Serious Crime Bill [Lords]
Public Bill Committee, 13 January 2015.
Philip Davies (Conservative, Shipley)
Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets during sittings. Please remember the rules on refreshments: no teas and coffees, but water is allowed. Please ensure that all electronic devices are turned off or switched to silent. As a general rule, I and my fellow Chair do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period in Public Bill Committees is three working days, so amendments should be tabled by the rise of the House on a Monday for consideration on a Thursday, and by the rise of the House on a Thursday for consideration on the following Tuesday.
Before we begin our line-by-line consideration of the Bill, some brief explanation may be useful to those relatively new to Public Bill Committees. The selection list for today’s sitting is available in the room. It shows how the amendments selected for debate have been grouped together. Amendments grouped together are generally on the same or a similar issue. The Member with their name on the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on any or all amendments in the group. A Member may speak more than once in a single debate.
At the end of the debate on a group, I will call the Member with the lead amendment again. Before they sit down they need to indicate whether they wish to withdraw the amendment or press it to a vote. Similarly, if another Member wishes to press a grouped amendment or a new clause to a vote, they should let me know. I will assume that the Government wish the Committee to reach a decision on their amendments. Decisions on amendments do not take place in the order they are debated, but in the order that they appear on the amendment paper. I have discretion to decide on separate stand part debates on clauses and schedules, taking account of the extent of debate on amendments.
The adjournment of the Committee this morning will be at 11.25 and is automatic. This afternoon it is in the hands of the Whips, but around 5 pm is conventional. I understand there may be consensus around making brisk progress on the Bill, given the nature of the matter with which it is concerned. I hope these explanations are helpful. Before we begin line-by-line consideration, we need to dispose of the programme motion and the motion to report written evidence.
Clause 1 - Determination of extent of defendant’s interest in property
Karen Bradley (Conservative, Staffordshire Moorlands)
I am delighted to serve under your chairmanship, Mr Davies, and that of your co-Chair, Ms Clark. I welcome all right hon. and hon. Members to the Committee. My hon. Friend the Solicitor General and I look forward to detailed discussions on the provisions in the Bill with all members of the Committee. We have sufficient time to discuss the Bill and I look forward to lively contributions reflecting our debate on Second Reading.
Clause 1 deals with the determination by a court of the extent of interest that a defendant holds in named property. The serious and organised crime strategy sets out proposals to strengthen the Proceeds of Crime Act 2002 by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties. Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order out of whatever assets he or she has available. A confiscation order specifies an amount to be paid. It does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. Such claims also reduce the amount of money available for recovery. Some of the claims may be perfectly legitimate. However, others will be spurious and designed simply to frustrate the confiscation process. To tackle such abuses and to help speed up the confiscation process, clause 1 will confer on the court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process.
In deciding whether to make a determination of any particular case, it is expected that judges will exercise the power to determine the defendant’s interest in property in those cases where their experience allows them to do so. That includes matters regarding property law, the nature of the property and the likely number and/or complexity of any third-party interest. To protect legitimate third-party interests, the new provision affords third parties who have or may have an interest in the property the right to make representations to the court about the extent of their interest. The right to make representations also extends to the defendant. That will allow the court to consider the evidence presented, assess its credibility and come to a decision.
The court is only able to make a determination if anyone who the court thinks is or may be a person holding an interest in the property is afforded a reasonable opportunity to make representations. Subject to exceptions, any determination as to the extent of the defendant’s interest in a particular property is binding on any court or other person involved in the enforcement of the confiscation order. The exceptions are where it is open to a court appointing an enforcement receiver to hear representations or in proceedings before the Court of Appeal or Supreme Court.
The exception in relation to any appeal to a higher court speaks for itself, but let me explain how the enforcement receiver fits into this process. On the application of a prosecutor to the Crown court, a receiver may be appointed to realise property where a confiscation order has been made but not been satisfied, and there is no appeal. The court may confer certain powers on the receiver, including taking possession of the property, managing and dealing with the property and realising it. Under the associated clause 4, a person affected by determination may make representations to a receiver where their interest in the property came to light only after the determination had been made. In such circumstances, it is right that the court appointing the receiver should be able to consider such representations and not be bound by the earlier court decision.
There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes account of when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.
Clause 2 - Provision of information
Jack Dromey (Labour, Birmingham, Erdington)
I beg to move amendment 33, in clause 2, page 3, line 22, at end insert—
“(4A) An interested person who is found by the court to have provided incomplete or false information in a deliberate attempt to mislead the court is guilty of an offence and is liable on conviction of indictment, to imprisonment for a term not exceeding 6 months, or to a fine, or to both.”.
It is a pleasure to serve under your chairmanship, Mr Davies. Crime is changing, and serious and organised crime is rapidly rising. It poses a major threat to our citizens and to our national interest. We will address a range of issues in this Committee, from tackling the obscenity of child sex exploitation through to the growing problems of banking crime and cybercrime and the threat they pose to our national security.
Specifically in relation to proceeds of crime, it is welcome that there have been some moves on the part of the Government, in particular as a consequence of the damning reports by the National Audit Office and the Public Accounts Committee last year. There are some welcome proposals in relation to proceeds of crime which range from the important to the modest. However, there are omissions, and we will therefore seek to move amendments as appropriate. I have to say that we are yet to be convinced that the Government have an overall serious strategy to send an unmistakeable message that crime should not pay and that ill-gotten gains will be recovered.
As the Minister said, it was in 2002 that the Proceeds of Crime Act was introduced. It expanded the law on money laundering to cover any crime rather than just drug-related offences, and it provided wide-ranging powers to deprive criminals of their main motivation—the money and property that they accumulate through illegal activities.
However, it has become clear that the way the asset recovery regime is governed is inadequate. The National Audit Office report on confiscation orders, which was released just over a year ago, drew attention to the poor progress that the Government have made on asset recovery. It specifically found that in 2012 and 2013 courts in England and Wales imposed 6,392 confiscation orders with a total value of £1.6 billion but that the various agencies only successfully confiscated £133 million of that amount.
Indeed, the Public Accounts Committee followed that NAO report by releasing its own report, which said that
“poor implementation of the confiscation order scheme has severely hampered its effectiveness.”
In reality, we have a system in which there are numerous different players, including the National Crime Agency, the Crown Prosecution Service, Her Majesty’s Revenue and Customs, and regional asset recovery teams. Sometimes, there is a lack of clarity as to who is responsible and no clear overall direction of travel.
I will give one example of exactly what we are seeking to tackle. It is the case of Nasir Khan, who the HMRC said used criminal profits to live the
“lifestyle of an international playboy”
after a £250 million VAT scam. Khan was handed a £14 million confiscation order, but none of his assets have yet been recovered.
Therefore, we welcome the introduction of proposals to strengthen the proceeds of crime regime, which go some way to addressing some of the current roadblocks to the recovery of ill-gotten gains. However, if the aim is truly to deprive criminals of their ill-gotten gains, the Government have not gone far enough. We must stop the Mr Bigs who are laughing at the system because of its flaws and loopholes. What is needed is rigorous enforcement of the law.
In addition, a very important point will come up throughout our consideration of this Bill. We must recognise that the import of asset recovery lies not only in the amount of money recovered, however crucial that is, but in the efficacy of the process. Indeed, financial investigation brings benefits beyond asset recovery, in that it increases the disruptive impact of criminal investigation. The Association of Chief Police Officers has rightly argued that financial investigation is a discipline that can assist in improving the efficiency and effectiveness of combating crime across most crime types and beyond; that it increases the disruptive impact on criminals’ activity; that it allows law enforcement to disrupt those who support organised crime by prosecuting them for moving and using criminal property; and that, of course, it removes criminal assets, first and foremost to stop criminals from enjoying their illicit gains but also to stop criminal capital from being used to fund further criminality.
I stress again that this part of the Bill is not only about confiscation, critical though confiscation is, but about seeking to prevent further crimes of this nature in future. Therefore, we need to take this opportunity to examine the problems associated with the Proceeds of Crime Act 2002 as it currently stands, and to see whether the proposals in the Bill fully address those problems, or whether more can be done to tackle those problems and improve enforcement.
In summary, this process is about strong political will, including a strong ministerial lead; later, we will consider clauses that specifically address those issues. It is also about creating an effective overall strategy, and about recognising that reductions in public expenditure in key areas do not help. Those reductions have damaged effective enforcement by agencies, ranging from the reductions in the budgets of RARTs on the one hand to the reductions in the strategic capacity of the CPS on the other: the CPS has suffered a 27% cut in its budget. We would argue that those are false economies, given the need to properly invest in what could benefit the taxpayer and deter crime. According to work done by the Library, one example of the potential gain from increased asset recovery is that it could bring in an additional £243 million in 2015 and 2016 if increased by 20%. That once again strongly makes the point that it is wise to invest in a serious strategy and unwise to cut back on key areas in the enforcement of proceeds of crime.
I have set out the context of the clause and the amendment is quite straightforward. We want to further strengthen the provision of information amendments made by the Government by criminalising those who seek to mislead the court about the extent of their assets. While the Bill currently addresses those who fail to comply with an order under that section by giving the court such powers as it believes appropriate, we wish to go one step further by adding another facet of deterrence. The defendant or any other interested person would be liable to either a stint in jail or a fine for making false claims, sending an unmistakeable message that if someone lies to assist crime or organised criminals, they will potentially pay the price with their liberty.
Karen Bradley (Conservative, Staffordshire Moorlands)
I thank the hon. Gentleman for his comments. Clauses 1 to 4 deliver on the commitment in the serious and organised crime strategy to strengthen the asset recovery regime by ensuring that criminal assets cannot be hidden with spouses, associates or other third parties. The shadow Minister talked about the Government’s overall position with regard to asset recovery. I have to say that it is disappointing to hear such comments coming from a former member of the Government that introduced the proceeds of crime regime and, during their time in government, did little to enhance the enforcement abilities of the law enforcement agencies and others. Their human rights positions also meant that many of the cases brought by criminals put us in a very difficult position. This Government are taking action to deal with that.
I want to ensure that members of the Committee are aware of our serious and organised crime strategy. We launched it in October 2013 and it sits under the four Ps programme: pursue, which means pursuing the bad guys; protect, which means ensuring that people do not become victims of bad guys; prevent, which means ensuring that people do not become bad guys in the first place; and finally, prepare, which means ensuring that we can give the support needed to victims of bad guys. That is what this Government are working on.
Asset recovery is an absolutely vital part of all four strands of the four Ps strategy. Clearly, if we are pursuing organised criminals, we need to take off them the money they have made through ill-gotten gains. That will prevent them from continuing their criminal activities, so it helps with the prevent side of our strategy. In terms of “protect”, if people know that they cannot keep their assets, they are less likely to become criminals and therefore make someone a victim. “Prepare” is the compensation side of the criminal assets recovery strategy, meaning that victims get the support they need.
The cases that the shadow Minister highlighted are very important and show why we have brought this Bill before the Committee. I chair the Criminal Finances Board, which has a criminal finances improvement plan. He will have seen that plan; it is open for other Committee members to see if they wish, and I would be more than happy to get copies of it for them. That clear plan sets out how we will address the defects and deficiencies in the system.
The funding of the regional asset recovery teams is not going down. The Government spent £9.857 million on them in 2012-13 and £10.246 million in 2013-14. I have visited those teams in the regional organised crime units, and they do fantastic work. They work with the Crown Prosecution Service, the police and HMRC to ensure that all the agencies that come into contact with criminals and criminal finances work together. I am pleased with the work they are doing, but they can do more. The Bill will give them more weapons and tools to enable them to get money off the criminals. As the hon. Gentleman rightly said, that is a massive deterrent. Many organised criminals see jail as just part of the job, but they want to keep hold of the money and assets that enable them to continue being criminals. I want to prevent them from doing that, and I know that the hon. Gentleman shares that aim.
It may assist the Committee’s consideration of the amendment if I explain how clauses 1 to 4 will address the issue of third-party rights more generally. The Bill brings forward the determination of third-party interests to an earlier stage in the confiscation process—to the confiscation hearing itself, rather than the enforcement stage, as is currently the case.
In addition, clauses 1 to 4 confer new powers on the court to make a binding determination about the extent of any third-party interests. To protect any legitimate third-party claims, those provisions enable third parties who have or may have an interest in the property to make representations to the court about the extent of their interest. The court will consider the evidence presented and make a binding decision about the extent of the interest held by the third party.
As part of that process, clause 2 confers on the court the power to order any interested person, such as someone making a claim against the defendant’s property, to provide the court with any information it considers necessary to enable it to determine the defendant’s interest in the property. That power will be used to tackle individuals who attempt to make bogus claims—in all likelihood in collusion with the defendant—to place assets out of reach of confiscation. If an individual has a genuine claim, it is unlikely that a court order will be required to make them produce that information. Individuals who are in collusion with the defendant are unlikely to want to co-operate with the court unless they are compelled to do so by the power of a court order. If a person fails to comply with the court order without reasonable cause, clause 2 also allows the court to draw such inferences as it believes are appropriate. The court retains flexibility through the use of the word “may” to make determinations if it sees it as appropriate to do so.
Amendment 33 seeks to make deliberate attempts to mislead the court by providing incomplete or false information a criminal offence, punishable by a term of imprisonment not exceeding six months, a fine or both. Proposed new section 18A(5) of the Proceeds of Crime Act makes it clear that where a court draws inferences as a consequence of a failure to provide the information requested in the order, the court can deal with the failure to comply with the order as it deems appropriate. That could include a finding that the party is in contempt of court.
When a court holds someone in contempt, it may sentence them to up to two years in prison. Therefore, the court’s existing sentencing powers are stronger than those envisaged by the amendment. We do not, therefore, believe that the creation of a criminal offence for a failure to comply with the court order is necessary. Moreover, the creation of such an offence might be taken to imply a setting aside of the court’s powers to deal with an interested person through contempt proceedings, which, as I have indicated, would lead to a weakening of the current sanction. I therefore ask the hon. Gentleman to withdraw his amendment.
