3.42 Guidance can be issued under different labels. In our Consultation Paper we explored existing models for issuing guidance, in particular:
(1) statutory guidance (for example, guidance produced under a requirement within the Bribery Act 2010 and HMRC Guidance on the corporate offences of failure to prevent the criminal facilitation of tax evasion in the Criminal Finances Act 2017);
(2) a code of practice (for example those issued pursuant to the Police and Criminal Evidence Act 1984 («PACE»)).
Statutory guidance
3.43 It is not uncommon for an Act to require or permit a Minister to issue guidance about how something is to be done under its provisions. Although such guidance is not to be treated as legislation, it is capable of having legal effect. The courts will give guidance produced under a statutory power greater weight than guidance produced voluntarily. Statutory guidance can be of substantial value in helping to administer complex and important areas of policy.
3.44 Statutory guidance was issued in relation to the Bribery Act 2010. Section 7 of the Bribery Act 2010 created a new offence which can be committed by commercial organisations which fail to prevent persons associated with them from committing bribery on their behalf. Although section 7 holds a commercial organisation liable for the actions of their associates, the legislation provides for a defence. If the commercial organisation can prove, on a balance of probabilities, that it had in place adequate procedures designed to prevent associated persons from paying bribes, it can avoid liability. This is true notwithstanding that corruption occurred.
3.45 The legislation does not clarify what would amount to adequate procedures. After much debate during the Bill's passage, an additional clause was introduced at a late stage obliging the Secretary of State to publish guidance.
3.46 Section 9 of the Act requires the Secretary of State to publish guidance about the types of procedure organisations can implement to prevent those associated with it from bribing, or being bribed by another. In March 2011, the Ministry of Justice published the Government's guidance on the Bribery Act 2010.
3.47 The Secretary of State may, from time to time, publish revisions to guidance or revised guidance. The Act imposes an obligation on the Secretary of State to consult the Scottish Ministers and the Department of Justice in Northern Ireland before publishing guidance. The Secretary of State may publish such guidance in any manner considered appropriate.
3.48 The guidance is non-prescriptive and requires commercial organisations to adopt a risk-based approach based on a set of guiding principles. It was not intended to «provide a box-ticking exercise for commercial enterprises.» Whether procedures are in fact adequate remains a matter to be decided by the courts:
The guidance is designed to be of general application and is formulated around six guiding principles, each followed by commentary and examples. The guidance is not prescriptive and is not a one-size-fits-all document. The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case.
3.49 Statutory guidance has also been produced in relation to offences under sections 45 and 46 of the Criminal Finances Act 2017 («the CFA»). The legislation creates offences of failure to prevent the facilitation of tax evasion offences in the UK or abroad. It is a defence to these offences if a relevant body is able to establish that when the tax evasion was facilitated it either had in place such procedures as it was reasonable in all the circumstances to expect it to have, or it was not reasonable in all the circumstances to expect the relevant body to have any procedures in place.
3.50 Section 47 of the CFA places an obligation upon the Chancellor of the Exchequer to prepare and publish guidance about the procedures that commercial organisations can put in place to prevent their employees from committing a tax evasion facilitation offence. The Government has published guidance in accordance with this provision which assists in consideration of whether the reasonable procedures defence is available to an organisation. The guidance explains the policy behind the creation of the new offences and offers assistance on how corporations can institute proportionate procedures to prevent the commission of a criminal offence. Additionally, section 47(7) allows the Chancellor to approve and endorse guidance produced by a trade association that addresses sector-specific risks. This allows for guidance directed towards specific industry issues which supplements statutory guidance.
A code of practice
3.51 Modern legislation frequently provides for a Minister, for example the Secretary of State, to issue guidance in the form of a code of practice in relation to particular matters contained in a given Act. Codes are an effective way of keeping the law relevant and operative as they can be revised regularly. Codes of practice published to supplement criminal legislation usually relate to the powers exercised by law enforcement. For example, both the Police and Criminal Evidence Act 1984 («PACE») and the Terrorism Act 2000 are supplemented by various codes of practice governing police powers.
3.52 The Cabinet Office's ‘Guide to Making Legislation' defines a code of practice in the following way:
A ‘code of practice' is an authoritative statement of practice to be followed in some field. It typically differs from legislation in that it offers guidance rather than imposing requirements: its prescriptions are not hard and fast rules but guidelines which may allow considerable latitude in their practical application and may be departed from in appropriate circumstances. The provisions of a code are not directly enforceable by legal proceedings, which is not to say that they may not have significant legal effects. A code of practice, unlike a legislative text, may also contain explanatory material and argument.
3.53 PACE codes have to offer guidance on concepts similar to those in the POCA context. Some of the powers exercisable by police officers contained within PACE require a minimum threshold to be reached before they can be exercised. Whilst the concept of suspicion is not a term in PACE, reasonable grounds for suspicion and/or reasonable suspicion are included in the provisions. These concepts are not defined within the legislation itself but are amplified in the codes of practice in a manner designed to be of maximum use to the people applying them and needing to do so consistently and fairly. There are parallels to be drawn. To some extent, the obligations to make required and authorised disclosures can be said to confer a law enforcement function on reporters and, arguably, providing clarity around those obligations is paramount.
