§ Mr. Deputy SpeakerWith this it will be convenient to take the following amendments: No. 7, in page 25, line 7 [Clause 43], leave out 'bank' and insert 'financial institution'.
No. 8, in page 25, line 26 [Clause 43], leave out 'banks' and insert 'financial institutions'.
No. 9, in page 25, line 32 [Clause 43], leave out 'bank' and insert 'financial institution'.
No. 10, in page 25, line 33 [Clause 43], leave out 'bank or banks' and insert 'financial institution or institutions'.
No. 11, in page 26, line 20 [Clause 44], leave out 'banks' and insert 'financial institutions'.
No. 12, in page 27, line 9 [Clause 46], leave out paragraph (b).
§ Mr. HeathAmendment No. 6 will be familiar to members of the Standing Committee, and particularly to Conservative Front-Bench Members, who were happy to move a similar amendment in Committee. I hope that they still feel able to support the sentiment involved.
We have a serious problem with the scope of clause 33(3)(a), which allows that the application for information on monetary transactions may specify as a single entity all financial institutions. Without wishing to spend a lot of time explaining our objections to that, 54 it seems to us that framing the provision in that way, so that every financial institution in the country must provide the relevant transaction information, or at the very least, look for it, implies a substantial burden on those institutions, to no great effect, first because the vast majority of them will be irrelevant to the investigation in question, and secondly because if all the institutions provide information, it will be extremely difficult for the investigating authorities to process it. I referred in Committee to the difficulties that the National Criminal Intelligence Service has in current circumstances in dealing with the amount of financial information involved, and such an increase would overwhelm its investigation systems. Moreover, if the evidence on the basis of which a request is made is so flimsy that it is impossible to identify even a class of financial institutions that should properly provide the necessary information, that suggests to me that that evidence is insufficient to be acceptable as a trigger for the procedure in the first instance.
In addition, as I said in Committee, I think that the drafting of clause 33(3)(b) and (c) covers all eventualities. I asked the Minister in Committee what would be the effect on any proposed investigation that she could envisage if paragraph (a) were missing. She did not give a convincing answer with regard to anything that would fall outside the provisions of paragraphs (b),
a particular description, or particular descriptions, of financial institutionsor (c),a particular financial institution or particular financial institutions".Paragraph (b) allows for a class of financial institutions which, under the extreme circumstances adduced by the Minister—for instance, an anti-terrorism investigation—could be extended to include all financial institutions, so paragraph (a) is otiose. I hope that the hon. Lady will consider further whether including paragraph (a) will not put an unnecessary burden on our financial institutions, which the British Bankers Association identifies as the part of the Bill with which it cannot agree. The Government should think again.Amendments Nos. 7 to 11 relate to circumstances in which account information could be sought by British authorities from overseas authorities. In Committee, I drew attention to the fact that, in considering this country, we refer to financial institutions, whereas in considering other countries, we refer to banks. I asked whether there was a reason for that, and whether it would be better to delete the word "bank" from the Bill and replace it with "financial institution", which the amendments would do. The Home Office and the Minister have considered that and I am grateful that the hon. Lady wrote to me to explain the thinking behind the Department's view.
I hope that I summarise fairly what the Minister wrote. She said that, in relation to a request from an institution in this country, since we have a loose definition of banks but a safe definition, in legal terms, of financial institutions, that is the proper term to use, which I accept entirely. However, she said that, in considering overseas authorities, definitions are necessarily enshrined in those countries' domestic legislation, and nothing to do with what we might care to say in our legislation. Those arguments are absolutely 55 right, but I am worried that the use of the word "bank" in the Bill will limit the scope of what could properly be requested from an overseas authority to information from either what a British court would define as a bank, which is a narrow and incomplete definition compared with that of a financial institution, or what an overseas body defines as a bank, which might be a limited subset of all the financial institutions in a country. For example, there are many mutual credit organisations in France that are not banks, by definition, but are nevertheless financial institutions in which people deposit money and to which I hope the provisions would apply.
The substitution of the word "bank" for "financial institution" when dealing with our requests to overseas authorities limits ab initio what we may ask for, which is an inherently weaker position. I ask the Minister to consider again whether the arguments in her letter hold water.