Jack Dromey (Labour, Birmingham, Erdington)
The Minister is right that a Labour Government introduced the legislation. However, all parties think that we need to go further, that there were defects in the original legislation and that there are problems relating to having an effective enforcement strategy.
On the effective enforcement strategy, a study by ACPO referred to the impact of the further fund reduction of 25% as a whole on the ability of the agencies concerned in regional asset recovery teams to discharge their duties in full. It argues strongly that
“This investment would bring increased receipts, improved attack on the finances of organised crime, improved direction of scarce resources and improved connectivity with the private sector thereby tapping into their intelligence more effectively.”
It goes on to make a powerful argument that one of the wisest investments we could make from the public purse is in a serious strategy on recovering the proceeds of crime. For every £1 invested, we are talking about potentially immense benefits. Sending that message—pursue, no hiding place and prevent—is key.
The Minister makes the point that we could have contempt of court proceedings if someone deliberately misleads. Of that there is no doubt. However, it is disappointing that the Government are not prepared to go one step further to enshrine in law the unmistakable message that, if someone lies to protect a criminal friend or criminal assets, that is against the law and they will pay the price accordingly. We hoped that the Minister would go one step further, but we note the Government’s position. I beg to ask leave to withdraw the amendment.
Clause 4 - Enforcement receivers
Jack Dromey (Labour, Birmingham, Erdington)
I beg to move amendment 31, in clause 4, page 5, line 5, at end add—
‘(2) In this section, a “reasonable opportunity” shall be interpreted as no more than a period of 21 days from the date of notice given by the court arising from the duty in subsection (8A).”.
What is clear from the experience of the proceeds of crime regime is that criminals will pull any stroke to avoid confiscation. Sadly, the evidence is that the most successful in pulling such strokes to keep their ill-gotten gains are the “Mr Bigs”. Part of their stock in trade is to have third parties saying, “The money is mine”, or, “I have a stake in the house.”
In the other place, the Labour Front-Bench team succeeded in pushing through some important changes to the Bill on third-party interests. Although the Government initially rejected the amendments tabled on Report, they made some welcome concessions. The Bill now brings forward the determination of third-party interest from the enforcement stage to the confiscation hearing, and confers new powers on the court to make binding determinations as to the extent of any third-party interest. Additionally, the court is now afforded the power to order an interested party, such as someone making a claim against the defendant’s property, to provide the court with any information.
We wish to go further, and legitimately so. We wish to do more to disrupt criminal cash flows through third parties, so we propose that the time limit during which third parties can declare their interest be set at 21 days. We understand that the restraint process has to be quick and efficient, but it is also important to tackle bogus claims and to make it more difficult for anything that may frustrate efforts to recover the money early on in the process.
The value of the property that ends up being confiscated can be eroded when people other than the defendant make claims against funds that are deemed by the authorities to have been obtained due to illicit or nefarious activities. Some criminals are running rings around the law with several tried and tested ways of avoiding the confiscation of some or all of their assets. Designer divorces are one ploy often used. However, moves are being made to tackle that, and that is welcome. The practice consists of third parties—for example, the criminal’s ex-spouse—saying that they own the property in whole or in part.
The former leader of the aptly named Adams family gang was asked to pay £650,000. He said that he could not afford it, adding that he felt “like a ponce” living off his wife. However, when the court heard that he and his wife had spent on average £97,000 per year since his release from prison, his request was rightly rejected by a judge. Cases such as that demonstrate the deviousness of criminals and the need to strengthen further the measures to reduce bogus claims.
Additionally, practitioners have noted that because the process is long and drawn out criminals are afforded more than enough time to drum up bogus claims to protect their ill-gotten assets. Indeed, as the Bill made its way through the other place, the then Parliamentary Under-Secretary of State, Lord Taylor of Holbeach, conceded:
“Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders…I wholeheartedly agree that we need to improve the effectiveness of the way in which the confiscation regime addresses third-party interests.”—[Official Report, House of Lords, 2 July 2014; Vol. 754, c. 1725-1727.]
We are therefore clearly all on the same page on this issue, across the parties.
We want to build on the progress made in the other place. We therefore propose limiting to 21 days the amount of time during which third parties can declare an interest in assets. Investigations of claims that come later in the recovery process halt the process while the claims are assessed. By ensuring that third parties come forward quite early on, such delays can be significantly reduced.
We should without hesitation allow a third party to express an interest, but there is no reason why that should not be done quickly. Allowing for delay gives the devious and unscrupulous time to get away with it, or to help their criminal friends to do so.
Karen Bradley (Conservative, Staffordshire Moorlands)
As the hon. Gentleman has explained, amendment 31 relates to provisions in part 1 of the Bill on the determination of third-party interest and specifically to cases in which a receiver is appointed. As I indicated in my response to the previous amendment, the decision by the court as to the extent of the defendant’s interest in a particular property is binding, subject to an exception whereby it is open to a court that has appointed an enforcement receiver to hear representations. It may assist the Committee if I explain briefly how that process will work.
If a confiscation order has been made but has not been satisfied and there is no appeal, it is open to the prosecutor to apply to the Crown court to appoint a receiver to realise the property. At that enforcement stage the court is able to confer a variety of powers on the receiver, including powers to take possession of, manage, deal with and realise the property. However, the court is required to give any person with an interest in the property a reasonable opportunity to make representations to the court before it does so.
Clause 4 limits the ability of an individual affected by a determination of interest to make representations to the court at the enforcement stage, as it is anticipated that such individuals will have had ample earlier opportunities to do so prior to the determination being made. That is in line with our objective to speed up the process by which third-party claims are dealt with. The clause permits an affected person to make further representations to the court only when they were not given a reasonable opportunity to make those representations earlier or when the court considers that the determination would result in a serious risk of injustice.
That is the background against which amendment 31 seeks to limit further the opportunities for a party to make representations. It would deem persons who have not made representations within 21 days of notice of the court’s determination to have had a reasonable opportunity to do so and so make them ineligible to make representations at the enforcement stage.
As I hope I demonstrated earlier, our aim in the Bill is to ensure that the enforcement of confiscation orders can be carried out more effectively while protecting the genuine rights of third parties and ensuring that they have a mechanism to make representations when it is appropriate for them to do so. Those opportunities will in any event be extremely limited, and we do not consider it appropriate or necessary to limit them further through a time restriction. The term “reasonable opportunities” affords a degree of flexibility that is entirely appropriate—a period that is reasonable in one instance may not be in another. However, I am clear that we can rely on the courts properly to police these provisions. If it is apparent to the court that a defendant or third party is seeking to play the system and to delay the making of their representations, the court will be alive to that and rule appropriately.
In short, I have some sympathy with the amendment’s underlying intention, but it imposes an unnecessarily tight straitjacket on the court. I hope that, having heard my remarks, the hon. Gentleman will be content to withdraw it.
Jack Dromey (Labour, Birmingham, Erdington)
The Minister said the amendment was not appropriate. One can conceive of circumstances where it might not be possible to make representations within 21 days, but that would be the exception, rather than the rule. The Government could therefore have amended the Bill in favour, at the very least, of a presumption of 21 days, other than in exceptional circumstances where it was not possible to make representations.
There has been movement elsewhere in the Bill, and it is to be regretted that the Government will not go this one step further, but we note their position. I beg to ask leave to withdraw the amendment.
Clause 7 - Orders for securing compliance with confiscation order
Jack Dromey (Labour, Birmingham, Erdington)
I beg to move amendment 32, in clause 7, page 7, line 39, at and insert—
‘(6A) Where the Supreme Court makes an order under subsection (6)(b) that gives rise to the award of costs to the appellant, such an award shall be calculated using the currently applicable legal aid rates.”.
On capping trial costs, restraint orders are mostly made ex parte—without the defendant present—but many defendants then appeal them and incur significant defence costs. Indeed, there have been cases, which I will refer to later, in which the most expensive lawyers have been hired, and the public purse has ultimately had to pick up the tab, with all the disincentives that can flow from that in terms of effective enforcement. As things stand, if defendants win their appeal, the CPS is liable for their costs, which can be very high, and that can act—I stress again—as a disincentive for prosecutors to get a restraint order in the first place. Our amendment would cap the costs recoverable by the defendant at legal aid rates.
A key point raised by practitioners is that if a restraint order is made and a receiver is appointed, but the order is then overturned or set aside on appeal, a serious issue arises about who should pay for the receiver’s work, which can be extremely expensive. Of course, somebody succeeding on appeal is entitled to recover their costs; the problem is: should they be entitled to recover the costs of Rolls-Royce lawyers who, as one prosecutor said to me, charge fees of an arm and a leg, when the public purse faces the consequences? That is against the background of the CPS undergoing cuts to its budget of 27% during this Parliament.
We do not want the fact that prosecutors face reduced resources on the one hand, and the risk involved in tackling the Mr Bigs on the other, to act as a disincentive. Let me cite a case that the CPS won in the Crown court, with the decision then overturned in the Court of Appeal. The issue was whether the threshold for restraint was the same as, or higher than, the arrest threshold. The order was for £1 million, and it had a significant impact on CPS lawyers’ view of whether they should take such risks in the future. We are therefore suggesting that a defendant should be able to recover costs only—I stress again—at legal aid rates, because otherwise we might end up with prosecutors becoming more risk averse, and with a disincentive to tackling large-scale restraint orders. The result would be to give sophisticated criminals ever-greater possibilities to evade the law.
I note that in the other place, on behalf of the Government, Lord Taylor of Holbeach said that this amendment “merited further consideration”. Lord Bates, again on behalf of the Government, agreed in principle on Report. We are retabling the amendment to probe the Government about their progress to date in light of those welcome statements in the other place.
The issue is clear. We cannot allow fabulously wealthy criminals hiring the most expensive lawyers to act as a disincentive to effective enforcement. If the Government believe, as I think they do, that that principle is right, I hope they will agree to provide for that in the Bill.
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
It is a pleasure to serve under your chairmanship. Mr Davies. Amendment 32 is perfectly sensible. In many other spheres of criminal law, costs are generally awarded at legal aid rates. There is nothing new or drastic about the proposal; it is entirely sensible, especially in light of several recent cases. I am not sure about Rolls-Royce lawyers—I am an Austin 7 myself—but, whatever the case, the amendment is entirely reasonable. It is wrong for the public purse to have to bear those huge extra funds, which are often not merited.
Karen Bradley (Conservative, Staffordshire Moorlands)
Clause 7 makes provision for compliance orders that allow the Crown court to impose any restrictions, prohibitions or requirements that it believes are appropriate to ensure that a defendant pays a confiscation order and that the order will be effective. The order will be made at the time that a confiscation order is granted. Breach of such an order will be contempt of court.
New section 13B of POCA provides for a right of appeal to the Court of Appeal and subsequently the Supreme Court either by the prosecutor against a decision by the court not to make a compliance order, or by the prosecutor or person affected by the compliance order against a decision to make such a compliance order. Such an appeal can include the terms of such an order. The provisions mirror the existing provisions in POCA on appeals in respect of restraint orders.
The hon. Member for Birmingham, Erdington referred to the test for a restraint order. Clause 11 deals with that, but I put on record that the current test for obtaining a restraint order is that there is reasonable cause to believe that the alleged offender has benefited from his or her criminal conduct. Case law and general operational experience have shown, however, that at the earliest stage of a criminal investigation, it can be extremely difficult to show belief, as there will often be little firm evidence at that time.
The hon. Gentleman said that the issue of costs was debated in the House of Lords, with particular reference to the recovery of costs claimed by the defendant in restraint order cases. He referred to the Messrs Bigs, if that is the correct term, using Rolls-Royce lawyers, and my hon. Friend the Member for South Derbyshire would like it put on record that, as Rolls-Royce is one of the major employers in her constituency, it is an extraordinarily wonderful British company of which we should be proud—[Interruption.] She mentions that it might be better than Bentley at Crewe, but I could not possibly comment, as Bentley is also a nearby employer to me in Staffordshire Moorlands, which is between Bentley in Crewe and Rolls-Royce in South Derbyshire.
Turning back to the reimbursement of defendants’ costs, we agree in principle that any reimbursement arising from a restraint hearing should be capped at legal aid rates. However, we understand that any changes in this regard will not need primary legislation as provision can be made under the criminal procedure rules. We have therefore undertaken to review the matter with the criminal procedure rule committee, and part of that review will cover the suggestion of a further capping of costs. I hope that that reassures the hon. Member for Birmingham, Erdington and that he will be content to withdraw his amendment.
Jack Dromey (Labour, Birmingham, Erdington)
I bow to no one in my admiration for Rolls-Royce, as I used to represent its workers. I just have a problem with cases such as the south London Mr Big—there are certainly Mrs Bigs as well—who drove a Rolls-Royce on the back of ill-gotten gains from crime.
The Minister’s response is very welcome indeed. There was common ground in the Lords, and there is common ground here. That sends an unmistakeable message that someone is absolutely entitled to hire a lawyer and to be represented, but that they are not entitled to hire the most expensive lawyers and then expect the public purse to pick up the tab. The Government’s response is constructive, and I beg to ask leave to withdraw the amendment.
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
I beg to move amendment 34, in clause 7, page 7, line 41, at end insert—
“13C Use of assets arising from the proceeds of crime for investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be used for the benefit of investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”.
This will almost be a rehash of a debate in the other place, but it is important that we have it. Amendment 34 is a probing amendment to give us the opportunity to have a general, albeit short, discussion about the principles that underpin it. I am indebted to Lord Harris of Haringey for first tabling the amendment in the other place, and I shall draw briefly on peers’ comments about it.
Amendment 34 would ensure that all proceeds of crime in the form of assets arising from the Proceeds of Crime Act 2002 would be used for the benefit of investigating and prosecuting, and for enforcement authorities, as well as being reinvested into the communities directly affected by the original crime. I am aware that a review is under way into the effectiveness of the asset recovery incentivisation scheme—ARIS—the results of which will no doubt impact on the matters before the Committee.
