Proceeds of Crime Bill

Public Bill Committee, 24 January 2002.

Standing Committee B

Proceeds of Crime Bill

Roger Gale (Conservative, North Thanet)

Good morning, ladies and gentlemen. I am pleased to see that the Committee has made at least modest progress during my absence. It has been suggested from certain quarters that a stand part debate on clause 324 is desired. I have studied the Hansard reports of the debates during my absence from the Chair. There has already been considerable debate on that clause, and, given the debates that are likely to take place on the remaining amendments, I am not at the moment minded to permit a clause stand part debate. I say that so that Members of the Committee can raise other issues during the debate on the remaining amendments—but that does not mean that I shall permit discussions that are out of order.Clause 324 Failure to disclose: regulated sector

Clause 324 - Failure to disclose: regulated sector

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 97, in page 187, line 33, at end insert—

'and he was directly involved in the activities by virtue of which the business is regulated.'.

The Committee will be aware that the line in the Bill that the amendment would affect says that the knowledge must have come to the person concerned

''in the course of a business in the regulated sector.''

At our previous sitting, we touched on the wording of schedule 6. I am mindful particularly of some comments made by the Minister during that debate, when his interpretation of the schedule was different from mine. I understood schedule 6 not to refer to, or in any way qualify, the nature of the staff working in the business who might be liable. I wait with interest to hear about his understanding of the schedule, because I am the first to accept that that has a bearing on whether the amendment is necessary.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

Does the hon. Gentleman accept that the definition of the phrase ''directly involved'' itself could lead to a substantial debate? Does he intend to table further amendments to define that term further, and provide information to the court on how it should be applied?

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman makes a good point. We tabled the amendment to stimulate discussion. It would exclude those working in a business in the regulated sector who are not

''directly involved in the activities by virtue of which the business is regulated.''

On Tuesday we referred to the fact that employees in a business in the regulated sector will include people who advise, place money and transfer money, but also

those who work in the canteen—unless that is subcontracted out—and cleaners. More specifically, employees will include those who, although they may be involved in the business itself or in its core activities that fall within the regulated sector, are only clerical staff, or carry out executive functions that do not, or would not usually, involve their having to focus on whether money laundering is taking place. It is that issue that I want the Committee to think about.

It is wrong that, within organisations, we should criminalise people whose standing and function would not normally involve their having to make the judgments that the clause is designed to penalise if they are not properly made. I want the Committee to explore the issue of who should, and who should not, be included under the provisions. As we said on Tuesday—the Under-Secretary knows my views on the matter—the offence under the clause is not one only of knowledge, but one of negligence. Following the votes on Tuesday, the clause has been preserved in that form, but it worries me that executives within an organisation could subsequently be told by the courts that they should have done something that it was not part of their job description to do. Irrespective of a person's function in a business, once he is working within the regulated sector he can be caught under the clause.

On Tuesday the Minister hinted that, under the wording of schedule 6, that was not the case. I inferred that he was suggesting that it was only to the extent to which the activities of the business were within the regulated sector that people would fall foul of clause 324. My understanding of what he said was that staff such as cleaners or canteen workers employed by a business within the regulated sector would not be caught under the provisions. That may be so, but I wait to be persuaded that that is what schedule 6 means.

Even if the Minister were right about schedule 6, several people could be caught under the clause. We should think about excluding people whose work—such as clerical work—makes it inappropriate for them to be criticised for performing executive functions that others have told them to do.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

I find the hon. Gentleman's exposition of amendment No. 97 interesting, although I am not persuaded by it. In fact, it would protect individuals whom even he would not wish to protect. For example, if the head of personnel of an organisation were to hear over lunch at work that money had been stashed away in an account in Bermuda, he would presumably not be regarded as being directly involved in the activities by virtue of which the business was regulated. Under the amendment, such a person would escape prosecution. Surely that cannot be right.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman makes another good point. But let us look at the matter from a slightly different angle. Let us suppose that I overhear two people in a City restaurant talking about stashing away or laundering money, and they identify the bank for which they work. As I do not work within the regulated sector, I am under no obligation to make a report under the clause. I would consider myself to be

morally blameworthy if I did not—but as a matter of law, I would not fall within the clause.

A personnel manager would ordinarily have no part to play in financial management or the transfer of money in a large organisation. He would not come by the information that the hon. Gentleman mentions any differently from the way in which I would come across similar information sitting in a City restaurant. If the personnel manager has no executive or scrutiny function relating to money laundering in his organisation, it might be argued that he is morally blameworthy for not tipping off the authorities, but why should we criminalise him?

Through those two examples I have tried to point out that the personnel manager of such an organisation does not seem to be in such a favoured position that we should say to him, ''You have a different responsibility from that of someone outside the regulated sector who came by the same information.''

Steve McCabe (Labour, Birmingham, Hall Green)

Does the hon. Gentleman draw no distinction between information overheard at a table in a restaurant and information gleaned by a personnel manager by virtue of the fact that he works in a company that performs illegal activities?

Dominic Grieve (Conservative, Beaconsfield)

I think that the hon. Gentleman has misunderstood the purpose of the argument that I was having with the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz).

Steve McCabe (Labour, Birmingham, Hall Green)

I did not misunderstand the argument.

Dominic Grieve (Conservative, Beaconsfield)

My point was that although the hon. Member for Edinburgh, North and Leith made a fair point, and although it could be argued that the personnel manager may be in a different category, it could also be argued that he is in a similar category to someone sitting in a restaurant.

Where do we draw the line? Interestingly, a line is clearly being drawn; if I understand correctly, the Minister will soon tell the Committee where it has been drawn. I had not previously fully appreciated that. My understanding was that everyone in the regulated sector, from top to bottom, including businesses that traded with or were involved in the sector's regulated component, would be covered. I therefore assumed, and made the—perhaps erroneous—suggestion on Tuesday, that that applied to those as far down as the cleaner. The use of discretion may mean that a cleaner is never prosecuted, but granting discretion to the prosecuting authorities does not commend itself to me if, in fairness, we should be drawing the line elsewhere.

The best thing I can do is listen to what the Minister has to say. Subject to what he says, we may be able to pursue the debate further. I make it clear that this is a probing amendment—but that does not mean that I shall withdraw it; I may decide to press it to a Division. However, I could be convinced that there is a better way of approaching the subject than mine. The

amendment has drawbacks, but so does the clause as presently drafted, particularly now that the Committee has decided to keep the negligence offence in the clause.

Nick Hawkins (Conservative, Surrey Heath)

Although my hon. Friend has rightly said that he and I will be interested to hear from the Minister, I shall first raise some additional issues with which I would like the Minister to deal.

On Tuesday, when we debated matters relating to the clause under other amendments, the hon. Member for Glasgow, Pollok (Mr. Davidson), among others, poked some gentle fun in his usual skilful and humorous way at my hon. Friend the Member for Beaconsfield (Mr. Grieve) and me and described us as the cleaners' friends.

While we are dealing with the amendment and talking about where the line should be drawn, I should reinforce my hon. Friend's reading of schedule 6. I have re-read it carefully, and I do not see that any line is drawn in the Bill. I hope that the Minister will say that at a later sitting, in another place or on Report, he will propose some Government amendments to clarify the position. Having talked to his officials, the Minister may perchance have been persuaded by the arguments made by myself, my hon. Friend and others on the Committee earlier in the week.

Once in a while there is a happy coincidence in our work as parliamentarians—although it is rare that two things happen in the right order on the right day. For many years, Mr. Gale, you and I have been members of one of the most effective parliamentary cross-party groups—the all-party group on insurance and financial services, of which your fellow Chairmen, Mr. McWilliam and Mr. O'Brien, are also members. You will know that many all-party groups of Members who share a common interest or professional background meet only once in a blue moon, but the all-party group on insurance and financial services is one of the most active, and meets most weeks.

It just so happens that I received an urgent fax earlier this week from the administrative organiser of our all-party group saying that a delegation of American legislators were on a short visit to the United Kingdom and wished to discuss some urgent issues concerning the financial sector. They were able to meet some of our all-party group this morning for a working breakfast, and in the hour before the Committee started, my colleagues and I were briefed on matters directly germane not only to this legislation, but to this amendment.

Some Members of the Committee may be sceptical—the hon. Member for Glasgow, Pollok in particular has said that no harm would come to the City of London from the imposition of the extra regulatory burdens in the Bill. However, the chairman of the National Conference of Insurance Legislators in America, David Counts, from Texas, says:

''We cannot exist without Lloyds of London''.

The leading members of the conference, American legislators from Texas, New York, Minnesota and

Illinois, have come to Europe, and London in particular, to see how our regulatory climate may be changing in the aftermath of 11 September, and how that will affect their business.

It is germane to the amendment that so many multinational insurance companies, especially American ones, have operations in London. They are concerned about the way in which junior staff—of the type whom I said that the British Bankers Association were concerned about—may be affected, when they should not face the full penalties of criminal law. Anyone who trades in the London market would be worried by the introduction of a new law that brings the kind of criminal sanctions that would follow this legislation. It would hit vulnerable people who cannot possibly have the same level of expertise or training as those whom the Bill should hit.

It is important to put that concern on the record, because it was ventilated to me in strong terms less than an hour ago. The same view was expressed by the president of the National Conference of Insurance Legislators, Senator Larkin from New York, Representative Terry Parke, the immediate past president, from Illinois, vice-chairman Senator Oliver from Minnesota and by the executive directors. We also met a senior representative from Lloyds, Mr. Matcham, and an old friend of my hon. Friend the Member for Beaconsfield and myself, Marie-Louise Rossi, the chief executive of the International Underwriting Association of London.

Steve McCabe (Labour, Birmingham, Hall Green)

Is it in order, Mr. Gale, for the hon. Gentleman to quote extensively from a list of names on a piece of paper to which no other member of the Committee has access?

Roger Gale (Conservative, North Thanet)

If it were not in order, Mr. McCabe, I would not have permitted it.

Nick Hawkins (Conservative, Surrey Heath)

If the hon. Gentleman would like a copy, I will happily circulate it to him or any other member of the Committee.

We must bear in mind the significant concerns of the people on whom the success of our economy so heavily depends, about precisely this kind of legislation. The amendment that my hon. Friends and I propose is designed to try to introduce common sense to the Bill so that it hits only the real target. We all want to hit the real money launderers, as do the Americans whose briefing the Committee heard this morning. However, we do not want to hit those at whom the Bill should not be aimed.

In a moment, the Minister will tell us whether he can point to any words in schedule 6 that draw the line that my hon. Friend the Member for Beaconsfield discussed. I do not see any. Will the Minister tell us that the Government will introduce a measure to ensure that the Bill is aimed at only those who should properly be targeted?

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

If the hon. Gentleman is leading us down the road of all members of the Committee confessing what they discussed over breakfast, I do not doubt that we will have fascinating conversations. However, I cannot understand how he was able to get up over an hour ago to have breakfast

when the Committee's starting time has been changed from five minutes to 9 to a quarter past 9 in order to accommodate him. If the Committee's times are to be changed every time somebody has a morning appointment, that will be bizarre.

Roger Gale (Conservative, North Thanet)

Order. There is a limit even to my legendary patience. We will not explore these culinary delights further.

Nick Hawkins (Conservative, Surrey Heath)

I will not be tempted by the hon. Gentleman, although he is good at tempting members of the Committee down all kinds of highways and byways.

My point is substantial and I hope that the Minister, if not some of his Back Benchers, will take it seriously. What proposals does he have to ensure that the Bill will hit only those at whom it should be aimed?

Bob Ainsworth (Labour, Coventry North East)

I refer Opposition Members to the clause, and especially to subsection (3), which says:

''The second condition is that the information or other matter . . .

(b) which gives reasonable grounds for such knowledge or suspicion, came to him in the course of a business in the regulated sector.''

Schedule 6 contains the definition of the regulated sector. We changed the schedule by inserting its first line in response to representations that were made on exactly the point that Opposition Members have raised. The first line clarifies the list in part 1 of the schedule. It reads:

''A business is in the regulated sector to the extent that it engages in any of the following activities''.

Therefore, as I said during a previous debate, I can assure Opposition Members that we have consulted draftsmen to ensure that the provision does what is intended. A cleaner or personnel officer would not be affected. The people affected will be only those who are engaged in the duties listed in schedule 6. That was achieved by the change to the schedule following previous consultation.

Nick Hawkins (Conservative, Surrey Heath)

I entirely accept that it was helpful for the Government to consult on and introduce the first part of schedule 6. That addresses what businesses must do. I stress again to the Minister that not only my hon. Friend the Member for Beaconsfield and I, but the British Bankers Association and the Law Society of England and Wales, too, are saying, ''Never mind about the business; there is no line drawn on the level of employee.''

As the Bill stands, any person who works for a business in the regulated sector might be caught. Guidance that states that people will not be prosecuted is not enough.

Bob Ainsworth (Labour, Coventry North East)

This has nothing to do with guidance. I would appreciate it if the hon. Gentleman did me the courtesy of listening to what I say, as he obviously did for his American friends over breakfast.

The offence is defined as information that

''came to him in the course of a business in the regulated sector.''

Schedule 6 defines a business as being in the regulated sector with regard to

''the extent that it engages in''

certain activities. Those activities do not include the activities of personnel officers. Therefore, personnel officers do not work in a part of a business that is within the regulated sector. We have checked that. I assure the Committee that people who are peripheral to those regulated activities—such as personnel officers, cleaners and cooks—are not covered.

Paul Stinchcombe (Labour, Wellingborough)

I am confused by the wording of the provision, as it misses out a verb that would help to clarify matters.

If my hon. Friend's answer is correct—and it makes a lot of sense—the preferred amendment might be simply to replace ''a business'' with ''his business'', so that the information would have to come to someone

''in the course of his business in the regulated sector'',

as that sector is defined in schedule 6.

Bob Ainsworth (Labour, Coventry North East)

It has just been pointed out to me that it might be sexist to put that into the Bill, but my hon. Friend's recommendation appears to make perfect sense, and to do so in good English.

The specific point that has been raised was first raised long ago, so we have been able to discuss the matter with the draftsmen, and we are convinced that, with the addition that we have made, the wording fully addresses the problem. We have consulted extensively, and we assure the Committee that people such as cooks, cleaners and personnel officers who are not involved in the activities listed in schedule 6 are not covered by the offence.

Dominic Grieve (Conservative, Beaconsfield)

I understand and appreciate the Minister's point, but I hope that he will forgive me for continuing to examine the matter.

When I first read schedule 6, I understood that it was seeking to differentiate between the nature of business activities, so that if a business occupied two buildings, but engaged in regulated sector matters in only one of them, the building in which it did not engage in such matters would not be covered, but that everyone who worked within the building that was engaged in regulated sector work would be covered, including—if they were directly employed—the cooks, cleaners and personnel managers.

The Minister has told me that I am wrong about that, but I echo the comments of the hon. Member for Wellingborough (Mr. Stinchcombe) by saying that the way in which the Minister has explained the provision does not accord with how I understood it when I read it. It is clear that we are in broad agreement, and I do not wish to cause the Minister grief for no reason, but I am worried about the way in which schedule 6 is worded.

Bob Ainsworth (Labour, Coventry North East)

We do not want to make a differentiation according to grade. We have debated that matter. We do not want to rule out people who are employed in a capacity that is not covered in

schedule 6, but who are temporarily moved so that they are engaged in a function that is covered.

A definition according to grade would not be workable. A definition of the extent to which a business is engaged in the regulated sector is preferable. The Bill defines the kinds of activities that are in the regulated sector, and states that a business is in the regulated sector only to the extent that it engages in them. It also states that the offence can occur only in the regulated sector.

The point has been covered. We have discussed it at length with the draftsmen, and I have been assured that there is not a problem. As the hon. Gentleman said, he raised the point the other day. Therefore, we had another debate about it with him—and we made another check to make certain that the kinds of people about whom he is concerned are not covered. I am sure that they are not.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

I have referred to the category of the head of personnel. That category should be covered by the legislation. I was satisfied that the provisions of subsection (2) would cover a cleaner or someone who worked for the canteen. Should not a senior officer, such as the head of personnel, even if he or she is not directly involved in the trading activities of the organisation, be obliged to disclose such information if he or she comes across it?

Bob Ainsworth (Labour, Coventry North East)

All of us, including the head of personnel of a company within the regulated sector, are covered by the other offences of money laundering. However, in relation to this specific offence, it is people who have regulated duties involving dealing with other people's money who should be subject to the requirement to report. I do not know how a personnel officer falls into that category to a greater extent than any other member of the company. As the hon. Member for Beaconsfield said, if information is revealed to him during a discussion in a restaurant, he has a duty under other parts of the money laundering regulations on concealment, holding of property and so on. We want this specific offence to apply to those who work in the regulated sector and are involved in the activities described in schedule 6, and we do not see any reason to draw it more widely.

Stephen Hesford (Labour, Wirral West)

My hon. Friend the Minister has put on record in clear and helpful terms that the sort of people who are not expected to be prosecuted under this clause are cooks, cleaners, personnel staff and so on. Because of the change of regime in terms of prosecuting such offences, the courts will be able to look at what the Minister has said for guidance. Does the Minister accept that there cannot be clearer guidance than the words that he has put on the record?

Bob Ainsworth (Labour, Coventry North East)

As I said, I cannot see the point of discussing the matter further when I am assured that those categories of people are not covered. That is on the record, and Hansard is quotable in a court of law, as people know. I have no intention to be anything other than clear on this point.