Amendment No. 12 relates to provisions for introducing new offences, effectively by negative resolution, through a decision by the Council of Ministers, which would be translated into British law with minimal scrutiny in this country. That is objectionable. The argument made in Committee was that we should not wish to overload this Parliament with scrutiny. When considering overseas requests to scrutinise the bank accounts of citizens of this country, we owe it to them to apply a little more scrutiny than that implied by the provision. The offences might be determined by qualified majority voting in the future, so the Council of Ministers could vote to overrule a British Minister and add offences to the list. The British Government would be required to add offences to the list with which they did not agree because they had been outvoted under QMV and there would be only minimal scrutiny by the House. Many hon. Members, myself included, do not think that that is acceptable. At the very least, a proper process of scrutiny in the House is required so that we constituency Members of Parliament may speak up for constituents who might be affected by such a decision. I make no apologies for taking an apocalyptic view. I do not think that the circumstances that I have described would arise in a reasonable scenario, but they could. It is right that when we legislate for the UK we consider the worst case rather than the best case. That is why the amendment is necessary.
This group of amendments is important, and it needs careful scrutiny because the process, although necessary, is intrusive. We have no argument with the basic principles of what the Government are trying to achieve, but the House should have careful control of the process. The wording is important because it may reduce the measures' effectiveness by applying too heavy a burden on those on whom they bear, by incorrectly defining the circumstances in which the powers can be used or by allowing an expansion of the powers without the proper imprimatur of the House, which is an important part of our legislative process.
§ Mr. PaiceI endorse and support what the hon. Member for Somerton and Frome (Mr. Heath) said. I reminded myself that we debated the earlier version of amendment No. 6, which my hon. Friends and I tabled, 56 35 minutes after the Minister started her first day in Committee, having just taken up her responsibilities. She acquitted herself well, but she has had four months to reflect on her answer. I hope she realises that our case on the wide terminology of "financial institutions" has some validity.
I do not want to repeat the arguments made in Committee or by the hon. Gentleman, but the hon. Gentleman was right to refer to the Minister's justification that all financial institutions may need to be considered in a major terrorism investigation. Nothing in the amendment would remove that possibility. The hon. Gentleman said that clause 33(3)(b) and (c) will allow such an investigation to be carried out. In addition, subsection (2) allows a further application to be made ex parte to a judge in chambers if it is later found that an institution or group of institutions was not covered in a previous application. There is a belt-and-braces approach even if it is necessary for a major investigation to cover every possible definition of the term "financial institutions".
I wholly endorse the argument that to allow the application to specify all financial institutions at the outset is a scatter-gun approach. It demonstrates a lack of clarity in relation to the person or people being investigated or the information being sought. There could also be a huge waste of resources if all financial institutions are approached. The Minister rightly said in Committee that people will not willingly waste resources—she perhaps has, a slightly higher opinion than me of some of the organisations that serve us—but we should ensure that that does not happen. The amendment is wise, and I hope that the Minister follows her earlier example and accepts it.
Amendment No. 12 relates to the issue of giving the Secretary of State—an interesting phraseology in the light of the earlier debate—the power
to give effect to any decision of the Council of the European Union under paragraph 6".Far be it from me to challenge the hon. Gentleman's European credentials. I read that the Liberal party is rowing back slightly from its enthusiasm for Europe, and perhaps the amendment is an example of that. [Interruption.] I do not know whether the hon. Gentleman would like me to put on the record what he just said sotto voce, but I shall refrain from doing so.
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The important point is the one that the hon. Gentleman made. It would not be right for the European Union by majority voting to support a proposal, with a British Government perhaps voting against it, and for Ministers to immediately translate something into a serious criminal offence to which all the Bill's provisions applied. There is a need for greater parliamentary scrutiny, and I wholly endorse the hon. Gentleman's amendment.
This is an important group of amendments. Many of them were covered to some extent in Committee, but they are worth reconsidering. In view of the time that the Minister has had to do so, I hope that she will give them a serious response and a fair wind, as she did in the case of those she accepted earlier.
