Treaty Scrutiny: Working Practices (EUC Report)

Baroness Bowles of Berkhamsted Excerpts

Monday 7th September 2020 Grand Committee

[The Deputy Chairman of Committees (Lord Bates) (Con)]

If we cannot reach the noble Baroness, Lady Goudie, we will go to the noble Baroness, Lady Bowles.

[Baroness Bowles of Berkhamsted (LD) (V)]

My Lords, the three reports we are considering today—

[The Deputy Chairman of Committees (Lord Bates) (Con)]

Baroness Bowles, I do apologise. Can we can just pause for a moment while we try to reconnect with the previous speaker?

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[Baroness Bowles of Berkhamsted [V]]

My Lords, I will start again. The three reports we are considering today provide a wealth of wisdom and background, as the excellent spoken contributions have done; most things have been said.

My own knowledge is derived more from practical experience in the EU than from UK legislative history and procedure. But I cannot help but think that we have not moved very far when we are left clinging to a 1924 precedent as a best hope, in this age of complex compound treaties and 24-hour international media. If a weak deal is negotiated by the Government, everyone will know. If Parliament has not been informed over time on tricky play-offs, that is when Parliament becomes difficult rather than an ally, and reasonable choices can end up misunderstood and publicly criticised.

The reports emphasise scrutiny and holding the Government to account, which of course is a primary purpose of Parliament. The Government’s approach is overly biased towards maximising their secretive freedom, believing that that always enables playing their best hand. That is not my experience. The Government can be in a stronger negotiating position if Parliament is on their side on the journey.

I first joined the European Parliament before the Lisbon treaty—before the Parliament’s veto came into force. I recall admissions that the Commission found itself weakened because countries would play the “Parliament/Congress won’t agree” card, to which it had no answer. No matter how tough you think you are in negotiations, just saying no—“Because I don’t want it, because it’s not my policy”—is hard. The reply comes back: “We’re blocked and you’re not. You’re the one that has to move.” The backing of a democratic mandate is strong in the pecking order.

When the Lisbon treaty came into force, the first parliament vetoes were on passenger name recognition and banking data transfers via SWIFT, which did result in better data protection standards. As well as holding Governments to account, parliaments provide equality of arms and can assist in discussions with other parliaments—which does not happen so much if there is no power.

I became involved in various public and private meetings on trade in financial services—a trade sector still not well developed. At a conference in the US Congress on one of my visits, I was spontaneously asked by a Senator on the banking committee to explain how the EU’s TTIP proposals on financial services would work in the US legal system. It was not a trick question, and Commission officials present confessed afterwards that they wished they could explain it as well as I had done. They noted that I had the advantage not only of being more specialist but of being in tune with the concerns of US parliamentarians, with whom I already had a working relationship.

We have a long way to go to harness the benefits of parliamentary involvement and grow our own modern method, and I commend the pragmatic proposals in the Treaty Scrutiny: Working Practices report. The Government should not waste the benefits of Parliament as an ally and on the interparliamentary front—both externally and within the devolved UK.

Environmental Protection (Plastic Straws, Cotton Buds and Stirrers) (England) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Friday 10th July 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I welcome this step towards reducing the amount of single-use disposable plastic that finds its way into the ecosystem. Paper straws evoke memories of school milk, soggy ends and pink or brown-coloured ends for special occasions, but thankfully paper technology has improved since then. Taking a broader environmental view, everyday use of non-essential straws should not be encouraged. Making and disposing of them still uses resources, and it is unclear how quickly they will biodegrade. On the packaging exemption, does it provide a loophole if a product—say, a flavouring—is supplied in a straw which is then used for drinking? Finally, as a general question, have the wire and elastic bits from surgical masks been assessed for environmental damage now that they are already being discarded a little carelessly?

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

These amendments follow the careful discussion and, as I referred to at the start, collaborative engagement that has taken place since Committee. They are a testament to the proficiency and collegiate work of your Lordships’ House, and I urge noble Lords to accept them. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I start by thanking the Minister, the Bill team and other officials, who have all played their part in getting this suite of amendments to Clause 43, as it now is, and Schedule 2 on to the Marshalled List. We had a flurry of meetings following the Recess and, once we got down to detailed discussion with papers and checklists, good progress was made. As has been said, I have added my name to the amendments because they deliver the understandings reached in our meetings—and that is also the view of my noble friend Lady Kramer.

I thank the noble and learned Lord, Lord Judge, and the noble Lords, Lord Pannick and Lord Collins, who on Report added their names to my amendment, which paved the way for today’s amendments and for the undertaking given on Report regarding tighter language in the potential modification of the definition of terrorist offences. That yet-to-be amendment depends on achieving resolution in the other place on how to deal, on the face of the Bill, with any necessary extension of criminal offences. I remain ready to assist with that on the anti-money laundering aspects.

When we started out with the Bill, there was no policy in Part 2, yet it gave sweeping powers to amend, rewrite or revoke the anti-money laundering legislation. There were no safeguards, save for the Minister saying, “Trust me—and all my successors—in all circumstances”. Clause 43—Clause 41 as it then was—could have resulted in too little in future, and Schedule 2 could have allowed too much. It took a bit of a journey to elucidate that the problems lay as much with what was not in the Bill as with what was in it, and I thank your Lordships for bearing with me in my endeavours to explain and then distil the main essence of the missing parts.

The words “enabling or facilitating” in Amendment 1 to Clause 43 will further define the detection or investigation of money laundering and terrorist financing purposes for which regulation may be made. This means that the scope and effectiveness of the present rules cannot be undermined—that would hardly be “facilitating”—but it gives some leeway for change, such as updating thresholds or removing redundant measures that perhaps other vocabulary such as “maintaining” or “strengthening” would have prevented.

My concerns with Schedule 2—apart from criminal offences by regulation—were that it was not at all limiting, potentially covering anyone and everyone, with unlimited scope to the burden imposed and no provision for relevance or guidance. Now, Amendment 6 narrows the scope of who can be covered and reflects far better that it is a shared process where the assessments are made at the three levels of Home Office and Treasury, supervisors and relevant businesses. Along with the protective effect of amended Clause 43, this provides the framework we sought and that, in the context of the current regulations, I described as the cascade of responsibility. No longer can it be read that an individual or business takes on the whole burden.

Amendment 7 is now clearer in its drafting and, very importantly, businesses will be subject only to a burden that is appropriate having regard to the size and nature of the business that the person carries on—now defined as “relevant businesses”—and those businesses also have to be of a kind that entails risks relating to money laundering, terrorist financing or other threats to the integrity of the financial system, which now appears in Amendment 8 and was part of the Report stage concessions.

