HL Deb 24 March 1986 vol 472 cc1158-74

2.52 p.m.

Lord Glenarthur

My Lords, I beg to move that the House do resolve itself into Committee on this Bill.

Moved, That the House do resolve itself into Committee.—(Lord Glenarthur.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 1 [Confiscation orders]:

Lord Glenarthur moved Amendment No. 1: Page 2, line 2, leave out from ("trafficking") to end of line 3.

The noble Lord said: I beg to move Amendment No. 1, and it may be convenient to discuss at the same time Amendments Nos. 2 and 39. No point of substance is raised by these amendments, which are intended to clarify the Bill. At present Clauses 1 and 2, in defining what is meant by the terms "has benefited from drug trafficking" and "the proceeds of drug trafficking", provide that payments made partly in connection with drug trafficking and partly in some other connection are to be regarded as payments for drug trafficking. This is important, because it is not uncommon for traffickers to operate through apparently legitimate concerns and, for example, to deliver a consignment of drugs hidden among quite innocuous goods. It would be wrong to allow them to escape full liability by claiming that the payment they had received was primarily for the routine cargo. These proposed amendments delete the specific provisions to this effect in Clauses 1 and 2 and insert a general interpretation provision in Clause 28. I beg to move.

Lord Mishcon

It seems a most sensible amendment.

On Question, amendment agreed to.

Clause 1, as amended, agreed to.

Clause 2 [Assessing the proceeds of drug trafficking]:

Lord Glenarthur moved Amendment No. 2: Page 3, line 8, leave out from ("are") to end of line 10 and insert ("his proceeds of drug trafficking").

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No. 3: Page 3, line 12, leave out ("the proceeds of drug trafficking by him") and insert ("his proceeds of drug trafficking").

The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 4 to 14, 17, 18, 20 and 21, and 35, 36 and 37. This is a lengthy list of amendments, but I hope I need not take long in explaining their purpose. We want to ensure that what is viewed as the defendant's proceeds from drug trafficking will be consistent throughout the Bill. Clause 2(1)(a) makes it clear that "the proceeds of drug trafficking" by the defendant includes both money made from his own trafficking activities and any payments he has received in connection with trafficking by others.

The phrase "the proceeds of drug trafficking by the defendant" (or "by him") appears in a good many other places in the Bill, and we feel that there may be a risk that, in some circumstances, it might inadvertently be taken to mean only the proceeds of the defendant's own trafficking activities. A change of label is desirable to reflect more clearly the broader nature of what is intended; that is, to differentiate between the proceeds of drug trafficking and the notion of trafficking conducted by a person. I beg to move.

Lord Mishcon

The same observation applies as applied to the previous amendment. This is a very sensible series of amendments.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No. 4: Page 3, line 19, leave out ("the proceeds of drug trafficking by him") and insert ("his proceeds of drug trafficking").

On Question, amendment agreed to.

Lord Glenarthur moved Amendments Nos. 5 to 7: Page 4, line 3, leave out ("the proceeds of drug trafficking by the defendant") and insert ("the defendant's proceeds of drug trafficking"). Page 4, line 8, leave out ("the proceeds of drug trafficking by the defendant") and insert ("the defendant's proceeds of drug trafficking"). Page 4, line 11, leave out ("proceeds of drug trafficking by him") and insert ("of his proceeds of drug trafficking").

On Question, amendments agreed to.

Clause 2, as amended, agreed to.

Clause 3 [Statements relating to drug trafficking]:

Lord Glenarthur moved Amendments Nos. 8 to 10: Page 4, line 19, leave out ("the proceeds of drug trafficking by him") and insert ("his proceeds of drug trafficking"). Page 4, line 41, leave out ("is the proceeds of drug trafficking by him") and insert ("was received by him in connection with drug trafficking carried on by him or another"). Page 5, line 17, leave out ("is the proceeds of drug trafficking by him") and insert ("was received by him in connection with drug trafficking carried on by him or another").

On Question, amendments agreed to.

Clause 3, as amended, agreed to.

Clause 4 [Amount to be recovered under confiscation order]:

Lord Glenarthur moved Amendments Nos. 11 and 12: Page 5, leave out line 23 and insert ("the defendant's proceeds of drug trafficking"). Page 5, line 34, leave out ("the proceeds of drug trafficking by the defendant") and insert ("his proceeds of drug trafficking").

On Question, amendments agreed to.

Clause 4, as amended, agreed to.

Clause 5 [Confiscation orders: definition of terms]:

Lord Glenarthur moved Amendments Nos. 13 and 14: Page 6, line 7, leave out ("the proceeds of drug trafficking by him") and insert ("received by him in connection with drug trafficking carried on by him or another"). Page 6, leave out line 9 and insert ("property received by him in that connection").

On Question, amendments agreed to.