§ Caroline FlintAs hon. Gentlemen said, there was discussion in Committee of the issues raised by the amendments. The substance of amendment No. 6 was 57 discussed at some length. I reiterate that we consider it essential to retain the provision to allow a customer information order to specify all financial institutions. Although I am happy to go on the record stating that the circumstances in which the provision might be used would be exceptional, there may be circumstances in which we would want to be able to make such an order.
For example, as we heard, in a terrorism case in which there is no specific evidence pointing to an account at a particular institution, but in which the seriousness of the offence and the need to trace any accounts are such that we consider a search of all financial institutions to be justified, it may be considered appropriate to obtain an order under the provision.
On the comments about paragraphs (a), (b) and (c) of subsection (3), we need paragraph (a), which refers to all financial institutions, because paragraphs (b) and (c) refer to particular institutions. In its natural everyday meaning, "particular" is different from "all", so how can "particular financial institutions" be read as covering "all financial institutions"? That is why we need to include paragraph (a).
The ability to target an order at all financial institutions does not open the door to fishing expeditions, as I argued in Committee. There are safeguards, which were not mentioned by either of the hon. Gentlemen who spoke, unless I did not hear correctly. The Bill gives both the Secretary of State and the court discretion as to whether to make an order. The Secretary of State will consider whether a request meets the conditions of the protocol. If he is not satisfied and the request appears to be a fishing expedition, he may refuse it.
The order has to be made by a judge, who must act in accordance with the Human Rights Act 1998, thereby taking into account matters such as proportionality. The investigator and the judge must consider whether the number of financial institutions potentially covered by a customer information order balances against the tests set. The CIO application must also be approved by a senior officer, even before the investigator can apply to the judge. That creates yet another safeguard. Those are the steps that must be taken before an order allowing coverage of all financial institutions may be met, and that will occur in pretty rare circumstances.
As was noted previously, the clause is consistent with the Proceeds of Crime Act 2002. I understand that Opposition Members were against the provisions of that Act and made their views clear while the Bill was proceeding through the House, but we stand by our position as outlined in that Act, which contains the power to make an order specifying all financial institutions. If we can do that for overseas money-laundering investigations, it is logical by extension to make similar provision in the Bill so that we can do so in the case of other serious crimes. Although, as I acknowledged in Committee, I recognise the potential burden of complying with such a request, I am afraid that I must resist the amendment.
I turn to amendments Nos. 7 to 11. In Committee, the hon. Member for Somerton and Frome (Mr. Heath) asked why the Bill referred to "financial institutions" in respect of incoming requests and "banks" in respect of outgoing requests. I have written to him with an explanation, which I will repeat for the benefit of the House. The protocol obliges us to assist participating 58 countries in identifying whether a suspect holds bank accounts. It also allows us to receive assistance from other participating countries in relation to banks and bank accounts. Because the protocol does not define "bank", and because each participating country will define the term differently under its domestic law, as was confirmed by the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), we considered that the provisions on incoming requests must be drafted sufficiently broadly to enable us to assist with all properly made requests from participating countries. There is no single definition of "bank" in UK law. Even if there were, there is no guarantee that it would correspond with what another participating country considers to be a bank under its own domestic law. That is why we have adopted the term "financial institution", which is familiar in UK law and follows the provisions in section 416(4) and (6) and schedule 9 of the Proceeds of Crime Act 2002. There would be scope to limit a search in a particular case in view of the overriding discretion on the part of the Secretary of State to consider requests from other countries under chapter 4.