When Lord Harris’s amendment was first debated, the other place was informed by Lord Taylor, the then Minister, that the review was likely to be published before the Bill completed its passage through that House. He therefore advised that any debate on the amendment should be resumed at that time. On that basis, the amendment was withdrawn, yet the review has not been published to date. I thought it pertinent to retable the amendment, with some changes, to give the Government an opportunity to update the Committee on when they expect that review to be published.
As hon. Members will know, the ARIS was introduced in 2006. Under the scheme, the Home Office retains 50% of the assets recovered under any confiscation order, with 18.5% given over to investigation agencies, 18.5% to prosecution agencies and 12.5% to enforcement agencies. Conversely, if cash has been seized under the Proceeds of Crime Act, while the Home Office also retains 50%, all the remaining portion is given over to the police.
Quite apart from that rather opaque means of dividing the receipts, there is a further sticking point: it is left to the agencies themselves to determine how to allocate the resources. As far as I know, the Home Office issues no guidance about how that money should be spent. As Lord Taylor asserted in the other place, the Government have
“previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance.”
No one in this Committee or elsewhere would argue with that. However, that would presumably include the appointment of financial investigators to track the networks used by criminals and perpetrators of fraud and, in some cases, to identify victims. Investing in such asset recovery work is commendable, of course, but I would support going further by determining how the assets that arise from the proceeds of crime are reinvested.
In Committee, Lord Harris cited an example to illustrate why it is so important that investigators are able to uncover what has happened to the proceeds of a crime:
“The processes are not straightforward. When an order is made, the court must separately determine the value of the benefit the defendant received from criminal conduct and the available assets. The order value is the lower of the two amounts, so if a defendant is deemed to have benefited by £200,000 from selling counterfeit goods but only has assets of £10,000, only £10,000 can be confiscated. It is therefore critically important to get to the bottom of what has happened to the criminal proceeds, as part of the investigation. It is not just about getting a conviction but about getting that extra resource out.”—[Official Report, House of Lords, 2 July 2014; Vol. 754, c. 1738-1742.]
As I have indicated, I do not intend to press amendment 34, but we need a discussion on how to increase the amount of assets that are recovered from perpetrators of fraud, which is something with which I am sure that everyone will agree. The idea would be to punish offenders, and—far more importantly—to compensate the victims of the offences and start to rebuild trust in the affected communities.
We live at a time when trust between neighbours and within communities might be suffering and a regrettable number of vulnerable people fall foul of fraudulent schemes. Surely it is worth considering anything that can be done to improve transparency about how Government money is spent, to reduce red tape and, crucially, to improve the experience of victims of crime. The amendment would do that, or at least go part of the way to achieving it.
Sarah Champion (Labour, Rotherham)
It is a pleasure to serve under your chairmanship, Mr Davies. I will speak in support of the right hon. Member for Dwyfor Meirionnydd on the basis of a briefing from the Local Government Association. This is about fairness, as I hear that local authorities and the police, who put all the work in, would like to receive some reinvestment.
Local authorities most commonly use incentivisation payments to fund the posts of accredited financial investigators, who make a significant contribution to the work of trading standards, enhance investigations by providing intelligence support, undertake money laundering investigations, and ensure that the proceeds of crime are recovered through confiscation and forfeiture.
As the right hon. Gentleman said, there have been many examples of when AFIs had an essential role in identifying victims, meaning that they could be compensated. A major case involving rogue traders, undertaken by Cambridgeshire county council, resulted in the successful prosecution of 15 defendants, who received combined prison sentences of 40 years, and the award of a £250,000 confiscation order. That was all paid to the victims, who had been defrauded of their life savings.
Incentivisation payments are essential to enable local authorities to fund their AFI resource, without which they might be cautious about pursuing such complex and expensive litigation. The money also goes into community safety activities. The amendment is, I accept, a probing one, but I hope that the Government will build on comments made in another place and seriously consider the investment of the profits.
Jack Dromey (Labour, Birmingham, Erdington)
As I said at the beginning of today’s proceedings, reports by both the Public Accounts Committee and the National Audit Office suggest that recovery when an order is made is, to say the least, lamentable: less than £1 in every £100. Enforcement is therefore a key matter, and one element of it is incentivisation. There are problems with the working of the ARIS. One the one hand there is pressure on the various agencies that are concerned with it at regional level and, on the other hand, the incentive scheme involves 50% of the money going back to the Home Office. There is therefore a strong argument in favour of the amendment.
Two things are crucial in relation to asset recovery. First, the work should be effective, and there should be the necessary capacity, which is why, to go back to my earlier point, the reductions in the Crown Prosecution Service are unfortunate, to say the least. We think that the Government should be bolder by investing in what could be lucrative returns for the taxpayer and local communities.
That takes me on to my second point, because the right hon. Member for Dwyfor Meirionnydd was absolutely right when he argued that communities want to see the benefit of tackling crime in their communities. I pray in aid the experience of Mark Burns-Williamson, the police and crime commissioner for West Yorkshire, where that has been done very effectively. People there would argue—rightly so—that enforcement needs to be significantly better, but what they do is to hold out to the public in the West Yorkshire area the benefits of asset recovery in terms of not only policing, but funding, such as for community projects to divert people from crime and prevent crime in the first place. The right hon. Gentleman made an important point.
I know that the matter has been under active review and that the Minister chaired a meeting of the criminal finances board on 16 December. We look forward to hearing her statement to the Committee. We note that the right hon. Gentleman will not press the amendment to a Division, but we hope that the Minister will give him a constructive response.
Karen Bradley (Conservative, Staffordshire Moorlands)
The Committee will be aware that the use of the proceeds of crime recovered from criminals is managed under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme. ARIS is a non-statutory scheme that provides for the reinvestment of criminal assets forfeited under any provisions of the Proceeds of Crime Act 2002. These include cash forfeiture, civil recovery and taxation as well as confiscation, to which this amendment specifically relates. The scheme provides for 50% of the monies removed from the criminal economy through the use of POCA powers to be returned to the investigation, prosecution and enforcement agencies involved. Under the scheme, £237 million has been returned to front-line agencies over the last three years. That is a record amount. Although the use of ARIS funds is a matter for each agency, we have, as the right hon. Gentleman said, previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance and, where appropriate, in funding local crime-fighting priorities for the benefit of the community.
Some £80 million was returned in the last year alone, of which around £7 million has been spent on crime reduction and community projects designed to assist those communities affected to reduce the impact of crime in their area. The community projects funded in the last financial year have included beat the loan sharks campaigns, safer city partnerships and a centre to help vulnerable women.
The remainder of the money returned to operational agencies has been used to reinvest in asset recovery work, including the provision of specialist financial investigators and asset recovery prosecutors. Reinvesting in front-line law enforcement capability to attack criminal finances and remove the proceeds of crime directly contributes to our crime reduction objective and provides greater reassurance for communities.
The share of the moneys retained by the Home Office forms part of the Department’s core budget line and, as such, contributes to the £8.2 billion of police funding as well as the £54 million provided by the Department to tackle serious and organised crime. The Department’s spend on serious and organised crime includes provisions to pursue organised criminals, as well as work under the other strand of the serious and organised crime strategy, which is to prevent people engaging in, to increase protection against and to reduce the impact of serious and organised crime. It is not therefore money which simply disappears into a black hole with no benefit accruing to the front line. In addition, one of the key objectives of the criminal finances improvement plan is to ensure that ARIS works effectively. To this end, we have undertaken a review of ARIS which has sought the views of all operational agencies that use the powers under the Proceeds of Crime Act.
The points made by right hon. and hon. Members demonstrate the difficulties here. I want to see as much of the money confiscated from criminals as possible being used to compensate victims. If compensation orders go up, the amount of money available for ARIS is reduced. That is a contradiction. I do not want there to be any incentive or anything in the system that means that anybody is under the illusion that it is not right to compensate victims as a first priority.
There is also the issue of which agency benefits. The hon. Member for Rotherham made the point about the Trading Standards Institute, but it is the Crown Prosecution Service that actually recovers the money. How is the money appropriately split under the incentivisation scheme? These are the challenges and questions that we are faced with in reviewing this scheme, and we need to get them right. The most commonly voiced suggestion for change relates to the portion of funds allocated to each of the agencies. Allocating greater funds to front-line agencies has the potential to increase capability, and therefore improve the recovery of criminal assets. However, as I mentioned, does this mean the front-line agency that recovers the money or the front-line agency that carries out the investigation?
It also has to be said that the corresponding reduction would have a direct impact on Home Office-funded capabilities, such as the regional organised crime units and regional asset recovery teams. We would in effect be robbing Peter to pay Paul, with no corresponding increase in overall capacity to fight serious and organised crime. It is also worth saying that some forces investigate criminals who have more criminal assets. A straight allocation directly to the agency that, for example, carried out the investigation or carried out the prosecution could see a skewing. Certain forces would end up with a significantly increased capability, while other forces and agencies in this field that are currently working extraordinarily hard would suffer, through no fault of their own, simply because they do not have access to those criminals with large sums of criminal finance and criminal assets.
A number of respondents suggested that we allocate increased funds directly to regional capabilities as a way to support front-line activity to recover assets. This could further encourage a joined-up approach to targeting regional, serious and organised crime priorities through criminal finances activity and incentivising partnership working. Others proposed that funds are allocated on the basis of planned activity rather than on the basis of receipts. Providing funds on the basis of a proposal to invest in activity that builds capacity and capability, therefore resulting in an increase in recovered assets, could demonstrate a concrete link between ARIS and criminal finances performance.
The various proposals have been examined by the Criminal Finances Board, which I chair and which was referred to by the hon. Member for Birmingham, Erdington. As he said, the board considered a final report in December. The board’s recommendations will now be considered by my right hon. Friend the Home Secretary and other relevant Ministers. I hope to be able to announce the outcome of the review before the Bill completes its passage through this House and, at that stage, I undertake to write to members of the Committee. I hope that the knowledge that ARIS funds are already being invested in activity that directly supports communities and neighbourhoods affected by crime, as well as the current review of the scheme, will provide some reassurance to the right hon. Member for Dwyfor Meirionnydd—I thank the Solicitor-General for his advice on the pronunciation—and I hope that, on that basis, he will be content to withdraw his amendment.
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
I thank the Minister for the detail of her response, but it is a little bit disappointing because it seems to be business as usual. I do not want to anticipate that the statement she will make in the coming weeks will vary the situation. That said, I think this amendment was worth discussing, not least because of what the hon. Member for Birmingham, Erdington said about the need to ensure that local people feel part of this process. Nobody on this Committee would wish to see anything less than full compensation to victims of crime, especially nowadays with all these bank and financial scams going on across the whole of the UK. The matter is urgent. I hope that in due course further consideration can be given to localising as much as possible of the use of these assets, so that the situation can be made more efficient and more transparent and the local link can be properly established, as perhaps in some instances now it is not. Having said that, I did say at the beginning that this was a probing amendment. We have had a debate on it, and the Minister has responded in detail and has also said that a statement will be forthcoming in the following days or weeks. I am not sure how long she said but the matter is under review and no doubt we can come back to it at another stage.
Philip Davies (Conservative, Shipley)
With this it will be convenient to discuss the following:
New clause 12—Proceeds of crime located overseas—
‘(1) The Secretary of State shall commission a study of the effectiveness of the methods used by UK authorities and agencies to recover the proceeds of crime from overseas.
(2) The study mentioned in subsection (1) shall consider—
(a) the legal, financial and economic relationships, with particular reference to existing treaties and agreements, between the UK and those countries in which assets identified for recovery are located, and
(b) the statutory powers, and levels of resources available to UK authorities and agencies to enable an assessment of the degree to which such asset recovery is efficient, effective and economic.
(3) The Secretary of State shall require this study to report within 12 months of Royal Assent to this Act and shall lay a copy of any report arising before each House of Parliament.”.
Jack Dromey (Labour, Birmingham, Erdington)
Recent United States estimates have put the worldwide cross-border flow of proceeds of crime, including corruption, at $1.6 trillion. In 2011 the United Nations Office on Drugs and Crime estimated that globally only 1% of illicit money flows are detected. Additionally, a freedom of information request to the Serious Fraud Office that was tabled by the former shadow Attorney-General revealed that £37 million of unpaid confiscation orders is thought to be located overseas. Such is the sophistication of many criminals that they seek to disseminate their ill-gotten gains to countries in which there is limited or no collaboration between asset recovery agencies. While the Bill was in the other place, Lord Bates conceded on behalf of the Government that
“the tools for international recovery…have historically been underused”.—[Official Report, House of Lords, 14 October 2014; c. 131.]
We note that the Government have made some positive steps forward in trying to increase success in repatriating ill-gotten gains that are now located abroad, including the appointment of specialist CPS asset recovery advisers in Spain, the United Arab Emirates, the Caribbean and Europe. However, several issues lead the Opposition to believe that far more could be done to ensure that the UK is in the best possible position to increase its success in recovering far more assets located abroad.
When I recently tabled a parliamentary question asking the Minister about the value of assets recovered from overseas confiscation orders, she responded that it was impossible for the Home Office to supply such information. It strikes me as strange that, while the Government seek to highlight their recent efforts in strengthening their bilateral recovery regime, they do not have the ability to measure the success of that. Our very strong view is that serious thought should be given to drawing up a more radical approach to mutual recognition arrangements, building on the existing arrangements in the European Union and further afield—in fact, globally. This would mean that orders made in the UK could be enforced in another jurisdiction without the need for those charged with enforcing them to re-litigate the matter, saving time and money, and potentially significantly improving results. It is regrettable that the UK has not signed up fully to the mutual recognition arrangements in the European Union and we believe that it needs to do so sooner rather than later. That should then be the starting point for negotiations with jurisdictions further afield.
