Plenary, 24 Oct 2001

Meeting date: Wednesday, October 24, 2001

Official Report 359KB pdf

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Proceeds of Crime Bill

The next item of business is a debate on motion S1M-2341, in the name of Jim Wallace, on the Proceeds of Crime Bill, which is a piece of UK legislation. This procedural motion is known as a Sewel motion. I hope that the debate will be short to allow time for the debate to follow.

At the outset, I will explain why we are recommending a Sewel motion on the Proceeds of Crime Bill, which has been introduced in the Westminster Parliament. I will explain why we have given the UK Government our full support on the bill and why we have collaborated extensively on it.

The law has clearly failed to keep pace with the increasingly sophisticated ways of hiding and laundering criminal assets. Confiscation orders in Scotland amount to about £1 million each year, but criminal profits probably amount to several hundred millions of pounds each year. Criminals are enjoying the proceeds of their crimes, investing their profits in further crime and creating harmful role models, especially in many communities that are scarred by drugs.

The Proceeds of Crime Bill is designed to recover ill-gotten gains, undermine crime and criminal finances and destroy the myth that crime pays. It will make the law more effective in recovering the proceeds of crime.

First, the bill will bring more cases to court. New powers of investigation and enforcement will help us trace assets better. Other powers will help us to secure those assets. For example, the police and HM Customs and Excise will be able to seize suspect cash anywhere, not just on import or export. Restraint orders will be available from the start of an investigation. Suspect assets must be traced and frozen quickly, given that the press of a button or the click of a mouse could take them out of our jurisdiction.

Secondly, in court, the bill will facilitate criminal confiscation by putting the schemes for drug trafficking and other crimes on to a new all-crimes basis. Separate schemes are ineffective against versatile criminals who traffic not just in drugs but in tobacco, alcohol and—most deplorably—people, and who may also be running outwardly legal businesses.

Thirdly, the bill will introduce a new civil recovery scheme. Where criminals distance themselves successfully from prosecution, there is no reason why we should not question the source of their assets under proceedings familiar to the civil courts. Fourthly, it will introduce new taxation arrangements. Undeclared or otherwise inexplicable income should be taxable. Fifthly, it will strengthen the existing money laundering arrangements.

Clearly, there is more in the bill, but I cannot go into all the details in the time allowed. Full details are set out in the explanatory notes.

Before I turn to arguments for the Sewel motion, it is important that I make clear the principles that will govern the operation of the powers in Scotland. Those principles are set out in the draft guidance that is attached to the memorandum.

First, priority will always be given to criminal investigations and proceedings by the law enforcement agencies and the Crown against those who commit criminal offences. In deciding whether to initiate or continue a criminal investigation or criminal proceedings, the Crown will apply its normal evidential and public interest tests and will have no regard to whether civil recovery or taxation proceedings might be available under the act.

Whenever an accused is convicted of an offence, confiscation will be the route to the recovery of his proceeds of crime as a result of that conviction. Subject to two limited exceptions that are explained in the guidance, the Scottish ministers will consider pursuing civil recovery only where a successful criminal prosecution has not proved possible, but where nonetheless there is sufficient evidence to pursue a civil action for the recovery of property that represents the proceeds of crime. The burden of proof is on the Crown and the Scottish ministers.

How does the minister's comment that it is important to act quickly to freeze assets tie up with what he has just said about action being taken only after determination that no criminal proceedings can be progressed?

It is a question as to when assets are recovered. After a conviction, assets will be recovered through confiscation. In a civil action, the onus will be on Scottish ministers to prove the illicit nature of the assets. A successful prosecution and confiscation or a successful action for civil recovery will allow the transfer of the assets. What we are saying about freezing assets and restraint orders is that at the outset of an investigation a bank account can be frozen. The assets will not be transferred at that point, but will be frozen and the owner will be unable to do anything with them.

I should add that the director of the criminal assets recovery agency may consider using his taxation powers only where the Scottish ministers have decided not to pursue civil recovery. In short, prosecution of criminals must always take priority and will continue to do so. Civil recovery and taxation will not be soft options. They will only be used where prosecution and civil recovery respectively are not viable.

