that, I mean those institutions that money laundering. fail to conduct due diligence on their clients. The UK At the end of the day, we are trying to get the message anti-corruption summit committed countries to pursuing across to the Government. Mostly, in broad terms and and punishing those who facilitate corruption, and the in specific situations, the Government have got that new clause reaffirms Britain’s commitment to do so. message, but it is the duty of the Opposition to push the 179 Public Bill Committee 22 NOVEMBER 2016 Criminal Finances Bill 180 boundary a bit more where we feel that the Government as both a sound enforcement tool and a measure have not acted as forcefully as they could, in the light of incentivising bribery prevention as part of good corporate what I have just said about scale, and in the light of the governance. We have already debated the new corporate comments we heard from our witnesses last week. offence of failure to prevent tax evasion created in the Bill. The provisions followed a process of extensive Richard Arkless (Dumfries and Galloway) (SNP): We consultation, as did the Bribery Act 2010. I trust that broadly support new clause 6, tabled by the Opposition, hon. Members will agree that such an approach is which seeks to extend corporate financial crime beyond necessary when considering the adequacy of the existing the provisions in the Bill as drafted—beyond tax evasion legal framework in matters involving complex legal and and bribery. We are generally supportive. It is worth policy issues. mentioning the point made by the hon. Gentleman that the provisions in new clause 6(4) defining a criminal In respect of the current law governing corporate financial offence are at the moment corporate offences criminal liability for economic crime, the Government that require the directing mind to be present. To my announced that a consultation would take place in May mind, the new clause would merely remove the directing this year. I confirm that we will publish a call for mind provision from those offences. evidence on the subject. In keeping with the considered and methodical approach adopted for the reforms on We broadly support the new clause, but I question bribery and tax evasion, the call for evidence will form subsection (2)(b), which states that a defence could be part of a two-part consultation process.