FINANCIAL INFORMATION (Hansard, 15 March 2000)

§ The Minister of State, Home Office (Mr. Charles Clarke)
I beg to move, That the clause be read a Second time.

§ Mr. Deputy Speaker (Mr. Michael Lord)
With this, it will be convenient to discuss the following: Government amendment No. 39.
Government new schedule—Financial Information.

§ Mr. Clarke
The purpose of the new clause is to provide a new power to investigate terrorist finance. New schedule 1 sets out how, and new clause 1 switches on the new schedule. Amendment No. 39 adds the two order-making powers in the new schedule to the list of orders under the Bill to be made by affirmative resolution.
A similar power is already in use in Northern Ireland for proceeds of crime investigations. It is a very powerful tool and has proved its effectiveness. A so-called general bank circular, once authorised by a circuit judge or equivalent, allows the police to write to financial institutions asking them whether they hold accounts in particular names. The financial institution only has to say whether it holds accounts in the names given. If a person under investigation has, for example, a very large number of accounts, or accounts with a very large number of banks, that in itself can be a useful lead.
The general bank circular does not enable the police to look at the details of what is in the account. If the police wanted to do that, they would need to seek a production order under schedule 5. The new schedule is modelled on certain powers of financial investigators under schedule 2 to the Proceeds of Crime (Northern Ireland) Order 1996. However, rather than proceeds of crime, the new schedule is for investigating terrorist finance: that can, of course, include money intended for use in terrorism, not just proceeds of acts of terrorism, as in the definition of "terrorist property" in clause 14. That is why the new power is needed in Northern Ireland, as well as in Great Britain. In Northern Ireland, it will complement the existing power in the proceeds of crime order. In Great Britain, it will be new.
We have consulted the banking and financial services industry on the proposal. The banks were generally supportive and supplied helpful information on compliance costs and other practical issues, for which I put on record the Government's thanks. We have taken their views into account in developing the proposal. Further details of the consultation are in the regulatory impact assessment document, which has been placed in the Library.
Where an order is made under paragraph (1), a constable can require financial institutions, as defined in the Bill, to provide customer information, which is also defined in the Bill.
330 The new schedule contains two order-making powers, to change the definitions of the terms "financial institutions" and "customer information" for the purposes of the schedule. Amendment No. 39 ensures that those orders are subject to the affirmative procedure of the House.

§ Mr. David Lidington (Aylesbury)
Throughout the proceedings on the Bill, the Opposition have joined the Government in stressing the importance of having on the statute book measures that are comprehensive and effective when it comes to dealing with terrorist finances. Therefore, we support the new measures that the Minister has just described.
The safeguards built into the new clause and the new schedule are sufficient to enable us to accept that the liberties of the people and institutions affected by the proposals have been protected, and the Minister has set out how the affirmative resolution procedure will be utilised. A police officer of senior rank seeking an order under the arrangements will have to get the permission of a senior judge in order to proceed.
As the Government made clear in the regulatory impact assessment, the proposed annual review of the legislation will give the Government and Parliament the opportunity to hear representations from the financial services industry about the practical effect of the measure. There will as a result be an opportunity for the House to consider possible changes to the law in the light of those representations.
I have one minor criticism. The consultation period lasted from 2 September to 15 October last year, and it is a pity that the Government could not present detailed conclusions about this aspect of the Bill a little earlier. Although the financial institutions were consulted earlier, and their views taken into account last autumn, they have not yet had the opportunity to consider the Government's final proposals at length, or to consult members of the various representative organisations.
However, the new clause and new schedule are welcome and have our support.

§ Mr. Simon Hughes (Southwark, North and Bermondsey)
We consider the power proposed in the new clause and new schedule to be reasonable. I have two specific questions for the Minister about the results of the consultation, which he has been kind enough to allow us to see.
First, has the Minister received an opinion from the Northern Ireland Human Rights Commission, the statutory body established to consider such matters? Secondly, a review of emergency legislation is reported to the House every year. Has the Minister received advice from any independent, Government-appointed person—Lord Lloyd, for example—who has undertaken such a review and can give authority to the proposal?
In general, we are happy with the new clause and new schedule. As the hon. Member for Aylesbury (Mr. Lidington) said, adjustments may have to made in the light of experience, but it is appropriate that this necessary power should be in this Bill.

§ Mr. Charles Clarke
I welcome the support from the Conservative and Liberal Democrat parties, and I accept the gentle and gracefully phrased rebuke from the hon. Member for Aylesbury (Mr. Lidington).
331 I can tell the hon. Member for Southwark, North and Bermondsey (Mr. Hughes) that our principal consultation was held with members of the financial, business and banking community. They would be most affected by our proposals, which we modified to some extent to meet the points that they raised. For example, we included the provision in paragraph (4)(b), which states that an institution can offer the defence that it has not complied with the requirement because to do so "was not reasonably practicable". That defence could be employed if an enormous number of names were involved, for example, or if there were other practical problems of a similar nature. The costs involved will not be disproportionate, as the regulatory impact assessment makes clear. We estimate that compliance costs to the banking and financial services industries will total about £900,000.
I cannot give the hon. Gentleman the detailed comments of the Northern Ireland Human Rights Commission, Lord Lloyd or anyone else, because our focus was on the banking community. However, I will write to him on that, as he requests.