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Draft Proceeds of Crime Bill: Q&A with Home Office

A staff reporter

29 January 2005

The following Q&A is taken from World Money Laundering Report and the questions, answered by a Home Office spokesman, were put to Jack Straw MP QC, home secretary. They focus on the recently announced draft UK Proceeds of Crime Bill. Q: Why is it felt necessary to form a new agency—the functions of identifying criminal assets and provision of training are already to a degree performed by NCIS and the enforcement agencies such as National Crime Squad and Customs and, even, the Serious Fraud Office? The problem is not one of capability but of lack of focus and lack of resources. The creation of a new agency will involve new hierarchies, new politics and as a result more expenditure. Would it not make more sense to give adequate resources to NCIS and to give them investigatory (but not enforcement) powers and to give the enforcement agencies the power to call an NCIS investigator at trial or earlier confiscation or forfeiture hearing? A: Until now, there has never been an agency whose principal role has been solely to tackle financial crime. This will create a new focus on the importance of directly targeting the proceeds of criminal conduct. The package set out in the draft Bill will set up the new agency, whose primary role will be the identification and confiscation/recovery of criminal assets, and whose secondary role will be the training of investigators. This new agency will work together with the existing authorities to produce a new joined up response to fighting crime more efficiently. As well as setting up the new agency, the work currently being done on the asset recovery strategy will focus on ‘mainstreaming’ financial investigation, i.e. encouraging chief constables to use the technique as a part of routine criminal investigation. The strategy will be backed by additional resources from the recovered assets fund, i.e. from successful confiscations. We have also announced funding of £250,000 this financial year and £1.8m annually over the next three years for the National Criminal Intelligence Service to help it improve the coordination and use of financial intelligence from suspicious transaction reports. Q: Will the suggested training be made available only to public sector investigators (as in the USA's Department of Justice programme) or will it be available to the private sector (which at present undertakes much of the work)? A: The Centre of Excellence’s primary role will be the training of financial investigators for law enforcement and the various government investigation agencies. However, we also intend to make training available to money laundering reporting officers of financial institutions and, in due course, to private sector investigators. Q: Is there any merit in the suggestion that there should be closer cooperation including the exchange of information between public sector investigators and those acting for a person who has been the victim of, for example, commercial fraud? A: The exchange of information in such a manner would pose a number of potential problems, not least under data protection and human rights legislation. The state must be careful about becoming involved in disputes between private parties. However, where law enforcement enquiries lead to a criminal trial, the court can make a compensation order in favour of the victim as well as a confiscation order in favour of the Crown. Q: There is an argument that to introduce a "reasonableness" test into counter-money laundering laws leads to uncertainty – at present the law requires a jury to consider only the fact of knowledge or suspicion and, because of the principle of wilful blindness, it is a simple test. However, to introduce a test based on state of mind will allow greater argument by defendants – we already know that in fraud cases, the defendant's most effective tool is to confuse the jury and this seems to bring the same problems to money laundering. Why not take the opportunity to move wilful blindness from case law to a principle of the legislative criminal law applicable across all offences – and make sure prosecutors and judges understand it, something that, at present, they patently do not? A: The key change to the law on money laundering, which will only apply to the regulated professions, will be to incorporate the so called objective mens rea into the “failure to report” offence. Under a new version of this offence, the determining factor in securing a conviction will not only be whether the professional knew or suspected the criminal nature of the money laundering activity, but whether he ought to have known or suspected. Accordingly, it is not the case that the new offence introduces a test based on state of mind. Q: The UK's counter-money laundering laws are in a raft of legislation, regulation and other rules, and the position will become even more complex after the EU's second Money Laundering Directive. Why not undertake a full, strategic, review of the UK's counter-money laundering laws and strategy, decide on its focus and then bring in a single, comprehensive Counter-Money Laundering Act so that we all know where to look and what to do? A: The PIU report “Recovering the Proceeds of Crime” examined the current legislative framework for combating money laundering and outlined the UK’s anti money laundering strategy. The report recommended that the law on money laundering was consolidated and simplified so as to remove unacceptable obstacles in the defendant’s favour. Part VIII of the draft Proceeds of Crime Bill represents a consolidation of the anti-money laundering legislation currently contained in the Criminal Justice Act 1993, the Drug Trafficking Act 1994 and other legislation in Scotland and Northern Ireland. The Money Laundering Regulations 1993 will be updated to reflect the revised second EU Money Laundering Directive. Thus, the Bill and the regulations will operate in tandem setting out the law in a much simpler manner than before. Q: There is a tendency by governments of all colours all over the world to make a lot of noise about money laundering just before an election, and then the proposals disappear – sometimes to be resurrected much later. A "draft Bill" seems a long way away from becoming law. Is there the political will to deal with this issue and to deal with it properly? A: The government is determined to tackle crime at all levels, and attacking criminal assets is a central plank of its anti crime strategy. The Bill is the outcome of a great deal of preparatory work and the government has made it clear that it will legislate at the earliest available opportunity. Q: Counter-money laundering measures seem to fall into the domains of Home Office, Treasury, Foreign & Commonwealth Office and even Defence. The approaches are often conflicting, which causes compliance problems especially in the financial services sector. If the topic is of such importance, why do we not have a government department that is ultimately responsible for our counter-money laundering strategy and for drafting all legislation? A: The issue of money laundering is one which cross-cuts the interests of many departments. There is no evidence that concentrating anti money laundering action in a single government department would make the UK’s anti money laundering effort more effective. On the contrary, different departments can bring different expertise to bear. What matters is that they are coordinated properly or, in current parlance, that there is “joined up government”. Q: To what extent is the UK's counter-money laundering strategy driven by the Treasury's intention to constrain tax avoidance? A: Our efforts are designed to create a just and fair society in which crime does not pay. Any success in the suppression of tax evasion – to the extent that it is a criminal offence – is consequential to, not the reason for, our initiatives. Q: The Home Office has certain responsibilities towards the Channel Islands and the Isle of Man. It often seems as if there is a greater alignment with the OECD and the Financial Action Task Force than with its dependent territories in relation to money laundering, especially in matters relating to tax. When push comes to shove, where do our loyalties lie? Do we support the dependent territories or the intergovernmental groups? A: With the international nature of forms of financial crime such as money laundering, it is imperative that a coordinated international response is developed and the UK plays its full part in this. We make no apology for encouraging the Crown Dependencies to adopt effective anti money laundering measures, which indeed they have done. We do not, however, accept the premise on which this question is based. The Crown Dependencies are fully committed to combating money laundering.