Clause 5, as amended, agreed to.

Clauses 6 to 11 agreed to.

Clause 12 [Application of proceeds of realisation and other sums]:

3 p.m.

Lord Mishcon moved Amendment No. 15: Page 14, line 37, after ("may") insert ("after giving the defendant an opportunity of being heard").

The noble Lord said: I hoped that a formula I have used up to now—namely, that the amendment is a sensible one and should be agreed to by the Committee—was one which we would hear from the Minister in answer to my amendment.

The clause deals with the application of proceeds of realisation and other sums which, under the Bill, as the Committee will remember, come into the hands of the receiver. After the taking out of such moneys as are necessary for a confiscation order, the rest of the funds have to be distributed equitably and in accordance with an order of the High Court, to which the receiver will apply. It does not say in the Bill that, after the moneys are taken from the confiscation order, the rest (which presumably are moneys that are not in any way affected by the iniquity of drugs) has to be distributed. It does not say that the defendant has any right of audience before the High Court judge in order to make submission as to the way in which those funds should be distributed. The sole purpose of this amendment is to give him that fair right.

Lord Glenarthur

I am grateful to the noble Lord for that explanation of the reasons behind his amendment. I fear that he is going to be a little disappointed in that I am going to try to adduce one or two reasons why I cannot follow the form of words which he used in relation to the other amendments.

I cannot agree with the noble Lord that the offender should be put in a special position at this point in the proceedings. That would be the effect of his amendment. The Bill recognises in Clause 11(8) that any person holding an interest in property which is liable to confiscation, whether the defendant or a third party, must be given a reasonable opportunity to make representations to the High Court before that property can be realised. Thus, a third party might argue that property in his hands should not have been included in the confiscation order because he gave full value for it; and the defendant might ask that, say, his shares should be realised rather than his house. It is right and proper that such representations should be made at that stage, before realisation begins. But we are here dealing with how any money left in the hands of a receiver after the confiscation order has been satisfied should be distributed.

In practice, the only cases in which distribution will arise are those where property has been taken not only from the defendant but from third parties as well. They, too, would no doubt have views on how surplus cash should be allocated. I should not favour the defendant being given an opportunity to indicate his preferences among them, which may have little to do with questions of justice, let alone to argue that his claims were greater than theirs. Nor would there seem to be much practical value in allowing all the possible claimants to come forward and argue why they should be given priority. All would simply seek the best possible deal for themselves, or could well do so. Such matters are, I believe, better left to the discretion of the High Court, taking account of all the circumstances of the case.

I hope that the noble Lord will see the force of that argument, and, in the light of the fact that Clause 11(8) has the effect it does on matters arising before the actual property can be realised, will see fit to withdraw his amendment.

Lord Mishcon

I would want to react graciously to anything that the noble Lord the Minister said in regard to a Bill for which, as everybody knows, there is wholehearted support in every quarter of the Committee, but I must confess that I do not understand his argument. If it is my fault, I shall apologise to him.

The noble Lord invokes in aid of his argument that there should be no representation open to a defendant in these cases the fact that there is a previous clause which gives the right of representation of any arguments before a High Court judge prior to realisation. There are two stages: first, the stage of whether you are allowed to realise, and, if so, the way in which you do it; and, after realisation, there are the proceeds of realisation. Therefore the previous clause has nothing to do with the submission I endeavoured to make in regard to this amendment. Realisation has taken place, and the right of audience therefore ceases under the previous clause. What we are dealing with here is what happens with the proceeds of realisation.

I should quite understand it if the noble Lord were to say: "Before the confiscation order has been sufficiently dealt with there should be no right to make submissions at all; the realisation has taken place, the confiscation order has to be effective and the proceeds will obviously be the source from which the confiscation moneys are to be taken". We are now dealing with what is left of what is the defendant's money, one would have assumed prima facie, and how it is to be distributed. I should not have objected if the noble Lord were to say that he wanted to extend the range of representation to those who might claim any interest in exactly the same way as one gets it with stolen property, often with various claimants being allowed to be heard by the court before anything is done by way of order as to where that property goes. I should not have objected if he extended the right of audience and the right of representation. But to say that the High Court is to do that without any guidance whatsoever from the person to whom, prima facie, these moneys belong, and without the defendant being given a right to appear before the High Court judge, is an absolute negation of justice.

One assumes that after the confiscation order has been sufficiently dealt with, the rest of the money belongs to somebody else—it may be the accused; it may be somebody else—but how can the High Court decide this without there being the right of representation to a High Court judge? After all, the person whose money it appears to be ought certainly to be heard. I am afraid that I cannot understand the Minister's reply. If he will show me where I have gone wrong on this argument, I shall be delighted to consider what he has to say, but at the moment I press the point.