In turn, it seems that the Government have not done enough to act upon mutual legal assistance requests to us. Last year, the former head of the UK Financial Intelligence Unit—part of the National Crime Agency—indicated that, when an investigation was initiated from the victim country and moneys were suspected to be in the UK, the request went through all the proper channels but there was limited motivation to comply. The assessment was that there was a mind-set that we could just be giving ourselves a headache. If we seek to recover, in Europe or globally, moneys accrued through illicit activity in the UK and which have been moved overseas, should we not also be serious in our approach to investigating moneys stolen in other countries that are now within the UK? Such an approach would clearly help to foster greater working relationships with other countries.
Furthermore, it is disappointing that as part of the 2014 decision, the UK Government have decided to exercise their right to opt out of a number of European Court of Justice and European Commission measures and rejoin only 35. Of those selected to be rejoined on 1 February 2014, MLA features only on the police elements of the 1985 Schengen agreement to do with the provision of cross-border assistance, surveillance and cooperation on tracking narcotic drugs. Clearly, there remains a problem with asset recovery within Europe, let alone outside of it. All of that taken together leads us to believe that the Government can and should do far more to thwart the efforts of those Costa del Sol or Caribbean bank robbers who are living a life of luxury abroad due to exploiting loopholes in our legislation. That is why we ask for the consultation to take place.
The other place also had a constructive debate on this issue and we hope that the Government will respond positively to the new clause.
Karen Bradley (Conservative, Staffordshire Moorlands)
New clause 12 seeks a formal study on the effectiveness of international co-operation in the recovery of proceeds of crime from overseas. As we emphasised in the serious and organised crime strategy, international co-operation with our partners overseas is essential to the effective recovery of assets held outside the UK. As we all know, criminals can now move money and assets quickly out of the reach of law enforcement agencies in the UK. That means we need our foreign counterparts to help us to freeze and recover the proceeds of crime. In return, we can help those jurisdictions that ask the UK for assistance.
I will come on to the other points in more detail, but the hon. Gentleman raised the issue of the countries with which we are doing excellent work. Spain is one such, and I want to tell the Committee about the visit I made there early last year. The CPS, together with its Spanish equivalents, hosted an asset recovery workshop where it went through real life case studies. Much of the difficulty is in understanding the different legal systems. A prosecutor in the UK will say, “This is what we need to do to recover the asset here in the UK. These are the legal steps we take,” but if we do not understand what legal steps are required in Spain where those assets are located, we cannot effectively get those assets back. It was an incredibly useful, two-day workshop with senior prosecutors from both the UK and Spain, law enforcement bodies and other officials. It went through how the process works in detail and is leading to real and genuine results.
The hon. Gentleman also mentioned the UAE, but I want to mention the Arab spring in relation to asset recovery, but on a different side of things—moneys in the UK that we have frozen, which belong, quite rightly, to the people who live in those countries that went through the Arab spring; Tunisia and Egypt, for example. The difficulty we have is that we have frozen their money, but, under our legal system, we need evidence of local criminal activity to release it and return it, quite properly, to the people who it has been stolen from; the people of Egypt and Tunisia.
We are working incredibly hard to ensure that happens, but I am sure the hon. Gentleman and the Committee will understand that there are difficulties during a regime change—and post-regime change—in trying to get the criminal evidence that is required under our courts’ rules to ensure that moneys can be recovered. I assure the Committee that the Government are committed to doing all we can on criminal finances. Whether we are dealing with UK criminals who have hidden their money overseas or foreign criminals who have hidden their money in the UK, it is incumbent on all of us to ensure that that money is taken from the criminals and given back to the people it was stolen from. In the case of the Arab spring, that is the general population of those countries.
Improving our performance overseas is a key objective in the criminal finances improvement plan. Progress against that plan is monitored at the quarterly Criminal Finances Board. We accept that, historically, international co-operation on asset recovery has been poor, with some countries being willing—or unwilling—safe havens for criminal assets. The usual way that international asset recovery works is that the country that recovers the assets retains them unless there is a formal asset-sharing mechanism in place that allows for moneys to be returned. Countries may agree to share assets on a case-by-case basis, or there may be an existing multilateral or bilateral agreement for asset recovery and sharing in place.
The UK is already party to a number of multilateral international agreements that contain asset recovery provisions. We have 37 bilateral mutual legal assistance agreements with other countries including such provisions. We continue to work with the Foreign and Commonwealth Office to identify further priority countries for asset recovery and to negotiate and sign further bilateral agreements where appropriate. As of 2 December last year, the UK has rejoined the EU framework decisions on the mutual recognition of freezing and confiscation orders, as part of the 2014 block opt-in decision. Those instruments include asset-sharing provisions and should facilitate the enforcement of UK confiscation orders.
Furthermore, we recently signed the Council of Europe convention on laundering, search, seizure and confiscation of the proceeds from crime and on the financing of terrorism 2005—the so-called Warsaw convention. That should help the UK to obtain asset-sharing agreements and encourage other jurisdictions to recognise the concept of UK civil recovery.
Therefore, we now have in place tools for successful co-operation, but it is true that historically they have been underused both here and overseas. We have seen improvements over the past few years, but we can do more to encourage their use. That is why, as I said earlier, we are engaging with a number of our priority countries, including Spain and the United Arab Emirates.
Importantly, we have seen the first repatriation of assets from the UAE of some £300,000 and we hope that more will follow shortly. Furthermore, the Crown Prosecution Service has posted dedicated asset recovery advisers overseas and the UK will provide targeted assistance to international counterparts, including through our network of overseas advisers where asset recovery advisers are not currently deployed.
We are already working to improve our performance on international asset recovery and reviewing processes and we are committed to making further improvements where necessary. We already see some improvement on recovering assets from overseas. It is therefore unnecessary to mandate a formal statutory study, because that would serve no good purpose. I hope that, having heard about the progress that we have made in this area, the hon. Gentleman will be content to withdraw his new clause.
Clause 10 - Default sentences
Jack Dromey (Labour, Birmingham, Erdington)
I beg to move amendment 30, in clause 10, page 10, line 40, at end add—
“(3A) The Secretary of State shall, within 18 months of this Act receiving Royal Assent, commission a study of—
(a) the effectiveness and impact of the ending of early release for fine defaulters owing in excess of £10 million, and
(b) the potential costs and benefits of extending the policy to those who owe less.
(3B) The Secretary of State shall require this study to report within 12 months and shall lay a copy of any report arising before each House of Parliament.”.
A report released by the Public Accounts Committee in March 2014 said that too many criminals were choosing to go to jail rather than pay their confiscation orders. It found that £490 million was owed by criminals who had served or were serving more time in prisons for non-payment, which suggests that existing policies on sentences and early release provide little deterrence.
While we welcome the Government’s increase in the duration of default sentences in the Bill as a step in the right direction, the amendment would require the Secretary of State to commission a review on the effectiveness of ending early release for those who have orders in excess of £10 million, with a view to lowering that threshold if it would be an effective deterrent.
Labour peers tabled an amendment in the other place that would have brought about an immediate lowering of that order value. They believe that it is not just those who steal multiple millions of pounds who should serve their full sentences, but criminals more generally who feel it is a viable option to live off wealth accrued through illicit and nefarious means. We want to send a strong message to criminals, whether international or local, that crime does not pay. However, the Government objected to that amendment. Not happy with having provided merely one rebuttal, they issued several subsequent rebuttals and statements, all of which said different things.
The initial impact assessment released by the Government stated:
“With no information as to how offenders might respond to the changes in default sentences, no changes have been assumed”.
On 16 July, in a letter to Lord Rosser, Lord Taylor of Holbeach noted that ending early release for all those with outstanding confiscation orders would
“require an additional 900 prison places, at a cost of some £25 million per annum by 2033”.
We then saw but a week ago the release of the Conservative party’s dossier of alleged Labour spending commitments. That document stated:
“There would also be an immediate capital cost to prepare for the increase in prisoner numbers as a result of this policy arising from 2016/17 onwards.”
It went on to say:
“In its steady state, it would lead to 880 additional prison places.”
It was claimed that the policy it would cost £19 million by 2019. That was on a Monday morning; by the time we got to Monday evening, the Home Secretary was saying something completely different. In the Chamber, on the very evening the dossier was released, there was an about turn, as she said:
“We will review the impact of that change on offender behaviour and, if, as we expect, it leads to a greater proportion of higher-value orders being settled on time, we will consider using the order-making powers in the Bill to strengthen the default sentences for other lower-value confiscation orders.”
Later in the Second Reading debate, during which there were good contributions from Members on both sides of the Chamber, the hon. Member for Enfield, Southgate (Mr Burrowes) rightly asked
“why the Government have decided to remove early release provisions only for those with £10 million confiscation orders, and not for those with lower levels.”—[Official Report, 5 January 2015; Vol. 590, c. 58-97.]
Is it not strange that on the very day that the Conservative party stood in front of the media and sought to ridicule Labour’s spending commitments, it proceeded that evening to ridicule its ridiculing of Labour’s proposals? If all that was not bad enough, the Conservatives said that they arrived at the costings in the spending dossier, which differ from the costings in the initial response from Lord Taylor of Holbeach, based on
“data from a financial database; it is not linked to sentencing information so we do not have information on the actual number of sentences for default imposed...Therefore we have assumed that, where a confiscation order is not paid, the offender receives a prison sentence for non-payment.”
That assumption is completely wrong. A response to a freedom of information request to the Ministry of Justice shows that, in reality, only 5% of those who refuse to pay back profits from crime receive a default sentence, not 100%, as assumed in the previous statement. Frankly, the Government are confusing themselves and the public.
We hope that the Minister will clear up the fog surrounding the issue. We are not pushing for an immediate reduction in the benchmark for the ending of early release, but instead asking for a review of the Bill’s provisions so that if and when it is fully proven that such measures will act as a deterrent—we believe they will—we can apply the sanctions to more of those benefiting from their ill-gotten gains beneath the £10 million trigger. We hope that, as the sun comes out, the fog will lift and the Minister will agree, on behalf of the Home Secretary, that she should agree with what was said last Monday night and consent to the proposed review.
Karen Bradley (Conservative, Staffordshire Moorlands)
Under this Government, around £746 million of criminal assets have been seized under the Proceeds of Crime Act, which is more than ever before. Some 60% of confiscation orders for sums up to £500,000 are discharged within six months. We recognise, however, that more needs to be done to ensure that confiscation orders, especially higher-value orders, are effectively enforced.
One of the ways in which the Proceeds of Crime Act incentivises the prompt settlement of confiscation orders is to provide for default prison sentences when someone fails to pay. Nearly 90% of confiscation orders under £1,000 are discharged, which suggests that, at least for lower-value orders, the availability of default sentences is a deterrent. However, payment rates decline as the value of confiscation orders increase. For orders over £1 million, only around one in five are settled in full. Indeed, there is some evidence, albeit anecdotal, that serious offenders would rather spend longer in prison if it meant that they still had their ill-gotten gains at the end of their sentence. We therefore need to toughen up default sentences to provide further encouragement to career criminals to pay up, and clause 10 does just that—it increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years. For orders over £1 million, the maximum sentence will increase from 10 to 14 years.
As well as increasing the maximum default sentences for higher-value orders, we are changing the early release arrangements to which amendment 30 relates. At present, those serving a default sentence are automatically released at the halfway point in their sentence. Such early release arrangements only serve to reinforce the view held by some offenders that a default sentence is a price worth paying to protect their criminally acquired assets from confiscation. Automatic early release at the mid-way point of a default sentence significantly reduces the intended deterrent effect of such sentences, particularly for higher-value orders. To address that, clause 10 will end automatic early release for those serving a default sentence for failing to pay a confiscation order valued at more than £10 million. Taken together, the changes will mean that in such a case an offender will serve up to 14 years in prison, rather than the current five years. That significant increase will make offenders think hard about serving such a long sentence, rather than paying the sum owing under a confiscation order.
We want to keep the impact of the changes under close review. We expect them to lead to a change in offender behaviour, but it is right that we proceed in a prudent and measured way on the basis of clear evidence about the effectiveness of the provisions. We should be wary of falling into a trap whereby the state not only fails to enforce a greater proportion of confiscation orders, but bears the cost of offenders spending longer periods in custody. If the increases in maximum sentences and the ending of early release for the highest-value orders prove effective, however, clause 10 provides a mechanism to increase sentence lengths—including by introducing minimum default sentences—and time served for lower-value orders. The two order-making powers in the clause will be subject to the affirmative procedure because it is right that any changes to the sentencing framework are subject to close scrutiny. Given that we have included those order-making powers in the Bill, it follows, as I have said, that we want to keep the effect of the changes to the default sentencing regime under review. To that extent, I agree with the spirit of amendment 30, although we clearly do not need to place a requirement to undertake such a review on a statutory footing.
As a Government who are committed to reducing the deficit, however, we need to proceed with appropriate caution. We have costed the provision—and, indeed, all the others in the Bill. As we set out in the explanatory notes, the changes to default sentences for which clause 10 provides will, we estimate, require an additional 60 prison places by 2033 at a cost of £1.78 million a year. Ten of those places relate to the ending of early release for confiscation orders of more than £10 million. In contrast, the Opposition’s policy, which the hon. Gentleman described, is to end early release across the board. If there was no change in offender behaviour, the Government estimate that that policy would require an additional 900 prison places at a cost of some £25 million a year by 2033. If the hon. Gentleman wants to know the potential cost of extending the policy, it is that, and we do not need a review to tell us.
It is all very well for the hon. Gentleman to say that there will be a change in offender behaviour. That may well be the case; indeed, we hope and expect that it will be. However, we do not know that for certain, so it is right that we test the proposition by starting with high-end confiscation orders. If the increase in default sentences and the ending of automatic early release lead to more offenders paying their confiscation orders on time and increased receipts, I will be the first to cheer. We cannot, however, make policy on a wing and a prayer. As I have said, we need to test the proposition and exercise the order-making powers only when we can be confident that doing so will lead to a recovery of yet more proceeds of crime, rather than a substantial increase in the number of defaulters in prison. The Government’s approach is the responsible and prudent one, so I have no hesitation in inviting the Committee to reject the amendment.