Mark Field (Conservative, Cities of London and Westminster)

I had hoped to touch briefly on the point that the Minister made about the example given by the hon. Member for Edinburgh, North and Leith. I appreciated that the hon. Gentleman's point applied generally, rather than specifically to personnel officers, but it seems to me that personnel or human resources departments often have considerable knowledge at all levels. Individuals in those departments might therefore have a stronger duty to disclose than other junior employees within a particular firm.

We must not return to the debate that took place at great length on Tuesday, but I am concerned that the Government do not think that there should be a distinction between grades. I appreciate that it will be difficult to couch the provision in exact terms without the risk of exempting guilty folk. Conversely, if it is expressed in broad terms, we might run the risk of an inordinate number of claims. The point has been well made that it will be difficult to make a distinction within the business as a whole if, as the Minister said, a distinction should not be made between grades, or between levels and types of qualification.

Roger Gale (Conservative, North Thanet)

Order. I must remind the hon. Gentleman that an intervention is not a speech—[Interruption.] I am terribly sorry. I did not realise that the Minister had finished, and the hon. Gentleman was making a speech..

Mark Field (Conservative, Cities of London and Westminster)

I have made speeches far shorter than this, Mr. O'Brien—[Interruption.] And amen say the rest of them. [Interruption.] Yes, perhaps I should stop now, while I am winning.

Representatives in the financial services industry take a plethora of examinations. It would be sensible for that fact to be recognised. I appreciate that the Minister will say that the real risk is that a small unscrupulous financial services organisation could drive a coach and horses through the Bill by ensuring that none of its employees took the registered representative examinations, and thus fell outside the duty of disclosure. However, a distinction needs to be made. I must not rehearse our argument of Tuesday that criminality will be established on the basis of objective grounds to suspect rather than negligence, but it that were genuinely to apply to junior employees, the real risk is that the clause would be lost on a day-to-day basis.

Nick Hawkins (Conservative, Surrey Heath)

Does my hon. Friend recall that at our previous sitting the Minister said, in response to other amendments tabled to the same clause, that the level of staff was to be looked in a specific way. He said:

''Of course, if somebody had been put into a job or position, and wound up having information thrown at them when they were a brand new learner on the job, the prosecution would have to consider that before targeting them rather than their employer for having put them in that position.''—[Official Report, Standing Committee B, 22 January 2992; c. 1114.]

Does not that reinforce the point made repeatedly by my hon. Friend and me, as well as the British Bankers Association, that it would be left to the prosecution to decide such matters? The staff whom my hon. Friend and I want to protect would be

vulnerable to prosecution, and the prosecution may make the wrong decisions.

Mark Field (Conservative, Cities of London and Westminster)

I could not agree more. A more sensible overview needs to be taken. My hon. Friend the Member for Beaconsfield talked about relying on the courts to take the right action, and 95 per cent.—perhaps even 99 per cent.—of the time they will take the right action. If there has been a big problem in a small department, they will go for the senior members in that department, and the juniors who may have been involved peripherally will not have the full force of the law against them—at least, not under the provisions on failure to disclose.

Clearly those individuals, even at a junior level, will find that their careers are harmed irreparably, at least within the financial services industry, notwithstanding that a fully fledged prosecution may not have been taken against them. I hope that the Minister will give some thought to the matter, because whatever he says about schedule 6, it is clear that it would be possible to broaden the measure extensively. Can some guidance be formulated, either in Committee or on Report, which is not necessarily hard and fast, but will ensure that relatively junior or peripheral staff would not be caught under the clause?

Bob Ainsworth (Labour, Coventry North East)

Following our extensive debate on amendment No. 487, which covered different matters, some of the concerns that were expressed then by my hon. Friends, and by outside organisations, are the same as those that have been expressed today, although today they have been amplified in respect of junior staff. We are fairly certain that such problems could be avoided. I can understand such worries, so let me explain what we have examined, which may allay some of the fears

I have said before that regulation 5 of the Money Laundering Regulations 1993 imposes a training requirement on the regulated sector. It is an offence for any company or institution to not provide relevant training on money laundering. However, there is a worry about junior staff, which has been raised both outside and inside the Committee. It is not right that a person who had not received relevant training could fall foul of a prosecution. That is the point that the hon. Member for Surrey Heath made: we should not rely entirely on the prosecution authority.

There may be a case for considering whether it would be beneficial to insert a training proviso as a defence for junior employees. If they could show that they did not know or suspect that money laundering was occurring, and that they had not received the training required under the Money Laundering Regulations 1993, they would have that specific defence for the alleged offence.

That might strengthen the existing reasonable excuse defence. A reasonable excuse would be for anyone to tell a court—the prosecution would take account of this—that they did not receive the training to which they were entitled, and that their employer was obliged to give under the Money Laundering Regulations 1993, so they could not be expected to have reasonable grounds for suspicion. However, we may strengthen that by inserting such a requirement in

the Bill. I assure Opposition Members and my hon. Friends that I will examine that, if their worries about junior staff in companies would be allayed by strengthening the ability of such staff to make that defence.

Paul Stinchcombe (Labour, Wellingborough)

I thank the Minister for that helpful contribution.

However, the Minister's arguments relied on the first line of schedule 6, which he tells us was specifically incorporated as an endeavour to deal with the problem. I do not understand that line. It does not define when a business is in the regulated sector. One wants a definition in a statute to contain qualification. This measure introduces quantification, but it does not give a threshold. I understand the reasons behind the measure, but it does not achieve what is intended.

Bob Ainsworth (Labour, Coventry North East)

I have raised that question repeatedly, and have received repeated reassurances that the line does what is required of it: it rules out people who are doing a job that should not fall under the provision. Hon. Members may have serious doubts, despite what I said. I see no point in arguing with them when they say that I have flatly refused to examine the provision in any circumstances. I have made the Committee aware that we repeatedly raised the issue with the draftsman, and he told us that it does what we want it to—but I will examine the issue again if hon. Members' worries remain.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

I found the Minister's statement helpful. My worry is about a senior officer in an organisation who was not otherwise covered by the regulations and who could be exempt from a duty to disclose in certain circumstances. That example should not be put aside, but, as the Minister said, there might be situations in which someone, such as a senior officer in an organisation who would not otherwise be covered by the term ''business activities'', as he defines it, might be regarded as morally blameworthy. We should consider ways of ensuring, as far as possible, that such individuals do not escape through changes that are introduced as a consequence of our discussion.

Bob Ainsworth (Labour, Coventry North East)

We need to be very careful about that. While I am happy to consider those two areas—although I do not hold out much prospect in relation to the second, having been given assurances—I want to bring the Committee's attention back to the main point, which I have made repeatedly. The current regulations, which I accept apply only to drug money laundering—

Mr. Hawkins rose—

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman should allow me to finish one point at least.

A fair amount of laundering of drug money is taking place in this country. However, the current offence is not used to any extent. People are saying, ''Well, prove it.'' They are not even prepared to believe me on that. To quantify it, I am told that there has not been a single offence recorded in Scotland under the

current regulations on reporting of drug money, and if there has been more than one in England and Wales, we are not aware of that either. That is the extent to which that specific regulation—not the other money laundering regulations—has been used. I hope that that reinforces the importance of introducing further measures in the Bill.

Nick Hawkins (Conservative, Surrey Heath)

Let me try to reassure the Minister that we share his aims, especially with regard to the matter raised by the hon. Member for Edinburgh, North and Leith. If the matter could be recast so that somebody who was senior and who ought to be a target was brought into the net, my hon. Friend the Member for Beaconsfield and I might support such a toughening up of the Bill, which might reassure Labour Members who are always accusing the Opposition of watering it down.

The Minister, in his usual reasonable way, has assured Opposition Members, and Labour Members who share some of our concerns, that he will consider the matter again. I know that we shall vote on the matter in a moment, but while he is reconsidering, will he give another undertaking? Rather than just going back to the same draftsman, who has not drafted correctly, will he also talk to people on the anti-money laundering committee of the Law Society of England and Wales, and to people at the British Bankers Association? Will he work with them on a draft that takes out of the net those people whom we all want to take out of the net? Surely the experts at the sharp end can best advise him on how that can be done. They are not satisfied with the current wording, and neither are we.

Bob Ainsworth (Labour, Coventry North East)

I have had numerous dealings over a period of time with parliamentary counsel, as, I am sure, has the hon. Gentleman. Regulations are drafted in a way that is supposed to enact the policy that we give to them. Some of the wordings that they use to do that may not be immediately apparent to all hon. Members. However, they are the experts.

I shall consider the matter again. I do not want to do anything that weakens the Bill. Despite the hon. Gentleman's assurances, I have not heard much from him that would do anything other than weaken our proposals. The removal of the negligence test, which is the main thrust of the amendment that we discussed previously, would take us back to a system that has been completely ineffective to date.

Dominic Grieve (Conservative, Beaconsfield)

I have some sympathy with the Minister. First, I fully appreciate that he is hardly likely to dismiss the opinion that he has been given by his draftsman in relation to schedule 6. I listened carefully to what he said about that, and was pleased to hear the Government's intentions on the matter. That certainly went some way towards providing reassurance.

It was right to table the amendment, because the offence can be committed either with guilty knowledge or negligently. If guilty knowledge was the only test, the fact that the provision might apply to the cleaner would matter far less, because if the cleaner had guilty knowledge or had picked up information, and knew

full well that he was helping a money laundering operation, my concerns would not arise.

It is precisely because the Committee has decided to continue for the moment with the clause as drafted, and because the House has decided that the Bill should be passed with a negligence offence, that it is so important to try to exclude from the clause those whom we should not even contemplate criminalising for negligence. Trying to do that adequately while not opening the doors too wide—I am trying to accept the clause as it is, not as I should wish it to be—poses a problem. The Minister has met that problem by tabling an amendment to schedule 6 as a result of consultations.

I do not wish to repeat myself ad nauseam, but—and I say so tentatively, as I am mindful of the skill of parliamentary draftsmen—that is not how the clause reads to me. It seems to leave the matter opaque at best, as the hon. Member for Wellingborough so rightly analysed. The alternative approach would be to include a restriction in the clause, and that is what we have tried to do. I am also mindful of the comments made about the other ways in which the amendment could be drafted, but if schedule 6 raises concerns, the correct approach to take to restrict criminality is to table an amendment to the clause. The amendment would restrict criminality to those

''directly involved in the activities . . . regulated.''

That seems to make a lot of sense, although I have picked up on the point about whether one needs the word ''directly'' in there.

The amendment may not be perfect, but I shall press it to a Division, if only to create a benchmark, as I believe that the matter will have to be considered again, either—depending on what the Government do—on Report or in another place, where there will be many people who can decide with far more skill than I can whether schedule 6 does what the Minister says it does. I am grateful to him for his comments, but I want to vote on the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 11.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 99, in page 187, line 35, after 'customs officer', insert 'Inland Revenue officer'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to take the following amendments: No. 500, in clause 327, page 189, line 26, after first 'officer', insert ', Inland Revenue officer'.

No. 504, in clause 328, page 189, line 37, after first 'officer', insert ', Inland Revenue officer'.

No. 505, in clause 328 page 190, line 3, after 'officer', insert ', Inland Revenue officer'.

Dominic Grieve (Conservative, Beaconsfield)

The amendments are designed to deal with the problem of Hansard agreements. The Minister may tell me that I am wrong, but an unintended consequence of the clause is that it seems to make a Hansard agreement almost impossible.

I will explain the situation. There is a well-established practice in law, which I believe dates back to 1944, whereby if a person wants to make a clean breast to the Inland Revenue about his tax evasion, he can do so. He will be required to pay the tax, and almost certainly to pay a penalty that could be substantial, but he will avoid the risk of being criminalised and prosecuted. That is dependent on the individual making a clean breast to the Inland Revenue, and in doing so showing that he is not seeking to withhold certain information. Subject to such provisos, he may take such action in confidence, and that confidentiality will be maintained.

I think that I am right in saying that, subsequent to such an agreement having been reached, the information remains wholly confidential for virtually all purposes, although disclosure of the fact that a person has had to pay a penalty to the Inland Revenue under those circumstances may sometimes be necessary. However, that is only in restricted areas, such as if the person were to apply for judicial office or the like.

Hansard agreements are thus well established and there has been no suggestion that they should be removed. It has always been my understanding that they are a useful device for enabling the Government and the Inland Revenue to obtain money to which they are entitled. The agreements also enable people to clear up back tax issues for which they might otherwise be liable for prosecution. The clause makes no mention of the Inland Revenue as a body to which disclosure can be made. It refers to ''a nominated officer'', but I believe that that refers to someone within the person's own organisation.

The amendments would ensure that the Hansard agreements mechanism is maintained. Let us suppose that a person consults his tax adviser or accountant—which does happen—and says, ''I have been extremely stupid and greedy, and over a number of years I have failed to declare to the Inland Revenue income that I have received from my garage business. Can you help me out of my difficulties?'' The accountant would normally be able to help that person by explaining the principles of the Hansard agreement to him and contacting the Inland Revenue on his behalf.

Such action would be impossible under the clause, because at the time that a person consulted him, the accountant would have no means of knowing whether he was being wholly truthful. It is possible that not only had there been tax evasion, but that the money was the proceeds of crime. Those two factors, as the Minister and I have previously agreed, can sometimes be linked.

If the money is the proceeds of crime, people other than Inland Revenue officers will have an interest in it. However, the poor accountant or solicitor cannot disentangle the matter. What is the accountant or solicitor supposed to do? As the legislation stands, he cannot even ring the Inland Revenue, because if he did he would be guilty of the offence of tipping off. Even if he does ring the Revenue, he cannot help his client, because the Revenue is not a relevant officer under the clause. That is why the amendments cover the whole of part 7 and apply through each sequence—but I will not go into that in more detail, because I hope that the Committee has got that point, and I do not wish to take up too much of its time.

The purpose of the amendments is simply to turn the Inland Revenue officer into a relevant person to whom disclosure can be made, as that would get the accountant or solicitor off the hook.

Unless the Government wish to depart from the previous principle of Hansard agreements, I cannot see why they should find the amendments unacceptable. There is only one conceivable problem with them, which is if the Minister were to say, ''The Inland Revenue, with its duty of confidentiality, would not be in a position to carry out the sort of investigation that we want NCIS to be able to conduct.'' If he said that, the Government would have to make a decision about whether they wished Hansard agreements to survive, because the key quality of such an agreement is its confidentiality.

There is an alternative approach. During the course of its Hansard agreement inquiries, the Inland Revenue might conclude that the money was not legitimately acquired, and therefore that more serious matters had been taking place than mere tax evasion. To cover such circumstances, a device or principle could be added to the legislation to entitle the Inland Revenue to make a disclosure to NCIS about its suspicions that the money was the proceeds of crime.

If the Minister has concerns about the amendments, that would be the correct approach for him to take, because otherwise the accountant or the solicitor would be put in an impossible position.

Stephen Hesford (Labour, Wirral West)

I want to outline a potential problem. If a criminal was aware that there were Revenue functions with regard to the legislation, and if he was afraid of them, he could avoid them by going to his accountant for such an agreement, which the accountant would be under a duty to honour. The accountant would also be let off the hook, because he would have reported it down the line. That might be a route to take to avoid disclosure. It is unclear to me whether NCIS would ever get the information.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman makes a reasonable point, and I tried to address it when I raised the difficulty of the disclosure not going to NCIS.

If a client were to say to his accountant, ''This money is the result of tax evasion and, on top of that, I

do not want too much said about its origins,'' I would expect the accountant to act in a different way from that which I have described. I am assuming that the only information that is given to the accountant is that the money is the result of tax evasion. I also made the point that in those circumstances, reasonable people, even though they may not be given any further information, may well say, ''Dear, oh dear. I hope that this money is not the fruit of criminal activity.''

Stephen Hesford (Labour, Wirral West)

That is the point. Criminals are most unlikely to walk into the accountant's office and say, ''Actually, this is drug money.'' They are more likely to come up with a story—a garage business or something.

Dominic Grieve (Conservative, Beaconsfield)

That may be so, but although I am not a tax lawyer or accountant, it would be surprising if the accountant contacted the Inland Revenue and said, ''I have a client who wishes to notify you under the Hansard agreement terms that he owes you £150,000 in unpaid tax. He is very sorry and would like to clear up the matter.'' Someone who knows more about it will correct me if I am wrong, but the Inland Revenue would not write back saying, ''Thank you very much, please send us the cheque.''

I suspect that some searching questions would be asked to establish whether a Hansard agreement would be appropriate and that there had been full disclosure of all the material facts surrounding the origin of the money. I would be staggered if the Inland Revenue would not check—and from talking to tax advisers, I understand that it does—the full facts of the matter, to be sure that someone was not trying to pull the wool over its eyes and laundering the money by paying the tax on it through a Hansard agreement. If that were found to be the case, I would expect the Inland Revenue to prosecute itself. Failing that, I have no objection to the full weight of the law and investigative powers falling on the individual concerned.

My concern is for the Hansard agreement. If the Bill goes through in its present form, the Hansard agreement will go down the plughole of history. An irony of that would be that the Government and the Inland Revenue would be substantial losers. All sorts of individuals who had wanted to regularise their tax affairs would no longer do so.

How will the Minister tackle such a problem? I have never heard it suggested that the Hansard agreement be jettisoned, and seeing that it is a tried and tested method, there would be a problem without it. Furthermore, as the Bill applies retrospectively, I foresee the raising of all sorts of human rights issues concerning the ability to keep Hansard agreements going until the legislation is enforced.