Lord Wigoder

Perhaps I may intervene to say that, having listened to the discussion on this amendment with an open mind, and having heard the contributions so far, I come down very much in favour of what has been said by the noble Lord, Lord Mishcon. I rather anticipated that the Minister might have attempted to put forward the suggestion and argument that the amendment was unnecessary because the High Court judge would, as a matter of elementary justice, ask that the defendant should be represented so that he can hear what had to be said. But the Minister has not said that at all. He has come down against giving the defendant a right to make representations over what seems to me to be an important stage in the disposal of what, prima facie, belongs to the defendant himself. I would therefore respectfully support what the noble Lord, Lord Mishcon, has said in urging this amendment upon the Government.

Lord Denning

I, too, have heard all that has been said. I think that the Minister has given a sufficient answer. If I may say so, I think that what my noble friend Lord Wigoder has said is the complete answer. If the judge of the High Court thinks it is necessary or desirable in the interests of justice to hear the defendant, he will certainly arrange accordingly. That is the answer which my noble friend Lord Wigoder suggested. I think it is a sufficient answer, and for myself I would not support the amendment.

Lord Edmund-Davies

I am unable to agree with the noble and learned Lord who has just spoken. The previous clause concluded with the words: has been given for persons holding any interest in the property to make representations to the court". That, I realise, is in relation to the making of an order for the realisation. But the property which is realised might, for example, be a lease. It has to be realised to make up the necessary funds, but it may be that after satisfaction has been obtained there are surplus proceeds in relation to which the defendant and other persons might have an interest. Those parties ought to be heard.

I would have thought that the amendment proposed by the noble Lord, Lord Mishcon, ought to be extended by the adoption of some such formula as that which concludes the preceding clause. That one should rely upon the learned judge doing something that the statute does not find it necessary to include is to expect too much. It ought to be there.

Lord Glenarthur

I have listened with care to what has been said and I have noted the dissenting opinions of the two noble and learned Lords on the Cross-Benches on this issue. The noble and learned Lord, Lord Denning, picked up the point that I made at the end of my initial remarks, that this is very much a matter for the discretion of the High Court, taking into account the circumstances of any case. I would have thought that that could cover the point made by the noble and learned Lord, Lord Edmund-Davies; I would have thought that it could do so, but I cannot be absolutely certain without verifying the fact. Nevertheless, it is an important point.

My other point is that as well as the defendant in this case, there are possible third parties as well to be taken into account. The amendment of the noble Lord, Lord Mishcon, does not take them into account in any case. It is possible that it might not be the defendant's money that we are talking about here: it might well be money that has been confiscated from third parties. I cannot accept that the defendant should have a special position. In fact, that is what he will have under the amendment—a special position; that the hearing should consider the case for all those involved.

The best thing that I can do, without making any commitment to the noble Lord, is this. When matters of this kind are raised, I realise that the remarks made should be studied very carefully. I should like, without making any commitment, to study the arguments that have been put forward and perhaps then correspond with the noble Lord or find some other way of taking the matter forward with him. I do not believe that I can offer any more today. If the noble Lord will be happy to go ahead on that basis, then I will be very grateful.

Lord Mishcon

As I have said, it is the wish of all parts of the Committee to be co-operative in regard to this Bill. The noble Lord the Minister says that—without any commitment, as he emphasises—he is prepared to consider the submissions that have been made. Will he take it for granted from me—and obviously this became apparent from the discussions that have taken place—that if he came forward with an amendment that allowed for the discretion of the court to be exercised but embodied in the statute, for any party who claimed to have an interest in the balance left over after the compensation order moneys have been paid, then of course I would not oppose any such amendment but would support it? I hope therefore that we may helpfully come forward with a sensible answer to this problem. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 agreed to.

Clauses 13 to 15 agreed to.

Clause 16 [Enforcement of orders in Scotland]:

3.15 p.m.

Lord Mishcon moved Amendment No. 16: Page 17, line 27, after ("may") insert ("for the purposes set out in subsection (1) above").

The noble Lord said: I can deal with this amendment very briefly. It is more of a probing amendment—or if it is not, it is an amendment to try to ensure that we do not do something beyond that which we would want to do in Committee. Clause 16(2) says: An Order in Council under this section may amend or apply, with or without modifications, any enactment". That is a very bold statement, and unless there is an explanation to the contrary that I have not seen it would appear to go beyond what one would want to do. One imagines that the purpose of subsection (2) is to have such an Order in Council that is capable of amending or applying, with or without modifications, any enactment for the purposes set out in subsection (1).

In case anyone should think that this amendment emanates from what little ingenuity I have, I may at once say that I received the amendment from that well-known organisation, Justice, which is very careful about such matters. I am indebted to that organisation for the amendment and it is only right that I should put its authorship where it properly belongs.