Jack Dromey (Labour, Birmingham, Erdington)
First, there is common ground on the need to strengthen the arrangements on default. Secondly, we note the current proposal in respect of the £10 million threshold. I think that the general public—I often refer, in the context of policing, to Joe and Josephine Soap in the Dog and Duck in Erdington—would struggle to understand why orders of £5 million, £2 million or £1 million would not be likewise caught. That said, the Minister makes the point about the order-making powers and says that the matter should be kept under review at the next stages, and it is welcome that she agrees with the spirit of our amendment.
All I would say in conclusion is that Joe and Josephine Soap in the Dog and Duck in Erdington would not expect us to play party political games on this issue. They want us to be serious, to go after serious and organised criminals and to recover their ill-gotten gains so that they can be reinvested in our society. They would not expect us to come out with statements in the morning that we then change in the evening. Having said that, I am sure that that is now behind us and that we can move on to a more intelligent debate as the review proceeds. I beg to ask leave to withdraw the amendment.
Clause 13 - Conditions for exercise of search and seizure powers
Philip Davies (Conservative, Shipley)
With this it will be convenient to discuss Government new clause 7—Exemption from civil liability for money-laundering disclosures .
Karen Bradley (Conservative, Staffordshire Moorlands)
In the serious organised crime strategy, we highlighted the need to strengthen partnership working with a wide range of sectors of society. We have, for example, been working with the financial sector to prevent the use of financial systems for criminal ends, including, in particular, to launder the proceeds of crime.
To counter the risk of money laundering, part 7 of the Proceeds of Crime Act 2002 places obligations on the regulated sector, such as banks and other financial institutions, to submit suspicious activity reports—SARs—to the National Crime Agency. The intention behind those reports is to alert law enforcement agencies that certain client activity is in some way suspicious and might indicate money laundering or terrorist financing. Some 354,000 SARs were submitted to the NCA in the year to September 2014. They provide valuable information on potential criminality and can help to protect organisations against the risk of money laundering.
Part 7 of POCA provides for a particular category of SARs—so-called consent SARs—when a person or business has reasonable grounds to suspect that a transaction might be related to money laundering. In such cases, the person or business may seek the NCA’s consent to proceed with the transaction to avail themselves of a defence against a money laundering charge. Some 14,000 consent SARs are submitted each year.
The NCA has seven working days to respond to a consent SAR. If consent is refused, it has a further 31 calendar days to investigate the transaction. While the reporter awaits the NCA’s decision on consent, the activity or transaction must not proceed. The process can therefore necessarily hold up the financial transaction in question.
The consequences for a customer whose request or transaction is so delayed may go beyond mere inconvenience and lead to financial loss. A customer who has suffered such loss may seek to take legal action against a bank or other institution to recover any losses or otherwise to make a claim for damages. We recognise the concerns of customers, but institutions that have suspicions regarding a transaction and report them to law enforcement authorities in good faith, as the law requires them to, should not be liable for civil claims for damages.
We are, in fact, obliged under article 26 of the EU third anti-money laundering directive to protect those who report suspicions of money laundering in good faith from incurring civil liability for doing so. The common law currently affords such protection. The Court of Appeal held in the case of Shah that although customers can require institutions to prove that the suspicion that gave rise to the SAR was reasonable, the institution cannot, provided the suspicion is so proved, be held liable for loss suffered by the customer as a consequence of the institution’s failure promptly to carry out the customer’s instructions. Following consultation with the British Bankers Association, regulators and others, we have concluded that there would be an advantage in placing that civil immunity on a statutory footing to provide for greater legal certainty. New clause 7 is directed to that end.
I stress that, as now, immunity from civil proceedings will apply only when a SAR is submitted in good faith. Financial institutions and others submitting SARs will continue to be liable for any negligent or malicious conduct. We do not expect those in the regulated sector to use this change as a justification for submitting defensive SARs simply to cover themselves against possible action. We expect banks and other institutions to take all appropriate steps to identify transactions that they believe to be suspicious, and to report only those about which they have genuine concerns.
We will work with the NCA and the Financial Conduct Authority to ensure that the change to the law does not lead to an abuse of the process. We believe that this amendment to the Proceeds of Crime Act will strengthen the UK’s compliance with the EU’s third anti-money laundering directive and increase the regulated sector’s trust and confidence in the SARs regime. I therefore commend it to the Committee.
Jack Dromey (Labour, Birmingham, Erdington)
We support the Government introducing this provision. We spoke earlier about the rapidly growing threat posed by serious and organised crime, and at the heart of that is money laundering. Elsewhere in the Bill, we will be talking about a mandatory duty to report. Here, we are not talking about that in quite the same way. However, following, we think, correct representations from the British Bankers Association that its members acting in the public interest should be protected, we believe that this is a sensible move to make, so we are happy to support the proposals.
Clause 40 - Unauthorised acts causing, or creating risk of, serious damage
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
I beg to move amendment 35, in clause 40, page 34, line 40, at end insert—
‘(1A) For the purposes of subsection (1)(a) an unauthorised act can include installing spyware software onto a computer, where the owner’s explicit consent has not been given.”.
Philip Davies (Conservative, Shipley)
With this it will be convenient to discuss amendment 36, in clause 40, page 35, line 13, at end insert—
“(g) harassment or alarm or distress which has a substantial impact on the victim’s day-to-day activities.”.
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
Clause 40 adds to the Computer Misuse Act 1990 a new list of unauthorised acts, which are defined as acts causing “serious damage”. I thought it might be helpful to specify that an unauthorised act can include installing spyware software on a computer unless the owner of the computer has given explicit consent.
Members of the Committee may be aware that in 2011-12 I chaired a cross-party group of Members of both Houses that looked into reviewing the law on stalking. During our inquiry we took evidence on cyber-stalking, and I learnt that 50% of all crimes in the UK now involve a cyber element. That is a shocking statistic.
Cybercrime is becoming more and more prevalent. We have all had cases in which vulnerable people—often, though not necessarily, elderly people—are preyed upon by someone pretending that somebody has defrauded them at their bank and they had better move their money. I have had many of those cases in the past few weeks; it is troubling. Age Concern reckons that such crimes are worth between £10 billion and £15 billion per annum—again, that is absolutely staggering. Only a small number of the people affected will ever get their money back.
We know how many people have access to the internet, through computers and telephones—for the purposes of the Computer Misuse Act the definition of a computer can include telephones. It is no wonder that more and more criminals perpetrate crimes on computers. Those crimes can vary from libel and fraud to stalking and even domestic violence.
It could be argued that installing spyware software is already an offence under the Computer Misuse Act since it is necessary to install the software on the computer or phone, and doing so is an unauthorised modification of the device, as well as being a means of obtaining data from it. Amendment 35 is intended as a probing amendment, as I want the Committee to discuss how we can improve the number of prosecutions of perpetrators who have been doing that.
Perpetrators can install the software on a device either in person or via a virus. They can disable preventive software that would otherwise protect devices, such as firewalls or anti-virus software. Perpetrators of stalking are sometimes able to enable location services remotely on other people’s devices, so that they can track where the person is. They can also send texts or e-mails that appear to come from the victim but of course do not, or change the privacy settings of victims’ online profiles, making them vulnerable to hackers. I understand that it is even possible from a remote location to enable a webcam to broadcast, unknown to the user, so that the victim is effectively broadcasting themselves on the internet without being aware that they are doing so. I am sure members of the Committee will agree that the implications of all those acts are worrying.
Amendment 36 has the same rationale of probing behind it. It would amend clause 40 to add to the list of acts causing damage to human welfare that subsection (2) inserts into the Computer Misuse Act behaviour that causes
“harassment or alarm or distress which has a substantial impact on the victim’s day-to-day activities.”
I have deliberately used parts of the definition of stalking in section 2A of the Protection from Harassment Act 1997, which was passed in 2012 as a result of our inquiry’s work. We argued then that stalking should be defined in relation to the actual impact of the crime on its victim. In that sense, it seems that stalking should certainly be classified as a behaviour which can cause “damage to human welfare”. It is certainly relevant in this case, as so many perpetrators of stalking engage in cyber-abuse of their victims.
I would also welcome some clarification from the Minister as to whether victims are protected under the Computer Misuse Act 1990 if the applications affected are in the cloud, as opposed to being on the victim’s computer or telephone. If an offender hacked into the cloud, would that qualify as a misuse of the computer or device on which the cloud services were running? Given that most of the cloud’s services in question are offshore, I presume that that would introduce other complications. I would welcome the Minister’s comments on the amendments. I have no intention of dividing the Committee on them, but I believe that they are important and I hope that she will respond to them in detail.
Steve Reed (Labour, Croydon North)
It is a pleasure to serve under your chairmanship, Mr Davies, not least as you have the entire job of chairing. Normally I am co-chairing our all-party parliamentary group with you. I want to make a few comments about the amendments tabled by the right hon. Member for Dwyfor Meirionnydd. There is a gap in the Home Office’s thinking on cybercrime; that is evident in the Bill. We have heard plenty about the serious threat to national security caused by cyber-attacks but little on what we might term low-level crime which affects individuals and businesses.
Amendment 35 specifies that
“an unauthorised act can include installing spyware software onto a computer”.
That is in line with Labour’s thinking on the subject. The term “computer” perhaps needs to be a little broader, to encompass the other devices by which people may access the internet. In terms of securing the owner’s “explicit consent”, we need to encompass those circumstances and occasions when an individual is tricked into giving their consent to harmful software being installed on their computer without them fully realising the intentions or what the software will do. Our proposed new clause 14 would see a responsibility placed on internet service providers to report to their users where such behaviour is evident from the usage data to which they have access.
Amendment 36 is to be welcomed, because it might reasonably be taken to focus on low-level crime. The Government have not looked at that properly, despite the opportunity presented by the Bill. Surveys tell us that business crime, in particular, is rising, yet it is not included in the official figures. Figures from Financial Fraud Action UK show that between 2013 and 2014, online banking fraud went up by 71%, e-commerce fraud went up by 23%, card fraud overall went up by 15% and half-year fraud losses on UK cards are now at their highest—£247 million—since 2008. In addition, remote banking fraud went up by 59%.
Andy McDonald (Labour, Middlesbrough)
As we have been sitting here, I have received an e-mail telling me that my tax return was incorrectly filled out. It is from John Smith, who draws to my attention some mistakes made. It asks me to press “here” to “follow the advice of the tax specialist”. I do not exactly have donkey ears, so I will not be pressing “here” or anywhere else.
Steve Reed (Labour, Croydon North)
I congratulate my hon. Friend on spotting that attempt to defraud him. I hope that other people will learn from his example and be very wary when receiving scam e-mails and messages.
There are serious implications for the small and medium businesses we rely on, as well as for the individual, who is increasingly turning to the internet for shopping. We have seen that particularly over the Christmas and new year sales period. It is those people who are being let down by the Government, who are being too complacent about this form of crime, which is still rising. Just last week, the Minister for Crime Prevention said:
“Up to now, cybercrime has been a lesser interest.”—[Official Report, 5 January 2015; Vol. 590, c. 10.]
There is a shared responsibility to tackle cybercrime. It is for the Government to show clear leadership and ensure that legislation is up to date, and it is for the police to investigate and prevent cybercrime. However, internet service providers have an important role to play in educating their users and warning them of potential threats to what amendment 36 terms “day-to-day activities”, which for most of us could be something as simple as online shopping. Indeed, it is in the face of those threats to daily activities that the Government’s lack of leadership on cybercrime is most evident. A report last year by Her Majesty’s inspectorate of constabulary said that
“officers told HMIC that they are poorly equipped to provide advice to the public about what they need to do to keep themselves safe online.”
The report further found that
“the gap between the threat and police capability is widening.”
It said:
“The capabilities to tackle cyber crime should not be the preserve of the specialist officer; every police officer needs an understanding of it and the capabilities to deal with the cyber crime they will encounter.”
The report stated:
“HMIC found that the police’s capacity and capability to respond to national threats was stronger in relation to some threats than others.”
It concluded:
“The police service must very soon be able to operate just as well in cyberspace as it does on the streets today.”
Protecting the day-to-day activities of individuals and businesses that are targeted by cybercriminals should be at the core of any Government strategy on cybercrime. It is an important principle and one that we support. I look forward to what I hope will be the Minister’s positive comments on the amendments.
Karen Bradley (Conservative, Staffordshire Moorlands)
It is a pleasure to be back here under your chairmanship, Mr Davies. I thank the right hon. Member for Dwyfor Meirionnydd for bringing the issue of harassment to the Committee’s attention through the amendments and I pay tribute to the work that he has done, particularly in the all-party group on stalking and harassment.
The amendments may not be, strictly speaking, what we have in mind when we think about the scope of clause 40, that being unauthorised acts causing, or creating risk of, serious damage, but it is right that the Committee should recognise the devastating impact that online harassment can have on victims. I think that we have all seen, as constituency MPs, examples of constituents who have suffered abuse online that would never have happened in the street. People feel that because it is online, they have anonymity; they appear to become desensitised to what is being said. We have to be clear that if it is illegal offline, it is illegal online. The Government are absolutely clear that abusive and threatening behaviour online, whoever the target, is totally unacceptable. I repeat: what is illegal offline is also illegal online. We have robust legislation in place to deal with internet trolls, cyber-stalking and harassment and perpetrators of grossly offensive, obscene or menacing behaviour.
The hon. Member for Croydon North, whom I welcome to his place—it is very nice to be debating with him, too—talked about fraud, which is not strictly speaking what we are talking about with the amendments, but it is worth making the point. He talked about Financial Fraud Action UK. I visited its offices a few months ago and am very impressed by the work that it does to keep us all safe online. We can all do more to raise awareness of that, and I would be very happy to work with the hon. Gentleman on ideas about how we can get messages to our constituents, through our constituency offices, about things that they should do.