The issue is broad. The amendments were tabled as a result of representations to me from those in the tax world. The amendments are designed to meet the need for a disclosure to be made to the Inland Revenue—for there not to be tipping off—to place the person to whom that disclosure can be made in the regulated sector, and to ensure that there is protected disclosure.

I need to hear from the Minister how the Government view the problem and then we may need further debate.

Nick Hawkins (Conservative, Surrey Heath)

Like my hon. Friend the Member for Beaconsfield, I am not a tax lawyer specifically, but during my own practice at the Bar, tax matters came into the ambit of fraud cases with which I dealt, and I have certainly come across the concept of Hansard agreements. The Hansard agreement system has been in place some considerable time, and while I have not had extensive dealings with tax officials, one of my godfathers was a senior Inland Revenue employee for many years.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

What kind of godfather?

Nick Hawkins (Conservative, Surrey Heath)

Not a mafia one, but a purely Christian one.

I recall from various discussions, not only during my work at the Bar, but with a member of my family, that often the most important theme for the Revenue has been the way in which it can get people to volunteer information to it. Sometimes, that would be under pressure, in that if the information were not volunteered, prosecutions would follow. As my hon. Friend the Member for Beaconsfield and I examined the Bill, it struck us as odd that, given the parallel functions of Customs and Excise when dealing with VAT and the Inland Revenue when dealing with other taxation, the clause should provide a defence if there was instant disclosure as soon as practicable to a Customs officer who was dealing with VAT, but there was no mention of Inland Revenue officers dealing with taxation. That seems peculiar, especially in light of the fact that the Hansard agreement system seems to work so well.

Bob Ainsworth (Labour, Coventry North East)

I take the point that one of the consequences of extending the possession offence under clause 323 that covers any criminal proceeds, whether or not they are one's own or another's, is that a tax adviser or an accountant will be duty bound to make a report. The hon. Member for Beaconsfield has taken soundings, and we have consulted fully on the matter. We have talked to the Revenue, the police and NCIS. Before we think about how we want the provision to work, it needs to be said that tax evasion is a serious, criminal offence. The hon. Gentleman did not suggest that it should be treated as anything other than that.

While the sums involved in tax evasion could, in some cases, be small, the offences with which we are concerned are serious. The main argument that has been advanced is that, when accountants and tax advisers are brought within the regulated sector, many clients who have a genuine desire to put their tax affairs straight through the Hansard process will be less inclined to seek the views of tax advisers, knowing that the matter will have to be reported to NCIS. They will be far more likely to seek advice from the solicitor next door who will not have to report the matter to NCIS, because of the legal privilege exemption. It is also argued that clients will no longer be so keen to regularise their tax affairs and that there will be a substantial loss of revenue as a result.

The facts do not bear that out. The Inland Revenue's analysis is that, against a background of a rough figure of £100 million of revenue recovered in total through the Hansard procedure, only about £15 million is recovered through Hansard disclosures, which are made spontaneously to the Revenue without there being any prior knowledge on the Revenue's part. The Hansard procedure is used, and the view of the tax authorities is that it is used more often than not when they are already on to the case, and in some circumstances they are more than happy to accept that they can regularise the position in that way. The sum is not huge and the Revenue advises that it would not expect to lose all of it anyway. It sees a counterbalancing effect of improving compliance through the more robust reporting regime. In short, the Revenue does not see an overall loss to it as a result of the clause. Indeed, it believes that there may be an increase.

It is important to point out that in the majority of cases a tax adviser will not know whether the criminal proceeds in the hands of his client were derived from tax evasion rather than another crime. The hon. Gentleman said that if the Revenue became aware that there was other criminality, obviously it would report that to NCIS, but the Revenue will not necessarily know whether other criminality is involved. NCIS, rather than the Revenue or the tax adviser, will be best able to decide whether the case is purely one of tax evasion, rather than other criminality.

Much has been said about the idea that NCIS will be swamped with minor reports of tax evasion. We accept that there will be an increase in the number of reports that will be made to NCIS, but we consulted NCIS, and it is satisfied that it can cope with the additional work load. It takes the view that it would be better to allow it to dismiss a report as relating only to minor tax evasion than to risk losing an important money laundering lead. The sums involved do not necessarily determine whether money laundering is involved.

Nick Hawkins (Conservative, Surrey Heath)

I do not know whether the Minister will come to this later, but he has not yet responded to my point that if there is provision for disclosure to Customs and Excise for VAT, surely there should be a parallel exemption for disclosure to the Revenue. Should that be examined?

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman can see that I am trying to answer several points on a range of issues, and I wish that he would wait until I am near completion before he asks whether I have answered a specific point. I find that he repeatedly wants me to answer his questions before those of other hon. Members, and if I do not, he gets a little agitated during my response.

When there is no evidence of wider criminality beyond tax evasion, NCIS will in any event pass cases back to the Inland Revenue to be dealt with, as happens at present. It is already public knowledge that the Revenue has a presence in NCIS. There is nothing new about a close liaison between the Revenue and NCIS on matters of this kind.

Concerns have been raised because reports must be made to NCIS as soon as practicable after the information gives rise to knowledge or suspicion. NCIS may pass on reports to the Revenue long before they would have been received under the Hansard procedure, which can take many months to sort out. However, I reassure the Committee and those who made representations that when that happens, the Revenue will not withhold the offer of a Hansard arrangement to settle the matter purely on the basis that it learned about the evasion from a report sent from NCIS, rather than being notified by the taxpayer or his adviser. That is important, because we have been asked for that assurance. The Revenue will not deal with cases differently because they were received via NCIS rather than directly.

Dominic Grieve (Conservative, Beaconsfield)

I am glad to hear that, although the problem is a little more twisted than that. A person will no longer be able to get advice from their tax adviser about making a Hansard agreement. The adviser might say, ''I'm sorry, but there's no such thing as a Hansard agreement—goodbye,'' and then, without the client's knowledge, pick up the telephone and say to NCIS, ''My client was seeking a Hansard agreement. I sent him away, but I think that you should know about it.'' Legal professional privilege would prevent that.

The irony is that NCIS will have to get information through another channel; the voluntary declaration via the tax accountant will come to an end. Surely that would be the consequence of the measure. The accountant or adviser will not be able to tell the Revenue because of legal professional privilege.

Bob Ainsworth (Labour, Coventry North East)

He will. The hon. Gentleman says that if the adviser tells the Revenue, he will be guilty of tipping off, but clause 325 states that the tipping-off offence applies where the disclosure may ''prejudice any investigation''. I do not see how telling the Revenue could ever be prejudicial to an investigation. Of course, the Hansard procedure supports my assurance.

Yes, there is a fear that the measure could discourage people from coming forward, knowing that a report will be made to NCIS—rightly so, if serious criminality is involved. We must assure people that we do not intend to alter the Hansard process, and that the intervention of NCIS in the information stream will not alter the way in which the case is dealt with when it eventually reaches the Revenue. The Revenue is not in a position to know whether criminality, other than tax evasion, is involved, nor is the accountant or tax adviser. NCIS knows that; it collects such information. However, if the tax evasion is purely minor, it will be passed on to the Revenue, which will deal with it. We are trying to ensure that that will not change.

Dominic Grieve (Conservative, Beaconsfield)

I am interested in the Minister's comment that the offence of tipping off would not apply to information given to the Inland Revenue because it would not prejudice the investigation. I can see the force of the argument. In that case, the Bill should state explicitly that there is no prejudice in

tipping off the Revenue, because that is not the understanding that tax advisers have of the matter.

The future of Hansard agreements is much more complicated, notwithstanding the Minister's comments. Inevitably, widening the principle by which the Revenue deals with the issue so that NCIS immediately becomes engaged is likely to be a powerful deterrent to individuals from providing information to their accountants to settle their affairs. The Minister may be right in saying that that is a good thing if someone has something to hide, but I suspect that it will also affect people who have nothing to hide but who are frightened of the consequences of bringing a substantial criminal investigation by the National Criminal Intelligence Service down on their backs, when previously they had more confidence in the practices of the Inland Revenue. If that is a public policy decision I must accept it, but we are in danger of throwing the baby out with the bathwater. My impression, which the Minister confirmed, is that the Inland Revenue has been broadly satisfied with the way in which Hansard agreements work, and considers them a good principle and device. Otherwise it would have got rid of them a long time ago.

Bob Ainsworth (Labour, Coventry North East)

The point about potential deterrence has been raised with us, which is why we consulted the Revenue. The hon. Gentleman heard its view. My main reason for intervening now is that although I got cross with the hon. Member for Surrey Heath, in the end I did not get to the points that he asked me about. Although he is not here now, he might want to know that although Customs and Excise has particular responsibilities for investigating crime generally, and money laundering in particular, the Inland Revenue has no such responsibilities, which is why the Revenue is treated differently from Customs and Excise.

Dominic Grieve (Conservative, Beaconsfield)

I thank the Minister for that explanation.

I will ask the Committee's leave to withdraw the amendment, but with some reluctance. People should be able to come clean on their tax affairs in the way that Hansard agreements provided for, and in practice that will become less likely. An individual will not go to see his accountant and say, ''Look, this is what happened,'' because he will be advised that the Hansard agreement no longer works in the same way. Indeed, it will be even more difficult, as the accountant will have to tell the person to go away. Even in explaining the way in which the new system works, he would be alerting the client to the fact that he might have to tip off NCIS if the client wanted him to notify the Inland Revenue. The change will put the tax adviser in considerable difficulty, and I ask the Minister to examine that aspect. The tax adviser will have a problem, because he will want to go along with the laws that the Minister sets out.

I will sketch out the specific situation so that the Minister understands. The client comes along and says, ''I have a tax problem; I want to come clean.'' The tax adviser can tell him about the Hansard agreement, and say that he can notify the Inland Revenue on the client's behalf, but at the same time it is in his mind that he must also tell NCIS without

telling his client. That puts a professional adviser in considerable difficulties, as the confidentiality of the communication with the Revenue used to be a paramount consideration. In reality, if someone tells the tax adviser that they have a problem with the Revenue, the adviser will just have to say that he does not want to know about it. A legal professional adviser would have great difficulty in dealing with that issue.

I see a note being passed to the Minister, so he may be able to reassure me that I am wrong. However, an accountant would not be covered by legal professional privilege, so he would be in an even more difficult position. I cannot help thinking that a channel of information that has been of value to the Inland Revenue will simply dry up.

Bob Ainsworth (Labour, Coventry North East)

I do not see some of the difficulties that the hon. Gentleman does. Obviously, advisers may want to make their clients aware of the general requirements under the law, and the idea has been raised with us that that could deter people from coming forward. In making their clients aware of their legal requirements, the advisers will make them aware that in certain circumstances they have a requirement to disclose. They will not then be in the difficult position of failing to point out to the individual that they must make a report in given circumstances. We want people to behave professionally and make reports where appropriate. People will decide whether to tell clients their obligations, and the manner in which they will do so, before having dealings with them.

Dominic Grieve (Conservative, Beaconsfield)

I see the point of that. In one of our debates, some hon. Members said that several City institutions already issue a prospectus stating that confidentiality no longer applies in cases of suspected money laundering, and that if they received information about such cases, they would make a disclosure under the Drug Trafficking Offences Act 1986. Organisations do not tell the client that they are going to make such a disclosure, but they make it clear that the confidentiality that used to exist is limited by that factor. Accountants, solicitors and others will doubtless make it clear to clients that that rule will generally apply in dealing with their tax affairs.

That is likely to mean that individuals no longer go to accountants to seek advice on Hansard agreements because accountants, unlike solicitors, have no legal professional privilege. Accountants' advice on the matter would force an immediate reference to NCIS, which would surely dry up that channel of communication.

I have raised the matter now, and I will not press it to a vote, but I will discuss it further with those who encouraged me to table the amendments. If they are not satisfied with the Minister's answers, we may return to it on Report.

Bob Ainsworth (Labour, Coventry North East)

To try to reassure the hon. Gentleman, I can tell him that the measure should not breach ordinary taxpayer confidentiality. There will be no requirement for NCIS to report to any body other than the Revenue, such as police authorities or enforcement authorities, unless an offence other than

tax evasion is involved. Information will be reported to and kept by NCIS, and reported back to the Revenue, where appropriate, to be dealt with under the Hansard procedures.

Dominic Grieve (Conservative, Beaconsfield)

I appreciate that. I said at an earlier sitting, slightly tongue in cheek, that the Inland Revenue was like the Spanish inquisition, as in the Monty Python sketch where people come bursting in whenever its name is mentioned. Similarly, NCIS has all the attributes of Big Brother: it is watching us and picking up lots of information which it holds secretly and close to its heart, communicating it only to the Spanish Inquisition.

I appreciate that the Government are trying to curb criminality, but the measures may constitute practical impediments to the orderly administration of society and the collection of tax revenue. Have the Minister's officials had further representations from those who work with taxation to give the matter careful consideration? I will ask the industry for its views on the Minister's comments in Committee, and we may return to the matter on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 488, in page 187, line 40, after 'and', insert 'believes'.

The line of the clause that the amendment would affect is about legal professional privilege. A person does not commit the offence of failing to disclose information if he has a reasonable excuse, or if he is a professional legal adviser and the information or other matter came to him in privileged circumstances. The amendment would provide that someone had to believe that the information, or whatever, had come to him in privileged circumstances, which would introduce the test of guilty knowledge rather than of negligence.

Put simply, legal professional privilege has always been a well established rule of our law, and it has repeatedly been justified on public policy grounds. In a recent case concerning obtaining tax advice, the Inland Revenue tried to obtain papers from the tax barrister who gave the advice, but the courts held that there were powerful public policy reasons for upholding legal professional privilege.

An interesting issue, which we shall consider later, is that there are no statutory efforts of which I am aware to define what constitutes legal professional privilege. However, to my surprise, in part 8—which I shall not debate now—I was able to identify at least one passage in which there is an attempt at defining legal professional privilege so that it does not cover, for instance, the identity and address of a lawyer's client.

As the term has not been statutorily defined, I would think it extraordinary if a legal adviser who received information and believed that he was covered by legal professional privilege were criminalised for making that mistake. The amendment is designed to deal with those circumstances. It would make the legal adviser aware that he was not covered by legal

professional privilege, so that he would not make such a mistake.

There may be occasions when a solicitor is not covered by legal professional privilege, particularly for a straightforward transaction that does not require the provision of legal advice, but there is a grey area in which the one fades into the other. I would be concerned about introducing a negligence test unless the Minister could persuade me that there are good and sufficient reasons to do so.

Bob Ainsworth (Labour, Coventry North East)

I am advised, from more than one source, that legal professional privilege is defined in section 10 of the Police and Criminal Evidence Act 1984.

We do not believe that the amendment is necessary. The clause as presently drafted assumes that the professional legal adviser, acting on information given to him by his client, would know whether the information came to him in privileged circumstances. We do not think that it is a problem that the word ''believes'' is not explicitly stated, because in order to commit the offence of failure to disclose, the professional adviser must know or suspect, or have reasonable grounds to suspect, that money laundering is going on. If he knows or suspects that, he must have some idea that information may be being communicated with a view to furthering a criminal purpose—that is, money laundering. If the legal adviser does not know or suspect, or have reasonable grounds for knowing or suspecting, anything, he cannot be guilty of a failure to disclose in the first place.

There will be circumstances in which the adviser knows or suspects that there is money laundering and it is clear that legal privilege does apply. A client might be charged with a criminal offence and give information about money laundering to his legal adviser. The adviser would then know that money laundering was going on, but he could be confident that the information was given to him in order to prepare a defence rather than to pursue a criminal purpose.

Other circumstances might be less clear cut. In conveyancing or divorce proceedings, a legal adviser may come across information that leads him to suspect money laundering. However, he may not be sure whether the conveyancing or divorce settlement is part of the money laundering, or whether the information is given to him in order to pursue the criminal purpose of money laundering. In those circumstances, we think that the legal adviser should make a report. The legal adviser will be protected from any professional duties of confidence by clause 327, so there is no risk to him in making a report.

Therefore, where the legal adviser has any doubt as to whether information that comes to him is privileged, he should go ahead and disclose. We believe that the majority of legal advisers would act in good faith in that regard. The existing offence of failure to disclose suspicion of the laundering of drug money contains the same definition of legal privilege.

That has not—so I have been told—given rise to any difficulties.

Dominic Grieve (Conservative, Beaconsfield)

I continue to be concerned about the matter, but I will consider it again, in the light of the Minister's comments about the statutory definition in the Police and Criminal Evidence Act. It might be more appropriate to consider my specific concern about the erosion of legal professional privilege at a later stage of our discussion of the Bill.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Does the hon. Gentleman agree that the Minister's comments about legal advisers making a disclosure if in doubt reinforce the need for the amendment? If the legal adviser makes a disclosure when he is in doubt, and it turns out that the information should not have been disclosed, he will be in breach of his duty of client confidentiality.

Dominic Grieve (Conservative, Beaconsfield)

Yes, that would be a serious breach of professional conduct. I have frequently expressed such concerns, as that problem arises throughout the Bill.

The hon. Gentleman may recall that an earlier part of the legislation did not contain a reference to legal professional privilege in connection with requiring people to answer questions. I think that it was the hon. Member for Redcar (Vera Baird) who said that it was extraordinary that there was no such reference, and the Minister responded by saying that it did not matter, because there could be no suggestion that the clause eroded legal professional privilege.

I found that odd at that time, and I find it even odder now I have been informed that there is a statutory definition of legal professional privilege in another piece of legislation. I wish to examine that definition, and the context in which it arises. It is worth bearing in mind that the Police and Criminal Evidence Act deals with certain restrictive facts and matters, rather than with the total ambit of legal professional privilege.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

It is also worth bearing in mind that that Act applies only to England and Wales. I am not aware that there is a statutory definition in Scottish law—other than in the Solicitors (Scotland) Act 1980, in which it will be defined in broad terms. Moreover, even that will not cover members of the Faculty of Advocates.

