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Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022

Volume 825: debated on Thursday 24 November 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Proceeds of Crime (Money Laundering) (Threshold Amount) Order 2022.

Relevant documents: 16th Report from the Secondary Legislation Scrutiny Committee

My Lords, this draft statutory instrument raises the existing threshold in the Proceeds of Crime Act 2002 below which certain businesses in the anti-money laundering regulated sector do not need to submit defence against money laundering suspicious activity reports, known as DAMLs. The amount is being raised from £250 to £1,000. This aims to increase the efficiency and effectiveness of the DAML regime for law enforcement, businesses and customers.

A DAML is submitted to the National Crime Agency by a person proposing to deal with suspected criminal property that may make them liable for one of the principal money laundering offences under the Proceeds of Crime Act 2002. By submitting a DAML, a person can avoid criminal liability by obtaining consent or deemed consent for the act they propose to carry out; for example, a customer’s transaction to pay their rent. The DAML provides intelligence to the National Crime Agency and effectively freezes a transaction until it gives a consent decision or seven working days pass, after which businesses can assume that they have the relevant consent.

Raising the threshold to £1,000 is required now because the volume of DAMLs is rising and the vast majority do not provide law enforcement with asset seizure opportunities. Instead, they place regulatory burdens on businesses to submit and burdens on law enforcement to review, and cause a delay to customers, who must often wait seven days for their transaction to process.

To put the volumes in perspective, between 2018-19 and 2019-20 they increased by 80%, from 34,543 to 62,341. They then increased by, by my calculations, a further 41% to approximately 105,000 in 2020-21. In 2019-20, only 2% of all DAMLs, equivalent to 1,365, were refused consent by the National Crime Agency. Of those, only 1,062 progressed to law enforcement pursuing asset denial. The threshold applies to transactions in the operation of an account which do not relate to the opening or closing of an account. It applies only to deposit-taking bodies—in essence, banks and building societies—and to electronic money and payment institutions. This uplift in the threshold will result in fewer delayed transactions for businesses and customers where a DAML is no longer needed. It will allow businesses to prioritise their resources towards intelligence-led investigations and will enable law enforcement to focus on higher-priority reports that provide opportunities for asset seizure and disruption of criminal activity.

The figure of £1,000 has been chosen bearing in mind that this is the minimum amount for law enforcement to pursue an account freezing order under the civil recovery provisions to investigate and pursue asset denial. To prevent the loss of intelligence, businesses must still submit an intelligence-only suspicious activity report to the National Crime Agency where they suspect money laundering. However, this does not require them to wait for consent to proceed.

This statutory instrument forms part of a package of reforms to the DAML regime within the Economic Crime and Corporate Transparency Bill currently in the other place. I therefore commend this motion to the Committee. I beg to move.

My Lords, again I thank the Minister for explaining this order. Raising the threshold from £250 to £1,000, the £250 limit being unchanged since 2005, seems quite a reasonable increase. I understand from the Explanatory Note that some organisations wanted the threshold to be raised to £3,000. I think The Home Office is right to limit the increase to £1,000. Law enforcement must focus its limited resources on transactions that are likely to be the result of money laundering. This order has the additional benefit of reducing the burden on commercial organisations, which can, in any event, report suspicious activity to law enforcement despite the changes in the limits in this order. Therefore, we support it.

My Lords, we support this order as well. As the noble Lord, Lord Paddick said, it seems a reasonable increase and some organisations would have gone to £3,000. However, there were other respondents to the consultation who were against the increase to £1,000; they wanted to keep it at the lower limit. Can the Minister say what their concerns were? Although I agree with the noble Lord, Lord Paddick, that £1,000 seems reasonable, other people thought it should have stayed at its original level: does the Minister know why they thought that? He indicates that he does not know why—okay.

I have some of the same figures that the Minister quoted. The Explanatory Memorandum states that the volume of DAMLs is rising steeply and gave those figures. The question is: what percentage of those 105,000 referrals were over the new £1,000 threshold—what difference will increasing the threshold to £1,000 make?

On the further figures that the Minister quoted, he said that only 2% of all DAMLs were refused consent in 2019-20, of which only 1,062 progressed towards asset denial. The question is, of that 2%, how many of those DAMLs were for amounts over £1,000 and so would still be caught? Both those questions are about how much the amount of work will be reduced by increasing this limit, although we of course approve of the objective.

One of the main benefits suggested by the Government, with which we agree, is that this measure should free up law enforcement to pursue other activities. We welcome that in itself. We heard from the current Home Secretary’s predecessor that the National Crime Agency has been asked to make staffing cuts of up to 20%. Can the Minister say anything about whether that previous expectation is still in place or has now been ruled out?

The Explanatory Memorandum states:

“A full Impact Assessment has been published alongside the Economic Crime and Corporate Transparency Bill, which considers the impact of the changes in this instrument.”

One of our key concerns about that Bill is its failure to tackle fraud and economic crime, with falling rates of enforcement and prosecution. I understand that this change is intended to reduce the number of ineffective DAMLs, but what action is being taken alongside that to try to increase the prosecution rate? It is a huge problem and it is very time-intensive to secure successful prosecutions—I understand that—so although we support this SI I would be grateful if the Minister could set out in a slightly broader context how he will try to increase the possibility of getting successful convictions.

My Lords, I thank both noble Lords for their support. In answer to the detailed statistical questions from the noble Lord, Lord Ponsonby, the National Crime Agency has yet to publish its report into 2020-21 or 2021-22. The details will be in there; I will be happy to share that report as soon as it is published, if that is acceptable.

The noble Lord also asked me about staffing at the National Crime Agency. I cannot answer his specific question and do not wish to stray there, but I can say that we are increasing capacity in law enforcement to analyse and act on suspicious activity report intelligence. That includes 75 additional officers in the UKFIU, which will almost double capacity. Some 45 of those officers are already in post, and the milestone for recruiting the remaining 30 is the end of this financial year, 2022-23. I will not go beyond that at the moment but we all share the noble Lord’s concerns, particularly about financial crime, which, as we know, is a pressing problem.

However, we should also salute the news stories I heard this morning about the Metropolitan Police apparently busting a fairly sizeable scamming organisation. Well done them; let us hope that that results in a large number of successful prosecutions.

I will stop there. Once again, I thank both noble Lords for their support. We believe that this intelligence is a critical tool in our ability to identify, disrupt and recover the hundreds of millions of pounds that underpin the most serious organised crime in the UK. That intelligence will be preserved through this adjustment and the requirement to submit intelligence-only SARs even when businesses are using the threshold exemption. Increasing the threshold is a measure supported by industry and law enforcement. I am sorry, I do not know who did not support the rise; I will try to find out.

Setting the threshold at a more appropriate level to reflect the current landscape is an important step towards improving the performance of the anti-money laundering system to better disrupt money laundering, terrorist financing and high-harm offences.

Motion agreed.