Lord Wigoder

I support this amendment. So far as I can see, it does not in any way change the sense of the existing Bill; it merely makes a statement that appears on the face of it to be a trifle bald and somewhat radical a little more moderate in its implications. I hope that the Minister will find a way to accept it.

Lord Glenarthur

I may tell both noble Lords that I can accept the amendment, but with one proviso. The noble Lord will remember that I mentioned on Second Reading that it was our intention to replace Clause 16 with new provisions that will specify in some detail the procedures by which the Bill will be enforced in Scotland.

I regret that I am not yet in a position to table the necessary amendments because they have proved technically to be rather complex due to the difficulties which are inherent in relating the two different legal systems to each other—that is, the Scottish and English legal systems. With your Lordships' permission, I shall be bringing forward the appropriate amendments on Report.

Those amendments will provide for restraint orders made by the High Court in England and Wales to be recognised in Scotland and to be enforceable against assets held in Scotland following registration in the Court of Session. The powers of any receiver appointed under the Bill will also be recognised in Scotland, and Scottish police and customs officers will be given similar powers to those available to English and Welsh police under the Bill.

With that explanation of what is intended for the future, but in order to clarify matters as they stand at present, I believe the best thing to do is to accept the amendment.

Lord Mishcon

I am most grateful.

On Question, amendment agreed to.

Clause 16, as amended, agreed to.

Clause 17 [Assisting another to retain the benefit of drug trafficking]:

Lord Glenarthur moved Amendment No. 17: Page 17, line 40, leave out ("the proceeds of drug trafficking by A") and insert ("A's proceeds of drug trafficking").

The noble Lord said: I spoke to this amendment with Amendment No. 3. I beg to move.

On Question, amendment agreed to.

Lord Glenarthur moved Amendment No. 18: Page 18, line 1, leave out ("the proceeds of drug trafficking by A") and insert ("A's proceeds of drug trafficking").

On Question, amendment agreed to.

Viscount Davidson moved Amendment No. 19: Page 18, line 7, after ("trafficking") insert ("or has benefited from drug trafficking").

The noble Viscount said: In speaking to this amendment, it may be for the convenience of the Committee to discuss also Amendments Nos. 22, 23 and 24. This series of amendments offers what we believe to be some useful improvements to Clause 17, which contains the provisions relating to the new laundering offence. The first amendment follows on from the point my noble friend made earlier; that a person may benefit from drug trafficking either by money derived from his own trafficking activities or by payments received in connection with trafficking by someone else. We want to make clear that where it can be shown that a person—in the terms of the clause, we call him "A"—has received payments in connection with his, or another's trafficking, then anyone who knowingly assists him to retain the benefits of those payments is guilty of the new laundering offence. It will not be necessary to prove that "A" has himself dealt in drugs, although, where he has received payments in connection with another's trafficking there will inevitably be some degree of complicity in drug dealing.

The other amendments seek to redefine, and to distinguish more clearly from each other, the two defences provided to a laundering charge. The second amendment narrows the scope of the defence in Clause 17(3)(a) by requiring the defendant to show, not simply that he did not know or suspect that the money with which he was dealing was a particular person's drug trafficking proceeds, but that he did not know it was drug proceeds at all. It would be wrong if the launderer could escape conviction by saying that, while he did suspect that the money must have come from drug dealing, he did not know or suspect that it derived specifically from a named person's trafficking.

The third and fourth amendments confine the second offence contained in Clause 17(3)(b) more clearly to the nature of the arrangement the defendant has entered into. He will have to show that he did not know or suspect that its effect would be to assist the particular person named in the charge to retain property or to invest funds. The reference to proceeds is unnecessary here. Ignorance of the provenance of the money will be dealt with by the first defence. I beg to move.

On Question, amendment agreed to.

Lord Glenarthur moved Amendments Nos. 20 and 21: Page 18, line 9, leave out ("the proceeds of drug trafficking by any person") and insert ("any person's proceeds of drug trafficking"). Page 18, line 11, leave out ("the proceeds of drug trafficking by him") and insert ("his proceeds of drug trafficking").

The noble Lord said: I spoke to these amendments earlier. I beg to move them together.

On Question, amendments agreed to.

Viscount Davidson moved Amendment Nos. 22 to 24: Page 18, line 16, leave out ("the proceeds of drug trafficking by A") and insert ("any person's proceeds of drug trafficking"). Page 18, line 18, leave out ("those proceeds") and insert ("any property"). Page 18, line 20, leave out ("those proceeds were") and insert ("any property was").

The noble Viscount said: I spoke to these amendments with Amendment No. 19. I beg to move them en bloc.

On Question, amendments agreed to.

Clause 17, as amended, agreed to.

Lord Denning moved Amendment No. 25:

After Clause 17, insert the following new clause:

("Powers and protection of financial institutions.