Dominic Grieve (Conservative, Beaconsfield)

I was busy scrabbling through my Archbold to see if I could find that, but I could not do so in the available time. The hon. Gentleman has made an important point.

I have to decide whether to press the amendment to a Division—and I see that my hon. Friend the Member for Surrey Heath is encouraging me to do that—or to reflect on the matter further in the light of the Minister's comments. The only reason why I was minded to withdraw the amendment was because I could see that further opportunities might arise later in the Bill to look at the extent to which legal professional privilege was being tinkered with.

I agree with the hon. Gentleman that the Minister's specific line on ''If in doubt, declare what is going on to NCIS'' does not address the problem at all. The absolute duty of maintaining confidentiality means

that legal professional privilege exists for the benefit not of lawyers but of clients. It exists to allow people free access to lawyers to get legal advice, and may be waived if the client wishes. It does not protect lawyers, but those whom they provide with advice. The idea that a person who is in doubt may go off and spill the beans to NCIS is wide of the mark.

Nick Hawkins (Conservative, Surrey Heath)

My hon. Friend is right. I agree with the hon. Member for Orkney and Shetland (Mr. Carmichael) because some of the Minister's comments toward the end of his remarks caused me, too, to worry. Does my hon. Friend agree that we have been aware for many years—perhaps since before either of us entered the House—that it is the ambition of many of those in government to chip away at legal professional privilege? I am not talking only about the present Government, because the apparatus of the Home Office under successive parties has wanted to do that. I can remember debates in the 1992–97 Parliament in which there were frequent efforts to chip away at that privilege.

My hon. Friend is correct to say that the privilege is designed to protect clients. Although the hon. Member for Glasgow, Pollok said that that was ''a likely story'', it remains the case, and the Government's Back Benchers must be conscious of that.

Dominic Grieve (Conservative, Beaconsfield)

I agree entirely with my hon. Friend. I mentioned that there were further issues under the investigatory powers in part 8 of the Bill that caused me serious worries.

Bob Ainsworth (Labour, Coventry North East)

May I repeat my point and, I hope, satisfy the hon. Gentleman? The legal adviser will be protected from any professional duties of confidence by clause 327, which I am told overrides the duty of confidence to the client.

I can also tell the hon. Gentleman—I have said this before—that the same definition of legal privilege is in the current money laundering regulations. Currently, NCIS encourages people to seek advice from the ethics division of the Law Society if they are uncertain whether to disclose. The hon. Gentleman is worried about encroachment, but I am not sure that he has real grounds for that.

Mr. Grieve rose—

Mr. Carmichael rose—

Dominic Grieve (Conservative, Beaconsfield)

I get the impression that the debate could continue fruitfully beyond my response to the Minister, and I hope that that will be possible. I see you shaking your head, Mr. Gale, so I shall give way to the hon. Member for Orkney and Shetland now.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Again, does the hon. Gentleman share my concerns about what the Minister said? He said that solicitors are encouraged to report matters to the ethics division of The Law Society. That is perfectly proper, but it is different from what he said earlier about reporting things when in doubt.

Dominic Grieve (Conservative, Beaconsfield)

I entirely agree with the hon. Gentleman. On occasions, I have sought the advice of my professional body about problems that arose in my professional practice. The Minister says that

notwithstanding the advice that the Bar Council gave me, I should be under an obligation to disregard that advice in a case of doubt. Curiously, the more our discussion continues, the more convinced I am that the amendment should be put to the vote. I am increasingly worried about the general drift on legal professional privilege.

Bob Ainsworth (Labour, Coventry North East)

Is the hon. Gentleman trying to achieve a position whereby a lawyer who is conducting financial activities for his client should escape the requirements of the clause when no criminal proceedings are involved? That is how it appears.

Dominic Grieve (Conservative, Beaconsfield)

No, the Minister is wrong. If a lawyer is conducting purely financial dealings for his client, without providing advice, and the lawyer says subsequently, ''I believed that I was covered by legal professional privilege,'' he would be laughed at, and rightly so. However, circumstances will arise in which an individual will legitimately be asked by a client to do two things at once. The question arises: which is the primary and which is the secondary function? Grey areas exist, and a solicitor would be sensible to ring up the Law Society of England and Wales, or the Law Society of Scotland, and obtain advice. The Minister is not saying, ''If in doubt, you can get the advice of your professional body, and the Government would not then criticise you.'' He is saying that a legal adviser can be prosecuted on the grounds that he was negligent if a view is taken subsequently, with the benefit of hindsight, that legal professional privilege was not attached to the advice or activities that he was carrying out. That troubles me.

On the whole, negligence should be a matter for professional bodies, and criminality should be a matter for the courts. I do not care for the mixing of the two, especially when lawyers may be placed in difficult situations.

Nick Hawkins (Conservative, Surrey Heath)

Like my hon. Friend, I am becoming more and more concerned. The more the Minister intervenes, the worse the position becomes. I apologise to my hon. Friend, as, having interrupted him, I am now going to raise a point of order.

On a point of order, Mr. Gale. Am I right in thinking that when a matter arises at the end of the Minister's response to the hon. Member who moved the amendment, and the mover of the amendment speaks again before there is time for other hon. Members—such as the hon. Member for Orkney and Shetland and I—to intervene, you could, if you felt it appropriate, and with the leave of the Committee, allow hon. Members who wished to take up that matter to do so after the mover of the amendment has finished speaking? Otherwise, the hon. Gentleman and I will be able to raise the further significant points that arose at the end of the Minister's response only as interventions on my hon. Friend the Member for Beaconsfield. I seek your leave, Mr. Gale, to make a further short contribution before the amendment is put to a vote.

Roger Gale (Conservative, North Thanet)

The convention is clear: once the hon. Member who moved the amendment has been called to reply, it is anticipated that no other hon. Member will be called. However, in the circumstances

that the hon. Gentleman has outlined, the Chair has the right to call other hon. Members, and in a moment I shall consider whether I am minded to do so.

Dominic Grieve (Conservative, Beaconsfield)

In conclusion, I accept that section 52 of the Drug Trafficking Act 1994 defines, in a highly acceptable way—interestingly, the Bill does not do so—legal professional privilege, which applies if information is communicated

''(a) by, or by a representative of, a client of his in connection with the giving by the adviser of legal advice to the client;

(b) by, or by a representative of, a person seeking legal advice from the adviser; or

(c) by any person—

(i) in contemplation of, or in connection with, legal proceedings; and

(ii) for the purpose of those proceedings.

(9) No information or other matter shall be treated as coming to a professional legal adviser in privileged circumstances if it is communicated or given with a view to furthering any criminal purpose.''

The Minister must accept that the matter under discussion is much wider than the furthering of a criminal purpose. It is about suspicion, and declaring and providing information merely because something has floated past one's eyes unexpectedly. That is a much wider problem for lawyers than the definition in section 52 of the Drug Trafficking Act, because the circumstances are restricted in that Act. A legal adviser would have to waive the privilege when considering something that was

''communicated or given with a view to furthering any criminal purpose.''

I do not much disagree with the definition of legal professional privilege given in the 1994 Act, but we do not have one in the Bill—at least, not in this clause.

Vera Baird (Labour, Redcar)

I think that there is one in clause 324(8) in the same terms. I followed the words as the hon. Gentleman read them out.

Dominic Grieve (Conservative, Beaconsfield)

I apologise to the hon. Lady. She is quite right. However, it still remains the case that the circumstances in which information is likely to come to light are wider in the Bill. I remain concerned about subsection (5)(b). Rather than continue the debate, we should put the matter to the vote, if only to express our concerns.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I shall be brief, Mr. Gale, because I have already made my point about the Minister's approach, which I urge him to reconsider. I hope that that turns out to be one of those things that is said in Committee but not followed in practice. It is right that the serious concerns felt by me and others should be properly registered.

I have read subsection (8), to which the hon. Member for Redcar has drawn the Committee's attention. Applying my practical mind to that, I can foresee occasions on which solicitors, advocates and barristers might have substantial doubts about whether they are covered by professional legal privilege. Subsection (8) gives a wide and bald definition, which I am pretty certain would, if tested in the courts, give rise to a substantial body of case

law. It has long been recognised that the lawyer-client relationship is in the interests of public policy, and for that reason the amendment is worthy of support.

Bob Ainsworth (Labour, Coventry North East)

The hon. Gentleman says that the definition would give rise to a substantial body of case law. I ask him to consider whether it would give rise to a substantial number of reports. He and other Opposition Members seem to be saying that there is nothing wrong with the current system. In 2001 NCIS received just 303 reports from 85,000 practising solicitors. Does the hon. Gentleman suggest that that number is acceptable, considering the number of financial transactions that are dealt with by solicitors? Would not he like there to be a substantial increase and improvement in the number of reports made?

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

There could be any number of explanations for those figures. Perhaps people are not using solicitors for money laundering as much as was initially thought. There are many more significant players in the regulated financial services sector, particularly since the passing of the Financial Services and Markets Act 2000. Solicitors are now bit-part players in that market. I am not surprised by the small number of reports made by solicitors. It is accountancy, stockbroking and other banking sectors that are worthy of examination.

I am slightly concerned about the implication of some of what the Minister says. He seems to be saying that solicitors as a body are acting unprofessionally. I know that the Law Society of Scotland was rigorous in its audits of the firm that employed me. I can think of one particular occasion when I was pulled in to speak to the auditor and explain why I had not asked a new client for identification in accordance with the money laundering regulations. As it transpires, it was proper for me not to have asked for identification in those circumstances because the client was known to me previously, so I had complied with regulations. I suggest to the Minister that if a solicitor undertaking a small conveyancing transaction in a small legal firm in Macduff is subject to that level of scrutiny, there is not much in the professional money laundering regulations that can be criticised.

Nick Hawkins (Conservative, Surrey Heath)

I wish to reinforce the good points made by the hon. Member for Orkney and Shetland and my hon. Friend the Member for Beaconsfield. The hon. Gentleman is probably being too moderate, however, in his balanced and reasonable response to the Minister. I have become more shocked each time the Minister has spoken in the debate. The most shocking thing of all was his intervention in the speech of the hon. Member for Orkney and Shetland, when he said that the Government regarded the matter as a quota exercise. The Minister compared the number of firms of solicitors with the number of reports. I think that he was quoting the global total for England and Wales, but no doubt he will say whether those figures included Scotland.

Neither the Minister nor NCIS can know whether those reports were proper reports, or whether they were the only proper reports. I agree wholeheartedly

with the hon. Member for Orkney and Shetland that as such matters have become increasingly dominated by the City of London, lawyers have become more like bit-part players. That does not mean that the Faculty of Advocates, the Law Society of Scotland and the Law Society of England and Wales do not have huge worries about the extension of negligence to junior staff under the Bill—but I would be out of order if I repeated them, Mr. Gale.

As I suggested earlier, the Minister may be chipping away at legal professional privilege. I have been a Member of Parliament for nearly 10 years and, with others who are legally qualified, I have been involved in many debates to defend both the basis for, and the concept and the retention of, legal professional privilege against the anti-lawyer voices in all parties that have become increasingly strident and worrying. We do not want to make assumptions, as the Minister does, that the very fact that there are only a certain number of reports means that there should be more.

I accept that it would be a proper response to the Bill to say that there will need to be much more reporting by financial institutions and the City of London. Although we have expressed concern that because of the absence of de minimis provisions, there will be many more reports than would be necessary to hit the real criminals, it is proper that there will be a big increase, as there already has been under the current arrangements since 11 September.

How many reports there are, and how many there should be, is relevant to the clause. I have to hand the figures that the Minister and I discussed generally in a previous debate. The NCIS website shows that there was a dramatic increase from 14,500 reports in 1999 to just over 18,000 in 2000. Before 11 September, it was anticipated that under the current law there would be a jump from 18,000 to 33,000. However, after 11 September it was anticipated that the figure would increase further to 40,000.

The Minister and I agree that it is proper that there should be an increase in reports, but those reports from the financial sector reinforce in spades what the hon. Member for Orkney and Shetland said. Despite the huge increase in reporting—with which those in both the financial and the legal sector say that NCIS is not equipped to cope now, never mind what will happen as a result of the further reports—the legal proportion is tiny. That point was made by the hon. Member for Orkney and Shetland, as well by my hon. Friend the Member for Beaconsfield and myself.

I am deeply worried by certain comments that the Minister has made. I know that he is a reasonable man, and is not trying to take a personal stance entirely at odds with his briefing. However, I cannot stress too strongly how worried we would all be if his unguarded remarks, which will be recorded in Hansard, were to undermine the basis on which clients are protected.

I do not blame the hon. Gentleman, because he has never been involved in the legal profession, but he has not fully thought through the implications of some of the comments that he made ''on the hoof'' when he intervened during the speeches of my hon. Friend the

Member for Beaconsfield and the hon. Member for Orkney and Shetland. This is not a personal attack on the Minister, but he will probably find that—even if he cannot accept our proposal or something akin to it—he has to write one of his clarificatory letters saying that that was not really the Government's intention.

I am grateful to you, Mr. Gale, for exercising your discretion and allowing me to express the seriousness of my worries. I hope that in a moment we shall be able to reflect the extent of those worries by pressing the amendment to a Division. Perhaps something along the lines of my hon. Friend's amendment will be accepted as a Government amendment in another place or on Report.

Mark Field (Conservative, Cities of London and Westminster)

At a later stage we shall have the opportunity to discuss professional privilege at length. I have sympathies with Labour Members, because as a former lawyer, I know that there is nothing so unedifying as watching certain lawyers trying to defend their own interests.

There are two matters that I want to raise. The first is that I am worried about the Minister's comments about the ethics division of either the Law Society or the Bar Council. I am not sure that that will be an entirely satisfactory route to take. There will be occasions when the time that it takes to obtain a definitive explanation may put lawyers in a difficult position. Indeed, it may happen that a junior and perhaps not very well qualified person in the ethics department gives an ad hoc judgment. However, we could argue that by going to the ethics division and having that on the record, a solicitor could avoid the potential problem—highlighted by my hon. Friend the Member for Beaconsfield—of falling foul of negligence and triggering a string of criminal charges.

Secondly, I wish to reiterate the point that has just been made, because I too am worried by the stance behind what the Minister when he played the numbers game. The success or otherwise of the provision will be dependent on the number of reports that come through—at least, that is how it will be judged—which is a great worry. The statistics revealed, I believe, that there were about 300 reports from however many tens of thousands of registered firms—but surely the rate of successful prosecutions would be a more sensible statistic. I appreciate the difficulty in assimilating figures for 2001 within a few weeks of the end of that year, but it is worrying if the perceived success of the legislation will boil down to a numbers game.

Bob Ainsworth (Labour, Coventry North East)

I was trying to point out a potential problem. If Opposition Members believe that my comments were made merely on the hoof, I assure them that they were not. I do not know if the hon. Gentleman is aware of, or interested in, the opinion of Select Committees, but the Select Committee on International Development said that it was

''concerned at the under-reporting of suspicious transactions by certain professional groups, in particular lawyers''.

Those worries were expressed by a Select Committee, and are not an on-the-hoof response from me.

Mark Field (Conservative, Cities of London and Westminster)

I was not suggesting that the Minister's response was made on the hoof. We live in a world of

league tables, and I accept that my party is as guilty as any in that respect. If we examine the matter in purely statistical terms, there is a grave danger of undermining a general and quantitative analysis of what occurs in new law, and the effectiveness of existing laws.

That was the point that I was trying to make, although I appreciate that it was not the only issue

that the Minister had in mind. It is worrying—this applies to the Government as a whole—that such measures are examined in terms of a statistical analysis rather than according to their general effectiveness.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee B

Clause 324 - Failure to disclose: regulated sector

Dominic Grieve (Conservative, Beaconsfield)

This morning, I was guilty of taking the Committee off at a slight tangent. [Hon. Members: ''Hear, hear.''] The Minister might also have been guilty of that. Therefore, a few matters should perhaps be clarified.

Apart from the definition in respect of professional legal privilege in section 10 of the Police and Criminal Evidence Act 1984 that deals with the seizure of documents, clause 324 derives from section 52 of the Drug Trafficking Act 1994, which is reproduced—almost unaltered, but with a slight variation of no importance—in subsection (8). That definition of professional legal privilege is acceptable.

In the light of the widening of the obligation on the professional legal adviser, the Committee must decide whether to support the amendment's introduction of a defence for the adviser, if he ''believes'' that the information or other matter came to him in privileged circumstances.

I believe that that defence should be introduced. Under the Drug Trafficking Offences Act 1986, someone can commit the offence of failing to disclose only if they know or suspect. The way in which clause 324 is worded, they can commit the offence if they are negligent. Because of that, the legal adviser should be given the extra safeguard that he cannot be prosecuted where he has honestly made an incorrect assessment that the information came to him in privileged circumstances.

I also wish to raise a further matter, which we shall return to when we discuss some later amendments. The statutory definition that is provided is not exhaustive: a glance at ''Halsbury's Laws of England'' or ''Archbold'' illustrates that this is an evolving area of the law, where definitions are not set in stone. It concerns me that a professional legal adviser who acts honestly and responsibly with a client, but who fails to make a correct assessment, could be criminalised—if, for example, he should have made a declaration to NCIS, because the information that he received did not fall within the circumstances of professional legal privilege, although he believed that they did.