Let me address the reasons for asking the Parliament to approve the Sewel motion. Legislation dealing with drug trafficking, money laundering and taxation is reserved, while other criminal and civil matters are within the legislative competence of this Parliament. A key principle of the bill is to put drug trafficking and other crimes on to an all-crimes basis. The principle applies to confiscation, civil recovery, money laundering and other provisions in the bill. It is the Executive's view that to attempt to legislate at Westminster for the reserved matters in the bill and at the same time to legislate in the Scottish Parliament for devolved matters would be highly complex and might lead to loopholes and inconsistencies between the two systems. Comprehensive UK legislation will therefore prove more effective and avoid the risk of inadvertent safe havens on either side of the border.

Finally, I draw attention to two temporary discrepancies between the memorandum and the bill as it has been introduced in the House of Commons. The intention is to bring the bill into line with the memorandum. First, paragraph 19 of the memorandum mentions an order being made by Scottish ministers subject to the draft affirmative resolution procedure in the Scottish Parliament. However, the bill mentions the negative resolution procedure and will be amended at the committee stage to refer to the affirmative resolution procedure.

Secondly, paragraph 27 of the memorandum mentions a similar order-making power in relation to information disclosure. That provision will be added to the bill at committee stage in the House of Commons.

Finally, a significant proportion of the receipts that are generated will be used in Scotland to improve performance in asset recovery and to fund schemes in support of crime prevention and our drugs strategy.

In conclusion, the bill is innovative, fair and proportionate to the scale of the crimes that we face. It will strengthen the law substantially. For the reasons that are set out in the memorandum, the Executive believes that it is therefore appropriate to legislate on a United Kingdom basis in the United Kingdom Parliament.

I move,

That the Parliament endorses the principles of the Proceeds of Crime Bill and agrees that the provisions in the Bill that relate to devolved matters should be considered by the UK Parliament.

As I have done before in Sewel motion debates on the International Criminal Court Bill, the Regulation of Investigatory Powers Bill, the Sexual Offences (Amendment) Bill and the Criminal Justice and Court Services Bill, I preface my remarks by placing on record my distaste for the process. I am concerned at the frequency with which the mechanism of Sewel motions is being employed. It is not appropriate for the Parliament to allow legislation over which it has competence to bypass the chamber.

Notwithstanding the Minister for Justice's remarks, I remind members—as I have done previously—that the late Donald Dewar reassured us in January 1998 that, although Westminster would continue to have the power to legislate on devolved matters, that power would be used only in very rare circumstances. The Scottish Parliament is far and away a better forum than Westminster for dealing with law specific to Scotland. Much of the Proceeds of Crime Bill—particularly regarding civil recovery of criminal assets—specifically relates to Scotland. Indeed, of the 444 clauses in the bill, 111—a full quarter of the bill—specifically relate to Scotland.

With that caveat on record, the SNP will support the motion because we support the principles of the bill and welcome the development that means that the Scottish Executive will become the enforcing agency for civil recovery in Scotland. Money recovered by civil recovery and criminal confiscation in Scotland will go into the Scottish budget.

However, I am concerned that civil recovery orders could fall foul of article 6.2 of the European convention on human rights. We know that criminal confiscation orders are lawful because they are part of the punishment for a crime. However, that cannot be said of civil recovery orders as they apply to civil recovery cases. A person who is the subject of such an order could be regarded as having put themselves in a position of self-incrimination because of the disclosure provisions in clause 379 of the bill. How would that fit in with the right to a fair trial, which is protected under article 6.1 of the ECHR?

The cynic in me cannot help but wonder whether one of the reasons why the Executive has lodged a Sewel motion rather than introducing a separate piece of legislation is that the Scottish Parliament has a higher standard of human rights protection than Westminster, as Westminster can pass laws that breach the ECHR. That is why I want the Executive to guarantee that the bill complies with human rights protections.

