The Serious Crime Bill will create new civil orders for the prevention of serious crime, new offences relating to the encouragement or assistance of crime and contains provisions regarding information sharing and data matching. The Bill was introduced in the House of Lords on 16 January 2007 and its Report stage commenced this week.
Serious Crime Prevention Orders ("SCPOs")
These have been referred to as ASBOs for companies
The DPP, Director of Revenue & Customs Prosecutions or Director of the Serious Fraud Office can apply to the High Court for an SCPO. The Court may make an order if it is satisfied that a person has been involved in serious crime and has reasonable grounds to believe that the order would protect the public by preventing, restricting or disrupting involvement by the person in serious crime (see clause 1 of the Bill). SCPOs may be made against individuals, corporate bodies, partnerships and unincorporated associations.
The concept of being involved in serious crime is broadly defined (at clauses 2 to 4) to include those who facilitate the commission of a serious offence (whether unintentionally or not) as well as those whose conduct is simply "likely to facilitate" the commission of a serious offence (even if the offence has not been committed). The scope of this concept has been criticised. For example, the House of Lords' Select Committee on Constitution highlighted that "the far-reaching restrictions of an SCPO may be placed on a person against whom no criminal proceedings have been instituted or who has been convicted of no criminal offence". Effectively, the only defence is if it can be shown that the conduct complained of was reasonable. There is no requirement to satisfy a mental test such as intention or recklessness: the Bill specifically proposes that unless the person's state of mind assists in determining what is reasonable, it must be ignored (see clause 4).
The definition of "serious crime" includes certain money laundering offences and fraud, other specified offences and anything that the Court considers to be sufficiently serious to be treated as such (at clause 2(2) and Part 1 of Schedule 1 to the Bill). Again the lack of legal certainty in the definition has been criticised in the House of Lords: indeed, the removal of the Court's discretion to designate an offence as a 'serious offence' was considered at the Committee stage. The Government's position is that the definition of serious crime allows for certainty and flexibility, and that the list of specified offences in Schedule 1 will give the Court guidance in the use of its discretion. The definition of serious offences also includes offences committed or likely to be committed anywhere in the world if they would also be classed as offences in England and Wales (see clause 2(5) and (7)).
Not only are the circumstances in which such orders can be imposed broad, the effect of them could be onerous. For example, recently HM Revenue & Customs ("HMRC") has been obtaining disclosure from financial institutions which have information stored in the United Kingdom on customers with a UK address holding a bank account in certain unspecified jurisdictions. HMRC were investigating the use of offshore accounts by UK residents which they consider presents a significant risk to the proper collection of UK tax. It remains to be seen whether an additional approach to prevent tax evasion would be to seek an SCPO. Whilst the proscribed offences do not include tax evasion per se, the new offence of fraud (under the Fraud Act 2006) is cast in sufficiently wide terms to cover tax evasion. Please click here for our January Corporate Fraud e-bulletin on the Fraud Act 2006.
As SCPOs are civil orders, the civil standard of proof applies (as noted at clause 33). The courts will decide on the balance of probabilities whether a person has been involved in serious crime, bearing in mind that the more serious the allegation, the stronger the evidence required before the court concludes that the allegation is established.
The types of provisions that may be made by an SCPO are unlimited (providing that the court considers them to be appropriate). The Bill includes various examples (at clause 5), including prohibitions or restrictions on property or business dealings, the types of agreements to which a person may be a party, the provision of goods or services, and the employment of staff. This aspect has also received criticism in the House of Lords for lack of certainty and clarity. The Government has argued that it is important for the Court to have flexibility in tailoring SCPOs to fit the circumstances of each particular case.
There are limited safeguards set out in the Bill (at clauses 6 to 15), including the following:
- third parties that are affected by an SCPO may be able to make representations to court (clause 9);
- legal professional privilege is preserved by clause 12 (although this does not prevent an order from requiring a lawyer to provide the name and address of a client of his); and
- an SCPO may not require a person to disclose any information or produce any documents where an obligation of confidentiality exists by virtue of carrying on a banking business, unless the person to whom the obligation of confidence is owed consents to the disclosure or production, or if the SCPO contains a requirement to disclose such information or produce such documents (clause 13). However, in our experience where such additional "safeguards" are built into the exercise of statutory powers, it is relatively straightforward for the conditions to be complied with and any objection to disclosure can be overridden.