If the Minister were to come up with an alternative, even the introduction of the word ''reasonably'', I might be prepared to consider it. In its absence, however, professional legal advisers are entitled to

protection, especially given that privilege does not exist to help lawyers but is a legal obligation on them. The usual way in which that legal obligation is challenged is in court proceedings. However, the irony is that a person may commit the criminal offence without the matter having previously been discussed in a court, which would decide whether the circumstances are such that the privilege has been waived or never existed in the first place.

Vera Baird (Labour, Redcar)

I am puzzled that the hon. Gentleman thinks that the negligence knocks on to the question of privilege. The offence, which we discussed extensively yesterday, would be negligently knowing or suspecting that money laundering was occurring. That has no bearing on privilege. The information comes to the lawyer. Whether or not he knows or believes that it relates to money laundering, he ought to do so. However, the question of whether the information that comes to him is privileged is not connected with the way in which he can be guilty of non-disclosure.

I would have thought that privilege was a fairly clear concept, which is clearly set out. As the hon. Gentleman now realises that there is a proper definition of privilege in this and other legislation, I cannot understand the purpose of persisting with the matter.

Dominic Grieve (Conservative, Beaconsfield)

I am afraid that the hon. Lady does not persuade me with that argument. The problem that may confront the professional legal adviser becomes even more complicated as a result of the introduction of the possible offence committed through negligence. It is always difficult to find an example that fits exactly, but one comes to mind. A lawyer is asked to carry out a transaction for a client, and at the same time he believes that in the course of doing so he has been providing legal advice. He may not even believe that he has been given information that indicates that money laundering has taken place, but he might subsequently be convicted, first on the basis that he ought to have realised that money laundering was an issue, and secondly on the basis that he ought to have realised that his actions were not privileged, whereas he thought that they were. That seems to be a double whammy.

The hon. Lady says that the categories are well established. I am not sure that I entirely agree with her about that. As I tried to do over lunch, one simply needs to look at some of the more recent case law on the subject to see that there is still scope for the law to evolve in that area. I had not intended to explore that issue now, as it would be better to deal with it in relation to a subsequent amendment. However, certain areas continue to be explored. I hope that the hon. Lady has understood my point.

Vera Baird (Labour, Redcar)

I must say that I do not understand. I cannot see a connection in relation to the circumstances in which information comes to a solicitor, whether it is privileged or not—the definition of what is privileged has survived since 1984, and is the same as it was under the previous legislation. The hon. Gentleman has not suggested ways in which it has hitherto caused difficulty. This compartment of law is fairly watertight—I do not accept what he says about its continuously evolving—

and I cannot identify a link with the question of negligently not disclosing such information. How does the material come into the person's possession? Does it come in a privileged way or not? The test of negligence is not applied to that question because the material is either privileged or it is not.

There was, perhaps, a tangential move by the Minister and others earlier. If a lawyer came across material that might be in a grey area of privilege, surely he would take that to his professional conduct body anonymously without disclosing the client's identity. He could set out a theoretical proposition and satisfy himself one way or the other.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Lady may have misunderstood me—that is probably my fault. A professional legal adviser faces a potential double problem. The first question that he must ask himself is, ''Do I know or suspect that money laundering is taking place from the specific information that I have been given?'' If he considers, knows or suspects that money laundering is occurring and that he is being used for the purpose of furthering criminal conduct, no issue of privilege arises, and he tells NCIS.

The second problem arises if the adviser does not know or suspect, but subsequent examination with the benefit of hindsight suggests that he should have had reasonable grounds to know or suspect. That subject troubled the hon. Lady and me, and it was the subject of an extensive debate. In such a case, the adviser may be sent to prison and criminalised. The question of privilege arises when considering that case. It is possible that the adviser considers that the information that came to him was privileged, and not to do with money laundering. It could be held subsequently that the information was not privileged and that the adviser should have had reasonable grounds for knowing or suspecting.

I stand by the fact that a professional legal adviser faces a potential double problem. We will leave one issue aside because the Committee appears to have reached a decision on keeping the negligence offence that a person ought to have known or suspected. However, it would be sensible and desirable not to criminalise and prosecute the adviser if it could be shown that he believed that information came to him in privileged circumstances, even though a subsequent examination, with the benefit of hindsight, showed that the information was not subject to legal professional privilege.

Stephen Hesford (Labour, Wirral West)

Would that not give a criminally minded professional legal adviser a complete get-out for any time that he acted criminally? He could claim subsequently, ''I thought I was covered, although it was patently obvious that I wasn't, but I didn't realise.''

Dominic Grieve (Conservative, Beaconsfield)

I do not think so. As we discussed on Tuesday, a court or jury is able to find that a person knew something, although he denies that he did. An examination of surrounding circumstances ought to make it perfectly possible for a court that is faced with a solicitor who says, ''Oh well, I accept, now I look at

it, that the information was not privileged, but at the time I considered that it was,'' to decide whether that was the case after examining the surrounding circumstances. If the court decided that it would be impossible to reach the solicitor's conclusion, it would be sure that he knew that the information was not privileged, and the solicitor would be convicted. Courts have to do that all the time when considering offences. I accept that it might make the hurdle of conviction more difficult, but I do not believe that it makes it impossible.

Vera Baird (Labour, Redcar)

Is the hon. Gentleman suggesting that the clause creates a separate offence: that of negligently thinking that something is privileged when it is not? It does not do that at all. Is not he mixing up two bits of the clause?

Dominic Grieve (Conservative, Beaconsfield)

I am always prepared to listen carefully to what the hon. Lady says, but I do not think that I am mixing them up. I am trying to follow her argument. I accept that, as matters stand, a professional legal adviser does not commit an offence if the

''Information or other matter comes to a professional legal adviser in privileged circumstances''.

If a court were to conclude that the information did not come to him in privileged circumstances, and if he does not communicate it, he lays himself open to prosecution and conviction, even if he could show the court that he did not disclose it because he genuinely believed that he had received it in privileged circumstances. Such a person could be negligent or make a mistake and still not be able to avail himself of the Bill's protection.

Vera Baird (Labour, Redcar)

Does that go beyond the position for the generality of cases? Perhaps the hon. Gentleman countenances circumstances in which the information is not privileged. I cannot think how a solicitor could mistakenly think that information was privileged unless the information fell under the provisions of subsection (9)—that is, it was always intended to further a criminal purpose. I cannot countenance a case in which a solicitor would be mixed up about what was privileged.

The basis on which information is privileged is fairly clear—let us not get into the argument about whether the law is still evolving—so it is hard to imagine a solicitor being muddled about it. It might transpire that, unknown to the solicitor, information was given to him to further a criminal purpose and he was used, although he did not appreciate it, as a pawn in a money launderer's hands. Is that any different from the generality of ways in which a solicitor can be used for all sorts of criminal purposes without realising it? The issue will be whether the police accept that he did not realise. I am not sure that the disclosure element makes the position any different from the usual one. That is why I think that the hon. Gentleman is barking up the wrong tree.

Howard Stoate (Labour, Dartford)

Not for the first time.

Dominic Grieve (Conservative, Beaconsfield)

I heard that, and I am the first to accept that in the course of the Committee I may have barked up the wrong tree on many occasions.

I am not wholly persuaded by the hon. Lady's argument, because the provision is linked to an offence that, as we discussed on Tuesday, can be committed negligently in any event. Solicitors who carry cases are not under the obligation to run off to NCIS to declare what their clients have told them unless they know or suspect or have reasonable grounds for knowing or suspecting that another person is laundering money. If they have had the wool pulled over their eyes and are exploited by a client, as she suggests, they lose the protection of legal professional privilege and can be convicted for negligently not realising that they had reasonable grounds for knowing or suspecting.

Ian Lucas (Labour, Wrexham)

If someone does not realise that they know or suspect that a criminal offence has been committed by the person giving instructions, they do not lose the protection of legal professional privilege. It is still there. That is correct, is it not?

Dominic Grieve (Conservative, Beaconsfield)

I apologise to the hon. Gentleman, but I am not sure that I follow his argument. If the professional adviser is given information and something alerts him about it, he would say, ''Goodness, that's information that makes me know or suspect that that person might have committed a criminal offence.'' However, he would then consider that the circumstances in which the information was divulged to him were such that it was covered by legal professional privilege. Although the professional may take other steps such as telling the person to go elsewhere or saying that he will not continue to act for him, he cannot and must not declare the information to NCIS. A professional legal adviser must follow such a train of thought.

The alternative approach is that the adviser never cottons on to the fact that the information is such that he should know or suspect that money laundering is taking place. However, a court could show that he ought to have realised that, even though he honestly did not. At that stage, the professional might say, ''Well, in those circumstances, all I can say is that I also believed that I was covered by legal professional privilege.'' That is a fallback defence. I would not have pursued the amendment if we had not introduced the offence of negligence that could fall on a legal practitioner by virtue of the decision taken by the Committee on Tuesday.

I apologise for my lack of clarity. Perhaps too many weeks in Committee have fuddled my mind. I must accept that I would not have got into the muddle this morning if I had bothered to read the note in front of me, which said, ''Read out subsection (8)''. However, what I have described is a fallback position to protect a legal professional adviser in such circumstances. If it had not been for what happened on Tuesday, I would not be asking the Committee to agree to the amendment. It would provide a measure of protection for the legal professional adviser in those limited circumstances. I am worried about the burden that will be placed on him, including criminalising him. Surely, if he were able to pass those two tests, a reasonable person would say that he was blameless.

Paul Stinchcombe (Labour, Wellingborough)

I do not know whether I understand the hon. Gentleman's point. If the lawyer does not know or suspect that the information is of a particular quality, it will never cross his mind to question whether he received it in privileged circumstances, because he had never contemplated disclosing it. I do not think that ''believes'' would add anything to the clause.

Dominic Grieve (Conservative, Beaconsfield)

I understand exactly what the hon. Gentleman has said, but I disagree with him. We have spent much time compartmentalising those two matters, but in reality, when a legal professional adviser is dealing with a client, I wonder whether that compartmentalisation will take place with the clarity that the hon. Gentleman would wish. Circumstances are likely to arise in which the mere fact that the legal adviser believes that legal professional privilege applies would make it far less likely that he would then consider the earlier issue of, ''Do I know or suspect something or could someone subsequently, with the benefit of hindsight, say that I might have had reasonable grounds for knowing or suspecting?''

Paul Stinchcombe (Labour, Wellingborough)

The question whether such information came to that professional in privileged circumstances will be addressed only if he is already suspicious that it is of a quality that should be disclosed. Otherwise, he would not be taking such action. If he already knows or suspects, that means that the offence cannot be committed through negligence on the objective standard, so the hon. Gentleman's circuitous argument must be wrong.

Dominic Grieve (Conservative, Beaconsfield)

I disagree with the hon. Gentleman on that, because of subsection (9). One of the difficult tests to which a professional legal adviser may be subject is to ask himself what the information was given to him for. Was it given for the furthering of a criminal purpose, which would vitiate the defence of privilege? Alternatively, was it given as part of a package of information in relation to seeking legal advice, in respect of which he has an absolute duty to protect the client?

I accept that the hon. Gentleman has a good point, but one of the problems is breaking down into narrow compartments a process that is by no means clear-cut, in terms of the way in which information is communicated to the professional legal adviser, what he has to do with it, or the circumstances in which he receives it. Other questions are whether it is being given to him for the purpose of general legal advice, or whether it might have been given to him in circumstances such that he might subsequently ask himself whether information was being sought from him that he should not have given. Some of those circumstances might be difficult, which is why the Committee should consider the extra layer of the defence of reasonably believing—or believing—that the information was privileged.

I appreciate the hon. Gentleman's point. In a perfect world, in which everyone carries out a perfect analysis, such problems might not occur. However, when one considers the diversity of circumstances in which professional legal advisers are called on to provide advice—which often may appear to be a million miles from money laundering—I wonder

whether there is a not a risk that we are exposing them unwittingly, when they are morally blameless, to serious penalties and criticism when they have acted with integrity throughout. The amendment has been tabled because the Committee did not remove the negligence offence on Tuesday.

I stand by the view that this is a complicated question. The surrounding circumstances are likely to be such that it would be easy for a professional legal adviser to be lulled into a sense that the matter that he was considering did not fall anywhere near money laundering. With hindsight, however, it might turn out that it did.

Stephen Hesford (Labour, Wirral West)

The hon. Gentleman may recall from an earlier debate that the Minister made the point, with which the Committee agreed, that part of the reason for this part of the Bill was to force the regulated sector to get its act together in terms of regulation. If that is right, and a laudable thing to do, it would be incumbent on a firm employing a legal adviser, knowing that the legislation had been passed, to ensure, in every case, that it knew the circumstances under which professional legal privilege was or was not being operated. It would not just be a question of sitting in a turret somewhere with a half-baked notion that one had legal professional privilege—one would be under a duty to inform oneself properly.

Dominic Grieve (Conservative, Beaconsfield)

I take the hon. Gentleman's point, and I do not disagree with him. I hope that those who provide legal advice will, after the passing of this legislation—as I hope they were doing before—try to consider, on every occasion, whether they have duties. However, one must distinguish between the professional legal adviser and other people caught under the clause. It is true that all sorts of people have a duty of confidence to clients, but the professional legal adviser has a duty, enshrined in legal professional privilege, that extends further than that. That became clear this morning when the Minister effectively said, ''If in doubt, tell NCIS.'' That might be a good rule for an accountant, but it cannot be followed by a professional legal adviser, because if he were to tell NCIS something that was covered by privilege, he would be guilty of serious professional misconduct. That is why the extra protection would be helpful to him.

Vera Baird (Labour, Redcar)

Does the hon. Gentleman agree that the protection for the lawyer that is contained in clause 327 does not cover the mischief that might be caused? A client's information might be wrongly given out. In that case, the innocent client has been done an injustice that cannot be rectified. Although the lawyer is protected under clause 327, the injustice cannot be undone.

Dominic Grieve (Conservative, Beaconsfield)

I agree with that.

I do not wish to trot out platitudes, but the legal professional privilege exists for what have for centuries—which is a very long time—been considered sound public policy reasons, so it is particularly important that those who operate under

its constraints should have adequate protection from legislation that might criminalise them when they are morally blameless. That is why I commend the amendment to the Committee.

If, at a later stage of our scrutiny of the Bill, the Minister were to table an amendment that went some way towards meeting my concerns, I would be the happiest person in the world. However, at present, I wish to press my amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 14.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 489, in page 187, line 41, at end insert—

'(c) he is a tax adviser and the information or other matter came to him in relevant circumstances.'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take the following amendments: No. 496, in page 188, line 18, at end insert—

'(8A) Information or other matter comes to a tax adviser in relevant circumstances if it is communicated or given to him—

(a) by a person to whom he is giving, or may be asked to give, advice on any matter relating to tax, or

(b) by a representative of such a person.'.

No. 497, in page 188, line 19, leave out 'subsection (8) does' and insert 'subsections (8) and (8A) do'.

No. 498, in clause 325, page 188, line 39, after 'adviser', insert 'or tax adviser'.

No. 499, in page 188, line 45, at end insert—

'(c) to (or to a representative of) a client of the tax adviser in connection with the giving by the adviser of tax advice to the client.'.

No. 511, in Clause 329, page 191, line 33, at end add—

'(12) ''Tax adviser'' means a professional who mainly and independently gives tax advice.

(13) ''Tax advice'' means the preparation and submission of tax returns, advice on tax planning, representation and defence of taxpayers before authorities and courts and the provision of overall advice in the area of taxation and complementary accounting and legal services.

(14) ''Tax'' means any form of taxation imposed by the laws of the United Kingdom or of another territory outside the United Kingdom.'.

Dominic Grieve (Conservative, Beaconsfield)

This is a probing amendment. I will not seek to press it to a Division, but I wish to hear the Minister's views about a problem that was raised by those who provide tax advice.

The amendments would extend professional legal privilege to a category of individual that has not hitherto enjoyed it. As a lawyer, it is perhaps my duty to try to do that—and it certainly appears to be my duty to ask the Committee to consider the matter.

The issue is simple. Members of the Chartered Institute of Taxation have serious concerns about aspects of the legislation. In particular, they are concerned that it will make it difficult for them to provide tax advice to clients, because it will be incumbent on them to notify NCIS if any information is communicated to them that might give rise to a suspicion that money laundering has taken place.

In a sense, that ties in with our earlier amendment about Hansard agreements. In the process of obtaining the Hansard agreement, the tax adviser may receive information that may lead him to think that NSIS should be notified. That is the same issue, but approached from a different angle. Let us suppose that a person is a tax adviser and the information or other matter comes to him in relevant circumstances and is communicated to him to obtain advice on a tax-related matter. Under the amendment, he would not commit an offence if he had not made a disclosure, albeit that the purpose of a disclosure would be such that he could notify the Inland Revenue to clear up his client's tax problems. I should be interested to hear the Minister's views so that the Committee will know the Government's attitude to the representations that they have received and why they consider that our proposals are not acceptable.

Bob Ainsworth (Labour, Coventry North East)

The Bill is drafted in line with the precedent set under existing legislation. There is a legal privilege exemption under the clause whereby a professional legal adviser is not required to report his knowledge or suspicions that another person is engaged in money laundering if the information on which such knowledge or suspicion is based comes to him in privileged circumstances. That is set out more extensively under subsection (8).