I will give an example. I know that we are talking about activity online, but at the moment there are a lot of vishing phone calls, whereby fraudsters are calling people and saying that they are their bank or one of their financial providers and they are staying on the line when people do not put their phones down long enough to disconnect them. I want us all to raise awareness of that, because if people put their phone down for five minutes, they will disconnect the call, which means that the fraudster or scammer cannot get the information from them. We should all work hard to do that. I would welcome working with Opposition Front Benchers and Government colleagues to make sure that we raise awareness of such things.
We should also all take simple measures online—as GCHQ put it, the simple disinfectant that it estimates could protect us all from 80% of online attacks. That includes making sure that we have up-to-date antivirus software and have installed protection against malware, and that we update and have complex passwords. I know that it is a pain, when people come into work in the morning, to have to log in using a three-word password that has numbers, letters and characters in it, but it is absolutely essential. I have seen too many examples of people who have been caught out, because criminals are using the internet to try to attack us all.
We also need to be clear: in many cases, it is the same crime online as it is offline—it is fraud, financial loss, or a personal attack—but because it happens online, criminals are able to access so many more of us. If somebody walking down the street has paint thrown at them, that is clearly abusive behaviour. The equivalent behaviour online can be done to millions of internet users in one go, whereas the paint might only be thrown at one person. The access for criminals to hurt us all online means that we have to be smart, clever and ahead of the game. I can also assure the Committee that the people I have met—those in law enforcement and others—who are helping us to fight this crime have very big brains. I know that our people with very big brains have bigger brains than any of the criminals, so we need to work together to make sure that we raise awareness and that our constituents are safe.
Sarah Champion (Labour, Rotherham)
I agree that law enforcement people have very big brains, but does the Minister think that they have big enough budgets, because that is the one thing that I see they are lacking?
Karen Bradley (Conservative, Staffordshire Moorlands)
I will come on to the amount of money that the Government have invested in cyber. The examples I have seen of cybercrime units—the national cybercrime unit that is housed at the National Crime Agency and the regional cybercrime units that are housed in the regional organised crime units—have significant resource. We have made sure that resource is protected for cybercrime. We need to make sure that all law enforcement understands that even if something happens online, it still has a fingerprint. There is a still a way to track and detect that crime. The investigation techniques, in the broadest sense, are the same for all types of crime. It is just that the way of finding that fingerprint is not the traditional powder that might have been used previously; it is done using online technology.
There are opportunities from digital for us all. For example, I suspect that we all have a wi-fi box in our homes. The previous Minister for Crime Prevention, the right hon. Member for Lewes, will know well that when a criminal breaks into someone’s house carrying a smartphone, that smartphone will try and access the person’s wi-fi. Their wi-fi therefore has a digital fingerprint of that smartphone number. We need to make sure that that sort of intelligence is being used—as I know it is—by police officers who come and investigate the break-in, and that they are using the digital opportunities to track criminals as well as the traditional investigation techniques that they have always used.
While I am talking generally about cybercrime, I want to mention Action Fraud, which has been talked about at some length. I am proud that Action Fraud is now housed in the City of London police together with the National Fraud Intelligence Bureau. It is important that we put Action Fraud’s capabilities under the roof of the City of London police, which has such expertise in investigating fraud. I visited Action Fraud and I am very impressed by the team working there, because Action Fraud is a national repository—or depository, depending on whether they are holding the information or receiving it—and it has the ability to take all the information about all the fraudulent crimes committed across the country, store it in one place and spot the indications and common threats. It might involve the same bank account or the same mobile phone number. People who report to Action Fraud will assist in making sure that information and intelligence about crimes is available to the law enforcement agencies so that they can build a picture. Action Fraud builds that picture and makes sure that the most appropriate local police force investigates the crime. I think that that is right.
A constituent who has been the victim of online fraud might come to me in Staffordshire Moorlands. They do not know where the fraudster was located, but they have a bank account number and they might have a mobile phone number. We give that information to Action Fraud, which can then say whether it is the same mobile phone and bank account number that was implicated in a fraud that happened in Middlesbrough, Rotherham, Croydon, or Birmingham, and then it can start to track from where the mobile number is being used and where the bank account is.
Staffordshire police do not have to investigate the crime, even though the victim was in Staffordshire. The police force local to where the bank account is held can do the investigation. That is the theory and practice behind how Action Fraud operates. I have said this in the House and I will continue to say it: I want to see Action Fraud communicate that to victims. Victims of crime want to be told that the crime is being taken seriously, and they want to understand how the information is disseminated to the right local police force to investigate the crime. Again, there is much that we can do to ensure that that information is given to victims of crime so that they have the security they need.
The hon. Member for Croydon North mentioned a comment in the House last week about cybercrime being “a lesser interest”. I think that the Minister for Crime Prevention, my right hon. Friend the Member for Hornsey and Wood Green (Lynne Featherstone), did not intend for it to sound the way it did. I think she was trying to say that it is something we are getting to grips with to understand more. Cybercrime has never been of lesser interest—crime is crime; it does not matter where it happens—but perhaps, from a police point of view, it has been difficult to understand. We need to get more training through the College of Policing and elsewhere—I will talk about that shortly—to make sure that local police understand about cybercrime and are not scared by it, but know how to deal with it.
The Government recognise that laws to deal with internet abuse are not sufficient on their own. Police and prosecutors need the capacity and knowledge to work within a complex legal framework to meet the jurisdictional challenges of the online world, and to understand and balance legitimate concerns about civil liberties. To support this, in July 2013 the Crown Prosecution Service published guidelines for prosecutors on the approach that they should take in cases involving communications sent via social media. The guidelines seek to draw the difficult balance between protecting freedom of speech and acting robustly against communications that cross the threshold into illegality. The College of Policing also wrote to all chief officers in July 2013 with advice on tackling online abuse.
The hon. Member for Croydon North talked about the definition of a computer. I have written to my hon. Friend the Member for Norwich North (Chloe Smith) about her contribution on Second Reading. I hope all members of the Committee have a copy of the letter, which explains the definition of a computer and how the law would define it so that it includes smartphones and tablets, and not just a desktop computer.
We recognise that there is still more to do, and we continue to work with the police and the Crown Prosecution Service to raise awareness and improve professional knowledge. Since October 2012, the College of Policing training package on investigating stalking effectively has been completed more than 56,000 times by police officers. The College of Policing is also undertaking a review of how stalking incidents are investigated by the police, which will include how the police understand what constitutes a course of conduct in policing, how the police support victims, and further training on the appropriate use of police information notices.
To ensure prosecutors’ knowledge is continuously refreshed, in April 2014 the Crown Prosecution Service launched a specific e-learning module on stalking, which focuses on victim support, working with the police, and ensuring that a strong case is built from the start. More than 1,500 Crown Prosecution Service staff have completed training in stalking.
Amendment 35 would add installing spyware to the definitions of an “unauthorised act” for the new offence. The circumstances of installing spyware on a computer without the owner’s consent is already covered by a combination of the arrangements in clause 40 and the definitions in the Computer Misuse Act 1990, particularly in section 17, which provides for the interpretation of that Act which also applies to clause 40.
Amendment 36 would extend the definition of serious damage to human welfare by adding harassment, alarm or distress that has a
“substantial impact on the victim’s day-to-day activities.”
It is right that the new offence should recognise impact on victims, which is why we have included provisions on serious damage to human welfare. Such damage includes “human illness or injury” under subsection (3)(b) of proposed new section 3ZA of the 1990 Act. It would therefore be for a juror to decide whether a serious cyber-attack that caused substantial harassment, alarm or distress was such that it constituted “human illness”. The purpose of the amendment is therefore already provided for.
This offence is designed to respond to serious cyber-attacks. If a cyber-attack has caused serious damage to human welfare, a person guilty of the offence would be liable on conviction to life imprisonment. In such circumstances, it is right that we have made “human illness or injury” the threshold for serious damage to human welfare. Without wishing to diminish the impact on victims, I do not believe that substantial harassment, alarm or distress should be included.
I want to make a few comments about stalking, which is, as I am sure we all agree, an appalling crime that can destroy lives. That was why the Government introduced new laws in 2012 that sent a clear message that those responsible should be brought to justice. The right hon. Member for Dwyfor Meirionnydd should take credit for those laws because the work of his all-party group formed part of the thinking behind them. Our new laws will help to stop people from living in fear and prevent escalation to more serious violence. In 2013-14, more than 700 prosecutions were commenced under the new stalking legislation. That represents a significant increase from 2012-13 and shows that the legislation is taking effect. Notably, three people were jailed last year for improper use of a communications network under section 127 of the Communications Act 2003 following online abuse directed at Caroline Criado-Perez and the hon. Member for Walthamstow (Stella Creasy), who had been campaigning for a woman to appear on £10 banknotes.
Changes to the law under the Criminal Justice and Courts Bill will increase the maximum penalty for offences under the Malicious Communications Act 1988 to two years’ imprisonment. That will mean that more serious offences can be dealt with in the Crown court and that there will not be a time limit for bringing prosecutions, thus allowing more time for offences to be investigated. Alongside that, the Government are extending the time within which prosecutions under the Communications Act 2003 may be brought to up to three years, as opposed to the previous six-month limit. I hope that I have demonstrated to the right hon. Gentleman that we take very seriously the need to tackle online harassment effectively and that, in the light of this useful debate, he will be content to withdraw his amendments.
Elfyn Llwyd (Plaid Cymru, Dwyfor Meirionnydd)
I am grateful to the Minister for her detailed response to amendment 35, the purport of which she explained is already covered by the Computer Misuse Act 1990 and clause 40. I am happy with that particular aspect, but I am still a little concerned about excluding harassment and distress from the provisions. She said that they could conceivably come within “human illness or injury”, and while I suppose that that is not ruled out altogether, it is not explicit in the Bill either. She also said one particularly encouraging thing about having wi-fi in premises where someone intrudes. I was burgled a few days before Christmas, so I have to remind my good friends in the North Wales police of what she said. All is not lost with this particular group of provisions, but I beg to ask leave to withdraw the amendment.
Steve Reed (Labour, Croydon North)
I beg to move amendment 41, in clause 40, page 35, line 36, at end insert—
‘(4) Internet service providers must take all reasonable steps to notify a customer of an unlawful attempt to compromise his or her internet-connected device.
(5) In this section “internet service provider” has the same meaning as in section 124N of the Communications Act 2003 (interpretation).”.
It is a pleasure to propose the amendment. The Government’s figures put the cost of cybercrime to UK citizens at £3.1 billion per year, which is an incredibly significant amount. Of that, £30 million is lost to scareware and £1.4 billion to online fraud of the type just combated by my hon. Friend the Member for Middlesbrough. Identity theft, which can be carried out using malicious software, costs some £1.7 billion per year.
The amendment would place a duty on internet service providers to take all reasonable steps to inform their customers if their computer was being misused, which relies on information readily available to ISPs, as a spike in internet use will often reflect a hacking attempt. It would also add a preventative measure to cut off potential misuse at its source as it is happening.
The principle is used in similar measures in other countries. In 2008, the Australian Government conducted a review of their cyber-security. One recommendation was a code of practice for internet service providers, which was led by the Internet Industry Association of Australia. The iCode, as it has been dubbed, has three aims: to empower citizens to be responsible for their own security online; to encourage the sharing of data among ISPs; and to standardise the steps that ISPs should take when a user’s computer has been compromised. It is part of an effort to provide a broader and more consistent message, in simple language, for individuals and to encourage ISPs to work together to identify compromised devices and potential threats.
A good case study shows how the measure might be implemented in practice in the United Kingdom. An ISP identified a compromised computer that had been infected with malware on its service. It was running as part of a hacking network and, as is often the case, the user was completely unaware. The ISP attempted to contact the user to offer advice on removing the malware. After 42 attempts to e-mail her, there was no reply, so every time she attempted to use the internet after that, she was redirected to a warning page notifying her of the problem before cutting off her internet service. It was only then that she finally made contact with the company, which was able to assist her with securing her computer. That is, perhaps, a rather extreme example, as it is likely that most people would contact their ISP before being cut off, but it is an example of the sort of technology that is available to tackle computer misuse at source and disrupt hacking networks.
The code in Australia is Government-backed, but industry-led. A similar, voluntary code is in practice in the United States, where the Federal Communications Commission implemented the Australian model. ISPs have agreed to take meaningful action to detect threats and educate users. In particular, there is a requirement in the code of conduct to notify users when malware appears on their computers. About half of all internet users in the US are covered by the code.
The original aims of the Australian model are also applicable in the UK. In particular, the sharing of data among ISPs can be a huge issue, but it is something that the Government should encourage. ISPs are often reluctant to share their information with law enforcement and that can involve a slow process. By putting the responsibility in their hands, ISPs will be able to maintain their independence while contributing to the fight against cybercrime.
Individuals and business users also need to be more empowered. The Minister for Crime Prevention told the House last week:
“What is illegal offline is also illegal online.”—[Official Report, 5 January 2015; Vol. 590, c. 10.]
Just as we would encourage the public to take what are now everyday, sensible safety precautions, such as locking doors and windows, we should encourage internet users to be safe and to act safely online.
Perhaps the most important point is that preventing crime is always better and less costly than clearing it up afterwards. Advanced crime prevention technology played a major part in cutting acquisitive crime. Despite the increasing prominence of items worth stealing over recent decades—TVs, cars, mobile phones, laptops and so on—acquisitive crime began to fall as people installed alarms, immobilisers and mobile phone security. Simply put, these advances in prevention made crime more difficult, and that is as important today for internet-based crime as it has been for traditional crime offline. The technology is readily available to internet service providers, which can already see when hacking operations are under way. It would be helpful if we could put more pressure on them, through the Bill, to take on the role that they could play to ensure that such operations are prevented.
Karen Bradley (Conservative, Staffordshire Moorlands)
I am grateful to the hon. Gentleman for tabling the amendment and giving me the opportunity to set out the industry’s important role in tackling cybercrime. I also want to pay tribute to my right hon. Friend the Member for Basingstoke, who raised this point on Second Reading. She was incredibly active in this field in her previous ministerial role and has done much to raise awareness of the threat of cybercrime within the industry, but there is more that we can do. I certainly want cybercrime and cyber-security to be taken seriously at board level, not merely at junior management level. I want companies to discuss this every day at board level to make sure that they take it seriously.