.—(1) If any bank or financial institution, or any other body, suspects that any proceeds of drug trafficking are or have been under its control or in passage through its banking or financial system, it may disclose the circumstances to the Chief Officer of police for the area, or to any constable in his stead, and may follow any directions which he may give.

(2) In disclosing information, or following the directions of the police, in accordance with subsection (1) above, any institution shall have statutory protection and shall not be liable to any person for breach of contract, confidence or duty in that respect.").

The noble and learned Lord said: This amendment is of more substance than we have hitherto discussed. Clause 17 deals with people who assist drug traffickers by laundering the money. Perhaps I should explain this Americanism, the word "launderers". It arises in this way. A drug trafficker obtains money in notes or otherwise and he wants to get rid of that money or keep it in hand as much as he can. He could take the notes in a suitcase to the hank, and bank them in his own name; but that would not suit his book, so he takes steps to conceal them.

For example, if he has his own business, such as a betting shop, which brings in proceeds, and he has a side business in drug trafficking, what does he do? He mixes the money together and pays it into the bank as though it is the proceeds of the genuine business. Who can then discover the money after that? Using that money through the genuine business he might buy a house in his wife's or lady friend's name; or he might buy a necklace, or anything like that. Who will then be able to track down those proceeds? If the man is modern enough he might order the bank to transfer the moneys to his numbered account in Switzerland.

There are no end of ways in which a drug trafficker can launder his dirty money and pass it through various channels, with concealment through various nominees, and so on, so that eventually the money appears to be clean. That is the launderer. The launderer and his assistants are now caught by Clause 17, which is a good, comprehensive clause that gets hold of all those who, by concealment, removal from the jurisdiction, transfer to nominees or otherwise conceal the proceeds of drug trafficking. They will be hit by Clause 17 unless they can prove, as stated in Clause 17, that they did not know or suspect that the money related to drug trafficking. That is very good as it stands.

But what about the bank handling these moneys? It may suspect that the moneys come from the proceeds of drug trafficking. The amounts may be so large that the bank thinks that they must come from drug trafficking; but what is it to do? I must tell your Lordships that the banks and financial institutions of this country are, by law, under a duty of confidence. They must not give notice to anyone of the state of their clients' accounts, the transactions passed through them, and whether or not an account is closed. There is an obligation of secrecy which was enunciated as long ago as 1924 by Lord Justice Atkin in the celebrated case of Tournier v. National Provincial Bank of England. In that case an employer suspected his servant of improperly handling money. He asked the hank manager about it. The bank manager said, "Oh, you need not worry about him. He is getting a lot of money from the bookmakers nowadays". The employee sued for damages for breach of confidence and succeeded because the bank manager had no right whatever to disclose his affairs to the employer.

The object of the new clause is to protect banks. If a bank manager suspects money has come from drug trafficking or anything of that kind, can he tell the police? He ought to be able to do so and to be protected. This is a new and recent problem which my noble friend Lord Harris of Greenwich has drawn to my attention. The Home Affairs Committee of the House of Commons reported last month, and in its first paragraph said, we have only one urgent, final recommendation to make. This relates to disposal or 'laundering' of drug money. We are greatly concerned at the apparent ease with which drug dealers are able to use the banking system to 'launder', that is to circulate and disguise the true origin of, drug money. It is a concern which is shared by the bankers themselves. We are satisfied that the banks are ready to co-operate fully with the authorities, provided that the law protects them from any legal action for disclosure of information which they believe to relate to drug money. We therefore recommend that the present law on the disclosure of confidential information by banks should be amended". The report adds that in addition to the provisions which protect bankers, we recommend that there should be statutory protection for bankers who volunteer information to the authorities about their clients' finances when these seem to be connected with drug trafficking".

It is that recommendation which we seek to enact in the amendment. In the first part we say that if the bank "suspects" that any proceeds come from drug trafficking, it may disclose the circumstances to the Chief Officer of police… or to any constable… and may follow any directions which he may give". The chief officer of police may say, "Hold that money", or he may say, "Let it go and see who it goes to". The bank may follow any directions which the chief officer of police may give. That is where the banks want protection.

Subsection (2) states: In disclosing information, or following the directions of the police… any institution shall have statutory protection and shall not be liable to any person for breach of contract, confidence or duty in that respect".

This is an attempt to carry out the very recent and modern recommendation of the Home Affairs Committee and I hope that the Government will accept it. I beg to move.

3.30 p.m.

Lord Lloyd of Kilgerran

Before the noble and learned Lord sits down, perhaps I may presume to ask him whether, when he emphasises the information that bankers have to produce in the circumstances which he has so clearly related, he is including in the generic term "bankers" the so-called bankers who are bankers of subsidiary organisations of Swiss banks? In other words, are the so-called Swiss bankers in London subject to this kind of compulsory disclosure? I ask purely from a state of ignorance.