The amendments are not desirable. Legal privilege is a well-established concept, the purpose of which is to protect the integrity of the legal system and the rights of individuals involved in legal proceedings. Legal privilege is therefore a special case and we are not persuaded of the case for an extension favoured by the hon. Gentleman. The usual functions of tax advisers will not fall within the regulated sector until after the implementation of the second European Community money laundering directive into United Kingdom law. Such advisers are not therefore currently subject to the money laundering regime under the Bill, except to the extent that they engage in regulated activities.

However, when the new directive is adopted, we intend that an order will be made under part 3 of schedule 6 to extend the definition of regulated activities under part 1 of the schedule, so that accountants and tax advisers will be caught by the clause. We expect the directive to be adopted early this year; it must then be implemented under United Kingdom law within 18 months. We are aware that the current draft of the directive contains a discretionary

provision that allows member states to extend legal privilege to accountants and tax advisers, giving advice to clients on their legal position under tax law. As the recital to the directive makes clear, that exemption is available only for directly comparable services. It was introduced because, in some European Union countries, accountants can represent their clients in a court of law and it was felt that, in those circumstances, they should be placed on the same basis and on the same footing as the legal profession.

We have considered the issue, but our thinking is not to take advantage of the discretionary provision. It would weaken the current requirements on UK professionals. We must bear in mind that tax advisers are among the front-line detectors of money laundering, and we do not want to do anything that would impact adversely on their responsibilities for that.

That is the Government's position. As the hon. Gentleman said, we have received representations and given thought to the provision. We do not think that the situation applies to our legal system in the way that it does in some European Union countries. We maintain our position, and I ask him to reconsider the amendment.

Dominic Grieve (Conservative, Beaconsfield)

I thank the Minister for his comments.

There is the slightest irony that at the time when successive Governments have, perhaps rightly, eroded the legal profession's monopoly on representation—we do not know quite where that will end up—we should keep legal professional privilege tied so closely to solicitors and barristers. I would not be doing my job properly if I did not indicate that I foresee circumstances in which one might end up with representation occurring before tribunals, which are not conducted by solicitors or barristers. That might happen sooner rather than later, and my profession might not welcome it. However, the Government should keep the matter under review.

I was interested to hear that accountants may represent their clients before certain courts in other European countries. I am not sure who is entitled to appear in a representative capacity before Inland Revenue commissioners. The Minister may know the answer, but I do not. I know that accountants may prepare cases for presentation before the Inland Revenue commissioners, but do they have any right to appear in front of them? Can the Minister answer that before the conclusion of our proceedings?

Norman Baker (Liberal Democrat, Lewes)

I am following the hon. Gentleman's comments with interest. Does he agree that the legislation would be best framed to ensure that it deals with the functions and individual discharges that are covered on any particular occasion, rather than the normal description that is applied to an individual?

Dominic Grieve (Conservative, Beaconsfield)

The hon. Gentleman makes a good point. Of course, over the past 15 years, the barriers between solicitors and barristers have broken down considerably. On the whole, that commended itself to Labour Members and to some Conservative Members, if not to members of my own profession.

It has become apparent that is possible to see a solicitor or accountant for legal advice on tax matters. Indeed, some might argue that one would be better off getting legal advice on specialist tax matters directly from an accountant. There are issues of direct professional access to the tax Bar, which need not be done through solicitors.

However, there is little doubt that a consequence of the Bill is that any person who wants legal advice on a tax matter will be well advised to see solicitors and barristers, rather than discussing the matter with their accountant. That is especially the case if the person thinks that they might fall foul of the law if they did not follow the advice. Unfortunately, that situation is not unknown.

The Minister explained the Government's view. Oddly enough, that might have the unintended consequence of helping people in my profession, especially specialist tax barristers—there are not many of them—and solicitors at the expense of accountants and tax advisers in this discrete area. That is contrary to some of the long-term trends that have developed in this country, which, apparently, have been welcomed.

In light of that, I wonder whether the Minister will think about the issue. As I have said, this is a probing amendment. I am offering, on behalf of my profession, to give something away—that is something that we are usually accused of being unwilling to do. I believe that the issue should be considered.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Can we clarify whether the hon. Gentleman is speaking on behalf of his profession or the Opposition? Was he elected to Parliament on behalf of his profession or his party?

Bill O'Brien (Labour, Normanton)

Order. We do not want to enter into that subject.

Dominic Grieve (Conservative, Beaconsfield)

I take the hon. Gentleman's question as an indication of his complete failure to understand what I was saying. I serve on the Committee to argue points on behalf of the public and my constituents and according to my conscience. I also bring my experiences to bear, just as he and all Members of the House do.

I am certainly not arguing on behalf of my profession. For all I know, the Bar Council might be horrified to hear my argument. I do not know what the Law Society would think about it. The issue was raised by the Chartered Institute of Taxation, who are linked to neither the Law Society nor the Criminal Bar Association of England and Wales—or the Scottish branches of the profession, for that matter. It is not an argument that favours the legal profession commercially. If the amendment were accepted, one might see a further removal of specialist tax work away from the legal profession towards specialist accountants.

The hon. Member for Glasgow, Pollok (Mr. Davidson) has got the wrong end of the stick. I am making the argument because I could see that the

Chartered Institute of Taxation has a point. It will be more difficult for it to provide specialist tax advice under the new regime, because although it does an effectively identical job to that done by a solicitor, who provides the same advice, a solicitor will be subject to legal professional privilege protection, whereas the Chartered Institution of Taxation will not enjoy it. For that reason, the Minister may wish to consider whether that aspect should be reviewed. I shall not take up any more of the Committee's time. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 520, in page 187, line 41, at end insert—

'(c) the amount of money involved does not exceed £1,000'.—[Mr. Grieve.]

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 13.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 490, in page 187, line 42, leave out subsection (6).

I need not trouble the Committee with the amendment, but the Minister may wish to amplify some of his previous remarks. The amendment was designed to be probing. It was intended to elicit details from the Minister about the guidance that might be provided by the supervisory authority for the benefit of practitioners. I am the first to accept that, during a debate on Tuesday, the Minister provided relevant details. However, I would be much happier if the Committee could have as much detail as possible. If the Minister has additional information, which will help the Committee to understand how the guidance mechanism will work, I should be grateful to hear it. However, I do not want to trouble the Committee further. The amendment is probing, and, subject to hearing the Minister's comments, I shall withdraw it. It was never my purpose or intention to lose the advantage that comes from having guidance published.

Bob Ainsworth (Labour, Coventry North East)

That was a helpful contribution. I shall therefore try to satisfy the hon. Gentleman.

As I explained, since 1990, guidance notes on money laundering have been issued to the regulated institutions by the industry's joint money laundering steering group, which includes representatives from all the leading trade associations of the UK financial industry. Clause 324 recognises the potential value of that guidance. The guidance that the court will consider must be issued by the supervisory authority

or another appropriate body, approved by the Treasury and published in the appropriate manner, so that it can be brought to the attention of the people affected by it. A list of the supervisory authorities will be found in part 2 of schedule 6. The appropriate body is defined in subsection (11). The Treasury will approve the guidance in its capacity as the Government Department with overall lead responsibility for money laundering policy in the regulated sector. It is important to note that the guidance provided for in subsection (6) is intended to be a comprehensive document, which should explain the new responsibilities in full.

All practitioners should be familiar with the guidance notes, which are expected to include a definition of the term ''reasonable grounds'' and examples of situations in which it would be appropriate to report. The existence of guidance notes will provide additional security for those working in the regulated sector. It would be reasonable to expect that if employees had followed the guidance, and did not know or suspect that money laundering was taking place, they would not be convicted of a failure to report such an offence. The guidance will be approved formally by Ministers so that it has the necessary status for use in court proceedings.

However, industry input will be vital in ensuring that practical concerns are effectively met. The notes will therefore be written, as before, by the body set up by the industry. The guidance will then be submitted to the new money laundering advisory committee, which, it is anticipated, will meet for the first time in April this year. That committee will offer recommendations to Ministers before final approval. I hope that that amplifies my earlier comments.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for his comments, which are helpful. I note that he said that if somebody had followed the guidance, and did not know or suspect, he would not be prosecuted. That may provide a measure of reassurance, although, as the Minister will realise, it does not persuade me on the main issue in relation to negligence and clause 324. However, I am grateful to the Minister for having placed his comments on the record, which amplify slightly some of the remarks that he made on Tuesday. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 491, in page 188, line 6, leave out 'employer' and insert—

'place of work'.

Bill O'Brien (Labour, Normanton)

With this it will be convenient to take the following: Amendment No. 100, in page 188, line 6, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation.'.

Amendment No. 492, in page 188, line 8, leave out 'employment' and insert—

'work'.

Amendment No. 493, in page 188, line 8, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 494, in page 188, line 9, leave out 'employer' and insert—

'place of work'.

Amendment No. 495, in page 188, line 9, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 501, in clause 327, page 189, line 29, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 502, in page 189, line 31, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 503, in page 189, line 32, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 506, in clause 328, page 190, line 15, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Amendment No. 507, in page 190, line 17, after 'employment', insert—

'or, as the case may be, his activity with the firm, company or voluntary organisation'.

Amendment No. 508, in page 190, line 18, after 'employer', insert—

'or, as the case may be, his firm, company or voluntary organisation'.

Government amendments Nos. 512 to 514.

Dominic Grieve (Conservative, Beaconsfield)

This group of amendments deals with an issue not of principle, but of good practice. I hope therefore that the Opposition amendments will commend themselves to the Government. Under the clause, a person is protected if he makes a disclosure to a nominated officer as soon as possible after the information comes to him. It states:

''A disclosure to a nominated officer is a disclosure which—

(a) is made to a person nominated by the alleged offender's employer to receive disclosures under this section, and

(b) is made in the course of the alleged offender's employment and in accordance with the procedure established by the employer for the purpose.''

Both those paragraphs presuppose that a person is an employee within an organisation. However, there are several types of organisation that may have a nominated officer, without there necessarily being a relationship of employer to employee within that organisation. That is why I have tabled the amendments.

Amendments Nos. 491 and 100 are the most important, because the others are consequential. Amendment No. 491 would leave out the word ''employer'' and replace it with the phrase ''place of work''. Under amendment No. 100, after ''employer'' would be inserted:

''or, as the case may be, his firm, company or voluntary organisation.''

Paul Stinchcombe (Labour, Wellingborough)

Is the hon. Gentleman's concern met by Government amendment No. 514?

Dominic Grieve (Conservative, Beaconsfield)

Yes, that would go some way to meeting my worry—although I would have been interested to see the Government's amendment earlier. My amendment was tabled before the Minister's amendment, so I do not see why I should not move mine and speak to it. There may be common ground between us. We must deal with voluntary organisations and partnerships, because they have not been adequately covered. Mindful of the fact that, as I said, my amendment was tabled before his, I await the Minister's response.

Mark Field (Conservative, Cities of London and Westminster)

I suspect that there will be a blossoming of consensus on this matter—if not on my hon. Friend's amendment, perhaps on the Government's amendment.

One fact that we must bear firmly in mind, particularly with the fast growing array of independent financial advisors, is that many of them are either self-employed or employed in a network consultancy arrangement. Therefore, it is important to find the right form of words with regard to nominated officers. I suspect that when the Bill is enacted, and the full implications of the money-laundering provisions are made clear to the financial services profession, some sort of network will have to be put in place to accommodate new and complex forms of employment.

We must be more imaginative, so that we can address more modern work environments than those of traditionally organised firms and partnerships. The world of employment is changing fast, and it is clear that networks will be put in place to ensure that nominated officers can be appointed, even if they are not employees or employers—or have no direct working relationship at all with individuals who might fall foul of the provisions.

Bob Ainsworth (Labour, Coventry North East)

In principle, I agree that the legislation could be improved by allowing for internal reporting to a nominated officer by employers as well as employees, and by providing for immunity from any legal or other proceedings relating to disclosure where a report is made voluntarily. We have met several organisations that have expressed concerns about Part 7, and we have also received representations. I have already indicated that I would table amendments to deal with those concerns—and in response to the little comment by the hon. Member for Beaconsfield, may I add that although he may have tabled his amendment first, we may have thought of ours first?

The Opposition's amendments are commendable, but they fail to achieve what the industry is looking for. With regard to reports to a nominated officer, it appears that the amendments that relate to a firm, company or voluntary organisation might exclude some of the sort of bodies that we want to include, and

on the immunity point, further adjustments would be necessary to clause 327 to cast the immunity wider than the regulated sector. Therefore, the Government have tabled three amendments that offer a more effective means of answering the industry's concerns.

Amendments Nos. 512 and 513 provide protection from charges of breach of confidence if a person outside the regulated sector reports suspicions of money laundering. Amendment No. 514 addresses internal reporting, and will allow employers as well as employees to report to a nominated officer within a firm, company or voluntary organisation.

Amendments Nos. 512 and 513 remove the references to the regulated sector in clause 327, so that the protected disclosure provision would no longer apply only to those conducting a business in the regulated sector. Instead, the amendments extend it to cover information that came to someone in the course of their

''trade, profession, business or employment.''

That is intended to cover those who exercise their profession in a voluntary capacity, such as solicitors working in law centres, or accountants giving free advice for organisations such as TaxAid. However, it would not catch professionals who were doing voluntary work unrelated to their profession.

Amendment No. 514, which inserts new subsection (10A) into clause 329, has the effect of applying the protected disclosures provision to people who are not technically employees, but who exercise functions for an organisation in which there is some sort of nominated officer scheme in place. That means that directors, volunteers, partners in traditional firms and members of limited liability partnerships will all be able to make a report to a nominated officer, if their organisation has one.

Because amendment No. 514 applies to the whole of part 7, and clarifies what is meant by references to employers and employment, non-employees can report to a nominated officer in all three of the situations envisaged under part 7 in order to avoid committing one of the principal money laundering offences, in order to avoid committing the failure to disclose offence and voluntarily with the protection offered under the clause.

When such a report is made to a nominated officer, the onus will fall on him to make the report to a constable, if he thinks it appropriate. Therefore, if the transaction is in the regulated sector, the liability for the failure to report an offence under the clause will be transferred to the nominated officer. If the transaction is outside the regulated sector and a report is made voluntarily or in order to avoid committing one of the principal money-laundering offences, under clause 322, the nominated officer could be guilty of becoming concerned in an arrangement that facilitates money laundering if he does not take appropriate action.

We consider that we have dealt in a wider way with part 7 and with the worries that have been expressed by the industry—the same worries that the hon. Member for Beaconsfield (Mr. Grieve) has mentioned. I commend the Government's

amendments to the Committee, and ask the hon. Gentleman to reconsider his amendments.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for what he has said. He has made this clear, but will he confirm that the change from the regulated sector to any trade or profession does not place a greater burden in terms of failure to disclose on individuals outside the regulated sector? I see his officials nodding. He will be aware that, under the Drug Trafficking Offences Act 1986, the duty to disclose extends precisely to that category of people who can make a protected disclosure.

Bob Ainsworth (Labour, Coventry North East)

I suppose that, for the sake of the Hansard report, I had better confirm those nods.

Dominic Grieve (Conservative, Beaconsfield)

In that case, the Minister will not be surprised to know that we do not intend to oppose the Government amendments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 324 ordered to stand part of the Bill.

Schedule 6 - Regulated sector and

Bob Ainsworth (Labour, Coventry North East)

I beg to move amendment No. 515, in page 265, line 3, leave out from beginning to end of line 43 on page 266 and insert—

'Part 1

Regulated sector

Business in the regulated sector

1 (1) A business is in the regulated sector to the extent that it engages in any of the following activities—

(a) accepting deposits by a person with permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to accept deposits (including, in the case of a building society, the raising of money from members of the society by the issue of shares);

(b) the business of the National Savings Bank;

(c) business carried on by a credit union;

(d) any home-regulated activity carried on by a European institution in respect of which the establishment conditions in paragraph 13 of Schedule 3 to the Financial Services and Markets Act 2000 (c. 8), or the service conditions in paragraph 14 of that Schedule, are satisfied;

(e) any activity carried on for the purpose of raising money authorised to be raised under the National Loans Act 1968 (c.13) under the auspices of the Director of Savings;

(f) the activity of operating a bureau de change, transmitting money (or any representation of monetary value) by any means or cashing cheques which are made payable to customers;

(g) any activity falling within sub-paragraph (2);

(h) any of the activities in points 1 to 12 or 14 of Annex 1 to the Banking Consolidation Directive, ignoring an activity described in any of sub-paragraphs (a) to (g) above;

(i) business which consists of effecting or carrying out contracts of long term insurance by a person who has received official authorisation pursuant to Article 6 or 27 of the First Life Directive.

(2) An activity falls within this sub-paragraph if it constitutes any of the following kinds of regulated activity in the United Kingdom—

(a) dealing in investments as principal or as agent;

(b) arranging deals in investments;

(c) managing investments;

(d) safeguarding and administering investments;

(e) sending dematerialised instructions;

(f) establishing (and taking other steps in relation to) collective investment schemes;

(g) advising on investments.

(3) Paragraphs (a) and (i) of sub-paragraph (1) and sub-paragraph (2) must be read with section 22 of the Financial Services and Markets Act 2000 (c. 8), any relevant order under that section and Schedule 2 to that Act.

2 (1) This paragraph has effect for the purposes of paragraph 1

(2) ''Building society'' has the meaning given by the Building Societies Act 1986.

(3) ''Credit union'' has the meaning given by the Credit Unions Act 1979 (c. 34) or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)).

(4) ''European institution'' means an EEA firm of the kind mentioned in paragraph 5(b) or (c) of Schedule 3 to the Financial Services and Markets Act 2000 (c. 8) which qualifies for authorisation for the purposes of that Act under paragraph 12 of that Schedule.

