In recent years the price of metal has risen consistently, reaching all-time highs during the course of 2011. Whilst good news for traders in the metal industry, this has led to an increase in criminal activity associated with metals, particularly scrap metal theft.
The knock-on effect of such criminal activity on UK industry is alarming. The Energy Networks Association reports that metal theft from electricity networks rose by 700% between June 2009 and June 2011. The UK rail network has also been affected: theft of overhead power cables has risen by 70% in the last year, costing Network Rail alone £43 million. Figures suggest that the overall cost to the UK economy has been over £770 million a year, affecting not just rail and telephone operators, but also end-user consumers.
In the UK, the scrap metal industry is currently regulated under the Scrap Metal Dealers Act 1964. The Act requires all scrap metal dealers to be registered with their local authority and obliges them to maintain records of all transactions relating to scrap metal received and processed, including specific details of the source of scrap metal provided to them. The penalties imposed for failure to comply are fixed fines. These fines are no longer seen as a sufficient deterrent to would-be criminals, given the current high prices available for scrap metal.
The industry is seeking to address the problem with a practical response. Some scrapyard companies have adopted a scheme of self-regulation by employing a number of measures. These focus on more stringent documentary compliance, more sophisticated checking of sources (including the use of security systems and photographic identity), and greater scrutiny of cash deals. These initiatives should be recognised and encouraged by the regulators. In addition, in certain areas of the UK, police forces have undertaken specific initiatives directed at combating this growing problem.
More recently, a Metal Theft (Prevention) Bill was introduced to Parliament on 15 November 2011, by way of a Private Member’s Bill. The Bill proposes a number of measures, including a licensing scheme for scrap metal dealers; giving magistrates’ courts the power to impose restrictions on licences; classifying scrap metal proven to have been obtained by theft as a criminal asset (thereby allowing the Proceeds of Crime Act 2002 to apply, which will give police forces the ability to recover monies obtained by selling stolen metal for scrap); creating a specific criminal offence for theft of scrap metal; and restricting financial transactions in the scrap metal trade to cashless transactions (a requirement already applicable in many European countries).
The proposed legislation reflects that introduced in a number of US States in recent years, with over 25 States having enacted metal theft legislation since 2009. Whilst the problem has not been completely eradicated, it would appear that those US States whose penalties are more closely aligned to a strict liability policy have had more success than those with weaker regulation and/or penalties. For any future UK legislation to achieve the success of those US States that have seen the introduction of new laws bring about a decrease in the amount of metal theft crime, the focus must be on the tightening of a registration scheme; the enforcement of a new licensing regime; as well as effective penalties imposed by a newly created criminal offence.
Following media attention on this issue and widespread calls for reform, the Bill was well received and is expected to have its second reading on 20 January 2012. It is hoped that the Government may give this issue priority, with the Prime Minister having already promised to tackle the problem, so that new legislation could be in force within 2012.
For more information, please contact Andrew Ridings, Partner, on +44 (0)20 7264 8158 or andrew.ridings@hfw.com, or Darren Wall, Associate, on +44 (0)20 7264 8229 or darren.wall@hfw.com, or your usual contact at HFW.