Lord Denning

I was careful to say that this is voluntary disclosure. A later amendment may concern compulsory disclosure. We may come on later to the question of compulsory disclosure.

In this amendment I am dealing only with voluntary disclosure. If the banks voluntarily disclose the information, then they are protected. They are not in any breach of confidence in respect of the client. I hope that the Swiss banks here and all the banks will voluntarily disclose the information in order to enable us to get to the roots of drug trafficking. I hope that the Swiss banks will volunteer in the same way as our own banks.

Lord Lloyd of Kilgerran

I thank the noble and learned Lord for that reply.

Lord Boardman

I should like first of all to declare an interest as the chairman of one of the clearing banks which would be involved in the operation of this clause. At the same time perhaps I may say that I am quite sure that their objectives would be those of the noble and learned Lord, Lord Denning, in wishing to do whatever was practicable in tracing the laundering of drug money and stamping out that evil. The amendment of the noble and learned Lord amounts to the volunteering of suspicions. I should like to strike a cautionary note. I have said that banks would wish to co-operate in every way possible and, as the noble and learned Lord will know from the report of the Home Affairs Committee, they have said that they do not want "crooks on their books"—to use their rather catching phrase. The purpose of this clause, as the noble and learned Lord has said, is to enable the banks to volunteer their suspicions.

I wonder whether there is a danger of turning banking staff into amateur detectives. Very large sums of cash cross the banks' counters every day and there are something like 300 registered banks in this country plus hundreds of building societies and other financial institutions. Vast sums pass across the banking counters every day. The culture in this country is somewhat different from that in the United States of America where there are rather different provisions in this respect. In the United States of America cash is not a usual commodity. People operate very largely and to a much greater extent than we do with credit cards of one kind or another. In this country the amount of cash which passes across the counters of banks from operations in a whole field of activities, such as the retail trade, quite apart from the bookies, casinos and other such large handlers of cash, is very great indeed. Inevitably, some of that money will come from an illegitimate source, but it is almost impossible to know how much it is or how it can be traced. Some of it will no doubt be intended for the evasion of tax, but again it is impossible for banks to identify how much or to trace it. I suggest that it would be even more difficult to identify illegitimate cash from drug sources.

There must be a fear that, in putting pressure on people to volunteer information, they will be faced with this sort of dilemma. The too-persistent inquiries to a customer whom they believe may be involved in drug trafficking could put the staff of the bank at risk. On the other hand, insufficient inquiries before reporting a suspicion to the police could cause many innocent customers who are carrying on their normal business to be subjected to police investigation. That is a dilemma which I see arising from this new clause.

There is a very valuable provision in the Bill which enables banks to open their books under a judge's order. Where the police suspect that someone is trafficking in drugs and laundering the money, they can get a judge's order or warrant to compel the banks to open their books. I believe that this is a most valuable amendment which I am sure the financial institutions will welcome. But it is for the police to take the initiative. They are the people who are most likely to have suspicions and the opening of the books may enable them to produce the evidence.

The noble and learned Lord touched on the power under the Tournier decision to disclose information where there is a public duty. This could probably mean that where a banker was quite clear in his own mind that there had been illicit drug trafficking going on, he would probably be protected by Tournier—I bow to the noble and learned Lord on this matter, who has far greater experience than I—in disclosing those circumstances.

I am sure that all bankers and Members of the Committee support the objectives of the clause. However, I wonder whether it may be counter-productive. I believe that discussions are taking place on this subject, and it may be wise to await the outcome to see to what extent the fears which I personally have expressed might be justified before pressing the clause.

Lord Wheatley

I have had to deal with quite a number of people against whom this amendment is directed, and as I sit north of the Border, I normally would not wish to say or do anything which would differ from the opinions of the noble and learned Lord, Lord Denning, and his comments in connection with this proposed new clause.

However, there is one point which I feel I must raise. The test which the clause lays down is that the bank or financial institution "suspects". That is a purely subjective test, and accordingly I wonder whether it would be more proper if the clause were to read: "suspects or has reasonable ground for suspicion". That is a test which is applied under the Road Traffic Act in other circumstances. It seems to me that it is too absolute simply to say "suspects", because that would allow the banker who had no great degree of conscience merely to say, "Oh well, I thought there was something fishy about this", and that would be sufficient for the purpose; whereas, if the test is to have an element of objectivity it should include the words "and had reasonable ground for suspicion". I offer that suggestion to the noble and learned Lord to consider whether or not he is prepared so to modify the clause.

Lord Denning

I accept it at once.

Lord Edmund-Davies

I should like to support the suggestion that has just been made by the noble and learned Lord, Lord Wheatley, in relation to the addition to the word "suspects". Having said that, I should like to express my wholehearted acceptance of this eminently suitable and required clause. As the noble and learned Lord, Lord Denning, has said, it does not impose any compulsion of disclosure upon the bank. It leaves it to the bank's discretion.