Our cyber-security strategy, which was launched in 2011, highlights the shared responsibility of industry, internet users and the Government in ensuring that the UK is one of the safest places to do business. This principle is reinforced in the Protect strand of the serious and organised crime strategy. We continue to work closely with the industry to raise awareness of the threats to revenues, reputation and intellectual property due to cyber-attacks. This has included the publication of Government advice to large businesses and smaller firms on how to improve their online safety, particularly the “10 Steps to Cyber Security” guidance for large businesses, and a small business cyber-security best practice guide. Furthermore, the Cyber Streetwise campaign is raising awareness of the cyber-threat among small businesses and encouraging small and medium-sized enterprises to take action to protect themselves.
There are scary numbers in relation to attitudes towards cybercrime, especially among small retailers. They are prepared to write off 20% of online sales and expect that to be the norm, but that cannot be right. We need to take action, but they need to take action, too. Simple measures can be taken and we all need to take the matter extremely seriously. As more and more of us carry smartphones and tablets, and access the internet and do our business online, we need to make sure that we are as secure as possible. It is clear that the Government cannot act alone against the threat of cybercrime. The hon. Gentleman is right that internet service providers have an important role to play in protecting their customers, but this will best succeed with a voluntary partnership approach, rather than statutory regulation.
We recognised that in December 2013 when we published “Guiding Principles on Cyber Security”. Those principles were co-developed and agreed with ISP partners, and they set out a series of principles and guidance for internet service providers. They provide a consistent and best-practice approach for ISPs to help to inform and educate their customers and to protect them from online threats. They cover areas in which internet service providers will work with their customers to raise awareness and to provide advice and security solutions, including reporting mechanisms.
Customer notification of a cyber-attack is helpful only if the customer has the understanding and tools to address the problem, which is why the guiding principles stress the importance of ISPs providing guidance and signposting tools that will help their customers to protect themselves. As I said earlier, GCHQ estimates that 80% or more of current successful attacks could be defeated by simple best practice, such as updating anti-virus software regularly. Good cyber-security and a healthy digital economy are not just about how the industry protects us. We, the public, have a responsibility to exercise good cyber-safety when we are using the internet.
Our approach is therefore not only focused on raising awareness across business, as it is also important that the public know how to protect themselves. That was why we launched the Cyber Streetwise campaign, the purpose of which is to encourage individuals and small businesses to adopt safer online behaviours to help better to protect them from cybercrime.
The amendment rightly draws attention to the important role for industry. However, in the light of all the work that we are doing with the industry, and in recognition of the reporting mechanisms to customers that have already been established in “Guiding Principles for Cyber Security”, legislating in such a way is not the answer, so I hope that the hon. Gentleman will withdraw his amendment.
Steve Reed (Labour, Croydon North)
I thank the Minister for her response. Again, I draw attention to the example of the United States and Australia, where a Government-backed approach that is voluntary within industry, but relies on law to an extent, has proved extremely successful. I hope she will look at that again but, for the time being, I beg to ask leave to withdraw the amendment.
Philip Davies (Conservative, Shipley)
With this it will be convenient to consider new clauses 13 and 14.
Steve Reed (Labour, Croydon North)
Although we are taking new clauses 13 and 14 together, I will address them separately as they focus on rather different issues.
The Government tell us that crime is falling, but the truth is that crime is changing. That point was made earlier by my hon. Friend the Member for Birmingham, Erdington. Figures from Financial Fraud Action UK show that between 2013 and 2014, online banking fraud went up by 71%, e-commerce fraud went up by 23%, card fraud went up by 15% and remote banking fraud went up by 59%. I repeat those figures, which I used earlier, because they are very relevant in the context of the new clause. Those are all cyber-enabled crimes, and the figures confirm that as technology advances rapidly, so too does the nature of crime.
The Government tell us that what is illegal offline is also illegal online. While that seems a simple principle, there seems to be some confusion in practice at the Home Office. In 2011, the then Under-Secretary of State for Crime and Security, the hon. Member for Old Bexley and Sidcup (James Brokenshire), said that
“online attacks can have a significant real-world impact”.—[Official Report, 3 February 2011; Vol. 522, c. 1051.]
He promised co-ordinated action against online threats and co-operation with European partners to make Britain a tougher place for online criminals to operate in. That is all very commendable. However, four years on, the Minister for Modern Slavery and Organised Crime said just last week at Home Office questions that the Home Office is still “learning about the parameters” of cybercrime and “getting to grips” with it. The Minister for Crime Prevention, as we have already heard, said that cybercrime has been a “lesser interest” for the Government up until now.
The fact that the Government appear to have downgraded cybercrime from a significant real-world impact to a learning exercise will not be much comfort to the thousands of victims of cyber-enabled crime, a form of crime that is growing exponentially. Nor will it be much comfort that the Home Office has repeatedly ignored warnings about the growing threat of cybercrime, which is far outpacing the police’s capability to tackle it. The Minister talked about her visit to Financial Fraud Action UK. I had the pleasure of visiting it myself with my hon. Friend the Member for Birmingham, Erdington. I wonder whether she heard expressed the same concerns that the rate of growth in cybercrime is not being matched by a growth in the resources to enable the authorities to tackle it.
In 2013, the National Audit Office found that it could take 20 years to build the skilled work force necessary to deal with cybercrime. A 2013 Home Affairs Committee report on cybercrime noted that
“there appears to be a ‘black hole’ where low-level e-crime is committed with impunity.”
It also said:
“At a time when fraud and e-crime is going up, the capability of the country to address it is going down.”
A 2014 HMIC report found that only three police forces have a comprehensive cyber-strategy, while only 2% of the work force are trained to investigate cybercrime. Only 15 forces had even considered cybercrime in their strategic threat and risk assessment. In November 2014, HMIC published another report, warning that
“the gap between the threat and police capability is widening.”
Crime is not just changing; it has already changed. All the warning signs were there for the Government to see and to act upon, had they wished to do so. It is clear that the victims of cybercrime and those investigating it deserve stronger leadership than they have seen from the Government so far. Under the Police Reform and Social Responsibility Act 2011, elected local policing bodies must produce an annual report on the body’s functions and the progress made on the police and crime commissioner’s crime plan. Those annual reports are designed to instil confidence in the public that their police force is performing well. However, it is particularly worrying that only three police forces out of 43 have comprehensive cyber-strategies in place.
New clause 13 would take a big step towards ensuring that every police force has a strategy for reducing cybercrime. The public rightly expect to have confidence that their local police force has the necessary resources and strategy to reduce and prevent crime of all types, and cybercrime should be no different. That is why the new clause includes a requirement to measure how much progress is being made. I look forward to the Minister’s comments on that.
I turn to new clause 14 and the rather different matter of how we can further increase the protection of children online. The changing nature of technology has contributed to the changing nature of crime. Just as we are seeing low-level crimes carried out by and against individuals, so too are we seeing serious internet-enabled crimes being carried out as individuals and crime groups move online to evade detection and prosecution.
The Government have made welcome progress on tackling indecent material online. In particular, they have worked with four major ISPs to introduce filters and a search engine blacklist. Co-operation in the industry, facilitated by the Child Exploitation and Online Protection Centre and the Internet Watch Foundation, has resulted in progress in tackling public-facing material. However, there is an important distinction between that progress and potential loopholes that are aided by advancing technology. The proposed new clause would place a duty on internet service providers to tackle privately stored material where the offender might be using digital storage facilities to store indecent material, as defined by the Protection of Children Act 1978, specifically including images of child abuse.
Currently, the only way to identify this material is to look for it. That means that police officers might be required to view indecent material, which no doubt causes immense distress and, potentially, harm to them in their line of duty. As technology offers new opportunities for crime, so too can it help with crime prevention and detection, as we have seen with other proposals to work with internet service providers and the technology available to them. Lord Harris noted in another place that there is one piece of technology that essentially distils images and videos into numerical values that can then be matched against a database. The software, called PhotoDNA, is developed by Microsoft, is available free to ISPs and has a 98% detection rate. The potential is there for that, or similar technology to improve prosecution rates and reduce the distress placed on individual police officers, by automating the process. The principle behind it is also important; it is using technology to prevent technology-enabled crimes. I hope that is something that the Minister will be sympathetic towards.
Maria Miller (Conservative, Basingstoke)
It is a pleasure to serve under your chairmanship, Mr Davies, and to speak in support of clause 40. We have heard a great deal in the Committee discussions today about how criminals game the system and how they trade off the risks of imprisonment against the rewards of their crime. The Bill is important because it attempts to redress the balance to help to ensure that crime does not pay.
When it comes to part 2 of the Bill, specifically clause 40, relating to the misuse of computers, some of those who seek to commit those crimes will be deterred by the prospect of life imprisonment if they seek to interfere with essential services such as fuel, power, food supplies or other essential parts of our infrastructure. However, others will have far more complex motivations. Cyber-attacks have been identified by the national security strategy as a tier 1 threat to national security.
I welcome the measures in the Bill, but ask the Minister to perhaps set those measures in a broader context for the Committee so that we can see how she anticipates that they will be successful. Tough laws are important and mean that we can punish those who act to disrupt our society, but those tough new laws need to be enforceable by the police and they also go hand in hand with more resilience in business. By increasing our resilience to cyber-attacks as a nation, we will have a more successful legislative framework. It is about sharpening the legal deterrents, but also ensuring that business and citizens take their responsibility in this area very seriously indeed.
We heard from the hon. Member for Croydon North some of the figures involved in the rapid rate of increase in these sorts of cyber-related crime Businesses must be looking at this issue as well and perhaps the Minister can give us some idea of the actions that they are taking. With these new criminal sanctions in place, what action is business taking to ensure that it closes down the opportunities for cybercriminal attacks to take place? What are the police doing to ensure that there are sufficient trained officers to detect such crime and successfully convict?
In many ways, Britain is leading the world on these matters and, as I highlighted at Second Reading, we should take pride in the fact that the Government have acted swiftly to deal with cyber-related crime problems. The measures in the Bill reflect that further. However, the Department for Business, Innovation and Skills’ own report, issued last year, shows that one in four large organisations detected that outsiders had successfully penetrated their networks in the last 12 months, and that figure has increased year on year. Of these organisations, 16% had had confidential data stolen. The cost of these breaches is increasing—indeed it has doubled in the past year. What is more concerning is that 70% of the organisations, according to the report, keep their worst security incidents under wraps.
The Minister is putting the right law in place to make it possible to punish those who attempt to damage this country’s crucial infrastructure, but research suggests that many organisations struggle to evaluate the effectiveness of their own security activities, according to the report. The interconnectedness of our supply chains in delivering the nation’s fuel, food, power and transport means that we are only as strong as our weakest link. The Minister, in responding to this debate, needs to make sure that we are aware of the context in which these new laws will operate. What is being done to encourage business to actively manage cyber-risk, in addition to Government legislating for it? We need business to act to reduce the number of crimes committed, because we know that the scale of cybercrime is growing rapidly.
Secondly, what plans are in place to ensure that the police have the right enforcement capability? If business is more effective, there will, we hope, be fewer crimes, but what are the police doing to ensure that officers are routinely trained in the collection of online evidence? Like it or not, cybercrime is routine as well as specialist policing.
Thirdly, what progress is being made on cross-border co-operation? This was raised by the hon. Member for Croydon North. As I mentioned in the Second Reading debate, the Government are to be applauded for their success in working across borders to tackle child exploitation. Is the Minister looking at that as a template for building broader co-operation?
Finally—this touches on the Opposition’s new clause—what are ISPs doing to ensure that illegal activity that occurs using their communication capabilities is acted upon when it is identified? The Government are doing the right thing and, as the 2013 Financial Times bellwether survey of FTSE 350 company secretaries has shown, 98%—almost all of them—are aware of the Government’s cyber-security guidance and more than two thirds have discussed it at board level, something that I know the Minister thinks is very important. However, it is clear that cyber-security is not always managed at board level and that some boards lack the skills necessary to identify and manage those risks.
The National Audit Office’s recent report identified that the range of industry-recommended standards and regulations risks confusing the situation, especially for small and medium-sized enterprises. The NAO has also identified that few people have the right technical expertise, and that there is a limited capacity among regulators to focus on this issue.
I welcome the action that the Government are taking. This is a Government that recognises that the law must be kept under constant review when it comes to the internet. The Minister has stated more than once this afternoon that what is illegal offline is illegal online too, but I gently encourage her to remember that the speed, impact and scale of online crimes are very different indeed. We have to make sure that the punishments available to the courts reflect the increased severity of crimes committed online. Perhaps the Minister will reflect on some of the issues that I have raised to reassure the Committee that the measures she is suggesting will be as effective as they need to be in a world where cyber-security and cybercrime are fast becoming part of everybody’s everyday life.
Norman Baker (Liberal Democrat, Lewes)
I follow on from my right hon. Friend’s comments and endorse her view that business needs to do more to tackle cybercrime than it has done hitherto. We would have less sympathy for people whose houses are burgled if they had left their doors and windows open and unlocked, and for people who have their cars stolen because they left the keys in the ignition. In cyber terms, that is what some businesses are doing with the lack of protection for their businesses. So it is vital that businesses take more precautions than they are doing. I have come across one or two shocking lapses in business. One major retailer in this country supplied goods to an overseas address following an internet order, and it turned out to be completely fictitious. Huge amounts of money were lost supplying goods overseas; elementary checks would have prevented that. So there is work for business to do.
I agree that this is an international issue. No longer is fraud about someone who is doing a hoax on someone down the road; it could be someone on the other side of the world. We therefore need an international approach, which is indeed the approach that the Government has been taking.