(5) ''Home-regulated activity'' in relation to a European institution, means an activity—

(a) which is specified in Annex 1 to the Banking Consolidation Directive and in respect of which a supervisory authority in the home State of the institution has regulatory functions, and

(b) if the institution is an EEA firm of the kind mentioned in paragraph 5(c) of Schedule 3 to the Financial Services and Markets Act 2000 (c. 8), which the institution carries on in its home State.

(6) ''Home State'', in relation to a person incorporated in or formed under the law of another member State, means that State.

(7) The Banking Consolidation Directive is the Directive of the European Parliament and Council relating to the taking up and pursuit of the business of credit institutions (No. 2000/12 EC).

(8) The First Life Directive is the First Council Directive on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance (No. 79/267/EEC).

Excluded activities

3 A business is not in the regulated sector to the extent that it engages in any of the following activities—

(a) the issue of withdrawable share capital within the limit set by section 6 of the Industrial and Provident Societies Act 1965 by a society registered under that Act;

(b) the acceptance of deposits from the public within the limit set by section 7(3) of that Act by such a society;

(c) the issue of withdrawable share capital within the limit set by section 6 of the Industrial and Provident Societies Act (Northern Ireland) 1969 by a society registered under that Act;

(d) the acceptance of deposits from the public within the limit set by section 7(3) of that Act by such a society;

(e) activities carried on by the Bank of England;

(f) any activity in respect of which an exemption order under section 38 of the Financial Services and Markets Act 2000 (c. 8) has effect if it is carried on by a person who is for the time being specified in the order or falls within a class of persons so specified.

Part 2

Supervisory authorities

4 (1) Each of the following is a supervisory authority—

(a) the Bank of England;

(b) the Financial Services Authority;

(c) the Council of Lloyd's;

(d) the Director General of Fair Trading;

(e) a body which is a designated professional body for the purposes of Part 20 of the Financial Services and Markets Act 2000 (c. 8).

(2) The Secretary of State is also a supervisory authority in the exercise, in relation to a person carrying on a business in the regulated sector, of his functions under the enactments relating to companies or insolvency or under the Financial Services and Markets Act 2000 (c. 8).

(3) The Treasury are also a supervisory authority in the exercise, in relation to a person carrying on a business in the regulated sector, of their functions under the enactments relating to companies or insolvency or under the Financial Services and Markets Act 2000 (c. 8).'.

The amendment would bring schedule 6 into line with the amendments that have been made to the Money Laundering Regulations 1993, as a result of the coming into force of the Financial Services and Markets Act 2000. The relevant amendments to the regulations were made formally on 9 November 2001 and are contained in the Money Laundering Regulations 2001.

Our policy is that the definition of a

''business in the regulated sector''

under the Bill should be the same as that under the money laundering regulations, so that the same group of people will have obligations relating to money laundering imposed on them. Members of the Committee will have noticed that the text that the amendment would substitute is the same as parts 1 and 2 of the schedule 3A that was inserted into the Terrorism Act 2000 by paragraph 5(6) of schedule 2 to the Anti-terrorism, Crime and Security Act 2001.

David Wilshire (Conservative, Spelthorne)

May I briefly seek your guidance, Mr. O'Brien? I wish to raise three matters, all of which I think may sensibly be debated in a stand part debate, but one of which relates to the amendment. It would be easier for me to raise all my points in a stand part debate, even though one refers to the amendment.

Bill O'Brien (Labour, Normanton)

The amendment as outlined covers nearly everything in the schedule. Does the hon. Gentleman want to raise anything arising from the amendment?

David Wilshire (Conservative, Spelthorne)

If you want me to take them separately, I shall be brief, Mr. O'Brien.

New paragraph 1(1)(h), which the amendment would insert, does not change the wording that caused me concern in the original draft. As I said, this could be a matter to be debated on stand part. New paragraph 1(1)(h) contains the words:

''ignoring an activity described in any of sub-paragraphs (a) to (g)''.

It is worth asking the Minister why the Government should want to ignore something. That wording makes me a bit nervous. I have no disagreement with the attempt to set out what the regulated sector is and listing its activities; that is eminently sensible. However, we cannot allow certain activities to be ignored without explanation.

Bob Ainsworth (Labour, Coventry North East)

We are not ignoring those activities. We are trying to make certain that they are not duplicated. Those that are picked up in other parts of

the schedule are not double-counted. That is the only effect of new paragraph 1(1)(h).

Amendment agreed to.

Question proposed, That this schedule, as amended, be the Sixth schedule to the Bill.

David Wilshire (Conservative, Spelthorne)

With hindsight, the second of my queries could just as well have been raised in discussion on the amendment, but I shall raise it now as a substantive matter. Paragraph 3, headed ''Excluded activities'', contains sub-paragraph (e), which mentions

''activities carried on by the Bank of England''.

I am neither a lawyer nor a financial expert—

Bill O'Brien (Labour, Normanton)

Order. I must draw the hon. Gentleman's attention to the fact that we are now discussing an amendment that has been approved. I consider it out of order to start a discussion on it again.

David Wilshire (Conservative, Spelthorne)

I was simply seeking clarification of the schedule as it now stands. I hope that you will allow me to ask why the activities carried out by the Bank of England—

Bill O'Brien (Labour, Normanton)

Order. I advised the hon. Gentleman when we were discussing the amendment that it would be better to discuss the issues under the appropriate amendment. The question that he was going to put to the Minister would have opened up the debate again, and that is not in the best interests of the Committee.

David Wilshire (Conservative, Spelthorne)

I understand exactly what you say, Mr. O'Brien. Clearly, I must accept what you say. I simply register that it seems reasonable to me to have a stand part discussion. However, there will be other opportunities to raise that point, no doubt.

The last of my points, which is not covered by the Government amendment, relates to part 3 of the schedule, which we did not amend. It is entitled, ''Power to amend'', and it seems appropriate to consider it. It states:

''The Treasury may by order amend Part 1 or 2 of this Schedule.''

We should not let that pass without asking the Minister what the Government have in mind. Why does the Treasury need the power? We are discussing things of importance such as draconian penalties and the reservations that my hon. Friend the Member for Beaconsfield has been, rightly, considering for a long time. If they are so important, why should we allow the procedure to happen by order rather than by allowing the House to consider legislation to amend the schedule? Why does the Treasury need the power in this way? I am no expert on parliamentary procedure, but will the order be made under the affirmative or the negative procedure? We need that information.

Bob Ainsworth (Labour, Coventry North East)

Part 3 of schedule 6 contains the order-making power about which the hon. Gentleman is worried. The Treasury may use it to amend the definitions in parts 1 and 2. That could be used to keep the scope of the legislation in line with future extensions of regulations to other sectors that are not currently regulated. The provision will be used when

we get to grips with the second European money laundering directive—I mentioned this in the previous debate—which will extend the money laundering regime to accountants and tax advisers. We will need order-making powers to amend the regulations because other pieces of legislation may impact on the Bill. That is not unusual, and the hon. Gentleman knows that.

David Wilshire (Conservative, Spelthorne)

I would be grateful if the Minister would tell us whether the procedure would be affirmative or negative.

Bob Ainsworth (Labour, Coventry North East)

I apologise to the hon. Gentleman. I think that the negative procedure would be appropriate.

Schedule 6, as amended, agreed to.

Clauses 325 and 326 ordered to stand part of the Bill.

Clause 327 - Protected disclosures

Clause 328 - Authorised disclosures

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 522, in page 190, line 2, leave out from 'act' to end of line 4.

This is a probing amendment that is designed to allow us to discuss the mechanisms through which consent is provided to enable a transaction to proceed. I am the first to accept that it does not make a great deal of sense in its purest form. The deletion of that part of the line would not add anything to the Bill and would look odd in the absence of further amendments.

The Minister may recollect that when we first discussed money laundering and part 7 we talked about professionals' problems under the existing system, such as being told whether they may go ahead with a transaction. Let me give the Committee some illustrations. Before I do so, however, I shall emphasise to the Committee what the clause is about.

Clause 328 provides for a system of authorised disclosure. It therefore requires that the individual concerned should make the disclosure to a constable, Customs officer or nominated officer, that the disclosure should be made before the alleged offender does the prohibited act, and that thereafter the solicitor, banker or whoever it may be does the act with the consent of a constable, Customs officer or nominated officer, as the case may be. On paper, that looks straightforward. A solicitor who is faced with the prospect of carrying out a conveyancing operation for a client, when he has reason to suspect that the money being brought into the country might have a tainted origin, rings up NCIS and says, ''Mr. Bloggs has come in to see me. He wants to carry out a

conveyance for the purchase of a property for £2 million on Wednesday. I am tipping you off that I am concerned about the origin of these funds, which seem to come out of a Zurich bank account and to be vaguely connected with a Liechtenstein Anstalt. What do you want me to do about it?''

The anecdotal information that the Law Society and others have made available to me suggests that, when those requests are made to NCIS, they do not receive a speedy reply. Those who are involved in the transaction are therefore in a difficult situation. They do not know whether to proceed with the transaction. Moreover, because of the tipping off regulations, they cannot even tell the client why the transaction is being held up. One solicitor described to me an incident in his firm: after four days of delay, and a problem in the property chain, the client got so angry that he kicked down the office door and punched the solicitor in the face. That seems to put a burden on the solicitor that is over and above the call of duty or even that which the Bill should impose on him.

How will the system work in practice? I am worried that, as my hon. Friend the Member for Surrey Heath (Mr. Hawkins) has said on several occasions, it will lead to a huge increase in the amount of information given to NCIS. As a result, it will become even more difficult to obtain a clear answer from NCIS about whether one should proceed with a transaction.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

Given that the hon. Gentleman has just mentioned the hon. Member for Surrey Heath, will he clarify, first, where he is, secondly, when he is coming back, and thirdly, whether he will tell us, in great detail, what he had for lunch, whom it was with, what was said—

Bill O'Brien (Labour, Normanton)

Order. The hon. Gentleman may wish to answer that question, but the Committee should move on and stick to the agenda.

Dominic Grieve (Conservative, Beaconsfield)

I shall stick to the agenda, which I was doing before the hon. Gentleman's attempt to divert me into an interesting sideline, which I would have been happy to pursue, although I cannot do so.

Ian Davidson (Labour/Co-operative, Glasgow Pollok)

You mentioned him.

Dominic Grieve (Conservative, Beaconsfield)

I mentioned my hon. Friend because he had previously raised the issue with the Minister. This is the correct opportunity for the Committee to discuss it.

The Minister will also recollect that my hon. Friend raised the issue of the level of disclosures. Further information has been provided, but it was predicted in the NCIS lecture that, on current trends, disclosures in the coming year would rise from 18,000—a figure mentioned by the Minister—to well in excess of 30,000. It seems likely that that may be a result of the events of 11 September. Nevertheless, there has been an exponential rise in the number of people contacting NCIS about difficult transactions.

I hope that the Minister will accept that that is a serious issue for those who are trying to discharge professional obligations. They are happy to inform NCIS if they are troubled by a transaction, but they need a rapid response as to what they should do next. The criminalisation provisions of the tipping off clause

mean that they cannot tell their client what is going on, but they are prevented from carrying out a transaction that they are contractually bound to effect as quickly and correctly as possible. That is an onerous burden. I am not satisfied, on the basis of information given to me by those in the legal profession, including solicitors and the Law Society, that the system is operating well at the moment, and I am worried that it will not operate properly in view of the far greater number of disclosures that are likely to arise.

The amendment is probing. I want to have a discussion and debate on an important issue. I do not intend to delete the clause, and I hope that I made that clear through the rather odd way in which I drafted the amendment in the first place.

Bob Ainsworth (Labour, Coventry North East)

In answer to my hon. Friend the Member for Glasgow, Pollok, there is no need for the hon. Member for Beaconsfield to explain where his hon. Friend is. He will give us a version of where he has been and what he has been doing when he comes back, whether we want it or not.

Norman Baker (Liberal Democrat, Lewes)

Will the Minister give way?

Bob Ainsworth (Labour, Coventry North East)

On that?

Norman Baker (Liberal Democrat, Lewes)

Yes, on a related point. I noticed that the hon. Member for Glasgow, Pollok was temporarily sitting on the Conservative Benches. By delaying giving way, the Minister has allowed him to return to the Government Benches.

Bill O'Brien (Labour, Normanton)

Order. That is not helpful to the Committee.

Bob Ainsworth (Labour, Coventry North East)

On disclosures, I am informed that this year they rose to the kind of levels to which the hon. Member for Beaconsfield referred. NCIS tells us that, contrary to what the hon. Member for Surrey Heath said earlier, that was entirely due to the incidents of 11 September, the raised public awareness of such matters and the concern and alarm that followed. We cannot rely on that continuing in the future. I hope that there will not be further incidents of that kind, and that people can return to the way of life or the level of alertness and alarm—or lack of it—that they had previously.

NCIS has been described previously as a dreadful Big Brother organisation, garnering information for no good purpose. I accept that we are not discussing terrorist measures—a separate Bill was introduced, which contained equivalent measures, in many instances, and applied them to terrorism—but the Committee is aware of the connections of organised crime to terrorism and so on. I therefore hope that it will be aware of the need for organisations such as NCIS. In an ideal world, not only would such organisations be nothing like the size of NCIS, they would not exist at all. However, none of us is naive enough to think that we live in an ideal world, and sadly there is a need for the kind of powers that we have given NCIS, and for the kind of resources that we have had to give it.

Hon. Members may find it helpful if I explain how the provisions in subsections (2) and (3) will work in

practice. We have not made any changes to the practice that currently operates by virtue of existing legislation, and the provisions closely follow our obligations under the European Community money laundering directive of 1991.

Clause 328 is directly linked to the prohibited acts in clauses 321 to 323. In essence, it provides a defence to the offence if someone's knowledge or suspicion about criminal property is reported to a constable, a Customs officer or their nominated officer. It requires a person to obtain the necessary consent before the transaction is processed. However, the provisions recognise that the person who is faced with a transaction, or who acquires or possesses criminal property, may not always have an opportunity to obtain prior consent before a transaction is processed or property acquired, and in that situation the person may proceed, but is required to report his knowledge or suspicion as soon as practicable to the relevant person.

When a person informs a nominated officer about his suspicions, the onus will lie on the nominated officer to decide whether to give consent to the transaction being continued or to report the matter to NCIS. If an employee reports his suspicions to a nominated officer, and that person fails to pass on those suspicions to NCIS, either before or after the transaction is processed, the nominated officer might find himself liable for the offence of being concerned in an arrangement that facilitates money laundering—or of failing to report the offence, if he is in the regulated sector.

The amendment would make the reporting of a transaction, prior to carrying out the prohibited act under clauses 321 to 323, rather pointless. All someone would need to do is to pick up the telephone and ring NCIS, and immediately afterwards process the transaction.

The provisions are meant to be an investigative tool and are designed, in the more serious cases, to give law enforcement an opportunity to take action against laundering before funds are dissipated. The amendment would mean that law enforcement would not have an opportunity to put a hold on an account pending further inquiries, or to obtain a restraint order against the funds. There are many instances in which there is no urgency to the case and suspicious transactions can be properly investigated before they are processed. When there is some urgency, the provisions allow for the transaction to be continued, and for a report to be made swiftly following that, as I have explained.

It has been claimed that a huge paper burden might be imposed on NCIS because of the expansion of the provisions. However, only 5 per cent. of reports are made prior to transactions. It is unsurprising that the hon. Gentleman has heard anecdotal evidence to the contrary. I am not saying that people are never inconvenienced—that cannot be completely avoided. I can only report to him what I have been told by NCIS. When a transaction is being held up, it is looked at within 24 hours; if it is reported early in the day, it is

looked at on the same day, with a view to assessing its priority. If it is judged not to be urgent, it might not be cleared on the same day. However, NCIS attempts to respond to the needs of people and believes that it is relatively successful in doing so and that this will continue when the Bill is enacted.

When a report is made before a transaction is conducted, law enforcement agencies need to make further inquiries. In most cases it is possible for the person making the report and the law enforcement agencies to reach an agreement on what may be said to the owner of the account or funds so that the reporting officer does not commit a tipping off offence.

The hon. Gentleman said that the amendment was probing, to tease out what the situation is, and I have tried to respond appropriately. The only point that I have not covered is the one about whether it is desirable for solicitors to be thumped. I hope that we do not put that to the vote, because I will happily vote with him on that occasion, but I am not sure that he will achieve unanimity from the Committee.

David Wilshire (Conservative, Spelthorne)

I thought that I understood all this, and the amendment made a great deal of sense. I then thought that we could vote rapidly on it while the hon. Member for Glasgow, Pollok was on this side, so that we might get a few more votes than we usually do—but he did not stay long enough, and the moment has passed. However, the more I have listened and thought about it, the more confused I have become, so I would be grateful if either the Minister or my hon. Friend could sort me out.

Subsection (2) says:

''The first condition is that—

(a) the disclosure is made before the alleged offender does the prohibited act,''.

I take this to mean that one picks up the telephone and says to a policeman or Customs officer, ''Hi, I'm going to break the law''. Well, some people may or may not do that, but what then concerns me is paragraph (b), and I believe that it makes sense to leave it out. Is anybody going to pick up the telephone and say, ''Excuse me, I'm about to break the law and please may I have your permission?''—because that is what I take it to mean. I cannot see a good reason why anyone would announce their intention to break the law and then say to the law enforcement agencies, ''That's alright with you, isn't it?''

Bob Ainsworth (Labour, Coventry North East)

Will the hon. Gentleman please read the title of the clause—''Authorised Disclosures''?