I am worried about the suggestion that it should be contingent upon a judge's order being made because even the inquiring authorities, the police or other bodies, may not know at all about the existence of a certain account and therefore not knowing it there can be no judge's order in respect of it. This amendment enables a bank or the officials of a bank who hold an account which is run by a person whom they suspect has been involved in drug trafficking to offer voluntary disclosure to the responsible authorities. But the clause is a good one. I want to be identified with it and I thank the noble and learned Lord, Lord Denning, and the noble Lord, Lord Harris, for proposing it.

Lord Mishcon

It has been said previously and I think with very good reason, that the duty of Parliament in this dreadful era of drug trafficking is a heavy one. It has a duty to protect the public and to pursue the ringleaders of this iniquitous trade. As I have so repeatedly said, there is no division in any part of the Committee about that duty and that very proper endeavour. There is equally a duty to see to it that principles that are precious in our law are preserved, if at all possible, and that we do not create precedents that future Parliaments may quote in order to excuse an invasion into a right or a sacred principle of our law in circumstances which today we should not envisage. This in no way causes me to oppose the amendment. As the Committee will hear subsequently, if your Lordships are kind enough to hear me, it will lead me to oppose Amendment No. 30 which is a very different kettle of fish, if I may use that expression.

Having said that, let me utter a few words of most respectful warning. As this is a particularly exceptional case, is it proper that a constable should be allowed to be the recipient of this confidential information and for the bank to follow such directions as a constable may give in regard to the utilisation of the information which the bank thinks that it has? I should have thought that in such an exceptional case it ought to be a high-ranking police officer who is the recipient of this confidential information and certainly who is the giver of advice or directions.

Lord Denning

Let me say that I would accept that, too.

Lord Mishcon

I have never known the noble and learned Lord in such a receptive mood. He is prepared to accept almost anything in order to get this amendment through, and I admire him for that.

Having said that, let me come to a second word of warning which goes the other way round. The noble and learned Lord said at once that he would accept the amendment which in many ways was so wisely put forward by the noble and learned Lord, Lord Wheatley; namely, that suspicion should be covered by the words "has reasonable grounds to suspect". Before the noble and learned Lord, with his great wisdom on these matters, accepts that amendment, may I issue this caveat? The bank is excepted from the normal law of contract and confidentiality by this clause, but if one limits that exception to the bank having reasonable cause to suspect, as against bona fide suspecting, do you not then open the floodgates to litigation from people who will sue banks by saying, "You disclosed this information. No charge has been brought against me. Two years have elapsed. You had no right to do that, and I challenge your reasonable grounds for suspecting"?

That would not be an avenue, if I may mix my metaphors for a moment, that would be open to anyone if the clause stood as it does now; namely, "the bank suspected". Once you put that additional ingredient in of its having to have reasonable grounds for suspecting, I (if I may use the phrase) smell litigation of a kind that I do not think the noble and learned Lords, Lord Denning or Lord Wheatley, would want to encourage.

With those remarks which qualify the amendment, I accept the spirit of it.

3.45 p.m.

Lord Glenarthur

I am grateful to the noble and learned Lord, Lord Denning, for his explanation of the intention which lies behind his amendment. During the Second Reading of the Bill he referred to the vital importance of information held by banks about suspects' financial dealings, and the amendment in his name is very much in line with the recommendation put forward earlier this month by the Select Committee on Home Affairs in another place, to which my noble friend Lord Boardman referred.

The Government have undertaken to consider that recommendation and are at present consulting the banks about it. I very much hope that the noble and learned Lord will not press me to accept this amendment before those consultations are complete. I certainly share his concern that information that would be helpful to the police in investigating drug trafficking should be made available to them. So far, we have considered that any specific provision of this sort is unnecessary, given the view the Court of Appeal expressed in Tournier v. the National Provincial Bank of England, to which my noble friend Lord Boardman referred, that the banks' duty of confidentiality did not prevent them disclosing information in the public interest under existing law.

I have expressed sympathy with the noble and learned Lord so far as his amendment is concerned. It is clearly an important issue, and we want to consider it further, not just in the light of the view of my noble friend Lord Boardman and that of the Select Committee of another place, but also in the light of the suggestions which have been made by the noble and learned Lords, Lord Wheatley and Lord Edmund-Davies.

I hope that the noble and learned Lord, Lord Denning, will agree that consideration of all those aspects is important before we decide precisely what is to be done. Once that consultation has been completed, we would hope that we would decide where to go and that that would take place before the Report stage of this Bill.

