Draft Proceeds of Crime
(Money Laundering) (Threshold Amount) Order 2022
The Minister for Security ()
I beg to move,
That the Committee has considered the draft Proceeds of Crime
(Money Laundering) (Threshold Amount) Order 2022.
It is very nice to serve under your chairmanship for the first
time, Mrs Murray. The amendment is a relatively simple one, and I
hope it will be relatively uncontentious: it allows the
declaration for defence against money laundering suspicious
activity reports, known as DAMLs, to be raised from £250 to
£1,000. Doing so makes eminent sense, partly because of the
increasing cost of everyday items, but also because of the need
for us to have a system that is able to check the genuine threats
to our money laundering regime, rather than simply keeping an eye
on absolutely everything that might happen to be going on.
Every DAML is submitted to the National Crime Agency by a person
proposing to deal with suspected criminal property that may make
them liable for money laundering under the Proceeds of Crime Act
2002; that DAML would make sure that that person is avoiding
liability. Clearly, if someone is paying their rent or taking
part in an ordinary transaction, we are not trying to criminalise
every transaction, but to make sure that we have a proper
awareness of what is going on and what could pose a threat. That
is why I believe that we must raise the threshold to £1,000,
because the vast majority of DAMLs do not provide law enforcement
with asset seizure opportunities—opportunities to take money away
from criminals. Instead, they place a regulatory burden on
businesses such as banks to submit, place a burden on law
enforcement to review, and create a delay for customers, who must
often wait seven days for their transactions to process. I think
there is general agreement with that.
6.02pm
(Halifax) (Lab)
It is a pleasure to serve under you as Chair this afternoon, Mrs
Murray, and I thank the Minister for his opening contribution. As
he has said, the regulations will increase the threshold amount
specified in section 339A of the Proceeds of Crime Act 2002 from
£250 to £1,000. In practice, this will increase the value of
transactions that a bank or similar firm can carry out in
operating an account for a customer without committing one of the
main money laundering offences laid out in POCA. By doing so, the
Government seek to reduce the number of ineffective defence
against money laundering suspicious activity reports, while also
improving the effectiveness of the anti-money laundering system
and enabling law enforcement to focus on—as the explanatory
memorandum says—
“opportunities that lead to asset seizure”.
We are keen to support these measures, which seek to enhance the
quality of suspicious activity reports coming from the private
sector and hasten their utilisation by law enforcement. However,
I am keen to probe whether we are satisfied that that is what the
regulations will do in practice. We appreciate that increasing
the threshold will hopefully lessen the burden on the NCA’s UK
Financial Intelligence Unit, but is the Minister not concerned
that these measures will inadvertently increase the prevalence of
so-called smurfing among criminals, a potential problem raised
with us by the Royal United Services Institute? Through that
practice, money laundering payments are broken down into smaller
amounts under the threshold, specifically to evade law
enforcement.
Moreover, reducing the reporting burden on businesses for
low-value money laundering will not necessarily mean that
businesses are somehow mandated to redirect their resources
towards detecting or reporting on high-value suspicious and
criminal activity. The main argument for the change seems to be
an attempt to prevent the Financial Intelligence Unit from being
overwhelmed, rather than there being no intelligence or
criminality below that threshold. I understand that in recent
years, there has been an exponential increase in the number of
reports that the UKFIU has had to deal with. It now receives over
400,000 reports per annum, which we can appreciate is a massive
challenge for a unit with only 200 members of staff.
In its 2020 report, the UKFIU recorded a 20% increase in the
total number of SARs, and an 80% increase in defence against
money laundering SARs from the previous year. The explanatory
memorandum states that only 2% were refused consent in
2019-20,
“of which only 1,062 progressed towards asset denial.”
Of that 2%, how many of those would have no longer been captured
under the changes?
In its May 2022 follow-up report into the UK’s mutual evaluation
report, the Financial Action Task Force noted continued concerns
about the under-resourcing and IT constraints of the financial
intelligence unit, including its failures to meet the target of
200 staff that the task force recommended more than 15 years
ago.
Our noble friends in the other place have already considered
these regulations, and told Members, who
asked him about resourcing of law enforcement on this crime type,
that 75 additional officers were being recruited to the UKFIU,
which we welcome. He told the Committee that 45 of those officers
were already in post, and the milestone for recruiting the
remaining 30 is at the end of this financial year, 2022-23. That
was on 24 November, so can the Minister update us on whether any
further progress has been made?
I will make the point again that we recognise these changes will
tighten up the information being provided to the FIU, but we are
not entirely convinced that the changes amount to an overall
enhancement of the money laundering framework that we must have
in place if we are to drive this out of our economy.
6.06pm
(Hayes and Harlington)
(Lab)
I just want to place on the record my reservations about this
measure. I think lifting the threshold to £1,000 is untoward when
we know the scale of fraud that is taking place. I am concerned
that minimising the multiple transactions is a way of getting
round this. In addition, I am anxious about the flow of
intelligence that comes from some of the lower-level frauds that
are detected. That could flow into tracing higher-level
frauds.
6.07pm
A quick note on the staffing: 45 officers are already in post,
and no doubt the others will come onstream very soon, because
that milestone is extremely important for making sure that we
have properly recruited for 2022-23. So I can update clearly on
that.
There will of course be a constant review of the number of
officers we keep in post in order to make sure that we have
proper staffing for the requirements. As the hon. Member for
Halifax can see, we are increasing numbers because the demands
are great. I understand the point made by the right hon. Member
for Hayes and Harlington about staffing, and I completely
agree—
6.08pm
Sitting suspended for Divisions in the House.
6.41pm
On resuming—
Please pass on my thanks to the right hon. Member for Hayes and
Harlington for his kind note, Mrs Murray. He wants to speak in
the debate in the Chamber, so I completely understand why he is
not here. His points, which I was going to address before we were
interrupted, are entirely valid. He asked about the change from
£250 to £1,000. The reality is that we are overloading the
system. It is true that we can constantly hire more people, but
we need to use them to analyse the data, not overload the system
with smaller transactions. That is why the request to raise the
threshold has been put before Parliament today.
I think this is an important, sensible adjustment, and we will
keep it under review. As the right hon. Gentleman said, there is
a broken windows theory that goes along with this: smaller crimes
can lead to larger ones. The UKFIU is keeping an eye on the
build-up of transactions, and not just the absolute numbers, so
in different areas it will be aware of how these elements are
going. I appreciate Members’ comments—I understand the spirit in
which they are raised—and I entirely respect their positions.
However, in order to achieve the aims that we are all seeking,
this is a sensible amendment to the existing regulations, and no
doubt it will be kept under review should the situation
change.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Proceeds of Crime
(Money Laundering) (Threshold Amount) Order 2022.