3.54 In 2015 the Attorney General issued a code of practice as to how, in England and Wales, the Director of Public Prosecutions, the Director of the Serious Fraud Office and other specified persons are to use investigatory powers under Part 8 of POCA. The Code explicitly states that it should not be regarded as a complete and authoritative statement of the law:
Only the courts can give an authoritative interpretation of the legislation, and the contents of this Code may be affected by subsequent judicial decisions and changes to the relevant legislation.
3.55 Codes have also been used in relation to the private sector. For example, a code of practice was issued in relation to landlords to avoid unlawful discrimination when conducting «right to rent» checks in the private rented residential sector.
Home Office Circular
3.56 We have also considered the alternative course: that of recommending that the Home Office produce a Circular to educate reporters as to their obligations under Part 7 of POCA.
3.57 Circulars are official Home Office documents that are used to communicate Home Office policy. They can be used to provide updates and further detail on policy and procedures. For example, circulars have been issued to advise of changes to the Misuse of Drugs Act 1971, to firearms provisions in the Policing and Crime Act 2017 and to issue guidance on police misconduct.
3.58 A number of Home Office Circulars were published to accompany the new provisions relating to extended moratorium periods and information sharing in the Criminal Finances Act 2017. Circulars can be a useful educational tool when there are significant policy changes. A Home Office Circular could be used to restate or clarify reporters' obligations under POCA.
3.59 The Home Office issued a short Circular in 2008 on the operation of the consent regime. It was issued to ensure greater consistency in considering requests for consent under Part 7 of POCA. This circular covered the decision-making process and the fundamental principles to be balanced by the Serious and Organised Crime Agency («SOCA») in arriving at a decision on consent.
3.60 The Home Office could issue a series of Circulars to offer additional guidance on the statutory concepts of suspicion, reasonable excuse and appropriate consent. However, Circulars are intended to be short documents. There may be multiple Circulars on a topic in existence, each issued and modified at different times resulting in muddle and confusion. The main drawback with issuing a Home Office Circular rather than introducing statutory guidance is the inferior level of protection provided to reporters. While a court may take the guidance in a circular into account, it would not be afforded the same weight as statutory guidance which has a superior status. For this reason, we have decided that a Home Office Circular would not drive cultural change.
Measuring the likely impact of statutory guidance
3.61 The model which most closely aligns with our objective of improving compliance with legal obligations is the guidance issued under the Bribery Act 2010. A significant period has now passed since that Act came into force and guidance was published. This allows for an assessment of its relative strengths and weaknesses as a model for reform of Part 7 of POCA.
3.62 Awareness is an important consideration. While reporters are more likely to avail themselves of statutory guidance because of its status, its introduction must be part of a committed programme of bringing about cultural change. In 2015, the Government commissioned a study to assess the impact of the Bribery Act on small and medium sized business («SMEs»). Of those SMEs surveyed, 26% were aware of the Ministry of Justice guidance on the Bribery Act 2010. Of those SMEs who were aware of the statutory guidance and had read it, the overwhelming majority (89%) of those who responded found it to be useful. Only 3 SMEs who were aware of the guidance, and had read it, did not find it useful. It is vital that the introduction of statutory guidance is coupled with a general programme of bringing about cultural change for reporters and those involved in the day-to-day functioning of the consent regime.
3.63 One consideration, should statutory guidance be implemented, is what the legal effect of it would be. At present reporters are personally liable for a money laundering offence or for failing to disclose a suspicion of money laundering. To have a material impact on the number of defensive reports, reporters would need to feel confident when making individual judgements about whether or not to make a disclosure. Clearly drafted guidance about how reporters can comply with their obligations under Part 7 of POCA could help with this. As discussed at paragraph 3.40 above, the courts will give some weight to statutory guidance. Sections 330(8) and 331(7) of POCA currently go further than that in providing that, in deciding whether a person committed an offence under those sections, a court must consider whether a person followed relevant guidance. Whether that type of provision should apply to any new statutory guidance of the type under discussion would be a matter for government to decide.
3.64 We remain of the view that statutory guidance is the optimal way to provide greater clarity and certainty to reporters. Currently there is a diffuse range of sources of guidance presented in different formats. There are good arguments for reconciling and consolidating the numerous existing interpretations of the laws relating to the consent regime into a single coherent source of guidance on the law, upon which reporters can rely.
3.65 We consider that statutory guidance would provide the most effective means of improving the effectiveness of the consent regime. We suggest that it would have six principal benefits:
(1) it would improve understanding of the current law;
(2) it would provide greater clarity and certainty for reporters;
(3) it would improve consistency of SARs and their quality;
(4) it would act as a counterbalance to the consent regime and help to reduce defensive and unnecessary reporting;
(5) it would introduce valuable flexibility in the system to respond to changes in money laundering behaviour and other legislation which may impact on SARs;
(6) it would reduce or stop the flow of those types of SARs which have been identified as having limited value.