Lord Harris of Greenwich

Let me just say a few words on that point, because the noble Lord, Lord Glenarthur, anticipated the question I was about to ask him. I am sure that my noble and learned ally, if I may so describe him, on this amendment would accept what the noble Lord, Lord Glenarthur, has just said, as long as, and clearly on the understanding that, we are able to come back to this issue either at Report stage or, if the discussions with the banks have not been completed by then, on Third Reading. I do not believe that at the moment this Bill deals adequately with the question of money laundering. I think many of our anxieties would be put at rest if either this amendment or something similar to it were written into the Bill.

I am sure the banks are anxious to co-operate, as the noble Lord, Lord Boardman, said a few moments ago, but we have to recognise the fact that, as the noble Lord, Lord Glenarthur, said when winding up the debate on Second Reading, money laundering is in reality at the heart of the issues that lie behind the drug trafficking problem in this country. Unless we get this right, future generations will blame us for not having dealt adequately with the issue at a time when we had the opportunity of doing so. If the noble Lord, Lord Glenarthur, comes forward at a later stage with a Government amendment which deals with this issue, I am sure the anxieties of many of us will be stilled. On that assumption, I suspect the noble and learned Lord, Lord Denning, will be content, for the time being at least.

Lord Shepherd

I had intended to ask the Minister what was the definition of "financial institutions" which is in the amendment that has been moved by the noble and learned Lord, Lord Denning. I entirely support the objectives of the noble and learned Lord in his amendment, but I agree very much with the noble Lord, Lord Harris, that the question of laundering is absolutely fundamental to the problem.

My experience—not personal experience, but my knowledge of laundering overseas, out in the Far East—is that a great deal of the laundering of, shall I say, illegal or illicit money is not so much done through the recognised banks as done through the money changers. I do not know whether money changers are a financial institution, as stated in the amendment. It seems to me, however, that if one is to achieve the real benefits of the amendment moved by the noble and learned Lord, Lord Denning, one has to look at the entire range of methods by which money is laundered. One of the first objectives of those having illicit money, it seems to me, is to move it into another currency. This can be done through a bank. But it is a good deal easier through a money changer.

This is a matter that needs to be examined not solely in terms of banks or financial institutions, if that is another phrase for banks. One has to look at the whole gamut of means by which currency can be moved. I hope that the Government, in giving thought to the proposal of the noble and learned Lord, Lord Denning, will look at the wider ramifications and difficulties and that they will examine laundering in real depth to see whether we can overcome the benefits that drug traffickers may receive through the laundering of money other than through recognised banks.

Lord Glenarthur

In reply to the noble Lord, Lord Harris, I can most certainly confirm that there is no question of not being able to come back to this matter at some future stage. The aims of the Bill, which have received universal praise in your Lordships' House, lead us against what the noble Lord, Lord Mishcon, has described as fairly fundamental principles of law, or words to that effect. So there is a difficult balance to be struck. There is no difficulty in taking on board the point made by the noble Lord, Lord Shepherd, about the wider means of moving currency around. I shall make sure that his remarks are taken into account.

Lord Mishcon

Would the noble Lord the Minister be kind enough to add to his points of consideration the two that I ventured to make about the reasonable grounds for suspicion and the rank of the officer concerned?

Lord Glenarthur

Certainly I can give that assurance in respect of reasonable grounds for suspicion. I thought that I had done so in answer to the point made by the noble and learned Lord, Lord Wheatley. As for rank, I shall certainly also consider that. I am sorry; I forgot to mention it.

Lord Denning

I should like to thank everyone who has contributed to the discussion. It seems to me to have been most valuable. I should also like to thank the noble Lord, Lord Glenarthur, for saying that the Government will consider the matter carefully. It needs consideration and careful drafting if all the points are to be dealt with. Offhand, I am not sure that "suspects" is not right. Equally, however, we have to bring in all those other chaps. Without a clause such as this, all this money will get away. The drug traffickers are clever enough to pass it through the banks and money changers and switch it abroad. One will never get hold of it without the co-operation of the banks and such like in voluntarily letting us know. In that way, the chief officer of police will be able to make his inquiries, very discreetly, if you please, without, of course, disclosing his source or anything of that kind. By this means, one would hope to prevent drug trafficking money going abroad.

As for the point made by the noble Lord, Lord Boardman, I recognise that if a bank knows and can prove that drug money is involved, there is no need for any provision in any statute. As in the case of Initial Services, we have heard that there is no breach of confidence involved in disclosure in respect of iniquity. If a bank knows that it is iniquitous drug dealing, it can disclose this as the law now stands without any fear. But that is not known in nearly every case: the bank merely suspects. It seems to me that as the law stands at the moment a bank must not disclose its suspicions. If it does, it is liable for breach of confidence or contract. So, please, let the banks disclose under the full protection of the law to the chief officer of police. I am grateful to the noble Lord the Minister for what he said, and I look forward to, perhaps, a Government amendment on Report. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Davidson

This may be a convenient moment for taking the Statement. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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