Together with other amendments from Report, with the statement by the Minister that, despite the without prejudice wording, Schedule 2 is limiting, and with the agreed pending matters to be dealt with in the other place, I hope we can all agree that this is a much improved Bill with regard to the administrative anti-money laundering aspect of Part 2.

More generally, I hope that the Government will take note, as other Brexit power-transferring Bills come along, that they do require policy to be stated or restated alongside empowerments, especially when they give sweeping powers to redo everything by regulation. In particular, the twin spectres of permissions to do too much and permissions to do too little need laying to rest.

[Lord Judge (CB)]

My Lords, I had not intended to speak again—your Lordships have been patient with me already—but there is a slight problem. Someone in the Minister’s office must have had a Homeric nod, because Clause 43 makes the express provision that regulations under subsection (1) may not make provisions that create new criminal offences. That was consequent on the vote in the House last week. Unfortunately, criminal offences remain in Schedule 2. Regulations under Section 43, in paragraphs 18 and 19, provide for the creation of criminal offences. Something has gone wrong and I look forward to the Minister telling the House how he proposes to deal with it.

A similar point arises in connection with Clause 17. The original clause made provision for the creation of criminal offences punishable by up to 10 years’ imprisonment. That proposal was defeated in this House and does not appear in Clause 17, which is the former Clause 16. However, in Clause 17(6) there is a provision that:

“Regulations may provide that a particular offence which is … created by virtue of this section”.


There is no such power, so I wonder whether the Homeric nod extended to both parts of the Bill.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Wednesday 17th January 2018 Lords Chamber

[Lord Cormack (Con)]

My Lords, I had not intended to speak and—I apologise—I have not taken a close interest in this Bill, but I was moved and impressed by what the noble and learned Lord, Lord Judge, and my noble friend Lord Hailsham said. The mantra of taking back control means only one thing to me: it is Parliament taking back control. It is not Parliament conferring a blank cheque upon the Executive, from whichever party they are drawn. I am disturbed that this principle appears very much at risk.

In the previous Divisions on this Bill I voted for the Government. I did so because I have not taken a close and continuing interest in the Bill, as I indicated at the beginning, and because I have a real regard for my noble friend Lord Ahmad of Wimbledon, who I have come to know well. I respect him greatly and regard him as a Minister who has proper regard for Parliament and the constraints under which Ministers should operate. I feel for him on this issue but add my appeal to the brief but eloquent appeal of my noble and learned friend Lord Mackay of Clashfern.

Taking up the point made by the noble Lord, Lord Pannick, I very much hope that my noble friend the Minister will indicate that he truly appreciates the concerns of those who are apprehensive about an accretion of power to the Executive, and that he will, after discussing the matter further with the noble and learned Lord, Lord Judge, come back at Third Reading with something that is acceptable throughout your Lordships’ House.

We are in difficult waters. This is a precursor to a long and I am sure complicated, but I hope not acrimonious, debate on the withdrawal Bill, on which the other place is coming towards the end of its deliberations. However, it is no part of the functions of your Lordships’ House to connive at the accretion of power to the Executive. Certain things should depend upon primary legislation, not the fiat of a Minister. I hope that my greatly respected noble friend Lord Ahmad will give me a response that will not oblige me to refrain from supporting the Government.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I recognise the great importance of Amendment 71A but wish to speak to some of the other amendments with which it is grouped. As has already been said by my noble friend Lady Kramer, we have had productive discussions and have identified common ground in relation to the concerns about paragraphs (a), (b) and (d) in Amendment 72. I understand that the Minister will make a statement about the House returning to these issues at Third Reading, with assurances and language that enable me to not press Amendment 72. I also understand that the Minister will clarify the effect of the term “without prejudice” at the beginning of Schedule 2, which relates to my Amendment 76A.

Amendment 74, standing in my name and those of my noble friend Lady Kramer and the noble Lord, Lord Collins of Highbury, would introduce a failure to prevent a money laundering facilitation offence. This was elaborated in Committee, so I need only remind noble Lords that the Law Commission has long recognised a need for a change in the law to enable large corporations to be brought to justice where the need to find a directing mind gets in the way of achieving justice. This type of offence has worked not only since it was introduced in the Bribery Act but has recently been legislated for with regard to tax evasion. Money laundering is in a similar category and this offence would enable offending British companies to be successfully prosecuted here instead of us witnessing the United States getting a better grip than us: that is not being a leader on anti-money laundering. It is also proper that such a new offence is brought in by primary legislation. I give notice that at the appropriate moment I will move Amendment 74 and, if need be, divide the House.

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I conclude with a final sporting metaphor. We have put the governmental horse at this fence a good many times. Each time the horse has galloped gamely towards the fence but at the last moment has swerved away from it. If tonight the Minister once again swerves away and cannot give the reassurances that I seek, and if my noble friend Lord Faulks chooses to divide the House, I shall be happy to support him.

[Baroness Bowles of Berkhamsted]

My Lords, I put my name to this amendment but I acknowledge that it is the noble Lords who have already spoken who have made the running on this recently, so I do not wish to be seen just to piggyback. I shall simply tell the House that the noble Lords have my support and that of these Benches.

[Lord Collins of Highbury]

My Lords, I agree with all the sentiments that have been expressed. This is about a very strong commitment given by David Cameron, and what we want to hear from the Minister is a clear timetable. The noble Lords, Lord Faulks and Lord Hodgson, are absolutely right. In the previous debate we talked about transparency and those who pay. On this issue, it is not just those in the poorest countries who are paying because of this hidden money; it is our own communities. I have said before in this Chamber that to look down the river and see a skyscraper that is 60% foreign-owned, with 40% of that ownership hidden through companies, is clearly scandalous. We do not have to look far. So we need action and a very clear timetable. I hope the Minister will give us that timetable tonight.

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[Lord Naseby]

My Lords, this amendment is about closing a major money laundering loophole. Noble Lords will be aware that, last year, 606,000 companies were formed in the UK. Of these, 250,000 were set up through Companies House, but the majority were set up by company formation agents. In the middle of last year, the fourth EU anti-money laundering directive came into force, requiring company formation agents to complete due diligence checks on anyone setting up a company.

However, for reasons that are not clear to me, the Government decided to exclude Companies House from doing such due diligence. For years, Companies House has set up companies and has had to accept documents sent to it in good faith. It is not required to and does not have any statutory powers to verify or validate the information contained in them. It can act only within the parameters of the Companies Act. It certainly has no investigatory powers under that legislation and, therefore, there are no significant checks being done on companies registered through Companies House. In reality, this means that, for just £12, someone can set up a company using entirely false details without having to go through any verification checks on beneficial ownership, and with only limited checks on registered directors. Therefore, individuals who have been involved in money laundering, have convictions or have been debarred as owners in other jurisdictions can gain access to UK companies though Companies House.

