My Lords, my name is on a number of amendments. I wonder whether the noble Lord will allow me to expand on them a little.
My noble friend Lord Hodgson suggests in his amendment that the High Court should be satisfied beyond reasonable doubt in relation to the requirements before making an unexplained wealth order. For reasons that I will come to, I do not support the amendment, but I think my noble friend seeks to provoke, understandably, a debate about the scope of UWOs and to understand how the Government intend to use them and what sort of evidence the agencies will obtain before seeking one.
The Government are absolutely right to bring forward these provisions in relation to unexplained wealth. Indeed, it is an exciting and significant new development. There is a precedent, provided principally by Ireland and Australia. I had the opportunity to read an extremely lengthy worldwide overview of the use of these orders, The Comparative Evaluation of UWOs by Booz Allen Hamilton, and a useful selection of essays from the White Collar Crime Centre dated January 2017 and edited by Jonathan Fisher QC of Bright Line Law Services Ltd. The main questions appear to be: who can UWOs be appropriately aimed at; how effective will they be; and, are there adequate safeguards? The other way of putting the last question is: do they have the potential to be unfair?
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It is important to stress that UWOs survived extensive judicial scrutiny in both Australia and Ireland. Furthermore, they are a much more modest response to the problem than what is sometimes proposed in this context, namely an actual criminal offence of illicit enrichment. Of course, a UWO is not a criminal offence and thus there is no risk of subverting what is often referred to as the golden thread—that is, the burden of proof resting upon the prosecution. The burden of proof here on the respondent is contrary to the normal burden in criminal cases but it is important to note that even the European Court of Human Rights has been very slow to criticise reverse burdens in a civil context.
The provisions in the Bill allow recovery without conviction of assets subject to various conditions. One is the incorporation in the Bill of the privilege against self-incrimination, referred to by my noble friend. This can be found in new Section 362F. With the inclusion of those provisions, Transparency International was happy with the burden shifting. It is also significant that a High Court judge will be involved in the process. I understand that the Government intend to publish a statutory code of practice and I hope this will be available before Report.
My concern is not in relation to the lack of safeguards but rather to ensure that this potentially important weapon is as effective as it reasonably can be. That is the basis of a number of amendments that I and others have put forward in this group. My view is that UWOs have the potential to deter the sort of activity that we are all concerned about. There is of course a risk that effective use of UWOs may tend to divert respondents rather than deter them but they need to be used.
As to the specifics of the amendment of my noble friend Lord Hodgson, the use of the words “is satisfied’ normally mean on the balance of probabilities. No doubt the Minister will clarify the Government’s intention in this area but the words “is satisfied’ are also used in new Section 362B under the requirements for making the UWO. It seems that what is provided there and in new Section 362A is a balance of probabilities approach, albeit that there are clearly opportunities for a respondent who does not consider the order fair to have it varied or discharged, or even—as per the recent proposed amendment from the Government—to be compensated.
It is significant that the application for a UWO can be made without notice and that it can be accompanied by an interim freezing order. This is critical to prevent the door of the stable being locked after the horse has bolted. The Minister said in summing up the Second Reading debate that the use of these UWOs will be ultimately a matter for the agencies which are operationally independent. However, if we are to approve the provisions in this Bill, I at least would like to be confident that not only will there be sufficient resources—on which my noble friend provided some reassurance at Second Reading—but also that there is the will, capacity and understanding of UWOs to make them as effective as they should be.
My amendments in this group are Amendments 2, 5, 7, 16 and 18. I degrouped Amendment 11 because it concerns specifically the London property market. A number of the amendments concern the use of the word “holds” and what that meant. Whether it was in response to those amendments or otherwise, a substantial amendment dealing with the point has been tabled by the Government, so I do not propose to expand on that now. Certainly, “holds” in the context of Section 84 of the Proceeds of Crime Act requires the respondent to have an interest in the relevant property.
New Section 362C provides that if there is no reasonable excuse for the failure to respond to a UWO in respect of any property, it is presumed to be “recoverable property”; that is, civil proceedings may then follow. At Second Reading I asked my noble friend the Minister to say a little more about what was meant by “purported compliance”—the words that are used in the Bill. She said that if there was,
“compliance or purported compliance, the rebuttable presumption that the property is recoverable does not arise”,
but that law enforcement would still have “valuable information” and could pursue an investigation. She also pointed out:
“If the purported compliance is false or misleading, it will be an offence”.—[Official Report, 9/3/17; col. 1517.]
I have to say that I was not greatly reassured by those comments. We must surely face the reality that UWO respondents who have invested the proceeds of tax evasion or bribery in specific property would be unlikely to choose to be frank about their conduct; nor would they be keen to hand over evidence to the authorities which would result in enforcement proceedings. This therefore begs the question: what sort of information would constitute purported compliance with a UWO? What if the answer is something of a stonewall?
As I said at Second Reading, we should not underestimate the role that lawyers may play in these proceedings. My understanding of the provisions relating to self-incrimination in new Section 362F is that they do not constitute an excuse for not complying with a UWO; rather, they simply restrict the circumstances in which statements provided in compliance or even in purported compliance can be used in criminal proceedings against the respondent. I find it difficult to envisage what would be purported compliance. Surely a respondent either complies with a UWO or he does not. I ask my noble friend the Minister: what is a “reasonable excuse”, as provided for in the Bill, for a failure to comply with the requirements of a UWO?
One of the problems encountered in Australia was a loophole that the UK enforcement authorities should take particular note of. Australian courts have considered it sufficient for respondents to point to gambling and/or racehorse winnings, gifts or inheritances received from relatives abroad as a lawful source to explain wealth. This is apparently attributable to the fact that the Australian tax regime does not require funds acquired through gambling or overseas inheritance or gifts to be recorded for tax purposes. I am concerned that the same situation might arise in the United Kingdom if an individual subject to UWO proceedings said that their unexplained wealth was the result of a number of successful trips to William Hill or some rival bookmaker.
I fear that it will be too easy to brush these UWOs aside by relying on a rather limited response, cleverly lawyered, and giving little by way of valuable information. For these orders to be effective, they need teeth. Hence my Amendment 5, which suggests that among the powers that should be given or incorporated in the order is a requirement that the respondent answers questions on oath. I look forward to hearing the Minister’s reasons for not including such a provision. After all, not dissimilar provisions are available in investigating companies, and if someone refuses to answer questions on oath, it may be appropriate to draw adverse inferences from that refusal. This should help in the process of recovering money.
The legislative opportunities are going to be rather few in the next few years because of the predominance of Brexit-related legislation. We have an opportunity here to deal with the cancer of fraud that threatens the stability and reputation of our country. Let us ensure that we do not miss it.
I see that the noble Baroness, Lady Hamwee, has responded to the Government’s proposal to reduce the value of property from £100,000 to £50,000 by raising the figure to £500,000. No doubt she will explain her reasoning, but at present I do not support that. If there is, for example, a drug dealer who happens to have three or four cars and no obvious means of support but who does not come over the £500,000 limit, it would simply be impossible to get a UWO. At the moment, I think the Government’s proposals are correct.
There are a number of issues to discuss, and I look forward to hearing what other noble Lords have to say about them.