The government has refused to allow finance industry professionals a defence of negligence against the charge of failure to disclose money laundering. The move is expected to prompt a battle in the House of Lords.

Peers are expected to take up the issue after the government voted down Conservative and Liberal Democrat attempts to safeguard "innocent" professionals whose "inadvertence" could leave them facing prison sentences of up to five years under the Proceeds of Crime Bill.

The Bill has passed all its Commons stages and is now due to be considered in the Lords. It has cross-party support overall for a crackdown on money laundering and giving courts draconian powers to seize crime barons' assets.

Home Office minister Bob Ainsworth defended the bill: "It is in the interests of the City and its financial reputation that we demand the highest standards of diligence."