Why does this matter? It is because, unfortunately, there are some companies being set up whose principal purpose is one of committing crime or which subsequently lend themselves to being used for that purpose. In extreme cases, incorporation is used entirely as a front to enable fraud to flourish. This leaves British businesses, consumers and taxpayers open to abuse. The evidence is there from an organisation called Transparency International. A couple of months ago, in November, it found that there were hundreds of British shell companies implicated in nearly £80 billion-worth of money laundering. That in itself should set off alarm bells in my judgment. Additionally, this lack of checks harms Britain’s reputation as a leading place to do business and must be addressed in the run-up to Brexit. It is essential to close this loophole to combat fraud, prevent money laundering and boost our country’s reputation.

The solutions seems pretty simple. In Committee, the Government said that they were not prepared to impose a financial burden on Companies House. However, we have to have some detailed checks and by adding a simple automated check of due diligence during the filing process, the Government can close their own loophole at a fractional cost while ensuring that the UK remains a competitive, low-cost place in which to do business. I understand that Her Majesty’s Government have recognised this is a problem and have given due thought to it. I look forward to hearing from my noble friend exactly how they may seek to close this large loophole. I beg to move.

[Baroness Bowles of Berkhamsted]

My Lords, I have added my name to the amendment of the noble Lord, Lord Naseby. We had a good mini-debate on this issue in Committee. His amendment is a neat solution to the problem that those of us involved in that mini-debate identified—that some sort of check has to be done at the Companies House stage. If money is not put behind that to enable personnel to do that, this proposal seems a neat solution. I would be interested to know whether the Government will take it up or provide something similar.

[Lord Lennie (Lab)]

My Lords, in Committee, the Minister—I think it was the noble Lord, Lord Bates—said that the OPBAS is being set up to deal with this stuff at some time in the future. I do not know when that will be and whether it is a consequence of our withdrawal from the European Union or is a separate matter. However, I would expect reassurance that that body will be up and running at least by the time that we leave the European Union, if and when we do so. Of the 250,000 companies to which the noble Lord, Lord Naseby, referred, thousands open and shut before anyone has had a chance even to notice them. Presumably, they do not always open and shut because they go bust but rather because they are concealing their activities. That needs to be addressed. I do not intend to prolong the proceedings other than to say that—I did not think I would ever say these words—I support the amendment of the noble Lord, Lord Naseby.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Committee: 4th sitting (Hansard): House of Lords
Tuesday 12th December 2017 Lords Chamber

[Lord Collins of Highbury]

My Lords, we may get the same response from the Minister to this amendment, but Clause 41 deals with more than simply bringing EU law into domestic law. We have a clause on anti-money laundering that basically says that we already have primary legislation, so we have no need for more and will deal with all this through regulation. I want to hear clearly from the Minister why that is the case. These probing amendments are about the Minister having to make the case. What is deficient in our existing legislative framework? Why is it not sufficient to deal with the problems that have already been identified or may be around the corner? It is up to the Minister to say why existing primary legislation is not sufficient.

If it is not sufficient, why are the Government not bringing forward primary legislation to deal with it, or making the case for primary legislation? I am tempted to use the terms “known unknowns” and “unknown unknowns”. What are we leading ourselves into? We have tabled this amendment to ask, if the Government have the powers of the super-affirmative procedure, what is the bare minimum? If we will not have scrutiny through primary legislation, let us ensure that on this clause the Government have to say what they intend to do, are required to consult on it and are required to respond to that consultation before any regulations are brought into force. That is the bare minimum.

So far, in all the Committee days, I have not heard that there is a case to be made on this anti-money laundering. By the way, I think it was on the last Committee day that I raised the question of the anti-corruption strategy. I am really pleased that that was published yesterday; I brought it with me and I hope, if we go on for long enough this afternoon, that I will have the opportunity to read it. One of the things about the strategy that concerns me is: who is leading on it? I understand that John Penrose has been given the responsibility, but when the then Prime Minister David Cameron talked about that need at the anti-corruption strategy summit, we were talking about a Cabinet Minister having responsibility. We were talking about the Government taking these issues seriously. We know that money laundering is the key element in most corruption in the world, where people secretly get money out, get it all cleaned up and buy property et cetera.

I hope the Minister will explain why we seem to have had a downgrade on corruption—and not only that. If it is a priority, why are we not getting primary legislation to address these issues? Why are we seeing this being done, in effect, through the back door? I strongly believe that if the clause remains as it is we must have the super-affirmative procedure to ensure not only that we have only proper parliamentary scrutiny but that the people who put the House of Commons there can see and comment on what is being proposed so that there is proper accountability. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I welcome the comments that have just been made on this group of amendments on the super-affirmative procedure. When I went to bed last night I was thinking of commenting only that this enhanced procedure was interesting and worth exploring further, particularly to see whether it goes far enough. We are entering new territory. If a procedure such as this gives sufficient consultative and amendment power to Parliament, it might work—but it is still, as has been emphasised, a big downgrade from participating in an Act of Parliament and therefore should not in any way be a “new normal” to replace what could, or should, be done more fully. Having said that, coupled with the sunset clause that noble Lords have proposed in the last group this evening, it is perhaps even more interesting as a backstop and a temporary measure.

However, this morning—I did not have an inspirational dream and I do not want to retract anything that I have just said—I replied to an email from a lobbyist seeking amendments to the withdrawal Bill to change some things in EU financial services legislation while it is being transposed. As part of my reply I explained that the issue concentrating my mind was far more the division of power between government and Parliament—how changes such as the one they sought to address by lobbying me might be addressed in future—and that there would be legislation following on from the withdrawal Bill. We could say that the Sanctions and Anti-Money Laundering Bill is an advance guard of that follow-on legislation. I ended up by saying that if the Government got their way on the division of power then the lobbyist need never lobby Parliament again. What a statement that is about lack of power and the place of Parliament, yet that is what the Government seek to do to what we proudly call the mother of Parliaments.

Now, “need never lobby Parliament again” is not entirely true. Lobbying would become concentrated solely on getting regulations voted down—in full. I wonder whether the Government have thought through how that would play out. For example, divide and rule—a tactic well used when lobbying and suggestions are varied—would no longer apply. Everyone would be as one, even if for different reasons. I have seen concerted naysaying on issues in the European Parliament—and it is both powerful and very unpleasant.