I rise to correct the record. When the hon. Member for Croydon North spoke to new clause 13, he implied that the Government was somehow wrongly positioned or had not been doing work on these matters, but it has. I can assure him that, certainly in my time at the Home Office, it was doing a good deal of work. As the Minister for Crime Prevention, I did a good deal of work, as have the Home Secretary and other Ministers in the Department.
We also engaged regularly with the police and those involved in tackling fraud. Indeed, we engaged with the 43 forces throughout the country. It is true to say, as the hon. Gentleman suggested, that the police are sometimes behind the curve on this, and that is why, in my time, Ministers were keen to ensure that the matter was addressed. That is why the College of Policing has a role to play, which it is playing, in making sure that the police are more up to speed in tackling cybercrime. It would be incorrect to leave uncorrected the suggestion that the Home Office and the Government have not been active; they have been.
However, the hon. Gentleman is correct to say that the police need to do more than they are doing, and to my knowledge, that is what Home Office Ministers have been asking them to do.
Karen Bradley (Conservative, Staffordshire Moorlands)
I am grateful to the hon. Member for Croydon North for affording me, through new clause 13, the opportunity to speak about the ongoing work that the Government have been doing to tackle cybercrime, and how we are supporting the police in this complex area. I thank my right hon. Friend the Member for Lewes for his comments. He, too, has first-hand experience of the extensive work that the Government are doing in this area.
Online crime is a threat that we take very seriously. Cybercrime was recognised as a tier 1 threat to national security in the 2010 national security strategy—a point that my right hon. Friend the Member for Basingstoke raised. That is why cybercrime is at the heart of our cyber-security strategy. The national cyber-security programme has boosted investment, increased capability and expanded training to improve the law enforcement response.
Tackling cybercrime is also a central feature of the pursue strand of our serious and organised crime strategy. The Government are investing £860 million over five years through the national cyber-security programme, and approximately 10% of that money has been invested in building law enforcement agencies’ capabilities to respond to the threat.
We have invested in the national cyber crime unit in the National Crime Agency; created cyber teams in each of the regional organised crime units; and provided training for officers and local police forces. In particular, the network of regional organised crime units provides access to specialist capabilities at a regional level and provides essential support to local forces on all cyber-related issues. I want to make a couple of points on that. Cybercrime needs specialist skills. We have regional organised crime units where we can locate incredibly technical specialist officers. They are available to all local police forces, since it would be difficult for local forces to provide stand-alone specialist resources. We should all agree that such skills are specialist. They are not the kind of skills that the average person in the street—the average Joe or Josephine Soap—may have, although I am sure that they will be getting that training over the years. They are not skills that everybody has; they are technical and specialist. The fact that we can locate technical specialists in regional organised crime units should reassure us all that our local police forces have access to the best brains, technical ability and skills to help them fight cybercrime.
Steve Reed (Labour, Croydon North)
Is the Minister aware that Her Majesty’s inspectorate of constabulary states that cybercrime is growing at such a rate that it is becoming relatively commonplace rather than a specialism? The inspectorate would like many more police officers to understand the nature and risks of cybercrime so that they can provide assistance there and then in the locality, rather than always referring such cases to relatively small specialist units. Those units would be swamped if we were to direct all such crimes to them without resourcing them in line with the scale of the growth in such crime.
Karen Bradley (Conservative, Staffordshire Moorlands)
I will come to the HMIC report shortly. We must distinguish between the specialist capabilities and skills needed to deal with incredibly complex cyber-attacks—involving people who have substantial levels of training and skills, often overseas, who are trying to attack our national infrastructure, large organisations and large companies—and ensuring that local front-line police officers understand, when constituents come to them after having lost money in becoming victims of online fraud, how to investigate that, what it means and where to get support.
As we have discussed in previous debates, the investigatory techniques for fraud are the same whether the fraud happens online or in the street, the marketplace or the shop. Money has been stolen from somebody, but it has been possible to do it online. I want to ensure that local police understand that such fraud is still fraud, and the individual experiences the same sense of loss. Even though it happened online rather than in person, it is still fraud. Local police must understand that, but we also need the technical skills required to deal with cyber-dependent crime, which is the high-tech side of cyber.
I pay tribute to the NCA, which last year was involved in two international operations. Operation Tovar involved the FBI and others to tackle the malware Gameover Zeus and Cryptolocker, which many will be aware of. Thanks to the NCA’s work, in conjunction with international partners, many people who would have been affected by that malware were given information to enable them, during the two-week window that the NCA and others created, to install the right anti-virus and anti-malware software to protect themselves. The NCA led an international operation for the first time in Project Disputed, which tackled the Shylock malware. The NCA is a world leader in the field, and it takes on international operations to keep all of us—businesses and individuals—safe online. We should pay tribute to the NCA for that.
It would be remiss of me not to pay tribute to the NCA for its work on Operation Notarise, an operation to deal with child sexual exploitation. The NCA led and co-ordinated that operation with local police forces across the country. Some 700 arrests have resulted directly from that operation. Since its creation in October 2013, the NCA has protected or safeguarded more than 1,300 children. By way of comparison, its predecessor, the Child Exploitation and Online Protection Centre in the Serious Organised Crime Agency unit, protected or safeguarded just 560 children in 2012-13. We can see that the NCA, in its work with international partners and in ensuring that local police forces have the support that they need, is seeing real success. However, there is always more to do. While I will continue to pay tribute to the NCA, I want to see an increase in awareness levels throughout police forces in the UK.
The Government have recognised the threat, prioritised it through national strategies and invested resources accordingly. However, the response to threats in each police force area and consequent allocation of resources are a matter for each chief constable, in consultation with their police and crime commissioner. It is right that police and crime commissioners set the local priorities and objectives and that those are set out in the police and crime plan.
Local priorities are not a matter for central Government to determine; they should be determined locally. To underpin that, cyber-knowledge is needed at the local policing level so that all police officers, not just specialist officers and units, can tackle cybercrime. My right hon. Friend the Member for Lewes, with his personal experience, made that point powerfully.
To assist the development of local capacity, the College of Policing has built cyber-modules into existing training courses and developed a bespoke cyber-course for existing officers, including four e-learning modules on cybercrime aimed at police officers and staff, which give an introduction to cyber, digital and social media. Since the modules were rolled out in 2013, more than 120,000 have been completed.
In addition, the college and police forces have been delivering a classroom-based course to police investigators, which gives them an understanding of how to exploit the intelligence and evidential opportunities offered by technology, social networking and communications data. We also established the police innovation fund in 2013 to incentivise collaboration, support improved police information and communications technology and digital working and enable investment in innovative delivery approaches with the potential to improve policing and deliver further efficiency. We are allocating £70 million to the fund for 2015-16, which will be available to support projects to enhance police capabilities to tackle emerging threats such as those from cybercrime.
The Government have a role in establishing national priorities. The strategic policing requirement articulates the national threats to which local forces must have regard and cybercrime and a large-scale cyber-incident have been identified as national threats in the strategic policing requirement. The hon. Member for Croydon North made reference to the concerns raised in the relevant HMIC inspection reports. I do not agree that they point to failure. Rather, they demonstrate that the system is working. Local priorities are set locally and national threats are set out in the strategic policing requirement.
HMIC is responsible for inspecting against appropriate standards and priorities and that is what has happened. It is for police chiefs and police and crime commissioners to consider the inspection reports in the light of their local circumstances and respond accordingly. That is what they are doing, including on cybercrime.
My right hon. Friend the Member for Basingstoke has spoken about her great interest in this issue. In the UK, we, necessarily, take cyber-threats extremely seriously. The UK has a growing online economy and the internet accounts for 8% of our GDP, so it is important that we work together to maintain people’s confidence in doing business online.
Clearly a lot more still needs to be done to minimise the economic impact of cyber-attacks. The average cost of breaches has nearly doubled. The average cost of the worst security breach for large organisations is now between £600,000 and £1.15 million and for smaller organisations it is between £65,000 and £115,000.
The private sector is the largest economic victim of crime and economic espionage perpetrated through cyberspace and much of the infrastructure that we need to protect in the UK is owned and operated by the private sector. Our approach is to work in partnership with industry to raise awareness of the threat to reputation, revenues and intellectual property from cyber-attack and to promote the measures that businesses can take to address them. That is why we launched a new Government scheme to help businesses to stay safe online: the Cyber Essentials scheme. That provides clarity to organisations on what good cyber-security practice is, and sets out the steps that they need to follow to manage cyber-risks.
Cyber Essentials is a robust, easy to use and cost-effective way to help businesses to protect against the risks of operating online. Organisations will now easily be able to demonstrate that they are cyber-safe, reassuring their clients and boosting confidence and growth. I encourage all organisations to adopt it. I am grateful to my right hon. Friend for raising the point because it has given me the opportunity to describe the scheme. I hope that that will raise awareness and that more businesses will take the opportunity to use the information available.
As to new clause 14, I agree with the hon. Member for Croydon North that we should work with internet service providers to tackle the abhorrent scourge of online child sexual exploitation. Our work with ISPs already shows progress, so we do not believe that legislation is required at this point. We have made it very clear that those who provide services online, particularly where images can be stored, must act to prevent them from being used for the storage or sharing of indecent images of children.
The internet industry operating in the UK has done significant work on a self-regulatory basis to tackle the availability of indecent images of children online. The hon. Gentleman spoke about searching for indecent images. The Government are developing the child abuse image database, which will produce hash sets—numerical identifiers for each image—that will be used to search for images on seized devices and on the internet.
Also, in December, the UK hosted the WePROTECT global summit on online child sexual exploitation. That was attended by delegations from more than 50 countries, 26 leading technology companies and 10 non-governmental organisations. We saw significant examples of the benefits of strong partnership with industry. The major global technology companies—Microsoft, Facebook, Google, Yahoo and Twitter—will take hashes of child sexual abuse images from the Internet Watch Foundation to detect and remove child sexual abuse material from their platforms and services. Companies will continue to work on new solutions, such as the ability for children to report and block self-generated indecent imagery, a tool to identify victims and a tool to identify paedophiles posing as children.
Google has made changes to its search algorithm to prevent images and videos containing child abuse material from appearing in search results. There has been a fivefold reduction in child sexual abuse image-related search queries in the past 12 months. That work is clearly having an impact. Since April 2014, the Internet Watch Foundation has been proactively seeking out child sexual abuse imagery. In 2014 the IWF processed some 70,500 reports, which is a 38% increase on 2013, and took action to get images removed from 27,850 web addresses, which is a 109% increase on the previous year.
My right hon. Friend the Member for Basingstoke asked about the lessons we can learn from child sexual exploitation and applying them to cyber. She is right: like online child sexual exploitation, cybercrime is a global threat requiring a co-ordinated global response by Governments, law enforcement agencies, technology companies and non-governmental organisations. For instance, we need strong partnerships with industry to develop technological solutions that protect both companies and their users.
That is why we work bilaterally with countries and multilateral institutions such as the European Union, the Council of Europe, Europol and Interpol, to ensure that UK objectives on cybercrime are delivered, and that there is effective international co-operation on cybercrime. We are working closely with industry to raise awareness of the threats to revenues and intellectual property from cyber-attack. That has included the publication of Government advice to large businesses and smaller firms on how to improve their online safety.
I want to mention CERT UK, the computer emergency response team. It is responsible in the UK for national cyber-incident management, complementing and building on existing UK capabilities. It links with the international CERT community and provides an authoritative voice for those agencies and organisations that are helping the UK to become more resilient, and so to prosper, in the cyber-age.
Industry has the skills and knowledge to provide technical solutions to assist in the removal of sexual images of children online. We welcomed the commitment at the WePROTECT summit to continue to develop new tools and techniques to improve the detection and removal of images of child sexual abuse. The industry has also committed to support charities that help to protect the victims of abuse and those who work to prevent these crimes through additional funding. That is important because we must always place victims at the heart of our efforts to tackle child sexual exploitation.
We are going even further. Work to tackle indecent images of children will be supported by a new £50 million child protection fund to develop global capacity building to prevent children from experiencing violence and exploitation, and to help those who have been victimised. UNICEF will support the development of the new fund, in close partnership with the UK, other Governments and partners from civil society and the private sector. That work builds on the work that the Government, law enforcement agencies and the Internet Watch Foundation have done over many years to tackle such images. We welcome internet service providers’ continued commitment to fund the IWF to ensure it can increase its remit and effectiveness.
This problem requires a co-ordinated global response that brings Governments, law enforcement agencies, technology companies and non-governmental organisations together. We believe that asking the industry to take action under a self-regulatory structure allows it to contribute to this work more effectively than legislating to require it to do so. We are not persuaded at this point that we would better protect children by placing a legal requirement on companies. Internet service providers are showing real progress in tackling the shocking existence of such appalling images. We will ensure that that progress continues.
The Government recognise that tackling online child sexual exploitation and other forms of cybercrime is one of the most important challenges that the police face today. We will continue to support and invest in the police to ensure that they have the resources and capability to respond to the ever-evolving world of cybercrime. I invite the hon. Member for Croydon North not to press his new clauses.
Steve Reed (Labour, Croydon North)
It is entirely my fault, Mr Davies, but I missed the opportunity to respond to the Minister. I intended to press one of the new clauses to a vote.
Philip Davies (Conservative, Shipley)
The votes on the new clauses will come later, when we dispose of new clauses. The hon. Gentleman will be able to press his new clause to a Division then.
Clause 42 - Territorial scope of computer misuse offence
Norman Baker (Liberal Democrat, Lewes)
I want to ask the Minister a question. She may be able to answer it now; if not, she can do so at a later stage. Clause 42 relates to the territorial scope of computer misuse offence. Sensibly, it deals with UK nationals who are outside the country at the time that the offence was committed. There are obviously people who are resident in the UK who are not UK nationals. I hope that the law can also capture people who commit an offence and have the right to remain in the country but are not UK nationals. It would be an unfortunate loophole if those people were not covered.
Karen Bradley (Conservative, Staffordshire Moorlands)
I thank my right hon. Friend for that question. My understanding is that they are caught by the law, but I will write to him to give full clarity to that point.