Finally, even though SCPOs are civil orders, it is a criminal offence to fail to comply with an SCPO "without reasonable excuse" (clause 25).
Whilst potentially the impact of SCPO's on legitimate business could be significant the Government has stated that it expects that will not be the case, as SCPO's will be used in a targeted fashion. It anticipates that only around 30 SCPO's will be made annually. Instead, where an organisation is involved with serious crime through unknowing or unintended facilitation, law enforcement will engage with that organisation in an attempt to resolve the situation before applying for an SCPO or by seeking an SCPO against the individuals involved.
New "assisting" offences
The Bill introduces three new offences for those who assist others to commit offences (clauses 39 to 41). Whilst initially the Government proposed that these offences could be committed based on "suspicion" that an act may assist the commission of an offence, the test is now that of "belief", which, as currently drafted, should reduce the chances of an offence being committed inadvertently. However, training may still be required to alert at risk employees to the issues requiring them to report concerns internally so an informed view can be taken on the risks involved. The offences are:
- Encouraging or assisting an offence with intent;
- Encouraging or assisting, believing that the offence will be committed and that act will encourage or assist its commission; and
- Encouraging or assisting, believing that one or more of a number of offences would be committed (but with no belief as to which) and believing that his act would encourage or assist one or more of the offences.
It is immaterial whether or not the underlying offence is committed (clause 44(1)). The offences therefore close the current gap in the common law whereby it is not an offence to assist a crime that is not committed.
There are potential defences to these offences. A person will not be guilty of an offence if he proves that he acted reasonably in order to prevent the commission of an offence (clause 45). Nor will a person be guilty of an offence if he knew or had a reasonable belief that certain circumstances existed, and it was reasonable to act in those circumstances (clause 46). These defences are clearly important given the risk that prohibited conduct under these provisions could also give rise to offences under the anti-money laundering regime, in particular, the offence of being concerned in an arrangement, contrary to section 328 of the Proceeds of Crime Act 2002 ("POCA"). In our view, where the circumstances do overlap, the appropriate course will still be to make a consent request under POCA to SOCA to obtain consent. If consent is then granted, it should then be possible to rely on the defence that it was reasonable to act based on the SOCA consent. Of course this means it is important to ensure that consent is "informed" i.e. all the relevant circumstances are disclosed to SOCA and that consent is sought and obtained before the prohibited act occurs. To the extent POCA goes further and has other defences available, it remains to be seen whether those defences will also assist where the circumstances overlap.
In our view it would be wrong that those who are already subject to the anti-money laundering regime should incur potential liability for other offences where SOCA has consented.
Disclosure of information to prevent fraud
Clause 61 of the Bill provides for the disclosure of information by public authorities in order to prevent fraud. Such disclosure may be made where the public authority is a member of any unincorporated association, body corporate or other person which has been specified by an order made by the Secretary of State, which enables or facilitates any sharing of information to prevent fraud or a particular kind of fraud or which has one of these functions as its purpose or one of its purposes (an "anti-fraud organisation"). Disclosure may also be made by a public authority in accordance with any arrangements made by such an organisation.
Any disclosure under clause 61 which contravenes the Data Protection Act 1998 or is prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000 is not permitted (see clause 61(4)). However, disclosure under clause 61 does not breach any obligation of confidence owed by the public authority in question, or any other restriction on the disclosure of information.
The Bill also proposes an offence of disclosing protected information (clause 62). Protected information is defined as revenue and customs information disclosed by HMRC and revealing the identity of the person to whom it relates or information to be specified by an order made by the Secretary of State. The penalties for such an offence are set out at clause 63.
The Bill also contains measures relating to:
- Data matching;
- The abolition of the Assets Recovery Agency;
- The use of production orders and search warrants for detained cash investigations;
- Extending the powers of accredited financial investigators; and
- Making criminal investigation powers apply consistently throughout HMRC.
The Report stage of the Bill commenced in the House of Lords this week. It is possible that amendments will be made to the Bill at this stage or during the later stages of the Bill's passing through Parliament. We will be monitoring any changes to the Bill and will issue a further briefing in due course.
It remains to be seen the extent to which the new powers and offences are used by law enforcement if enacted. Given the nature of the offences, they increase the risks for businesses which may become caught up in other's criminal conduct. They will increase the need for all business, not just those in the regulated sector, to develop policies and training to reduce the risks.