It is important that Parliament has not just negative but positive power to seek amendments, including to make additions that are significant, not just tweaks. That is what I am looking to preserve, even for any interim measure.

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Moved by

[Baroness Bowles of Berkhamsted]

77: Clause 47, page 32, line 13, leave out subsections (1) to (3)

[Baroness Bowles of Berkhamsted]

My Lords, Amendment 77, which is in my name and that of my noble friend Lady Kramer, takes your Lordships again to the issues of the Ahmed case. The amendment would delete the first three subsections of Clause 47, which repeal the Terrorist Asset-Freezing etc Act 2010, so would stop that Act being revoked. We do not agree with the repeal of that Act and its replacement by a general power to do anything, which is what the Bill does.

There have already been significant contributions from noble Lords, and especially noble and learned Lords, in respect of powers in Clauses 10, 11, 16 and 32 which reach into the same issues. If anything, the amendments proposed already have not gone far enough. The rights of appeal as well as review that are contained in the Terrorist Asset-Freezing etc Act 2010 should not be dispensed with.

The Supreme Court struck down the Treasury’s previous regime as an oppressive one that had devastating effects on families, which led to the 2010 Act. It looks like the Government are giving themselves power to do that again. We come back to worthy intentions, but the safeguards must be there. Under the current law, the court hears appeals against designation decisions, not just reviews. That should be maintained.

This amendment revisits issues debated at the time of the 2010 Act, such as who decides questions of fact and the scope of error allowed to the administrative decision-maker. There will be noble and learned Lords who have a better grasp of the issues than me, and as I mentioned, we have already been around that loop in previous debates on other clauses. However, to me, it is a question of principle: to seek to increase power and simultaneously reduce defences is not acceptable, all the more so when there is no relevant change in circumstances or threats brought about by Brexit. It is no excuse to ravage what have previously been just defences. I beg to move.

[Baroness Kramer]

My Lords, I will speak briefly. I am no expert on the relevant legislation that is being repealed under this clause, but I have spoken to those who are, and the response I have had is one of shock. Legislation that went through both Houses of Parliament, with great care, debate, consideration and amendment, is now being swept away, to be replaced by a regulatory power, which, again, is not bounded in any way. It could be identical or it could be completely different, but it is not discussed or laid out anywhere in this legislation.

In the past we have talked primarily of powers that have come through a democratic process in Brussels: through the European Parliament’s scrutiny, consultation and voting processes, and through votes of the Council. In this case, we are talking about sweeping away, to be replaced by regulation, significant legislation that came through this Parliament in a democratic process. I do not understand, nor have I heard any explanation, why the Government are choosing to take this route.

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[Baroness Bowles of Berkhamsted]

I thank the Minister for his response. I am sure he appreciates that this is, if I may use the words of the noble Lord, Lord Collins, a backstop amendment. The point is that satisfaction has to be achieved somewhere in the Bill in respect of the clauses I named, particularly Clauses 10, 11, 16 and 32, and so far we do not appear to have that. This is of a package with that. Something has to be done, so while for the moment I am prepared to withdraw the amendment, I expect this whole issue to be revisited with considerable force on Report. I beg leave to withdraw the amendment.

Amendment 77 withdrawn.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Committee: 3rd sitting (Hansard - continued): House of Lords
Wednesday 6th December 2017 Lords Chamber

[Lord Davidson of Glen Clova (Lab)]

My Lords, the Opposition are sympathetic to many of the points that have been made, and I single out Amendment 69H. The capacity to carry out UK company formation from outside the UK is a real lacuna in the current money laundering regime. Monitoring within the UK is difficult enough, as is evidenced by the use of, for example, Scottish limited partnerships in Russian and former eastern-bloc bank fraud and money laundering of gigantic proportions. This vulnerability is of course magnified when the company information provider eludes the UK’s money laundering oversight.

Amendment 69J provides, we respectfully suggest, a useful additional hurdle for any prospective money launderer to negotiate. While the provision of the requisite materials for opening a bank account no doubt seems irksome to many, it none the less provides an additional external check on the background of those seeking to operate via a UK company.

The amendment of the noble Lord, Lord Naseby, offers a clear and useful mechanism for combating money laundering and I share his observation that it would be surprising if the Government did not support this measure with considerable force.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, there are two issues here. The first is to make sure that money laundering checks are carried out somewhere in the chain. There could be various mechanisms to do so, some of which are suggested in the amendments. Then there is the issue of how Companies House itself will get the money to conduct the checks. That is the point of the provision in Amendment 69L for a mechanism to levy a fee. Obviously, there could be other mechanisms. As to Amendment 69J, if there is no bank account, the fee could be levied at that point. Ways in which to tighten up and get the money are the objectives of this family of amendments.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank the noble Baroness, Lady Kramer, for leading a short but interesting debate on these matters. I shall put some remarks on the record to see whether they satisfy her and my noble friend.

Amendments 69H and 69J would prohibit trust or company service providers, known as TCSPs, that do not carry on business in the UK from incorporating UK companies, unless overseen by a UK anti-money laundering supervisor. The amendments would also require UK companies to establish a UK bank account and evidence this to Companies House. The money laundering regulations 2017 require TCSPs carrying on business in the UK to be fit and proper. We will also shortly formally establish the office for professional body anti-money laundering supervision, or OPBAS, which will work to ensure consistently high standards of anti-money laundering supervision by professional bodies, including TCSPs.

If there are factors that make it unclear whether a trust or company service provider could be regarded as acting by way of business in the UK—in which case it would fall within the jurisdiction of a UK anti-money laundering supervisor—HMRC considers on a case-by-case basis whether registration for supervision is necessary in order to combat attempted evasion of supervisory requirements. I therefore agree with the intention behind the amendment. However, given the pending establishment of the office for professional body anti-money laundering supervision, it is right that we establish this body first and then take proper account of its conclusions around TCSP supervision before taking further action in this space.

Additionally, the problem that the noble Baroness, Lady Kramer, and my noble friend Lord Naseby correctly identified ultimately results from trust or company service providers exploiting the comparative weakness of anti-money laundering supervision in certain overseas jurisdictions. In order to comprehensively address this, our emphasis should not be solely on expanding the scope of our anti-money laundering regime, particularly given the practical difficulties that would arise from UK supervisors seeking to exercise effective oversight over trust or company service providers established outside the UK and with no physical presence within the UK.