However, the bill will enable the justice system to deal with drugs barons, who until now have regarded themselves as above the law. Over a year and a half ago, Roseanna Cunningham and I visited Ireland to see what Scotland could learn from the various aspects of its justice system, such as drugs courts, which the Executive at that point was decrying, but has now adopted. While we were there, we visited the Criminal Assets Bureau and were extremely impressed. I know that the previous Deputy Minister for Justice, Angus MacKay, paid a similar visit and returned extolling the virtues of the Irish system.

The Proceeds of Crime Bill will send a message to those who seek to make their fortunes from a life of crime. If they cannot prove that their gains are not ill-gotten, those gains will be confiscated. They will no longer be untouchable. However, the new legislation will have to be properly resourced. Only last year, James Hamill, who was convicted of heroin dealing and was reputed to be worth £4 million, was sentenced to 18 years in prison and under a confiscation order was ordered to hand over the profits from his crimes. He was reported to have

"punched the air in delight"

when a 60-second court hearing ordered him to pay up just £32,000. The explanation that was given at the time was that the Crown Office had just two full-time staff dealing with the seizure of criminal assets and they had neither the time nor the resources to get to the bottom of his finances. The financial stress on our Crown Office is a different debate, but that report highlights the fact that the system is not sufficiently well resourced for the provisions that are in place. If that problem is not addressed, no matter how strongly I support the principles of the Proceeds of Crime Bill and the motion, there will be little point in passing the bill.

We welcome the bill as an extension of the policy of the previous Conservative Government. We introduced measures to seize the assets of criminals some years ago. In the House of Commons, the Conservative Opposition will consider the Proceeds of Crime Bill in the light of the responses to the consultation on the draft bill.

On 5 March, the Minister for Justice announced the decision to pursue a bill targeted at seizing criminally gained assets. First, in connection with that, we warmly welcome the move to unify powers of criminal confiscation and to strengthen investigatory and enforcement powers, including the power to restrain property at the start of a criminal investigation to prevent it being hidden or dissipated. That will ensure that action can be taken speedily.

Secondly, we welcome the creation of powers of civil recovery to recover proceeds of criminal activity in cases where it is not possible to secure a criminal conviction. That is a safeguard for the public, and is consistent with policies on the prevention of crime.

Thirdly, we support strengthening existing powers against money laundering following a conviction, and the imposition of tougher disclosure requirements on third parties, such as financial institutions. In the light of the events of 11 September, that is a necessary measure.

Fourthly, we back enabling tax to be levied on income that is believed to be derived from criminal activity, but we wish to study the drafting closely.

The minister was correct to say that the legislation must be on a UK basis so that we do not create any safe havens for criminals, but it is appropriate that the bill will contain specific Scottish provisions to ensure that the new powers are fully aligned with Scots law and procedures.

Although I give general support, I wish to ask the Minister for Justice two questions. First, in combating and preventing drug misuse, how much of the law is devolved? The minister will appreciate that schedule 5 to the Scotland Act 1998 indicates that the Proceeds of Crime (Scotland) Act 1995 is reserved in so far as it relates to drug trafficking, but it does not mention the Drug Trafficking Act 1994. With the greatest respect, Scottish police forces need to know where their powers of enforcement begin and end in this area, so that the policy will be fully effective.

Secondly, I ask the minister whether he is satisfied that article 6.2 of the European convention on human rights, which is contained in schedule 1 to the Human Rights Act 1998, will not prevent the implementation of the Proceeds of Crime Bill and will not be used as a tool for obstructing the seizure of drug barons' assets.

I remind the minister of the 1999 Scottish Conservative manifesto pledge, which stated that we would strengthen the law in relation to the seizure and confiscation of assets suspected of being derived from drug dealing. I warmly welcome the recognition of that important policy by the Executive and the United Kingdom Government. I hope that that is a sign of encouraging things to come. Subject to appropriate ministerial reassurances, we will support the motion.

Although this is a short debate, it is an important one, whose subject touches the lives of many people in our constituencies. People in Springburn have been greatly concerned to see the local criminal fraternity flaunting their wealth to give the impression that crime pays and have raised the matter on many occasions.