Who would draft and approve the guidance we recommend: does the SARs regime need an Advisory Board?
3.66 We have considered the best way to ensure that guidance achieves the objectives of clarity and consistency and meets the needs of the specific sectors with reporting obligations. In this section, we go on to consider the best approach for ensuring that:
(1) the drafting process benefits from the collective expertise of those working in the regulated sector, law enforcement agencies and Government;
(2) there is adequate oversight ensuring that it is reviewed and updated at regular intervals; and
(3) there is critical oversight of the process of drafting guidance to ensure it accurately reflects the correct legal position.
3.67 In this section, we will explore the arrangement and merits of creating a Board with responsibility for overseeing the writing and updating of guidance.
3.68 Boards have been used with varying degrees of influence and oversight to review and consult on legislative matters.
3.69 The Home Office PACE Strategy Board was established in December 2007 as an independent monitoring group, appointed to oversee and advise on two public consultations commissioned by the Home Office in relation to the Police and Criminal Evidence Act 1984. It was disbanded in April 2008 following publication of the final Consultation Paper.
3.70 Board members included police, civil servants and other relevant parties. The Board's Terms of Reference were:
[To] monitor the review process and advise on its strategic development. The Board will monitor and help direct the programme of work arising from the Review programme and oversee and support the evidence based development of policy.
3.71 In a recent evidence session before a Select Committee Rodney Warren discussed the difficulties with failing to regularly review guidance and commented on the success of the PACE review mechanism:
My example is the Police and Criminal Evidence Act. That is a very live piece of legislation. It is in operation all the time by very many people. It is at the cornerstone of our criminal justice system. It came up for review, and the Home Office, looking at the review after approaching 20 years.felt that it was helpful to see how the codes of practice were being operated; whether they were appropriate, whether they could be changed or improved.
The then Home Secretary then set up the PACE review Board, which has continued to exist. As life has changed, with electronic working and so forth, there has been a ready opportunity to develop the codes of practice, to seek approval, and to seek input from specialists across the broad spectrum; the Board is not just made up of individuals in the Home Office—invited to participate are academics, practitioners, police officers of course, and those directly concerned with its operation.
It has served to generate a constantly renewing focus on how the Act is operating, and it seemed to me that there is an opportunity here for the Ministry of Justice to consider doing something like that with the guidance so that it is frequently refreshed, maybe annotated at the point at which it is refreshed periodically— perhaps annually—and people will be able to look at it. It is a document that they will see and they will not think that it is stale or out of date.
3.72 As a further example, the Firearms Consultative Committee («FCC») was established in 1988 in accordance with the Firearms Amendment Act 1988. Its remit included keeping the working of the Act under review and making specific recommendations on amendments. The Act included no statutory criteria for membership of the FCC; therefore the Home Secretary was given a broad power to make appointments. The FCC's members included those who had knowledge and experience of either the possession, use or keeping of, or transactions in firearms, weapon technology or the administration or enforcement of the provisions of the Firearms Act. They ranged from the Royal Society for the Prevention of Cruelty to Animals, to the National Rifle Association and the British Shooting Sports Council. The life of the FCC was extended numerous times but it was ultimately disbanded in 2004.The Select Committee on Home Affairs acknowledges its achievements:
We believe that the Firearms Consultative Committee has operated effectively to its remit of reviewing the operation of the Firearms Act, and has provided a valuable forum for contact and discussion between representatives of shooting organisations, the police and other interested parties. We regret that successive Governments have not found it possible to implement some of the Committee's more detailed recommendations for the operation of firearms legislation, and we hope that this Government will, in reviewing the Firearms Acts, keep the full range of those recommendations in mind.
3.73 Further examples are the Joint VAT Consultative Committee («JVCC») and the Joint Customs Consultative Committee («JCCC»). They are HMRC-sponsored bodies. They were designed to improve the administration of VAT or customs policies and procedures. Neither body has legislative powers. As purely advisory Committees, their functions include:
• exchanging views between HMRC and the relevant sector representatives;
• providing advice on strategic changes;
• reviewing progress against aims and objectives;
• suggesting remedial action for objectives that are not being achieved.
3.74 As with the FCC, the membership of these bodies is drawn from relevant experts comprising representatives of professional trade and sector bodies. The JVCC has additional powers to establish and remit work to an informal sub-group.
3.75 We consider that there are significant benefits to the creation of a specialist Advisory Board for the SARs regime. The constitution could ensure that the views and needs of the reporting sector, law enforcement agencies and Government were represented. In addition, other members may include academics, experts with technological or digital or data interests. The inclusion of such experts would assist with ongoing analysis of SARs and measuring their effectiveness. Such a panel of experts would be able to advise the Secretary of State and produce valuable guidance clarifying the obligations of reporters. The Board could be established for a set period with the option to be extended.