Such circumstances would present significant challenges for effective supervision, which typically includes measures such as on-site visits to firms that present higher risks of money laundering. The most effective way of addressing the problem which the proposers of the amendment have highlighted is through effective international co-ordination to drive up standards of supervision in jurisdictions with weaker anti-money laundering regimes than we have here in the UK. This is the agenda which we promote with international partners through the Financial Action Task Force, and it is this agenda which will offer a durable, long-term solution to the problem of weak overseas supervision of trust or company service providers.

Amendment 69J would amend the Companies Act 2006 to require UK companies to establish a UK bank account and evidence this to Companies House on an annual basis, or otherwise pay a fee or financial penalty. The wider purpose behind this part of the Companies Act is to provide a simple mechanism for companies to confirm that corporate information registered with Companies House as required under other obligations is accurate and up to date. The amendment would significantly change the purpose of the annual confirmation statement. As drafted, it would additionally require all UK companies to demonstrate annually that they hold a UK bank account; otherwise, they would have to pay a financial penalty. This would mark a significant increase in the reporting burden on the 3.9 million entities registered with Companies House, the majority of which are small, local businesses which would have to provide evidence of a UK bank account every year.

Amendment 69K would require company formation agents—defined for these purposes as including the UK registrar of companies at Companies House—to conduct customer due diligence. I appreciate my noble friend’s remarks about the consultation which has taken place, led by my noble friend Lord Ahmad, with colleagues and officials. I understand and sympathise with my noble friend’s intention; it is quite correct that we should take steps to avoid corporate vehicles being used for money laundering. However, I hope I can convince him that his amendment is not the best way to do that—although he prefaced his remarks by saying that it was a probing amendment. He will probably want to reflect on my remarks in response to it.

The amendment would represent a fundamental change in the principles under which the UK’s company law system has long operated. The UK registrar of companies has a statutory duty to incorporate and dissolve limited companies. This is carried out by Companies House, which registers company information and makes it available to the public. Companies House is not—unlike trust or company service providers, which are already supervised for anti-money laundering purposes under the money laundering regulations—a private-sector profit-making business. The registrar has no discretion in law to refuse or decline a request to incorporate a company. Companies House therefore cannot decline to establish a business relationship in the way that firms regulated for anti-money laundering purposes must when they cannot discharge their customer due diligence obligations. Because of the registrar’s statutory obligations, Companies House is not considered to be a company formation agent. If approved, the amendment would require further substantial revision to UK company law to allow Companies House to operate in the same fashion as company formation agents.

Approximately 600,000 new companies are registered each year at Companies House. The customer due diligence measures required under the money laundering regulations are significant, and are required to be applied by regulated firms on an ongoing, risk-sensitive basis to prevent illicit actors making use of the financial system. They are not intended—either by international standards, EU law or UK law—to be applied by a public body to all companies that are incorporated within the UK. Were these measures to be adopted, they would be a significant, unfunded burden upon Companies House and would fundamentally alter its relationship with the company formation process. They would also unnecessarily delay the process of company formation. The overwhelming majority of UK companies are set up for legitimate commercial purposes. Applying this amendment as drafted would not address or identify higher risks of money laundering or terrorist financing, but would instead impose an across-the-board administrative burden on Companies House and individual companies.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

My Lords, my noble friend Lady Kramer and I gave notice that this schedule should not stand part of the Bill. I would like noble Lords to take a few moments in private to give the schedule the “read it out aloud” test. Let us try one bit of it now. Paragraph 4 says:

“Require prescribed persons to take prescribed measures in relation to their customers in prescribed circumstances”.


All the prescribing is yet to be defined. I am sorry to appear light-hearted, but I can imagine that coming out of the mouths of comedians. Truly, I do not know whether the schedule is sinister or whether it just fails to understand how the money laundering regulations 2017 work. It is sinister if you look at the scope of the powers, which gives opportunity for boundless increase in who can be covered and ignores any proportionality or safeguards that are included in the current law.

It is no use pointing to the reference to the current regulations, which appears in paragraph 20, because that is basically there only to give power for them all to be rewritten, amended or revoked—so there are no guarantees for anything. It is worth having a quick look at paragraph 20, which starts:

“Without prejudice to anything in section 41, paragraphs 1 to 19 or section 44(2), regulations under section 41 may”.


We have to remember that Schedule 2 starts:

“Without prejudice to the generality of section 41”.


So we have a paragraph that starts with three mentions of “without prejudice”, reinforcing that a whole lot of other stuff is expected to be going on. Paragraph 20 then says:

“(a) subject to any modifications the appropriate Minister making the regulations considers appropriate, make provision corresponding or similar to any provision of the Money Laundering Regulations 2017, as those Regulations have effect immediately before they are saved by section 2 of the European Union (Withdrawal) Act 2017; (b) amend or revoke the Money Laundering Regulations 2017”.

It says that you can make provisions corresponding or similar to, or revoke. If that, together with the three references to “without prejudice” is not giving notice that you intend to completely rewrite them, then I really do not know what is. This is, as I have said before, a big part of the problem. It is sinister when looked at that way.

There is also a failure to understand, or at least to commit to, how the money laundering regulations 2017 work. That misunderstanding or failure to acknowledge is there by virtue of the very structure of Schedule 2. It is upside down, starting with the person, moving on to supervisors and leaving out duties of government. It does not seem to appreciate the cascade of risk assessment that drives automatic updating of the nature of risks from the Treasury and Home Office, to supervisors and then on to the persons. The list of powers seems to have been composed by lifting a short part-sentence here and there from individual sub-regulations, ignoring any safeguards including, as I said, the surrounding cascade methodology. The part-sentences are then turned into a list of naked powers that have already received criticism from the Delegated Powers Committee in paragraph 36 of its report. I commend reading that paragraph to noble Lords; it highlights and criticises the unrestricted power over persons, the powers to create supervisors with investigatory powers, the powers to prohibit the carrying on of business and power to impose unlimited fines and criminal offences—all without limit save for the sentencing limits.

It would stretch your Lordships’ patience, especially at this hour, if I went through each paragraph to show its origins and what is missing—although I could do that, if noble Lords wanted. I will just illustrate the pattern with one paragraph but, as I have said, it is a repeating pattern. Paragraph 2(1) requires “prescribed persons”—the yet to be defined prescribed persons—

“to identify and assess risks relating to money laundering, terrorist financing and other threats to the integrity of the international financial system”.

That actually sounds like a pretty good definition of what the Financial Action Task Force was set up to do. The Minister can by regulation make anyone—some small accountant, lawyer or bookkeeper, you, me, the doorkeeper, a schoolteacher—do it all, not forgetting unlimited fines for getting it wrong. Am I being ridiculous? Well, no, because there is no mention of the category of person or it being about their own or a relevant business. Where does this wording come from? Let us look at Regulation 18(1) of the 2017 regulations, entitled:

“Risk assessment by relevant persons”.