It is important that swift legal action is taken. As Michael Matheson said, human rights must be taken into consideration. However, our constituents also have human rights, and we must consider the fact that they have had to live in the shadow of criminals who have flaunted the proceeds of their criminal activities. We should ensure that our constituents' human rights are also taken into consideration.

We are aware that the legislation is in line with international policy. I ask the minister to consider the model of the assets forfeiture fund that was introduced by the Department of Justice in America. The intention is to punish and deter criminal activity by depriving criminals of property that is acquired through illegal activities. Will the minister consider ensuring that the criminals themselves—

I am not feeling that great, Presiding Officer. I would like to suspend my contribution for the moment.

One of the reasons why Liberal Democrats are here is to safeguard the civil liberties corner of the argument in instances such as this. My colleagues and I approach this sort of bill with distinct suspicion and we need a good deal of persuasion that it is necessary. I think that that persuasion has taken effect because the fight against organised crime is such an unequal contest. The masters of crime are probably highly intelligent, they are totally unscrupulous, they can afford the best possible lawyers and they always tend to be a few steps ahead of the law. The situation has to be equalised, so a measure to capture the possessions illegally acquired by people is a reasonable one to pursue. We are therefore persuaded to support the motion.

I am sure that other members have spoken to the police, who will say that they know perfectly well who some of the criminals are. They live in posh houses, belong to posh clubs and associate with posh people. They are pillars of society, but the whole thing is founded on crime. Although the police know who they are, they cannot pin anything on them because of the large number of links in the chain between them and the poor suckers doing the dirty work down on the ground. I have no compunction about trying to go after those people if we can.

This measure should be just part of a campaign. I hope that the minister will co-operate with United Kingdom colleagues to pursue those involved in money-laundering activities of all sorts. Through my enthusiasm for pursuing issues relating to licensing and alcohol, it has become clear to me that the bottom end of the security industry is a big way of washing dirty money. A great deal of importation of cigarettes and other tobacco products is done illegally as a huge combine; it is not just a case of one or two people owning a van.

The whole of the City of London is not corrupt, but it is so huge and complex that many dubious things go on and I hope that the Government in London will pursue such matters vigorously. We will ensure that financial activities in Scotland are kept as clean as possible.

The Liberal Democrats are happy to support the bill as part of a series of measures to make serious war on crime. We do not want to continue to lose the battle against crime, which Governments of all kinds have done hitherto.

I welcome the motion in Jim Wallace's name on the UK Proceeds of Crime Bill.

My colleague Donald Gorrie pointed out that the Liberal Democrats believe that a new law to track and recover proceeds of serious crime is justified. However, it is important to stress that attempts should always be made to obtain a conviction first. Where there is a good reason why a conviction is not possible but, on the balance of proof, there is strong evidence that particular assets are derived from particular crimes, it must be justified for the authorities to freeze or take the profits in question.

With the increased sophistication of organised crime, the criminals behind organisations have too often been able to hold on to their ill-gotten gains. The bill should help to put the justice system on an equal footing with the criminals. That is important and is the reason for the introduction of the bill.

The bill should also strengthen public confidence in the authorities' ability to tackle the criminals head on and deprive them of their ill-gotten gains. Perhaps most important, it should cripple their ability to continue financing further criminal activity.

I offer the Liberal Democrats' support for the motion.

It would be strange indeed if the Conservatives did not give full support to the bill, given that it fulfils one of our long-made pleas.

On Michael Matheson's comments on Sewel motions, such a motion is the only approach in this instance. It is right that we proceed on a UK basis. Not to have done so would have been folly.

The fact that the UK Government seems to have picked up on the issue on the back of the terrible atrocities of 11 September is sad. To a degree, the bill was needed long before this. In the early days of the parliamentary session, we addressed the confiscation of assets and there were press reservations. I recall Angus MacKay, who was then Deputy Minister for Justice, going off to Ireland to look at its system of confiscation and freezing of assets, given the implications of the European convention on human rights.

I do not usually rush to the defence of the Westminster Government but, to be fair, a draft bill was published, I think, in February this year. The bill was announced in the Queen's speech so it is unfair to say that it was prompted entirely by the events of 11 September.