David Wilshire (Conservative, Spelthorne)

I understand what the Minister is saying, but that does not help me. Whether or not it is an ''authorised disclosure'', or whatever other title one may wish to give it, I am still left mystified as to why it is suggested in legislation that would-be criminals announce their intention of breaking the law and then say, ''Is it alright with you, guv?''. If the title means what I think it does, having called to ask permission somehow or other authorises the action. That is an extraordinary suggestion.

Bob Ainsworth (Labour, Coventry North East)

I do not think that the hon. Gentleman is quite as obtuse as he is trying to make

out. He knows that by picking up the telephone he is avoiding breaking the law.

David Wilshire (Conservative, Spelthorne)

That is even better. I am even more confused. The longer this goes on, the worse it gets. If every time I pick up the telephone and say that I am about to do something that I should not, I am not breaking the law. That is a novel suggestion, and I think it lucky that the hon. Member for Glasgow, Pollok is not here or he would blow a fuse about the way in which this Government Bill seems to be relaxing its attempt to catch criminals by saying that they can pick up the telephone and suddenly become innocent. If the Minister cannot help me out, perhaps my hon. Friend can.

Mark Field (Conservative, Cities of London and Westminster)

Underlying the whole issue of disclosure, and authorised disclosures in particular, is a very regrettable development, and I do not think there are any easy answers if we need to enact this money laundering legislation. It is regrettable that the whole ethos of a professional relationship will be entirely undermined. There will always be a suspicion in the back of any client's mind in a professional relationship, be it with a lawyer—notwithstanding the legal privilege—with accountants or with other financial services individuals. It will put professional advisers into an impossible position. They can pass on to the police any suspicions that they may have if a client suddenly appears with a spanking new car and wants to ensure that new accounts are opened, but they will not be able to tell the client, with whom they may have a long-standing relationship. I appreciate that, for the legislation to be workable, there must be some way in which professionals are made accountable.

I hope that I have recognised in my various contributions to the debate on part 7 at least that there is a distinction between the everyday person in the street and those in the regulated sector. There must be a higher burden in the regulated sector for professionals, who cannot simply turn a blind eye to these matters. However, that will undermine the ethos of the professional relationship. There are many ex-lawyers, as I am, and ex-professionals in the Committee, at a time when there is an increasing questioning of professionals. As the vestiges of the professional relationship break down, the reputation of professionals will be diminished further as the years go by, which is regrettable. The amendment at least goes some way towards trying to rectify that, and I hope that the Minister will give it serious thought.

Dominic Grieve (Conservative, Beaconsfield)

I listened carefully to the Minister. I am glad that he accepted the point, but I am not entirely reassured that the system will get much better as a result of the vast number of authorised disclosures that he hopes will take place. If the Government's proposal is to work and disclosures are made before transactions take place, it is essential that the response is very quick. It is in NCIS's interest that that should be the case. The sort of transaction that will be of particular concern to it is the one in which a solicitor says that his client wishes to transfer £2 million to a bank in a country that has a reputation for being a haven for tainted money.

That is an example of a transaction that escapes out of the jurisdiction and cannot be recovered. Obviously, the problem does not arise with the same force where a disclosure can be made subsequently. However, solicitors have a peculiar problem. Some of the stories that I was told had a humorous side, but there is a serious side, in that professional reputations are on the line, with a client who is metaphorically beating on the door and asking why his transaction is not going ahead. The solicitor is waiting to hear from NCIS whether he should say that he is not going ahead with the transaction without giving an explanation, or whether he should go ahead with it so that NCIS can follow it. The solicitor should not be left in limbo.

I hope that as a result of our discussions the Minister will take the opportunity to tell NCIS that the issue has caused concern. A delegation raised it with me, not just an individual solicitor. I therefore assume that unless it had been causing concern in the profession, it would have been dismissed as an isolated incident. I did not get that impression, although I may be mistaken, which is always possible. However, I got a clear impression that the profession at an official level regarded it as a potentially serious problem that had manifested itself on several occasions. I hope that NCIS and the Government can provide some reassurance that there will be rapid responses when disclosures are made.

Bob Ainsworth (Labour, Coventry North East)

I am told that that happens already. I do not know whether I said so earlier, but I am aware that NCIS officials met representatives of the Law Society recently and agreed to make a contribution to its training programme to ensure that this regulation is more fully understood. There is a framework for the Law Society and NCIS to work closely together to overcome the potential problems rightly raised by the hon. Gentleman.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Minister for that comment, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 328 ordered to stand part of the Bill.

Clause 329 - Interpretation

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 509, in page 190, line 28, after 'an', insert—

'indictable'.

This is another way of approaching the issue that we discussed under the de minimis clause. A number of organisations suggested that criminal conduct should be confined to indictable offences, rather than any offence. This takes us back to the early stages of this legislation. However, I would be grateful for the Minister's comments on such a proposal, although I can foresee what he is likely to tell the Committee.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

On reading the terms of the amendment, I wonder whether the hon. Gentleman fully appreciates

its consequences. As I see it, it would restrict criminal conduct to indictable conduct. Given that the proposed new section interprets criminal conduct for the purposes of that part alone, the effect of the amendment would surely be to restrict the exemptions available to officers of the law who undertake criminal acts as part of their normal duties. That would criminalise activity by law enforcement officers. We have already heard how the hon. Gentleman is soft on criminals, but being tough on law officers is perhaps going a bit too far.

Dominic Grieve (Conservative, Beaconsfield)

The brevity of my remarks in introducing the amendment reflected the fact that I could see, notwithstanding that perhaps I tabled it in a fit of enthusiasm at the behest of others, that it was not without some difficulty.

Mark Lazarowicz (Labour/Co-operative, Edinburgh North and Leith)

I suggest that the hon. Gentleman should think more carefully before acting so quickly at the behest of others.

Dominic Grieve (Conservative, Beaconsfield)

Much as I would like throughout my life to follow the hon. Gentleman's counsels of perfection, I have learned in the course of debating in this Committee that it may occasionally be wiser to try to fire a blunderbuss than to try to shoot a bullet. I apologise for that, but I would not wish issues to go by default and not be considered, however briefly, if only for an inadequacy in the amendment to be pointed out. I prefer to be humbled by his comments than to feel that a part of the Bill has passed without adequate scrutiny. I am sure that the Minister's comments will echo the hon. Gentleman's, and that we can then move on to other business.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

The hon. Gentleman may have been able to predict the reply to his amendment, but he was not able to predict who would give it.

As it is drafted, part 7 operates on the basis of the proceeds of any criminal conduct. No distinction is made between the proceeds of indictable offences or summary offences. As the hon. Gentleman is aware, this approach is consistent with that in parts 2, 3 and 4 in relation to the confiscation of proceeds following a conviction for a criminal offence. We believe that it is vital to have consistency across the Bill and that there should be no distinction between indictable or summary offences.

There are also real practical reasons why there should be no qualification to the type of offence caught by the provisions on money laundering. For example, at the stage at which a report would need to be made by someone in the regulated sector, he or she may suspect that the money used in a transaction was the proceeds of crime, without having any way of knowing the underlying predicate offence. The person would not know whether the initial offence that generated the laundered proceeds was an indictable or a summary offence. In addition, laundering the proceeds of a summary offence might be part of a larger pattern of other money laundering of which the person making the report was not aware. As we have said on many occasions, it is important that NCIS has as much information available to it as possible.

Restricting the reporting offence would limit the information that it receives.

As far as principal money laundering offences are concerned, the amendment would take us back to the position where having to identify the predicate offence to prove that money laundering was taking place acted as a barrier against successful prosecutions. That would be a negative step. We find it unacceptable in principle that the proceeds of some offences should effectively be exempt from the money laundering provisions. If conduct constitutes a criminal offence, as does summary as well as indictable conduct, we should also be able to prosecute the offender for laundering the proceeds of his or her crime or crimes.

As I have said, the classification of an offence is not the determining factor of whether proceeds are laundered. Even some summary offences can generate large amounts of proceeds and the Government cannot see any reason why those proceeds should not be caught by part 7. As the hon. Gentleman conceded, we rehearsed much of the argument in our debate on part 2, but it may be useful to repeat some helpful examples. Summary offences such as possession of video recordings of unclassified work for the purposes of supply, use of unlicensed premises for exhibition requiring a licence and offences relating to sex establishments can generate substantial proceeds. We cannot see any good reason why such proceeds should not be covered by part 7.

The Government are satisfied that the Bill as drafted adopts the right approach by applying the three principal money laundering offences to the proceeds of all crime, and I hope that the hon. Gentleman will withdraw the amendment. He hinted that he would do so when he moved it, and he is presumably even more intent on doing so having heard my convincing arguments.

Dominic Grieve (Conservative, Beaconsfield)

The Minister has persuaded me that the amendment is unnecessary, and indeed possibly counter-productive. I am grateful to him for having given a complete and clear exposition of why that is the case. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nick Hawkins (Conservative, Surrey Heath)

I beg to move amendment No. 510, in page 190, line 39, leave out paragraph (c).

As we discovered in Committee a week or so ago, the shortest amendments often elicit the greatest debate on matters of principle. This amendment is a case in point, because it goes to the issue of retrospection. Ministers or members of the Committee of any party will not be surprised to learn that there are concerns of principle about legislation having retrospective effect. I anticipate that the Minister will accuse us of being soft on money launderers. I will listen carefully to what he has to say on the special reasons why retrospection is justified in this case. Despite that, and the fact that I understand that he may have more of a case for retrospection in that field of law than in others, it would not be right to the let the matter go through

without at least discussing it, because it is rather like legal professional privilege.

Governments of all parties are always tempted to chip away at the traditional principle that provisions should not have a retrospective effect, and that is a danger. I am not making a partisan political point.

Vera Baird (Labour, Redcar)

Will the hon. Gentleman make it clear how the provision is an example of retrospective criminalisation? It does not matter whether the criminal property being dealt with has acquired its criminal status before or after the Bill has been enacted. In what sense does that retrospectively criminalise a person?

Nick Hawkins (Conservative, Surrey Heath)

I did not say, ''retrospectively criminalise''. Unusually for her, the hon. Lady misquotes me. I said that parliamentarians of all parties should be worried when part of a Bill can have a retrospective effect. One of the interesting things about the provision, as she has rightly identified, is that it refers to what happened to the property, rather than, as she would put it, retrospectively criminalising people.

We have debated the problem of cut-off times on previous occasions, and while it would be out of order to repeat our debates, I will touch on them briefly. My hon. Friend the Member for Spelthorne (Mr. Wilshire) gave a hypothetical example about property that had belonged to one of his now deceased relations, which had long ago been the subject of crime. The hon. Member for Glasgow, Pollok, who is sadly not with us at the moment, went into flights of fancy about property that may once have been the proceeds of crime and ended up on the Scottish borders in the hands of the ancestors of my hon. Friend the Member for Beaconsfield. There must be clear signs of where the line is drawn. It might be possible to say that it is immaterial whether the property was the proceeds of crime before or after the Bill was enacted and we have no defined cut-off point.

Let us suppose that some of the proceeds of criminal activity that took place 25 years ago or longer was not recovered at the time. An example could be the great train robbery, or the Brink's-Mat robbery. What if some of those proceeds of crime were to turn up now? Where is the cut-off point? It is that type of retrospection that we must be careful about.

Paul Stinchcombe (Labour, Wellingborough)

Would the amendment change the criminal character of any criminal property, bearing in mind subsection (3)? If it would not, the purpose of subsection (4)(c) is to clarify the case.

Nick Hawkins (Conservative, Surrey Heath)

As he so often does, the hon. Gentleman has touched on an important matter. It would have been possible for my hon. Friend the Member for Beaconsfield and myself to try to change any part of the Bill that might have dealt with timing. Certainly, I considered whether a consequential amendment to subsection (3) was needed. We did not say that our amendment was perfect. Indeed, neither of us would say that any of our amendments were perfect, although a couple of them—now known to members of the Committee as the Grieve amendment and the Hawkins amendment—cannot have been that bad, because the Government accepted

them. Most of the time, we do not place any great faith in our drafting skills, but we want to be able to raise significant issues. The Government could say, ''We accept that point, but we wish to amend subsection (3) as well.''

Ian Lucas (Labour, Wrexham)

My hon. Friend asked why this is a significant issue. He said that the deletion would have no effect.

Nick Hawkins (Conservative, Surrey Heath)

No, I think that the hon. Member for Wellingborough (Mr. Stinchcombe) said that removing subsection (4)(c) would have no effect because of the form of subsection (3). However, the hon. Members for Wellingborough and for Wrexham (Ian Lucas) will accept that we do not mind whether subsections (3) and (4) would need amending.

Paul Stinchcombe (Labour, Wellingborough)

Does the hon. Gentleman accept that his amendment has no effect at all?

Nick Hawkins (Conservative, Surrey Heath)

No, I do not. We often table amendments to raise an issue. That is the Committee's purpose. We do not say that our drafting is perfect, but we felt that suggesting the deletion was a simple and clear way in which to raise the issue. I have set out our case, and I will listen to what the Minister says. I anticipate that interesting issues will be raised by the question of what retrospectivity is.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

I do not think that we are talking about a retrospective effect in the way that the hon. Gentleman claims. I hope that I can convince him of that.

As currently drafted, the legislation provides that it is does not matter whether criminal conduct took place before or after the passing of the Bill. It would be quite impractical to apply part 7 to only proceeds that were acquired through conduct that was committed after the Bill came into force. That would mean that the Bill would have no effect for many years, and it would create uncertainty about the status of the present law, which also catches conduct committed prior to the date on which the relevant provisions in the Drug Trafficking Act 1994 and the Criminal Justice Act 1988, as amended by the Criminal Justice Act 1993, were brought into force.

I emphasise that the way in which subsection (4)(c) is drafted does not mean that the actual principal offences or the failure to report an offence may be retrospective. Those offences can be committed only if the laundering occurs, or the actual knowledge or suspicion for reporting purposes is formed, after the Bill comes into force. The subsection does, however, mean that a person who committed an acquisitive crime before or after the Bill comes into force, and who then launders the proceeds of that crime after the legislation has been commenced, or who fails to report his suspicions after the commencement, will commit an offence under clauses 321 to 324. Hon. Members will agree that that is sensible.

In order to commit a money laundering offence, a person must know or suspect that property is the

proceeds of crime. If the person has that suspicion, he should stop any dealings with it, regardless of how long ago the offence was committed. I hope that that convinces the hon. Member for Surrey Heath.

The construction of the offences, which replicates the approach taken in existing legislation, is fully compatible with the European convention on human rights. Article 7 of the ECHR requires that there shall be no punishment without law. However, in order to commit a money laundering offence, a person must do something in addition to the original crime that generated the proceeds. People who have already generated proceeds from criminal conduct will have time to become aware of the provisions of part 7 before they come into force. They will be able to take steps to ensure that they do not commit a money laundering offence.

In view of that explanation of the operation of part 7, I hope that the hon. Gentleman will withdraw the amendment.

Nick Hawkins (Conservative, Surrey Heath)

I anticipated that the Minister would take such a line and at this stage—and only at this stage—I am willing to withdraw the amendment. However, he may have to be a little cautious because some issues may yet be raised by much more expert lawyers in another place. From reading their debates, I know that any issues that touch on even the slightest retrospection always cause Law Lords grave concern. I am not sure that he is completely off the hook in the long term, but for now I am prepared to say that I concede some faults.

I know that the Minister would recognise from the intervention of the hon. Member for Redcar that the measure was not retrospective in the full sense, but we thought that that such matters were worth raising. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 286, in page 190, line 40, leave out 'or a pecuniary advantage'.

No. 287, in page 190, line 41, at end insert—

'(5A) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.'.

No. 288, in page 191, line 4, leave out 'or pecuniary advantage'.—[Mr. Bob Ainsworth.]

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

I beg to move amendment No. 289, in page 191, line 6, leave out subsection (8) and insert—

'(8) Property is all property wherever situated and includes—

(a) money;

(b) all forms of property, real or personal, heritable or moveable;

(c) things in action and other intangible or incorporeal property.'.

The amendment is technical. It will have no effect on what is meant by property under part 7. Its purpose is to avoid unnecessary confusion if the definition under part 7 is compared with the definitions of property under parts 6 and 8.

Amendment agreed to.

Amendments made: No. 267, in page 191, line 19, leave out 'but excluding a lease which is not a long lease'.—[Mr. Foulkes.]

No. 514, in page 191, line 30, at end insert—

'(10A) For the purposes of a disclosure to a nominated officer—

(a) references to a person's employer include any body, association or organisation (including a voluntary organisation) in connection with whose activities the person exercises a function (whether or not for gain or reward), and

(b) references to employment must be construed accordingly.'—[Mr. Bob Ainsworth.]

Clause 329, as amended, ordered to stand part of the Bill.

Anne McGuire (Labour, Stirling)

I beg to move, That further consideration be now adjourned.

David Wilshire (Conservative, Spelthorne)

I believe that this is a debatable motion. I am not about to do anything silly, but I want

to put on record that there could have been a guillotine a sitting and three quarters ago that would not have enabled us to have such discussions. It would be churlish not to say that it was helpful of Labour Members to make that possible, given that such discussions were worth having. I hope that they were taken in the spirit in which they were meant. I am not conscious of time wasting, other than if that means raising matters that people did not want to hear. Genuine points were made and I wanted to say, on behalf of colleagues, that I appreciate the courtesy that has been shown to us to enable us to reach this part of the Bill.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to Five o'clock till Tuesday 29 January at half-past Ten o'clock.