It starts:

“A relevant person must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”.


Spot the missing bits. It has to be “appropriate steps” relating to its own business. The “relevant person” is not open-ended either, because there is a list of relevant persons in Regulation 8.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

The noble Baroness says “everyone”. I know that she and the noble Baroness, Lady Bowles, made that point but I do not agree. She has made her point and I have listened; perhaps she should listen to the point that I am making in response.

As the noble Baroness says, Schedule 2 ignores the cascade of information. The power in Clause 41 will enable us to update and amend existing legislation that does this, as we did when the regulations were replaced this year, as I have already mentioned. This should not be viewed in isolation, which I fear is what the noble Baroness is doing. When new categories of risk manifest—the noble Baroness, Lady Bowles, talked about virtual currency exchanges—new legislation will be needed, and this power helps to fill that gap.

In sum, Schedule 2 sets out examples of the scope of the anti-money laundering and counterterrorist financing power contained in Clause 41, and it defines the limits of this power in relation to criminal penalties. The noble Baroness, Lady Bowles, ignores proportionality. However, this issue must be looked at in the wider context, not in isolation. Ministers are bound to use these powers proportionately, taking account of people’s human rights, and they are bound by Section 6 of the Human Rights Act 1998. I therefore contend that Schedule 2 should stand part of the Bill.

Perhaps I may briefly mention Amendment 71A, which I understand is related to the opposition of the noble Baronesses, Lady Kramer and Lady Bowles, to Schedule 2. To give an example, the reference in paragraph 2 of Schedule 2 to regulations, mentioned by the noble Baroness, being capable of requiring,

“prescribed persons to identify and assess risks relating to money laundering, terrorist financing and other threats to the integrity of the international financial system”,

corresponds with regulations 16 to 18 of the money laundering regulations 2017. These require the Government, supervisors and regulated firms to assess the risks of money laundering and terrorist financing at a national, sectoral and business level as appropriate so as to inform the nature and extent of any due diligence measures applied by regulated firms.

Perhaps I may give a further example. The reference to “prescribed persons” in paragraph 4 of Schedule 2, which again the noble Baroness quoted, corresponds to Part 3 of the money laundering regulations 2017. This establishes a framework giving effect to the standards of the Financial Action Task Force relating to simplified and enhanced customer due diligence, which I am sure we all welcome. Again, this is not about the UK going it alone; it is about how we are part and parcel of the FATF.

Therefore, the amendment would not remove the Government’s ability to designate categories of business as regulated for anti-money laundering purposes, or designate supervisors. These purposes are already permitted under Clause 41 and are referred to in Schedule 2.

There may also be a number of areas where we want to confer functions upon persons to assist with the implementation and enforcement of sanctions. I think that the noble Baroness, Lady Bowles, startled the doorkeepers when she quoted various examples. Captains of ships and harbour masters, for example, might need to exercise functions in order to comply with shipping sanctions. We might also need to confer functions to help enforce sanctions on border officials, agents of Her Majesty’s Revenue and Customs, or law enforcement agencies, such as the National Crime Agency.

I know the noble Baroness. She is well versed in the money laundering issue, and I respect that. That is why I said at the outset that I will listen again, or read, I should say—listening to Hansard may be stretching it a bit—her contribution very carefully and see if there are aspects that need further amplification and explanation from the Government. I hope that through my practical examples I have addressed some, if not all, of her concerns and that at this point, she will be minded to withdraw her amendment.

[Baroness Bowles of Berkhamsted]

I thank the Minister for his reply. I fear that a large part of it merely proved my point that small extracts have been turned into powers. I maintain that without the surrounding framework to give proportionality, you do not need everything that is in there. It is difficult—

[Lord Ahmad of Wimbledon]

I was merely giving a few illustrative examples. Like the noble Baroness mentioned, I think she and I would be the only ones here if we carried on in this respect. What I was doing was merely illustrating, but it is dealt with comprehensively.

[Baroness Bowles of Berkhamsted]

That is the point. It is converted into a power very comprehensively but it just takes the first section. For instance the one I quoted does not even point out that they are responsible only for what goes on in their own business. That makes it very difficult. A lot of this could be dealt with by putting in those proportionality statements and a few more things.

The other source from which this list of powers has been obtained—which I think the Minister was referring to—is the FATF recommendations. However, you have to bear in mind that the FATF is an organisation meant to look at risks to the financial system, terrorist financing and those kinds of things. It is not set up with a branch to deal with civil liberties or even human rights. It leaves that to the nation states which are then going to implement. I could probably find it in the FATF but it is too late in the evening to do that. You cannot just put the list of powers or of things that the FATF wants you to do into powers without acknowledging that there has to be a framework.

Yes, there may be human rights elements that we have not abolished, nevertheless there are more things—

[Lord Ahmad of Wimbledon]

To clarify, I said that we need to look at this in the wider context. That is why I referred to the obligations that Ministers are bound by in the Human Rights Act. That is part of our statute, so we are obliged to follow that.

[Baroness Bowles of Berkhamsted]

Unfortunately, it seems that that ends up in the courts from time to time, which is very difficult for the sorts of people that might find themselves entangled in this. My plea is really that we just make an effort to get this a little bit more right. In that spirit, I will not be pressing Amendment 71A, which was linked to the creation of supervisory powers, which was why it was in the same group. This issue is one that we will wish to return to in general on Report.

Schedule 2 agreed.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I shall speak to the whole of this group of amendments. I gave notice of my intention to oppose Clause 16 standing part of the Bill. From the debate we have had it is quite clear that there is a little bit of an earthquake going on throughout the whole of the Bill. In a sense, its epicentre, as has been rightly explained by the noble and learned Lord, Lord Judge, comes to a climax with the criminal sanctions. Deleting the criminal sanctions parts would not provide a solution because they build on all the other wrongs, if I may call them that, that exist in the other clauses—throughout the sanctions part debated today and the powers contained in Schedule 2, which we will debate. We may eliminate those criminal sanctions, but we would still have an awful lot of other powers that will still do an awful lot of wrong. The fact that the criminal sanctions are laid on top of them is what makes it so egregious.