Introduction of the bill has been speeded up and I welcome that. I recognise the sad implications of 11 September.

One aspect that I feel strongly about is the fact that, at last, the Government will consider not just criminal matters, but civil matters and will examine the Inland Revenue model of confiscation. That is all-important. Donald Gorrie spoke about the fact that our communities know the pushers and the sellers, yet they cannot be touched. It is right that we should be able to get at those individuals and the bill will allow that.

On the cases that have been mentioned—such as the Hamill case—and the comments that have been made about the ECHR, it is a disadvantage that Scotland has seemed to go in fear of the ECHR and that, in its interpretation of it, Scotland has in many ways put the interests of the criminals ahead of those of wider society. The fact that England has slightly more flexibility is an asset rather than something to bemoan.

Swiftness in dealing with confiscation is all-important. As the minister suggested when he responded to my query on the freezing of assets, we should ensure that assets are frozen as soon as a suspicion is laid and before intensive investigation proceeds. By freezing assets at that time, it is my hope that the figures on confiscation will at long last improve. The minister referred to the figures in Scotland—only £1 million has been seized out of a multimillion pound industry. That has got to stop and the bill shows the way.

My colleague Lord James Douglas-Hamilton laid the ground for the Conservatives and I give my full support to everything he said. I also give full support to the United Kingdom Government, at the discretion of the Westminster Parliament, to analyse the detail and to proceed with the bill expeditiously.

Ireland has been referred to in the debate as it has had similar legislation for five years. It is interesting that, in the three years between 1998 and now, the Irish Criminal Assets Bureau confiscated £6.5 million of goods. The bureau also seized a bar called the Paradise Bar—perhaps it was aptly named—that had been used to launder hundreds of thousands of pounds of drug money. Through civil proceedings, the bar was put into receivership and sold, as a result of which the bureau received £215,000.

The bill has merits. The Scottish National Party supports in principle the thrust of the bill. It is obviously just and satisfactory that those who appear to benefit from crime should cease to do so through proceedings in either the criminal or the civil courts.

The Scottish National Party also welcomes restraint orders. The minister is quite right—one must be able to act quickly, especially in these days of selling goods by electronic means.

In this instance, it is our view that there should have been a Scottish bill—there could have been Scottish consolidating legislation. The current legislation is the Proceeds of Crime (Scotland) Act 1995 and the Criminal Law (Consolidation) (Scotland) Act 1995, which is to do with money laundering. In our view, those acts could have been dealt with under consolidating legislation in Scotland, which could have been in parallel with any existing legislation down south. After all, the purpose is not to erode the demarcation lines around Scots law, but to strengthen and buttress them against an invasion from the south.

As convener of the Justice 1 Committee, Christine Grahame has given the green light to more legislation being introduced to her committee.

Now that there is the Freedom of Information (Scotland) Bill—which, as the minister knows, I was resistant to—I can be a bit choosy about what comes in my direction next.

I want to raise matters of civil recovery. Interestingly, the minister said that civil recovery was not a soft option. I thought that there were already difficulties and I will give examples. As members will realise, the evidential test in civil actions is the balance of probability, which is a substantially lower standard of proof than that required in criminal proceedings—beyond reasonable doubt.

I want to raise an issue on the European convention on human rights, a copy of which I have with me—how we have come to love that document. I will refer to article 6.2, which states:

"Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law."

I thought that perhaps we were heading for difficulties. A rather uninteresting example—it is the best that I could come up with at this time of day—would be if Joe Bloggs was suspected of unlawful conduct and was using the proceeds of crime to purchase, let us say, a string of fish and chip shops—I told members the example was not interesting. The Crown Office might be suspicious, but might not have enough evidence to charge him, let alone secure a conviction. It could serve a disclosure order and would be able to obtain enough information to bring not a criminal prosecution, but a civil action for recovery at the Court of Session.