In terms of outgoing requests, we are entitled to seek assistance under the terms of the protocol in relation to bank accounts that are held in establishments located outside UK jurisdiction, where the UK legal concept of "financial institution" will not necessarily have any meaning. If we were to use the expression "financial institution" in respect of outgoing requests, a UK judicial authority that requested assistance under clause 43 would have to be satisfied that an account was held at an overseas establishment conforming to the UK concept of "financial institution" and carrying on
business in the regulated sector".It would not be correct for the Bill to require overseas banks to come within the domestic UK framework. What constitutes an overseas bank for the purposes of the protocol is interpreted in each of the member states' own legal systems. It would not be possible—or, for that matter, sensible—for us to legislate for each country's own domestic law. When making requests to the UK under the protocol, overseas authorities must interpret the term "bank" consistently with the protocol within their own legal framework. For those reasons, we are satisfied that the use of the term "bank" in clause 43 is appropriate.Finally, let me deal with amendment No. 12. I am afraid that we cannot accept the deletion that it proposes. That would remove our ability to comply with article 1 of the protocol in the event that its scope was expanded at a future date. When the protocol was negotiated, a number of member states argued that the identification of bank accounts should be possible in relation to all crimes. As many member states do not have central registers of bank accounts, and because the measure was so new and was seen by some states, including the UK, as being potentially intrusive, it was agreed that the scope would be limited to serious crimes. However, member states agreed that it should be possible to extend the scope to allow for advances in technology and for the possibility that experience of the operation of the protocol might prove the value of the measure. Having agreed the terms and signed the protocol, we need to be in a position to comply with it, including the potential to apply article 1 to other crimes. We therefore require a mechanism to extend our legislation accordingly.
59 Any decision by the European Council to extend the scope of article 1 would be subject to the usual parliamentary scrutiny arrangements. The subsequent statutory instrument implementing the revised obligations would be subject to the negative resolution procedure, which we believe to be proportionate. The Delegated Powers and Regulatory Reform Committee did not comment on that power. Where it highlighted concerns about the level of scrutiny in relation to designation of non-EU countries as participating countries, we amended the Bill accordingly. We have listened and given further consideration to the concerns that have been expressed, but, for the reasons that I outlined, we cannot accept the amendment.
§ Mr. HawkinsEarlier, the Minister gave the impression that Conservative Members opposed the whole of the Proceeds of Crime Act 2002. I know that she did not intend to do so, as I was the shadow Minister who dealt with that Bill. Will she confirm for the record that we supported many of its important measures, although we had some concerns, which we expressed at the time?
§ Caroline FlintI am happy to confirm that sections of the Act were supported by Members from both Opposition parties represented here today. Given that we must have the scope to investigate suspects' accounts, particularly in the most grave situations involving terrible crimes, we felt that all financial institutions should be covered by that Act, and likewise, therefore, by this Bill.
§ Mr. HeathI am disappointed that the Minister has not acceded to my request. In respect of amendment No. 6, I do not wear her argument. As the hon. Member for Surrey Heath (Mr. Hawkins) pointed out in Committee, one of the problems with having such blanket cover is that there is no way of challenging the procedure, which involves an ex parte application by judges in chamber with no possibility of the institutions that will bear the burden playing any part in the decision. We are therefore right to be extremely cautious about the way in which such an application is made. I recognise, however, that I will not persuade the hon. Lady at this stage.
On the definition of banks and financial institutions, I would accept the Minister's argument if the word "bank" had a connotation that went wider than the term "financial institution", because it would be logical to use the widest term, which can then be interpreted by the local jurisdiction consonant with its domestic legislation. However, she is saying the reverse—that we must limit the term to that which has a narrower definition even before the application is made. If we are able to understand what the term "financial institution" means within our domestic law for incoming requests, I have every confidence that overseas jurisdictions would be able to do so in terms of their own legislation for outgoing requests. That creates an anomaly whereby we effectively place a self-denying ordinance on the requests that we can make by using a term that is not consistent with the wider definition of "financial institution" that applies overseas. I accept, however, that having had this dialogue we are not going to agree.
60 On amendment No. 12, the Minister is being a little disingenuous in saying that were it to be accepted it would be impossible for the Government to make appropriate provision to bring into effect any decision of the Council. Of course it would be possible—I am simply saying that we should not do it via the Secretary of State. It occurred to me after the previous debate that perhaps we should go through legislation crossing out "Secretary of State" and inserting "Treasury": in reality the Treasury makes the decisions, so why not say so in statute? Setting that aside, the mechanism is not entirely appropriate for what the Minister wants to do.
Clearly, we can make no further progress at this stage. I do not intend to press the amendment to a Division, because that would be pointless. We have made our comments and they stand on the record. If the Bill does not work as the Government hope, we will be able to tell the Minister that we told her so. I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.