I move on to the transposition of the fourth money laundering directive and the issue of precedents. It has been said that there are precedents for creating criminal offences by statutory instrument and that in the past as well as now constitutional committees and delegated powers committees of this House have objected. In the earlier debate, the noble and learned Lord, Lord Judge, explained that those criminal offences might be buried among many other regulations. I have a good example here; it is a pretty thick one. It is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—that is, the fourth money laundering directive. I think that there are 116 pages of dense type there, together with the schedules, and 109 other articles—sorry, we are not in Europe any more, or we will not be, or we may not be, or maybe we are. There are 109 other regulations contained within that. One of those is new—we have just dealt with it again recently—but in terms of the precedent, they derive from things that happened in the Proceeds of Crime Act. They reflect what has happened to the primary offence of money laundering, on to the secondary or derived offences where banks or other financial institutions have failed to have the right procedures in place. So there are kinds of precedents, even though I do not agree with the way that it has been done.

If we turn to what we have both in Clause 16 and Schedule 2, we see that there are no limitations at all. There are very open powers—they are even more open in Schedule 2 than in the sanctions part of the Bill. There may have been a failed attempt to create a framework for those criminal offences by referencing alongside them that the Minister will look to the matters of defences and evidence, but that has created other problems. As was again elaborated by the noble and learned Lord, Lord Judge, how can we tell that those will not be the right kinds of provisions? What do we know about the future?

The noble and learned Lord, Lord Falconer, said earlier that, ultimately, the only thing that matters is what is in the Act; it does not matter what the Minister’s intentions are, even if he says what they are—it is the words of the Act. We do use legislation for purposes that were not intended. In 2008, at the height of the financial crisis, the UK used anti-terrorism legislation to freeze £4 billion of assets of Landsbanki. It caused us a great loss of reputation in some circles, which is not to say I endorse what Landsbanki was up to. When the Anti-terrorism, Crime and Security Act 2001 was going through Parliament, I do not think anybody said, “We’re going to use this to freeze the assets of banks because they were a bit too laissez-faire in their financial regulation”. Something that was done for one purpose was used seven years later for another. Who is to say that there are not many other examples—I am sure if I dig I can find them—or that we may not get examples like that in the future? One cannot have new offences that are unpredictable as to how the rule of law, the defence and due process will operate. One has to have those safeguards, and this Bill does not do any of that.

I refer to what the Minister said in the debate on Clause 2 on whether one should wind up a company or disqualify directors. This was in the context of a company that would have been breaching sanctions and doing things such as arms trading. The Minister said that those amendments would not do because all the Bill aims to do is to replicate sanctions and the amendments went over and above that—the sanctions provisions that are already in existence, he meant—and we do not want to go further than other countries on sanctions and do what the UN and the EU are not doing. I can tell noble Lords that they do not do unlimited, undefined, potentially abolish-the-defence type of criminal sanctions. Actually, they do not have the powers to do that, but I doubt that they would do it anyway.

Another thing that the Minister said was that the sanctions need to be reversible. I fear that there is nothing very reversible about 10 years in prison. There is something seriously wrong here: it needs a lot more structure around it if they are even going to make the case that we can have sanctions, for instance, if they are going to follow, or punishment for sanctions, if they are new ones. The circumstances that give rise to requiring sanctions might be unpredictable, but the general nature of the sanctions that are imposed are not. You stop people trading or stop people having access to financial services: you can certainly put a framework around those. No effort whatever has been made, yet if you turn to something such as the fourth money laundering directive—and, indeed, the very regulations that have just been made to transpose it—all those safeguards are already there. There is absolutely no reason why they should not be replicated in the Bill.

[Lord Thomas of Gresford]

My Lords, I emphasise everything that has been said up to now about how unacceptable Clause 16 is. If someone is a designated person, sanctions are imposed upon him and he wilfully and deliberately breaks those sanctions, there is perhaps room for criminal offences which can be defined and can carry sentences of up to 10 years’ imprisonment. However, these regulations are concerned not with that so much as with trying to create a system of regulation of banks and providers of financial services to encourage them to report and to follow what is required in order to prevent money laundering or the busting of sanctions. These are banks and institutions which are not acting wilfully and deliberately and so are not criminal in that sense.

It might be proportionate in those cases—this is what has happened with other regulations—to have a small criminal sanction for a breach of the particular regulation which requires that you report on a client. That is one thing, but here there seems to be a confusion; the two types of criminality are put together. The serious criminality of breaching the sanctions is looked at in the same way as a failure to report what a client may be doing which could amount to a breach of sanctions. It is wrong that that should be subject to serious criminal sanctions of the nature described in the Bill.

What really offends me about it, however, is that the Minister has power to stipulate where the burden of proof should lie: for example, whether hearsay evidence could be introduced or whether a particular defence can or cannot be run—“It shall not be a defence to do” whatever it may say. That is the sort of thing you see in statutes from time to time. It is not Parliament deciding that; it is the Minister. He creates his criminal offence and then makes it almost impossible for a person to defend themselves.

It is one thing to face a charge where you know that the burden of proof is on the prosecution—and there are strict rules of evidence which apply across the board in criminal cases. It is something else if a Minister has power to create his own form of criminal law. That is really what this is all about. It is wholly unacceptable and must be defeated.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will mainly speak on the anti-money laundering aspects of the Bill; other colleagues will speak on the sanctions part. I convey apologies from my noble friend Lady Kramer, who regrets not being available to speak today.

I am not entirely convinced that the two components of the Bill, sanctions and anti-money laundering, sit well together. Sanctions have generally come through an intergovernmental and ministerial channel, while the administrative money laundering requirements have come under the co-legislative procedure, with equal power for the European Parliament. I thank the Minister for explaining some of the web of where the various aspects reside, but it is also helpful to review this. The primary money laundering offences appear in the Proceeds of Crime Act, not referenced in the Bill, which also contains requirements for regulated businesses to report suspicious activity, with three secondary criminal offences for failing to report suspicious activity, tipping off or prejudicing an investigation. A similar set of primary and secondary offences appears in the Terrorism Act. The money laundering regulations of 2017, and their 2007 predecessor, cover further administrative provisions on businesses, including criminal offences for contravening a relevant requirement and for prejudicing investigations.

The EU directives in fact require only effective enforcement and deterrent: it is left open how that should happen, and the UK included criminal offences which appear to have been first introduced by secondary legislation in 2007 and added to in the 2017 regulations. Maybe it can be said that these offences derive from, or at least follow, the pattern of the POCA secondary offences. The money laundering definition in POCA is so wide as to cover use of money or any asset that has come from criminal activity, so in theory it covers use of a stolen paperclip, as some wag has suggested on Wikipedia.

With such a scope, it remains an insult that property bought with the proceeds of crime can hide under anonymity of the beneficial owner, enabling both the property and rental from it to evade any effective discovery.

I turn to today’s Bill. It is proposed that significant money laundering legislation is to continue to be made by unamendable regulation, and these may be substantial and manifold regulations all in one. This is legislation that impinges on the daily lives of everyone opening a bank account or transferring money, and who may become subject to—well, under this Bill, I would say almost anything.