During civil proceedings of proof, evidence might come out that established that there was sufficient evidence for criminal prosecution, which there was not at the beginning. If a decision at the end of that was made in favour of the Lord Advocate, who is the pursuer in the action, as I understand it—I would like an explanation of this—there would be great difficulty in bringing a criminal prosecution against the defender, as they would no longer have the right to the presumption of innocence. It is the opposite of the Duffy case, when a criminal prosecution produced a not proven verdict and civil proceedings were then brought.

We support the bill, especially the fact that the funds recovered will be used for drugs strategies and so on. I would also like the funds to be used to reduce recidivism.

This has been a short but useful debate. I welcome the agreement that criminals and their associates should not enjoy the proceeds of crime. That is the purpose of the bill. It will hit drug dealers and other criminals where it hurts—in their pockets. It will hit them across the range of crimes which fill those pockets—very few criminals limit themselves to one type of crime. It will hit them even if they escape conviction, as Christine Grahame discussed. It will hit their ill-gotten gains whether they are held in cash or property.

The provisions relate to a complex mix of devolved and reserved issues. That is the basis for taking the Sewel motion approach and asking the UK Parliament to legislate on Scotland's behalf. It is incumbent on us to say that there are protections for Scotland, Scotland's people and this Parliament. The bill is fully aligned to Scots law and procedure. It has separate clauses where necessary and takes fully into account the different institutional arrangements in Scotland. The Lord Advocate will remain responsible for criminal confiscation in Scotland, while responsibility for civil recovery will rest with Scottish ministers and will be pursued to the civil standards familiar in the Court of Session, with the burden of proof on the Scottish ministers.

The First Minister is likely to delegate day-to-day administrative responsibility for civil recovery to the Lord Advocate, but there will be a clear demarcation between the Lord Advocate's civil recovery and prosecution functions. The bill will confer a number of powers to make subordinate legislation on Scottish ministers, subject to procedure before this Parliament. In other cases, the secretary of state will be required to consult Scottish ministers.

I will address some of the points that have been raised. The matter of ECHR compliance was a consistent theme. We are confident that the legislation is compliant with the ECHR. The position is laid out in section 19 of the Human Rights Act 1998. It requires the minister in charge of a bill in either House of Parliament to make a statement about the compatibility of the provisions of the bill with convention rights.

The right hon David Blunkett, Secretary of State for the Home Department, has made the following statement:

"In my view the provisions of the Proceeds of Crime Bill are compatible with the Convention rights."

Does the minister accept that there is a difference, in that if legislation passed by this Parliament was deemed by the courts to be contrary to the ECHR it would be struck down, whereas if legislation passed by the United Kingdom Parliament was deemed by a court to be contrary to the ECHR it would not be immediately struck down, but would be the subject of a further process involving the discretion of Her Majesty's Government as to whether any corrective action should take place?

I appreciate and understand that point, but the question that was raised was whether we believe that the legislation is ECHR-compliant and the answer to that is that we do. That includes compliance with article 6.2, which Christine Grahame read out.

The point is that article 6.2, which is the right to presumption of innocence, refers to criminal proceedings so, as civil recovery is a civil process, article 6.2 would not apply. As the civil recovery process carries no presumption of crime, the presumption of innocence would remain if it were decided later to pursue criminal proceedings against the individual. I think that that was Christine Grahame's point.

Will the minister give way?

No. We are very tight for time.

Perhaps we can return to the issue at another time.

I take Mr Matheson's well-made point on the issue of resources. Crown Office resources are under scrutiny on a number of fronts, even today. As far as civil recovery is concerned, we intend to create a civil recovery unit and have earmarked resources for such a purpose.

Before he had to desist, Mr Martin raised the possibility of using seized proceeds of crime. I can confirm that we plan to invest a significant proportion of recovered assets in a fund that will be used to repair some of the damage done in communities that have been blighted by crime. As for Lord James Douglas-Hamilton's point, we feel that the Drug Trafficking Act 1994 would indeed be caught by the reservation on drug trafficking, even though that is not specifically mentioned in the Scotland Act 1998.

We are clear that UK legislation will be more workable and effective than complex complementary legislation by both Parliaments. For that reason, we seek Parliament's support for today's motion.