The fourth money laundering directive is clear on issues of proportionality and other guidance around the nature of things that should be covered in risk assessments and supervisory behaviour, such as record-keeping. The 2017 regulations add further detail relevant to the UK, but I am not sure they are quite so hot on proportionality. In future, though, under Clause 41 of today’s Bill, we are to get the regulatory imposition of anything that the Minister of the day might fancy in the name of money laundering or terrorist financing, which, as I have said, are defined very broadly. It is a very strange way to take back control if instead of transposing EU legislation—which, whether or not you care for the system, has a full parliamentary process—we replace it with the omnibus rubber-stamping of standards from the Financial Action Task Force, which has no such scrutiny or accountability, and simultaneously paves the way for the exercise of generic powers and the creation of unspecified criminal offences, all by regulation.

We know what happens with regulations. A good example on this very subject comes up next Monday concerning the transposition of the fourth money laundering directive. There is to be a regret Motion, not least because the instrument was laid with three days’ notice. How much regret can we tolerate? It gets worse if there is a rejection because it results in threats to the existence of this House. Switching to an affirmative procedure does not make any difference in that regard, even if it is a bit more respectful.

Schedule 2 gives some 27 wide regulatory powers to amend all the administrative topics that are in the 2017 regulation, and it is far from clear what safeguards will continue. I have called them topics because that is what they are; they are headings. There are no checks and balances, no mention of proportionality, no policy relating to the type of risk factors to cover, all kinds of yet-to-be-prescribed measures against yet-to-be-prescribed customers, and no indications regarding the use of information and data by supervisors or the need for supervisors to keep proper records. I could go on. It may be a technical Bill but I am afraid that power without policy is a very dangerous instrument.

The Government may have wanted to keep the schedule to three pages but there is a reason why the fourth money laundering directive is longer: it contains balance because it had to stand up to proper parliamentary scrutiny. I declare an interest in so far as that directive came under my remit as chair of the Economic and Monetary Affairs Committee in the European Parliament. I could ask why I should have less say here than I did there. Further, Schedule 2 states that these 27 powers are:

“Without prejudice to the generality of section 41”.


So not only could every jot and tittle of the 116 pages of the 2017 regulations be changed or revoked, almost anything could be added under Clause 41 using the massively wide definitions of money laundering or terrorist financing.

Great things could be done with those powers. Paragraph 6 of Schedule 2 could be used to create the beneficial owner registers for property that David Cameron promised. Further headway could be made on transparency in overseas territories and Crown dependencies. Paragraph 8 could be used to consolidate the myriad money laundering supervisors—some 25 of them—to get something more effective. Under paragraph 15, which gives carte blanche to create new but unspecified criminal offences, a “failure to prevent” offence could be created. But it could also make it criminal to open a bank account on Tuesdays or to present the wrong kind of utility bill because there is no guidance. New criminal offences by regulation are also enabled in Clause 16(3) in the sanctions part of the Bill, in that case with far longer sentences.

If there is no policy constraint, alongside possibilities for good things, the opposite could happen: setting aside the absurd, everything could be weakened or revoked, depending on the Minister at the wheel. It has been suggested that regulations are needed to keep up with the regular updates to FATF standards and other matters. The far longer EU process manages to keep up, as the Minister has already explained, so surely this Parliament, which is much more nimble, can also keep up. Indeed, I thought that was part of taking back control, and it certainly does not justify rule by regulation.

The Minister will know from my contributions during the passage of the Criminal Finances Bill that I am not a shrinking violet about money laundering criminal offences. The issue is that they need definition in an Act, along with the relevant defence. Noble Lords may recall that due to the ongoing call for evidence about “failure to prevent” offences, I explored an arrangement where both the offence and defence were defined in the Bill but not activated until later by an individual and specific statutory instrument—one not buried in a sheaf of other regulatory adjustments—and not to sunrise it through a statutory instrument until the result of the call for evidence was known. Even then, several noble Lords were very uncomfortable with the idea of any new criminal offence by statutory instrument.

Given that new offence by regulation is enshrined in Schedule 2 to the Bill and in Clause 16(3), I ask the Minister to explain the Government’s policy on criminal offences introduced by secondary legislation. I shall be considering two strands for amendments: one to limit the perpetuation of legislation by regulation, and the other to add to the Bill the things I have mentioned—in particular, issues around transparency and beneficial ownership, which have been criticised frequently in the European Parliament and by the OECD.

There is some urgency over this. The House of Commons Home Affairs Committee Proceeds of Crime report put estimates of at least £100 billion being laundered in the UK every year. In addition, failure to be seen to address those known weaknesses—well known in the European forums—could jeopardise equivalence or other arrangements made for financial services with the EU if we are outside the EU.

Brexit: Case for a Second Referendum

Baroness Bowles of Berkhamsted Excerpts

Thursday 7th July 2016 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the way in which the referendum campaign was conducted and covered was shocking. Even the BBC news, which neutralised expertise in the name of balance, was about as useful as an exam where everyone gets 50% because those getting the answer wrong thought it was right and vice versa. It is not the first time this has happened—last time it was about autism and the MMR vaccine.

Nevertheless, a rerun of a close referendum is unlikely to be broadly acceptable to the public without compelling evidence for it. Nor is a rerun for a supermajority; measures such as that need to be contemplated well away from heat or likely use. However, another referendum, later on, about a more focused question is another matter. It might be appropriate after a significant change in circumstances or on the outcome of negotiations with the EU, especially bearing in mind that negotiation strategy cannot all be public.

The last few days of debate have yielded a wealth of reasoning, including that the remain or leave question was broad in scope about a complex matter and was the start of a process that needs parliamentary sovereignty and public assent. Above all, the national interest must come first and cannot be ruled out. However, the fact that there could be a referendum on the outcome should not undermine sincere efforts to identify a genuine mandate and negotiate with the EU. As was also mentioned on previous days of debate, the referendum lock in the 2011 Act is drafted very widely. It covers where an EU treaty confers on an EU institution or body,

“power to impose a requirement or obligation on the United Kingdom”,

and also covers replacing treaties. Such things may well be needed to achieve Brexit, and the logic still applies—a say on being bound.

Finally, it is important that there is the time for a possible referendum or some other ratification. A hard deadline must not rob us of that opportunity. I have seen it all before with the Greek bailouts. Therefore I note that nothing in Article 50 says that extensions are negotiated only at the end—and a ratification extension, or other circumstantial extension, could be pre-agreed as part of the triggering process.